<PAGE>
MARKED TO SHOW CHANGES
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996
REGISTRATION NO. 333-4568
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AMERICAN GENERAL HOSPITALITY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
3860 WEST NORTHWEST HIGHWAY
SUITE 300
DALLAS, TEXAS 75220
(214) 352-3330
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES)
STEVEN D. JORNS
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
3860 WEST NORTHWEST HIGHWAY
SUITE 300
DALLAS, TEXAS 75220
(214) 352-3330
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
PETER M. FASS, ESQ. DAVID C. WRIGHT, ESQ.
STEVEN L. LICHTENFELD, ESQ. HUNTON & WILLIAMS
LESLIE H. LOFFMAN, ESQ. 2000 RIVERVIEW TOWER
BATTLE FOWLER LLP 900 SOUTH GAY STREET
75 EAST 55TH STREET KNOXVILLE, TENNESSEE 37902
NEW YORK, NEW YORK 10022 (423) 549-7700
(212) 856-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the share of
Common Stock.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 60,458
NASD filing fee................................................ 18,033
NYSE listing fee............................................... 91,600
Printing, engraving and mailing expenses....................... 350,000
Accountant's fees and expenses................................. 350,000
Blue Sky fees and expenses..................................... 50,000
Legal fees..................................................... 800,000
Transfer agent's fees.......................................... 15,000
Miscellaneous expenses......................................... 464,909
----------
Total........................................................ $2,200,000
==========
</TABLE>
ITEM 31. SALES TO SPECIAL PARTIES
See response to Item 32.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold 15.83, 5.00, 47.51, 15.83 and 15.83 shares of Common Stock
to Messrs. Jorns, Wiles, Sowell, Shaw and Shaw, respectively, on April 12,
1996 for an aggregate price of $100. The Company also has agreed to issue
134,679 shares (subject to adjustment in certain circumstances) of Common
Stock to the Plan, valued at approximately $3.0 million, based on the Offering
Price, in exchange for its interests in five of the Initial Hotels. The shares
were purchased for investment purposes only, and not with a view to any
resale, fractionalization or distribution thereof, and for the purpose of
organizing the Company. The shares have been or will be issued by the Company
in reliance on the exemption provided by Section 4(2) of the Securities Act of
1933, as amended. The shares will be redeemed by the Company for $100 upon
closing of the Offering.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.
The Charter of the Company obligates it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final deposition of a proceeding to any person (or the estate of
any person) who is or was a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding whether or not
by or in the right of the Company, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or
II-1
<PAGE>
officer of the Company, or is or was serving at the request of the Company as
a director, officer, trustee, partner, member, agent or employee of another
corporation, partnership, limited liability company, association, joint
venture, trust or other enterprise. The Charter and Bylaws also permit the
Company to indemnify and advance expenses to any person who served a
predecessor of the Company in any of the capacities described above and to any
employee or agent of the Company or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (b) a written statement by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that
the standard of conduct was not met.
The Company intends to purchase director and officer liability insurance for
the purpose of providing a source of funds to pay any indemnification
described above.
The Underwriting Agreement will contain certain provisions pursuant to which
certain officers, directors and controlling persons may be entitled to be
indemnified by the underwriters named therein.
ITEM 34. TREATMENT OF PROCEEDS FROM SHARES BEING REGISTERED
None.
II-2
<PAGE>
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS
(A) INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
American General Hospitality Corporation
Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1995 (unaudited).......................................... F-2
Pro Forma Consolidated Balance Sheet as of December 31, 1995
(unaudited)............................................................ F-4
Report of Independent Accountants....................................... F-7
Consolidated Balance Sheet as of April 12, 1996......................... F-8
Notes to Consolidated Balance Sheet..................................... F-9
Initial Hotels and Lessee
Pro Forma Combined Statement of Operations for the Year Ended December
31, 1995 (unaudited)................................................... F-11
AGH Predecessor Hotels
Report of Independent Accountants....................................... F-13
Combined Balance Sheets as of December 30, 1994 and December 29, 1995... F-14
Combined Statements of Operations for the Period from December 30, 1993
through December 31, 1993, and the Years Ended December 30, 1994 and
December 29, 1995...................................................... F-15
Combined Statements of Equity for the Period from December 30, 1993
through December 31, 1993, and the Years Ended December 30, 1994 and
December 29, 1995...................................................... F-16
Combined Statements of Cash Flows for the Period from December 30, 1993
through December 31, 1993, and the Years Ended December 30, 1994 and
December 29, 1995...................................................... F-17
Notes to Combined Financial Statements.................................. F-18
Schedule III--Real Estate and Accumulated Depreciation.................. F-22
AGH Acquisition Hotels
Report of Independent Accountants....................................... F-23
Combined Balance Sheets as of December 31, 1994 and 1995................ F-24
Combined Statements of Operations for each of the Three Years in the
Period Ended December 31, 1995......................................... F-25
Combined Statements of Equity for each of the Three Years in the Period
Ended December 31, 1995................................................ F-26
Combined Statements of Cash Flows for each of the Three Years in the
Period Ended December 31, 1995......................................... F-27
Notes to Combined Financial Statements.................................. F-28
Schedule III--Real Estate and Accumulated Depreciation.................. F-33
</TABLE>
II-3
<PAGE>
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
+1.1 --Form of Underwriting Agreement
*3.1 --Articles of Incorporation of the Registrant
**3.2 --Form of Articles of Amendment and Restatement of the Registrant
**3.3 --Bylaws of the Registrant
+4.1 --Form of Common Stock Certificate for the Registrant
+5.1 --Opinion of Battle Fowler LLP
+8.1 --Opinion of Battle Fowler LLP as to Tax Matters
+8.2 --Opinion of Coopers & Lybrand L.L.P., as to Texas Franchise Tax
Matters
*10.1 --American General Hospitality Partnership, L.P. Limited Partnership
Formation Agreement
**10.2 --Form of Amended and Restated Agreement of Limited Partnership of
American General Hospitality Operating Partnership, L.P.
+10.3 --Form of Participating Lease between the Registrant and AGH Leasing,
L.P.
+10.4 --Form of Lease Master Agreement between the Registrant and AGH
Leasing, L.P.
+10.5 --Form of Management Agreement between AGH Leasing, L.P. and American
General
Hospitality, Inc.
+10.6 --Form of Supplemental Representations, Warranties and Indemnity
Agreement
**10.7 --Form of Exchange Rights Agreement
**10.8 --Form of Registration Rights Agreement
+10.9 --Form of Lock-up Agreement
+10.10 --Commitment Letter for Line of Credit
**10.11 --Form of American General Hospitality Corporation 1996 Incentive Plan
**10.12 --Form of American General Hospitality Corporation Non-Employee
Directors' Incentive Plan
**10.13 --Form of Employment Agreement between the Registrant and Steven D.
Jorns
**10.14 --Form of Employment Agreement between the Registrant and Bruce G.
Wiles
**10.15 --Form of Employment Agreement between the Registrant and Kenneth E.
Barr
**10.16 --Form of Employment Agreement between the Registrant and Russ C.
Valentine
+10.17 --Form of Sublease and Services Agreement
+10.18 --Option to Purchase and Right of First Refusal Agreement between the
Registrant and American General Hospitality, Inc.
+10.19 --Form of Indemnification Agreement between the Registrant and its
executive officers and directors
**10.20 --Omnibus Option Agreement (OP Units) for Holiday Inn Dallas DFW
Airport South
**10.21 --Omnibus Option Agreement (Cash) for Holiday Inn Dallas DFW Airport
South
**10.22 --Contribution Agreement (GP) for Holiday Inn Dallas DFW Airport South
**10.23 --Contribution Agreement (Primary Contributors) for Holiday Inn Dallas
DFW Airport South; Holiday Inn Dallas DFW Airport West; Courtyard
by Marriott-Meadowlands; Hampton Inn Richmond Airport; and Hilton
Hotel & Conference Center
**10.24 --Option Agreement for Holiday Inn Dallas DFW Airport West
**10.25 --Contribution Agreement for Holiday Inn New Orleans Airport
**10.26 --Sale and Contribution Agreement for Holiday Inn Select
**10.27 --Purchase and Sale Agreement for Holiday Inn Park Center Plaza
**10.28 --Hotel Purchase Agreement for Fred Harvey Albuquerque Airport Hotel
**10.29 --Hotel Purchase Agreement for Le Baron Airport Hotel
**10.30 --Real Estate Sale Agreement for Days Inn Ocean City
**10.31 --Purchase and Sale Agreement and Escrow Instructions for Holiday Inn
Mission Valley
**10.32 --Omnibus Option Agreement (OP Units) for Hotel Maison de Ville
**10.33 --Omnibus Option Agreement (Cash) for Hotel Maison de Ville
**10.34 --Option Agreement for Hotel Maison de Ville
**10.35 --Option Agreement (the Plan) for Holiday Inn Dallas DFW Airport
South; Holiday Inn Dallas DFW Airport West; Courtyard by Marriott-
Meadowlands; Hampton Inn Richmond Airport;
and Hotel Maison de Ville
+21.1 --Subsidiaries of the Company
+23.1 --Consent of Battle Fowler LLP (included in Exhibits 5.1 and 8.1
hereto)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
+23.2 --Consent of Coopers & Lybrand L.L.P. giving opinion on Texas
Franchise Tax Matters (included in Exhibit 8.2 hereto)
*23.3 --Consent of Coopers & Lybrand L.L.P.
*24.1 --Powers of Attorney (included on signature page hereto)
**99.1 --Consent of H. Cabot Lodge III
**99.2 --Consent of James R. Worms
**99.3 --Consent of James McCurry
</TABLE>
- --------
* Previously filed.
** Filed herewith.
+ To be filed by amendment.
ITEM 36. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 33 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question as to whether such indemnification by it
is against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement.
(2) For purpose of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high end of the estimated offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-11 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN THE CITY OF DALLAS, STATE OF TEXAS ON MAY 24,
1996.
AMERICAN GENERAL HOSPITALITY CORPORATION
a Maryland corporation (Registrant)
/s/ Steven D. Jorns
By: _________________________________
STEVEN D. JORNS
Chairman of the Board, Chief
Executive Officer, and President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY 24, 1996.
SIGNATURE TITLE DATE
/s/ Steven D. Jorns Chairman of the
- ------------------------------------- Board, Chief May 24, 1996
STEVEN D. JORNS Executive Officer,
and President
/s/ Kenneth E. Barr Executive Vice
- ------------------------------------- President, Chief May 24, 1996
KENNETH E. BARR Financial Officer,
and Principal
Accounting Officer
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
+1.1 --Form of Underwriting Agreement
*3.1 --Articles of Incorporation of the Registrant
**3.2 --Form of Articles of Amendment and Restatement of the
Registrant
**3.3 --Bylaws of the Registrant
+4.1 --Form of Common Stock Certificate for the Registrant
+5.1 --Opinion of Battle Fowler LLP
+8.1 --Opinion of Battle Fowler LLP as to Tax Matters
+8.2 --Opinion of Coopers & Lybrand L.L.P., as to Texas
Franchise Tax Matters
*10.1 --American General Hospitality Partnership, L.P.
Limited Partnership Formation Agreement
**10.2 --Form of Amended and Restated Agreement of Limited
Partnership of American General Hospitality
Operating Partnership, L.P.
+10.3 --Form of Participating Lease between the Registrant
and AGH Leasing, L.P.
+10.4 --Form of Lease Master Agreement between the Registrant
and AGH Leasing, L.P.
+10.5 --Form of Management Agreement between AGH Leasing,
L.P. and American General
Hospitality, Inc.
+10.6 --Form of Supplemental Representations, Warranties and
Indemnity Agreement
**10.7 --Form of Exchange Rights Agreement
**10.8 --Form of Registration Rights Agreement
+10.9 --Form of Lock-up Agreement
+10.10 --Commitment Letter for Line of Credit
**10.11 --Form of American General Hospitality Corporation 1996
Incentive Plan
**10.12 --Form of American General Hospitality Corporation Non-
Employee Directors' Incentive Plan
**10.13 --Form of Employment Agreement between the Registrant
and Steven D. Jorns
**10.14 --Form of Employment Agreement between the Registrant
and Bruce G. Wiles
**10.15 --Form of Employment Agreement between the Registrant
and Kenneth E. Barr
**10.16 --Form of Employment Agreement between the Registrant
and Russ C. Valentine
+10.17 --Form of Sublease and Services Agreement
+10.18 --Option to Purchase and Right of First Refusal
Agreement between the Registrant and American
General Hospitality, Inc.
+10.19 --Form of Indemnification Agreement between the
Registrant and its executive officers and directors
**10.20 --Omnibus Option Agreement (OP Units) for Holiday Inn
Dallas DFW Airport South
**10.21 --Omnibus Option Agreement (Cash) for Holiday Inn
Dallas DFW Airport South
**10.22 --Contribution Agreement (GP) for Holiday Inn Dallas
DFW Airport South
**10.23 --Contribution Agreement (Primary Contributors) for
Holiday Inn Dallas DFW Airport South; Holiday Inn
Dallas DFW Airport West; Courtyard by Marriott-
Meadowlands; Hampton Inn Richmond Airport; and
Hilton Hotel & Conference Center
**10.24 --Option Agreement for Holiday Inn Dallas DFW Airport
West
**10.25 --Contribution Agreement for Holiday Inn New Orleans
Airport
**10.26 --Sale and Contribution Agreement for Holiday Inn
Select
**10.27 --Purchase and Sale Agreement for Holiday Inn Park
Center Plaza
**10.28 --Hotel Purchase Agreement for Fred Harvey Albuquerque
Airport Hotel
**10.29 --Hotel Purchase Agreement for Le Baron Airport Hotel
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
**10.30 --Real Estate Sale Agreement for Days Inn Ocean City
**10.31 --Purchase and Sale Agreement and Escrow Instructions
for Holiday Inn Mission Valley
**10.32 --Omnibus Option Agreement (OP Units) for Hotel Maison
de Ville
**10.33 --Omnibus Option Agreement (Cash) for Hotel Maison de
Ville
**10.34 --Option Agreement for Hotel Maison de Ville
**10.35 --Option Agreement (the Plan) for Holiday Inn Dallas
DFW Airport South; Holiday Inn Dallas DFW Airport
West; Courtyard by Marriott-Meadowlands; Hampton Inn
Richmond Airport; and Hotel Maison de Ville
+21.1 --Subsidiaries of the Company
--Consent of Battle Fowler LLP (included in Exhibits
+23.1 5.1 and 8.1 hereto)
+23.2 --Consent of Coopers & Lybrand L.L.P. giving opinion on
Texas Franchise Tax Matters (included in Exhibit 8.2
hereto)
*23.3 --Consent of Coopers & Lybrand L.L.P.
*24.1 --Powers of Attorney (included on signature page hereto)
**99.1 --Consent of H. Cabot Lodge III
**99.2 --Consent of James R. Worms
**99.3 --Consent of James McCurry
</TABLE>
- --------
* Previously filed.
** Filed herewith.
+ To be filed by amendment.
<PAGE>
EXHIBIT 3.2
FORM OF
AMERICAN GENERAL HOSPITALITY CORPORATION
ARTICLES OF AMENDMENT AND RESTATEMENT
AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland corporation,
having its principal office in the State of Maryland c/o Ballard Spahr Andrews &
Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202, Attention: Tracy
A. Bacigalupo, Esq. (hereafter referred to as the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland (the
"Department") that:
FIRST: The Corporation desires to and does hereby amend and restate
its charter as currently in effect and as hereinafter provided. The provisions
set forth in these Articles of Amendment and Restatement are all of the
provisions of the charter of the Corporation as currently in effect.
SECOND: The following provisions are all the provisions of the
charter currently in effect and as hereinafter amended:
ARTICLE I
The undersigned, Tracy A. Bacigalupo, whose address is c/o Ballard
Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202,
being at least eighteen (18) years of age, does hereby form a corporation under
the general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (hereinafter, the "Corporation") is
AMERICAN GENERAL HOSPITALITY CORPORATION
ARTICLE III
PURPOSES
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the general
laws of the State of Maryland now or hereafter in force. Subject to, and not in
limitation of the
<PAGE>
authority of the preceding sentence, the Corporation intends to engage in
business as a real estate investment trust (a "REIT") qualifying as such under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or
any successor statute (the "Code").
ARTICLE IV
PRINCIPAL OFFICE IN MARYLAND
AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of
Maryland is 300 East Lombard Street, Baltimore, Maryland 21202, Attention: Tracy
A. Bacigalupo, Esq. The name of the resident agent of the Corporation in the
State of Maryland is Tracy A. Bacigalupo, c/o Ballard Spahr Andrews & Ingersoll,
300 East Lombard Street, Baltimore, Maryland 21202.
ARTICLE V
SHARES OF STOCK
SECTION 1. AUTHORIZED SHARES OF STOCK
Authorized Shares. The total number of shares of stock of all classes
that the Corporation has authority to issue is 120,000,000 shares, consisting of
(i) 20,000,000 shares of Preferred Stock, $0.01 par value per share
(the "Preferred Stock"), which may be issued in one or more classes as
described in Section 3 of this Article V; and
(ii) 100,000,000 shares of Common Stock, $0.01 par value per share
(the "Common Stock").
Each class of the Preferred Stock and the Common Stock shall constitute a
separate class of stock of the Corporation.
SECTION 2. REIT-RELATED RESTRICTIONS AND LIMITATIONS ON THE EQUITY STOCK
The Corporation shall seek to elect and maintain status as a REIT under the
Code. Until such time as Article V shall have been amended in accordance with
Section 2(E) of this Article V in order to terminate the REIT status of the
Corporation, it shall be the duty of the Board of Directors to use commercially
reasonable efforts to ensure that the Corporation satisfies the requirements for
qualification as a REIT under the Code, including, but not limited to, the
ownership of its outstanding
-2-
<PAGE>
stock, the nature of its assets, the sources of its income, and the amount and
timing of its distributions to the Corporation's stockholders (the
"Stockholders").
A. Restrictions on Transfer.
------------------------
1. Definitions. For purposes of this Article V, the following terms shall
-----------
have the following meanings set forth below:
"American General Hospitality Operating Partnership Agreement" shall mean
the First Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, as it may be amended or restated from time to time.
"Beneficial Ownership" shall mean ownership of shares of Equity Stock by a
Person who would be treated as an owner of such shares of Equity Stock either
directly or indirectly through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns," "Beneficially Own," and "Beneficially Owned" shall have
correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the
Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 2(B)(1) of Article V hereof.
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Constructive Ownership" shall mean ownership of shares of Equity Stock by
a Person who would be treated as an owner of such shares of Equity Stock either
directly or indirectly through the application of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns," and "Constructively Owned" shall have correlative
meanings.
"Equity Stock" shall mean Preferred Stock and Common Stock of the
Corporation. The term "Equity Stock" shall include all shares of Preferred
Stock and Common Stock of the Corporation that are held as Shares-in-Trust in
accordance with the provisions of Section 2(B) of Article V hereof.
"Initial Public Offering" means the sale of shares of Common Stock pursuant
to the Corporation's first effective registration statement for such shares of
Common Stock filed under the Securities Act of 1933, as amended.
-3-
<PAGE>
"Look-Through Entity" shall mean an entity (i) that is looked through for
purposes of the "closely held" test in Section 856(h) of the Code and (ii) each
beneficial owner of which would satisfy the Ownership Limit if such beneficial
owner owned directly its proportionate share of the shares of Equity Stock that
are held by the Look-Through Entity, which, by way of example, could include (i)
a pension trust that qualifies for look-through treatment under Section
856(h)(3) of the Code, (ii) an entity that qualifies as a regulated investment
company under Section 851 of the Code, or (iii) a corporation.
"Look-Through Ownership Limit" shall mean 15% of the number of outstanding
shares of any class of Equity Stock.
"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days ending on such date. The "Closing Price" on
any date shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Equity Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Equity Stock are listed or admitted to trading or, if the shares of Equity Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or, if such
system is no longer in use, the principal other automated quotations system that
may then be in use or, if the shares of Equity Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares of Equity Stock selected
by the Board of Directors.
"Non-Transfer Event" shall mean an event, other than a purported Transfer,
that would cause any Person to Beneficially Own or Constructively Own shares of
Equity Stock in excess of the Ownership Limit or Look-Through Ownership Limit,
as applicable, including, but not limited to, the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
shares of Equity Stock or the sale, transfer, assignment or other disposition of
any securities or rights convertible into or exchangeable for shares of Equity
Stock.
-4-
<PAGE>
"Operating Partnership" shall mean American General Hospitality Operating
Partnership, L.P., a Delaware limited partnership.
"Ownership Limit" shall mean 9.8% of the number of outstanding shares of
any class of Equity Stock.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section 2(B)(5) of Article V
hereof.
"Person" shall mean an individual, corporation, partnership, estate, trust,
a portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity and also includes a "group" as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Prohibited Owner" shall mean, with respect to any purported Transfer or
Non-Transfer Event, any Person who, but for the provisions of Section 2(A)(3) of
Article V hereof, would own record title to shares of Equity Stock.
"Restriction Termination Date" shall mean the first day after the date of
the Initial Public Offering on which this Article V has been amended in
accordance with Section 2(E) of this Article V in order to terminate the REIT
status of the Corporation.
"Shares-in-Trust" shall mean any shares of Equity Stock designated Shares-
in-Trust pursuant to Section 2(A)(3) of Article V hereof.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Equity Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Equity Stock are
not listed or admitted to trading on any national securities exchange, shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift, assignment,
devise or other disposition of shares of Equity Stock, whether voluntary or
involuntary, whether of record, constructively or beneficially and whether by
operation of law or otherwise. "Transfer" (as a verb) shall have the
correlative meaning.
-5-
<PAGE>
"Trust" shall mean any separate trust created pursuant to Section 2(A)(3)
of Article V hereof and administered in accordance with the terms of Section
2(B) of Article V hereof, for the exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with both the
Corporation and any Prohibited Owner, such Trustee to be designated by the
Corporation to act as trustee of any Trust, or any successor trustee thereof.
2. Restriction on Transfers.
------------------------
a. Except as provided in Section 2(A)(7) of Article V hereof, from the
date of the Initial Public Offering and prior to the Restriction Termination
Date, (i) no Person shall Beneficially Own or Constructively Own outstanding
shares of Equity Stock in excess of the Ownership Limit; provided, however, a
Look-Through Entity may Beneficially Own or Constructively Own outstanding
shares of Equity Stock in an amount not to exceed the Look-Through Ownership
Limit, and (ii) any Transfer that, if effective, would result in any Person
Beneficially Owning or Constructively Owning shares of Equity Stock in excess of
the Ownership Limit or the Look-Through Ownership Limit, as applicable, shall be
void ab initio as to the Transfer of that number of shares of Equity Stock which
-- ------
would be otherwise Beneficially Owned or Constructively Owned by such Person in
excess of the Ownership Limit or the Look-Through Ownership Limit, as
applicable, and the intended transferee shall acquire no rights in such excess
shares of Equity Stock.
b. Except as provided in Section 2(A)(7) of Article V hereof, from the
date of the Initial Public Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result in shares of Equity Stock
being beneficially owned by fewer than 100 Persons (determined without reference
to any rules of attribution) shall be void ab initio as to the Transfer of that
-- ------
number of shares which would be otherwise beneficially owned (determined without
reference to any rules of attribution) by the transferee, and the intended
transferee shall acquire no rights in such shares of Equity Stock.
c. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer
-- ------
of that number of shares of Equity Stock which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
-6-
<PAGE>
d. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would cause the Corporation to Constructively Own 9.9% or more of the
ownership interests in a tenant of the real property of the Corporation, the
Operating Partnership or any direct or indirect subsidiary (including, without
limitation, partnerships and limited liability companies) of the Corporation or
the Operating Partnership (a "Subsidiary"), within the meaning of Section
856(d)(2)(B) of the Code, shall be void ab initio as to the Transfer of that
-- ------
number of shares of Equity Stock which would cause the Corporation to
Constructively Own 9.9% or more of the ownership interests in a tenant of the
Corporation's, the Operating Partnership's or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code, and the intended
transferee shall acquire no rights in such excess shares of Equity Stock.
3. Transfer to Trust.
-----------------
a. If, notwithstanding the other provisions contained in this Section
2(A) of Article V, at any time after the Initial Public Offering and prior to
the Restriction Termination Date, there is a purported Transfer or Non-Transfer
Event such that any Person would either Beneficially Own or Constructively Own
shares of Equity Stock in excess of the Ownership Limit (or, in the case of a
Look-Through Entity, either Beneficially Own or Constructively Own shares of
Equity Stock in excess of the Look-Through Ownership Limit), then, (i) except as
otherwise provided in Section 2(A)(7) of Article V hereof, the purported
transferee shall acquire no right or interest (or, in the case of a Non-Transfer
Event, the Person holding record title to the shares of Equity Stock
Beneficially Owned or Constructively Owned by such Beneficial Owner or
Constructive Owner, shall cease to own any right or interest) in such number of
shares of Equity Stock which would cause such Beneficial Owner or Constructive
Owner to Beneficially Own or Constructively Own shares of Equity Stock in excess
of the Ownership Limit or the Look-Through Ownership Limit, as applicable, (ii)
such number of shares of Equity Stock in excess of the Ownership Limit or the
Look-Through Ownership Limit, as applicable (rounded up to the nearest whole
share) shall be designated Shares-in-Trust and, in accordance with the
provisions of Section 2(B) of Article V hereof, transferred automatically and by
operation of law to the Trust to be held in accordance with that Section 2(B) of
Article V, and (iii) the Prohibited Owner shall submit such number of shares of
Equity Stock to the Corporation for registration in the name of the Trustee.
Such transfer to a Trust and the designation of shares as Shares-in-Trust shall
be effective as of the close of business on the business day prior to the date
of the Transfer or Non-Transfer Event, as the case may be.
-7-
<PAGE>
b. If, notwithstanding the other provisions contained in this Section 2(A)
of Article V, at any time after the Initial Public Offering and prior to the
Restriction Termination Date, there is a purported Transfer or Non-Transfer
Event that, if effective, would (i) result in the shares of Equity Stock being
beneficially owned by fewer than 100 Persons (determined without reference to
any rules of attribution), (ii) result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code, or (iii) cause the Corporation
to Constructively Own 10% or more of the ownership interests in a tenant of the
Corporation's, the Operating Partnership's or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code, then (x) the purported
transferee shall not acquire any right or interest (or, in the case of a Non-
Transfer Event, the Person holding record title of the shares of Equity Stock
with respect to which such Non-Transfer Event occurred, shall cease to own any
right or interest) in such number of shares of Equity Stock, the ownership of
which by such purported transferee or record holder would (A) result in the
shares of Equity Stock being beneficially owned by fewer than 100 Persons
(determined without reference to any rules of attribution), (B) result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or (C) cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's, the Operating
Partnership's or a Subsidiary's real property, within the meaning of Section
856(d)(2)(B) of the Code, (y) such number of shares of Equity Stock (rounded up
to the nearest whole share) shall be designated Shares-in-Trust and, in
accordance with the provisions of Section 2(B) of Article V hereof, transferred
automatically and by operation of law to the Trust to be held in accordance with
that Section 2(B) of Article V, and (z) the Prohibited Owner shall submit such
number of shares of Equity Stock to the Corporation for registration in the name
of the Trustee. Such transfer to a Trust and the designation of shares as
Shares-in-Trust shall be effective as of the close of business on the business
day prior to the date of the Transfer or Non-Transfer Event, as the case may be.
4. Remedies For Breach. If the Corporation, or its designees, shall at
-------------------
any time determine in good faith that a Transfer has taken place in violation of
Section 2(A)(2) of Article V hereof or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership or Constructive Ownership of any
shares of Equity Stock in violation of Section 2(A)(2) of Article V hereof, the
Corporation shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or acquisition, including, but not limited
to, refusing to give effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer or acquisition.
-8-
<PAGE>
5. Notice of Restricted Transfer. Any Person who acquires or attempts to
-----------------------------
acquire shares of Equity Stock in violation of Section 2(A)(2) of Article V
hereof, or any Person who owned shares of Equity Stock that were transferred to
the Trust pursuant to the provisions of Section 2(A)(3) of Article V hereof,
shall immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or Non-Transfer
Event, as the case may be, on the Corporation's status as a REIT.
6. Owners Required to Provide Information. From the date of the Initial
--------------------------------------
Public Offering and prior to the Restriction Termination Date:
a. Every Beneficial Owner or Constructive Owner of more than 5%, or such
lower percentages as required pursuant to regulations under the Code (currently
Regulation (S)1.857-8(d)), of the outstanding shares of all classes of stock of
the Corporation shall, within 30 days after January 1 of each year, provide to
the Corporation a written statement or affidavit stating the name and address of
such Beneficial Owner or Constructive Owner, the number of shares of Equity
Stock Beneficially Owned or Constructively Owned, and a description of how such
shares are held. Each such Beneficial Owner or Constructive Owner shall provide
to the Corporation such additional information as the Corporation may request in
order to determine the effect, if any, of such Beneficial Ownership or
Constructive Ownership on the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit or the Look-Through Ownership Limit, as
applicable.
b. Each Person who is a Beneficial Owner or Constructive Owner of shares
of Equity Stock and each Person (including the stockholder of record) who is
holding shares of Equity Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation a written statement or affidavit stating such
information as the Corporation may request in order to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership Limit
or the Look-Through Ownership Limit, as applicable.
7. Exception. The Ownership Limit or the Look-Through Ownership Limit, as
---------
applicable, shall not apply to the acquisition of shares of Equity Stock by an
underwriter that participates in a public offering of such shares for a period
of 90 days following the purchase by such underwriter of such shares provided
that the restrictions contained in Section 2(A)(2) of Article V hereof will not
be violated following the distribution by such underwriter of such shares. In
addition, the Board of Directors, in its sole discretion and upon receipt of a
ruling from the Internal Revenue Service or an opinion of counsel, in
-9-
<PAGE>
either case in form and substance satisfactory to the Board of Directors as it
may deem necessary or desirable in order to maintain the Corporation's status as
a REIT, may exempt a Person from the Ownership Limit or the Look-Through
Ownership Limit, if (i) such Person is not (A) an individual for purposes of
Code Section 542(a)(2), as modified by Code Section 856(h) or (B) treated as the
owner of such stock for purposes of Code Section 542(a)(2), as modified by Code
Section 856(h) and the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
Person's Beneficial or Constructive Ownership of such shares of Equity Stock
will violate Section 2(A)(2)(b), 2(A)(2)(c) or 2(A)(2)(d) of Article V hereof,
(ii) such Person does not and represents that it will not Constructively Own
shares of Equity Stock to the extent that such Constructive Ownership of Equity
Stock would result in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or otherwise failing to qualify as a REIT
(including, but not limited to, Beneficial or Constructive Ownership that would
result in the Corporation Constructively Owning an interest in a tenant of the
Corporation (or a tenant of any entity owned or controlled by the Corporation)
that would cause the Corporation, the Operating Partnership or a Subsidiary to
Constructively Own more than a 9.9% interest in such tenant), and the Board of
Directors obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact, and (iii) such Person agrees that
any violation or attempted violation of such representations or undertakings (or
other action which is contrary to the restrictions contained in Sections 2(A)(2)
through 2(A)(6) of this Article V) will result in such shares of Equity Stock
being designated as Shares-in-Trust in accordance with the provisions of Section
2(A)(3) of Article V hereof.
8. New York Stock Exchange Transactions. Notwithstanding any provision
------------------------------------
contained herein to the contrary, nothing in these Articles of Amendment and
Restatement shall preclude the settlement of any transaction entered into
through the facilities of the New York Stock Exchange, Inc. The fact that the
settlement of any transaction is so permitted shall not negate the effect of any
other provision of this Article V and any transferee in such a transaction shall
be subject to all of the provisions and limitations set forth in this Article.
B. Shares-in-Trust.
---------------
1. Trust. Any shares of Equity Stock transferred to a Trust and
-----
designated Shares-in-Trust pursuant to Section 2(A)(3) of Article V hereof shall
be held for the exclusive benefit of the Beneficiary. The Corporation shall
name a Beneficiary for each Trust within five days after the establishment
thereof. Any transfer to a Trust, and subsequent designation of shares of
Equity Stock as Shares-in-Trust, pursuant to Section 2(A)(3) of
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<PAGE>
Article V hereof shall be effective as of the close of business on the business
day prior to the date of the Transfer or Non-Transfer Event that results in the
transfer to the Trust. Shares-in-Trust shall remain issued and outstanding
shares of Equity Stock of the Corporation and shall be entitled to the same
rights and privileges on identical terms and conditions as are all other issued
and outstanding shares of Equity Stock of the same class and series. When
transferred to a Permitted Transferee in accordance with the provisions of
Section 2(B)(5) of Article V hereof, such Shares-in-Trust shall cease to be
designated as Shares-in-Trust.
2. Dividend Rights. The Trust, as record holder of Shares-in-Trust, shall
---------------
be entitled to receive all dividends and distributions as may be authorized by
the Board of Directors on such shares of Equity Stock and shall hold such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to Shares-in-Trust shall repay to the Trust the
amount of any dividends or distributions received by it that (i) are
attributable to any shares of Equity Stock designated Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares became
Shares-in-Trust. The Corporation shall take all measures that it determines
reasonably necessary to recover the amount of any such dividend or distribution
paid to a Prohibited Owner, including, if necessary, withholding any portion of
future dividends or distributions payable on shares of Equity Stock Beneficially
Owned or Constructively Owned by the Person who, but for the provisions of
Section 2(A)(3) of Article V hereof, would Constructively Own or Beneficially
Own the Shares-in-Trust; and, as soon as reasonably practicable following the
Corporation's receipt or withholding thereof, paying over to the Trust for the
benefit of the Beneficiary the dividends so received or withheld, as the case
may be.
3. Rights Upon Liquidation. In the event of any voluntary or involuntary
-----------------------
liquidation, dissolution or winding-up of, or any distribution of the assets of,
the Corporation, each holder of Shares-in-Trust shall be entitled to receive,
ratably with each other holder of shares of Equity Stock of the same class or
series, that portion of the assets of the Corporation which is available for
distribution to the holders of such class or series of shares of Equity Stock.
The Trust shall distribute to the Prohibited Owner the amounts received upon
such liquidation, dissolution, or winding-up, or distribution; provided,
--------
however, that the Prohibited Owner shall not be entitled to receive amounts
- -------
pursuant to this Section 2(B)(3) of Article V in excess of, in the case of a
purported Transfer in which the Prohibited Owner gave value for shares of Equity
Stock and which Transfer resulted in the transfer of the shares to the Trust,
the price per share, if any, such Prohibited Owner paid for the shares of Equity
Stock and, in the case of a Non-Transfer Event or Transfer
-11-
<PAGE>
in which the Prohibited Owner did not give value for such shares (e.g., if the
----
shares were received through a gift or devise) and which Non-Transfer Event or
Transfer, as the case may be, resulted in the transfer of shares to the Trust,
the price per share equal to the Market Price on the date of such Non-Transfer
Event or Transfer. Any remaining amount in such Trust shall be distributed to
the Beneficiary.
4. Voting Rights. The Trustee shall be entitled to vote all Shares-in-
-------------
Trust. Any vote by a Prohibited Owner as a holder of shares of Equity Stock
prior to the discovery by the Corporation that the shares of Equity Stock are
Shares-in-Trust shall, subject to applicable law, be rescinded and be void ab
--
initio with respect to such Shares-in-Trust and be recast by the Trustee, in its
- ------
sole and absolute discretion; provided, however, that if the Corporation has
already taken irreversible corporate action based on such vote, then the Trustee
shall not have the authority to rescind and recast such vote. The Prohibited
Owner shall be deemed to have given, as of the close of business on the business
day prior to the date of the purported Transfer or Non-Transfer Event that
results in the transfer to the Trust of shares of Equity Stock under Section
2(A)(3) of Article V hereof, an irrevocable proxy to the Trustee to vote the
Shares-in-Trust in the manner in which the Trustee, in its sole and absolute
discretion, desires.
5. Designation of Permitted Transferee. The Trustee shall have the
-----------------------------------
exclusive and absolute right to designate a Permitted Transferee of any and all
Shares-in-Trust. In an orderly fashion so as not to materially adversely affect
the Market Price of the Shares-in-Trust, the Trustee shall designate any Person
as Permitted Transferee, provided, however, that (i) the Permitted Transferee so
-------- -------
designated purchases for valuable consideration (whether in a public or private
sale) the Shares-in-Trust and (ii) the Permitted Transferee so designated may
acquire such Shares-in-Trust without such acquisition resulting in a transfer to
a Trust and the redesignation of such shares of Equity Stock so acquired as
Shares-in-Trust under Section 2(A)(3) of Article V hereof. Upon the designation
by the Trustee of a Permitted Transferee in accordance with the provisions of
this Section 2(B)(5) of Article V, the Trustee shall (i) cause to be transferred
to the Permitted Transferee that number of Shares-in-Trust acquired by the
Permitted Transferee, (ii) cause to be recorded on the books of the Corporation
that the Permitted Transferee is the holder of record of such number of shares
of Equity Stock, (iii) cause the Shares-in-Trust to be canceled, and (iv)
distribute to the Beneficiary any and all amounts held with respect to the
Shares-in-Trust after making the payment to the Prohibited Owner pursuant to
Section 2(B)(6) of Article V hereof.
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<PAGE>
6. Compensation to Record Holder of Shares of Equity Stock that Become
-------------------------------------------------------------------
Shares-in-Trust. Any Prohibited Owner shall be entitled (following discovery of
- ---------------
the Shares-in-Trust and subsequent designation of the Permitted Transferee in
accordance with Section 2(B)(5) of Article V hereof or following the acceptance
of the offer to purchase such shares in accordance with Section 2(B)(7) of
Article V hereof) to receive from the Trustee following the sale or other
disposition of such Shares-in-Trust the lesser of (i) in the case of (a) a
purported Transfer in which the Prohibited Owner gave value for shares of Equity
Stock and which Transfer resulted in the transfer of the shares to the Trust,
the price per share, if any, such Prohibited Owner paid for the shares of Equity
Stock, or (b) a Non-Transfer Event or Transfer in which the Prohibited Owner did
not give value for such shares (e.g., if the shares were received through a gift
----
or devise) and which Non-Transfer Event or Transfer, as the case may be,
resulted in the transfer of shares to the Trust, the price per share equal to
the Market Price on the date of such Non-Transfer Event or Transfer, and (ii)
the price per share received by the Trustee from the sale or other disposition
of
such Shares-in-Trust in accordance with Section 2(B)(5) or 2(B)(6) of Article V
hereof. Any amounts received by the Trustee in respect of such Shares-in-Trust
and in excess of such amounts to be paid the Prohibited Owner pursuant to this
Section 2(B)(6) shall be distributed to the Beneficiary in accordance with the
provisions of Section 2(B)(5) of Article V hereof. Each Beneficiary and
Prohibited Owner waive any and all claims that they may have against the Trustee
and the Trust arising out of the disposition of Shares-in-Trust, except for
claims arising out of the gross negligence or willful misconduct of, or any
failure to make payments in accordance with this Section 2(B), by such Trustee
or the Corporation.
7. Purchase Right in Shares-in-Trust. Shares-in-Trust shall be deemed to
---------------------------------
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
created such Shares-in-Trust (or, in the case of devise, gift or Non-Transfer
Event, the Market Price at the time of such devise, gift or Non-Transfer Event)
and (ii) the Market Price on the date the Corporation, or its designee, accepts
such offer. Subject to Section 2(B)(6) of Article V hereof, the Corporation
shall have the right to accept such offer for a period of ninety days after the
later of (i) the date of the Non-Transfer Event or purported Transfer which
resulted in such Shares-in-Trust and (ii) the date the Corporation determines in
good faith that a Transfer or Non-Transfer Event resulting in Shares-in-Trust
has occurred, if the Corporation does not receive a notice of such Transfer or
Non-Transfer Event pursuant to Section 2(A)(5) of Article V hereof.
C. Remedies Not Limited. Nothing contained in this Article V shall limit
--------------------
the authority of the Corporation to take such other
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<PAGE>
action as it deems necessary or advisable to protect the Corporation and the
interests of its stockholders by preservation of the Corporation's status as a
REIT and to ensure compliance with the Ownership Limit or the Look-Through
Ownership Limit, as applicable.
D. Legend. Each certificate for shares of Equity Stock shall
------
substantially bear the following legend:
"The shares of [Common or Preferred] Stock represented by this certificate
are subject to restrictions on transfer for the purpose of the
Corporation's maintenance of its status as a real estate investment trust
under the Internal Revenue Code of 1986, as amended (the "Code"). No
Person may (i) Beneficially Own or Constructively Own shares of Equity
Stock in excess of 9.8% of the number of outstanding shares of any class of
Equity Stock (or, in the case of a Look-Through Entity, in excess of 15% of
the number of outstanding shares of any class of Equity Stock), (ii)
beneficially own shares of Equity Stock that would result in the shares of
Equity Stock being beneficially owned by fewer than 100 Persons (determined
without reference to any rules of attribution), (iii) Beneficially Own
shares of Equity Stock that would result in the Corporation being "closely
held" under Section 856(h) of the Code, or (iv) Constructively Own shares
of Equity Stock that would cause the Corporation to Constructively Own more
than 9.9% or more of the ownership interests in a tenant of the
Corporation's, the Operating Partnership's or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code. Any Person who
attempts to Beneficially Own or Constructively Own shares of Equity Stock
in excess of the above limitations must immediately notify the Corporation
in writing. If the restrictions above are violated, the shares of Equity
Stock represented hereby will be transferred automatically and by operation
of law to a Trust and shall be designated Shares-in-Trust. All capitalized
terms in this legend have the meanings defined in the Corporation's
charter, as the same may be further amended from time to time, a copy of
which, including the restrictions on transfer, will be sent without charge
to each Stockholder who so requests."
Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability on request and without charge.
E. Amendment. Notwithstanding any other provisions of the charter or the
---------
Bylaws of the Corporation (and notwithstanding that some lesser percentage may
be specified by law, the charter
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<PAGE>
or the Bylaws of the Corporation), the provisions of this Article V shall not be
amended, altered, changed or repealed without the affirmative vote of all of the
Independent Directors and the holders of not less than two-thirds of the
outstanding shares of stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
SECTION 3. PREFERRED STOCK.
A. Authority to Designate and Fix Rights and Restrictions of Preferred
-------------------------------------------------------------------
Stock. The Board of Directors may classify any unissued shares of Preferred
- -----
Stock in one or more separately designated classes (hereinafter a "class").
Prior to issuance of classified shares of any class of Preferred Stock, the
Board of Directors shall:
1. designate such class in order to distinguish it from all other then-
outstanding classes of Preferred Stock;
2. set the number of shares of Preferred Stock to be included in such
class;
3. subject to the provisions of Sections 2 and 5 of this Article V, and to
the express limitations, if any, of any other classes of which shares are
outstanding at the time, set or change the preferences, conversion or other
rights, voting powers, restrictions (including, without limitation, any
restriction not inconsistent with law on the transferability of the shares
of such class), limitations as to dividends or other distributions,
qualifications and terms and conditions of the redemption of the shares of
such class, provided that all shares of any class shall be alike in every
particular, except that shares of such class issued at different times may
accumulate dividends from different dates; and
4. cause the Corporation to file Articles Supplementary with the State
Department of Assessments and Taxation of Maryland (the "SDAT").
Any of the terms of any class of stock set or changed pursuant to this Section 3
may be made dependent upon facts or events ascertainable outside the charter
(including determinations by the Board of Directors or other facts or events
within the control of the Corporation) and may vary among holders thereof,
provided that the manner in which such facts, events or variations shall operate
upon the terms of such class of stock is clearly and expressly set forth in the
Articles Supplementary filed with the SDAT.
B. Amendment of Terms. Subject to the provisions of Sections 2 and 5 of
------------------
this Article V and to the express
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limitations, if any, of any class of Preferred Stock of which shares are
outstanding at the time, by resolution the Board of Directors may:
1. increase or decrease (but not below the number of shares of Preferred
Stock of such class then outstanding) the number of shares of Preferred
Stock of any class; and
2. alter the designation of, or classify or reclassify, any unissued
shares of Preferred Stock of any class from time to time by setting or
changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications, or terms or conditions of redemption of such class.
C. Permissible Distributions. Unless otherwise determined by the Board of
-------------------------
Directors, in determining whether a distribution (other than upon liquidation,
dissolution or winding-up of the Corporation), by dividend, redemption or other
acquisition of shares or otherwise, is permitted under the Maryland General
Corporation Law as may be amended from time to time (the "MGCL"), amounts that
would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
shares of any class or series of stock whose preferential rights upon
dissolution are superior to those receiving the distribution shall not be added
to the Corporation's total liabilities.
SECTION 4. COMMON STOCK.
Subject to the provisions of Sections 2 and 5 of this Article V, the Common
Stock shall have the following preferences, rights, powers, restrictions,
limitations and qualifications, and such others as may be afforded by law:
A. Voting Rights. Except as may otherwise be required by law, and subject
-------------
to action, if any, by the Board of Directors, pursuant to Section 3 of this
Article V, granting to the holders of one or more classes of Preferred Stock
exclusive voting powers with respect to specified matters, each holder of Common
Stock shall have one vote in respect of each share of Common Stock held of
record on all matters to be voted upon by the Stockholders.
B. Dividend Rights. After provision(s) with respect to preferential
---------------
dividends on any then-outstanding classes of Preferred Stock, if any, fixed by
the Board of Directors pursuant to Section 3 of this Article V, shall have been
satisfied, and after satisfaction of any other requirements, if any, including
with respect to redemption rights and preferences, in any such classes of
Preferred Stock, then and thereafter the holders of Common Stock shall be
entitled to receive, ratably in proportion to the number of shares of Common
Stock held by them, such
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dividends as may be authorized from time to time by the Board of Directors out
of assets legally available therefor.
C. Liquidation Rights. In the event of the voluntary or involuntary
------------------
liquidation, dissolution or winding-up of the Corporation, after distribution in
full of the preferential amounts, if any, fixed pursuant to Section 3 of this
Article V, to be distributed to the holders of any then-outstanding Preferred
Stock, and subject to the right, if any, of the holders of any outstanding
Preferred Stock to participate further in any liquidating distributions, all of
the assets of the Corporation, if any, remaining, of whatever kind available for
distribution to Stockholders after the foregoing distributions have been made
shall be distributed to the holders of the Common Stock, ratably in proportion
to the number of shares of Common Stock held by them.
D. Reclassification of Common Stock. The Board of Directors may
--------------------------------
reclassify any unissued shares of Common Stock from time to time as one or more
classes or series of stock.
SECTION 5. GENERAL PROVISIONS.
A. Interpretation and Ambiguities. The Board shall have the power to
------------------------------
interpret and to construe the provisions of this Article V, and in the case of
an ambiguity in the application of any of the provisions of this Article V,
including any definition contained in Section 1(A), the Board shall have the
power to determine the application of the provisions of this Article V with
respect to any situation based on the facts known to it, and any such
interpretation, construction or determination shall be final and binding on all
interested parties, including the Stockholders.
B. Severability. If any provision of this Article V or any application of
------------
any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
ARTICLE VI
THE BOARD OF DIRECTORS
SECTION 1. AUTHORIZED NUMBER AND INITIAL DIRECTORS.
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. The authorized number of directors of the
Corporation initially shall consist of
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not less than three, the minimum number required by the MGCL, and not more than
15 persons, which number may be increased or decreased pursuant to the Bylaws of
the Corporation.
SECTION 2. CLASSIFIED BOARD.
The directors of the Corporation (other than any directors who may be
elected by holders of Preferred Stock as may be provided from time to time by
the Board of Directors) shall be and are hereby divided into three Classes,
designated "Class I," "Class II" and "Class III," respectively. The number of
directors in each such c`lass shall be as nearly equal in number as possible.
Each director shall serve for a term ending on the date of the third Annual
Meeting of Stockholders following the Annual Meeting at which such director was
elected, provided, however, that each initial director in Class I shall serve
for a term ending on the date of the Annual Meeting held in 1997; each initial
director in Class II shall serve for a term ending on the date of the Annual
Meeting held in 1998; and each initial director in Class III shall serve for a
term ending on the date of the Annual Meeting held in 1999.
SECTION 3. GENERAL TERM OF OFFICE.
Notwithstanding the provisions of Section 2 of this Article VI, each
director shall serve until such director's successor is elected and qualified or
until such director's death, retirement, resignation or removal.
SECTION 4. REMOVAL OF DIRECTORS.
Subject to the rights of the holders of any class or series of Preferred
Stock then outstanding, a director may be removed, with or without cause, by the
affirmative vote of at least 75% of the votes entitled to be cast for the
election of directors at an annual meeting or at a special meeting of the
stockholders called for the purpose of removing such director.
SECTION 5. INDEPENDENT DIRECTORS.
A. Notwithstanding anything herein to the contrary, at all times (except
during a period not to exceed 60 days following the death, resignation,
incapacity or removal from office of a director prior to expiration of the
director's term of office), a majority of the Board of Directors shall be
comprised of persons (each such person an "Independent Director") who are not
officers or employees of the Corporation or the Operating Partnership or
Affiliates (as hereinafter defined) of (i) any officers or employees of the
Corporation or the Operating Partnership or of any advisor to the Corporation or
the Operating Partnership under an advisory agreement, (ii) any lessee or
contract manager of any property of the Corporation or the Operating Partnership
or their
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respective subsidiaries, (iii) any subsidiary of the Corporation or the
Operating Partnership, or (iv) any Person that is an Affiliate of the
Corporation or the Operating Partnership.
B. For purposes of this Section 5, "Affiliate" of a Person shall mean (i)
any Person that, directly or indirectly, controls or is controlled by or is
under the common control with such other Person, (ii) any Person that owns,
beneficially, directly or indirectly, five percent or more of the outstanding
stock of such other Person, or (iii) any officer, director, employee, partner or
trustee of such other Person or of any or of any Person controlling, controlled
by or under common control with such Person (excluding directors and Persons
serving in similar capacities who are not otherwise an Affiliate of such
Person). The term "Person" means and includes any natural person, corporation,
partnership, association, trust, limited liability company or any other legal
entity. For purposes of this definition, "control" (including the correlative
meanings of the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, through the ownership of voting securities, partnership interests
or other equity interests.
C. Notwithstanding anything herein to the contrary, no term or provision
of this Section 5 of Article VI may be added, amended or repealed in any respect
without the affirmative vote of all the Independent Directors.
SECTION 6. BOARD AUTHORIZATION OF STOCK ISSUANCES.
The Board of Directors of the Corporation may authorize the issuance from
time to time of shares of stock of any class, whether now or hereafter
authorized, or securities convertible into shares of any class or series,
whether now or hereafter authorized, for such consideration as the Board of
Directors may deem advisable, subject to such restrictions or limitations, if
any, as may be set forth in the charter.
SECTION 7. CERTAIN OTHER DETERMINATIONS BY THE BOARD OF DIRECTORS.
The determination as to any of the following matters, made in good faith by
or pursuant to the direction of the Board of Directors consistent with the
charter and in the absence of actual receipt of an improper benefit in money,
property or services or active and deliberate dishonesty established by a court,
shall be final and conclusive and shall be binding upon the Corporation and
every holder of shares of its stock: the amount of the net income of the
Corporation for any period and the amount of assets at any time legally
available for the
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payment of dividends, redemption of shares or the payment of other distributions
on shares; the amount of paid-in surplus, net assets, other surplus, annual or
other net profit, net assets in excess of capital, undivided profits or excess
of profits over losses on sales of assets; the amount, purpose, time of
creation, increase or decrease, alteration or cancellation of any reserves or
charges and the propriety thereof (whether or not any obligation or liability
for which such reserves or charges shall have been created shall have been paid
or discharged); the fair value, or any sale, bid or asked price to be applied in
determining the fair value, of any asset owned or held by the Corporation; and
any matters relating to the acquisition, holding and disposition of any assets,
of the Corporation.
SECTION 8. RESERVED POWERS OF THE BOARD OF DIRECTORS.
The enumeration and definition of particular powers of the Board of
Directors included in this Article VI shall in no way be limited or restricted
by reference to or inference from the terms of any other clause of this or any
other provision of the charter of the Corporation, or construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board of Directors under the general laws of the State of Maryland as
now or hereafter in force.
ARTICLE VII
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF THE
STOCKHOLDERS AND DIRECTORS
SECTION 1. NO PREEMPTIVE RIGHTS.
Except as may be provided by the Board of Directors in authorizing the
issuance of Preferred Stock pursuant to Section 3 of Article V, no holder of
shares of stock of the Corporation, shall, as such holder, have any preemptive
right to purchase or subscribe for any additional shares of the Corporation or
any other security of the Corporation which it may issue or sell.
SECTION 2. ADVISOR AGREEMENTS.
Subject to such approval of Stockholders and other conditions, if any, as
may be required by applicable statute, rule or regulation, the Board of
Directors may authorize the execution and performance by the Corporation of one
or more agreements with any Person (as defined in Article VI Section 5(B))
whereby, subject to the supervision of the Board of Directors, any such other
person, corporation, association, company, trust, partnership (limited or
general) or other organization shall render or make available to the Corporation
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managerial, investment, advisory and/or related services, office space and other
services and facilities (including, if deemed advisable by the Board of
Directors, the management or supervision of the investments of the Corporation)
upon such terms and conditions as may be provided in such agreement or
agreements (including, if deemed fair and equitable by the Board of Directors,
the compensation payable thereunder by the Corporation).
SECTION 3. OTHER ACTIVITIES OF MANAGEMENT.
Certain of the officers and directors of the Corporation and their
affiliates are continuously engaged in acquiring, developing, constructing,
operating and managing real property. By virtue of these activities,
opportunities to acquire, develop and own properties will become available to
the officers and directors of the Corporation and their affiliates in the
future. Any of the officers and directors of the Corporation and their
affiliates may continue to engage in such activities, independently or with
others, and the officers and directors of the Corporation and their affiliates
shall have no obligation to make any such business opportunities available to
the Corporation. The Corporation shall have no interest in any such business
opportunities other than business opportunities which the officers and directors
of the Corporation and their affiliates, in their sole discretion, have made
available to the Corporation and in which the Corporation has invested.
SECTION 4. REIT QUALIFICATION.
The Board of Directors shall use commercially reasonable efforts to cause
the Corporation and its Stockholders to qualify for U.S. federal income tax
treatment in accordance with the provisions of the Code applicable to a REIT.
In furtherance of the foregoing, the Board of Directors shall use commercially
reasonable efforts to take such actions as are necessary, and may take such
actions as in its sole judgment and discretion are desirable, to preserve the
status of the Corporation as a REIT, provided, however, that if Article V has
been amended in accordance with Section 2(E) of Article V in order to terminate
the REIT status of the Corporation, the Board of Directors shall revoke or
otherwise terminate the Corporation's REIT election pursuant to Section 856(g)
of the Code.
SECTION 5. STOCKHOLDER VOTING REQUIREMENTS.
A. Notwithstanding any provision of law to the contrary, except as
otherwise specifically provided herein, the affirmative vote of holders of
shares entitled to cast a majority of all votes entitled to be cast on any
matter or act requiring approval of the Stockholders of the Corporation shall be
sufficient, valid
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<PAGE>
and effective, after due authorization, approval or advice by the Board of
Directors, to approve and authorize such matter or act.
B. Pursuant to Section 3-603(e)(1)(iii) of the MGCL, the Corporation
expressly elects not to be governed by the provisions of Section 3-602 of the
MGCL with respect to any Business Combination (as defined in Section 3-601 of
the MGCL) with any or all of Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr,
James E. Sowell, Lewis W. Shaw and Kenneth W. Shaw and all present or future
Affiliates (as defined in Article VI Section S) or Associates (as such term is
defined in Rule 12b-2 promulgated under the Securities and Exchange Act of 1934,
as amended) of, or any other person acting in concert or as a group with, any of
the foregoing persons and any other Business Combination which may arise in
connection with the Formation Transactions (as such term is defined in the
Corporation's Registration Statement on Form S-11 (Registration No. 333-4568),
generally.
ARTICLE VIII
INDEMNIFICATION, ADVANCE OF EXPENSES
AND LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
SECTION 1. INDEMNIFICATION AND ADVANCE OF EXPENSES.
A. Mandatory Indemnification and Advance of Expenses. To the fullest
-------------------------------------------------
extent permitted by Maryland law in effect from time to time, the Corporation
shall indemnify and, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall pay on behalf of or reimburse
reasonable expenses in advance of final disposition of a proceeding any person
(or the estate of any person) who is or was a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of the Corporation, and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
trustee, partner, member, agent or employee of another corporation, partnership,
limited liability company, association, joint venture, trust or other
enterprise. To the fullest extent permitted by Maryland law, the
indemnification provided herein shall include reasonable expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advancement of expenses as set forth in the first sentence
of this Section 1(A) of this Article VIII to a person who served a predecessor
of the Corporation in any of the capacities described in the first sentence of
this Section 1(A) of this Article VIII and to agents and employees of the
Corporation and any predecessor Corporation.
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<PAGE>
B. Insurance. The Corporation may, to the fullest extent permitted by
---------
law, purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against such person, as described in Section
1(A) of this Article VIII, and on any obligation of the Corporation to indemnify
or advance expenses pursuant to the charter or Bylaws of the Corporation or any
resolution of the Board of Directors or contract to which the Corporation is a
party.
C. Non-Exclusivity. The rights provided herein shall not be deemed to
---------------
limit the right of the Corporation to indemnify or advance expenses to any other
person to the fullest extent permitted by law, nor shall it be deemed exclusive
of any other rights to which any person seeking indemnification or advances of
expenses from the Corporation may be entitled under any agreement, the Bylaws of
the Corporation, a resolution of Stockholders or the Board of Directors, or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
SECTION 2. LIMITATION OF LIABILITY.
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers, no director or officer of
the Corporation shall be liable to the Corporation or its Stockholders for money
damages.
SECTION 3. EFFECT OF AMENDMENT.
Neither the amendment nor repeal of this Article VIII, nor the adoption or
amendment of any other provision of the charter or the Bylaws of the Corporation
inconsistent with this Article VIII, shall apply to or affect in any respect the
applicability of the provisions of this Article VIII with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
ARTICLE IX
AMENDMENTS
A. Right to Amend Articles. Subject to the provisions hereof, the
-----------------------
Corporation reserves the right at any time, and from time to time, to amend,
alter, repeal, or rescind any provision contained herein, including but not
limited to the provisions setting forth the terms or the contract and other
rights of the issued and outstanding stock of the Corporation of any class or
series, in the manner now or hereafter prescribed by law, and other provisions
authorized by the laws of the State of Maryland at the time in force may be
added or inserted, in the manner now or hereafter prescribed by law; and all
contract or other rights,
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preferences and privileges of whatsoever nature conferred upon Stockholders,
directors, officers, employees or any other persons whomsoever by and pursuant
to the charter of the Corporation, in its present form or as hereafter amended,
are granted subject to this reservation.
B. Certain Amendments Requiring Special Stockholder Vote. Any provision
-----------------------------------------------------
of the charter of the Corporation to the contrary notwithstanding:
1. no term or provision of the charter of the Corporation may be
added, amended or repealed in any respect that would, in the determination
of the Board of Directors, cause the Corporation not to qualify as a REIT
under the Code;
2. Article VI, Section 2 (classification of directors), Section 4
(removal of directors), Section 5 (independent directors); Article VII,
Section 1 (no preemptive rights); Article VIII (indemnification, advance of
expenses and limitation of liability of officers); and this Article IX
(amendments) shall not be amended or repealed; and
3. no provisions imposing cumulative voting in the election of
directors may be added to the charter of the Corporation;
unless in each such case, in addition to any vote of the holders of the
Preferred Stock required by the terms of then-outstanding Preferred Stock, such
action is approved by the affirmative vote of the holders of not less than two-
thirds of all of the votes entitled to be cast on the matter.
THIRD: The amendment to and restatement of the charter of the Corporation
as hereinabove set forth have been duly advised by the Board of Directors of the
Corporation by unanimous written consent and authorized and approved by the sole
Stockholder of the Corporation by written consent.
FOURTH: The current address of the principal office of the Corporation
within the State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East
Lombard Street, Baltimore, Maryland 21202, Attention: Tracy A. Bacigalupo, Esq.
FIFTH: The name and address of the Corporation's current resident agent is
Tracy A. Bacigalupo, whose address is c/o Ballard Spahr Andrews & Ingersoll, 300
East Lombard Street, Baltimore, Maryland 21202.
SIXTH: The number of directors of the Corporation is currently five and
the names of the directors currently in office
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are as follows: Steven J. Jorns, H. Cabot Lodge III, James R. Worms, James
McCurry and [TO COME].
SEVENTH:
(a) The total number of shares of stock of all classes which the
Corporation had authority to issue immediately prior to this amendment
was 1,000 shares of stock, no par value per share.
(b) The total number of shares of all classes of stock which the
Corporation has authority to issue pursuant to the foregoing amendment
and restatement of the charter is 120,000,000, consisting of the
following:
(1) 100,000,000 shares of Common Stock, $0.01 par value per
share (the "Common Stock"); and
(2) 20,000,000 shares of Preferred Stock, $0.01 par value per
share (the "Preferred Stock").
(c) The aggregate par value of all authorized shares of stock
having par value is $1,200,000.
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IN WITNESS WHEREOF, American General Hospitality Corporation has caused
these Articles of Amendment and Restatement to be signed in its name and on its
behalf by the Chairman of the Board, Chief Executive Officer and President and
attested to by its Secretary on this ____ day of ________, 1996, and its
Chairman of the Board, Chief Executive Officer and President acknowledges that
these Articles of Amendment and Restatement are the corporate act and deed of
the Corporation and, under the penalties for perjury, that the matters and facts
set forth herein are true in all material respects to the best of his knowledge,
information and belief.
ATTEST: AMERICAN GENERAL HOSPITALITY CORPORATION
By: By: (Seal)
--------------------------- -----------------------------------------
, Secretary Steven J. Jorns, Chairman of the Board,
---------------- Chief Executive Officer and President
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<PAGE>
EXHIBIT 3.3
AMERICAN GENERAL HOSPITALITY CORPORATION
----------------------------------------
BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
----------------
shall be located at such place or places as the Board of Directors may
designate. The initial principal office of the Corporation shall be 3860 West
Northwest Highway, Suite 300, Dallas, Texas 75220.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
------------------
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
-----
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the
--------------
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year; provided, however, that the
first annual meeting of stockholders to be held in 1996 shall be held during the
month of July.
Section 3. SPECIAL MEETINGS. The president, chief executive officer or
----------------
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast
not less than a majority of all the votes entitled to be cast at such meeting.
Such request shall state the purpose of such meeting and the matters proposed to
be acted on at such meeting. The secretary shall inform such stockholders of
the reasonably estimated cost of preparing and mailing notice of the meeting
and, upon payment to the Corporation
<PAGE>
by such stockholders of such costs, the secretary shall give notice to each
stockholder entitled to notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
------
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
---------------
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except as otherwise set forth in Section 12(a) and
except for such business as is required by any statute to be stated in such
notice. No business shall be transacted at a special meeting of stockholders
except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the chairman
------------
of the board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the chairman of the board, one of the following
officers present shall conduct the meeting in the order stated: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in person
------
or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business
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<PAGE>
may be transacted which might have been transacted at the meeting as originally
notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
------
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the charter of the Corporation. Unless
otherwise provided in the charter, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
Section 9. PROXIES. A stockholder may vote the stock owned of record by
-------
him, either in person or by proxy executed in writing by the stockholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 10. (a) VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
----------------------------------
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by an office thereof, a general
partner or trustee thereof, as the case may be, or a proxy appointed by any of
the foregoing individuals, unless some other person who has been appointed to
vote such stock pursuant to a bylaw or a resolution of the governing body of
such corporation or other entity or agreement of the partners of a partnership
presents a certified copy of such bylaw, resolution or agreement, in which case
such person may vote such stock. Any director or other fiduciary may vote stock
registered in his name as such fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which
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the certification may be made, the form of certification and the information to
be contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
(b) Exemption From Control Share Acquisition Statute. Notwithstanding any
------------------------------------------------
other provision of the charter of the Corporation or these Bylaws, Title 3,
Subtitle 7 of the Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any acquisition by any
person of shares of stock of the Corporation. This section may be repealed, in
whole or in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the chairman of
----------
the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
-----
facie evidence thereof.
- -----
Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS
------------------------------------
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
-------------------------------
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record both at the time of giving of notice provided for in this
Section 12(a) and at the time of the annual meeting of stockholders, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 12(a).
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(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of
this Section 12, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (y) the number of shares of each class of stock of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Section 12 to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Section 12(a) shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
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(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 12(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 12(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 12 shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the tenth
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General. (1) Only such persons who are nominated in accordance with
-------
the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this
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Section 12. Nothing in this Section 12 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any election
----------------
may be viva voce unless the presiding officer shall order or any stockholder
---------
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
--------------
shall be managed under the direction of its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or
---------------------------------
at any special meeting called for that purpose, a majority of the entire Board
of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than three, the minimum
number required by the Maryland General Corporation Law, nor more than 15, and
further provided that the tenure of office of a director shall not be affected
by any decrease in the number of directors.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
---------------------------
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
----------------
may be called by or at the request of the chairman of the board, president or by
a majority of the directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
------
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such notice in a
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telephone call to which he is a party. Facsimile transmission notice shall be
deemed to be given upon completion of the transmission of the message to the
number given to the Corporation by the director and receipt of a completed
answer-back indicating receipt. Neither the business to be transacted at, nor
the purpose of, any annual, regular or special meeting of the Board of Directors
need be stated in the notice, unless specifically required by statute or these
Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a quorum
------
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the charter of
the Corporation or these Bylaws, the vote of a majority of a particular group of
directors is required for action, a quorum must also include a majority of such
group.
The directors present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. (a) The action of the majority of the directors
------
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by applicable statute.
(b) Any action pertaining to any transaction in which the Corporation is
purchasing, selling, leasing or mortgaging any real estate asset, making a joint
venture investment or engaging in any other transaction in which an advisor,
director or officer of the Corporation, any affiliated lessee or affiliated
contract manager of any property of the Corporation or any affiliate of the
foregoing, has any direct or indirect interest other than as a result of their
status as a director, officer or stockholder of the Corporation, shall be
approved by the affirmative vote of a majority of the Independent Directors (as
defined in the Corporation's charter), even if the Independent Directors
constitute less than a quorum.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by
------------------
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or permitted
----------------------------
to be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to
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<PAGE>
such action is signed by each director and such written consent is filed with
the minutes of proceedings of the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors cease
---------
to be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, although such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors.
The newly-created or eliminated directorships resulting from any increase or
decrease shall be apportioned by the Board of Directors among the three classes
of directorships as provided in the Corporation's charter so as to keep the
number of directors in each class as nearly equal as possible. Any individual
so elected as director shall hold office until the next annual meeting of
stockholders and until his successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated salary
------------
for their services as directors but, by resolution of the Board of Directors,
may receive fixed sums per year and/or per meeting and/or per visit to real
property or other facilities owned or leased by the Corporation and for any
service or activity they performed or engaged in as directors. Directors may be
reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
----------------
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
------------
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of the
--------
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of
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<PAGE>
Directors or officers of the Corporation, regardless of whether such counsel or
expert may also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
-----------------------------------------------------------
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may
---------------------------------
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee, a Leasing Committee, a Nominating Committee and other
committees, composed of two or more directors, to serve at the pleasure of the
Board of Directors. The members of the Audit Committee and Compensation
Committee shall at all times consist solely of Independent Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
------
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
--------
same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee,
and such chairman or any two members of any committee may fix the time and place
of its meeting unless the Board shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
------------------
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
-----------------------------
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent
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in writing to such action is signed by each member of the committee and such
written consent is filed with the minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
---------
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
------------------
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board, a vice chairman of the board, one or more
vice presidents, a chief operating officer, a chief financial officer, one or
more assistant secretaries and one or more assistant treasurers. In addition,
the Board of Directors may from time to time appoint such other officers with
such powers and duties as they shall deem necessary or desirable. The officers
of the Corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
stockholders, except that the chief executive officer may appoint one or more
vice presidents, assistant secretaries and assistant treasurers. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices except
president and vice president may be held by the same person. In its discretion,
the Board of Directors may leave unfilled any office except that of president,
treasurer and secretary. Election of an officer or agent shall not of itself
create contract rights between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
-----------------------
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.
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Section 3. VACANCIES. A vacancy in any office may be filled by the Board
---------
of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate
-----------------------
a chief executive officer. In the absence of such designation, the chairman of
the board shall be the chief executive officer of the Corporation. The chief
executive officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the management of the business and affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate
-----------------------
a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate
-----------------------
a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall designate
---------------------
a chairman of the board. The chairman of the board shall preside over the
meetings of the Board of Directors and of the stockholders at which he shall be
present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president or chief executive officer, as the
---------
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
---------------
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or
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more vice presidents as executive vice president or as vice president for
particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
---------
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
have general charge of the share transfer books of the Corporation; and (f) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of the funds
---------
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation.
The treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the president and Board of Directors, at the regular meetings of
the Board of Directors or whenever it may so require, an account of all his
transactions as treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
----------------------------------------------
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Board of Directors. The assistant treasurers shall, if
required by the Board of Directors, give bonds for the faithful performance of
their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.
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Section 13. SALARIES. The salaries and other compensation of the officers
--------
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer or
---------
agent to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of the Corporation and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
-----------------
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or agent of the Corporation in
such manner as shall from time to time be determined by the Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
------------
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Corporation shall, from
time to time, issue several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a
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statement of such restriction, limitation, preference or redemption provision,
or a summary thereof, plainly stated on the certificate. If the Corporation has
authority to issue stock of more than one class, the certificate shall contain
on the face or back a full statement or summary of the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption of each class of stock and, if the Corporation is
authorized to issue any preferred or special class in series, the differences in
the relative rights and preferences between the shares of each series to the
extent they have been set and the authority of the Board of Directors to set the
relative rights and preferences of subsequent series. In lieu of such statement
or summary, the certificate may state that the Corporation will furnish a full
statement of such information to any stockholder upon request and without
charge. If any class of stock is restricted by the Corporation as to
transferability, the certificate shall contain a full statement of the
restriction or state that the Corporation will furnish information about the
restrictions to the stockholder on request and without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
---------
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of the
terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board
-----------------------
of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient
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surety, to the Corporation to indemnify it against any loss or claim which may
arise as a result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board
--------------------------------------------------
of Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
determining stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer than
20 days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its principal
------------
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
-16-
<PAGE>
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
-----------------------------------
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the charter or these Bylaws, the Board of Directors may issue
units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board of Directors may provide that
for a specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
-------------
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
-------------
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
-17-
<PAGE>
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
----
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Incorporated Maryland." The Board
of Directors may authorize one or more duplicate seals and provide for the
custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
-------------
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE XIII
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
-18-
<PAGE>
EXHIBIT 10.2
FORM OF
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
__________ __, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE 1 DEFINED TERMS................................. 1
ARTICLE 2 ORGANIZATIONAL MATTERS........................ 12
Section 2.1 Continuation.................................. 12
Section 2.2 Name.......................................... 12
Section 2.3 Registered Office and Agent; Principal Office. 12
Section 2.4 Power of Attorney............................. 13
Section 2.5 Term.......................................... 14
ARTICLE 3 PURPOSE....................................... 14
Section 3.1 Purpose and Business.......................... 14
Section 3.2 Powers........................................ 15
ARTICLE 4 CAPITAL CONTRIBUTIONS......................... 15
Section 4.1 Capital Contributions of the Partners......... 15
Section 4.2 Additional Funds; Restrictions on the Company. 16
Section 4.3 Issuance of Additional Partnership Interests;
Admission of Additional Limited Partners...... 17
Section 4.4 Contribution of Proceeds of Issuance of
REIT Stock.................................... 17
Section 4.5 Repurchase of REIT Stock...................... 18
Section 4.6 No Third Party Beneficiary.................... 18
Section 4.7 No Interest; No Return........................ 18
Section 4.8 No Preemptive Rights.......................... 19
ARTICLE 5 DISTRIBUTIONS................................. 19
ARTICLE 6 ALLOCATIONS................................... 20
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS......... 20
Section 7.1 Management.................................... 20
Section 7.2 Certificate of Limited Partnership............ 24
Section 7.3 Reimbursement of the General Partner
and the Company............................... 25
Section 7.4 Outside Activities of the General Partner..... 25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.5 Contracts with Affiliates..................... 26
Section 7.6 Indemnification............................... 26
Section 7.7 Liability of the General Partner.............. 28
Section 7.8 Other Matters Concerning the General Partner.. 29
Section 7.9 Title to Partnership Assets................... 29
Section 7.10 Reliance by Third Parties..................... 30
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.... 30
Section 8.1 Limitation of Liability....................... 30
Section 8.2 Management of Business........................ 31
Section 8.3 Outside Activities of Limited Partners........ 31
Section 8.4 Return of Capital............................. 31
Section 8.5 Rights of Limited Partners Relating to
the Partnership............................... 32
Section 8.6 Exchange Rights Agreement..................... 32
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS........ 33
Section 9.1 Records and Accounting........................ 33
Section 9.2 Fiscal Year................................... 33
Section 9.3 Reports....................................... 33
ARTICLE 10 TAX MATTERS................................... 34
Section 10.1 Preparation of Tax Returns.................... 34
Section 10.2 Tax Elections................................. 34
Section 10.3 Tax Matters Partner........................... 34
Section 10.4 Organizational Expenses....................... 36
Section 10.5 Withholding................................... 36
ARTICLE 11 TRANSFERS AND WITHDRAWALS..................... 37
Section 11.1 Transfer...................................... 37
Section 11.2 Transfer of the General Partner's General
Partner Interest.............................. 37
Section 11.3 Limited Partners' Rights to Transfer.......... 39
Section 11.4 Substituted Limited Partners.................. 40
Section 11.5 Assignees..................................... 41
Section 11.6 General Provisions............................ 41
ARTICLE 12 ADMISSION OF PARTNERS......................... 42
Section 12.1 Admission of Successor General Partner........ 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 12.2 Admission of Additional Limited Partners...... 43
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership........................... 44
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION...... 44
Section 13.1 Dissolution................................... 44
Section 13.2 Winding Up.................................... 45
Section 13.3 No Obligation to Contribute Deficit........... 47
Section 13.4 Rights of Limited Partners.................... 47
Section 13.5 Notice of Dissolution......................... 47
Section 13.6 Termination of Partnership and Cancellation
of Certificate of Limited Partnership......... 47
Section 13.7 Reasonable Time for Winding-Up................ 47
Section 13.8 Waiver of Partition........................... 47
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.. 48
Section 14.1 Amendments.................................... 48
Section 14.2 Meetings of the Partners...................... 49
ARTICLE 15 GENERAL PROVISIONS............................ 50
Section 15.1 Addresses and Notice.......................... 50
Section 15.2 Titles and Captions........................... 50
Section 15.3 Pronouns and Plurals.......................... 51
Section 15.4 Further Action................................ 51
Section 15.5 Binding Effect................................ 51
Section 15.6 Creditors..................................... 51
Section 15.7 Waiver........................................ 51
Section 15.8 Counterparts.................................. 51
Section 15.9 Applicable Law................................ 51
Section 15.10 Invalidity of Provisions...................... 52
Section 15.11 Entire Agreement.............................. 52
Section 15.12 Guaranty by the Company....................... 52
EXHIBITS
Exhibit A - Partners' Contributions and Partnership Interests
Exhibit B - Allocations
Exhibit C - Exchange Rights Agreement
</TABLE>
The exhibits and/or schedules of Exhibit 10.2, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
iii
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AMERICAN
GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P. (this "AGREEMENT"), dated as of
________ __, 1996, is entered into by and among AGH GP, Inc., a Nevada
corporation, as general partner (the "GENERAL PARTNER"), AGH LP, Inc., a Nevada
corporation, as the initial limited partner (the "INITIAL LIMITED PARTNER") and
the Persons (as defined below) whose names are set forth on Exhibit A attached
hereto (as it may be amended from time to time);
WHEREAS, the General Partner and the Initial Limited Partner formed
American General Hospitality Operating Partnership, L.P., (the "PARTNERSHIP")
pursuant to the Revised Uniform Limited Partnership Act of the State of Delaware
by filing a certificate of limited partnership on April 9, 1996 with the
Secretary of State of the State of Delaware and entering into a limited
partnership agreement dated as of April 9, 1996 (the "ORIGINAL PARTNERSHIP
AGREEMENT");
WHEREAS, the General Partner and the Initial Limited Partner desire to
admit the Persons whose names are set forth on Exhibit A as additional partners,
and to continue the existence of the Partnership and to amend and restate the
Original Partnership Agreement in its entirety;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ACT" means the Delaware Revised Uniform Limited Partnership Act, as
---
it may be amended from time to time, and any successor to such statute.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
--------------------------
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
<PAGE>
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
--------------------------------
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
the Regulations, or (ii) is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
"ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
---------------------
reduced by the total distributions to such Partner from Capital Events. With
respect to the General Partner or the Initial Limited Partner (as the case may
be), the Adjusted Contribution shall include the difference, if any, between
gross proceeds from the future issuance of REIT Stock, if any, and the proceeds
actually received by the Company.
"AFFILIATE" means, (a) with respect to any individual Person, any
---------
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
"AGREEMENT" means this Amended and Restated Agreement of Limited
---------
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
"ARTICLES OF INCORPORATION" means the Company's Amended and Restated
-------------------------
Articles of Incorporation, filed with the Maryland State Department of
Assessments and Taxation, as amended, modified, supplemented or restated from
time to time, as the context requires.
"ASSIGNEE" means a Person to whom one or more OP Units have been
--------
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"AVAILABLE CASH" means, with respect to the applicable period of
--------------
measurement (i.e., any period beginning on the first day of the fiscal year,
quarter or other period commencing immediately after the last day of the fiscal
year, quarter or other applicable period for purposes of the prior calculation
of Available Cash for or with respect to which a distribution has been made, and
ending on the last day of the fiscal year, quarter or other applicable period
immediately preceding the date of the calculation), the excess, if any, as of
2
<PAGE>
such date, of (a) the gross cash receipts of the Partnership for such period
from all sources whatsoever, including, without limitation, the following:
(i) all Participating Lease and other rents, revenues, income and
proceeds derived by the Partnership from its operations, including, without
limitation, distributions received by the Partnership from any Entity in
which the Partnership has an interest; (ii) all proceeds and revenues
received by the Partnership on account of any sales of hotels or other
property of the Partnership or as a refinancing of or payments of
principal, interest, costs, fees, penalties or otherwise on account of any
borrowings or loans made by the Partnership or financings or refinancings
of any hotel or other property of the Partnership; (iii) the amount of any
insurance proceeds and condemnation awards received by the Partnership;
(iv) all capital contributions or loans received by the Partnership from
its Partners; (v) all cash amounts previously reserved by the Partnership,
to the extent such amounts are no longer needed for the specific purposes
for which such amounts were reserved; (vi) all principal and interest
received under the FF&E Note; and (vii) the proceeds of liquidation of the
Partnership's property in accordance with this Agreement,
over (b) the sum of:
(i) all operating costs and expenses, including, to the extent of the
Partnership's obligations under the Participating Leases, costs relating to
the replacement or refurbishment of FF&E, taxes and other expenses of the
Hotels, of the Partnership and capital expenditures made during such period
(without deduction, however, for any capital expenditures, charges for
Depreciation or other expenses not paid in cash or expenditures from
reserves described in (viii) below); (ii) all costs and expenses expended
or paid during such period in connection with the sale or other
disposition, or financing or refinancing, of the hotels or other property
of the Partnership or the recovery of insurance or condemnation proceeds;
(iii) all fees provided for under this Agreement; (iv) all debt service,
including principal and interest, paid during such period on all
indebtedness (including under any line of credit) of the Partnership; (v)
all capital contributions, advances, reimbursements or similar payments
made to any Person in which the Partnership has an interest; (vi) all loans
made by the Partnership in accordance with the terms of this Agreement;
(vii) all reimbursements to the General Partner or its Affiliates during
such period; and (viii) any new reserves or increases in reserves required
to be established under the Participating Leases or reasonably determined
by the General Partner to be necessary for working capital, capital
improvements, payments of periodic expenditures, debt service or other
purposes for the Partnership or any Person in which the Partnership has an
interest.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
3
<PAGE>
"CAPITAL ACCOUNT" means with respect to any Partner, the Capital
---------------
Account maintained for such Partner in accordance with the following provisions:
a. to each Partner's Capital Account there shall be credited (i) such
Partner's Capital Contributions, (ii) such Partner's distributive share of
Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Paragraphs 1 and 2 of
Exhibit B and (iii) the amount of any Partnership liabilities assumed by
such Partner or which are secured by any asset distributed to such Partner;
b. to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Hotel distributed to such
Partner pursuant to any provision of this Agreement, (ii) such Partner's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated to such Partner pursuant to Paragraphs
1 and 2 of Exhibit B and (iii) the amount of any liabilities of such
Partner assumed by the Partnership or which are secured by any asset
contributed by such Partner to the Partnership; and
c. in the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Sections 1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall reasonably determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
--------
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
--------------------
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
"CAPITAL EVENT" means any Partnership transaction not in the ordinary
-------------
course of its business including, without limitation, principal payments,
prepayments, prepayment penalties, Participating Lease termination penalties,
sales, exchanges, foreclosures or other dispositions of Hotels owned by the
Partnership, recoveries of damage awards and insurance
4
<PAGE>
proceeds not used to rebuild (other than the receipt of contributions to the
capital of the Partnership and business or rental interruption insurance
proceeds not used to rebuild).
"CERTIFICATE" means the Certificate of Limited Partnership relating to
-----------
the Partnership filed on April 9, 1996 in the office of the Delaware Secretary
of State, as amended from time to time in accordance with the terms hereof and
the Act.
"CODE" means the Internal Revenue Code of 1986, as amended and in
----
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"COMPANY" means American General Hospitality Corporation, a Maryland
-------
corporation and the parent of the General Partner and the Initial Limited
Partner.
"CONSENT" means the consent or approval of a proposed action by a
-------
Partner given in accordance with Section 14.2 hereof.
"CONTRIBUTED PROPERTY" means each property, partnership interest,
--------------------
contract right or other asset, in such form as may be permitted by the Act,
contributed or deemed contributed to the Partnership by any Partner (including
deemed contributions to the Partnership on termination and reconstitution
thereof pursuant to Section 708 of the Code).
"DEPRECIATION" means, with respect to any asset of the Partnership for
------------
any fiscal year or other period, the depreciation, depletion, amortization or
other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
-------- -------
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph 1 of
the definition of Gross Asset Value) and the adjusted tax basis of such asset at
the beginning of such fiscal year or other period, Depreciation for such asset
shall be an amount that bears the same ratio to the beginning Gross Asset Value
of such asset as the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such fiscal year or other period bears to the
beginning adjusted tax basis of such asset; provided, further, that if the
-------- -------
federal income tax depreciation, depletion, amortization or other cost recovery
deduction for such asset for such fiscal year or other period is zero,
Depreciation of such asset shall be determined with reference to the beginning
Gross Asset Value of such asset using any reasonable method selected by the
General Partner.
"EFFECTIVE DATE" means the date of closing of the initial offering of
--------------
REIT Stock by the Company pursuant to that certain underwriting agreement among
the Company, the Partnership and Smith Barney Inc., Legg Mason Wood Walker,
Incorporated, Prudential Securities Incorporated and The Robinson-Humphrey
Company, Inc., as representatives for the underwriters named therein.
5
<PAGE>
"ENTITY" means any general partnership, limited partnership,
------
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time (or any corresponding provisions of succeeding laws).
"EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
---------------
Agreement.
"EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
--------------
Agreement.
"EXCHANGE RIGHTS AGREEMENT" has the meaning set forth in Section 8.6.
-------------------------
"FF&E" means furniture, fixtures and equipment.
----
"FF&E NOTE" means those certain promissory notes in the original
---------
principal amount of $400,000 between the Lessee, as maker, and the Partnership's
subsidiaries, as payee, issued in connection with such subsidiary's sale of
certain FF&E to the Lessee.
"GAAP" means United States generally accepted accounting principles,
----
as in effect from time to time.
"GENERAL PARTNER" means AGH GP, Inc., a Nevada corporation, in its
---------------
capacity as the general partner of the Partnership, or its successors as general
partner of the Partnership.
"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
------------------------
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of OP Units.
"GROSS ASSET VALUE" means, with respect to any asset of the
-----------------
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
1. the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
2. if the General Partner reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of the
Partners, the Gross Asset Values of all Partnership assets shall be
adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the
Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General Partner,
as of the following times:
6
<PAGE>
a. a Capital Contribution (other than a de minimis Capital
----------
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
b. the distribution by the Partnership to a Partner of more than
a de minimis amount of Partnership assets as consideration for the
----------
repurchase of a Partnership Interest; or
c. the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
3. the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the date
of distribution; and
4. the Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as
set forth in Exhibit B); provided, however, that Gross Asset Values shall
-------- -------
not be adjusted pursuant to this paragraph (4) to the extent that the
General Partner reasonably determines that an adjustment pursuant to
paragraph (2) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (4).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss.
"HOTEL" means any hotel in which the Partnership, directly or
-----
indirectly, acquires ownership of a fee or leasehold interest.
"IMMEDIATE FAMILY" means, with respect to any individual, such
----------------
individual's spouse, parents, parents-in-law, children, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law or any trust solely for the benefit of any of the foregoing
family members whose sole beneficiaries include the foregoing family members.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any individual
---------- -------------
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition,
7
<PAGE>
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
----------
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner, the Company or the Partnership) as
the General Partner may designate from time to time (whether before or after the
event giving rise to potential liability), in its sole and absolute discretion.
"INITIAL LIMITED PARTNER" means AGH LP, Inc., a Delaware corporation.
-----------------------
"IRS" shall mean the Internal Revenue Service of the United States.
---
"LESSEE" shall mean AGH Leasing L.P., a Delaware limited partnership.
------
"LIEN" means any lien, security interest, mortgage, deed of trust,
----
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means the Initial Limited Partner and any other
---------------
Person named as a Limited Partner in Exhibit A, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
------------------------
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and
8
<PAGE>
includes any and all benefits to which the holder of such a Partnership Interest
may be entitled, as provided in this Agreement, together with all obligations of
such Person to comply with the terms and provisions of this Agreement. A
Limited Partner Interest may be expressed as a number of OP Units.
"LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
-----------------
"LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
----------
"LOCK-UP AGREEMENT" means that certain letter agreement by and among
-----------------
certain Limited Partners, the Company and Smith Barney Inc., the form of which
is attached in Exhibit to the Registration Statement.
"NET INCOME" or "NET LOSS" means, for each fiscal year or other
------------------------
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Exhibit B; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Paragraphs 1 and 2 of Exhibit B.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections 1.704-
----------------------
2(b)(1) and 1.704-2(c) of the Regulations.
"NONRECOURSE LIABILITIES" has the meaning set forth in Section 1.704-
-----------------------
2(b)(3) of the Regulations.
9
<PAGE>
"OP UNIT" means a fractional, undivided share of the Partnership
-------
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of OP Units outstanding and the Percentage Interests in the Partnership
represented by such OP Units are set forth in Exhibit A, as such Exhibit may be
amended from time to time. The ownership of OP Units shall be evidenced by such
form of certificate for units as the General Partner adopts from time to time
unless the General Partner determines that the OP Units shall be uncertificated
securities.
"PARTICIPATING LEASES" shall mean those certain lease agreements
--------------------
relating to lease of the Partnership's Hotels as set forth on Exhibit C hereto,
as such Exhibit may be amended from time to time.
"PARTNER" means a General Partner or a Limited Partner, and "Partners"
-------
means the General Partner and the Limited Partners collectively.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
--------------------
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
------------------------------
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP" means the limited partnership formed under the Act and
-----------
pursuant to this Agreement, and any successor thereto.
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
--------------------
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of OP
Units.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by the
-----------------------
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the Company for a distribution to its stockholders of some or all of its portion
of such distribution.
10
<PAGE>
"PARTNERSHIP YEAR" means the fiscal year of the Partnership, as set
----------------
forth in Section 9.2 hereof.
"PERCENTAGE INTEREST" means, as to a Partner, the fractional part of
-------------------
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Exhibit A, as such Exhibit may be amended from time to time.
"PERMITTED PARTNERS" has the meaning set forth in subparagraph 1(b) of
------------------
Exhibit B.
"PERMITTED TRANSFEREE" means any person to whom OP Units are
--------------------
Transferred in accordance with Section 11.3 of this Agreement.
"PERSON" means an individual or Entity.
------
"PRECONTRIBUTION GAIN" has the meaning set forth in subparagraph 3(c)
--------------------
of Exhibit B.
"QUARTER" means each of the three month periods ending on March 31,
-------
June 30, September 30 and December 31.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-11
-----------------------
(Registration Statement No. 333-4568), previously filed by the Company with the
Securities and Exchange Commission, and any amendments at any time made thereto.
"REGULATIONS" means the final, temporary or proposed Income Tax
-----------
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust as defined in Section 856
----
of the Code.
"REIT REQUIREMENTS" has the meaning set forth in Section 5.2.
-----------------
"REIT STOCK" means a share of stock of the Company.
----------
"REIT STOCK AMOUNT" has the meaning set forth in the Exchange Rights
-----------------
Agreement.
"RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
------------------
Exhibit B.
"STOCK OPTION PLANS" means collectively, the Company's 1996 Incentive
------------------
Plan, the Company's Non-Employee Directors' Incentive Plan and any other plan
adopted from time to time by the Company pursuant to which REIT Stock is issued,
or options to acquire REIT Stock are granted, to employees or directors of the
Company, employees of the Partnership or employees of their respective
Affiliates in consideration for services or future services.
11
<PAGE>
"SUBSIDIARY" means, with respect to any Person, any corporation,
----------
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owned,
directly or indirectly, by such Person.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
---------------------------
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
"TAX ITEMS" has the meaning set forth in Exhibit B.
---------
"TERMINATING CAPITAL TRANSACTION" means any sale or other disposition
-------------------------------
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
--------
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
Certain additional terms and phrases have the meanings set forth in
Exhibit B.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Continuation
------------
The Partners hereby agree to continue the Partnership under and
pursuant to the Act. Except as expressly provided herein to the contrary, the
rights and obligations of the Partners and the administration and termination of
the Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
Section 2.2 Name
----
The name of the Partnership shall continue to be American General
Hospitality Operating Partnership, L.P. The Partnership's business may be
conducted under any other name or names deemed advisable by the General Partner,
including the name of the Company or any Affiliate thereof. The words "Limited
Partnership,""L.P.,""Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may, upon 5 days prior written notice to the Limited
Partners, change the name of the Partnership.
Section 2.3 Registered Office and Agent; Principal Office
---------------------------------------------
The address of the registered office of the Partnership in the State
of Delaware and the name and address of the registered agent for service of
process on the Partnership in
12
<PAGE>
the State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington (New Castle County), Delaware 19801. The principal office of the
Partnership shall be 3860 West Northwest Highway, Suite 300, Dallas, Texas
75220, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney
-----------------
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or the Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the Limited Partners have limited liability) in the
State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own
property, including, without limitation, any documents
necessary or advisable to convey any Contributed Property to
the Partnership; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all conveyances
and other instruments or documents that the General Partner
or the Liquidator deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant
to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal
or substitution of any Partner pursuant to, or other events
described in, Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; (e) all certificates, documents
and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interest;
and (f) amendments to this Agreement as provided in Article
14 hereof; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any
Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other
13
<PAGE>
action which is made or given by the Partners hereunder or
is consistent with the terms of this Agreement or
appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms
or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
Transfer of all or any portion of such Limited Partner's or Assignee's OP Units
and shall extend to such Limited Partner's or Assignee's heirs, successors,
assigns and personal representatives. Each such Limited Partner or Assignee
hereby agrees to be bound by any representation made by the General Partner or
any Liquidator, acting in good faith pursuant to such power of attorney, and
each such Limited Partner or Assignee hereby waives any and all defenses which
may be available to contest, negate or disaffirm the action of the General
Partner or any Liquidator, taken in good faith under such power of attorney.
Each Limited Partner or Assignee shall execute and deliver to the General
Partner or the Liquidator, within fifteen (15) days after receipt of the General
Partner's or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the purposes of
the Partnership.
Section 2.5 Term
----
The term of the Partnership shall commence on the date hereof and
shall continue until December 31, 2046, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
--------------------
The purpose and nature of the business to be conducted by the
Partnership is to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act including, without limitation,
to engage in the following activities: to acquire, hold, own, develop,
construct, improve, maintain, operate, sell, lease, transfer, encumber, convey,
exchange, and otherwise dispose of or deal with the Hotels; to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with real and
personal property of all kinds; to undertake such other activities as may be
necessary, advisable, desirable or
14
<PAGE>
convenient to the business of the Partnership; and to engage in such other
ancillary activities as shall be necessary or desirable to effectuate the
foregoing purposes. The Partnership shall have all powers necessary or
desirable to accomplish the purposes enumerated. In connection with the
foregoing, but subject to all of the terms, covenants, conditions and
limitations contained in this Agreement and any other agreement entered into by
the Partnership, the Partnership shall have full power and authority to enter
into, perform, and carry out contracts of any kind, to borrow money and to issue
evidences of indebtedness, whether or not secured by mortgage, trust deed,
pledge or other Lien, and, directly or indirectly, to acquire and construct
additional Hotels necessary or useful in connection with its business.
Section 3.2 Powers
------
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership; provided, that the
Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the Company to continue to qualify as a REIT,
unless the Company otherwise ceases to qualify as a REIT; (ii) could subject the
Company to any additional taxes under Section 857 or Section 4981 of the Code;
or (iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the Company or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing. The Partnership also is empowered to do any and all acts and things
necessary, appropriate or advisable to ensure that the Partnership will not be
classified as a "publicly traded partnership" for the purposes of Section 7704
of the Code.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
A. On the Effective Date, the Partners shall make the Capital
Contribution as set forth in Exhibit A to this Agreement. To the extent the
Partnership acquires any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for their
interests in the Person merging into the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Exhibit A, as amended to reflect such
deemed Capital Contributions. Each Partner shall own OP Units in the amounts
set forth for such Partner in Exhibit A and shall have a Percentage Interest in
the Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the General Partner to the extent
necessary to reflect accurately exchanges, additional Capital Contributions, the
issuance of additional OP Units or similar events having an effect on any
Partner's Percentage Interest. The number of OP Units held by the General
Partner, in its capacity as general partner, shall be deemed to be the General
Partner Interest. Except as provided in Sections 4.2 and 10.5, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
15
<PAGE>
Section 4.2 Additional Funds; Restrictions on the Company
---------------------------------------------
A. The sums of money required to finance the business and affairs of
the Partnership shall be derived from the initial Capital Contributions made to
the Partnership by the Partners as set forth in Section 4.1 and from funds
generated from the operation and business of the Partnership including, without
limitation, rents received under the Participating Leases and distributions
directly or indirectly received by the Partnership from any Subsidiary. In the
event additional financing is needed from sources other than as set forth in the
preceding sentence for any reason, the General Partner may, in its sole and
absolute discretion, in such amounts and at such times as it solely shall
determine to be necessary or appropriate, (i) cause the Partnership to issue
additional Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3; (ii) make additional Capital
Contributions to the Partnership (subject to the provisions of Section 4.2B);
(iii) cause the Partnership to borrow money, enter into loan arrangements, issue
debt securities, obtain letters of credit or otherwise borrow money on a secured
or unsecured basis; (iv) make a loan or loans to the Partnership (subject to
Section 4.2B); or (v) sell any Hotels or other assets or properties of the
Partnership. In no event shall the Limited Partners be required to make any
additional Capital Contributions or any loan to, or otherwise provide any
financial accommodation for the benefit of, the Partnership.
B. The Company shall not issue any debt securities, any preferred
stock or any common stock (including additional REIT Stock (other than (i) as
payment of the REIT Stock Amount or (ii) in connection with the conversion or
exchange of securities of the Company solely in conversion or exchange for other
securities of the Company)) or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase any of
the foregoing (collectively, "SECURITIES"), other than to all holders of REIT
Stock, unless the Company (through the General Partner and the Initial Limited
Partner) shall (i) in the case of debt securities, lend to the Partnership the
proceeds of or consideration received for such Securities on the same terms and
conditions, including interest rate and repayment schedule, as shall be
applicable with respect to or incurred in connection with the issuance of such
Securities and the proceeds of, or consideration received from, any subsequent
exercise, exchange or conversion thereof (if applicable); (ii) in the case of
equity Securities senior or junior to the REIT Stock as to dividends and
distributions on liquidation, contribute to the Partnership the proceeds of or
consideration (including any property or other non-cash assets) received for
such Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable), and receive
from the Partnership, interests in the Partnership in consideration therefor
with the same terms and conditions, including dividend, dividend priority and
liquidation preference, as are applicable to such Securities; and (iii) in the
case of REIT Stock or other equity Securities on a parity with the REIT Stock as
to dividends and distributions on liquidation, (including, without limitation,
REIT Stock or other Securities issued as a stock award or upon exercise of
options issued under the Stock Option Plans), contribute to the Partnership the
proceeds of or consideration (including any property or other non-cash assets,
including services) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange or conversion
thereof (if applicable), and receive from the Partnership a number of additional
OP Units in consideration therefor equal to the product of (x) the number of
shares of REIT Stock or other equity Securities issued by the Company,
multiplied by (y) a fraction the numerator of
16
<PAGE>
which is one and the denominator of which is the Exchange Factor in effect on
the date of such contribution.
Section 4.3 Issuance of Additional Partnership Interests; Admission
-------------------------------------------------------
of Additional Limited Partners
- ------------------------------
In addition to any Partnership Interests issuable by the Partnership
pursuant to Section 4.2, the General Partner is authorized to cause the
Partnership to issue additional Partnership Interests (or options therefor) in
the form of OP Units or other Partnership Interests senior or junior to the OP
Units to any Persons at any time or from time to time, for consideration not
less than the fair market value thereof (or the fair market value as of the date
an option is granted) (as such fair market value is determined in the discretion
of the General Partner's Board of Directors), and on such terms and conditions,
as the General Partner shall establish in each case in its sole and absolute
discretion, without any approval being required from any Limited Partner or any
other Person; provided, however, that (i) such issuance does not effect a
-------- -------
material adverse impact (as such material adverse impact is determined in the
discretion of the General Partner's Board of Directors) on (A) the existing
Limited Partners' right to exercise the Exchange Rights pursuant to the Exchange
Rights Agreement or (B) the economic interest of the Limited Partners in the
allocations set forth in Exhibit B (other than due to the issuance of OP Units
or other interests in the Partnership as set forth in this Section 4.3 or
Section 4.2B); (ii) such issuance does not cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance would not cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Exhibit A or any other provision of this
Agreement.
Section 4.4 Contribution of Proceeds of Issuance of REIT Stock
--------------------------------------------------
In connection with the initial offering of common stock by the
Company, and any other offering, grant, award, or issuance of REIT Stock or
securities, rights, options, warrants or convertible or exchangeable securities
pursuant to Section 4.2, the Company shall cause the General Partner and the
Initial Partner to make aggregate Capital Contributions to the Partnership of
the proceeds raised in connection with such offering, grant, award, or issuance,
provided that if the proceeds actually received by the Company are less than the
gross proceeds of such offering, grant, award, or issuance as a result of any
underwriter's discount, commission, or fee or other expenses paid or incurred in
connection with such offering, grant, award, or issuance, then the General
Partner and the Initial Limited Partner shall be deemed to have made a Capital
Contribution to the Partnership in the amount of the gross proceeds of such
issuance and the Partnership shall be deemed simultaneously to have
17
<PAGE>
issuance and the Partnership shall be deemed to simultaneously to have paid
pursuant to Section 7.3C for the amount of such underwriter's discount or other
expenses.
Section 4.5 Repurchase of REIT Stock; Excess Shares
---------------------------------------
A. In the event that the Company shall elect to purchase from its
stockholders REIT Stock for the purpose of delivering such REIT Stock to satisfy
an obligation under any dividend reinvestment program adopted by the Company,
any employee stock purchase plan adopted by the Company, or any other obligation
or arrangement undertaken by the Company in the future, the purchase price paid
by the Company for such REIT Stock and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the General Partner on behalf of the
Company, subject to the condition that: (i) if such REIT Stock subsequently is
to be sold by the Company, the Company shall pay to the Partnership, through the
General Partner and the Initial Limited Partner, any proceeds received by the
Company from the sale of such REIT Stock (provided that an exchange of REIT
Stock for OP Units pursuant to the Exchange Rights Agreement would not be
considered a sale for such purposes); and (ii) if such REIT Stock is not re-
transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel a number of OP Units held
by the Initial Limited Partner and/or the General Partner (as applicable) equal
to the product of (x) the number of shares of such REIT Stock and (y) a
fraction, the numerator of which is one and the denominator of which is the
Exchange Factor in effect on the date of such cancellation.
B. In the event the Company purchases Shares-in-Trust (as defined in
the Articles of Incorporation), the Partnership will purchase from the General
Partner and/or the Initial Limited Partner (as applicable) a number of OP Units
equal to the product of (x) the number of Shares-in-Trust purchased by the
Company multiplied by (y) a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
purchase.
Section 4.6 No Third Party Beneficiary
--------------------------
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns.
Section 4.7 No Interest; No Return
----------------------
No Partner shall be entitled to interest on its Capital Contribution
or on such Partner's Capital Account. Except as provided herein or by law, no
Partner shall have any right to demand or receive the return of its Capital
Contribution from the Partnership.
18
<PAGE>
Section 4.8 No Preemptive Rights
--------------------
Subject to any preemptive rights that may be granted pursuant to
Section 4.3 hereof, no Person shall have any preemptive or other similar right
with respect to (i) additional Capital Contributions or loans to the
Partnership; or (ii) issuance or sale of any OP Units or other Partnership
Interests.
ARTICLE 5
DISTRIBUTIONS
5.1 Regular Distributions
---------------------
Except for distributions pursuant to Section 13.2 in connection with
the dissolution and liquidation of the Partnership, and subject to the
provisions of Sections 5.3, 5.4, 5.5 and 12.2C, the General Partner shall cause
the Partnership to distribute, on a quarterly basis (or, at the election of the
General Partner, more frequently), an amount of Available Cash, determined by
the General Partner in its sole discretion to the Partners, as of the applicable
Partnership Record Date, in accordance with each Partner's respective Percentage
Interest, provided, however, that in no event may a Partner receive a
distribution of Available Cash with respect to an OP Unit if such Partner is
entitled to receive a distribution out of such Available Cash with respect to
REIT Stock for which such OP Unit has been exchanged.
5.2 Qualification as a REIT
-----------------------
The General Partner shall use its best efforts to cause the
Partnership to distribute sufficient amounts under this Article 5 to enable the
Company to pay stockholder dividends that will enable the Company (i) satisfy
the requirements for qualification as a REIT under the Code and Regulations
("REIT Requirements"), and (ii) avoid any federal income or excise tax
liability; provided, however, the General Partner shall not be bound to comply
with this covenant to the extent such distributions would (i) violate applicable
Delaware law or (ii) contravene the terms of any notes, mortgages or other types
of debt obligations which the Partnership may be subject to in conjunction with
borrowed funds.
5.3 Withholding
-----------
With respect to any withholding tax or other similar tax liability or
obligation to which the Partnership may be subject as a result of any act or
status of any Partner or to which the Partnership becomes subject with respect
to any OP Unit, the Partnership shall have the right to withhold amounts of
Available Cash distributable to such Partner or with respect to such OP Units,
to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
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5.4 Additional Partnership Interests
--------------------------------
If the Partnership issues Partnership Interests in accordance with
Section 4.2 or 4.3, the distribution priorities set forth in Section 5.1 shall
be amended, as necessary, to reflect the distribution priority of such
Partnership Interests and corresponding amendments shall be made to the
provisions of Exhibit B.
5.5 Distributions Upon Liquidation
------------------------------
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
ARTICLE 6
ALLOCATIONS
The Net Income, Net Loss and other Partnership items shall be
allocated pursuant to the provisions of Exhibit B.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
----------
A. Except as otherwise expressly provided in this Agreement, full,
complete and exclusive discretion to manage and control the business and affairs
of the Partnership are and shall be vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without cause. In
addition to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or which are granted to the General Partner
under any other provision of this Agreement, the General Partner shall have full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) (a) the making of any expenditures, the lending or
borrowing of money, including, without limitation, making
prepayments on loans and borrowing money to permit the
Partnership to make distributions to its Partners in such
amounts as will permit the Company (so long as the Company
qualifies as a REIT) to avoid the payment of any federal
income tax (including, for this
20
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purpose, any excise tax pursuant to Section 4981 of the
Code) and to make distributions to its stockholders in
amounts sufficient to permit the Company to maintain REIT
status, (b) the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, (c) the
issuance of evidence of indebtedness (including the securing
of the same by deed, mortgage, deed of trust or other lien
or encumbrance on the Partnership's assets) and (d) the
incurring of any obligations it deems necessary for the
conduct of the activities of the Partnership, including the
payment of all expenses associated with the Company;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership or the Company;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the
Partnership) or the merger or other combination of the
Partnership with or into another entity;
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct
of the operations of the Company, the Partnership or any of
the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the Company) and the
repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity
investment, and the making of capital contributions to its
Subsidiaries;
(5) the expansion, development, construction, leasing, repair,
alteration, demolition or improvement of any Hotel owed by
the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any contracts
(including, without limitation, the Participating Leases),
conveyances or other instruments that the General Partner
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considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the
Partnership (including, without limitation, employees having
titles such as "president," "vice president," "secretary"
and "treasurer" of the Partnership), and agents, outside
attorneys, accountants, consultants and contractors of the
Partnership, and the determination of their compensation and
other terms of employment or engagement;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of
property to, its Subsidiaries and any other Person from time
to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of
dispute resolution, or abandonment of, any claim, cause of
action, liability, debt or damages, due or owing to or from
the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration or
other forms of dispute resolution, and the representation of
the Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or
22
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other forms of dispute resolution, the incurring of legal
expenses, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by
law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as the General Partner may
adopt;
(16) the exercise, directly or indirectly, through any attorney-
in-fact acting under a general or limited power of attorney,
of any right, including the right to vote, appurtenant to
any asset or investment held by the Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person
in which the Partnership has a direct or indirect interest,
or jointly with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership does not have an interest pursuant to
contractual or other arrangements with such Person;
(19) the making, execution and delivery of any and all deeds,
leases, notes, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or
agreements in writing necessary or appropriate, in the
judgment of the General Partner, for the accomplishment of
any of the foregoing;
(20) the issuance of additional OP Units in connection with
Capital Contributions by Additional Limited Partners and
additional Capital Contributions by Partners pursuant to
Article 4 hereof; and
(21) The opening of bank accounts on behalf of, and in the name
of, the Partnership and its Subsidiaries.
23
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B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement to
the fullest extent permitted under the Act or other applicable law, rule or
regulation. The execution, delivery or performance by the General Partner or
the Partnership of any agreement authorized or permitted under this Agreement
shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner
at the expense of the Partnership, may or may not, cause the Partnership to
obtain and maintain (i) casualty, liability and other insurance on the
properties of the Partnership and (ii) liability insurance for the Indemnitees
hereunder.
D. At all times from and after the date hereof, the General Partner
may cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amount as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner of any action taken by it; provided, that if the
General Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use reasonable
efforts to structure such refinancing in a manner that minimizes any adverse tax
consequences resulting therefrom to the Limited Partners. The General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under and in accordance with this Agreement.
Section 7.2 Certificate of Limited Partnership
----------------------------------
The General Partner has filed the Certificate with the Secretary of
State of Delaware as required by the Act. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware and any
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. To the extent that such action is determined by
the General Partner to be reasonable and necessary or appropriate, the General
Partner shall file amendments to and restatements of the Certificate and do all
of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District
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of Columbia, in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5A(4) hereof, the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
or any amendment thereto to any Limited Partner.
Section 7.3 Reimbursement of the General Partner and the Company
----------------------------------------------------
A. Except as provided in this Section 7.3 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or
such other basis as it may determine in its sole and absolute discretion, for
all expenses that it incurs on behalf of the Partnership relating to the
ownership and operation of the Partnership's assets, or for the benefit of the
Partnership, including all expenses associated with compliance by the Company,
the General Partner and the Initial Limited Partner with laws, rules and
regulations promulgated by any regulatory body and any and all salaries,
compensation and expenses of officers and employees of the Company; provided,
that the amount of any such reimbursement shall be reduced by any interest
earned by the Company (including the General Partner and the Initial Limited
Partner) with respect to bank accounts or other instruments or accounts held by
it in its name. Such reimbursement shall be in addition to any reimbursement
made as a result of indemnification pursuant to Section 7.6 hereof.
Notwithstanding any provisions to the contrary set forth herein, the General
Partner shall not be entitled to reimbursement for any administrative costs and
expenses incurred by the Company or that are attributable to Hotels or
partnership interests in a Subsidiary of the Partnership that are owned by the
Company directly.
C. Expenses incurred by the Company relating to the organization
and/or reorganization of the Partnership and the Company, the initial public
offering of REIT Stock by the Company, and any other issuance of additional
Partnership Interests, REIT Stock or rights, options, warrants, or convertible
or exchangeable securities pursuant to Section 4.2 hereof and all costs and
expenses associated with the preparation and filing of any periodic reports by
the Company under federal, state or local laws or regulations (including,
without limitation, all costs, expenses, damages, and other payments resulting
from or arising in connection with litigation related to any of the foregoing)
are primarily obligations of the Partnership. To the extent the General
Partner, on behalf of the Company, pays or incurs such expenses, the General
Partner, on behalf of the Company, shall be reimbursed for such expenses.
Section 7.4 Outside Activities of the General Partner
-----------------------------------------
The Company shall not, and it shall cause the General Partner and the
Initial Limited Partner not to, directly or indirectly enter into or conduct any
business other than in
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connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
Section 7.5 Contracts with Affiliates
-------------------------
A. The Partnership may lend or contribute funds or other assets to
its Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer
assets to joint ventures, limited liability companies, other partnerships,
corporations or other business entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions consistent with this
Agreement and applicable law as the General Partner, in its sole and absolute
discretion may determine.
C. Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, Transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the General
Partner in good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and
without the approval of the Limited Partners, may propose and adopt, on behalf
of the Partnership, employee benefit plans, stock option plans, and similar
plans funded by the Partnership for the benefit of employees of the Company, the
Partnership, the General Partner, any Subsidiaries of the Partnership or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the Company, any Subsidiaries of
the Partnership or any Affiliate of any of them.
E. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a "right of first opportunity" or "right
of first offer" arrangement, non-competition agreements and other conflict
avoidance agreements with various Affiliates of the Partnership and the General
Partner, on such terms as the General Partner, in its sole and absolute
discretion, believes are advisable.
Section 7.6 Indemnification
---------------
A. To the fullest extent permitted by Delaware law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other
26
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legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of the
Partnership, the General Partner or the Company as set forth in this Agreement,
in which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, except to the extent it is finally determined by a court of
competent jurisdiction, from which no further appeal may be taken, that such
Indemnitee's action constituted intentional acts or omissions constituting
willful misconduct or fraud. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.6 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 7.6 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement pursuant
to which such Indemnitees are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by such Indemnitee of its duties to the
Partnership also imposes duties on, or otherwise involves services by, such
Indemnitee to the plan or participants or beneficiaries of the plan; excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 7.6; and actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the
27
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participant and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.6 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.6, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.7 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner and its officers and directors shall not be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership and the shareholders of the
Company collectively, that the General Partner, subject to the provisions of
Section 7.1E hereof, is under no obligation to consider the separate interest of
the Limited Partners in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that the General Partner shall not be liable
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith. With respect to any indebtedness of
the Partnership which any Limited Partner may have guaranteed, the General
Partner shall have no duty to keep such indebtedness outstanding.
C. Subject to its obligations and duties as General Partner set
forth in Section 7.1A hereof, the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agent. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by the General Partner in good faith.
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D. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.8 Other Matters Concerning the General Partner
--------------------------------------------
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT; or (ii) to avoid the Company incurring any taxes
under Section 857 or Section 4981 of the Code, is expressly authorized under
this Agreement and is deemed approved by all of the Limited Partners.
Section 7.9 Title to Partnership Assets
---------------------------
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner
29
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may determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership asset for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
that the General Partner shall use its best efforts to cause beneficial and
record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which legal title to such Partnership assets is held.
Section 7.10 Reliance by Third Parties
-------------------------
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership, and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act. Notwithstanding the preceding sentence, each Limited Partner
shall have the right, but not the obligation, to guarantee a portion of
indebtedness of the Partnership.
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Section 8.2 Management of Business
----------------------
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operation, management or control (within the
meaning of the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any
of its Affiliates or any officer, director, employee, partner, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
--------------------------------------
Subject to any agreements entered into pursuant to Section 7.5 hereof
and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or any of its Subsidiaries, any Limited Partner (other than
the Initial Limiter Partner) and any officer, director, employee, agent,
trustee, Affiliate or shareholder of any Limited Partner (other than the Initial
Limited Partner) shall be entitled to and may have business interests and engage
in business activities in addition to those relating to the Partnership,
including business interests and activities that are in direct competition with
the Partnership or that are enhanced by the activities of the Partnership.
Neither the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. None of
the Limited Partners (other than the Initial Limited Partner) nor any other
Person shall have any rights by virtue of this Agreement or the Partnership
relationship established hereby in any business ventures of any other Person and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or any such other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.
Section 8.4 Return of Capital
-----------------
Except pursuant to the Exchange Rights Agreement, no Limited Partner
shall be entitled to the withdrawal or return of its Capital Contribution,
except to the extent of distributions made pursuant to this Agreement or upon
termination of the Partnership as provided herein. Except to the extent
provided by Exhibit B, or as otherwise expressly provided in this Agreement, no
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee, either as to the return of Capital Contributions or as to profits,
losses or distributions.
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Section 8.5 Rights of Limited Partners Relating to the Partnership
------------------------------------------------------
A. In addition to the other rights provided by this Agreement or by
the Act, and except as limited by Section 8.5B hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner' s own
expense (including such reasonable copying and administrative charges as the
General Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
the Company pursuant to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and
all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which
this Agreement, the Certificate and all amendments and/or
restatements thereto have been executed; and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property
or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date
on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the
General Partner may keep confidential from the Limited Partners, for such period
of time as the General Partner determines in its sole and absolute discretion to
be reasonable, any information that (i) the General Partner reasonably believes
to be in the nature of trade secrets or other information, the disclosure of
which the General Partner in good faith believes is not in the best interests of
the Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Exchange Rights Agreement
-------------------------
The Limited Partners have been granted the right, but not the
obligation, to exchange all or a portion of their OP Units for cash or at the
option of the Company, for
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shares of REIT Stock on the terms and subject to the conditions and restrictions
contained in that certain Exchange Rights Agreement among the Company and the
Limited Partners (as amended from time to time, the "Exchange Rights
Agreement"), the form of which is attached hereto as Exhibit C.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------------------
The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to comply with applicable REIT
Requirements and to provide to the Limited Partners any information, lists and
copies of documents required to be provided pursuant to Sections 8.5A and 9.3
hereof. Any records maintained by or on behalf of the Partnership in the
regular course of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
-------
A. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each Partnership Year, the General Partner
shall cause to be mailed to each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the Company, if such statements are prepared on a
consolidated basis with the Company, for such Partnership Year, presented in
accordance with GAAP, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner in its
sole discretion.
B. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each calendar quarter (except the last
calendar quarter of each calendar year), the General Partner shall cause to be
mailed to each Limited Partner a report containing unaudited financial
statements as of the last day of the calendar quarter of the Partnership, or of
the Company, if such statements are prepared on a consolidated basis with the
Company,
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and such other information as may be required by applicable law or regulation,
or as the General Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
--------------------------
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and other
items required of the Partnership for federal and state income tax purposes and
shall use all reasonable efforts to furnish, within ninety (90) days of the
close of each taxable year, the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
-------------
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder effective for the first calendar year following the Effective Date.
The General Partner shall elect a permissible method of eliminating the
disparity between the book value and the tax basis of property contributed to
the Partnership or to a Subsidiary of the Partnership pursuant to the
regulations promulgated under the provisions of Section 704(c) of the Code. The
General Partner shall have the right to seek to revoke any tax election it makes
including, without limitation, the election under Section 754 of the Code, upon
the General Partner's determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
-------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and profit interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue
Service with respect to any administrative or judicial
proceedings for the adjustment of Partnership items required
to be taken into account
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by a Partner for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind
all Partners, except that such settlement agreement shall
not bind any Partner (i) who (within the time prescribed
pursuant to the Code and Regulations) files a statement with
the Internal Revenue Service providing that the tax matters
partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who
is a "notice partner" (as defined in Section 6231(a)(8) of
the Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to
be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the tax matters partner, to
seek judicial review of such final adjustment, including the
filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States
Claims Court or the District Court of the United States for
the district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is
not allowed by the Internal Revenue Service, to file an
appropriate pleading (petition or complaint) for judicial
review with respect to such request;
(5) to enter into an agreement with the Internal Revenue Service
to extend the period for assessing any tax which is
attributable to any item required to be taken account of by
a Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
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The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.6 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
-----------------------
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
-----------
Each Limited Partner hereby authorizes the Partnership to withhold
from, or pay on behalf of or with respect to, such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay when due any amounts owed to the Partnership pursuant to this
Section 10.5, the General Partner may, in its sole and absolute discretion,
elect to make the payment to the Partnership on behalf of such defaulting
Limited Partner, and in such event shall be deemed to have loaned such amount to
such defaulting Limited Partner and shall succeed to all rights and remedies of
the Partnership as against such defaulting Limited Partner. Without limitation,
in
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such event, the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amount payable by a Limited Partner hereunder shall
bear interest at the highest base or prime rate of interest published from time
to time by any of Citibank, N.A., Chemical Bank, Morgan Guaranty Trust Company
of New York and Chase Manhattan Bank, N.A., plus four (4) percentage points, but
in no event higher than the maximum lawful rate of interest on such obligation,
such interest to accrue from the date such amount is due (i.e., fifteen (15)
days after demand) until such amount is paid in full. Each Limited Partner
shall take such actions as the Partnership or the General Partner shall request
in order to perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
--------
A. The term "Transfer," when used in this Article 11 with respect to
an OP Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person. The term "Transfer" when
used in this Article 11 does not include any exchange of OP Units for cash or
REIT Stock pursuant to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of the General Partner's General Partner
-------------------------------------------------
Interest
--------
A. The General Partner may not Transfer any of its General Partner
Interest or withdraw as General Partner, or Transfer any of its Limited Partner
Interest, except (i) if Limited Partners holding at least a majority of the
Percentage Interests of the Limited Partners (other than Limited Partner
Interests held by the Company or any Affiliate thereof) consent to such Transfer
or withdrawal, (ii) if such Transfer is to the Company or an entity which is
wholly-owned by the Company and is a Qualified REIT Subsidiary as defined in
Section 856(i) of the Code or (iii) in connection with a transaction described
in Section 11.2D or 11.2E (as applicable).
37
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B. The Initial Limited Partner may not Transfer any of its Limited
Partner Interest or withdraw as a Limited Partner, except (i) if Limited
Partners holding a majority of the Percentage Interest of the Limited Partners
(other than Limited Partner Interests held by the Company or any Affiliate
thereof) consent to such Transfer or withdrawal, (ii) if such Transfer is to the
Company or an entity which is wholly owned by the Company and is a Qualified
REIT Subsidiary as defined in Section 856(i) of the Code or (iii) in connection
with a transaction described as Section 11.2D.
C. In the event the General Partner withdraws as general partner of
the Partnership in accordance with clause (A) above, the General Partner's
General Partner Interest shall immediately be converted into a Limited Partner
Interest.
D. Except as otherwise provided in Section 11.2E, the Company shall
not engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding REIT Stock
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination of REIT Stock) (a "Transaction"), unless
(i) the Transaction also includes a merger of the Partnership or sale of
substantially all of the assets of the Partnership as a result of which all
Limited Partners will receive for each OP Unit an amount of cash, securities, or
other property equal to the product of the Exchange Factor and the greatest
amount of cash, securities or other property or value paid in the Transaction to
or received by a holder of one share of REIT Stock in consideration of one share
of REIT Stock, provided that if, in connection with the Transaction, a purchase,
-------- ----
tender or exchange offer ("Offer") shall have been made to and accepted by the
holders of more than 50% of the outstanding REIT Stock, each holder of OP Units
shall be given the option to exchange its OP Units for the greatest amount of
cash, securities, or other property which a Limited Partner would have received
had it (A) exercised its Exchange Right and (B) sold, tendered or exchanged
pursuant to the Offer the REIT Stock received upon exercise of the Exchange
Right immediately prior to the expiration of the Offer; and (ii) no more than
75% of the equity securities of the acquiring Person in such Transaction shall
be owned, after consummation of such Transaction, by the General Partner or
Persons who were Affiliates of the Partnership or the General Partner
immediately prior to the date on which the Transaction is consummated.
E. Notwithstanding Section 11.2D, the General Partner may merge into
or consolidate with another entity if immediately after such merger or
consolidation (i) substantially all of the assets of the successor or surviving
entity (the "Surviving General Partner"), other than OP Units held by the
General Partner, are contributed to the Partnership as a Capital Contribution in
exchange for OP Units with a fair market value equal to the value of the assets
so contributed as determined by the Surviving General Partner in good faith and
(ii) the Surviving General Partner expressly agrees to assume all obligations of
the General Partner hereunder. Upon such contribution and assumption, the
Surviving General Partner shall have the right and duty to amend this Exchange
Rights Agreement as set forth in this Section 11.2.E. The Surviving General
Partner shall in good faith arrive at a new method for
38
<PAGE>
the calculation of the Exchange Factor for an OP Unit after any such merger or
consolidation so as to approximate the existing method for such calculation as
closely as reasonably possible. Such calculation shall take into account, among
other things, the kind and amount of securities, cash and other property that
was receivable upon such merger or consolidation by a holder of REIT Stock or
options, warrants or other rights relating thereto, and which a holder of OP
Units could have acquired had such OP Units been redeemed for REIT Stock
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for with respect to the Exchange Factor. The above provisions of this Section
11.2E shall similarly apply to successive mergers or consolidations permitted
hereunder.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Sections 11.3C, 11.3D, 11.3E and
11.4 and the restrictions included in the Lock-up Agreement, a Limited Partner
(other than the Initial Limited Partner) may, without the consent of the General
Partner, Transfer all or any portion of its Limited Partnership Interest.
B. If a Limited Partner is Incapacitated, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to Transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any Transfer by a Limited
Partner of its OP Units if, in the opinion of legal counsel to the Partnership,
such Transfer would require filing of a registration statement under the
Securities Act of 1933, as amended, or would otherwise violate any federal or
state securities laws or regulations applicable to the Partnership or the OP
Units.
D. No Transfer by a Limited Partner of its OP Units may be made to
any Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation for federal income tax purposes; (ii) such Transfer would cause the
Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA)
or a "disqualified person" (as defined in Section 4975(c) of the Code); (iii)
such Transfer would, in the opinion of legal counsel for the Partnership, cause
any portion of the assets of the Partnership to constitute assets of any
employee benefit plan pursuant to Department of Labor Regulations Section
2510.2-101; (iv) such Transfer would subject the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974,
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each as amended; (v) without the consent of the General Partner, which consent
may be withheld in its sole and absolute discretion, such Transfer is a sale or
exchange, and such sale or exchange would, when aggregated with all other sales
and exchanges during the 12-month period ending on the date of the proposed
Transfer, result in 50% or more of the interests in Partnership capital and
profits being sold or exchanged during such 12-month period; or (vi) such
Transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code.
E. No transfer of any OP Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Regulations
Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a
nonrecourse liability (within the meaning of Regulations Section 1.752.1(a)(2)),
without the consent of the General Partner, which may be withheld in its sole
and absolute discretion, provided that as a condition to such consent the lender
-------- ----
will be required to enter into an arrangement with the Partnership and the
General Partner to exchange for the Cash Amount (as such term is defined in the
Exchange Rights Agreement) any OP Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.
F. Any Transfer in contravention of any of the provisions of this
Section 11.3 shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
Section 11.4 Substituted Limited Partners
----------------------------
A. No Limited Partner shall have the right to substitute a Permitted
Transferee for a Limited Partner in his place. The General Partner shall,
however, have the right to consent to the admission of a Permitted Transferee of
the Partnership Interest of a Limited Partner pursuant to this Section 11.4 as a
Substitute Limited Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit such transferee to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited Partner
under this Agreement.
C. No Permitted Transferee will be admitted as a Substituted Limited
Partner unless such transferee has furnished to the General Partner (a) evidence
of acceptance in form satisfactory to the General Partner of all of the terms
and conditions of this Agreement and the Exchange Rights Agreement, including,
without limitation, the power of attorney granted in Section 2.4 hereof and (b)
such other documents or instruments as may be required in the reasonable
discretion of the General Partner in order to effect such Person's admission as
a Substituted Limited Partner. Upon the admission of a Substituted Limited
Partner, the General Partner shall amend Exhibit A to reflect the name, address,
number of
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OP Units, and Percentage Interest of such Substituted Limited Partner and to
eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any transferee as a Substituted Limited Partner, as
described in Section 11.4A, such transferee shall be considered an Assignee for
purposes of this Agreement. An Assignee shall be deemed to have had assigned to
it, and shall be entitled to receive distributions from the Partnership and the
share of Net Income, Net Losses and any other items, gain, loss deduction and
credit of the Partnership attributable to the OP Units assigned to such
transferee, but shall not be deemed to be a holder of OP Units for any other
purpose under this Agreement, and shall not be entitled to vote such OP Units in
any matter presented to the Limited Partners for a vote (such OP Units being
deemed to have been voted on such matter in the same proportion as all other OP
Units held by Limited Partners are voted). In the event any such transferee
desires to make a further assignment of any such OP Units, such transferee shall
be subject to all of the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of OP
Units.
Section 11.6 General Provisions
------------------
A. No Limited Partner may withdraw from the Partnership other than
as a result of a permitted Transfer of all of such Limited Partner's OP Units in
accordance with this Article 11 or pursuant to exchange of all of its OP Units
pursuant to the Exchange Rights Agreement.
B. Any Limited Partner which shall Transfer all of its OP Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such OP Units as Substituted
Limited Partners. Similarly, any Limited Partner which shall Transfer all of
its OP Units pursuant to an exchange of all of its OP Units pursuant to the
Exchange Rights Agreement shall cease to be a Limited Partner.
C. Other than pursuant to the Exchange Rights Agreement without the
consent of the General Partner, transfers pursuant to this Article 11 may only
be made as of the first day of a fiscal quarter of the Partnership.
D. If any Partnership Interest is transferred or assigned during the
Partnership's fiscal year in compliance with the provisions of this Article 11
or exchanged pursuant to the Exchange Rights Agreement on any day other than the
first day of a Partnership Year, then Net Income, Net Losses, each item thereof
and all other items attributable to such interest for such Partnership Year
shall be divided and allocated between the transferor Partner and the transferee
Partner by taking into account their varying interests during the Partnership
Year in accordance with Section 706(d) of the Code, using the interim
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closing of the books method. Solely for purposes of making such allocations,
each of such items for the calendar month in which the Transfer or assignment
occurs shall be allocated to the transferee Partner, and none of such items for
the calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may adopt such
other conventions relating to allocations in connection with transfers,
assignments, or exchanges as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such OP Units with respect to
which the Partnership Record Date is before the date of such transfer,
assignment, or exchange shall be made to the transferor Partner or the
exchanging Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such OP Units shall be made to the transferee
Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
A. A successor to all of the General Partner Interest pursuant to
Section 11 hereof who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective
immediately following such transfer and the admission of such successor General
Partner as a general partner of the Partnership. Any such transferee shall
carry on the business of the Partnership without dissolution.
B. A Person shall be admitted as a substitute or successor General
Partner of the Partnership only if the following terms and conditions are
satisfied:
(a) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a counterpart thereof and
such other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner;
(b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided
the Partnership with evidence satisfactory to counsel for the Partnership
of such Person's authority to become a General Partner and to be bound by
the terms and provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel as may be necessary) that the
admission of the person to be admitted as a substitute or additional
General Partner is in conformity with the Act, that none of the actions
taken in connection with the admission of such Person as a substitute or
additional General Partner will cause (i)
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the Partnership to be classified other than as a partnership for federal
income tax purposes, or (ii) the loss of any Limited Partner's limited
liability.
C. In the case of such admission on any day other than the first day
of a Partnership Year, all items attributable to the General Partner Interest
for such Partnership Year shall be allocated between the transferring General
Partner and such successor as provided in Section 11.6D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. After the admission to the Partnership of the additional Limited
Partners on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement and the Exchange Rights
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other documents or instruments as may be
required in the discretion of the General Partner in order to effect such
Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute
discretion. The admission of any Person as an Additional Limited Partner shall
become effective on the date upon which the name of such Person is recorded on
the books and records of the Partnership, following the consent of the General
Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such Additional
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each of such item for the calendar month in
which an admission of any Additional Limited Partner occurs shall be allocated
among all of the Partners and Assignees, including such Additional Limited
Partner. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such admission shall be made
solely to Partners and Assignees, other than the Additional Limited Partner, and
all distributions of Available Cash thereafter shall be made to all of the
Partners and Assignees, including such Additional Limited Partner.
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Section 12.3 Amendment of Agreement and Certificate of Limited
-------------------------------------------------
Partnership
- -----------
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. The
Partnership shall dissolve, and its affairs shall be wound up, only upon the
first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within ninety (90) days after
such event of withdrawal, majority in interest of the remaining Partners agree
in writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31,
2046, an election to dissolve the Partnership made by the General Partner, with
the Consent of Limited Partners holding at least a majority of the Percentage
Interest of the Limited Partners (other than Limited Partnership Interests held
by the Initial Limited Partner);
D. on or after January 1, 2047, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties
of the Partnership;
44
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G. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
Section 13.2 Winding Up
----------
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being referred
to herein as the "Liquidator"), shall be responsible for overseeing the winding
up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of common stock or other securities of the Company)
shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner and Limited Partners
to the extent of and in accordance with the positive balances in
their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13. Any distributions pursuant to
this Section 13.2A shall be made by the end of the Partnership's taxable year in
which the liquidation occurs (or, if later, within 90 days after the date of the
liquidation).
45
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B. Notwithstanding the provisions of Section 13.2A hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any asset except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interests of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this
Article 13 may be:
(1) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or the General
Partner arising out of or in connection with the
Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise
have been distributed to the General Partner and Limited
Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment
obligations owed to the Partnership, provided that such
withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order
of priority set forth in Section 13.2A as soon as
practicable.
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Section 13.3 No Obligation to Contribute Deficit
-----------------------------------
If any Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
Section 13.4 Rights of Limited Partners
--------------------------
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.5 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would,
but for the provisions of an election or objection by one or more Partners
pursuant to Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners.
Section 13.6 Termination of Partnership and Cancellation of
----------------------------------------------
Certificate of Limited Partnership
----------------------------------
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.7 Reasonable Time for Winding-Up
------------------------------
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
Section 13.8 Waiver of Partition
-------------------
Each Partner hereby waives any right to partition of the Partnership
property.
47
<PAGE>
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
----------
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners (other than the Initial Limited Partner)
holding in the aggregate 25 percent or more of the Partnership Interests.
Following such proposal, the General Partner shall submit any proposed amendment
to the Limited Partners. The General Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem appropriate. For purposes of
obtaining a written vote, the General Partner may require a response within a
reasonable specified time, but not less than fifteen (15) days, and failure to
respond in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 14.1B, 14.1C or 14.1D, a proposed amendment shall be adopted
and be effective as an amendment hereto if it is approved by the General Partner
and it receives the Consent of Limited Partners holding at least a majority of
the Percentage Interests of the Limited Partners (including Limited Partnership
Interests held by the Initial Limited Partner).
B. Notwithstanding Section 14.1A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that
will not be inconsistent with law or with the provisions of
this Agreement; and
48
<PAGE>
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding Section 14.1A and 14.1B hereof, this Agreement
shall not be amended without the Consent of each Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the Partnership
into a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Article IV
and Section 14.1B(3) hereof); (iv) cause the termination of the Partnership
prior to the time set forth in Section 2.5 or 13.1; or (v) amend this Section
14.1C.
D. Notwithstanding Section 14.1A or Section 14.1B hereof, the
General Partner shall not amend Section 4.3, 7.4, 7.5, 11.2, 13.1 or 14.2
without the Consent of Limited Partners holding a majority of the Percentage
Interests of the Limited Partners, excluding Limited Partner Interests held by
the Initial Limited Partner.
Section 14.2 Meetings of the Partners
------------------------
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Initial Limited Partner) holding 25 percent or
more of the Partnership Interests. The request shall state the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven (7) days nor more than thirty (30) days prior to
the date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of the Limited Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
the Partners or may be given in accordance with the procedure prescribed in
Section 14.1A hereof. Except as otherwise expressly provided in this Agreement,
the Consent of holders of a majority of the Percentage Interests held by
Partners (including Limited Partnership Interests held by the Initial Limited
Partner) shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall
49
<PAGE>
be deemed to have been taken at a meeting held on the effective date of the
consent as certified by the General Partner.
C. Each Limited Partner may authorize any Person or Persons to act
for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact and a copy thereof delivered to the Partnership. No proxy
shall be valid after the expiration of eleven (11) months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it, such revocation to be effective
upon the General Partner's receipt of written notice of such revocation from the
Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate. Meetings of Partners may be conducted in the same manner as
meetings of the stockholders of the Company and may be held at the same time,
and as part of, meetings of the shareholders of the Company.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
--------------------
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by first
class United States mail or by overnight delivery or via facsimile to the
Partner or Assignee at the address set forth in Exhibit A or such other address
of which the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
-------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
50
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Section 15.3 Pronouns and Plurals
--------------------
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
Section 15.4 Further Action
--------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
---------
Other than as expressly set forth herein with respect to the
Indemnitees, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
------------
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
51
<PAGE>
Section 15.10 Invalidity of Provisions
------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.12 Guaranty by the Company
-----------------------
For so long as the General Partner is a wholly-owned subsidiary of the
Company and the General Partner is the general partner of the Partnership, the
Company unconditionally and irrevocably guarantees to the Limited Partners the
performance by the General Partner of the General Partner's obligations under
this Agreement. This guarantee is exclusively for the benefit of the Limited
Partners and shall not extend to the benefit any creditor of the Partnership.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
GENERAL PARTNER:
AGH GP, INC.
By:______________________________________
Title:___________________________________
LIMITED PARTNERS:
AGH LP, INC.
By:______________________________________
Title:___________________________________
[OTHERS TO COME]
With respect to Sections 4.2, 4.4, 4.5, 7.4,
11.2D, 15.4 and 15.12 only:
AMERICAN GENERAL HOSPITALITY
CORPORATION
By:______________________________________
Title:___________________________________
53
<PAGE>
Exhibit A
---------
Partners' Contributions and Partnership Interests
<TABLE>
<CAPTION>
Name and Address Cash Agreed Value of Total OP Percentage
of Partner Contributions Contributed Property Contribution Units Interest
--------------------- ------------- -------------------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C>
1%
General Partner
- ---------------
AGH GP, Inc.
3860 West Northwest Highway,
Suite 300
Dallas, Texas 75220
Limited Partners
- ----------------
AGH LP, Inc.
3860 West Northwest Highway,
Suite 300
Dallas, Texas 75220
[Other Limited Partners
To Come]
</TABLE>
A-1
<PAGE>
Exhibit B
---------
Allocations
1. Allocation of Net Income and Net Loss.
-------------------------------------
(a) Net Income. Except as otherwise provided in this Exhibit B, Net Income
----------
(or items thereof) (other than Net Income, or items thereof, arising in
connection with a Terminating Capital Transaction) for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) Net Loss. Except as otherwise provided in this Exhibit B, Net Loss (or
--------
items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
--- ----
with each Permitted Partner's Percentage Interest.
(c) Terminating Capital Transaction; Liquidation. Allocations of Net
--------------------------------------------
Income or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
- --- ----
(d) Rules of Construction.
---------------------
(1) Capital Account Increases. For purposes of making allocations
-------------------------
pursuant to subparagraph 1(c) of this Exhibit B, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) Change in Percentage Interests. In the event any Partner's
------------------------------
Percentage Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership, the tax
allocations contained in this Exhibit B shall be applied as necessary to reflect
the varying interests of the Partners during such year.
<PAGE>
2. Special Allocations. Notwithstanding any provisions of paragraph 1 of this
-------------------
Exhibit B, the following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise
-------------------------------------------------
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain to the extent required by Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (i) of the Regulations. This
subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
-------------------------------
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This subparagraph 2(b) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said section of the Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph 2(b) shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly receives
-----------------------
any adjustments, allocations or distributions described in Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) is intended
to constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.
(d) Other Chargeback of Impermissible Negative Capital Account. To the
----------------------------------------------------------
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership fiscal year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
--------
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
B-2
<PAGE>
for in this Exhibit B have been tentatively made as if this paragraph 2(d) were
not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
----------------------
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
------------------------------
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections 1.704-
2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) Intent of Allocations. The parties intend that the allocation
---------------------
provisions of this Exhibit B shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Exhibit B, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Exhibit B and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service or
any other taxing authority.
(h) Section 754 Adjustment. To the extent an adjustment to the adjusted
----------------------
tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code
or Section 743(b) of the Code is required, pursuant to Section 1.704-
1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated among the Partners in a manner consistent with the manner in
which each of their respective Capital Accounts are required to be adjusted
pursuant to such section of the Regulations.
(i) Gross Income Allocation. There shall be specially allocated to the
-----------------------
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof
B-3
<PAGE>
over the cumulative allocations of Partnership income and gain to the General
Partner pursuant to this Section 2(i) of this Exhibit B.
3. Tax Allocations.
---------------
(a) Items of Income or Loss. Except as is otherwise provided in this
-----------------------
Exhibit B, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. If any portion of gain from the sale of
---------------------------
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for each
fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) Precontribution Gain, Revaluations. With respect to any Contributed
----------------------------------
Property, the Partnership shall use any permissible method contained in the
Regulations promulgated under Section 704(c) of the Code selected by the General
Partner, in its sole discretion, to take into account any variation between the
adjusted basis of such asset and the fair market value of such asset as of the
time of the contribution ("Precontribution Gain"). Each Partner hereby agrees
to report income, gain, loss and deduction on such Partner's federal income tax
return in a manner consistent with the method used by the Partnership. If any
asset has a Gross Asset Value which is different from the Partnership's adjusted
basis for such asset for federal income tax purposes because the Partnership has
revalued such asset pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
allocations of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder. The intent of this subparagraph 3(c) is that each
Partner who contributed to the capital of the Partnership a Contributed Property
will bear, through reduced allocations of depreciation, increased allocations of
gain or other items, the tax detriments associated with any Precontribution
Gain. This subparagraph 3(c) is to be interpreted consistently with such
intent.
(d) Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
----------------------------------------
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
-------- -------
contributed an asset to the Partnership shall be allocated, to the extent
possible, a
B-4
<PAGE>
share of "excess nonrecourse liabilities" of the Partnership which results in
such Partner being allocated nonrecourse liabilities in an amount which is at
least equal to the amount of income pursuant to Section 704(c) of the Code and
the Regulations promulgated thereunder (the "Liability Shortfall"). In the
event there is an insufficient amount of nonrecourse liabilities to allocate to
each Partner an amount of nonrecourse liabilities equal to the Liability
Shortfall, then an amount of nonrecourse liabilities in proportion to, and to
the extent of, the Liability Shortfall shall be allocated to each Partner.
(e) References to Regulations. Any reference in this Exhibit B or the
-------------------------
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(f) Successor Partners. For purposes of this Exhibit B, a transferee of a
------------------
Partnership Interest shall be deemed to have been allocated the Net Income, Net
Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
B-5
<PAGE>
EXHIBIT 10.7
FORM OF EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
______________, 1996, is entered into by and among American General Hospitality
Corporation, a Maryland corporation (the "COMPANY"), American General
Hospitality Operating Partnership, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and the Persons whose names are set forth on Exhibit A
---------
attached hereto (as it may be amended from time to time).
R E C I T A L S:
- - - - - - - -
A. The Company, through AGH GP, Inc., a Nevada corporation ("AGH GP") and
AGH LP, Inc., a Nevada corporation ("AGH LP"), each a wholly-owned subsidiary of
the Company, have formed the Operating Partnership pursuant to the Amended and
Restated Agreement of Limited Partnership of the Operating Partnership dated the
date hereof (the "PARTNERSHIP AGREEMENT").
B. Pursuant to the Partnership Agreement, the Limited Partners (as defined
below) hold units of limited partnership interest ("OP UNITS") in the Operating
Partnership.
C. The Operating Partnership has agreed to provide the Limited Partners
with certain rights to exchange their OP Units for cash or, at the election of
the Company, for shares of the Company's common stock, $0.01 par value per share
(the "REIT STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on the
Valuation Date of the REIT Stock Amount.
<PAGE>
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Stock in REIT Stock or
makes a distribution to all holders of its outstanding REIT Stock in REIT Stock;
(ii) subdivides its outstanding REIT Stock; or (iii) combines its outstanding
REIT Stock into a smaller number of shares of REIT Stock, the Exchange Factor
shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of shares of REIT Stock issued and
outstanding on the record date for such dividend, contribution, subdivision or
combination assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time, and the denominator of
which shall be the actual number of shares of REIT Stock (determined without the
above assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Exchange Factor
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust, charge,
claim, encumbrance, pledge, option, right of first offer or first refusal and
any other right or interest of others of any kind or nature, actual or
contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than AGH LP, named as a Limited
Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means the Lock-up Agreement among the Company and the
Limited Partners, dated the date hereof.
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the form
of Exhibit B to this Agreement.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to the
product of the number of OP Units offered for exchange by an Exchanging Partner,
multiplied by the Exchange Factor as of the Valuation Date, provided, that in
the event the Company or the Operating Partnership issues to all holders of REIT
Stock rights, options, warrants or convertible or exchangeable securities
entitling the stockholders to subscribe for or purchase REIT Stock, or any other
securities or property (collectively, the "rights"), then the REIT Stock Amount
shall also include such rights that a holder of that number of shares of REIT
Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
-2-
<PAGE>
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after receipt
by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership and
the Company of a Notice of Exchange or, if such date is not a Business Day, the
first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (i) if the REIT Stock are listed or admitted to trading on the New York
Stock Exchange (the "NYSE"), any national securities exchange or the Nasdaq
Stock Market ("Nasdaq"), the closing price on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day;
(ii) if the REIT Stock is not listed or admitted to trading on the NYSE, any
national securities exchange or the Nasdaq, the last reported sale price on such
day or, if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reliable quotation source designated
by the Company; or (iii) if the REIT Stock is not listed or admitted to trading
on the NYSE, any national securities exchange or the Nasdaq and no such last
reported sale price or closing bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported by a
reliable quotation source designated by the Company, or if there shall be no bid
and asked prices on such day, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than five (5) days prior to the
date in question) for which prices have been so reported; provided, that if
there are no bid and asked prices reported during the five (5) days prior to the
date in question, the Value of the REIT Stock shall be determined by the
independent directors of the Company acting in good faith on the basis of such
quotations and other information as they consider, in their reasonable judgment,
appropriate. In the event the REIT Stock Amount includes rights that a holder
of REIT Stock would be entitled to receive, then the Value of such rights shall
be determined by the independent directors of the Company acting in good faith
on the basis of such quotations and other information as they consider, in their
reasonable judgment, appropriate.
ARTICLE 2
EXCHANGE RIGHT
Section 2.1. Exchange Right.
--------------
A. Subject to Sections 2.1.B, 2.1.C, 2.1.D and 2.1.E hereof, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount. The Exchange Right shall
be exercised pursuant to a Notice of Exchange delivered to the Operating
Partnership, with a copy delivered to the Company, by the Limited Partner who is
exercising the Exchange Right (the "EXCHANGING PARTNER"); provided, however,
that the Company, on behalf of the Operating Partnership, may elect, after a
Notice of Exchange is
-3-
<PAGE>
delivered, to satisfy the Exchange Right which is the subject of such notice in
accordance with Section 2.1.B. A Limited Partner may not exercise the Exchange
Right for less than one thousand (1,000) OP Units or, if such Limited Partner
holds less than one thousand (1,000) OP Units, all of the OP Units held by such
Limited Partner. Any Assignee of a Limited Partner may exercise the rights of
such Limited Partner pursuant to this Section 2.1, and such Limited Partner
shall be deemed to have assigned such rights to such Assignee and shall be bound
by the exercise of such rights by such Assignee. In connection with any exercise
of such rights by an Assignee on behalf of a Limited Partner, the Cash Amount or
the REIT Stock Amount, as the case may be, shall be satisfied by the Operating
Partnership or the Company, as the case may be, directly to such Assignee and
not to such Limited Partner.
B. Notwithstanding the provisions of Section 2.1.A, the Company may, on
behalf of the Operating Partnership, in its sole and absolute discretion, elect
to satisfy an Exchanging Partner's Exchange Right by exchanging REIT Stock and
rights equal to the REIT Stock Amount on the Specified Exchange Date for the OP
Units offered for exchange by the Exchanging Partner. In the event the Company
shall elect to satisfy, on behalf of the Operating Partnership, an Exchanging
Partner's Exchange Right by exchanging REIT Stock for the OP Units offered for
exchange, (i) the Company hereby agrees to notify the Exchanging Partner within
five (5) Business Days after the receipt by the Company of such Notice of
Exchange, (ii) each Exchanging Partner hereby agrees to execute such documents
and instruments as the Company may reasonably require in connection with the
issuance of REIT Stock upon exercise of the Exchange Right and (iii) the Company
hereby agrees to deliver stock certificates representing fully paid and
nonassessable shares of REIT Stock.
C. Notwithstanding anything herein to the contrary, the Company shall not
be entitled to satisfy an Exchanging Partner's Exchange Right pursuant to
Section 2.1.B if the delivery of REIT Stock to such Limited Partner by the
Company pursuant to Section 2.1.B (regardless of the Operating Partnership's
obligations to the Limited Partner under Section 2.1.A) (i) would be prohibited
under the Articles of Incorporation of the Company, (ii) would otherwise
jeopardize the REIT status of the Company, or (iii) would cause the acquisition
of the REIT Stock by the Limited Partner to be "integrated" with any other
distribution of REIT Stock by the Company for purposes of complying with the
registration provisions of the Securities Act of 1933, as amended.
D. Notwithstanding the provisions of Section 2.1., any person to whom OP
Units have been pledged, in compliance with the terms of the Lock-up Agreement,
may exercise its Exchange Right prior to the date that is one (1) year after the
closing of the IPO, provided however, such OP Units shall only be exchangeable
for the Cash Amount.
E. The Exchange Right shall expire with respect to any OP Units for which
an Exchange Notice has not been delivered to the Operating Partnership and the
Company on or before December 31, 2046.
F. Any exchange of OP Units pursuant to this Article 2 shall be deemed to
have occurred as of the Specified Exchange Date for all purposes, including
without limitation the payment of distributions or dividends in respect of OP
Units or REIT Stock, as applicable. Any
-4-
<PAGE>
OP Units acquired by the Company pursuant to an exercise by any Limited Partner
of an Exchange Right shall be deemed to be acquired by and reallocated or
reissued to the Company. AGH GP, as general partner of the Operating
Partnership, shall amend the Partnership Agreement to reflect each such exchange
and reallocation or reissuance of OP Units and each corresponding recalculation
of the OP Units of the Limited Partners. The number of OP Units to be
reallocated or reissued to the Company shall equal the number of shares of REIT
Stock issued to a Limited Partner upon exercise of an Exchange Right in
accordance with the terms of this Agreement.
ARTICLE 3
OTHER PROVISIONS
Section 3.1. Covenants of the Company.
------------------------
A. At all times during the pendency of the Exchange Right, the Company
shall reserve for issuance such number of shares of REIT Stock as may be
necessary to enable the Company to issue such shares in full payment of the REIT
Stock Amount in regard to all OP Units held by Limited Partners which are from
time to time outstanding.
B. During the pendency of the Exchange Right, the Company shall deliver to
Limited Partners in a timely manner all reports filed by the Company with the
SEC to the extent the Company also transmits such reports to its stockholders
and all other communications transmitted from time to time by the Company to its
stockholders generally.
C. The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
Section 3.2. Fractional Shares.
-----------------
No fractional shares of REIT Stock shall be issued upon exchange of OP
Units. The number of full shares of REIT Stock which shall be issuable upon
exchange of OP Units (or the cash equivalent amount thereof if the Cash Amount
is paid) shall be computed on the basis of the aggregate amount of OP Units so
surrendered. Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
-5-
<PAGE>
ARTICLE 4
GENERAL PROVISIONS
Section 4.1. Addresses and Notice.
--------------------
Any notice, demand, request or report required or permitted to be
given or made to the Operating Partnership, the Company, a Limited Partner or
Assignee, as the case may be, under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other similarly reliable means of written communication
to the Operating Partnership, the Company, a Limited Partner or Assignee, as the
case may be, (i) at the address listed on the records of the Operating
Partnership, with respect to a Limited partner or Assignee, and (ii) at 3860
West Northwest Highway, Suite 300, Dallas, Texas 75220, Attn: President, with
respect to the Operating Partnership or the Company.
Section 4.2. Titles and Captions.
-------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 4.3. Pronouns and Plurals.
--------------------
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
Section 4.4. Further Action and Additional Restrictions.
------------------------------------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 4.5. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 4.6. Waiver.
------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
-6-
<PAGE>
Section 4.7. Counterparts.
------------
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 4.8. Applicable Law.
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Maryland, without regard to the principles
of conflicts of law thereof.
Section 4.9. Invalidity of Provisions.
------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 4.10. Entire Agreement.
----------------
This Agreement contains the entire understanding and agreement among
the Limited Partners, the Operating Partnership and the Company with respect to
the subject matter hereof and supersedes any other prior written or oral
understandings or agreements among them with respect thereto.
Section 4.11. Amendment.
---------
This Agreement may be amended from time to time in the same manner as
the Partnership Agreement (in accordance with Section 14.1A thereof) may be
amended as provided therein but excluding the interests of AGHLP.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
THE COMPANY:
AMERICAN GENERAL HOSPITALITY CORPORATION
By:
--------------------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
BY: AGH GP, INC., its general partner
By:
---------------------------------
Name:
Title:
-8-
<PAGE>
LIMITED PARTNERS:
-------------------------------------
Signature
-------------------------------------
Name (Please Print or Type)
-9-
<PAGE>
Exhibit A
---------
Name and Address
- ----------------
Limited Partners
- ----------------
[To come]
<PAGE>
Exhibit B
---------
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in American General Hospitality Operating Partnership,
L.P., in accordance with the terms of the Exchange Rights Agreement, dated as of
______________, 1996, and the Exchange Right referred to therein; (ii)
surrenders such OP Units and all right, title and interest therein; and (iii)
directs that the Cash Amount or REIT Stock Amount (as determined by the Company)
deliverable upon exercise of the Exchange Right be delivered to the address
specified below, and if REIT Stock is to be delivered, such REIT Stock will be
registered or placed in the name(s) and at the address(es) specified below. The
undersigned hereby represents, warrants, and certifies that the undersigned (a)
has marketable and unencumbered title to such OP Units, free and clear, other
than any encumbrance arising pursuant to the Partnership Agreement, of the
rights or interests of any other person or entity; (b) has the full right,
power, and authority to exchange and surrender such OP Units as provided herein;
and (c) has obtained the consent or approval of all persons or entities, if any,
(other than consent or approval that may be required of the Company or the
Operating Partnership) having the right to consent or approve such exchange and
surrender on the part of the undersigned.
Dated: __________________________
Name of Limited Partner:
--------------------------------------
Please Print
--------------------------------------
(Signature of Limited Partner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------------
If REIT Stock is to be issued, issue to:
Name:
--------------------------------
Please insert social security or identifying number: ______________
<PAGE>
EXHIBIT 10.8
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into as of ____ __, 1996 by and among American General Hospitality Corporation,
a Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), American General Hospitality Operating Partnership, L.P., a Delaware
limited partnership (the "OPERATING PARTNERSHIP"), and the other parties which
are signatories hereto (each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring, among
other things, certain partnership interests or assets of various partnerships,
joint ventures, corporations and other entities in which the Holders own direct
or indirect interests (the "PROPERTY PARTNERSHIPS") pursuant to contribution
agreements of even date herewith (the "CONTRIBUTION AGREEMENTS") by and among
the Operating Partnership, the Property Partnerships and the Holders and such
other parties named thereto, and in connection therewith the Holders will
receive units of limited partnership interest in the Operating Partnership (such
units of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are parties
to an Exchange Rights Agreement which provides the Holders, among other things,
with the right to demand the Operating Partnership redeem their limited
partnership units for cash and, at the option of the Company, the Company may
satisfy that redemption request on behalf of the Operating Partnership through
the issuance of Common Stock; and
WHEREAS, in order to induce the Property Partnerships and the Holders to
consummate the closings contemplated under the Contribution Agreements, the
Company has agreed to grant to Holders the registration rights set forth in
Section 2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"COMMON STOCK" shall mean shares of common stock, no par value per share,
of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also shall
include the Company's successors.
<PAGE>
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement, dated
the date hereof, among the Company, the Operating Partnership and the other
parties thereto.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the Preamble
and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, trust, estate,
or unincorporated organization, or other entity, or a government or agency or
political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Stock, excluding (i) Stock for
which a Registration Statement relating to the sale thereof shall have become
effective under the Securities Act and which have been disposed of under such
Registration Statement or (ii) Stock sold or eligible for sale pursuant to Rule
144 promulgated under the Securities Act.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing fees; (ii) all fees
and expenses incurred in connection with compliance with state securities or
"blue sky" laws (including reasonable fees and disbursements of counsel in
connection with "blue sky" qualification of any of the Registrable Securities
and the preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD; (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to the
performance of and compliance with this Agreement; (iv) all fees and expenses
incurred in connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges pursuant to Section 3(l)
hereof; and (v) the fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance. Registration Expenses shall specifically exclude
underwriting discounts and
-2-
<PAGE>
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 under Rule 415 promulgated under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
"STOCK" shall mean any Common Stock issued or to be issued to the Holders
upon the exchange of their OP Units pursuant to the Exchange Rights Agreement.
2. Shelf Registration Under the Securities Act.
-------------------------------------------
(a) Filing of Shelf Registration Statement. Within 90 days after the
--------------------------------------
first anniversary date of the date hereof, the Company shall cause to be filed a
Shelf Registration Statement providing for the sale by the Holders of the
Registrable Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable. The Company agrees to use its reasonable efforts to keep the Shelf
Registration Statement continuously effective for a period expiring on the date
on which all of the Registrable Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement or have
become eligible for sale pursuant to Rule 144 promulgated under the Securities
Act and, subject to Section 3(b) and Section 3(i) hereof, further agrees to
supplement or amend the Shelf Registration Statement, if and as required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or by
any other rules and regulations thereunder for shelf registration; provided,
--------
however, that the Company shall not be deemed to have used its reasonable
- -------
efforts to keep a Registration Statement effective during the applicable period
if it voluntarily takes any action that would result in selling Holders covered
thereby not being able to sell such Registrable Securities during that period,
unless such action is required under applicable law or the Company has filed a
post-effective amendment to the Registration Statement and the SEC has not
declared it effective. Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration Statement
effective if the negotiation or consummation of a transaction is pending or an
event has occurred, which negotiation, consummation or event would require
additional disclosure by the Company in the
-3-
<PAGE>
Registration Statement of material information which the Company has a bona fide
---- ----
business purpose for keeping confidential and the nondisclosure of which in the
Registration Statement might cause the Registration Statement to fail to comply
with applicable disclosure requirements; provided, however, that the Company may
-------- -------
not delay, suspend or withdraw a Registration Statement for such reason for more
than 60 days or more often than twice during any period of 12 consecutive
months. The Company is not required to file a separate Registration Statement,
but may file one Registration Statement covering the Registrable Securities held
by more than one Holder.
(b) Expenses. The Company shall pay all Registration Expenses in
--------
connection with any registration pursuant to Section 2(a). Each Holder shall
pay all underwriting discounts, if any, sales commissions, the fees and
disbursements of counsel representing such Holder and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement or Rule 144 promulgated under the
Securities Act.
(c) Inclusion in Shelf Registration Statement. Any Holder who does not
-----------------------------------------
within 10 days of a request provide the information reasonably requested by the
Company in connection with the Shelf Registration Statement shall not be
entitled to have its Registrable Securities included in the Shelf Registration
Statement.
3. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the
Registration Statement required to be filed pursuant to Section 2 hereof, the
Company shall, to the extent applicable:
(a) prepare and file with the SEC, within the time period set forth in
Section 2 hereof, a Shelf Registration Statement, which Shelf Registration
Statement (i) shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof, and (ii) shall comply as to form in all material respects with
the requirements of the applicable form of registration statement and include
all financial statements required by the SEC to be filed therewith;
(b) subject to the last two sentences of this Section 3(b), (i) prepare and
file with the SEC such amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep such Registration Statement
effective for the applicable period; (ii) cause each such Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 or any similar rule that may be adopted under the
Securities Act; (iii) respond as promptly as practicable to any comments
received from the SEC with respect to the Shelf Registration Statement, or any
amendment, post-effective amendment or supplement relating thereto; and (iv)
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by each Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
selling Holders thereof. All Holders shall promptly provide to the Company such
information as the Company reasonably requests in order to identify such Holder
and the method of distribution in a post-effective amendment to the Registration
Statement or a supplement to the Prospectus.
-4-
<PAGE>
Such Holder also shall notify the Company in writing upon completion of any
offer or sale or at such time as such Holder no longer intends to make offers or
sales under the Registration Statement;
(c) furnish to each Holder of Registrable Securities, without charge, as
many copies of each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such Holder may
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Securities; the Company consents to the use of the
Prospectus, including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary Prospectus;
(d) use its reasonable efforts to register or qualify the Registrable
Securities by the time the applicable Registration Statement is declared
effective by the SEC under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing, keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that the Company shall not
-------- -------
be required to (i) qualify generally to do business in any jurisdiction or to
register as a broker or dealer in such jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (ii) subject itself to
taxation in any such jurisdiction, or (iii) submit to the general service of
process in any such jurisdiction;
(e) notify each Holder of Registrable Securities promptly and, if requested
by such Holder, confirm such notification in writing (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of the issuance by the SEC or any
state securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iii) if the Company receives any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any jurisdiction or
the initiation of any proceeding for such purpose, and (iv) of the happening of
any event during the period a Registration Statement is effective which is of a
type specified in the last sentence of Section 2(a) hereof or as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the Prospectus), not
misleading;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(g) furnish to each Holder of Registrable Securities, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
-5-
<PAGE>
(h) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for such
numbers of shares of Common Stock and registered in such names as the selling
Holders may reasonably request at least two business days prior to any sale of
Registrable Securities;
(i) subject to the last sentence of Section 2(a) hereof and the last two
sentences of Section 3(b) hereof, upon the occurrence of any event contemplated
by Section 3(e)(iv) hereof, use its reasonable efforts promptly to prepare and
file a supplement or prepare, file and obtain effectiveness of a post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(j) make available for inspection by representatives of the Holders of the
Registrable Securities and any counsel or accountant retained by such Holders,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the respective officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
-------- -------
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by such representatives,
counsel or accountants unless (i) the disclosure of such records, documents or
information is necessary to avoid or correct a material misstatement or omission
in a Registration Statement, (ii) the release of such records, documents or
information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, or (iii) such records, documents or information have
been generally made available to the public;
(k) a reasonable time prior to the filing of any Registration Statement,
any Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document (not including any
documents incorporated by reference therein unless requested) to the Holders of
Registrable Securities;
(l) use its reasonable efforts to cause all Registrable Securities to be
listed on any securities exchange on which similar securities issued by the
Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of a Registration Statement;
(n) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 promulgated thereunder; and
-6-
<PAGE>
(o) use its reasonable efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holders to consummate the
disposition of such Registrable Securities.
The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution by
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
In connection with and as a condition to the Company's obligations with
respect to the Registration Statement required to be filed pursuant to Section 2
hereof and this Section 3, each Holder agrees that (i) it will not offer or sell
its Registrable Securities under the Registration Statement until it has
received copies of the supplemental or amended Prospectus contemplated by
Section 3(b) hereof and receives notice that any post-effective amendment has
become effective, (ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(iv) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof and
receives notice that any post-effective amendment has become effective, and, if
so directed by the Company, such Holder will deliver to the Company (at the
expense of the Company) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
4. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue
-7-
<PAGE>
statement or omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the Company, which
consent shall not be unreasonably withheld or delayed; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 4(a)
- -------- -------
does not apply to any Holder with respect to any loss, liability, claim, damage
or expense to the extent arising out of (x) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) or (y) such Holder's failure to deliver an
amended or supplemental Prospectus, after having been provided copies of any
such amended or supplemental Prospectus by the Company, if such loss, liability,
claim, damage or expense would not have arisen had such delivery occurred.
(b) Indemnification by Holders. Each Holder severally agrees to indemnify
--------------------------
and hold harmless the Company and the other selling Holders, and each of their
respective directors and officers (including each director and officer of the
Company who signed the Registration Statement), and each Person, if any, who
controls the Company or any other selling Holder within the meaning of Section
15 of the Securities Act, to the same extent as the indemnity contained in
Section 4(a) hereof (except that any settlement described in Section 4(a)(ii)
shall be effected with the written consent of such Holder which consent shall
not be unreasonably withheld or delayed), but only insofar as such loss,
liability, claim, damage or expense arises out of or is based upon any untrue
statement or omission, or alleged untrue statements or omissions, made in a
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such selling Holder expressly for use in
such Registration Statement (or any amendment thereto) or such Prospectus (or
any amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in Section 4(a) or 4(b) above, unless and to the extent it did not otherwise
learn of such action and the lack of notice by the indemnified party results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided under Section 4(a) or 4(b) above. If the indemnifying party so elects
within a reasonable time after receipt of such notice, the indemnifying party
may
-8-
<PAGE>
assume the defense of such action or proceeding at such indemnifying party's own
expense with counsel chosen by the indemnifying party and approved by the
indemnified parties defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
-------- -------
or parties reasonably determine that a conflict of interest exists where it is
advisable for such indemnified party or parties to be represented by separate
counsel or that, upon advice of counsel, there may be legal defenses available
to them which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to assume
such defense and the indemnified party or parties shall be entitled to one
separate counsel at the indemnifying party's or parties' expense. If an
indemnifying party is not entitled to assume the defense of such action or
proceeding as a result of the proviso to the preceding sentence, such
indemnifying party's counsel shall be entitled to conduct such indemnifying
party's defense and counsel for the indemnified party or parties shall be
entitled to conduct the defense of such indemnified party or parties, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently as possible. If an
indemnifying party is not so entitled to assume the defense of such action or
does not assume such defense, after having received the notice referred to in
the first sentence of this paragraph, the indemnifying party or parties will pay
the reasonable fees and expenses of counsel for the indemnified party or parties
as incurred. In such event, however, no indemnifying party will be liable for
any settlement effected without the written consent of such indemnifying party,
which consent may not be unreasonably withheld or delayed. If an indemnifying
party is entitled to assume, and assumes, the defense of such action or
proceeding in accordance with this paragraph, such indemnifying party shall not
be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action or proceeding.
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 4
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Company and the selling Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company and the selling
Holders, in such proportion as is appropriate to reflect the relative fault of
and benefits to the Company on the one hand and the selling Holders on the other
(in such proportions that the selling Holders are severally, not jointly,
responsible for the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits to the
indemnifying party and indemnified parties shall be determined by reference to,
among other things, the total proceeds received by the indemnified party and
indemnified parties in connection with the offering to which such losses,
claims, damages, liabilities or expenses relate. The relative fault of the
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether the action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or the indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action.
-9-
<PAGE>
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 4(d), no selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such selling Holder were offered to
the public exceeds the amount of any damages which such selling Holder would
otherwise have been required to pay by reason of such untrue statement or
omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 4(d), each Person,
if any, who controls a Holder within the meaning of Section 15 of the Securities
Act and directors and officers of a Holder shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
5. Filing of Exchange Act Reports; Rule 144 Sales.
----------------------------------------------
(a) The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Stock pursuant to Rule 144 promulgated under the
Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Stock pursuant to Rule 144 promulgated under the Securities Act,
the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Stock to be sold and not
bearing any Securities Act legend, and enable certificates for such Stock to be
for such number of shares and registered in such names as the selling Holders
may reasonably request at least two business days prior to any sale of Stock.
6. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of the Company and the Holders of a majority
in amount of the outstanding Registrable Securities; provided, however, that no
-------- -------
amendment, modification or supplement or waiver or consent to the departure with
respect to the provisions of Sections 2, 4 or 5 hereof shall be effective as
against any Holder unless consented to in writing by such Holder. Notice of any
amendment, modification or supplement to this Agreement adopted in accordance
with this Section 6(a) shall be provided by the Company to each Holder at least
thirty (30) days prior to the effective date of such amendment, modification or
supplement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier,
-10-
<PAGE>
or any courier guaranteeing overnight delivery, to the parties at their
respective addresses set forth opposite their signatures below or at such other
address as a party may indicate by written notice to the other party or parties.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three (3)
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; or
at the time delivered, if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be entitled to receive the benefits hereof and
shall be conclusively deemed to have agreed to be bound by all of the terms and
provisions hereof.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
(g) Specific Performance. The parties hereto acknowledge that there would
--------------------
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
(h) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
-11-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement,
or caused this Agreement to be duly executed on its behalf, as of the date first
written above.
Address:
- -------
3860 West Northwest Highway AMERICAN GENERAL HOSPITALITY
Suite 300 CORPORATION
Dallas, Texas 75220
By:
---------------------------------
Name
Title:
3860 West Northwest Highway AMERICAN GENERAL HOSPITALITY
Suite 300 OPERATING PARTNERSHIP, L.P.
Dallas, Texas 75220
By:
By:
---------------------------------
Name:
Title:
HOLDERS:
[Address:]
--------------------------------------
Signature
--------------------------------------
Name (Please Print or Type)
<PAGE>
EXHIBIT 10.11
FORM OF
AMERICAN GENERAL HOSPITALITY CORPORATION
1996 INCENTIVE PLAN
<PAGE>
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS............................... 1
1.1 Affiliate 1
1.2 AGHI 1
1.3 Agreement................................. 1
1.4 Board 1
1.5 Code 1
1.6 Committee................................. 1
1.7 Common Stock 1
1.8 Company................................... 2
1.9 Exchange Act 2
1.10 Fair Market Value........................ 2
1.11 Incentive Award.......................... 3
1.12 Lessee 3
1.13 Option 3
1.14 Participant 3
1.15 Performance Shares....................... 3
1.16 Plan 4
1.17 Stock Award 4
1.18 Ten Percent Shareholder.................. 4
ARTICLE II PURPOSES................................. 4
ARTICLE III ADMINISTRATION.......................... 5
ARTICLE IV ELIGIBILITY.............................. 6
ARTICLE V STOCK SUBJECT TO PLAN..................... 7
5.1 Shares Issued 7
5.2 Aggregate Limit........................... 7
5.3 Reallocation of Shares 8
ARTICLE VI OPTIONS.................................. 8
6.1 Award 8
6.2 Option Price 8
6.3 Maximum Option Period..................... 9
6.4 Nontransferability........................ 9
6.5 Transferable Options...................... 10
6.6 Employee Status........................... 10
6.7 Exercise 10
6.8 Payment 11
6.9 Shareholder Rights........................ 11
6.10 Disposition of Stock 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII STOCK AWARDS............................ 12
7.1 Award 12
7.2 Vesting 12
7.3 Performance Objectives.................... 13
7.4 Employee Status........................... 13
7.5 Shareholder Rights........................ 13
ARTICLE VIII PERFORMANCE SHARE AWARDS............... 14
8.1 Award 14
8.2 Earning the Award......................... 14
8.3 Payment 15
8.4 Shareholder Rights........................ 15
8.5 Nontransferability........................ 15
8.6 Transferable Performance Shares........... 16
8.7 Employee Status........................... 16
ARTICLE IX INCENTIVE AWARDS......................... 16
9.1 Award 16
9.2 Terms and Conditions...................... 17
9.3 Nontransferability........................ 17
9.4 Transferable Incentive Awards............. 18
9.5 Employee Status........................... 18
9.6 Shareholder Rights........................ 18
ARTICLE X ADJUSTMENT UPON CHANGE IN COMMON STOCK.... 18
ARTICLE XI COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW... 20
ARTICLE XII GENERAL PROVISIONS...................... 21
12.1 Effect on Employment and Service......... 21
12.2 Unfunded Plan 21
12.3 Rules of Construction 21
ARTICLE XIII AMENDMENT.............................. 22
ARTICLE XIV DURATION OF PLAN........................ 22
ARTICLE XV EFFECTIVE DATE OF PLAN................... 23
</TABLE>
ii
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Affiliate means any "subsidiary" or "parent" corporation (within
---------
the meaning of Section 424 of the Code) of the Company.
1.2 AGHI means American General Hospitality, Inc., a [Delaware]
----
corporation.
1.3 Agreement means a written agreement (including any amendment or
---------
supplement thereto) between the Company and a Participant specifying the terms
and conditions of a Stock Award, an award of Performance Shares or an Option or
Incentive Award granted to such Participant.
1.4 Board means the Board of Directors of the Company.
-----
1.5 Code means the Internal Revenue Code of 1986, and any amendments
----
thereto.
1.6 Committee means the Compensation Committee of the Board or a
---------
subcommittee thereof comprised of at least two (2) directors each of whom is
disinterested within the meaning of Securities and Exchange Commission Rule 16b-
3. Prior to the date that the registration statement relating to the Company's
initial public offering of Common Stock is declared effective by the Securities
and Exchange Commission, references in the Plan to the Committee shall be deemed
to be references to the Board. References to the Committee shall include any
delegate appointed in accordance with Article III of this Plan.
1.7 Common Stock means the common stock, $0.01 par value, of the
------------
Company.
<PAGE>
1.8 Company means American General Hospitality Corporation, a Maryland
-------
corporation.
1.9 Exchange Act means the Securities Exchange Act of 1934, as
------------
amended and as in effect on the effective date of this Plan.
1.10 Fair Market Value means, on any given date, the current fair
-----------------
market value of the shares of Common Stock as determined pursuant to subsection
(a) or (b) below.
(a) While the Company is a Non-Public Company, Fair Market Value
shall be determined by the Board using any reasonable method in good faith.
(b) While the Company is a Public Company, Fair Market Value shall be
determined as follows: if the Common Stock is not listed on an established
stock exchange, the Fair Market Value shall be the average of the final bid and
asked quotations on the over-the-counter market in which the Common Stock is
traded or, if applicable, the reported "closing" price of a share of Common
Stock in the New York over-the-counter market as reported by the National
Association of Securities Dealers, Inc. If the Common Stock is listed on one or
more established stock exchanges, Fair Market Value shall be deemed to be the
highest closing price of a share of Common Stock reported on any such exchange.
In any case, if no sale of Common Stock is made on any stock exchange or over-
the-counter market on that date, then Fair Market Value shall be determined as
of the next preceding day on which there was a sale. For purposes of this
definition, the term "Public Company" means a corporation that has sold
securities pursuant to an effective registration statement on Form S-1 or Form
S-11 filed pursuant to the Securities Act of 1933, as
2
<PAGE>
amended, and the term "Non-Public Company" means a corporation that has never
sold securities pursuant to an effective registration statement on Form S-1 or
Form S-11 filed pursuant to the Securities Act of 1933, as amended.
Notwithstanding the foregoing, Fair Market Value shall mean with respect to the
initial awards to be made in connection with, and as described in the
registration statement relating to, the Company's initial public offering of
Common Stock, the initial public offering price of such Common Stock.
1.11 Incentive Award means an award which, subject to such terms and
---------------
conditions as may be prescribed by the Administrator, entitles the Participant
to receive a cash payment from the Company or an Affiliate.
1.12 Lessee means AGH Leasing, L.P., a Delaware limited partnership.
------
1.13 Option means a stock option that entitles the holder to purchase
------
from the Company a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.14 Participant means an employee of the Company or an Affiliate,
-----------
including an employee who is a member of the Board, or an individual whose
efforts contribute to the performance or success of the Company or an Affiliate,
who satisfies the requirements of Article IV and is selected by the Committee to
receive a Stock Award, an Option, an Incentive Award, an award of Performance
Shares or a combination thereof.
1.15 Performance Shares means an award, in the amount determined by
------------------
the Committee and specified in an Agreement, stated with reference to a
specified number of shares of Common Stock, that entitles the holder to receive
a payment for each specified share equal to the Fair Market Value of Common
Stock on the date of payment.
3
<PAGE>
1.16 Plan means the American General Hospitality Corporation 1996
----
Incentive Plan.
1.17 Stock Award means Common Stock awarded to a Participant under
-----------
Article VIII.
1.18 Ten Percent Shareholder means any individual owning more than ten
-----------------------
percent (10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate. An individual shall be considered to own any voting
stock owned (directly or indirectly) by or for his brothers, sisters, spouse,
ancestors or lineal descendants and shall be considered to own proportionately
any voting stock owned (directly or indirectly) by or for a corporation,
partnership, estate or trust of which such individual is a shareholder, partner
or beneficiary.
ARTICLE II
PURPOSES
--------
The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates and to associate their interests with those of the Company and its
stockholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying, and the grant of Stock Awards, Performance Shares and
Incentive Awards. No Option that is intended to be an incentive stock option
shall be invalid for failure to qualify as
4
<PAGE>
an incentive stock option. The proceeds received by the Company from the sale
of Common Stock pursuant to this Plan shall be used for general corporate
purposes.
ARTICLE III
ADMINISTRATION
--------------
The Plan shall be administered by the Committee. The Committee shall
have authority to grant Stock Awards, Performance Shares, Incentive Awards and
Options upon such terms (not inconsistent with the provisions of this Plan) as
the Committee may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or on the transferability or forfeitability of a Stock Award,
Incentive Award or Performance Shares. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which any Option may be
exercised, or the time at which a Stock Award may become transferable or
nonforfeitable or the time at which an Incentive Award or Performance Shares may
be settled. In addition, the Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific
power to the Committee shall not be construed as limiting any power or authority
of the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of this Plan shall be final and conclusive.
Neither the Committee nor any
5
<PAGE>
member of the Committee shall be liable for any act done in good faith with
respect to this Plan or any Agreement, Option, Stock Award, Incentive Award or
award of Performance Shares. All expenses of administering this Plan shall be
borne by the Company.
The Committee, in its discretion, may delegate to one or more officers
of the Company all or part of the Committee's authority and duties with respect
to grants and awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act; provided, however, the
Committee shall not delegate its authority (i) to appoint delegates or its
authority to amend or revoke any delegation, (ii) under Articles X and XI hereof
and (iii) to accelerate the exercisability of Options, the transferability of
Stock Awards or the time at which Incentive Awards or awards of Performance
Shares may be settled. The Committee may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Committee's delegate or delegates that were consistent with the terms of the
Plan.
ARTICLE IV
ELIGIBILITY
-----------
Any employee of the Company or an Affiliate (including a corporation
that becomes an Affiliate after the adoption of this Plan) or a person whose
efforts contribute to the performance or success of the Company or an Affiliate
(including a corporation that becomes an Affiliate after the adoption of this
Plan) (other than a Board member or an employee of the Lessee or AGHI, in each
case, who is not also an employee of the Company
6
<PAGE>
or an Affiliate) is eligible to participate in this Plan if the Committee, in
its sole discretion, determines that such person has contributed significantly
or can be expected to contribute significantly to the profits or growth of the
Company or an Affiliate. Directors of the Company who are employees of the
Company or an Affiliate may be selected to participate in this Plan. A member
of the Committee may not participate in this Plan during the time that his
participation would prevent the Committee from being "disinterested" for
purposes of Securities and Exchange Commission Rule 16b-3 as in effect from time
to time.
ARTICLE V
STOCK SUBJECT TO PLAN
---------------------
5.1 Shares Issued. Upon the award of shares of Common Stock pursuant
-------------
to a Stock Award or the settlement of a Performance Share award, the Company may
issue shares of Common Stock from its authorized but unissued Common Stock.
Upon the exercise of an Option, the Company may deliver to the Participant (or
the Participant's broker if the Participant so directs), shares of Common Stock
from its authorized but unissued Common Stock.
5.2 Aggregate Limit. The maximum aggregate number of shares of Common
---------------
Stock that may be issued under this Plan is 900,000 shares. The maximum
aggregate number of shares that may be issued under this Plan shall be subject
to adjustment as provided in Article X.
7
<PAGE>
5.3 Reallocation of Shares. If an Option is terminated, in whole or
----------------------
in part, for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options, Stock Awards and Performance Share awards to be granted under this
Plan. If an award of Performance Shares is forfeited, in whole or in part, the
number of shares of Common Stock allocated to the Performance Share award or
portion thereof may be reallocated to other Options and Stock Awards and
Performance Share awards to be granted under this Plan.
ARTICLE VI
OPTIONS
-------
6.1 Award. In accordance with the provisions of Article IV, the
-----
Committee will designate each individual to whom an Option is to be granted and
will specify the number of shares of Common Stock covered by such awards;
provided, however, that no individual may be granted Options in any calendar
year covering more than 250,000 shares of Common Stock.
6.2 Option Price. The price per share for Common Stock purchased on
------------
the exercise of an Option shall be determined by the Committee on the date of
grant; provided, however, that the price per share for Common Stock purchased on
the exercise of any Option shall not be less than the Fair Market Value on the
date of grant or, with respect to Options granted in connection with the initial
employment of an individual following the effective date of the registration
statement relating to the Company's initial public offering of Common
8
<PAGE>
Stock, eighty-five (85%) percent of the Fair Market Value on the date the Option
is granted. Notwithstanding the preceding sentence, the price per share for
Common Stock purchased on the exercise of any Option that is an incentive stock
option shall not be less than the Fair Market Value on the date the Option is
granted or, in the case of an incentive stock option granted to an individual
who is a Ten Percent Shareholder on the date such option is granted, shall not
be less than one hundred ten (110%) percent of the Fair Market Value on the date
the Option is granted.
6.3 Maximum Option Period. The maximum period in which an Option may
---------------------
be exercised shall be determined by the Committee on the date of grant, except
that no Option that is an incentive stock option shall be exercisable after the
expiration of ten years from the date such Option was granted. In the case of
an incentive stock option that is granted to a Participant who is a Ten Percent
Shareholder on the date of grant, such Option shall not be exercisable after the
expiration of five years from the date of grant. The terms of any Option that
is an incentive stock option may provide that it is exercisable for a period
less than such maximum period.
6.4 Nontransferability. Except as provided in Section 6.5, each
------------------
Option granted under this Plan shall be nontransferable except by will or by the
laws of descent and distribution. During the lifetime of the Participant to
whom the option is granted, the Option may be exercised only by the Participant.
No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
9
<PAGE>
6.5 Transferable Options. Section 6.4 to the contrary
--------------------
notwithstanding, if the Agreement provides, an Option that is not an incentive
stock option may be transferred by a Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family members
or a partnership in which such family members are the only partners; provided,
however, that the Participant may not receive any consideration for the
transfer. In addition to transfers described in the preceding sentence, the
Committee may grant Options that are not incentive stock options that are
transferable on other terms and conditions as may be permitted under Securities
Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an
Option transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Option during the period that it was held by the
Participant.
6.6 Employee Status. For purposes of determining the applicability of
---------------
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons, shall not be
deemed interruptions of continuous employment.
6.7 Exercise. Subject to the provisions of this Plan and the
--------
applicable Agreement, an Option shall become exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Committee and set forth in the Agreement; provided, however, that incentive
stock options (granted under the Plan and all
10
<PAGE>
plans of the Company and its Affiliates) may not be first exercisable in a
calendar year for stock having a Fair Market Value (determined as of the date an
option is granted) exceeding $100,000. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option expires
in accordance with Section 6.3 hereof. An Option granted under this Plan may be
exercised with respect to any number of whole shares less than the full number
for which the Option could be exercised. A partial exercise of an Option shall
not affect the right to exercise the Option from time to time in accordance with
this Plan and the applicable Agreement with respect to the remaining shares
subject to the Option.
6.8 Payment. Unless otherwise provided by the Agreement, payment of
-------
the Option price shall be made in cash or a cash equivalent acceptable to the
Committee. If the Agreement provides, payment of all or part of the Option
price may be made by surrendering shares of Common Stock to the Company. If
Common stock is used to pay all or part of the Option price, the sum of the cash
and cash equivalent and the Fair Market Value (determined as of the day
preceding the date of exercise) of the shares surrendered must not be less than
the Option price of the shares for which the Option is being exercised.
6.9 Shareholder Rights. No Participant shall have any rights as a
------------------
shareholder with respect to shares subject to his Option until the date of
exercise of such Option.
6.10 Disposition of Stock. A Participant shall notify the Company of
--------------------
any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs:
11
<PAGE>
(i) within two years of the grant of an Option or
(ii) within one year of the issuance of the Common Stock to the
Participant.
Such notice shall be in writing and directed to the Secretary of the Company.
ARTICLE VII
STOCK AWARDS
------------
7.1 Award. In accordance with the provisions of Article IV, the
-----
Committee will designate each individual to whom a Stock Award is to be made and
will specify the number of shares of Common Stock covered by such awards;
provided, however, that no more than 50,000 shares of Common Stock may be issued
in respect of Stock Awards pursuant to the Plan and no Individual may receive
Stock Awards with respect to more than 30,000 shares of Common Stock in any
calendar year.
7.2 Vesting. The Committee, on the date of the award, may prescribe
-------
that a Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time or subject to such conditions as may be set
forth in the Agreement. Except with respect to Stock Awards any portion of
which are immediately vested, the period of restriction shall be at least three
years; provided, however, that the minimum period of restriction shall be at
least one year in the case of (i) the restricted portion of a Stock Award with
an immediately vested portion and (ii) a Stock Award that will become
transferable and nonforfeitable on account of the satisfaction of performance
objectives prescribed by the Committee.
12
<PAGE>
7.3 Performance Objectives. In accordance with Section 7.2, the
----------------------
Committee may prescribe that Stock Awards will be vested immediately upon grant
or will become vested or transferable or both based on objectives stated with
respect to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. If the Committee,
on the date of award, prescribes that a Stock Award shall become nonforfeitable
and transferable only upon the attainment of performance objectives stated with
respect to one or more of the foregoing criteria, the shares subject to such
Stock Award shall become nonforfeitable and transferable only to the extent that
the Committee certifies that such objectives have been achieved.
7.4 Employee Status. In the event that the terms of any Stock Award
---------------
provide that shares may become transferable and nonforfeitable thereunder only
after completion of a specified period of employment, the Committee may decide
in each case to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
7.5 Shareholder Rights. Prior to their forfeiture (in accordance with
------------------
the applicable Agreement and while the shares of Common Stock granted pursuant
to the Stock Award may be forfeited or are nontransferable), a Participant will
have all rights of a shareholder with respect to a Stock Award, including the
right to receive dividends and vote the shares; provided, however, that during
such period (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares of Common Stock granted
13
<PAGE>
pursuant to a Stock Award, (ii) the Company shall retain custody of the
certificates evidencing shares of Common Stock granted pursuant to a Stock
Award, and (iii) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to each Stock Award. The limitations set forth
in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are transferable and are no longer forfeitable.
ARTICLE VIII
PERFORMANCE SHARE AWARDS
------------------------
8.1 Award. In accordance with the provisions of Article IV, the
-----
Committee will designate each individual to whom an award of Performance Shares
is to be made and will specify the number of shares of Common Stock covered by
such awards; provided, however, that no Participant may receive an award of
Performance Shares in any calendar year for more than 12,500 shares of Common
Stock.
8.2 Earning the Award. The Committee, on the date of the grant of an
-----------------
award, may prescribe that the Performance Shares, or portion thereof, will be
earned, and the Participant will be entitled to receive payment pursuant to the
award of Performance Shares only upon the satisfaction of certain requirements
or the attainment of certain objectives. By way of example and not of
limitation, the restrictions may provide that Performance Shares will be
forfeited without payment if the Participant separates from the service of the
Company and its Affiliates before the expiration of a stated term or unless the
Company, an Affiliate or
14
<PAGE>
an operating unit achieves objectives stated with reference to the Company's, an
Affiliate's or an operating unit's return on equity, earnings per share, total
earnings, earnings growth, return on capital, return on assets, funds from
operations or Fair Market Value. If the Committee, on the date of award,
prescribes that no payments will be made with respect to Performance Shares
unless performance objectives stated with respect to the foregoing criteria are
attained, no such payment will be made unless, and then only to the extent that,
the Committee certifies that such objectives have been achieved.
8.3 Payment. In the discretion of the Committee, the amount payable
-------
when an award of Performance Shares is earned may be settled in cash, by the
issuance of Common Stock or a combination of cash and Common Stock. A
fractional share shall not be deliverable when an award of Performance Shares is
earned, but a cash payment will be made in lieu thereof.
8.4 Shareholder Rights. No Participant shall, as a result of
------------------
receiving an award of Performance Shares, have any rights as a shareholder until
and to the extent that the award of Performance Shares is earned and settled by
the issuance of Common Stock. After an award of Performance Shares is earned,
if settled completely or partially in Common Stock, a Participant will have all
the rights of a shareholder with respect to such Common Stock.
8.5 Nontransferability. Except as provided in Section 8.6,
------------------
Performance Shares granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution. No right or interest of a
Participant in any Performance Shares shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
15
<PAGE>
8.6 Transferable Performance Shares. Section 8.5 to the contrary
-------------------------------
notwithstanding, the Committee may grant transferable Performance Shares to the
extent that, and on such terms and conditions as may be permitted by, Securities
Exchange Commission Rule 16b-3 as in effect from time to time. The holder of
Performance Shares transferred pursuant to this section shall be bound by the
same terms and conditions that governed the Performance Shares during the period
that they were held by the Participant.
8.7 Employee Status. In the event that the terms of any Performance
---------------
Share award provide that no payment will be made unless the Participant
completes a stated period of employment, the Committee may decide to what extent
leaves of absence for government or military service, illness, temporary
disability, or other reasons shall not be deemed interruptions of continuous
employment.
ARTICLE IX
INCENTIVE AWARDS
----------------
9.1 Award. In accordance with the provisions of Article IV, the
-----
Committee shall designate Participants to whom Incentive Awards are made. All
Incentive Awards shall be finally determined exclusively by the Committee under
the procedures established by the Committee; provided, however, that no
Participant may receive an Incentive Award payment in any calendar year that
exceeds the lesser of (i) one hundred (100%) percent of the Participant's base
salary (prior to any salary reduction or deferral elections) as of the date of
grant of the Incentive Award or (ii) $250,000.
16
<PAGE>
9.2 Terms and Conditions. The Committee, at the time an Incentive
--------------------
Award is made, shall specify the terms and conditions which govern the award.
Such terms and conditions shall prescribe that the Incentive Award shall be
earned only to the extent that the Company, an Affiliate or an operating unit,
during a performance period of at least one year, achieves objectives stated
with respect to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. Such terms and
conditions also may include other limitations on the payment of Incentive Awards
including, by way of example and not of limitation, requirements that the
Participant complete a specified period of employment with the Company or an
Affiliate or that the Company, an Affiliate, or the Participant attain stated
objectives or goals (in addition to those prescribed in accordance with the
preceding sentence) as a prerequisite to payment under an Incentive Award. The
Committee, at the time an Incentive Award is made, shall also specify when
amounts shall be payable under the Incentive Award and whether amounts shall be
payable in the event of the Participant's death, disability, or retirement. No
payment shall be made under an Incentive Award except to the extent that the
Committee certifies that the objectives governing such award have been achieved.
9.3 Nontransferability. Except as provided in Section 9.4, Incentive
------------------
Awards granted under this Plan shall be nontransferable except by will or by the
laws of descent and distribution. No right or interest of a Participant in an
Incentive Award shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
17
<PAGE>
9.4 Transferable Incentive Awards. Section 9.3 to the contrary
-----------------------------
notwithstanding, the Committee may grant transferable Incentive Awards to the
extent that, and on such terms and conditions as may be permitted by, Securities
Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an
Incentive Award transferred pursuant to this section shall be bound by the same
terms and conditions that governed the Incentive Award during the period that it
was held by the Participant.
9.5 Employee Status. If the terms of an Incentive Award provide that
---------------
a payment will be made thereunder only if the Participant completes a stated
period of employment, the Committee may decide to what extent leaves of absence
for governmental or military service, illness, temporary disability or other
reasons shall not be deemed interruptions of continuous employment.
9.6 Shareholder Rights. No Participant shall, as a result of
------------------
receiving an Incentive Award, have any rights as a shareholder of the Company or
any Affiliate on account of such award.
ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number of shares as to which Options, Stock Awards and
Performance Shares may be granted under this Plan, the terms of outstanding
Stock Awards, Options, Performance Share awards and Incentive Awards, and the
per individual limitations on the number of shares for which Options, Stock
Awards and Performance Shares may be
18
<PAGE>
granted, shall be adjusted as the Committee shall determine to be equitably
required in the event that there is an increase or reduction in the number of
shares of Common Stock, or any change (including, but not limited to, a change
in value) in the shares of Common Stock or exchange of shares of Common Stock
for a different number or kind of shares or other securities of the Company by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, subdivision or consolidation of shares,
extraordinary dividend, change in corporate structure or otherwise. Any
determination made under this Article X by the Committee shall be final and
conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Options, Stock Awards and Performance
Shares may be granted, the per individual limitations on the number of shares
for which Options, Stock Awards and Performance Shares may be granted or the
terms of outstanding Stock Awards, Options, Incentive Awards or Performance
Shares.
The Committee may make Stock Awards and may grant Options, Incentive
Awards and Performance Shares in substitution for performance shares, phantom
shares, stock awards, stock options, stock appreciation rights, or similar
awards held by an individual who becomes an employee of the Company or an
Affiliate in connection with a transaction
19
<PAGE>
described in the first paragraph of this Article X. Notwithstanding any
provision of the Plan (other than the limitation of Section 5.2), the terms of
such substituted Stock Awards, Option, Incentive Awards or Performance Share
grants shall be as the Committee, in its discretion, determines is appropriate.
ARTICLE XI
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW
--------------------------------------------
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel
as to such compliance. Any share certificate issued to evidence Common Stock
when a Stock Award is granted or for which an option is exercised or a
Performance Share settled may bear such legends and statements as the Committee
may deem advisable to assure compliance with federal and state laws and
regulations. No Option shall be exercisable, no Stock Award shall be granted,
no Common Stock shall be issued, no certificate for shares shall be delivered,
and no payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters. Except as to matters of federal law,
this Plan
20
<PAGE>
and the rights of all persons claiming hereunder shall be construed and
determined in accordance with the laws of the State of Texas without giving
effect to conflicts of law principles.
ARTICLE XII
GENERAL PROVISIONS
------------------
12.1 Effect on Employment and Service. Neither the adoption of this
--------------------------------
Plan, its operation, nor any documents describing or referring to this Plan (or
any part thereof) shall confer upon any individual any right to continue in the
employ or service of the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate to terminate the employment or service
of any individual at any time with or without assigning a reason therefor.
12.2 Unfunded Plan. The Plan, insofar as it provides for grants,
-------------
shall be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by grants under this Plan. Any liability of
the Company to any person with respect to any grant under this Plan shall be
based solely upon any contractual obligations that may be created pursuant to
this Plan. No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
12.3 Rules of Construction. Headings are given to the articles and
---------------------
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute,
21
<PAGE>
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
ARTICLE XIII
AMENDMENT
---------
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if the amendment materially (i) increases the aggregate number of
shares of Common Stock that may be issued under the Plan, (ii) changes the class
of individuals eligible to become Participants or (iii) increases the benefits
that may be provided under the Plan. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding Stock Award, Option, Incentive Award or Performance Share award
outstanding at the time such amendment is made.
ARTICLE XIV
DURATION OF PLAN
----------------
No Stock Award, Option, Incentive Award or Performance Share award may
be granted under this Plan more than ten years after the earlier of the date
this Plan is adopted by the Board or the date this Plan is approved by
stockholders in accordance with Article XV. Stock Awards, Options, Incentive
Awards and Performance Share awards granted before that date shall remain valid
in accordance with their terms.
22
<PAGE>
ARTICLE XV
EFFECTIVE DATE OF PLAN
----------------------
Options, Incentive Awards and Performance Share awards may be granted
under this Plan upon its adoption by the Board, provided that no Option,
Incentive Award or Performance Share award shall be effective or exercisable
unless this Plan is approved by a majority of the votes entitled to be cast by
the Company's stockholders, voting either in person or by proxy, at a duly held
stockholders' meeting or by unanimous consent of the Company's stockholders.
Stock Awards may be granted under this Plan upon the later of its adoption by
the Board or its approval by stockholders in accordance with the preceding
sentence.
23
<PAGE>
EXHIBIT 10.12
FORM OF
AMERICAN GENERAL HOSPITALITY CORPORATION
NON-EMPLOYEE DIRECTORS' INCENTIVE PLAN
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Award Date means the date of the first Board meeting after each
----------
annual meeting of the Company's stockholders beginning with the annual meeting
of stockholders in 1997.
1.2 Board means the Board of Directors of the Company.
-----
1.3 Committee means the committee appointed by the Board to
---------
administer the Plan.
1.4 Common Stock means the common stock of the Company.
------------
1.5 Company means American General Hospitality Corporation, a
-------
Maryland corporation.
1.6 Fair Market Value means, on any given date, the current fair
-----------------
market value of a share of Common Stock as determined pursuant to subsection (a)
or (b) below.
(a) The Fair Market Value on the First Award Date for Founding
Directors shall be the initial public offering price of the Common Stock.
(b) Except as provided in subsection (a), Fair Market Value shall be
determined as follows: if the Common Stock is not listed on an established
stock exchange, Fair Market Value shall be the average of the final bid and
asked quotations on the over-the-counter market in which the Common Stock is
traded or, if applicable, the reported "closing" price of a share of Common
Stock in the New York over-the-counter market as reported by the National
Association of Securities Dealers, Inc. If the Common Stock is listed on one or
more established stock exchanges, Fair Market Value shall be deemed to be the
highest closing price of a share of Common Stock reported on any of such
exchanges. In any case, if
<PAGE>
no sale of Common Stock is made on any stock exchange or over-the-counter market
on that date, then Fair Market Value shall be determined as of the next
preceding day on which there was a sale.
1.7 First Award Date means (i) with respect to Founding Directors,
----------------
the date that the registration statement relating to the Company's initial
public offering of Common Stock is declared effective by the Securities and
Exchange Commission, and (ii) with respect to Non-Founding Directors, the date
of the meeting of the Company's stockholders at which the Non-Founding Director
is first elected to the Board.
1.8 Founding Director means a Participant who is a member of the
-----------------
Board on the date that the registration statement relating to the Company's
initial public offering of Common Stock is declared effective by the Securities
and Exchange Commission.
1.9 Internal Revenue Code means the Internal Revenue Code of 1986, as
---------------------
amended.
1.10 Non-Founding Director means a Participant who is not a Founding
---------------------
Director.
1.11 Option means a stock option that entitles the holder to purchase
------
shares of Common Stock from the Company on the terms set forth in Article IV of
this Plan.
1.12 Participant means a member of the Board who, on the First Award
-----------
Date or applicable Award Date, is not an employee or officer of the Company or
any "subsidiary" or "parent" corporation of the Company within the meaning of
Section 424 of the Internal Revenue Code.
2
<PAGE>
1.13 Plan means the American General Hospitality Corporation Non-
----
Employee Directors' Incentive Plan.
ARTICLE II
PURPOSES
--------
The Plan is intended to (i) assist the Company in recruiting and
retaining non-employee directors and (ii) promote a greater identity of interest
between Participants and stockholders by enabling Participants to participate in
the Company's future success.
ARTICLE III
ADMINISTRATION
--------------
The Plan shall be administered by the Committee. The Committee shall
have complete authority to interpret all provisions of the Plan; to adopt,
amend, and rescind rules and regulations pertaining to the administration of the
Plan and to make all other determinations necessary or advisable for the
administration of the Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee in
connection with the administration of the Plan shall be final and conclusive.
No member of the Committee shall be liable for any act done in good faith with
respect to the Plan. All expenses of administering the Plan shall be borne by
the Company.
3
<PAGE>
ARTICLE IV
OPTIONS
-------
4.1 Grant of Options. Each Participant shall be granted an Option
----------------
for 10,000 shares of Common Stock on the applicable First Award Date. All
Options shall be evidenced by Agreements that shall be subject to the applicable
provisions of this Plan and to such other provisions as the Committee may adopt
which are not inconsistent with the provisions of this Plan.
4.2 Option Price. The price per share of Common Stock purchased on
------------
the exercise of an Option shall be the Fair Market Value on the date that the
Option is granted.
4.3 Maximum Option Period. The maximum period during which an Option
---------------------
may be exercised shall be ten years from the date of grant.
4.4 Exercise of Options. All Options granted under the Plan shall
-------------------
vest in three installments of 3,333, 3,333 and 3,334 shares, respectively,
beginning on the date of grant and on subsequent anniversaries thereof (each, a
"Vesting Date"), provided the Participant continues to serve as a director of
the Company on such Vesting Date.
4.5 Effect of Termination of Services or Death. If a Participant
------------------------------------------
ceases to serve as a director of the Company for any reason, the Options that
have been previously granted to that Participant and that are not vested as of
that date shall be forfeited. Options that have vested as of the date of such
cessation of services may be exercised by the Participant, in accordance with
and subject to the terms of the Plan, after the date such Participant ceases to
be a director of the Company. If a Participant dies, the Options that have been
previously granted to that Participant and that are vested as of the date of
death
4
<PAGE>
may be exercised by the administrator of the Participant's estate, or by the
person to whom such Options are transferred by will or the laws of descent and
distribution. In no event, however, may any Option be exercised after the
expiration date of such Option. Any Option or portion thereof that is not
exercised during the applicable time period specified above shall be deemed
terminated at the end of the applicable time period for purposes of Article VI
hereof.
4.6 Payment of Option Price. Payment of the Option price shall be
-----------------------
made in cash, cash equivalent acceptable to the Committee, by the surrender of
shares of Common Stock, or a combination thereof. If shares of Common Stock are
surrendered in payment of the Option price, the shares surrendered must have an
aggregate Fair Market Value (determined as of the day preceding the exercise
date) that, together with any cash or cash equivalent paid, is not less than the
Option price for the number of shares of Common Stock for which this Option is
being exercised.
4.7 Nontransferability. Each Option granted under this Plan shall be
------------------
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom an Option is granted, the Option
may be exercised only by the Participant. No right or interest of a Participant
in any Option shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
4.8 Shareholder Rights. No Participant shall have any rights as a
------------------
shareholder with respect to shares of Common Stock subject to his or her Option
until the date of exercise of such option.
5
<PAGE>
ARTICLE V
SHARE AWARDS
------------
5.1 Eligibility. Each Participant will be awarded shares of Common
-----------
Stock on each Award Date. The number of shares of Common Stock issued to each
Participant in accordance with the preceding sentence will be the number of
whole shares that has an aggregate Fair Market Value on the Award Date that as
nearly as possible equals $8,500. In addition, shares of Common Stock will be
awarded to each Founding Director and to each Non-Founding Director who is first
appointed to the Board to fill a vacancy on the Board other than at the
regularly scheduled annual meeting of the Company's stockholders on the
applicable First Award Date. The number of shares issued in accordance with the
preceding sentence will be the number of whole shares that have an aggregate
Fair Market Value on the date of award that as nearly as possible equals the
product of $8,500 and a fraction, the numerator of which is the number of full
months preceding the next anticipated Award Date and the denominator of which is
twelve.
5.2 Vesting. Shares of Common Stock issued under Section 5.1 shall be
-------
immediately and fully vested.
5.3 Shareholder Rights. A member of the Board who is issued shares
------------------
of Common Stock under Section 5.1 will have the right to vote all such shares
and to receive all dividends thereon and shall have all the rights of a
shareholder of the Company with respect to such shares.
6
<PAGE>
ARTICLE VI
STOCK SUBJECT TO PLAN
---------------------
6.1 Shares Issued. Upon the award of shares of Common Stock in
-------------
accordance with Article V, the Company may issue shares of Common Stock from its
authorized but unissued Common Stock. Upon the exercise of an Option, the
Company may deliver to the Participant (or the Participant's broker if the
Participant so directs), shares of Common Stock from its authorized but unissued
Common Stock.
6.2 Aggregate Limit. The maximum aggregate number of shares of
---------------
Common Stock that may be issued under this Plan is 100,000 shares, 80,000 of
which may be issued pursuant to Article IV and 20,000 of which may be issued
pursuant to Article V. The maximum aggregate number of shares that may be
issued under this Plan shall be subject to adjustment as provided in Article
VII.
6.3 Reallocation of Shares. If an Option is terminated, in whole or
----------------------
in part, for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options to be granted under this Plan.
ARTICLE VII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The provisions of this Plan and the terms of outstanding Options shall
be adjusted as the Committee shall determine to be equitably required in the
event that there is an increase or reduction in the number of shares of Common
Stock, or any change (including, but not limited to, a change in value) in the
shares of Common Stock or exchange of shares
7
<PAGE>
of Common Stock for a different number or kind of shares or other securities of
the Company by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, subdivision or consolidation
of shares, extraordinary dividend, change in corporate structure or otherwise.
Any determination made under this Article VII by the Committee shall be final
and conclusive.
The issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares of obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the provisions of
this Plan or the terms of outstanding Options.
ARTICLE VIII
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW
--------------------------------------------
No Common Stock shall be issued and no certificates for shares of
Common Stock shall be delivered under the Plan except in compliance with all
applicable federal and state laws and regulations, any listing agreement to
which the Company is a party, and the rules of all domestic stock exchanges on
which the Company's Common Stock may be listed. The Company shall have the
right to rely on an opinion of its counsel as to such compliance. Any
certificate issued to evidence Common Stock issued upon the exercise of an
Option granted under the Plan may bear such legends and statements as the
Committee may deem advisable to assure compliance with federal and state laws
and regulations. No Common
8
<PAGE>
Stock shall be issued and no certificate for shares of Common Stock shall be
delivered upon the exercise of an Option granted under the Plan until the
Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters. Except
as to matters of federal law, this Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Texas without giving effect to conflicts of law principles.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Unfunded Plan. The Plan, insofar as it provides for awards,
-------------
shall be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by awards under the Plan. Any liability of
the Company to any person with respect to any award to be made under the Plan
shall be based solely upon any contractual obligations that may be created
pursuant to the Plan. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the Company.
9.2 Rules of Construction. Headings are given to the articles and
---------------------
sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
9
<PAGE>
ARTICLE X
AMENDMENT
---------
The Board may amend from time to time or terminate the Plan at any
time; provided, however, that no amendment may become effective until
shareholder approval is obtained if the amendment materially (i) increases the
aggregate number of shares of Common Stock that may be issued under this Plan
(other than an adjustment authorized under Article VII), (ii) increases the
benefits to be awarded under the Plan or (iii) changes the class of individuals
eligible to become Participants. The provisions of the Plan relating to the
amount, price and timing of grants of Options and awards of shares of Common
Stock (including Sections 1.1, 1.6, 1.7, 1.12 and Articles IV, V, VI, and VII)
may not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code and the rules and regulations thereunder.
No amendment shall, without a Participant's consent, adversely affect any rights
of such Participant under any outstanding Option or award of shares with Common
Stock.
ARTICLE XI
DURATION OF PLAN
----------------
No Option or award of Common Stock may be made under this Plan after
December 31, 2006. Options and awards of Common Stock made before that date
shall remain valid in accordance with their terms.
10
<PAGE>
ARTICLE XII
EFFECTIVE DATE OF PLAN
----------------------
Options may be granted under this Plan upon its adoption by the Board,
provided that no Option shall be effective or exercisable unless this Plan is
approved by a majority of the votes entitled to be cast by the Company's
stockholders, voting either in person or by proxy, at a duly held stockholders'
meeting or by unanimous consent of the Company's stockholders. Awards of Common
Stock may be granted under this Plan upon the later of its adoption by the Board
or its approval by stockholders in accordance with the preceding sentence.
11
<PAGE>
EXHIBIT 10.13
CERTAIN ASPECTS OF THIS
-----------------------
AGREEMENT ARE SUBJECT TO
------------------------
ARBITRATION UNDER THE TEXAS
---------------------------
GENERAL ARBITRATION ACT
-----------------------
FORM OF EMPLOYMENT AGREEMENT FOR STEVEN D. JORNS
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of ___, 1996, is
entered into between AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland
corporation (the "Company"), and Steven D. Jorns ("Executive").
------- ---------
RECITALS
--------
A. The Company is a corporation intended to be qualified and to operate as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
B. The Company is the sole shareholder of the general partner of American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership,
which has, among other things, acquired interests in various hotels from, among
others, the principals of American General Hospitality, Inc. ("AGHI"), including
Executive.
C. The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. EMPLOYMENT DUTIES. During the Term (as defined in paragraph 2 below),
-----------------
the Company will employ Executive as its Chairman of the Board, Chief Executive
Officer and President. Executive will devote substantially all of his business
time and attention to the performance of his duties under this Agreement.
Executive may provide services to AGHI, so long as such activity does not
interfere with the performance of Executive's duties hereunder. Executive
initially shall have the duties, rights and responsibilities normally associated
with his position with the Company, together with such other reasonable duties
relating to the operation of the business of the Company and its affiliates as
may be assigned to him from time to time by the Board of Directors of the
Company (the "Board") or may otherwise be provided for in the Company's Bylaws.
-----
If the Company shall so request, Executive shall become and shall, at any time
during the term of this Agreement as the Company shall so request, act as a
director of the Company and/or as an officer and/or director of any of the
subsidiaries of the Company as they may now exist or may be established by the
Company in the future without any compensation other than that provided for in
paragraph 3.
2. TERM. The term of Executive's employment under this Agreement (the
----
"Term") will begin on the date of this Agreement and will continue, subject to
- -----
the termination provisions set forth in paragraph 5 below, until the fifth
anniversary of the date hereof.
<PAGE>
3. SALARY AND BONUS.
----------------
a. Salary. During each year of the Term, Executive will receive a salary
------
at the annual rate of $100,000, which salary will be subject to increase as set
forth below (as so increased, the "Base Salary"). The Compensation Committee of
-----------
the Board (the "Committee") will review Executive's Base Salary on an annual
---------
basis, and the Committee, upon such review and in its sole discretion, may
increase or decrease the Base Salary by an amount which the Committee deems
appropriate in light of the Company's and Executive's performance during the
period covered by such review; provided, however, that the Base Salary will not
be reduced below $100,000 per annum. The Base Salary will be payable to
Executive in accordance with the Company's standard payroll practices.
b. Bonus. In addition to the Base Salary, the Company may pay to
-----
Executive performance-based bonus compensation for each fiscal year of the
Company as determined by the Committee in its sole discretion.
4. FRINGE BENEFITS. In addition to the other compensation payable
---------------
pursuant to this Agreement, during the Term:
a. Standard Benefits. Executive will be entitled to receive such fringe
-----------------
benefits and perquisites, including medical, dental, disability and life
insurance, as are generally made available from time to time to management
employees and Executives of the Company and to participate in any pension,
profit-sharing, stock option or similar plan or program established from time to
time by the Company for the benefit of its employees.
b. Vacation and Sick Leave. Executive will be entitled to such periods of
-----------------------
paid vacation and sick leave allowance each year (not less than four weeks) that
are consistent with the Company's vacation and sick leave policy for senior
management.
c. Business Expenses. The Company will pay or reimburse Executive for all
-----------------
business-related expenses incurred by Executive in the course of his performance
of duties under this Agreement, subject to the procedures established by the
Company from time to time with respect to incurrence, substantiation,
reasonableness and approval.
d. Stock Options; Stock Awards. Executive shall be entitled to
---------------------------
participate in employee stock plans from time to time established for the
benefit of employees of the Company in accordance with the terms and conditions
of such plans. Upon effectiveness of the registration statement relating to the
Company's initial public offering of shares of its Common Stock (the "IPO"),
Executive shall receive a grant of 225,000 stock options pursuant to the
Company's 1996 Incentive Plan, which options shall vest, subject to Executive's
continuing to be employed by the Company on the applicable dates, in four equal
annual installments beginning on the date of the IPO. The option exercise price
with respect to the stock options granted on the date of the IPO shall be equal
to the price per share of Common Stock in the IPO. Immediately after the IPO,
and subject to the filing of the registration statement on Form S-8 described in
paragraph 4(e),
2
<PAGE>
Executive shall receive a grant of 30,000 shares of Common Stock pursuant to the
Company's 1996 Incentive Plan, which shares shall vest and become
nonforfeitable, subject to Executive's continuing to be employed by the Company
on the applicable dates, as follows: 10 percent on the date of grant, 20 percent
on each of the first and second anniversaries of the date of grant and 25
percent on each of the third and fourth anniversaries of the date of grant.
e. Registration. Within 10 days after the date of the IPO, the Company
------------
shall file a registration statement on Form S-8 registering under the Securities
Act of 1933, as amended (the "Securities Act") the shares of common stock issued
--------------
to Executive or to be issued upon the exercise of the options granted to
Executive pursuant to paragraph 4(d) (collectively, the "Registrable
-----------
Securities"). The Company shall use commercially reasonable efforts to maintain
the effectiveness of such registration statement under the Securities Act until
the earlier of (i) the date the Registrable Securities are no longer eligible
for registration on Form S-8 or (ii) the date the Registrable Securities are
permitted to be disposed of pursuant to Rule 144(k) (or any successor rule)
under the Securities Act.
5. TERMINATION OF EMPLOYMENT.
-------------------------
a. Death and Disability. Executive's employment under this Agreement will
--------------------
terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may terminate Executive's employment under this
---------
Agreement for "Cause" (as defined below), upon providing Executive 30 days'
prior written notice of termination, which notice will describe in detail the
basis of such termination and will become effective on the 30th day after
Executive's receipt thereof unless Executive (i) cures the alleged violation or
other circumstance which was the basis of such termination within such 30-day
notice period or (ii) sends, within such 30-day notice period, written notice to
the Board disputing in good faith the existence of Cause and requesting
arbitration of such dispute pursuant to paragraph 8 below. During the pendency
of the arbitration, Executive will continue to receive all compensation and
benefits to which he is entitled hereunder. If the Company is not successful in
obtaining a determination by the arbitrators that there was Cause for
termination, the Company will pay Executive's reasonable expenses, including,
without limitation, reasonable attorneys' fees and disbursements, in connection
with such dispute resolution.
c. For Good Reason. Executive may terminate his employment under this
---------------
Agreement for "Good Reason" (as defined below) upon providing the Company 30
days' prior written notice of termination, which notice will detail the basis of
such termination and will become effective on the 30th day after the Company's
receipt thereof unless the Company cures the alleged violation or other
circumstance which was the basis of such termination within such 30-day notice
period.
d. Definitions. For purposes of this Agreement:
-----------
3
<PAGE>
(i) Executive will be deemed "permanently disabled" if he
--------------------
becomes unable to discharge his normal duties as contemplated under
this Agreement for more than six consecutive months as a result of
incapacity due to mental or physical illness by a physician acceptable
to Executive and the Company and paid by the Company, whose
determination will be final and binding. If Executive and the Company
are unable to agree on a physician, Executive and the Company will
each choose one physician who will mutually choose the third
physician, whose determination will be final and binding.
(ii) "Cause" means either (A) a material breach by Executive of
-----
any material provisions of this Agreement, but only if, after notice
provided in subparagraph (b) above, Executive fails to cure such
breach or, if such breach is not subject to cure, fails on an on-going
basis thereafter to comply with the provisions of this Agreement with
respect to which he was in such breach; (B) action by Executive
constituting willful malfeasance or gross negligence, having a
material adverse effect on the Company; (C) an act of fraud,
misappropriation of funds or embezzlement by Executive in connection
with his employment hereunder; or (D) Executive is convicted of,
pleads guilty to or confesses to any felony.
(iii) "Good Reason" means the occurrence of any of the
-----------
following, without the prior written consent of Executive: (A) any
substantial diminution of duties, responsibilities or status, or other
imposition by the Company of unreasonable requirements or working
conditions on Executive, which are not withdrawn or corrected within a
30-day period following notice by Executive to the Company of such
diminution or imposition; (B) a material breach by the Company of any
of its material obligations under this Agreement, but only if (x)
after expiration of the 30-day notice period provided in subparagraph
(c) above, the Company fails to cure such breach or (y)
notwithstanding such cure, the Company willfully and repeatedly
breaches its obligations under this Agreement; or (C) a relocation of
the Company's principal executive offices or of Executive's principal
place of employment to a location more than 25 miles from Dallas,
Texas.
6. BENEFITS UPON TERMINATION.
-------------------------
a. Termination with Cause or Resignation. Upon termination of
-------------------------------------
Executive's employment by the Company pursuant to paragraph 5(b) above or a
voluntary resignation by Executive (other than for Good Reason pursuant to
paragraph 5(c) above), the Company will remain obligated to pay Executive only
the unpaid portion of his Base Salary, bonus and benefits (including the value
of any untaken vacation time to the extent Executive has, during the year in
which such termination occurs, taken less vacation time than permitted to him
hereunder), to the extent accrued through the effective date of termination.
Any amount due under this subparagraph will be payable within 30 days after the
date of termination.
4
<PAGE>
b. Termination without Cause or for Good Reason. Upon termination of
--------------------------------------------
Executive's employment (x) by the Company other than for Cause or upon
Executive's death or permanent disability or (y) by Executive for Good Reason,
Executive will be entitled to the benefits provided below:
(i) the Company will pay as severance pay to Executive, not
later than the 30th day following the date of termination, a lump sum
severance payment (the "Severance Payment") equal to the greater of
-----------------
(x) the aggregate of all compensation due to Executive hereunder
during the balance of the Term, assuming that the annual bonuses
payable to Executive during such period will equal the average of the
annual bonuses paid to Executive under this Agreement prior to
termination of employment, or (y) 1.99 times the "base amount" within
the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable temporary or
----
final regulations promulgated thereunder, or its equivalent as
provided in any successor statute or regulation; and
(ii) for the duration of the Term, those fringe benefits
specified in paragraph 4(a) above, including coverage under all
insurance programs and plans.
c. No Mitigation. Executive will not be required to mitigate the
-------------
amount of any payment provided for in this paragraph 6 by seeking other
employment or otherwise, nor will the amount of any payment or benefit provided
for in this paragraph 6 be reduced by any compensation earned by him as the
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
d. Expiration of this Agreement. In the event the Term of this
----------------------------
Agreement expires without having otherwise been previously terminated pursuant
to paragraph 5 above or by the Company without cause, Executive will not be
entitled to any severance compensation whatsoever under this paragraph 6.
7. INDEMNIFICATION. To the full extent permitted by applicable law,
---------------
Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and other
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company.
Indemnification under this paragraph 7 shall be in addition to, and not in
substitution of, any other indemnification by the Company of its officers and
directors. Expenses incurred by Executive in defending an action, suit or
proceeding for which he claims the right to be indemnified pursuant to this
paragraph 7 shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon the Company's receipt of (x) a written
5
<PAGE>
affirmation by Executive of his good faith belief that the standard of conduct
necessary for his indemnification hereunder and under the provisions of Section
2-418(b) of the Maryland General Corporation Law, as such provision may be
amended or superseded from time to time, has been met and (y) a written
undertaking by or on behalf of Executive to repay the amount advanced if it
shall ultimately be determined that Executive engaged in conduct which precludes
indemnification under the provisions of Section 2-418(b) of the Maryland General
Corporation Law, as such provision may be amended or superseded from time to
time. Such written undertaking in clause (y) shall be accepted by the Company
without security therefor and without reference to the financial ability of
Executive to make repayment thereunder. The Company shall use commercially
reasonable efforts to maintain in effect for the Term of this Agreement a
directors' and officers' liability insurance policy, with a policy limit of at
least $5,000,000, subject to customary exclusions, with respect to claims made
against officers and directors of the Company; provided, however, the Company
shall be relieved of this obligation to maintain directors' and officers'
liability insurance if, in the good faith judgment of the Company, it cannot be
obtained at a reasonable cost.
8. ARBITRATION. The parties hereto will endeavor to resolve in good
-----------
faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other of
the existence of a dispute which it desires to have arbitrated. The arbitration
will be conducted in Dallas, Texas by a panel of three (3) arbitrators and will
be held in accordance with the rules of the American Arbitration Association.
Of the three arbitrators, one will be selected by the Company, one will be
selected by Executive and the third will be selected by the two arbitrators so
selected. Each party will notify the other party of the arbitrator selected by
him or it within fifteen (15) days after the giving of the written notice
referred to in this paragraph 8. The decision and award of the arbitrators must
be in writing and will be final and binding upon the parties hereto. Judgment
upon the award may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be. The expenses of arbitration will
be borne in accordance with the determination of the arbitrators with respect
thereto, except as otherwise specified in paragraph 5(b) above. Pending a
decision by the arbitrators with respect to the dispute or difference undergoing
arbitration, all other obligations of the parties will continue as stipulated
herein, and all monies not directly involved in such dispute or difference will
be paid when due.
9. MISCELLANEOUS.
-------------
a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
6
<PAGE>
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement
inure to the benefit of, and will be binding on, the Company and its successors
and permitted assigns, and the rights and obligations (other than obligations to
perform services) of Executive under this Agreement will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and permitted assigns; provided, however, Executive shall not be entitled to
--------
assign or delegate any of his rights and obligations under this Agreement
without the prior written consent of the Company; provided, further, that the
--------
Company shall not have the right to assign or delegate any of its rights or
obligations under this Agreement except to a corporation, partnership or other
business entity that is, directly or indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
e. The failure of either party to enforce any provision or
provisions of this Agreement will not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience
and are not a part of this Agreement and will not be used in construing it.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
AMERICAN GENERAL HOSPITALITY CORPORATION
By:
---------------------------------------------------
Its:
----------------------------------------------
------------------------------------------------------
STEVEN D. JORNS
8
<PAGE>
EXHIBIT 10.14
CERTAIN ASPECTS OF THIS
-----------------------
AGREEMENT ARE SUBJECT TO
------------------------
ARBITRATION UNDER THE TEXAS
---------------------------
GENERAL ARBITRATION ACT
-----------------------
FORM OF EMPLOYMENT AGREEMENT FOR BRUCE G. WILES
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of ___, 1996, is
entered into between AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland
corporation (the "Company"), and Bruce G. Wiles ("Executive").
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RECITALS
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A. The Company is a corporation intended to be qualified and to operate as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
B. The Company is the sole shareholder of the general partner of American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership,
which has, among other things, acquired interests in various hotels from, among
others, the principals of American General Hospitality, Inc. ("AGHI"), including
Executive.
C. The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. EMPLOYMENT DUTIES. During the Term (as defined in paragraph 2 below),
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the Company will employ Executive as its Executive Vice President. Executive
will devote substantially all of his business time and attention to the
performance of his duties under this Agreement. Executive may provide services
to AGHI, so long as such activity does not interfere with the performance of
Executive's duties hereunder. Executive initially shall have the duties, rights
and responsibilities normally associated with his position with the Company,
together with such other reasonable duties relating to the operation of the
business of the Company and its affiliates as may be assigned to him from time
to time by the Board of Directors of the Company (the "Board") or may otherwise
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be provided for in the Company's Bylaws. If the Company shall so request,
Executive shall become and shall, at any time during the term of this Agreement
as the Company shall so request, act as a director of the Company and/or as an
officer and/or director of any of the subsidiaries of the Company as they may
now exist or may be established by the Company in the future without any
compensation other than that provided for in paragraph 3.
2. TERM. The term of Executive's employment under this Agreement (the
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"Term") will begin on the date of this Agreement and will continue, subject to
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the termination provisions set forth in paragraph 5 below, until the fifth
anniversary of the date hereof.
<PAGE>
3. SALARY AND BONUS.
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a. Salary. During each year of the Term, Executive will receive a salary
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at the annual rate of $90,000, which salary will be subject to increase as set
forth below (as so increased, the "Base Salary"). The Compensation Committee of
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the Board (the "Committee") will review Executive's Base Salary on an annual
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basis, and the Committee, upon such review and in its sole discretion, may
increase or decrease the Base Salary by an amount which the Committee deems
appropriate in light of the Company's and Executive's performance during the
period covered by such review; provided, however, that the Base Salary will not
be reduced below $90,000 per annum. The Base Salary will be payable to
Executive in accordance with the Company's standard payroll practices.
b. Bonus. In addition to the Base Salary, the Company may pay to
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Executive performance-based bonus compensation for each fiscal year of the
Company as determined by the Committee in its sole discretion.
4. FRINGE BENEFITS. In addition to the other compensation payable
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pursuant to this Agreement, during the Term:
a. Standard Benefits. Executive will be entitled to receive such fringe
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benefits and perquisites, including medical, dental, disability and life
insurance, as are generally made available from time to time to management
employees and Executives of the Company and to participate in any pension,
profit-sharing, stock option or similar plan or program established from time to
time by the Company for the benefit of its employees.
b. Vacation and Sick Leave. Executive will be entitled to such periods of
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paid vacation and sick leave allowance each year (not less than four weeks) that
are consistent with the Company's vacation and sick leave policy for senior
management.
c. Business Expenses. The Company will pay or reimburse Executive for all
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business-related expenses incurred by Executive in the course of his performance
of duties under this Agreement, subject to the procedures established by the
Company from time to time with respect to incurrence, substantiation,
reasonableness and approval.
d. Stock Options; Stock Awards. Executive shall be entitled to
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participate in employee stock plans from time to time established for the
benefit of employees of the Company in accordance with the terms and conditions
of such plans. Upon effectiveness of the registration statement relating to the
Company's initial public offering of shares of its Common Stock (the "IPO"),
Executive shall receive a grant of 75,000 stock options pursuant to the
Company's 1996 Incentive Plan, which options shall vest, subject to Executive's
continuing to be employed by the Company on the applicable dates, in four equal
annual installments beginning on the date of the IPO. The option exercise price
with respect to the stock options granted on the date of the IPO shall be equal
to the price per share of Common Stock in the IPO. Immediately after the IPO,
and subject to the filing of the registration statement on Form S-8 described in
paragraph 4(e),
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<PAGE>
Executive shall receive a grant of 10,000 shares of Common Stock pursuant to the
Company's 1996 Incentive Plan, which shares shall vest and become
nonforfeitable, subject to Executive's continuing to be employed by the Company
on the applicable dates, as follows: 10 percent on the date of grant, 20 percent
on each of the first and second anniversaries of the date
of grant and 25 percent on each of the third and fourth anniversaries of the
date of grant.
e. Registration. Within 10 days after the date of the IPO, the Company
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shall file a registration statement on Form S-8 registering under the Securities
Act of 1933, as amended (the "Securities Act") the shares of common stock issued
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to Executive or to be issued upon the exercise of the options granted to
Executive pursuant to paragraph 4(d) (collectively, the "Registrable
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Securities"). The Company shall use commercially reasonable efforts to maintain
the effectiveness of such registration statement under the Securities Act until
the earlier of (i) the date the Registrable Securities are no longer eligible
for registration on Form S-8 or (ii) the date the Registrable Securities are
permitted to be disposed of pursuant to Rule 144(k) (or any successor rule)
under the Securities Act.
5. TERMINATION OF EMPLOYMENT.
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a. Death and Disability. Executive's employment under this Agreement will
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terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may terminate Executive's employment under this
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Agreement for "Cause" (as defined below), upon providing Executive 30 days'
prior written notice of termination, which notice will describe in detail the
basis of such termination and will become effective on the 30th day after
Executive's receipt thereof unless Executive (i) cures the alleged violation or
other circumstance which was the basis of such termination within such 30-day
notice period or (ii) sends, within such 30-day notice period, written notice to
the Board disputing in good faith the existence of Cause and requesting
arbitration of such dispute pursuant to paragraph 8 below. During the pendency
of the arbitration, Executive will continue to receive all compensation and
benefits to which he is entitled hereunder. If the Company is not successful in
obtaining a determination by the arbitrators that there was Cause for
termination, the Company will pay Executive's reasonable expenses, including,
without limitation, reasonable attorneys' fees and disbursements, in connection
with such dispute resolution.
c. For Good Reason. Executive may terminate his employment under this
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Agreement for "Good Reason" (as defined below) upon providing the Company 30
days' prior written notice of termination, which notice will detail the basis of
such termination and will become effective on the 30th day after the Company's
receipt thereof unless the Company cures the alleged violation or other
circumstance which was the basis of such termination within such 30-day notice
period.
d. Definitions. For purposes of this Agreement:
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<PAGE>
(i) Executive will be deemed "permanently disabled" if he
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becomes unable to discharge his normal duties as contemplated under
this Agreement for more than six consecutive months as a result of
incapacity due to mental or physical illness by a physician acceptable
to Executive and the Company and paid by the Company, whose
determination will be final and binding. If Executive and the Company
are unable to agree on a physician, Executive and the Company will
each choose one physician who will mutually choose the third
physician, whose determination will be final and binding.
(ii) "Cause" means either (A) a material breach by Executive of
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any material provisions of this Agreement, but only if, after notice
provided in subparagraph (b) above, Executive fails to cure such
breach or, if such breach is not subject to cure, fails on an on-going
basis thereafter to comply with the provisions of this Agreement with
respect to which he was in such breach; (B) action by Executive
constituting willful malfeasance or gross negligence, having a
material adverse effect on the Company; (C) an act of fraud,
misappropriation of funds or embezzlement by Executive in connection
with his employment hereunder; or (D) Executive is convicted of,
pleads guilty to or confesses to any felony.
(iii) "Good Reason" means the occurrence of any of the
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following, without the prior written consent of Executive: (A) any
substantial diminution of duties, responsibilities or status, or other
imposition by the Company of unreasonable requirements or working
conditions on Executive, which are not withdrawn or corrected within a
30-day period following notice by Executive to the Company of such
diminution or imposition; (B) a material breach by the Company of any
of its material obligations under this Agreement, but only if (x)
after expiration of the 30-day notice period provided in subparagraph
(c) above, the Company fails to cure such breach or (y)
notwithstanding such cure, the Company willfully and repeatedly
breaches its obligations under this Agreement; or (C) a relocation of
the Company's principal executive offices or of Executive's principal
place of employment to a location more than 25 miles from Dallas,
Texas.
6. BENEFITS UPON TERMINATION.
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a. Termination with Cause or Resignation. Upon termination of
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Executive's employment by the Company pursuant to paragraph 5(b) above or a
voluntary resignation by Executive (other than for Good Reason pursuant to
paragraph 5(c) above), the Company will remain obligated to pay Executive only
the unpaid portion of his Base Salary, bonus and benefits (including the value
of any untaken vacation time to the extent Executive has, during the year in
which such termination occurs, taken less vacation time than permitted to him
hereunder), to the extent accrued through the effective date of termination.
Any amount due under this subparagraph will be payable within 30 days after the
date of termination.
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<PAGE>
b. Termination without Cause or for Good Reason. Upon termination of
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Executive's employment (x) by the Company other than for Cause or upon
Executive's death or permanent disability or (y) by Executive for Good Reason,
Executive will be entitled to the benefits provided below:
(i) the Company will pay as severance pay to Executive, not
later than the 30th day following the date of termination, a lump sum
severance payment (the "Severance Payment") equal to the greater of
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(x) the aggregate of all compensation due to Executive hereunder
during the balance of the Term, assuming that the annual bonuses
payable to Executive during such period will equal the average of the
annual bonuses paid to Executive under this Agreement prior to
termination of employment, or (y) 1.99 times the "base amount" within
the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable temporary or
----
final regulations promulgated thereunder, or its equivalent as
provided in any successor statute or regulation; and
(ii) for the duration of the Term, those fringe benefits
specified in paragraph 4(a) above, including coverage under all
insurance programs and plans.
c. No Mitigation. Executive will not be required to mitigate the
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amount of any payment provided for in this paragraph 6 by seeking other
employment or otherwise, nor will the amount of any payment or benefit provided
for in this paragraph 6 be reduced by any compensation earned by him as the
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
d. Expiration of this Agreement. In the event the Term of this
----------------------------
Agreement expires without having otherwise been previously terminated pursuant
to paragraph 5 above or by the Company without cause, Executive will not be
entitled to any severance compensation whatsoever under this paragraph 6.
7. INDEMNIFICATION. To the full extent permitted by applicable law,
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Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and other
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company.
Indemnification under this paragraph 7 shall be in addition to, and not in
substitution of, any other indemnification by the Company of its officers and
directors. Expenses incurred by Executive in defending an action, suit or
proceeding for which he claims the right to be indemnified pursuant to this
paragraph 7 shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon the Company's receipt of (x) a written
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<PAGE>
affirmation by Executive of his good faith belief that the standard of conduct
necessary for his indemnification hereunder and under the provisions of Section
2-418(b) of the Maryland General Corporation Law, as such provision may be
amended or superseded from time to time, has been met and (y) a written
undertaking by or on behalf of Executive to repay the amount advanced if it
shall ultimately be determined that Executive engaged in conduct which precludes
indemnification under the provisions of Section 2-418(b) of the Maryland General
Corporation Law, as such provision may be amended or superseded from time to
time. Such written undertaking in clause (y) shall be accepted by the Company
without security therefor and without reference to the financial ability of
Executive to make repayment thereunder. The Company shall use commercially
reasonable efforts to maintain in effect for the Term of this Agreement a
directors' and officers' liability insurance policy, with a policy limit of at
least $5,000,000, subject to customary exclusions, with respect to claims made
against officers and directors of the Company; provided, however, the Company
shall be relieved of this obligation to maintain directors' and officers'
liability insurance if, in the good faith judgment of the Company, it cannot be
obtained at a reasonable cost.
8. ARBITRATION. The parties hereto will endeavor to resolve in good
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faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other of
the existence of a dispute which it desires to have arbitrated. The arbitration
will be conducted in Dallas, Texas by a panel of three (3) arbitrators and will
be held in accordance with the rules of the American Arbitration Association.
Of the three arbitrators, one will be selected by the Company, one will be
selected by Executive and the third will be selected by the two arbitrators so
selected. Each party will notify the other party of the arbitrator selected by
him or it within fifteen (15) days after the giving of the written notice
referred to in this paragraph 8. The decision and award of the arbitrators must
be in writing and will be final and binding upon the parties hereto. Judgment
upon the award may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be. The expenses of arbitration will
be borne in accordance with the determination of the arbitrators with respect
thereto, except as otherwise specified in paragraph 5(b) above. Pending a
decision by the arbitrators with respect to the dispute or difference undergoing
arbitration, all other obligations of the parties will continue as stipulated
herein, and all monies not directly involved in such dispute or difference will
be paid when due.
9. MISCELLANEOUS.
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a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
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<PAGE>
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement
inure to the benefit of, and will be binding on, the Company and its successors
and permitted assigns, and the rights and obligations (other than obligations to
perform services) of Executive under this Agreement will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and permitted assigns; provided, however, Executive shall not be entitled to
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assign or delegate any of his rights and obligations under this Agreement
without the prior written consent of the Company; provided, further, that the
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Company shall not have the right to assign or delegate any of its rights or
obligations under this Agreement except to a corporation, partnership or other
business entity that is, directly or indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
e. The failure of either party to enforce any provision or
provisions of this Agreement will not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience
and are not a part of this Agreement and will not be used in construing it.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
AMERICAN GENERAL HOSPITALITY CORPORATION
By:
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Its:
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BRUCE G. WILES
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<PAGE>
EXHIBIT 10.15
CERTAIN ASPECTS OF THIS
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AGREEMENT ARE SUBJECT TO
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ARBITRATION UNDER THE TEXAS
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GENERAL ARBITRATION ACT
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FORM OF EMPLOYMENT AGREEMENT FOR KENNETH E. BARR
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of ___, 1996, is
entered into between AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland
corporation (the "Company"), and Kenneth E. Barr ("Executive").
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RECITALS
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A. The Company is a corporation intended to be qualified and to operate as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
B. The Company is the sole shareholder of the general partner of American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership,
which has, among other things, acquired interests in various hotels from, among
others, the principals of American General Hospitality, Inc. ("AGHI"), including
Executive.
C. The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. EMPLOYMENT DUTIES. During the Term (as defined in paragraph 2 below),
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the Company will employ Executive as its Executive Vice President, Chief
Financial Officer and Principal Accounting Officer. Executive will devote
substantially all of his business time and attention to the performance of his
duties under this Agreement. Executive may provide services to AGHI, so long as
such activity does not interfere with the performance of Executive's duties
hereunder. Executive initially shall have the duties, rights and
responsibilities normally associated with his position with the Company,
together with such other reasonable duties relating to the operation of the
business of the Company and its affiliates as may be assigned to him from time
to time by the Board of Directors of the Company (the "Board") or may otherwise
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be provided for in the Company's Bylaws. If the Company shall so request,
Executive shall become and shall, at any time during the term of this Agreement
as the Company shall so request, act as a director of the Company and/or as an
officer and/or director of any of the subsidiaries of the Company as they may
now exist or may be established by the Company in the future without any
compensation other than that provided for in paragraph 3.
2. TERM. The term of Executive's employment under this Agreement (the
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"Term") will begin on the date of this Agreement and will continue, subject to
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the termination provisions set forth in paragraph 5 below, until the fifth
anniversary of the date hereof.
<PAGE>
3. SALARY AND BONUS.
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a. Salary. During each year of the Term, Executive will receive a salary
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at the annual rate of $80,000, which salary will be subject to increase as set
forth below (as so increased, the "Base Salary"). The Compensation Committee of
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the Board (the "Committee") will review Executive's Base Salary on an annual
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basis, and the Committee, upon such review and in its sole discretion, may
increase or decrease the Base Salary by an amount which the Committee deems
appropriate in light of the Company's and Executive's performance during the
period covered by such review; provided, however, that the Base Salary will not
be reduced below $80,000 per annum. The Base Salary will be payable to
Executive in accordance with the Company's standard payroll practices.
b. Bonus. In addition to the Base Salary, the Company may pay to
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Executive performance-based bonus compensation for each fiscal year of the
Company as determined by the Committee in its sole discretion.
4. FRINGE BENEFITS. In addition to the other compensation payable
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pursuant to this Agreement, during the Term:
a. Standard Benefits. Executive will be entitled to receive such fringe
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benefits and perquisites, including medical, dental, disability and life
insurance, as are generally made available from time to time to management
employees and Executives of the Company and to participate in any pension,
profit-sharing, stock option or similar plan or program established from time to
time by the Company for the benefit of its employees.
b. Vacation and Sick Leave. Executive will be entitled to such periods of
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paid vacation and sick leave allowance each year (not less than four weeks) that
are consistent with the Company's vacation and sick leave policy for senior
management.
c. Business Expenses. The Company will pay or reimburse Executive for all
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business-related expenses incurred by Executive in the course of his performance
of duties under this Agreement, subject to the procedures established by the
Company from time to time with respect to incurrence, substantiation,
reasonableness and approval.
d. Stock Options; Stock Awards. Executive shall be entitled to
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participate in employee stock plans from time to time established for the
benefit of employees of the Company in accordance with the terms and conditions
of such plans. Upon effectiveness of the registration statement relating to the
Company's initial public offering of shares of its Common Stock (the "IPO"),
Executive shall receive a grant of 40,000 stock options pursuant to the
Company's 1996 Incentive Plan, which options shall vest, subject to Executive's
continuing to be employed by the Company on the applicable dates, in four equal
annual installments beginning on the date of the IPO. The option exercise price
with respect to the stock options granted on the date of the IPO shall be equal
to the price per share of Common Stock in the IPO. Immediately after the IPO,
and subject to the filing of the registration statement on Form S-8 described in
paragraph 4(e),
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<PAGE>
Executive shall receive a grant of 6,000 shares of Common Stock pursuant to the
Company's 1996 Incentive Plan, which shares shall vest and become
nonforfeitable, subject to Executive's continuing to be employed by the Company
on the applicable dates, as follows: 10 percent on the date of grant, 20 percent
on each of the first and second anniversaries of the date of grant and 25
percent on each of the third and fourth anniversaries of the date of grant.
e. Registration. Within 10 days after the date of the IPO, the Company
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shall file a registration statement on Form S-8 registering under the Securities
Act of 1933, as amended (the "Securities Act") the shares of common stock issued
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to Executive or to be issued upon the exercise of the options granted to
Executive pursuant to paragraph 4(d) (collectively, the "Registrable
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Securities"). The Company shall use commercially reasonable efforts to maintain
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the effectiveness of such registration statement under the Securities Act until
the earlier of (i) the date the Registrable Securities are no longer eligible
for registration on Form S-8 or (ii) the date the Registrable Securities are
permitted to be disposed of pursuant to Rule 144(k) (or any successor rule)
under the Securities Act.
5. TERMINATION OF EMPLOYMENT.
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a. Death and Disability. Executive's employment under this Agreement will
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terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may terminate Executive's employment under this
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Agreement for "Cause" (as defined below), upon providing Executive 30 days'
prior written notice of termination, which notice will describe in detail the
basis of such termination and will become effective on the 30th day after
Executive's receipt thereof unless Executive (i) cures the alleged violation or
other circumstance which was the basis of such termination within such 30-day
notice period or (ii) sends, within such 30-day notice period, written notice to
the Board disputing in good faith the existence of Cause and requesting
arbitration of such dispute pursuant to paragraph 8 below. During the pendency
of the arbitration, Executive will continue to receive all compensation and
benefits to which he is entitled hereunder. If the Company is not successful in
obtaining a determination by the arbitrators that there was Cause for
termination, the Company will pay Executive's reasonable expenses, including,
without limitation, reasonable attorneys' fees and disbursements, in connection
with such dispute resolution.
c. For Good Reason. Executive may terminate his employment under this
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Agreement for "Good Reason" (as defined below) upon providing the Company 30
days' prior written notice of termination, which notice will detail the basis of
such termination and will become effective on the 30th day after the Company's
receipt thereof unless the Company cures the alleged violation or other
circumstance which was the basis of such termination within such 30-day notice
period.
d. Definitions. For purposes of this Agreement:
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(i) Executive will be deemed "permanently disabled" if he
--------------------
becomes unable to discharge his normal duties as contemplated under
this Agreement for more than six consecutive months as a result of
incapacity due to mental or physical illness by a physician acceptable
to Executive and the Company and paid by the Company, whose
determination will be final and binding. If Executive and the Company
are unable to agree on a physician, Executive and the Company will
each choose one physician who will mutually choose the third
physician, whose determination will be final and binding.
(ii) "Cause" means either (A) a material breach by Executive of
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any material provisions of this Agreement, but only if, after notice
provided in subparagraph (b) above, Executive fails to cure such
breach or, if such breach is not subject to cure, fails on an on-going
basis thereafter to comply with the provisions of this Agreement with
respect to which he was in such breach; (B) action by Executive
constituting willful malfeasance or gross negligence, having a
material adverse effect on the Company; (C) an act of fraud,
misappropriation of funds or embezzlement by Executive in connection
with his employment hereunder; or (D) Executive is convicted of,
pleads guilty to or confesses to any felony.
(iii) "Good Reason" means the occurrence of any of the
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following, without the prior written consent of Executive: (A) any
substantial diminution of duties, responsibilities or status, or other
imposition by the Company of unreasonable requirements or working
conditions on Executive, which are not withdrawn or corrected within a
30-day period following notice by Executive to the Company of such
diminution or imposition; (B) a material breach by the Company of any
of its material obligations under this Agreement, but only if (x)
after expiration of the 30-day notice period provided in subparagraph
(c) above, the Company fails to cure such breach or (y)
notwithstanding such cure, the Company willfully and repeatedly
breaches its obligations under this Agreement; or (C) a relocation of
the Company's principal executive offices or of Executive's principal
place of employment to a location more than 25 miles from Dallas,
Texas.
6. BENEFITS UPON TERMINATION.
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a. Termination with Cause or Resignation. Upon termination of
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Executive's employment by the Company pursuant to paragraph 5(b) above or a
voluntary resignation by Executive (other than for Good Reason pursuant to
paragraph 5(c) above), the Company will remain obligated to pay Executive only
the unpaid portion of his Base Salary, bonus and benefits (including the value
of any untaken vacation time to the extent Executive has, during the year in
which such termination occurs, taken less vacation time than permitted to him
hereunder), to the extent accrued through the effective date of termination.
Any amount due under this subparagraph will be payable within 30 days after the
date of termination.
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<PAGE>
b. Termination without Cause or for Good Reason. Upon termination of
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Executive's employment (x) by the Company other than for Cause or upon
Executive's death or permanent disability or (y) by Executive for Good Reason,
Executive will be entitled to the benefits provided below:
(i) the Company will pay as severance pay to Executive, not
later than the 30th day following the date of termination, a lump sum
severance payment (the "Severance Payment") equal to the greater of
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(x) the aggregate of all compensation due to Executive hereunder
during the balance of the Term, assuming that the annual bonuses
payable to Executive during such period will equal the average of the
annual bonuses paid to Executive under this Agreement prior to
termination of employment, or (y) 1.99 times the "base amount" within
the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable temporary or
----
final regulations promulgated thereunder, or its equivalent as
provided in any successor statute or regulation; and
(ii) for the duration of the Term, those fringe benefits
specified in paragraph 4(a) above, including coverage under all
insurance programs and plans.
c. No Mitigation. Executive will not be required to mitigate the
-------------
amount of any payment provided for in this paragraph 6 by seeking other
employment or otherwise, nor will the amount of any payment or benefit provided
for in this paragraph 6 be reduced by any compensation earned by him as the
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
d. Expiration of this Agreement. In the event the Term of this
----------------------------
Agreement expires without having otherwise been previously terminated pursuant
to paragraph 5 above or by the Company without cause, Executive will not be
entitled to any severance compensation whatsoever under this paragraph 6.
7. INDEMNIFICATION. To the full extent permitted by applicable law,
---------------
Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and other
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company.
Indemnification under this paragraph 7 shall be in addition to, and not in
substitution of, any other indemnification by the Company of its officers and
directors. Expenses incurred by Executive in defending an action, suit or
proceeding for which he claims the right to be indemnified pursuant to this
paragraph 7 shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon the Company's receipt of (x) a written
5
<PAGE>
affirmation by Executive of his good faith belief that the standard of conduct
necessary for his indemnification hereunder and under the provisions of Section
2-418(b) of the Maryland General Corporation Law, as such provision may be
amended or superseded from time to time, has been met and (y) a written
undertaking by or on behalf of Executive to repay the amount advanced if it
shall ultimately be determined that Executive engaged in conduct which precludes
indemnification under the provisions of Section 2-418(b) of the Maryland General
Corporation Law, as such provision may be amended or superseded from time to
time. Such written undertaking in clause (y) shall be accepted by the Company
without security therefor and without reference to the financial ability of
Executive to make repayment thereunder. The Company shall use commercially
reasonable efforts to maintain in effect for the Term of this Agreement a
directors' and officers' liability insurance policy, with a policy limit of at
least $5,000,000, subject to customary exclusions, with respect to claims made
against officers and directors of the Company; provided, however, the Company
shall be relieved of this obligation to maintain directors' and officers'
liability insurance if, in the good faith judgment of the Company, it cannot be
obtained at a reasonable cost.
8. ARBITRATION. The parties hereto will endeavor to resolve in good
-----------
faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other of
the existence of a dispute which it desires to have arbitrated. The arbitration
will be conducted in Dallas, Texas by a panel of three (3) arbitrators and will
be held in accordance with the rules of the American Arbitration Association.
Of the three arbitrators, one will be selected by the Company, one will be
selected by Executive and the third will be selected by the two arbitrators so
selected. Each party will notify the other party of the arbitrator selected by
him or it within fifteen (15) days after the giving of the written notice
referred to in this paragraph 8. The decision and award of the arbitrators must
be in writing and will be final and binding upon the parties hereto. Judgment
upon the award may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be. The expenses of arbitration will
be borne in accordance with the determination of the arbitrators with respect
thereto, except as otherwise specified in paragraph 5(b) above. Pending a
decision by the arbitrators with respect to the dispute or difference undergoing
arbitration, all other obligations of the parties will continue as stipulated
herein, and all monies not directly involved in such dispute or difference will
be paid when due.
9. MISCELLANEOUS.
-------------
a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
6
<PAGE>
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement
inure to the benefit of, and will be binding on, the Company and its successors
and permitted assigns, and the rights and obligations (other than obligations to
perform services) of Executive under this Agreement will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and permitted assigns; provided, however, Executive shall not be entitled to
--------
assign or delegate any of his rights and obligations under this Agreement
without the prior written consent of the Company; provided, further, that the
--------
Company shall not have the right to assign or delegate any of its rights or
obligations under this Agreement except to a corporation, partnership or other
business entity that is, directly or indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
e. The failure of either party to enforce any provision or
provisions of this Agreement will not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience
and are not a part of this Agreement and will not be used in construing it.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
AMERICAN GENERAL HOSPITALITY CORPORATION
By:
----------------------------------------------------
Its:
-----------------------------------------------
-------------------------------------------------------
KENNETH E. BARR
8
<PAGE>
EXHIBIT 10.16
CERTAIN ASPECTS OF THIS
-----------------------
AGREEMENT ARE SUBJECT TO
------------------------
ARBITRATION UNDER THE TEXAS
---------------------------
GENERAL ARBITRATION ACT
-----------------------
FORM OF EMPLOYMENT AGREEMENT FOR RUSS C. VALENTINE
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of ___, 1996, is
entered into between AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland
corporation (the "Company"), and Russ C. Valentine ("Executive").
------- ---------
RECITALS
--------
A. The Company is a corporation intended to be qualified and to operate as
a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
B. The Company is the sole shareholder of the general partner of American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership,
which has, among other things, acquired interests in various hotels from, among
others, the principals of American General Hospitality, Inc. ("AGHI").
C. The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. EMPLOYMENT DUTIES. During the Term (as defined in paragraph 2 below),
-----------------
the Company will employ Executive as its Senior Vice President - Acquisitions.
Executive will devote substantially all of his business time and attention to
the performance of his duties under this Agreement. Executive may provide
services to AGHI, so long as such activity does not interfere with the
performance of Executive's duties hereunder. Executive initially shall have the
duties, rights and responsibilities normally associated with his position with
the Company, together with such other reasonable duties relating to the
operation of the business of the Company and its affiliates as may be assigned
to him from time to time by the Board of Directors of the Company (the "Board")
-----
or may otherwise be provided for in the Company's Bylaws. If the Company shall
so request, Executive shall become and shall, at any time during the term of
this Agreement as the Company shall so request, act as a director of the Company
and/or as an officer and/or director of any of the subsidiaries of the Company
as they may now exist or may be established by the Company in the future without
any compensation other than that provided for in paragraph 3.
2. TERM. The term of Executive's employment under this Agreement (the
----
"Term") will begin on the date of this Agreement and will continue, subject to
- -----
the termination provisions set forth in paragraph 5 below, until the fifth
anniversary of the date hereof.
<PAGE>
3. SALARY AND BONUS.
----------------
a. Salary. During each year of the Term, Executive will receive a salary
------
at the annual rate of $60,000, which salary will be subject to increase as set
forth below (as so increased, the "Base Salary"). The Compensation Committee of
-----------
the Board (the "Committee") will review Executive's Base Salary on an annual
---------
basis, and the Committee, upon such review and in its sole discretion, may
increase or decrease the Base Salary by an amount which the Committee deems
appropriate in light of the Company's and Executive's performance during the
period covered by such review; provided, however, that the Base Salary will not
be reduced below $60,000 per annum. The Base Salary will be payable to
Executive in accordance with the Company's standard payroll practices.
b. Bonus. In addition to the Base Salary, the Company may pay to
-----
Executive performance-based bonus compensation for each fiscal year of the
Company as determined by the Committee in its sole discretion.
4. FRINGE BENEFITS. In addition to the other compensation payable
---------------
pursuant to this Agreement, during the Term:
a. Standard Benefits. Executive will be entitled to receive such fringe
-----------------
benefits and perquisites, including medical, dental, disability and life
insurance, as are generally made available from time to time to management
employees and Executives of the Company and to participate in any pension,
profit-sharing, stock option or similar plan or program established from time to
time by the Company for the benefit of its employees.
b. Vacation and Sick Leave. Executive will be entitled to such periods of
-----------------------
paid vacation and sick leave allowance each year (not less than four weeks) that
are consistent with the Company's vacation and sick leave policy for senior
management.
c. Business Expenses. The Company will pay or reimburse Executive for all
-----------------
business-related expenses incurred by Executive in the course of his performance
of duties under this Agreement, subject to the procedures established by the
Company from time to time with respect to incurrence, substantiation,
reasonableness and approval.
d. Stock Options; Stock Awards. Executive shall be entitled to
---------------------------
participate in employee stock plans from time to time established for the
benefit of employees of the Company in accordance with the terms and conditions
of such plans. Upon effectiveness of the registration statement relating to the
Company's initial public offering of shares of its Common Stock (the "IPO"),
Executive shall receive a grant of 20,000 stock options pursuant to the
Company's 1996 Incentive Plan, which options shall vest, subject to Executive's
continuing to be employed by the Company on the applicable dates, in four equal
annual installments beginning on the date of the IPO. The option exercise price
with respect to the stock options granted on the date of the IPO shall be equal
to the price per share of Common Stock in the IPO. Immediately after the IPO,
and subject to the filing of the registration statement on Form S-8 described in
paragraph 4(e),
2
<PAGE>
Executive shall receive a grant of 4,000 shares of Common Stock pursuant to the
Company's 1996 Incentive Plan, which shares shall vest and become
nonforfeitable, subject to Executive's continuing to be employed by the Company
on the applicable dates, as follows: 10 percent on the date of grant, 20 percent
on each of the first and second anniversaries of the date
of grant and 25 percent on each of the third and fourth anniversaries of the
date of grant.
e. Registration. Within 10 days after the date of the IPO, the Company
------------
shall file a registration statement on Form S-8 registering under the Securities
Act of 1933, as amended (the "Securities Act") the shares of common stock issued
--------------
to Executive or to be issued upon the exercise of the options granted to
Executive pursuant to paragraph 4(d) (collectively, the "Registrable
-----------
Securities"). The Company shall use commercially reasonable efforts to maintain
the effectiveness of such registration statement under the Securities Act until
the earlier of (i) the date the Registrable Securities are no longer eligible
for registration on Form S-8 or (ii) the date the Registrable Securities are
permitted to be disposed of pursuant to Rule 144(k) (or any successor rule)
under the Securities Act.
5. TERMINATION OF EMPLOYMENT.
-------------------------
a. Death and Disability. Executive's employment under this Agreement will
--------------------
terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may terminate Executive's employment under this
---------
Agreement for "Cause" (as defined below), upon providing Executive 30 days'
prior written notice of termination, which notice will describe in detail the
basis of such termination and will become effective on the 30th day after
Executive's receipt thereof unless Executive (i) cures the alleged violation or
other circumstance which was the basis of such termination within such 30-day
notice period or (ii) sends, within such 30-day notice period, written notice to
the Board disputing in good faith the existence of Cause and requesting
arbitration of such dispute pursuant to paragraph 8 below. During the pendency
of the arbitration, Executive will continue to receive all compensation and
benefits to which he is entitled hereunder. If the Company is not successful in
obtaining a determination by the arbitrators that there was Cause for
termination, the Company will pay Executive's reasonable expenses, including,
without limitation, reasonable attorneys' fees and disbursements, in connection
with such dispute resolution.
c. For Good Reason. Executive may terminate his employment under this
---------------
Agreement for "Good Reason" (as defined below) upon providing the Company 30
days' prior written notice of termination, which notice will detail the basis of
such termination and will become effective on the 30th day after the Company's
receipt thereof unless the Company cures the alleged violation or other
circumstance which was the basis of such termination within such 30-day notice
period.
d. Definitions. For purposes of this Agreement:
-----------
3
<PAGE>
(i) Executive will be deemed "permanently disabled" if he
--------------------
becomes unable to discharge his normal duties as contemplated under
this Agreement for more than six consecutive months as a result of
incapacity due to mental or physical illness by a physician acceptable
to Executive and the Company and paid by the Company, whose
determination will be final and binding. If Executive and the Company
are unable to agree on a physician, Executive and the Company will
each choose one physician who will mutually choose the third
physician, whose determination will be final and binding.
(ii) "Cause" means either (A) a material breach by Executive of
-----
any material provisions of this Agreement, but only if, after notice
provided in subparagraph (b) above, Executive fails to cure such
breach or, if such breach is not subject to cure, fails on an on-going
basis thereafter to comply with the provisions of this Agreement with
respect to which he was in such breach; (B) action by Executive
constituting willful malfeasance or gross negligence, having a
material adverse effect on the Company; (C) an act of fraud,
misappropriation of funds or embezzlement by Executive in connection
with his employment hereunder; or (D) Executive is convicted of,
pleads guilty to or confesses to any felony.
(iii) "Good Reason" means the occurrence of any of the
-----------
following, without the prior written consent of Executive: (A) any
substantial diminution of duties, responsibilities or status, or other
imposition by the Company of unreasonable requirements or working
conditions on Executive, which are not withdrawn or corrected within a
30-day period following notice by Executive to the Company of such
diminution or imposition; (B) a material breach by the Company of any
of its material obligations under this Agreement, but only if (x)
after expiration of the 30-day notice period provided in subparagraph
(c) above, the Company fails to cure such breach or (y)
notwithstanding such cure, the Company willfully and repeatedly
breaches its obligations under this Agreement; or (C) a relocation of
the Company's principal executive offices or of Executive's principal
place of employment to a location more than 25 miles from Dallas,
Texas.
6. BENEFITS UPON TERMINATION.
-------------------------
a. Termination with Cause or Resignation. Upon termination of
-------------------------------------
Executive's employment by the Company pursuant to paragraph 5(b) above or a
voluntary resignation by Executive (other than for Good Reason pursuant to
paragraph 5(c) above), the Company will remain obligated to pay Executive only
the unpaid portion of his Base Salary, bonus and benefits (including the value
of any untaken vacation time to the extent Executive has, during the year in
which such termination occurs, taken less vacation time than permitted to him
hereunder), to the extent accrued through the effective date of termination.
Any amount due under this subparagraph will be payable within 30 days after the
date of termination.
4
<PAGE>
b. Termination without Cause or for Good Reason. Upon termination of
--------------------------------------------
Executive's employment (x) by the Company other than for Cause or upon
Executive's death or permanent disability or (y) by Executive for Good Reason,
Executive will be entitled to the benefits provided below:
(i) the Company will pay as severance pay to Executive, not
later than the 30th day following the date of termination, a lump sum
severance payment (the "Severance Payment") equal to the greater of
-----------------
(x) the aggregate of all compensation due to Executive hereunder
during the balance of the Term, assuming that the annual bonuses
payable to Executive during such period will equal the average of the
annual bonuses paid to Executive under this Agreement prior to
termination of employment, or (y) 1.99 times the "base amount" within
the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable temporary or
----
final regulations promulgated thereunder, or its equivalent as
provided in any successor statute or regulation; and
(ii) for the duration of the Term, those fringe benefits
specified in paragraph 4(a) above, including coverage under all
insurance programs and plans.
c. No Mitigation. Executive will not be required to mitigate the
-------------
amount of any payment provided for in this paragraph 6 by seeking other
employment or otherwise, nor will the amount of any payment or benefit provided
for in this paragraph 6 be reduced by any compensation earned by him as the
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.
d. Expiration of this Agreement. In the event the Term of this
----------------------------
Agreement expires without having otherwise been previously terminated pursuant
to paragraph 5 above or by the Company without cause, Executive will not be
entitled to any severance compensation whatsoever under this paragraph 6.
7. INDEMNIFICATION. To the full extent permitted by applicable law,
---------------
Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and other
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company.
Indemnification under this paragraph 7 shall be in addition to, and not in
substitution of, any other indemnification by the Company of its officers and
directors. Expenses incurred by Executive in defending an action, suit or
proceeding for which he claims the right to be indemnified pursuant to this
paragraph 7 shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon the Company's receipt of (x) a written
5
<PAGE>
affirmation by Executive of his good faith belief that the standard of conduct
necessary for his indemnification hereunder and under the provisions of Section
2-418(b) of the Maryland General Corporation Law, as such provision may be
amended or superseded from time to time, has been met and (y) a written
undertaking by or on behalf of Executive to repay the amount advanced if it
shall ultimately be determined that Executive engaged in conduct which precludes
indemnification under the provisions of Section 2-418(b) of the Maryland General
Corporation Law, as such provision may be amended or superseded from time to
time. Such written undertaking in clause (y) shall be accepted by the Company
without security therefor and without reference to the financial ability of
Executive to make repayment thereunder. The Company shall use commercially
reasonable efforts to maintain in effect for the Term of this Agreement a
directors' and officers' liability insurance policy, with a policy limit of at
least $5,000,000, subject to customary exclusions, with respect to claims made
against officers and directors of the Company; provided, however, the Company
shall be relieved of this obligation to maintain directors' and officers'
liability insurance if, in the good faith judgment of the Company, it cannot be
obtained at a reasonable cost.
8. ARBITRATION. The parties hereto will endeavor to resolve in good
-----------
faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding arbitration, for final
resolution without appeal, by either party giving written notice to the other of
the existence of a dispute which it desires to have arbitrated. The arbitration
will be conducted in Dallas, Texas by a panel of three (3) arbitrators and will
be held in accordance with the rules of the American Arbitration Association.
Of the three arbitrators, one will be selected by the Company, one will be
selected by Executive and the third will be selected by the two arbitrators so
selected. Each party will notify the other party of the arbitrator selected by
him or it within fifteen (15) days after the giving of the written notice
referred to in this paragraph 8. The decision and award of the arbitrators must
be in writing and will be final and binding upon the parties hereto. Judgment
upon the award may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be. The expenses of arbitration will
be borne in accordance with the determination of the arbitrators with respect
thereto, except as otherwise specified in paragraph 5(b) above. Pending a
decision by the arbitrators with respect to the dispute or difference undergoing
arbitration, all other obligations of the parties will continue as stipulated
herein, and all monies not directly involved in such dispute or difference will
be paid when due.
9. MISCELLANEOUS.
-------------
a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
6
<PAGE>
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement
inure to the benefit of, and will be binding on, the Company and its successors
and permitted assigns, and the rights and obligations (other than obligations to
perform services) of Executive under this Agreement will inure to the benefit
of, and will be binding upon, Executive and his heirs, personal representatives
and permitted assigns; provided, however, Executive shall not be entitled to
--------
assign or delegate any of his rights and obligations under this Agreement
without the prior written consent of the Company; provided, further, that the
--------
Company shall not have the right to assign or delegate any of its rights or
obligations under this Agreement except to a corporation, partnership or other
business entity that is, directly or indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
e. The failure of either party to enforce any provision or
provisions of this Agreement will not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience
and are not a part of this Agreement and will not be used in construing it.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
AMERICAN GENERAL HOSPITALITY CORPORATION
By:
---------------------------------------------------
Its:
----------------------------------------------
-------------------------------------------------------
RUSS C. VALENTINE
8
<PAGE>
Exhibit 10.20
OMNIBUS OPTION AGREEMENT
(OP Units)
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTORS NAMED BELOW
LOUIS E. CAPT
RICHARD O. JACOBSON
THOMAS J. CORCORAN, JR.
HERVEY A. FELDMAN
PIN N. HWANG
THOMAS L. WIESE
STEVEN L. COBB
RICHARD A. & BARBARA A. HESS
JERRY JACOB
Dated as of April 26, 1996
* THIS AGREEMENT HAS BEEN AMENDED IN ACCORDANCE WITH SECTION 6.1 BY DELETING
AJG FAMILY PARTNERS, LTD. AND MARTIN L. PRICE AS PARTIES HERETO AND
CONFORMING EXHIBIT A AND EXHIBIT B IN CONNECTION WITH SUCH DELETION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I: THE OPTION................................................................ 1
1.1 Grant of Option........................................................... 1
1.2 Term and Exercise of Option............................................... 1
1.3 Acquisition Consideration................................................. 2
1.4 Lock-Up Agreement......................................................... 2
1.5 Other Agreements.......................................................... 2
1.6 Adjustments to Acquisition Consideration.................................. 2
ARTICLE II: CLOSING PROCEDURES........................................................ 2
2.1 Contribution of Property Interests........................................ 2
2.2 Closing; Conditions to Obligations........................................ 2
2.3 Documents to Be Delivered at the Closing.................................. 4
2.4 Cessation of Public Offering.............................................. 4
2.5 Closing Costs............................................................. 4
2.6 Default................................................................... 5
2.7 Further Assurances........................................................ 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS..................... 5
3.1 Title to Interests........................................................ 5
3.2 Organization; Authority; No Conflicts..................................... 6
3.3 Litigation................................................................ 6
3.4 No Other Agreements....................................................... 6
3.5 No Brokers................................................................ 7
3.6 Investment Representations and Warranties................................. 7
3.7 Private Placement Memorandum.............................................. 8
3.8 Covenant to Remedy Breaches............................................... 8
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP.... 8
4.1 Authority................................................................. 8
4.2 No Brokers................................................................ 9
4.3 Exercise of Options....................................................... 9
ARTICLE V: POWER OF ATTORNEY......................................................... 9
5.1 Grant of Power of Attorney................................................ 9
5.2 Limitation on Liability.................................................. 10
5.3 Ratification; Third Party Reliance....................................... 10
ARTICLE VI: MISCELLANEOUS............................................................ 10
6.1 Amendment................................................................ 10
6.2 Entire Agreement; Counterparts; Applicable Law........................... 10
6.3 Assignability............................................................ 11
6.4 Titles................................................................... 11
6.5 Third Party Beneficiary.................................................. 11
6.6 Severability............................................................. 11
6.7 Equitable Remedies....................................................... 11
6.8 Notices; Exercise of Option.............................................. 11
6.9 Waiver of Rights; Consents with Respect to Partnership Interests......... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6.10 Confidentiality.......................................................... 13
6.11 Computation of Time...................................................... 13
6.12 Survival................................................................. 13
6.13 Time of the Essence...................................................... 13
</TABLE>
Exhibits
A. Grantors
B. Partnerships & Interests
C. Form of Lock-Up Agreement
D. Form of Exchange Rights Agreement
E. Form of Registration Rights Agreement
Schedule 1.3
The exhibits and/or schedules of Exhibit 10.20, set forth herein have not been
included as exhibits to the Registration Statement. The Registrant agrees to
furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OMNIBUS OPTION AGREEMENT
------------------------
This Omnibus Option Agreement (this "AGREEMENT") dated as of the 26th
day of April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and the Grantors listed on Exhibit A attached hereto (each, a "GRANTOR" and,
collectively, the "GRANTORS").
R E C I T A L S:
- - - - - - - -
A. Each Grantor owns interests in one or more partnerships as
described on Exhibit B (the "PARTNERSHIPS").
B. The Operating Partnership desires to acquire through a
contribution to capital from each Grantor, and each Grantor desires to grant to
the Operating Partnership, an option to acquire on the terms and conditions set
forth herein, all interests owned by such Grantor and set forth on Exhibit B and
any other direct or indirect interests such Grantor may have, whether now owned
or hereinafter acquired, in the Partnerships and/or in the properties set forth
opposite each such Partnership's name on Exhibit B. (Each such property and all
personal property related thereto or to the operation thereof is hereinafter
referred to as such Partnership's "PROPERTY," and all of such direct or indirect
interests of a Grantor in such Partnership or Property, including, without
limitation, the interests shown on Exhibit B, are referred to collectively as
such Grantor's "PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, no par value ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to each Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantors agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. Each Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (each, an "OPTION") to acquire
through a contribution to capital all such Grantor's right, title and interest
in such Grantor's Property Interests on the terms and conditions set forth
herein.
1.2 Term and Exercise of Option. Each Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (the
earlier of such dates, the "OPTION TERMINATION DATE"); provided, that if on the
Option Termination Date the Operating Partnership or the Grantor of such Option
is prohibited by applicable law, or the Operating Partnership or such Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
such Option, then such Option may be exercised by the Operating Partnership
during the 10 business day period commencing on the first business day following
the removal of each such prohibition, stay, order, injunction, action,
proceeding or similar limitation in effect at that time. Subject to the
foregoing, if the Operating Partnership does not exercise an Option by the
Option Termination Date, such Option shall be deemed terminated and shall be of
no further force or effect and the Grantor of such Option shall have no further
obligations hereunder.
<PAGE>
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
-------------------------
CONSIDERATION") to be received by each Grantor in respect of the contribution of
such Grantor's Property Interests to the Operating Partnership shall be
determined in accordance with Schedule 1.3 annexed hereto prior to any
adjustments pursuant to Section 1.6. The Acquisition Consideration shall be
paid in units of limited partnership interests in the Operating Partnership ("OP
UNITS"). All adjustments under Section 1.6 shall be paid in cash. The
Acquisition Consideration will be allocated 90% to buildings, fixtures and other
improvements and 10% to personal property.
1.4 Lock-Up Agreement. The Units to be issued to each Grantor
-----------------
hereunder shall be subject to a Lock-Up Agreement to be executed at Closing by
the Operating Partnership and each Grantor, substantially in the form attached
as Exhibit C, whereby no Grantor will be permitted to transfer Units for one
year after Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to Closing, the Company, Grantors
----------------
and the other parties thereto shall enter into a Registration Rights Agreement
and Exchange Rights Agreement, as described in Section 5.1(a) and substantially
in the forms attached as Exhibits D and E, respectively.
1.6 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to each Grantor and each Partnership, the items of revenue and expense
shall be prorated as of 12:01 A.M. on the Closing Date for each Partnership in
accordance with Article X of the Contribution Agreement, dated as of April 26,
1996, by and among DFW South Acquisition Corporation, American General
Hospitality, Inc., and the Operating Partnership (the "Contribution Agreement").
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Contribution of Property Interests. Upon the Operating
----------------------------------
Partnership's exercise of an Option, the Grantor of such Option shall, in
accordance with Section 2.2 hereof, transfer, assign, and convey to the
Operating Partnership and the Operating Partnership shall accept as a
contribution to capital from such Grantor, all right, title and interest in such
Grantor's Property Interests, free and clear of all Encumbrances in exchange for
such Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Operating Partnership shall exercise each Option by
delivering to the Grantor of such Option a notice (the "OPTION NOTICE"), which
notice shall state the date (the "CLOSING DATE") of the closing of the
transactions contemplated by Section 2.1 (the "CLOSING"), which date shall be no
less than 3 days and no more than 30 days following the date of such Option
Notice. The Closing shall be held within such 30 day period at the offices of
American General Hospitality, Inc. or at the offices of the attorneys for the
lead underwriter of the IPO. Following delivery of an Option Notice, the
Operating Partnership and Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing, deposit
such Closing Documents in escrow with Chicago Title Insurance Company, as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to acquire all the Property Interests of each
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement, as the same shall be in effect on the
day of the IPO Closing.
-2-
<PAGE>
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to each Grantor whose Option has been
exercised, (x) a certificate of the general partner of the Operating Partnership
(the "GENERAL PARTNER") certifying that such Grantor has been or will be,
effective as of the Closing, admitted as a limited partner of the Operating
Partnership and that the Operating Partnership's books and records indicate or
will indicate that such Grantor is the holder of the number of OP Units that
represents such Grantor's Acquisition Consideration and (y) if such OP Units are
represented by certificates, a certificate or certificates in the name of such
Grantor representing the number of OP Units to which such Grantor is entitled;
and
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to each Grantor whose Option has been exercised, the
certificates, if any, representing such Grantor's OP Units and, if requested by
such Grantor, a copy of the General Partner's certificate referred to in clause
(i).
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Property Interests of any Grantor as
follows:
(i) in the event that such Grantor either identifies in its
Assignment delivered pursuant to Section 2.3(a) a breach of or other exception
with respect to any of the representations, warranties or covenants contained in
Article III or has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of such Grantor's
Property Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess substantial
damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
- ----
such Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to consummate the contribution of all of such Grantor's Property
Interests, notify the Escrow Agent of such election and direct the Escrow Agent
to return such Grantor's Closing Documents to such Grantor, or (B) in all other
cases, equitably adjust the delivery with respect to such Grantor pursuant to
clause (c)(i) above to reflect the portion of such Grantor's Property Interests
with respect to which the contribution is actually being consummated, which
adjustment shall be determined in the Operating Partnership's reasonable
discretion, and shall in all events be binding upon such Grantor. The election
of the Operating Partnership not to purchase all or any portion of the Property
Interests of a particular Grantor shall not affect the obligations of any other
Grantor hereunder.
(e) Notwithstanding any other provision of this Agreement, any
Grantor may, in its sole discretion, elect not to contribute all or any portion
of its Property Interests unless the transactions governed by the Contribution
Agreement shall have been consummated simultaneously herewith.
(f) Except as the result of a default by a Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor any Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise each Option again
at any time before the Option Termination Date.
-3-
<PAGE>
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, each Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of such Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form reasonably satisfactory to
the Operating Partnership and such Grantor, shall contain a warranty of title
that such Grantor owns such Grantor's Property Interests free and clear of all
Encumbrances (as defined below) and shall either (i) reaffirm the accuracy of
all representations and warranties and the satisfaction of all covenants
contained in Article III hereof, or (ii) if such reaffirmation cannot be made,
identify those representations, warranties and/or covenants contained in Article
III hereof (other than Section 3.9) which the Grantor can no longer make or
comply with, represent that such Grantor has used reasonable efforts to take
such actions as would permit the Grantor to make such representations and
warranties and/or to comply with such covenants, and reaffirm the accuracy of
all other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, a certified copy of all
appropriate corporate resolutions or partnership or trust actions authorizing
the execution, delivery and performance by such Grantor of this Agreement and
the Closing Documents.
(c) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event Grantor fails to provide such an affidavit, the Operating
Partnership shall be entitled to withhold from the Acquisition Consideration and
pay to the Internal Revenue Service the sums required to be withheld pursuant to
FIRPTA (and the amount so withheld shall be paid by the Operating Partnership to
the Internal Revenue Service, in order for the Operating Partnership to comply
with the provisions of Section 1445 of the Internal Revenue Code of 1986 or
successor similar legislation, as the same may be amended hereafter).
(d) The Lock-up Agreement, the Exchange Rights Agreement, the
partnership agreement for the Operating Partnership (the "Partnership
Agreement") and the Registration Rights Agreement.
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
such Grantor's Property Interests to the Operating Partnership as a contribution
to capital and to otherwise effectuate the transactions contemplated hereby,
including filings with any applicable governmental jurisdiction in which the
Operating Partnership is required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Operating Partnership will so advise each Grantor in
writing and thereupon all parties hereto will be relieved of all obligations
under this Agreement and all Closing Documents (except for obligations arising
under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
-------------
the closing costs, other than Grantor's legal fees, arising from the
contribution of the Property Interests of each Grantor to the Operating
Partnership pursuant to the exercise by the Operating Partnership of such
Grantor's Option.
-4-
<PAGE>
2.6 Default.
-------
(a) If after having exercised an Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to each Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of each Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of each Grantor's damages in such event.
(b) If any Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
such Grantor as its sole and exclusive remedy the right of specific performance,
provided that if the right of specific performance is not available, the
Operating Partnership shall be entitled to exercise any and all remedies
provided at law or in equity. All damages awarded to the Operating Partnership
shall be limited to the value of the Grantor's Property Interest plus all
reasonable and necessary costs and expenses incurred by the Operating
Partnership in order to enforce and perfect such legal rights. No default by
any Grantor hereunder shall in any way limit or affect the obligations of all
other Grantors hereunder.
2.7 Further Assurances. Each Grantor will, from time to time,
------------------
execute and deliver to the Operating Partnership all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Operating Partnership may reasonably request in order to
effect the transactions contemplated by this Agreement, including instruments or
documents deemed necessary or desirable by the Operating Partnership to effect
and evidence the contribution of such Grantor's Property Interests to the
Operating Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS
------------------------------------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, each
Grantor hereby severally makes to the Operating Partnership with respect only to
its respective Property Interest each of the representations and warranties set
forth in this Article III, which representations and warranties (unless
otherwise noted) are true as of the date hereof. As a condition to the
Operating Partnership's obligation to consummate the contribution of any
Grantor's Property Interests to the Operating Partnership after the exercise of
such Grantor's Option, such representations and warranties must be true as of
the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit B, such
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by such Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will acquire as a
contribution to capital good and valid title thereto, free and clear of any
Encumbrance, except Encumbrances created in favor of the Operating Partnership
by the transactions contemplated hereby. Each of such Grantor's Property
Interests representing an interest in a Partnership has been validly issued and
such Grantor has funded (or will fund before the same is past due) all capital
contributions and advances to the Partnership in which such Property Interest
represents an interest that are required to be funded or advanced prior to the
date hereof and the date of the Closing. There are no agreements, instruments
or understandings with respect to any of such Grantor's Property Interests
except, in the case of any Property Interest constituting an interest in a
Partnership, as set forth in the partnership agreement of such Partnership.
Such Grantor has no interest, either direct or indirect, in any of the
Partnerships or Properties except for the Property Interests identified on
Exhibit B which are the subject of this Agreement. No Permitted Pledge will be
in existence as of
-5-
<PAGE>
the date of the Closing, and such Grantor shall provide, at the Closing, such
documentary evidence of the release of any Permitted Pledge as the Operating
Partnership may reasonably request. In making the representations in this
Section 3.1 regarding the absence of Encumbrances, each Grantor may assume that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of any Partnerships in which such Grantor's Property
Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. Any such Grantor which is
-------------------------------------
not a natural person is a corporation, limited partnership, general partnership
or trust duly organized, validly existing and in good standing under the laws of
the state of its organization. Such Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of such Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of such Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable corporate,
partnership or trust action necessary for such Grantor to execute and deliver
this Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of such Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date. This Agreement, each Closing
Document and each other agreement, document and instrument executed and
delivered by or on behalf of such Grantor pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of such Grantor, each enforceable in accordance with its
respective terms. Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Grantor: (x) does not and will not violate
such Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable; (y) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Grantor or require such Grantor to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and (z) does not and will not result in a
breach or a violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract, instrument,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Grantor is a party or by which
the property of such Grantor is bound or affected, or result in the creation of
any Encumbrance on any of the property or assets of any Partnership in which any
Property Interest of such Grantor represents an interest. In making the
representations set forth in this Section 3.2, each Grantor may assume (i) that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of Partnerships in which such Grantor's Property Interests
represent direct or indirect interests and (ii) that, for purposes of making
such representation as of the date hereof, any Permitted Pledge has been
released.
3.3 Litigation. Such Grantor knows of no litigation or proceeding,
----------
either judicial or administrative, pending or overtly threatened, affecting all
or any portion of such Grantor's Property Interests or such Grantor's ability to
consummate the transactions contemplated hereby. Such Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair such
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. Such Grantor has made no agreement with,
-------------------
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of such Grantor's Property Interests or restricting in any
way such Grantor's ability to contribute such Grantor's Property Interests to
the Operating Partnership or to enter into any agreement with respect to such
Grantor's Property Interests. In making the representations set forth in this
Section 3.4, each Grantor may assume (i) that the consents and waivers of rights
set forth in Section 6.9 hereof have been given by all partners of the
Partnerships in which such Grantor's Property Interests represent direct or
indirect interests and (ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released.
-6-
<PAGE>
3.5 No Brokers. Such Grantor has not entered into, and covenants
----------
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
-----------------------------------------
(a) Such Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in connection
with the contribution of Property Interests to the Operating Partnership (which
Private Placement Memorandum includes a draft Registration Statement, the
Summary of Partnership Agreement Provisions (the "PARTNERSHIP SUMMARY") and the
Summary of Tax Matters (the "TAX MATTERS SUMMARY"), and understands the risks
of, and other considerations relating to, an investment in OP Units. Such
Grantor, by reason of its business and financial experience, together with the
business and financial experience of those persons, if any, retained by it to
represent or advise it with respect to its investment in OP Units, (i) has such
knowledge, sophistication and experience in financial and business matters and
in making investment decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment decision with respect
to an investment in OP Units, (ii) is capable of protecting its own interest or
has engaged representatives or advisors to assist it in protecting its interests
and (iii) is capable of bearing the economic risk of such investment. Such
Grantor is an "accredited investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act. If such Grantor has retained or retains a
person to represent or advise it with respect to its investment in OP Units,
such Grantor will advise the Operating Partnership of such retention and, at the
Operating Partnership's request, such Grantor shall, prior to or at the Closing,
(i) acknowledge in writing such representation and (ii) cause such
representative or advisor to deliver a certificate to the Operating Partnership
containing such representations as may be reasonably requested by the Operating
Partnership.
(b) Such Grantor understands that an investment in the Operating
Partnership involves substantial risks. Such Grantor has been given the
opportunity to make a thorough investigation of the proposed activities of the
Operating Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary and the
Tax Matters Summary. Such Grantor has been afforded the opportunity to obtain
any additional information requested by it. Such Grantor has had an opportunity
to ask questions of and receive answers from representatives of the Operating
Partnership concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units. Such Grantor has relied
and is making its investment decision based upon the Private Placement
Memorandum, the Partnership Summary, the Tax Matters Summary and other written
information provided to the Grantor by or on behalf of the Operating Partnership
and/or, as applicable, such Grantor's position as a director and/or executive
officer of the Company.
(c) The OP Units to be issued to such Grantor at the Closing will be
acquired by such Grantor for its own account, for investment only and not with a
view to, or with any intention of, a distribution or resale thereof, in whole or
in part, or the grant of any participation therein. Such Grantor was not formed
for the specific purpose of acquiring an interest in the Operating Partnership.
(d) Such Grantor acknowledges that (i) the OP Units to be issued to
such Grantor at the Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and,
if such OP Units are represented by certificates, such certificates will bear a
legend to such effect, (ii) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such Grantor contained
herein, (iii) the OP Units to be issued to such Grantor at the Closing may not
be resold or otherwise distributed unless registered under the Securities Act
and applicable state securities laws, or unless an exemption from registration
is available, (iv) there is no public market for such OP Units, and (v) the
Operating Partnership has no obligation or intention to register such OP Units
under the Securities
-7-
<PAGE>
Act or any state securities laws or to take any action that would make available
any exemption from the registration requirements of such laws, except as
provided in the Registration Rights Agreement (as defined below). Such Grantor
hereby acknowledges that because of the restrictions on transfer or assignment
of such OP Units to be issued hereunder which will be set forth in the
Partnership Agreement and in the Lock-up Agreement, such Grantor may have to
bear the economic risk of the investment commitment evidenced by this Agreement
and any OP Units issued hereunder for an indefinite period of time, although (x)
under the terms of the Exchange Rights Agreement, as it will be in effect at the
time of the IPO, OP Units will be exchangeable at the request of the holder
thereof at any time after the first anniversary of their issuance for cash based
on their fair market value or, at the option of the Company, for Common Stock
and (y) the holder of any such Common Stock issued upon exchange of OP Units
will be afforded certain rights to have such Common Stock registered under the
Securities Act and applicable state securities laws pursuant to the Registration
Rights Agreement (as described in Section 5. 1 (a)).
(e) The address set forth under such Grantor's name in Exhibit A is
the address of the Grantor's principal place of business or, if a natural
person, the address of the Grantor's residence, and such Grantor has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal place of business or
residence is sited.
3.7 Private Placement Memorandum. Such Grantor understands and
----------------------------
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of such Grantor. Without limiting the foregoing,
such changes may include the deletion (or addition) of one or more properties
expected to be acquired by the Operating Partnership and changes in the amount
of the indebtedness expected to be repaid with the proceeds of the IPO. The
Operating Partnership shall not be obligated to obtain such Grantor's consent as
a result of such changes, although such changes could affect the nature and
value of such Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. Each Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of such Grantor hereunder, (ii) to satisfy all
covenants of such Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of such Grantor hereunder upon its learning
of same.
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to each Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to each Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; (ii) to
perform the transactions contemplated hereby and thereby; and (iii) to issue OP
Units to each Grantor pursuant to and in accordance with the terms of this
Agreement. This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms. The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating
-8-
<PAGE>
Partnership: (x) does not and will not violate the Partnership Agreement; (y)
does not and will not violate any foreign, federal, state, local or other laws
applicable to the Operating Partnership or require the Operating Partnership to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (government or otherwise) that has not been obtained or made and
which does not remain in effect; and (z) does not and will not result in a
breach or a violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement, contract,
instrument, lease, permit or authorization, or any order, writ, judgment,
injunction, decree, determination or arbitration award to which the Operating
Partnership is a party or by which the property of the Operating Partnership is
bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
----------
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
Option of any Grantor hereunder, it will exercise the Options of all Grantors
hereunder, but this covenant shall in no way affect the Operating Partnership's
right, pursuant to Section 2.2(c), to elect not to accept the contribution of
all or any portion of the Property Interests of any Non-Complying Grantor.
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. Each Grantor does hereby irrevocably
--------------------------
appoint Thomas J. Corcoran, Jr. and Thomas L. Wiese with full power of
substitution (such person or any such successor acting in his, her or its
capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of such Grantor, to act in the name,
place and stead of such Grantor:
(a) To enter into (i) the Exchange Rights Agreement, as well as the
(ii) Registration Rights Agreement, which provides such Grantor certain
rights to have the Common Stock which may be issued to such Grantor upon
exchange of such Grantor's OP Units registered under the Securities Act,
and (iii) the Lock-up Agreement.
(b) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the contribution of such Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could such Grantor if personally present
and acting.
The Power of Attorney granted by each Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other Grantors and is for the purpose of completing the transactions
contemplated by this Agreement. The Power of Attorney of each Grantor granted
hereby and all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act of such
Grantor or by operation of law, whether by the death, disability, incapacity or
liquidation of such Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
such Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, such Grantor shall die or become disabled or incapacitated or
is liquidated, or if any other such event or events shall occur before the
-9-
<PAGE>
completion of the transactions contemplated by this Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. Each Grantor
agrees that, at the request of the Operating Partnership, it will promptly
execute a separate power of attorney on the same terms set forth in this Article
V, such execution to be witnessed and notarized.
Each Grantor hereby acknowledges and confirms that the Power of
Attorney granted by each Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of such Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the aggregate number of OP Units that
such Grantor will receive in connection with the exercise by the Operating
Partnership of such Grantor's Option, provided that such power is used for such
purpose only in connection with a change in the anticipated range of initial
offering prices of the Company's Common Stock or if the actual initial offering
price of the Company's Common Stock is different from that which was originally
anticipated in determining the Acquisition Consideration.
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by each Grantor hereby. Each Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the contribution of the Property Interests to the
Operating Partnership, the Registration Statement (as defined in Schedule 1.3),
the Red Herring (as defined in Schedule 1.3) or any preliminary prospectus, nor
for any aspect of the IPO, and it shall not be liable for any error of judgment
or for any act done or omitted or for any mistake of fact or law except for its
own gross negligence or bad faith. Each Grantor agrees to indemnify the
Attorney-in-Fact for and to hold the Attorney-in-Fact harmless against any loss,
claim, damage or liability incurred or in part arising out of or in connection
with its acting as the Attorney-in-Fact under the Power of Attorney created by
such Grantor hereby, as well as the cost and expense of investigating and
defending against any such loss, claim, damage or liability, except to the
extent such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Attorney-in-Fact. Each Grantor agrees that the Attorney-in-
Fact may consult with counsel of its own choice (who may be counsel for the
Operating Partnership and/or the Company) and it shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel. It is understood
that each Attorney-in-Fact may, without breaching any express or implied
obligation to the Grantor hereunder, release, amend or modify any other Power of
Attorney granted by any other Grantor hereunder or by any other person under any
related agreement.
5.3 Ratification; Third Party Reliance. Each Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by such Grantor
hereunder, and such Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
-------------
6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment, provided that the Operating Partnership may amend this Agreement
without notice to or the consent of any Grantor for the purpose of adding
additional Grantors as parties hereto or deleting Grantors as parties hereto and
conforming Exhibit A in connection with such additions or deletions. No waiver
of any provisions of this Agreement shall be valid unless in writing and signed
by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects,
-10-
<PAGE>
including validity, interpretation and effect, by the laws of the State of
Delaware without giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantors, or
by any Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantors.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 6.3 and 6.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of Texas (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of an Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
-11-
<PAGE>
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of a notice to a Grantor,
to the address and telecopy number set forth under such Grantor's name in
Exhibit A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) Each Grantor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of Property Interests) may conflict with,
and may not have been contemplated by, the partnership agreement of one or more
Partnerships in which one or more of such Grantor's Property Interests represent
a direct or indirect interest or another agreement among one or more holders of
such Property Interests or one or more of the partners of any such partnership.
With respect to each Partnership in which a Property Interest of a Grantor
represents a direct or indirect interest, each Grantor expressly gives all
Consents (and any consent necessary to authorize the proper parties in interest
to give all Consents) and Waivers necessary or desirable to facilitate any
Conveyance Action relating to such partnership (as such terms are defined
below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is a
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company as described in the
Private Placement Memorandum, or (ii) the entering into by any such partner or
holder of any agreement relating to (x) the formation of the Operating
Partnership or the Company as described in the Private Placement Memorandum, (y)
the direct or indirect acquisition by to the Operating Partnership or the
Company of any such direct or indirect interest, or (z) the transactions
described in or contemplated by the Private Placement Memorandum, or (iii) the
taking by any such partner or holder of any action necessary or desirable to
facilitate any of the foregoing, including, without limitation, the following
(provided that the same are taken in furtherance of the foregoing): any sale or
distribution to any person of a direct or indirect interest in such partnership,
the entering into any agreement with any person that grant to such person the
right to purchase a direct or indirect interest in such partnership, and the
giving of the Consents and Waivers contained in this Section 6.9 or consent or
waivers similar thereto in form or purpose. As used herein, the term "CONSENTS"
means, with respect to any such partnership, any consent necessary or desirable
under the partnership agreement of such partnership or any other agreement among
all or any of the holders of interests therein or any other agreement relating
thereto or referred to therein (i) to permit any and all Conveyance Actions
relating to such partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs or
interferes with any Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default under such
agreement if interests therein are
-12-
<PAGE>
transferred for other than cash), (ii) to admit the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's acquisition of a
limited or general partner interest therein, respectively, and to adopt such
amendment as is necessary or desirable to effect such admission, (iii) to adopt
any amendment as may be deemed desirable by the Operating Partnership, either
simultaneously with or immediately prior to the acquisition of a limited or
general partnership interest therein provided, that such amendment will not
result in any increased liability on the part of any Grantor hereunder or under
the applicable partnership agreement, and (iv) to continue such partnership
following the transfer of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above). As used herein, the term "WAIVERS" means,
with respect to a partnership of which a Property Interest of a Grantor
represents a direct or indirect interest, the waiving of any and all rights that
such Grantor may have with respect to, and (to the extent possible) that any
other person may have with respect to, or that may accrue to such Grantor or
other person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights: rights of
notice, rights to response periods, rights to purchase the direct or indirect
interest of another partner in such partnership or to sell such Grantor's or
other person's direct or indirect interest therein to another partner, rights to
sell such Grantor's or other person's direct or indirect interest therein at a
price other than as provided herein, or rights to prohibit, limit, invalidate,
otherwise restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such Conveyance
Action. Each Grantor further agrees that such Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which a Property Interest of
such Grantor represents a direct or indirect interest. The Waivers and Consent
contained in this Section 6.9 shall terminate upon the termination of this
Agreement, except as to transactions completed hereunder prior to termination.
6.10 Confidentiality. Each Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
such Grantor who agree to keep such terms confidential and any lender holding a
lien on any Property Interests. Grantor shall treat all information received
from the Operating Partnership or its counsel or advisors pertaining to the
Operating Partnership or the Company confidential and shall disseminate same
only to counsel to such Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of the
Operating Partnership and each Grantor set forth in this Agreement shall survive
the consummation of the transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of Grantor under this Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
/s/ Bruce G. Wiles
By: __________________________________
Name: Bruce G. Wiles
Title: Executive Vice President
-14-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Louis E. Capt
-----------------------------------
Name: L. E. C. Investments Inc.
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
-1-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Richard O. Jacobson
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: Box 224
-----------------------------------
Des Moines, Iowa 50301
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
-2-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Thomas J. Corcoran, Jr.
-----------------------------------
Name: Thomas J. Corcoran, Jr.
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals hereunder pursuant to Article V.
Percentage to be paid in Cash --
----
Percentage to be paid in OP Units 100%
----
-3-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Hervey A. Feldman
-----------------------------------
Name: Hervey A. Feldman
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals hereunder pursuant to Article V.
Percentage to be paid in Cash 50%
----
Percentage to be paid in OP Units 50%
----
-4-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Pin HWang
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: /s/ Pin HWang
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: 360 E. Randolph #3006
-----------------------------------
Chicago, Illinois 60601
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals hereunder pursuant to Article V.
P.S. Half of the unit cashes out
Half of the unit convert to stock option
-5-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Thomas L. Wiese
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: Thomas L. Wiese
-----------------------------------
3611 Ingleside Dr.
-----------------------------------
Dallas, TX 75229
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and the Operating Partnership hereunder pursuant to Article V.
-6-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Steve Cobb
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: /s/ Steve Cobb
-----------------------------------
140 Mockingbird Lane
-----------------------------------
Coppel, TX 75019
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
-7-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Richard A. Hess
/s/ Barbara A. Hess
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: 12920 N.W. 17th
-----------------------------------
Topeka, KS 66615
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
Percentage to be paid in Cash 40%
----
Percentage to be paid in OP Units 60%
----
-8-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Jerry Jacob
-----------------------------------
Name: Jerry Jacob
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: One Holly Hill Lane
-----------------------------------
Greenwich, CT 06830
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
-9-
<PAGE>
Schedule 1.3
------------
At the Closing, each Grantor, who has elected to receive OP Units
shall receive a number of OP Units equal to (i) the value of the Equity Interest
(as defined below) (subject to adjustment as set forth below) divided by (ii)
the mid-point of the proposed per share offering prices (the "Mid-Point") set
forth in the final red herring prospectus (the "RED HERRING") included in the
Company's Registration Statement on Form S-11 prepared and filed in connection
with the IPO (the "REGISTRATION STATEMENT"). In the event the initial yield (the
"Initial Yield") (calculated by dividing the estimated annual distribution per
share for the 12-month period following the IPO, as set forth in the Red
Herring, by the Mid-Point) is a percentage greater or less than 8.0%, then the
value of the Equity Interest shall increase or decrease accordingly by an amount
equal to the Applicable Percentage (as defined below) times the resulting change
in the value of the Operating Partnership; provided, however, in no event shall
the value of the Equity Interest be reduced by more than 7.5%. As used herein,
the "value of the Operating Partnership" shall be determined by taking the
product of the "Pro Forma Cash Available for Distribution" as defined in the Red
Herring ("CAD") times the percentage of CAD (expressed as a decimal fraction) to
be distributed to the partners in the Operating Partnership or the shareholders
in the Company (as the case may be) as set forth in the Red Herring, and
dividing that product by the Initial Yield. While the value of the Equity
Interest may never be reduced by more than 7.5%, there shall be no cap on
increases in the value of the Equity Interest as a result of any positive
pricing adjustment described in this Schedule 1.3. For purposes of this Schedule
1.3, "Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus
each Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of each of the respective Grantors shall be calculated assuming
a sale of the Property at an aggregate purchase price of $25,132,000 in cash
less the outstanding mortgage balance in the original amount of $14,250,000, in
accordance with the terms and conditions of the Amended and Restated Agreement
of Limited Partnership of DFW South I Limited Partnership, dated May 1, 1992.
<PAGE>
Exhibit 10.21
OMNIBUS OPTION AGREEMENT
(Cash)
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTORS NAMED BELOW
SABANA GRANDE S.A.,
S&B TECHNICAL PRODUCTS, INC.,
AJG FAMILY PARTNERS, LTD.,
RICHARD A. & BARBARA A. HESS,
ALEX BROWN & SONS INC., CUST FBO JIM SALE, IRA #223-24085
HERVEY A. FELDMAN,
MARTIN L. PRICE
SCHRADER FAMILY TRUST
AND
PIN N. HWANG
Dated as of April 26, 1996
* THIS AGREEMENT HAS BEEN AMENDED IN ACCORDANCE WITH SECTION 6.1 BY ADDING
AJG FAMILY PARTNERS, LTD., RICHARD A. & BARBARA A. HESS, ALEX BROWN & SONS
INC. CUST. FBO JIM SALE, IRA #223-24085-18, HERVEY A. FELDMAN, MARTIN L.
PRICE AND PIN N. HWANG AS PARTIES HERETO AND CONFORMING EXHIBIT A AND
EXHIBIT B IN CONNECTION WITH SUCH ADDITION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I: THE OPTION................................................... 1
1.1 Grant of Option.............................................. 1
1.2 Term and Exercise of Option.................................. 1
1.3 Acquisition Consideration.................................... 2
1.4 Adjustments to Acquisition Consideration..................... 2
ARTICLE II: CLOSING PROCEDURES........................................... 2
2.1 Purchase of Property Interests............................... 2
2.2 Closing; Conditions to Obligations........................... 2
2.3 Documents to Be Delivered at the Closing..................... 3
2.4 Cessation of Public Offering................................. 4
2.5 Closing Costs................................................ 5
2.6 Default...................................................... 5
2.7 Further Assurances........................................... 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS........ 5
3.1 Title to Interests........................................... 5
3.2 Organization; Authority; No Conflicts........................ 6
3.3 Litigation................................................... 6
3.4 No Other Agreements.......................................... 6
3.5 No Brokers................................................... 7
3.6 Covenant to Remedy Breaches.................................. 7
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP.................................................. 7
4.1 Authority.................................................... 7
4.2 No Brokers................................................... 7
4.3 Exercise of Options.......................................... 7
ARTICLE V: POWER OF ATTORNEY............................................ 8
5.1 Grant of Power of Attorney................................... 8
5.2 Limitation on Liability...................................... 9
5.3 Ratification; Third Party Reliance........................... 9
ARTICLE VI: MISCELLANEOUS................................................ 9
6.1 Amendment.................................................... 9
6.2 Entire Agreement; Counterparts; Applicable Law............... 9
6.3 Assignability................................................ 9
6.4 Titles....................................................... 9
6.5 Third Party Beneficiary...................................... 10
6.6 Severability................................................. 10
6.7 Equitable Remedies........................................... 10
6.8 Notices; Exercise of Option.................................. 10
6.9 Waiver of Rights; Consents with Respect to Partnership
Interests.................................................... 10
6.10 Confidentiality.............................................. 12
6.11 Computation of Time.......................................... 12
6.12 Survival..................................................... 12
6.13 Time of the Essence.......................................... 12
</TABLE>
<PAGE>
Exhibits
A. Grantors
B. Partnerships & Interests
C. Adjustment Provisions
The exhibits and/or schedules of Exhibit 10.21, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OMNIBUS OPTION AGREEMENT
------------------------
This Omnibus Option Agreement (this "AGREEMENT") dated as of the 26th
day of April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and the Grantors listed on Exhibit A attached hereto (each, a "GRANTOR" and,
collectively, the "GRANTORS").
R E C I T A L S:
- - - - - - - -
A. Each Grantor owns interests in one or more partnerships as
described on Exhibit B (the "PARTNERSHIPS").
B. The Operating Partnership desires to purchase for cash from each
Grantor, and each Grantor desires to grant to the Operating Partnership, an
option to acquire on the terms and conditions set forth herein, all interests
owned by such Grantor and set forth on Exhibit B and any other direct or
indirect interests such Grantor may have, whether now owned or hereinafter
acquired, in the Partnerships and/or in the properties set forth opposite each
such Partnership's name on Exhibit B. (Each such property and all personal
property related thereto or to the operation thereof is hereinafter referred to
as such Partnership's "PROPERTY," and all of such direct or indirect interests
of a Grantor in such Partnership or Property, including, without limitation, the
interests shown on Exhibit B, are referred to collectively as such Grantor's
"PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, $.01 par value ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to each Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantors agree as follows:
ARTICLE I: THE OPTION
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1.1 Grant of Option. Each Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (each, an "OPTION") to purchase for
cash all such Grantor's right, title and interest in such Grantor's Property
Interests on the terms and conditions set forth herein.
1.2 Term and Exercise of Option. Each Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (as such
term is defined in Section 2.4) (the earlier of such dates, the "OPTION
TERMINATION DATE"); provided, that if on the Option Termination Date the
Operating Partnership or the Grantor of such Option is prohibited by applicable
law, or the Operating Partnership or such Grantor is subject to a stay, order,
injunction, or similar limitation or any pending or threatened action or
proceeding to enjoin, restrain, prohibit or assess substantial damages in
respect of the exercise by the Operating Partnership of such Option, then such
Option may be exercised by the Operating Partnership during the 10 business day
period commencing on the first business day following the removal of each such
prohibition, stay, order, injunction, action, proceeding or similar limitation
in effect at that time. Subject to the foregoing, if the Operating Partnership
does not exercise an Option by the Option
<PAGE>
Termination Date, such Option shall be deemed terminated and shall be of no
further force or effect and the Grantor of such Option shall have no further
obligations hereunder.
1.3 Acquisition Consideration. The cash consideration (the
-------------------------
"ACQUISITION CONSIDERATION") to be received by each Grantor in respect of the
Operating Partnership's purchase of each Grantor's Property Interests shall be
the amount which is equal to the product of the respective Grantor's applicable
Property Interest as set forth on Exhibit B, multiplied by $1,949,270.
Acquisition Consideration shall be adjusted as set forth in Section 1.4 below.
The Acquisition Consideration will be allocated 95% to buildings, fixtures and
other improvements and 5% to personal property.
1.4 Adjustments to Acquisition Consideration. At Closing, with
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respect to each Grantor and each Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for each Partnership in
accordance with provisions substantially in the form on Exhibit C attached
hereto. For purposes of this Section 1.4 and Exhibit C, each Grantor shall be
considered a "Seller" within the meaning of the provisions of Exhibit C and
agrees to be bound by Exhibit C and fulfill all obligations thereunder,
including the obligation to make payments prescribed thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
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2.1 Purchase of Property Interests. Upon the Operating Partnership's
------------------------------
exercise of an Option, the Grantor of such Option shall, in accordance with
Section 2.2 hereof, transfer, assign, and convey to the Operating Partnership
and the Operating Partnership shall purchase from such Grantor, all right, title
and interest in such Grantor's Property Interests, free and clear of all
Encumbrances in exchange for such Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
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(a) The Operating Partnership shall exercise each Option by
delivering to the Grantor of such Option a notice (the "OPTION NOTICE"), which
notice shall state the date (the "CLOSING DATE") of the closing of the
transactions contemplated by Section 2.1 (the "CLOSING"), which date shall be no
more than 30 days following the date of such Option Notice. The Closing shall
be held within such 30 day period at the offices of Battle Fowler, LLP, 75 East
55th Street, New York, New York or at such other place to be determined by the
Operating Partnership in its sole discretion. Following delivery of an Option
Notice, the Operating Partnership and Grantor will at or prior to the Closing
execute and deliver all closing documents (the "CLOSING DOCUMENTS") required by
the Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP, as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to purchase all the Property Interests of each
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO, as the same shall be in effect on the day of the IPO
Closing.
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<PAGE>
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to each Grantor whose Option has been
exercised, the Acquisition Consideration in immediately available funds by check
or wire transfer; and
(ii) upon receipt of the consideration set forth in
clause (i) above, the Escrow Agent will release the Closing Documents to the
Operating Partnership and deliver to each Grantor whose Option has been
exercised, the Acquisition Consideration owed to such Grantor.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to purchase of all
or any portion of the Property Interests of any Grantor as follows:
(i) in the event that such Grantor either identifies in
its Assignment delivered pursuant to Section 2.3(a) a breach of or other
exception with respect to any of the representations, warranties or covenants
contained in Article III or has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to purchase such Grantor's Property Interests, or there
exists an order or judgment enjoining, restraining or prohibiting, or assessing
substantial damages in respect of such consummation, or there shall be any
action or proceeding instituted or threatened in writing to enjoin, restrain,
prohibit or assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
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such Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to purchase of all of such Grantor's Property Interests, notify the
Escrow Agent of such election and direct the Escrow Agent to return such
Grantor's Closing Documents to such Grantor, or (B) in all other cases,
equitably adjust the delivery with respect to such Grantor pursuant to clause
(c)(i) above to reflect the portion of such Grantor's Property Interests with
respect to which the purchase is actually being made, which adjustment shall be
determined in the Operating Partnership's reasonable discretion, and shall in
all events be binding upon such Grantor. The election of the Operating
Partnership not to purchase all or any portion of the Property Interests of a
particular Grantor shall not affect the obligations of any other Grantor
hereunder.
(e) Except as the result of a default by a Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor any Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise each Option again
at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
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Closing, each Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of such Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Operating
Partnership, shall contain a warranty of title that such Grantor owns such
Grantor's Property Interests free and clear of all Encumbrances (as defined
below) and shall either (i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article III
hereof, or (ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III hereof
(other than Section 3.9) which the Grantor can no longer make or comply with,
represent that such Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such
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<PAGE>
representations and warranties and/or to comply with such covenants, and
reaffirm the accuracy of all other representations and warranties and the
satisfaction of all other covenants contained in Article III hereof.
(b) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, a certified copy of all
appropriate corporate resolutions or partnership or trust actions authorizing
the execution, delivery and performance by such Grantor of this Agreement and
the Closing Documents.
(c) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, an opinion from counsel
for such Grantor in form and content reasonably acceptable to the Operating
Partnership substantially to the effect that:
(i) such Grantor is a corporation, limited partnership,
general partnership or trust duly organized, validly existing and in good
standing under the laws of the state of its organization and had and has
all applicable power and authority to execute, deliver and perform this
Agreement and the Closing Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of such
Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other material
agreement or instrument to which such Grantor is a party or by which it or
its assets or properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and warranted will
be waived or cured, or discharged or repaid prior to or contemporaneously
with the Closing; (y) to the knowledge of such counsel, constitute a
violation of any order, judgment or decree to which such Grantor is a party
or by which it or any of its assets or properties are bound or affected; or
(z) to the knowledge of such counsel, result in the creation of any lien,
charge or encumbrance upon any of Grantor's assets or properties, except
for Permitted Pledges (as defined below); and
(iii) all applicable corporate, partnership or trust action
necessary for such Grantor to execute and deliver this Agreement and the
Closing Documents and to perform the transactions contemplated hereby and
thereby has been taken and that the same have been validly executed and
delivered and are the valid and binding obligations of such Grantor
enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights and remedies
generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event Grantor fails to provide such an affidavit, the Operating
Partnership shall be entitled to withhold from the Acquisition Consideration and
pay to the Internal Revenue Service the sums required to be withheld pursuant to
FIRPTA (and the amount so withheld shall be paid by the Operating Partnership to
the Internal Revenue Service, in order for the Operating Partnership to comply
with the provisions of Section 1445 of the Internal Revenue Code of 1986 or
successor similar legislation, as the same may be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
such Grantor's Property Interests to the Operating Partnership and to otherwise
effectuate the transactions contemplated hereby, including filings with any
applicable governmental jurisdiction in which the Operating Partnership is
required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being
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<PAGE>
referred to as the "CESSATION DATE"), the Operating Partnership will so advise
each Grantor in writing and thereupon all parties hereto will be relieved of all
obligations under this Agreement and all Closing Documents (except for
obligations arising under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
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the closing costs, other than Grantor's legal fees, arising from the purchase of
the Property Interests of each Grantor to the Operating Partnership pursuant to
the exercise by the Operating Partnership of such Grantor's Option.
2.6 Default.
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(a) If after having exercised an Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to each Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of each Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of each Grantor's damages in such event.
(b) If any Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
such Grantor any and all remedies provided at law or in equity, including but
not limited to, the right of specific performance. No default by any Grantor
hereunder shall in any way limit or affect the obligations of all other Grantors
hereunder.
2.7 Further Assurances. Each Grantor will, from time to time,
------------------
execute and deliver to the Operating Partnership all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Operating Partnership may reasonably request in order to
effect the transactions contemplated by this Agreement, including instruments or
documents deemed necessary or desirable by the Operating Partnership to effect
and evidence the purchase of such Grantor's Property Interests to the Operating
Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS
-----------------------------------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, each
Grantor hereby severally makes to the Operating Partnership each of the
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to purchase of
any Grantor's Property Interests to the Operating Partnership after the exercise
of such Grantor's Option, such representations and warranties must be true as of
the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit B, such
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by such Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will purchase good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby. Each of such Grantor's Property Interests representing an interest in a
Partnership has been validly issued and such Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Property Interest represents an interest that are
required to be funded or advanced prior to the date hereof and the date of the
Closing. There are no agreements, instruments or understandings with respect
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<PAGE>
to any of such Grantor's Property Interests except, in the case of any Property
Interest constituting an interest in a Partnership, as set forth in the
partnership agreement of such Partnership. Such Grantor has no interest, either
direct or indirect, in any of the Partnerships or Properties except for the
Property Interests identified on Exhibit B which are the subject of this
Agreement. No Permitted Pledge will be in existence as of the date of the
Closing, and such Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request. In making the representations in this Section 3.1 regarding
the absence of Encumbrances, each Grantor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of any Partnerships in which such Grantor's Property Interests
represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. Any such Grantor which is
-------------------------------------
not a natural person is a corporation, limited partnership, general partnership
or trust duly organized, validly existing and in good standing under the laws of
the state of its organization. Such Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of such Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of such Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable corporate,
partnership or trust action necessary for such Grantor to execute and deliver
this Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of such Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date. This Agreement, each Closing
Document and each other agreement, document and instrument executed and
delivered by or on behalf of such Grantor pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of such Grantor, each enforceable in accordance with its
respective terms. Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Grantor: (x) does not and will not violate
such Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable; (y) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Grantor or require such Grantor to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and (z) does not and will not result in a
breach or a violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract, instrument,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Grantor is a party or by which
the property of such Grantor is bound or affected, or result in the creation of
any Encumbrance on any of the property or assets of any Partnership in which any
Property Interest of such Grantor represents an interest. In making the
representations set forth in this Section 3.2, each Grantor may assume (i) that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of Partnerships in which such Grantor's Property Interests
represent direct or indirect interests and (ii) that, for purposes of making
such representation as of the date hereof, any Permitted Pledge has been
released.
3.3 Litigation. There is no litigation or proceeding, either
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judicial or administrative, pending or overtly threatened, affecting all or any
portion of such Grantor's Property Interests or such Grantor's ability to
consummate the transactions contemplated hereby. Such Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair such
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. Such Grantor has made no agreement with,
-------------------
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of such Grantor's Property Interests or restricting in any
way such Grantor's ability to sell such Grantor's Property Interests to the
Operating Partnership or to enter into any agreement with
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<PAGE>
respect to such Grantor's Property Interests. In making the representations set
forth in this Section 3.4, each Grantor may assume (i) that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnerships in which such Grantor's Property Interests
represent direct or indirect interests and (ii) that, for purposes of making
such representations as of the date hereof, any Permitted Pledge has been
released.
3.5 No Brokers. Such Grantor has not entered into, and covenants
----------
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. Each Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of such Grantor hereunder, (ii) to satisfy all
covenants of such Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of such Grantor hereunder upon its learning
of same.
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to each Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to each Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; and
(ii) to perform the transactions contemplated hereby and thereby. This
Agreement, each Closing Document to which the Operating Partnership is a party
and each agreement, document and instrument executed and delivered by the
Operating Partnership pursuant to this Agreement constitutes, or when executed
and delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable in accordance with its respective terms.
The execution, delivery and performance of this Agreement, each Closing Document
to which the Operating Partnership is a party and each such agreement, document
and instrument by the Operating Partnership: (x) does not and will not violate
the Partnership Agreement; (y) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (government or otherwise) that
has not been obtained or made and which does not remain in effect; and (z) does
not and will not result in a breach or a violation of, constitute a default
under, accelerate any obligation under or give rise to a right of termination
of, any indenture, deed of trust, mortgage, loan or credit agreement, any other
material agreement, contract, instrument, lease, permit or authorization, or any
order, writ, judgment, injunction, decree, determination or arbitration award to
which the Operating Partnership is a party or by which the property of the
Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
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covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
Option of any Grantor hereunder, it will exercise the Options of all Grantors
hereunder, but this covenant shall in no way affect the
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Operating Partnership's right, pursuant to Section 2.2(c), to elect not to
purchase all or any portion of the Property Interests of any Non-Complying
Grantor.
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. Each Grantor does hereby irrevocably
--------------------------
appoint Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the Operating
Partnership, and each of them individually, with full power of substitution
(such person or the Operating Partnership or any such successor of any of them
acting in his, her or its capacity as attorney-in-fact pursuant hereto, the
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of such
Grantor, to act in the name, place and stead of such Grantor:
(a) To take for such Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the IPO, including without
limitation (i) filing a registration statement and amendments thereto (the
"REGISTRATION STATEMENT") under the Securities Act which describes the
benefit to be received by such Grantor in connection with the formation of
the Company and the offering of the Company's Common Stock, (ii)
distributing a preliminary prospectus and prospectus regarding the offering
of the Company's Common Stock (the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and (iii) to take such other steps as
the Attorney-in-Fact may deem necessary or advisable.
(b) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the purchase of such Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could such Grantor if personally present
and acting.
The Power of Attorney granted by each Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other Grantors and is for the purpose of completing the transactions
contemplated by this Agreement. The Power of Attorney of each Grantor granted
hereby and all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act of such
Grantor or by operation of law, whether by the death, disability, incapacity or
liquidation of such Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
such Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, such Grantor shall die or become disabled or incapacitated or
is liquidated, or if any other such event or events shall occur before the
completion of the transactions contemplated by this Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. Each Grantor
acknowledges that Steven D. Jorns, Bruce G. Wiles and Kenneth E. Barr and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transaction contemplated by this
Agreement. Each Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
Each Grantor hereby acknowledges and confirms that the Power of
Attorney granted by each Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of such Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the amount of Acquisition Consideration
that such Grantor will receive in connection with the exercise by the Operating
Partnership of such Grantor's Option.
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<PAGE>
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by each Grantor hereby. Each Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the purchase of the Property Interests by the
Operating Partnership, the Registration Statement, the Prospectus or any
Preliminary Prospectus, nor for any aspect of the IPO, and it shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. Each
Grantor agrees to indemnify the Attorney-in-Fact for and to hold the
Attorney-in-Fact harmless against any loss, claim, damage or liability incurred
or in part arising out of or in connection with its acting as the Attorney-in-
Fact under the Power of Attorney created by such Grantor hereby, as well as the
cost and expense of investigating and defending against any such loss, claim,
damage or liability, except to the extent such loss, claim, damage or liability
is due to the gross negligence or bad faith of the Attorney-in-Fact. Each
Grantor agrees that the Attorney-in-Fact may consult with counsel of its own
choice (who may be counsel for the Operating Partnership and/or the Company) and
it shall have full and complete authorization and protection for any action
taken or suffered by it hereunder in good faith and in accordance with the
opinion of such counsel. It is understood that each Attorney-in-Fact may,
without breaching any express or implied obligation to the Grantor hereunder,
release, amend or modify any other Power of Attorney granted by any other
Grantor hereunder or by any other person under any related agreement.
5.3 Ratification; Third Party Reliance. Each Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by such Grantor
hereunder, and such Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
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6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment, provided that the Operating Partnership may amend this Agreement
without notice to or the consent of any Grantor for the purpose of adding
additional Grantors as parties hereto or deleting Grantors as parties hereto and
conforming Exhibit A in connection with such additions or deletions. No waiver
of any provisions of this Agreement shall be valid unless in writing and signed
by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantors, or
by any Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantors.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
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<PAGE>
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 6.3 and 6.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of an Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of a notice to a Grantor,
to the address and telecopy number set forth under such Grantor's name in
Exhibit A hereto.
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<PAGE>
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) Each Grantor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of Property Interests) may conflict with,
and may not have been contemplated by, the partnership agreement of one or more
Partnerships in which one or more of such Grantor's Property Interests represent
a direct or indirect interest or another agreement among one or more holders of
such Property Interests or one or more of the partners of any such partnership.
With respect to each Partnership in which a Property Interest of a Grantor
represents a direct or indirect interest, each Grantor expressly gives all
Consents (and any consent necessary to authorize the proper parties in interest
to give all Consents) and Waivers necessary or desirable to facilitate any
Conveyance Action relating to such partnership (as such terms are defined
below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is a
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company, or (ii) the entering into
by any such partner or holder of any agreement relating to (x) the formation of
the Operating Partnership or the Company or (y) the direct or indirect
acquisition by to the Operating Partnership or the Company of any such direct or
indirect interest, or (iii) the taking by any such partner or holder of any
action necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing): any sale or distribution to any person of a
direct or indirect interest in such partnership, the entering into any agreement
with any person that grant to such person the right to purchase a direct or
indirect interest in such partnership, and the giving of the Consents and
Waivers contained in this Section 6.9 or consent or waivers similar thereto in
form or purpose. As used herein, the term "CONSENTS" means, with respect to any
such partnership, any consent necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any of the
holders of interests therein or any other agreement relating thereto or referred
to therein (i) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other agreements so
that no provision thereof prohibit, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if interests therein
are transferred for other than cash), (ii) to admit the Operating Partnership
(or the Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's acquisition of a
limited or general partner interest therein, respectively, and to adopt such
amendment as is necessary or desirable to effect such admission, (iii) to adopt
any amendment as may be deemed desirable by the Operating Partnership, either
simultaneously with or immediately prior to the acquisition of a limited or
general partnership interest therein, and (iv) to continue such partnership
following the transfer of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above). As used herein, the term "WAIVERS" means,
with respect to a partnership of which a Property Interest of a Grantor
represents a direct or indirect interest, the waiving of any and all rights that
such Grantor may have with respect to, and (to the extent possible) that any
other person may have with respect to, or that may accrue to such Grantor or
other person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights: rights of
notice, rights to response periods, rights to purchase the direct or indirect
interest of another partner in such partnership or to sell such Grantor's or
other person's direct or indirect interest therein to another partner, rights to
sell such Grantor's or other person's direct or indirect interest therein at a
price other than as provided herein, or rights to prohibit, limit, invalidate,
otherwise restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such Conveyance
Action. Each Grantor further agrees that such Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which a Property Interest of
such Grantor represents a direct or indirect interest. The Waivers and Consent
contained in
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<PAGE>
this Section 6.9 shall terminate upon the termination of this Agreement, except
as to transactions completed hereunder prior to termination.
(b) Each Grantor by its execution hereof (i) with respect to each
Partnership in which a Property Interest owned by such Grantor represents a
direct or indirect interest therein, gives such consent as is necessary to cause
each Partnership, as applicable, to have authority to transfer all or
substantially all of the assets of such Partnership to the Operating Partnership
on such terms and conditions as such Partnership and the Operating Partnership
may agree; and (ii) agrees that such Grantor's Acquisition Consideration may be
reduced to reflect such direct transfer of assets and the consequent receipt of
cash and other consideration directly by such Partnership, provided that the
total consideration to be received by such Grantor either directly hereunder or
indirectly through the receipt of distributions from a Partnership shall equal
Grantor's Acquisition Consideration.
(c) Each Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which a Property Interest of such Grantor represents directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law, (i)
to admit the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section 6.3 above) as a
substitute limited partner therein and/or a substitute general partner therein
if the Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by the exercise
of the Grantor's Option acquires a limited partnership interest or a general
partnership interest in such partnership, (ii) to redeem the interest of any
other partner therein who has not agreed to become a party to this Agreement,
(iii) to distribute to all partners thereof, including any partner who has not
agreed to become a party to this Agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or general partners
thereof may determine, provided that such Grantor receives as a result of all
such distributions and the direct payment of consideration hereunder, the amount
of cash that is in conformity with the Acquisition Consideration of such Grantor
provided for herein), and thereafter, at the Operating Partnership's option, to
dissolve, and (iv) any such other amendment as the Operating Partnership may
deem desirable, provided that such amendment occurs simultaneously with or
immediately prior to the acquisition of the applicable partnership interest and,
provided further, that such amendment will not result in any increased liability
on the part of any Grantor hereunder or under the applicable partnership
agreement. The Attorney-in-Fact may on behalf of each Grantor execute such
consents, amendments or other instruments as it deems necessary or desirable in
connection with the foregoing.
6.10 Confidentiality. Each Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to such
Grantor who agree to keep such terms confidential. Grantor shall treat all
information received from the Operating Partnership or its counsel or advisors
pertaining to the Operating Partnership or the Company confidential and shall
disseminate same only to counsel to such Grantor who agree to keep such
information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of each
Grantor set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of Grantor under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
By: /s/ Bruce G. Wiles
--------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
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<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons:
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: /s/ Sabana Grande, SA.
-----------------------------------
Name of Grantor
By: /s/ THOMAS J. CORCORAN
-----------------------------
Name: Thomas J. Corcoran, Jr.
Title: Attorney-in-Fact
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals hereunder pursuant to Article V.
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<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned (the "Grantor"), by this power of attorney ("Power of
Attorney"), does hereby irrevocably appoint Thomas J. Corcoran, Jr. with full
power of substitution and resubstitution, for him, in any and all capacities,
(or any successor to Thomas J. Corcoran, Jr. acting in his, her or its capacity
as attorney-in-fact pursuant hereto, the "Attorney-in-Fact"), as the true and
lawful attorney-in-fact and agent of the Grantor, to act in the name, place and
stead of the Grantor to enter into, make, execute, acknowledge and deliver an
option agreement relating to the contribution of the Grantor's partnership
interest in DFW South I Limited Partnership to American General Hospitality
Partnership, L.P. for CASH.
The Power of Attorney of the Grantor granted hereby and all authority
conferred hereby is coupled with an interest and therefore shall be irrevocable
and shall not be terminated by any act of the Grantor or by operation of law,
whether by the death, disability, incapacity or liquidation of the Grantor or by
the occurrence of any other event or events (including without limitation the
termination of any trust or estate for which the Grantor is acting as a
fiduciary or fiduciaries), and if, after the execution hereof, the Grantor shall
die or become disabled or incapacitated or is liquidated, or if any other such
event or events shall occur before the completion of the transactions
contemplated by the Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such death,
disability, incapacity, liquidation or other event or events had not occurred
and regardless of notice thereof.
It is understood that the Attorney-in-Fact will not assume any
responsibility or liability to any person by virtue of the Power of Attorney
granted hereby.
/s/ ARTURO MONTEALGRE
----------------------------
Name: Arturo Montealgre, President
Sabana Grande SA
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of ________, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons:
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: /s/ Brad Corbett
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
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<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned (the "Grantor"), by this power of attorney ("Power of
Attorney"), does hereby irrevocably appoint Thomas L. Wiese with full power of
substitution and resubstitution, for him, in any and all capacities, (or any
successor to Thomas L. Weise acting in his, her or its capacity as
attorney-in-fact pursuant hereto, the "Attorney-in-Fact"), as the true and
lawful attorney-in-fact and agent of the Grantor, to act in the name, place and
stead of the Grantor to enter into, make, execute, acknowledge and deliver an
option agreement relating to the contribution of the Grantor's partnership
interest in DFW South I Limited Partnership to American General Hospitality
Partnership, L.P. for CASH.
The Power of Attorney of the Grantor granted hereby and all authority
conferred hereby is coupled with an interest and therefore shall be irrevocable
and shall not be terminated by any act of the Grantor or by operation of law,
whether by the death, disability, incapacity or liquidation of the Grantor or
by the occurrence of any other event or events (including without limitation the
termination of any trust or estate for which the Grantor is acting as a
fiduciary or fiduciaries), and if, after the execution hereof, the Grantor shall
die or become disabled or incapacitated or is liquidated, or if any other such
event or events shall occur before the completion of the transactions
contemplated by the Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such death,
disability, incapacity, liquidation or other event or events had not occurred
and regardless of notice thereof.
It is understood that the Attorney-in-Fact will not assume any
responsibility or liability to any person by virtue of the Power of Attorney
granted hereby.
/s/ BRAD CORBETT
----------------------------
Name: Brad Corbett, President
S & B Technical Products, Inc.
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 29, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons:
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: /s/ AJG FAMILY LIMITED PARTNERSHP
-----------------------------------
Name of Grantor
By: /s/ Alan J. Gold
-----------------------------
Name:
Title: General Partner
Address of Grantor: 8115 PRESTON ROAD SUITE 240
-----------------------------------
DALLAS, TEXAS 75225
-----------------------------------
-----------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
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<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Hervey A. Feldman
-----------------------------------
Name: Hervey A. Feldman
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals hereunder pursuant to Article V.
Percentage to be paid in Cash 50%
----
Percentage to be paid in OP Units 50%
----
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<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of May 3, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ MARTIN L. PRICE
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor:
--------------------------------------------
--------------------------------------------
--------------------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
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<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Operating Partnership, L.P. and such Grantors, dated as of April 30, 1996 hereby
--------
becomes a party to such Omnibus Option Agreement.
Signature line for Grantors
who are natural persons: -------------------------------------
Name:
Signature line for trusts,
partnerships and other
entities Schrader Family Trust
---------------------------------------
Name of Grantor
By: /s/ Dorothy M. Schrader
--------------------------
Name: /s/ Martin C. Schrader
Title: Co Trustee
Address of Grantor: ---------------------------------------
---------------------------------------
---------------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Partnership, L.P. and such Grantors, dated as of April 26, 1996 hereby becomes a
party to such Omnibus Option Agreement. The undersigned agrees that this
signature page may be attached to any counterpart of said Omnibus Option
Agreement.
Signature line for Grantors
who are natural persons: /s/ Pin N. HWang
-----------------------------------
Name: Pin N. HWang
Signature line for trusts,
partnerships and other
entities:
-----------------------------------
Name of Grantor
By:
-----------------------------
Name:
Title:
Address of Grantor: 360 E. Randolph # 3006
-----------------------------------
Chicago, Illinois 60601
-----------------------------------
-----------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnerrshi hereunder pursuant to Article V.
Percentage to be paid in Cash 50%
----
Percentage to be paid in OP Units 50%
----
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<PAGE>
EXHIBIT C
The Adjustment Provisions set forth herein are substantially in the form as
Sections 10.8 through 10.12 of Article 10 (the "Article 10 Provisions") of that
certain Contribution Agreement, by and among DFW South Acquisition Corporation,
American General Hospitality, Inc., and the Operating Partnership, dated on or
about the 26th of April, 1996. It is the intention of the parties that the
adjustments contemplated in Section 1.4 shall be made in accordance with the
Article 10 Provisions.
ADJUSTMENT PROVISIONS
- ---------------------
10.8 Prorations and Adjustments. It is the parties' intention that
--------------------------
the prorations and adjustments conform in substance to those that would be made
in a sale of real property as set forth herein. All such prorations shall be
netted against each other and the new amount shall be paid in cash to Sellers
(in which case, a GP shall receive such amount and shall distribute to Sellers
each Seller's Share of such amount) or to the Partnership (in which case, DFWGP
shall pay such amount and shall seek reimbursement of each Seller's Share from
each of the Sellers), as the case may be, by the wire transfer of Federal funds
on the Closing Date. As used in this Article 10, Seller's Share shall mean each
Seller's percentage share equal to its percentage share of the Aggregate
Purchase Price as determined pursuant to the applicable provisions of the
Amended and Restated Agreement of Limited Partnership of DFWS. At Closing, the
following items of revenue and expense shall be prorated as of 12:01 A.M. on the
Closing Date:
(a) Hotel Taxes. Real estate taxes, personal property or use taxes
-----------
and sewer rents, on the basis of the best available estimates for such taxes and
rents that will be due and payable on the Hotel for the calendar year in which
the Closing occurs;
(b) Operating Costs. All utility costs and expenses and other costs
---------------
and expenses of operating the Hotel which are reasonably capable of proration,
including but not limited to all salaries, compensation, sick pay, vacation pay,
other accrued benefits of Hotel employees and other expenses which are charged
to Sellers under the Managing Agreement;
(c) Service Contracts and FF&E Leases. Amounts paid or payable under
---------------------------------
the Service Contracts and FF&E Leases;
(d) Lease Rents. Rents and other revenues under Leases;
-----------
(e) Debt Interest. Interest due and payable on the Debt;
-------------
(f) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service and
restaurant revenue shall be read, measured (and tapes preserved) and apportioned
as of 2:00 a.m. on the Closing Date. Each Seller's Share of the final night's
room revenue (revenue from rooms occupied on the evening preceding the Closing
Date) less a sum equal to all room maid services with respect thereto shall be
the property of each of Sellers. All cash, checks, and other funds, and all
other notes, security and other evidence of indebtedness located at the Hotel as
of 2:00 a.m. on the Closing Date and balances on deposit to the credit of DFWS
with banking institutions are and shall remain the property of Sellers and are
not included in this sale (except for the guest (tray) ledger for guests staying
in the Hotel on the Closing Date which will be paid for by the Partnership);
(g) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade, newspaper and other periodical subscriptions, coin
machine income, and washroom and checkroom income;
<PAGE>
(h) Food and Liquor. The value of the food and liquor inventory in
---------------
unopened containers;
(i) Deposits. Deposits as provided in Section 2.1(g);
--------
(j) Escrow and Operating Accounts. The amount, if any, held in any
-----------------------------
tax and insurance escrow with Bank relating to the Debt, and the amount of the
net balance, if any, in any operating account maintained (and retained) by the
Partnership relating to the Hotel; and
(k) Current Assets and Liabilities. If, after the prorations to be
------------------------------
made pursuant to the preceding subparagraphs, (x) the sum of all cash and cash
equivalents, investments, accounts receivable, prepaid expenses and deposits and
other assets generally recognized as current assets owned by Sellers, exceeds or
is less than (y) the sum of all accounts payable, accrued real estate taxes,
accrued interest, other accrued expenses and other liabilities generally
recognized as current liabilities owed by Sellers, the net cash prorations under
this Section shall be increased or decreased, as the case may be, by such excess
or deficiency; provided, however, that each of Sellers shall remain responsible
for each Seller's Share of the payment of all accounts payable and other pre-
Closing liabilities of DFWS relating exclusively to periods prior to the Closing
Date and each of Sellers shall be entitled to receive each Seller's Share of all
accounts receivable relating exclusively to such period, and no prorations will
be made with respect thereto.
10.9 Capital Improvement Plan. The parties acknowledge that there is
------------------------
currently in place a capital improvement plan ("CIP") at the Hotel to which DFWS
has committed to spending $800,000. The portion of that $800,000 that has not
been expended or placed in escrow in accordance with the CIP by the Closing Date
shall be credited at Closing to the Partnership as part of the prorations
provided for in the preceding Section.
10.10 Sales Tax. Each Seller's Share of all sales, use and occupancy
---------
taxes, if any, due or to become due in connection with revenues received from
the Hotel prior to the Closing Date will be paid by each of Sellers. All sales,
use and other transfer taxes, if any, payable as a result of the conveyance of
the Interest to Partnership will be paid by the Partnership. Each of Sellers
shall be entitled to receive each Seller's Share of any rebates or refunds on
taxes paid by DFWS prior to the Closing.
10.11 Document Recordation and Transfer Costs. Sellers and
---------------------------------------
Partnership shall bear equally the escrow fee and other charges payable to the
Title Company, except that the premium payable to the Title Company for the
Revised Coverage shall be paid pursuant to the terms of Article 4, above. Each
of Sellers shall pay each Seller's Share of any costs or transfer taxes in
conjunction with the conveyance of the Interests. The cost of preparing or
obtaining documents to be delivered by Partnership or REIT to DFWGP pursuant to
this Agreement shall be paid by Partnership. The cost of preparing or obtaining
other documents to be delivered by Sellers to Partnership pursuant to this
Agreement shall be paid by Sellers. Any other costs of Closing shall be borne
in accordance with local custom in Dallas, Texas.
10.12 Reconciliation and Final Payment. Prior to Closing, Sellers
--------------------------------
and Partnership shall reasonably cooperate to make a preliminary determination
of the prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. After Closing, Sellers
and Partnership shall reasonably cooperate to make a final determination of such
prorations. Upon the final reconciliation of the prorations under this Article,
but in any event not later than ninety (90) days following Closing, the party
which owes the other party any sums hereunder shall pay such party such sums
within ten (10) days after the reconciliation of such sums. The obligations to
calculate such prorations, make such reconciliations and pay any such sums shall
survive the Closing.
<PAGE>
Exhibit 10.22
================================================================================
CONTRIBUTION AGREEMENT
BY AND AMONG
DFW SOUTH ACQUISITION CORPORATION,
a Texas corporation,
AND
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation,
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of April 26, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 The Contract................................................. 2
1.1 Agreement to Contribute...................................... 2
1.2 Earnest Money................................................ 2
ARTICLE 2 Hotel........................................................ 3
2.1 Hotel........................................................ 3
ARTICLE 3 Purchase Price; Payment; Issuance of Limited
Partner Units................................................ 6
3.1 Purchase Price............................................... 6
3.2 Registration Rights.......................................... 6
3.3 Covenants, Representations and Warranties With
Respect to Units and Shares.................................. 7
3.4 Securities Covenants, Representations and
Warranties of................................................ 8
ARTICLE 4 Title Deliveries............................................. 11
4.1 Title Commitment............................................. 11
4.2 UCC Search................................................... 11
ARTICLE 5 Hotel Documents, Inspection and Objections................... 12
5.1 Hotel Documents.............................................. 12
5.2 Procedure for Objections..................................... 12
5.3 Inspection of Hotel and Environmental Report................. 13
5.4 Feasibility Determination.................................... 13
5.5 Financial Information........................................ 14
5.6 Termination Right of DFWGP................................... 14
ARTICLE 6 Permitted Exceptions......................................... 14
6.1 Permitted Exceptions......................................... 14
ARTICLE 7 Operation of Hotel........................................... 14
7.1 Interim Operation............................................ 14
7.2 Notices of Violation......................................... 15
ARTICLE 8 Representations and Covenants................................ 16
8.1 Representations by Partnership............................... 16
8.2 Representations by AGH....................................... 16
8.3 Representations by DFWGP..................................... 17
8.4 Management................................................... 22
8.5 Access to Hotel Books and Records............................ 22
8.6 Liquor License............................................... 22
8.7 Hart Act..................................................... 22
8.8 Employees.................................................... 22
ARTICLE 9 Conditions Precedent to the Closing.......................... 23
9.1 Conditions to Obligations of the Partnership................. 23
9.2 Conditions to DFWGP's Obligations............................ 24
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 10 Closing and Closing Documents................................ 26
10.1 Closing...................................................... 26
10.2 Escrow....................................................... 26
10.3 DFWGP's Deliveries........................................... 26
10.4 Deliveries by Partnership and REIT........................... 28
10.5 Amendment of Formation Documents............................. 28
10.6 Concurrent Transactions...................................... 28
10.7 Further Assurances........................................... 28
10.8 Prorations and Adjustments................................... 29
10.9 Capital Improvement Plan..................................... 30
10.10 Sales Tax.................................................... 30
10.11 Document Recordation and Transfer Costs...................... 31
10.12 Reconciliation and Final Payment............................. 31
ARTICLE 11 Casualty And Condemnation.................................... 31
11.1 Risk of Loss Notice.......................................... 31
11.2 Partnership's Termination Right.............................. 31
11.3 Procedure for Closing........................................ 32
ARTICLE 12 Default And Remedies......................................... 32
12.1 Default by Partnership or REIT............................... 32
12.2 DFWGP's Default.............................................. 33
ARTICLE 13 Indemnities.................................................. 34
13.1 DFWGP's Indemnity............................................ 34
13.2 Partnership's Indemnity...................................... 35
ARTICLE 14 Broker....................................................... 36
14.1 No Broker.................................................... 36
14.2 Indemnification by DFWGP..................................... 36
14.3 Indemnification by AGH....................................... 36
ARTICLE 15 Definitions.................................................. 36
15.1 Definitions.................................................. 36
ARTICLE 16 Miscellaneous................................................ 39
16.1 Notice....................................................... 39
16.2 Entire Agreement; Modifications and Waivers;
Cumulative Remedies.......................................... 40
16.3 Exhibits..................................................... 41
16.4 Successors and Assigns....................................... 41
16.5 Article Headings............................................. 41
16.6 Governing Law................................................ 41
16.7 Time Periods................................................. 41
16.8 Counterparts................................................. 41
16.9 Survival..................................................... 41
16.10 Further Acts................................................. 42
16.11 Severability................................................. 42
16.12 Attorneys' Fees.............................................. 42
</TABLE>
-ii-
<PAGE>
EXHIBITS
- --------
Exhibit A Limited Partners
Exhibit B Legal Description
Exhibit C Service Contracts
Exhibit D FF&E Leases
Exhibit D-1 Lock-Up Agreement
Exhibit D-2 Exchange Rights Agreement
Exhibit D-3 Registration Rights Agreement
Exhibit E Security Documents
Exhibit F Leases
Exhibit G Insurance Policies
Exhibit H Licenses
Exhibit I Violations
Exhibit J Warranties
Exhibit K Environmental Reports
SCHEDULES
- ---------
Schedule 1 Purchase Price
The exhibits and/or schedules of Exhibit 10.22, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
-iii-
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of April __,
1996 by and among DFW South Acquisition Corporation, a Texas corporation
("DFWGP"), AMERICAN GENERAL HOSPITALITY, INC., a Texas corporation ("AGH") and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership").
R E C I T A L S:
- - - - - - - -
WHEREAS, DFWGP, is the General Partner of and the owner of 13.333333%
of the Interests (as defined below) in DFW South I Limited Partnership, a Texas
limited partnership ("DFWS") that owns the Hotel (as hereinafter defined), which
is currently licensed and operated as a "Holiday Inn" hotel;
WHEREAS, the parties listed on Exhibit A attached hereto
---------
(collectively, the "Limited Partners") own the remainder of the Interests and
are contributing their Interests to the Partnership pursuant to separate
agreements (the "Other Contracts");
WHEREAS, the majority owner of the Partnership will be American
General Hospitality Corporation (the "REIT"), a corporation organized under the
laws of the State of Maryland which intends to be qualified as a real estate
investment trust under the Internal Revenue Code to continue and expand the
hotel acquisition, development, repositioning and ownership operations of AGH
and its affiliates. An affiliate of the REIT is sole general partner of the
Partnership;
WHEREAS, AGH and the REIT intend to file with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-11 (as amended
from time to time through the date of the offering, the "Registration
Statement") relating to an underwritten initial public offering (the "IPO") of
its shares (collectively, the "Shares") of common stock, par value $.01 per
share ("Common Stock"); and
WHEREAS, at the Closing, DFWGP wishes to contribute all of its
partnership interest in DFWS to the Partnership in exchange for units of limited
partnership interest in the Partnership ("Units") as hereinafter set forth in
this Agreement.
<PAGE>
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
THE CONTRACT
------------
1.1 Agreement to Contribute. For and in consideration of the mutual
-----------------------
benefits enjoyed by one another under this Agreement and the terms and
conditions hereof, DFWGP agrees to contribute, assign and transfer its Interest
to the Partnership (and/or such affiliates of the Partnership as it may
designate, in such percentage allocations as the Partnership may designate), and
the Partnership (or its designee) agrees to accept the DFWGP Interest. As used
herein, "Interest" shall mean all of a person or entity's right, title and
interest in DFWS, including his or its right, title and interest in capital,
profits and distributions.
1.2 Earnest Money. For the purpose of securing the performance of
-------------
the Partnership and the REIT under the terms and provisions of this Agreement
and as a condition precedent to DFWGP's obligations hereunder, AGH has
delivered, prior to or contemporaneously with the execution hereof, the Earnest
Money to Chicago Title Insurance Company ("Escrow Agent") in current funds. The
term "Earnest Money" shall mean $50,000, and any other sums which may from time
to time be deposited as "Earnest Money" or "Additional Earnest Money" under the
terms of any addendum or amendment hereto. All interest accruing on Earnest
Money deposited under this Agreement shall become a part of and be added to the
Earnest Money so that it shall be subject to disbursement or application in the
same manner as is the principal of the Earnest Money. The Earnest Money shall
be held in escrow pursuant to the terms of an escrow agreement (the "Escrow
Agreement") executed contemporaneously herewith. The Escrow Agent shall deposit
the Earnest Money in an interest bearing account at a bank or savings
institution reasonably acceptable to DFWGP and Partnership, and all interest
accrued thereon shall be reported under the Partnership's federal tax
identification number. If the transactions contemplated by this Agreement are
not consummated in accordance with the terms hereof, the Earnest Money shall be
disbursed pursuant to the terms of this Agreement and the terms of the Escrow
Agreement. If the transactions contemplated by this Agreement are consummated
in accordance with the terms hereof, the Earnest Money shall be returned to AGH.
-2-
<PAGE>
ARTICLE 2
HOTEL
-----
2.1 Hotel. As used in this Agreement, the term "Hotel" shall mean
-----
and refer to the following:
(a) The parcel or parcels of real property located at 4440 West
Airport Freeway, Irving, Texas 75062 and more particularly described on Exhibit
-------
B attached hereto (collectively, the "Land");
- -
(b) The 409-room hotel and all other buildings, structures, parking
areas, and other improvements presently located upon the Land (collectively, the
"Improvements");
(c) All tangible personal property and fixtures (collectively, the
"FF&E") of any kind owned by DFWS and attached to, or located upon and used in
connection with the ownership, maintenance, use or operation of the Land or
Improvements as of the date hereof (or acquired by DFWS and so employed prior to
Closing, as defined below), including, but not limited to, all furniture,
fixtures, equipment, signs, personal property; all heating, lighting, plumbing,
drainage, electrical, air conditioning, and other mechanical fixtures and
equipment and systems; all elevators, escalators, and related motors and
electrical equipment and systems; all hot water heaters, furnaces, heating
controls, motors and boiler pressure systems and equipment, all shelving and
partitions, all ventilating equipment; and all incinerating and disposal
equipment; all health club and fitness equipment; all vans, automobiles and
other motor vehicles; all carpet, drapes, beds, furniture, televisions and other
furnishings; all stoves, ovens, freezers, refrigerators, dishwashers, disposals,
kitchen equipment and utensils, tables, chairs, plates and other dishes,
glasses, silverware, serving pieces and other restaurant and bar equipment,
apparatus and utensils;
(d) All merchandise, supplies, inventory and other items used for the
operation and maintenance of guest rooms, restaurants, lounges, swimming pools,
health clubs, and other common areas and recreational areas located within or
relating to the Improvements, including, without limitation, all food and
beverage (alcoholic and non-alcoholic) inventory, office supplies and
stationery, advertising and promotional materials, towels, linen and bedding,
guest cleaning, paper and other supplies, upholstery material, carpets, rugs,
furniture, engineers' supplies, paint and painters' supplies, employee uniforms,
and pool, tennis court and other recreational area cleaning and maintenance
supplies (collectively, the "Other Personalty");
-3-
<PAGE>
(e) All leases, occupancy agreements, "trade-out" agreements or other
agreements, franchises, leases, demising space in, providing for the use or
occupancy of, or otherwise similarly affecting or relating to the use or
occupancy of, the Improvements or Land, together with all amendments,
modifications, renewals and extensions thereof, and all guaranties by third
parties of the obligations of the tenants, licensees, franchisees,
concessionaires or other entities thereunder (collectively, the "Leases" and
individually, a "Lease");
(f) All advance bookings, convention reservations and other guest,
room and other booking and reservation contracts (collectively, the "Guest
Bookings");
(g) All prepaid rents and deposits, including but not limited to,
utility deposits, refundable security deposits and rental deposits, and all
other deposits for advance reservations, banquets or future services or made in
connection with the Leases or the Guest Bookings (collectively, the "Deposits");
provided, however, that DFWGP and the Limited Partners (DFWGP and the Limited
Partners, collectively, the "Sellers"; each, a "Seller") shall be entitled to a
proration credit under Section 10.8 hereof at Closing for the amount of the
Deposits which are transferred to or for the account of the Partnership, and the
Partnership will assume all of DFWGP's post-Closing liability and obligations,
if any, with regard to such Deposits;
(h) Any and all of the right, title and interest of DFWS in and to
the following that relate to or affect in any way, the design, construction,
ownership, use, occupancy, leasing, maintenance, service, or operation of the
Land, Improvements, Leases, Deposits, Guest Bookings, Other Personalty, or FF&E
to the extent assignable:
(i) The contracts or agreements described on Exhibit C attached
---------
hereto, and all other contracts or agreements, such as maintenance, supply,
service, parking or utility contracts, (collectively, the "Service
Contracts");
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of DFWS against providers of goods or services (other than under
the Management Agreement or the Franchise Agreement) relating to the Hotel
(collectively, the "Warranties");
(iii) Licenses, permits, franchises, certificates of occupancy,
and similar documents issued by any federal, state, or municipal authority
or by any private party, including without limitation the liquor license
and the franchise or license agreement permitting the operation of the
Circle Spur Saloon restaurant at the Hotel (if it does
-4-
<PAGE>
not automatically continue on a change of control, DFWGP agrees to use
reasonable efforts to obtain any necessary consents to the continuation of
the license) (collectively, the "Licenses");
(iv) Telephone exchanges, trade names, trade styles, trade marks,
and other identifying material, and all variations thereof, together with
all related goodwill (collectively, the "Tradenames") (it being understood
and agreed that the name of the hotel chain to which the Hotel is
affiliated by franchise or other license agreement is a protected name or
registered service mark of such hotel chain);
(v) Plans, drawings, specifications, surveys, soil reports,
environmental reports, engineering reports, inspection reports, and other
technical descriptions and reports to the extent in DFWGP's possession or
control and without any representation or warranty of any kind from DFWGP
(collectively, the "Plans and Specs"); and
(vi) The leases and other contracts permitting the use of any
FF&E at the Improvements described on Exhibit D attached hereto and all
---------
other leases and other contracts permitting the use of any FF&E at the
Improvements, (collectively, the "FF&E Leases").
(i) DFWS' interest, if any, in the right to receive immediately on
and after Closing and continuously consume thereafter water service, sanitary
and storm sewer service, electrical service, gas service, and telephone service
on and for the Land and Improvements;
(j) All right, title and interest of DFWS, if any, appurtenant to the
Land and Improvements, including, but not limited to, (i) all easements, rights
of way, rights of ingress and egress, tenements, hereditaments, privileges, and
appurtenances in any way belonging to the Land or Improvements, (ii) any land
lying in the bed of any alley, highway, street, road or avenue, open or
proposed, in front of or abutting or adjoining the Land, (iii) any strips or
gores of real estate adjacent to the Land (other than the adjacent lot currently
owned by an affiliate of DFWS), and (iv) the use of all alleys, easements and
rights-of-way, if any, abutting, adjacent, contiguous to or adjoining the Land;
and
(k) All books, records, promotional material, tenant data, marketing
and leasing material and forms, market studies, keys, and other materials of any
kind owned by DFWS and in DFWS' possession or control, or which DFWS has access
to or may obtain and has the right to convey and deliver which are or may be
used in DFWS' ownership or use of the Land, the Improvements or the
-5-
<PAGE>
FF&E (collectively, the "Records"); provided, however, that a copy of any such
records may be retained by DFWGP. Partnership agrees to retain all Records for
the applicable statutory periods unless Partnership provides DFWGP fifteen (15)
days notice prior to disposing of the Records. Partnership shall permit DFWGP
reasonable access to the Records while the Records are in Partnership's
possession. All of the property and rights constituting the Hotel except for
the Land and Improvements are hereinafter referred to as the "Personal
Property."
ARTICLE 3
PURCHASE PRICE; PAYMENT;
------------------------
ISSUANCE OF LIMITED PARTNER UNITS
---------------------------------
3.1 Purchase Price. The aggregate purchase price less the value of
--------------
the Debt for all the Interests shall be $10,882,000 ("Aggregate Purchase
Price"). The purchase price ("Purchase Price") to be received by DFWGP in
respect of the contribution of DFWGP's Interest shall be determined by applying
the applicable provisions of the Amended and Restated Agreement of Limited
Partnership of DFWS dated May 1, 1992 to the result of the sale transaction
based upon the Aggregate Purchase Price. The Purchase Price as adjusted as set
forth below shall be paid to DFWGP at the Closing in Units. The Purchase Price
shall be adjusted and the total number of Units to be delivered to DFWGP shall
be determined in accordance with Schedule 1 annexed hereto. The parties agree
that the Purchase Price (after adjustment pursuant to Schedule 1, but before any
adjustment pursuant to Section 10.8 an 10.9) will be allocated 5% to the Land,
90% to the Improvements and 5% to the Personal Property.
DFWGP hereby subscribes for and agrees to accept the issuance of the
Units and the terms and conditions of the partnership agreement for the
Partnership to be executed at or prior to Closing (the "Partnership Agreement"),
including without limitation the power of attorney granted in the Partnership
Agreement, and to execute and deliver at the Closing such other documents or
instruments as may be reasonably required by the REIT under the Partnership
Agreement to effect the admission of DFWGP as a limited partner in the
Partnership. At the Closing, DFWGP and the REIT shall execute and deliver the
Partnership Agreement (or an amendment thereto) by which DFWGP is issued its
Units and admitted as a limited partner to the Partnership (the "Partnership
Amendment").
3.2 Registration Rights. DFWGP shall have certain rights, after a
-------------------
one-year "lock-up period", to exchange the Units for shares of the Common Stock
and to register the shares with the SEC. Such rights will be set forth in a
lock-up agreement (the "Lock-Up Agreement"), an exchange rights agreement (the
"Exchange Rights Agreement") and a registration rights agreement (the
"Registration Rights Agreement") to be executed by DFWGP and
-6-
<PAGE>
the REIT at the Closing. The Lock-Up Agreement, Exchange Rights Agreement and
Registration Rights Agreement shall be substantially in the form attached hereto
as Exhibit D-1, Exhibit D-2, and Exhibit D-3, respectively.
----------- ----------- -----------
3.3 Covenants, Representations and Warranties With Respect to Units
---------------------------------------------------------------
and Shares. The Partnership hereby covenants, represents and warrants to DFWGP
- ----------
that, as of the Closing, the following will be true and correct:
(a) The REIT will have the full legal right, power and authority to
enter into the Registration Rights Agreement and the Exchange Rights Agreement
and to consummate the transactions contemplated therein. The Registration
Rights Agreement and the Exchange Rights Agreement will be duly authorized by
all necessary corporate action on the part of and will constitute the valid and
binding obligation of the REIT, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting the
enforcement thereof or relating to creditors' rights generally. The Partnership
will have the full right, power and authority to enter into the Lock-Up
Agreement and its execution will be duly authorized by all necessary partnership
action.
(b) The Partnership Agreement and any Partnership Amendment will
constitute valid and binding obligations of the REIT, enforceable in accordance
with their terms.
(c) The Units to be issued to DFWGP will have been duly and validly
authorized and issued, free of any preemptive or similar rights, and be fully
paid and nonassessable, without any obligation to restore capital except as
required by the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act"). As holders thereof, DFWGP shall be admitted as limited partners of the
Partnership entitled to all of the rights and protections of limited partners
under the Delaware Act and the provisions of the Partnership Agreement, with the
same rights, preferences and privileges as all existing limited partners on a
pari passu basis.
(d) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery by the Partnership of the Units, the valid authorization,
issuance, sale and delivery of any shares of Common Stock that may be issued by
the REIT upon any exchange of the Units, and the execution, delivery and
performance of the Registration Rights Agreement by the REIT (other than
complying with applicable securities laws and regulations), will have been made
or obtained and will be in full force and effect.
-7-
<PAGE>
(e) Neither the issuance or sale and delivery by Partnership of the
Units, nor the issuance, sale and delivery by REIT of any shares of Common Stock
that may be issued upon any redemption of the Units, nor the execution, delivery
and performance of the Registration Rights Agreement, will conflict with or
result in a breach or violation of any of the terms and provisions of, or (with
or without the giving of notice or passage of time or both) constitute a default
under the certificate of incorporation or by-laws of the REIT or the certificate
of limited partnership or the Partnership Agreement of the Partnership; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or the Partnership is a party or to
which any of them, any of their respective properties or other assets or any
hotel is subject; or any applicable statute, judgment, decree, rule or
regulation of any court or governmental agency or body applicable to any of the
foregoing or any of their respective properties (other than compliance with the
securities laws and regulations); or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the REIT or the
Partnership.
The foregoing representations and warranties shall be true and
accurate on the Closing Date, and the Partnership and the REIT shall execute and
deliver to DFWGP at the Closing a certificate confirming the accuracy of the
foregoing representations and warranties.
3.4 Securities Covenants, Representations and Warranties of DFWGP.
-------------------------------------------------------------
(a) DFWGP represents that it has received and reviewed a copy of the
draft Registration Statement prepared in connection with the contribution of
Interests to the Partnership hereunder and the draft financial statements for
the REIT describing the property and interests which are currently expected to
be owned directly or indirectly by the REIT upon consummation of the IPO. DFWGP
understands that an investment in the Units involves risks. DFWGP, by reason of
its business and financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or advise it
with respect to its investment in Units, (i) has such knowledge, sophistication
and experience in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the merits and risks of
and of making an informed investment decision with respect to an investment in
Units, (ii) is capable of protecting its own interests or has engaged
representatives or advisors to assist it in protecting its interests and (iii)
is capable of bearing the economic risk of such investment including the loss of
its entire investment. It is an "accredited investor" as defined in Rule 501 of
the regulations promulgated under the Securities Act of 1933, as
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amended (the "Securities Act"). If DFWGP has retained or retains a person to
represent or advise it with respect to its investment in Units, it will advise
the Partnership of such retention and, at the Partnership's request, DFWGP
shall, prior to or at the Closing, (i) acknowledge in writing such
representation and (ii) cause such representative or advisor to deliver a
certificate to the Partnership containing such representations as may be
reasonably requested by the Partnership.
(b) DFWGP understands that an investment in the Partnership involves
substantial risks. It has been given the opportunity to make a thorough
investigation of the proposed activities of the Partnership and has been
furnished with materials relating to the Partnership and its proposed
activities, including, without limitation, the draft Registration Statement. It
has been afforded the opportunity to obtain any additional information requested
by it. It has had an opportunity to ask questions of and receive answers from
representatives of the Partnership concerning the Partnership and its proposed
activities and the terms and conditions of an investment in Units. It has
relied and is making its investment decision based upon the draft Registration
Statement and other written information provided to DFWGP by or on behalf of the
Partnership.
(c) The Units to be issued to DFWGP at the Closing will be acquired
by DFWGP for its own account, for investment only and not with a view to, or
with any intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein (whether to the constituent partners of
DFWGP or otherwise). DFWGP was not formed for the specific purpose of acquiring
an interest in the Partnership.
(d) DFWGP acknowledges that (i) the Units to be issued to it at the
Closing have not been registered under the Securities Act or state securities
laws by reason of a specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, if such Units are
represented by certificates, such certificates will bear a legend to such
effect, (ii) the REIT's and the Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of DFWGP contained in this Section, (iii) the Units to be issued to
it at the Closing may not be resold or otherwise distributed unless registered
under the Securities Act and applicable state securities laws, or unless an
exemption from registration is available, (iv) there is no public market for
such Units, and (v) it has no obligation or intention to register such Units
under the Securities Act or any state securities laws or to take any action that
would make available any exemption from the registration requirements of such
laws, except as provided in the Registration Rights Agreement. DFWGP hereby
acknowledges that it
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may have to bear the economic risk of the investment commitment evidenced by
this Agreement and any Units issued hereunder for an indefinite period of time,
although (x) subject to the Lock-Up Agreement and under the terms of the
Partnership Agreement and Exchange Rights Agreement, as they will be in effect
at the time of the IPO, Units will be exchangeable at the request of the holder
thereof at any time after the first anniversary of their issuance for Shares or,
at the option of the REIT, cash, and (y) subject to the Lock-Up Agreement, the
holder of any such Shares issued upon exchange of Units will be afforded certain
rights to have such Shares registered under the Securities Act and applicable
state securities laws pursuant to the Registration Rights Agreement.
(e) The address set forth under DFWGP's name in Section 8.2(u) is the
address of DFWGP's principal place of business and it has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal place of business or residence is
located.
(f) DFWGP acknowledges that after Closing of the IPO, it will be
provided annually with financial statements of the Partnership including a
balance sheet and the related statements of income and retained earnings and
changes in financial position, accompanied by a report of an independent public
accountant stating that an audit of such financial statements has been made in
accordance with generally accepted accounting principles, stating the opinion of
the accountant with respect to the financial statements and the accounting
principles and practices reflected therein and with respect to the consistency
of the application of the accounting principles, and identifying any matters to
which the accountant takes exception and stating, to the extent practicable, the
effect of each such exception on such financial statements.
(g) DFWGP agrees that it will not sell or otherwise transfer the
Units unless they are registered under the Federal Securities Act of 1933 or
unless an exemption from such registration is available. DFWGP represents that
it has adequate means of providing for its current needs and possible
contingencies, and that it has no need for liquidity of the investment.
(h) It is understood that all documents, records and books pertaining
to the investment have been made available for inspection by DFWGP's attorney or
accountant or offeree representative and DFWGP, and that the books and records
of the Partnership will be available upon reasonable notice, for inspection by
DFWGP at reasonable hours at its principal place of business.
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(i) The foregoing representations and warranties shall be true and
accurate as of the Closing Date.
ARTICLE 4
TITLE DELIVERIES
----------------
4.1 Title Commitment. Within ten (10) days after the execution of
----------------
this Agreement, DFWGP shall obtain and deliver the following to the Partnership:
(a) A title commitment for revised coverage (the "Revised Coverage")
increasing the value of the coverage provided in that certain Commitment for
Title Insurance issued by Commonwealth Land Title Insurance Company dated
January 30, 1996 (the "Prior Title") to $25,132,000.00, which Revised Coverage
shall be issued by a title company designated by the Partnership and acceptable
to DFWGP (the "Title Company"), for the most recent form of ALTEX Owner's policy
(the "Title Commitment") covering the Land and Improvements, setting forth the
current status of the title to the Land and Improvements, showing all liens,
claims, encumbrances, easements, rights of way, encroachments, reservations,
restrictions, and any other matters affecting the Land and Improvements, and
pursuant to which the Title Company agrees to issue to DFWS at Closing an Owner
Policy of Title Insurance (the "Title Policy") on the most recent form of ALTEX
Owner's policy. DFWGP shall pay the cost of the Revised Coverage premium,
provided, however, DFWGP's obligation hereunder shall be limited to a maximum
cost not to exceed the cost of a new premium in the amount of the full Purchase
Price less the original cost of the premium for the Prior Title. DFWGP agrees
----
that Chicago Title Insurance Company is acceptable to DFWGP; and
(b) A true, complete, legible and, where applicable, recorded copy of
all documents and instruments referred to or identified in the Title Commitment,
each of which shall be obtained at DFWGP's sole cost and expense, including, but
not limited to, all deeds, lien instruments, leases, plats, surveys,
reservations, restrictions, and easements.
4.2 UCC Search. Within ten (10) days after the execution hereof,
----------
DFWGP shall obtain and deliver to the Partnership, at Sellers' sole cost and
expense, current written reports (the "UCC Searches") (a) from the Offices of
the Delaware and Texas Secretaries of State and the deed recording offices of
Dallas County, Texas, reflecting the results of current searches of the Uniform
Commercial Code Records maintained by such offices, said UCC Searches to be made
under the names of DFWGP and DFWS and under the Tradename used by DFWGP at the
Hotel, (b) of any judgment or tax liens against either of DFWGP or the Hotel,
and (c) of any bankruptcy filing by or against DFWGP.
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ARTICLE 5
HOTEL DOCUMENTS, INSPECTION AND OBJECTIONS
------------------------------------------
5.1 Hotel Documents. As soon as practicable but in no event later
---------------
than ten (10) days after the execution hereof and to the extent in DFWGP's
possession or control and not previously delivered to AGH, DFWGP, at AGH's sole
cost and expense, will deliver to AGH true, correct and complete copies (or
where specifically indicated, original counterparts) of the following together
with all amendments, modifications, renewals or extensions thereof:
(i) All Warranties relating to the Hotel or any part thereof
which are still in effect;
(ii) All Licenses;
(iii) All agreements relating to the operation of the Hotel
(including leases of adjacent land or facilities);
(iv) All documentation relating to the terms of employment of any
employees of DFWS;
(v) All of the Plans and Specs;
(vi) All Service Contracts;
(vii) All Leases and all agreements for real estate commissions,
brokerage fees, finder's fees or other compensation payable by DFWS in
connection therewith; and
(viii) To the extent in the possession or control of DFWS, all
notices received from governmental authorities in connection with the Hotel
since January 1, 1994.
5.2 Procedure for Objections. The Partnership shall have until
------------------------
twenty-eight (28) days following the completion of all deliveries required by
DFWGP to the Partnership under Sections 4.1, 4.2, 4.3 and 5.1 hereof (the
"Document Review Period") to notify DFWGP in writing of any objections the
Partnership may have to matters reflected in or concerning the Title Commitment,
the UCC Searches or any documents or items delivered by DFWGP to the Partnership
pursuant to those Sections. If the Partnership shall so notify DFWGP of any
objections, DFWGP shall cure such objections within fourteen (14) days from the
date on which DFWGP receives the Partnership's objections. If the Partnership
is not reasonably satisfied with the results of any cure efforts by DFWGP, the
Partnership may terminate this Agreement by giving written notice of termination
to DFWGP within ten (10) days after the end of DFWGP's fourteen (14) day cure
period. If the Partnership has not so notified DFWGP within the aforementioned
period, DFWGP will be deemed to have waived its objections to
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matters referred to in this Section. If the Partnership terminates this
Agreement pursuant to this Section, the Earnest Money shall be returned to AGH
within five (5) days after any such termination, and neither party shall have
any further rights or obligations one to the other. DFWGP agrees to provide any
necessary written directions to Escrow Agent to release the Earnest Money to
AGH. The Partnership may elect to waive the cure of such objections and to
proceed to Closing in lieu of terminating this Agreement.
5.3 Inspection of Hotel and Environmental Report. DFWGP shall give
--------------------------------------------
the agents and representatives of AGH and Partnership full, free access to the
Hotel prior to Closing, to inspect the Hotel's physical plant, accounting
records, and correspondence. DFWGP shall give the agents and representatives of
AGH and the Partnership the right to physically inspect the Hotel and to conduct
soil tests and other inspections (the "Inspections") (so long as such
Inspections do not unreasonably interfere with the use and occupancy of the
Hotel by DFWGP, by guests or patrons of the Hotel, or by Tenants). The costs
and expenses of any investigations by AGH and Partnership shall be borne solely
by them. Partnership and AGH shall have the obligation to restore the Hotel to
its condition prior to the Inspections, which obligation shall survive any
termination of this Agreement. AGH covenants and agrees that the Hotel shall
not be damaged or impaired in any way as the result of the Inspections, and
hereby agrees to indemnify and hold DFWGP harmless from and against any claims,
causes of action, damages and expenses (including attorneys' fees) to the extent
incident to, resulting from or in any way arising out of the presence in, on or
about the Hotel of AGH or Partnership, or their agents or representatives, or
out of any such Inspection. Such indemnity shall survive the Closing or any
termination of this Agreement.
5.4 Feasibility Determination. AGH shall have forty-five (45) days
-------------------------
from the date of this Agreement to evaluate the feasibility of the transaction
contemplated herein and to conduct its Inspections under Section 5.3 hereof (the
"Feasibility Review Period"). AGH, in its sole discretion, shall determine the
acceptability of the Hotel and feasibility of the transaction based on its
Inspection and financing efforts. In the event AGH determines from the results
of the Inspection or its financing efforts that the transaction is infeasible,
AGH may elect to terminate this Agreement by written notice prior to the end of
such forty-five (45) day period. The Earnest Money (and accrued interest) shall
be returned to AGH within five (5) days after any such termination, and neither
party shall have any further rights or obligations one to the other, except for
the indemnity set forth in Section 5.3. DFWGP agrees to provide any necessary
written directions to Escrow Agent to release the Earnest Money to AGH.
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<PAGE>
5.5 Financial Information. Representatives of the Partnership and
---------------------
the REIT shall have access to all existing financial and other relevant
information reasonably available to DFWGP relating to DFWGP, DFWS and the Hotel
sufficient to enable them to prepare audited financial statements in conformity
with Regulation S-X of the SEC and to enable them to complete and file the
Registration Statement. The foregoing financial information shall include,
without limitation, the financial records for each of the five calendar-year
periods ending 1991, 1992, 1993, 1994 and 1995 and the information for 1996.
DFWGP shall also provide to representatives of the Partnership and the REIT a
signed representation letter in form reasonably acceptable to the parties.
5.6 Termination Right of DFWGP. DFWGP shall have the right to
--------------------------
terminate this Agreement by notice of such termination to the Partnership if the
Closing has not occurred by October 1, 1996 (the "Termination Date").
ARTICLE 6
PERMITTED EXCEPTIONS
--------------------
6.1 Permitted Exceptions. Any title exceptions to which the
--------------------
Partnership does not object in accordance with Section 5.2, any title exceptions
which appear on Schedule B of the Prior Title and any title exceptions to which
the Partnership objects that are not cured and which the Partnership is deemed
to have accepted and approved in accordance with Section 5.2 shall be herein
referred to as the "Permitted Exceptions."
ARTICLE 7
OPERATION OF HOTEL
------------------
7.1 Interim Operation. DFWGP hereby covenants and agrees that
-----------------
between the date of this Agreement and the Closing Date, and to the extent
within DFWGP's control, DFWGP shall (or shall cause DFWS to):
(a) Operate, manage, and maintain the Hotel consistent with DFWS'
prior practice and as a reasonable and prudent first class hotel operator would
operate, manage, and maintain the Hotel;
(b) Not commit waste of any portion of the Hotel;
(c) Keep and maintain the Hotel in a good state of repair and
condition, reasonable and ordinary wear and tear excepted;
(d) Not enter into any new material Leases or amendments,
modifications, renewals or extensions of any existing Leases without AGH's prior
written consent, except that DFWGP
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<PAGE>
shall not be required to obtain AGH's consent to any renewal or extension
specifically permitted under the terms of an existing Lease or on terms at least
as favorable to DFWGP as set forth in such existing agreement, provided that any
such renewal or extension shall not exceed a term of six (6) months without
AGH's prior written consent, such consent not to be unreasonably withheld or
delayed;
(e) Not amend, modify, renew or extend any of the FF&E Leases or
Service Contracts or enter into any new contractual relationships with any party
to provide services or goods to the Hotel, except in the ordinary course of
business in accordance with past practice, without the Partnership's prior
written consent, which consent shall not be unreasonably withheld or delayed;
(f) Make reasonable efforts to not take, or omit to take, any action
that would have the effect of violating any of the representations, warranties,
covenants or agreements of DFWGP contained in this Agreement;
(g) Comply in all material respects with all federal, state, and
municipal laws, ordinances, regulations, and orders relating to the Hotel;
(h) Not sell or assign, or enter into any agreement to sell or
assign, or create or permit to exist any lien or encumbrance (other than a
Permitted Encumbrance) on, the Hotel or any portion thereof;
(i) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is delinquent; and
(j) Maintain in full force and effect the present policies and level
of insurance with respect to the Hotel until the Closing Date.
7.2 Notices of Violation. DFWGP hereby covenants and agrees that all
--------------------
notices of violation of federal, state or municipal laws, ordinances, orders,
regulations or requirements issued by, or filed by, or served by, any
governmental agency having jurisdiction over the Hotel against or affecting the
Hotel on or before the Closing Date of which DFWGP have actual knowledge shall
be promptly disclosed to AGH and the Partnership.
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<PAGE>
ARTICLE 8
REPRESENTATIONS AND COVENANTS
-----------------------------
8.1 Representations by Partnership. The Partnership represents and
------------------------------
warrants unto DFWGP that each and every one of the following statements will be
true, correct and complete as of the Closing Date:
(a) The Partnership is duly formed, validly existing and in good
standing under the laws of the State of Delaware, and has full right, power and
authority to assume and perform all of its obligations under this Agreement; the
performance by Partnership of its obligations under this Agreement will require
no further action or approval of the Partnership's partners or of any other
individuals or entities in order to constitute this Agreement as a binding and
enforceable obligation of the Partnership.
(b) The Partnership will not be a foreign partnership (as that term
is defined in the Internal Revenue Code and income tax regulations).
(c) The performance of, or compliance with, this Agreement by the
Partnership will not result in any violation of, or default under, or result in
the acceleration of, any obligation under the Partnership Agreement or any
existing mortgage indenture, lien agreement, note, contract, permit, judgment,
decree, order, restrictive covenant, statute, rule or regulation applicable to
Partnership.
(d) The REIT is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland.
(e) The REIT will not be a foreign corporation (as that term is
defined in the Internal Revenue Code and income tax regulations).
8.2 Representations by AGH. AGH represents and warrants unto DFWGP
----------------------
that each and every one of the following statements will be true, correct and
complete as of the Closing Date:
(a) AGH is duly formed, validly existing and in good standing under
the laws of the State of Delaware, and has full right, power and authority to
assume and perform all of its obligations under this Agreement; the performance
by AGH of its obligations under this Agreement will require no further action or
approval of AGH's partners or of any other individuals or entities in order to
constitute this Agreement as a binding and enforceable obligation of AGH.
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<PAGE>
(b) The performance of, or compliance with, this Agreement by AGH
will not result in any violation of, or default under, or result in the
acceleration of, any obligation under the articles on incorporation or any
existing mortgage indenture, lien agreement, note, contract, permit, judgment,
decree, order, restrictive covenant, statute, rule or regulation applicable to
AGH.
8.3 Representations by DFWGP. DFWGP hereby represents and warrants
------------------------
unto the Partnership that each and every one of the following statements is
true, correct and complete in every material respect as of the date of this
Agreement and will be true, correct and complete as of the Closing Date. (For
purposes of this Section 8.3, the term "Knowledge" shall mean to DFWGP's actual
knowledge, with no duty of further investigation, and except as otherwise known
to AGH as of the Closing Date.)
(a) DFWGP is a corporation duly organized and validly existing under
the laws of the State of Texas and is duly qualified to do business in the State
of Texas. DFWGP has full corporate right, power and authority to enter into
this Agreement and to assume and perform all of its obligations under this
Agreement; and the execution and delivery of this Agreement and the performance
by DFWGP of its obligations under this Agreement require no further action or
approval of DFWGP's shareholders, directors or partners, or of any other
individuals or entities in order to constitute this Agreement a binding and
enforceable obligation of DFWGP. Except as otherwise set forth in this
Agreement and except for the filing of any requisite pre-merger notification
report under the Hart-Scott Rodino Act (the "Hart Act"), DFWGP has obtained each
and every consent, approval, permit or order of, and has made each and every
filing with, any individual, partnership, corporation, trust or other entity,
government agency or political subdivision required to be obtained or made in
connection with: (A) its execution, deliver and performance of this Agreement
and (B) its consummation of the transactions contemplated hereby. This
Agreement is the legal, valid and binding obligation of DFWGP, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting the enforcement thereof or relating to
creditors' rights generally.
(b) DFWGP is not a foreign partnership (as that term is defined in
the Internal Revenue Code and Income tax regulations).
(c) Except with respect to the obligations of DFWGP to Bank, neither
the entry into nor the performance of, or compliance with, this Agreement by
DFWGP has resulted, or will
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<PAGE>
result, in any violation of, or default under, or result in the acceleration of,
any obligation under the articles of incorporation of DFWGP, or any existing
mortgage indenture, lien agreement, note, contract, permit, judgment, decree,
order, restrictive covenant, statute, rule or regulation applicable to DFWGP or
DFWS or to the Hotel.
(d) DFWGP has and will have at the Closing, good and valid title to
its Interest, free and clear of all liens, encumbrances, restrictions and claims
of every kind and nature whatsoever. DFWGP and the Limited Partners are the
only entities which have any interest in or right to receive the profits and
distributions of DFWS. Upon consummation of the assignments contemplated by
this Agreement, the Partnership (or its designee) will acquire good and valid
title to 100% of DFWGP's legal and beneficial interest in DFWS, free and clear
of any liens, encumbrances, equities, restrictions and claims of every kind, but
subject to the Debt.
(e) At Closing, DFWS will be a limited partnership duly formed and
validly existing with full power and authority to own and operate the Hotel.
The documents pursuant to which DFWS will be organized and governed, including
all certificates of partnership and agreements of partnership and operating
agreements (collectively, "Formation Documents") will be in form reasonably
acceptable to the parties, and will be in full force and effect.
(f) To Knowledge, no party has any right or option to acquire the
Interests or the Hotel or any portion thereof, other than AGH and the
Partnership under this Agreement.
(g) Neither DFWS nor DFWGP (i) is in receivership or dissolution,
(ii) has made an assignment for the benefit of creditors or admitted in writing
its inability to pay its debts as they mature, or (iii) has been adjudicated a
bankrupt or filed a petition in voluntary bankruptcy or a petition or answer
seeking reorganization or an arrangement with creditors under the Federal
bankruptcy law or any other similar law or statue of the United States or any
jurisdiction and, to Knowledge, no such petition has been filed against DFWS or
the Limited Partners.
(h) To Knowledge, there are no:
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial orders respecting awards, with respect to the Hotel;
(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice or judicial proceedings or orders with
respect thereto, with respect to the Hotel;
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<PAGE>
(iii) pending charges or complaints with or by the city, state or
federal civil or human rights agencies, unremedied orders by such agencies
or judicial proceedings or orders with respect to obligations under city,
state or federal civil or human rights or antidiscrimination laws or
executive orders, with respect to the Hotel; or
(iv) other pending, or threatened or actual litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affect the Hotel.
(i) DFWS is indebted to Column Financial, Inc. ("Bank") pursuant to
a Promissory Note dated January 25, 1996, made by DFWGP (the "Note") in the
original principal amount of indebtedness of $14,250,000.00 (the "Debt").
The Debt is secured by a Deed of Trust and Security Agreement and
Assignment of Leases and Rents, each dated as of January 25, 1996, which
create a first and prior lien and security interest burdening the Hotel
(the "Security Documents").
(j) DFWS is not in default under the Note or any of the Security
Documents, and no event has occurred which with notice or the passage of
time would constitute a default thereunder. DFWGP has provided, or will
promptly provide, to AGH and Partnership a true, correct and complete copy
of all documents relating to the Debt, including the Note and the Security
Documents.
(k) To Knowledge, (i) annexed hereto as Exhibit E is a list of all of
---------
the Security Documents and there have been no modifications or amendments
thereto except as set forth in said Exhibit E; and (ii) true and complete copies
---------
of each of the Security Documents have been delivered to Purchaser.
(l) To Knowledge, Exhibit F is a true, correct and complete list of
---------
all Leases in effect and that the Leases to be delivered to the Partnership
hereunder are and will be true, complete and correct copies of such Leases
(including, without limitation, all amendments, modifications, renewals, and
extensions thereof) and that there are and will be no other written or oral
agreements binding on the Partnership with any tenant, licensees, franchisees,
concessionaires or other persons or entities (collectively, "Tenants", and
individually, "Tenant") or any guarantors of the Tenants' obligations relating
to their use or occupancy other than those permitted under Section 7.1(e) of
this Agreement. The term Tenant shall refer only to tenants under Leases. To
the extent that there may be any discrepancy between any Lease and its
identification or description in the Exhibit of Leases, the Lease itself shall
control. To Knowledge, except as disclosed on the Exhibit of Leases, no tenant
has made
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any claim of default on the part of the landlord nor any right of offset.
(m) To Knowledge, (i) the insurance covering the Hotel is listed in
the insurance schedule annexed hereto as Exhibit G; (ii) each of said policies
---------
is in full force and effect; and (iii) no notice has been received by DFWGP or
DFWS from the insurance company which issued any of such policies stating that
any of such policies is not in full force and effect, will not be renewed or
will be renewed only at a higher premium rate than is presently payable
therefor.
(n) To Knowledge, the Service Contracts are in full force and effect
and there are no defaults thereunder by any party thereto and all amounts now
due thereunder have been paid.
(o) To Knowledge, all FF&E (other than that covered by the FF&E
Leases) and Other Personalty included in this sale has been fully paid for and
is owned by DFWGP or DFWS free and clear of all liens and encumbrances, except
for the Permitted Encumbrances.
(p) To Knowledge, true and complete copies of the Licenses are
annexed hereto as Exhibit H. To Knowledge, no material default has occurred in
---------
the due observance of any condition to any license, permit or certificate
relating to the Hotel.
(q) To Knowledge, there is no pending or threatened condemnation
affecting any of the Hotel or of any improvement liens or special assessments to
be made against the Hotel by any governmental authority.
(r) To Knowledge, the FF&E Leases are in full force and effect and
there are no defaults thereunder, nor have there occurred any events which with
the passage of time or the giving of notice or both would constitute a default
thereunder.
(s) To Knowledge, except as set forth in Exhibit I, neither DFWGP nor
---------
DFWS has received any notice of any violation of law or municipal ordinance,
order or requirement noted in or issued by any governmental entity asserting
jurisdiction against or affecting the Hotel.
(t) To Knowledge, the only Warranties still in effect for any portion
of the Hotel are described on Exhibit J.
---------
(u) The principal place of business of DFWGP for purposes of the UCC
Searches is as follows:
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<PAGE>
DFW South Acquisition Corporation
Williams Square, Suite 330
5215 N. O'Connor Blvd.
Irving, TX 75039
(v) DFWGP and DFWS have no employees.
(w) Except as otherwise disclosed in writing to AGH prior to Closing,
as of Closing, DFWS will, to Knowledge, have no liabilities except (i) real
estate taxes or assessments not yet due and payable and adjusted for to the
extent of periods prior to Closing, (ii) obligations under the Security
Documents, (iii) obligations arising under Leases, FF&E Leases and Service
Contracts permitted under this Agreement, and under insurance policies and
utilities for periods prior to Closing and adjusted at Closing, (iv) obligations
under Leases, FF&E Leases and Service Contracts attributable to any period after
Closing, (v) trade payables and obligations arising in connection with contracts
and other agreements to be entered into in the ordinary course of business which
are not in contravention of this Agreement, and (vi) other liabilities
specifically identified in this Section and the Exhibits attached hereto for
periods prior to Closing and to be adjusted at Closing.
(x) For the purpose of this Section (w), the term "Hazardous
Substances" shall mean substances defined as a "hazardous waste," "hazardous
substance," "toxic substance" or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxins, or urea formaldehyde
insulation. As used herein, "Environmental Laws" shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, 42 U.S.C. (S) 9601, et seq., the Resource Conservation and
-- ---
Recovery Act, 42 U.S.C. (S) 6901, et seq., the Clean Air Act, 42 U.S.C. (S)
-- ---
7401, et seq., the Clean Water Act, 33 U.S.C. (S) 1251, et seq., the Toxic
-- --- -- ---
Substance Control Act, 15 U.S.C. (S) 2601, et seq., and the Occupational Safety
-- ---
and Health Act, 29 U.S.C. (S) 651, et seq., as any of the preceding have been
-- ---
amended prior to the date hereof, and any other federal, state, or local law,
ordinance, regulation, rule, order, decision or permit relating to the
protection of the environment or of human health from environmental effects of
Hazardous Substances and which are applicable to the Hotel.
To Knowledge, and except for those conditions specifically described
in the environmental reports which are listed on Exhibit L (the "Environmental
---------
Reports"), and without independent investigation other than the Environmental
Reports, (i) no Hazardous Substances have been spilled or released in, on or
under the Hotel so as to impose liability or require
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<PAGE>
remediation under any Environmental Law and (ii) no liability under or violation
of any Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel,
except in each case for remediation obligations, liabilities or violations that
would not, individually or in the aggregate, have a material adverse effect on
the business or financial condition of DFWGP, DFWS or the Hotel. To Knowledge,
there are no other environmental reports relating to the Hotel currently in the
possession of DFWGP or DFWS other than the Environmental Report.
Each of the foregoing representations and warranties shall be deemed
remade at and as of the Closing and the representations shall survive the
Closing for the period of one year.
8.4 Management. DFWGP shall permit AGH to continue its management
----------
operation with respect to the Hotel up until and including the Closing Date,
subject to the terms of the existing Management Agreement.
8.5 Access to Hotel Books and Records. Prior to Closing, DFWGP
---------------------------------
shall, upon request of AGH or the Partnership, make available to AGH or
Partnership and their authorized representatives and employees for inspection
during normal business hours and at their sole cost, risk and expense, all of
the then existing books, records, surveys, plans, specifications, permits,
certificates of occupancy and other files that are relevant to the management,
ownership, operation, use, occupancy, construction or leasing of the Hotel and
are in DFWGP's or DFWS' possession or control.
8.6 Liquor License. DFWGP shall cooperate with the efforts of DFWS
--------------
as well as the Partnership or its lessee or management company in obtaining new
liquor licenses or permits for the Hotel to the extent required.
8.7 Hart Act. DFWGP and the Partnership will furnish all information
--------
required under the Hart Act with respect to the subject transaction, and shall
take such action as shall be required thereunder, including the prompt filing,
if required, of a pre-merger notification under the Hart Act. AGH shall pay all
filing fees in the event of such filing.
8.8 Employees. The Partnership shall be obligated to hire and retain
---------
substantially all Hotel employees at not less than the same terms and conditions
as existing prior to Closing and retain them on such basis from at least sixty
(60) days thereafter. The parties hereto acknowledge that the foregoing
sentence is intended to create a direct obligation of the
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<PAGE>
Partnership to DFWS relating to the Worker Adjustment and Retraining
Notification Act, and that no third party benefits shall be created or inferred
by this Section 8.8.
ARTICLE 9
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
In addition to any other conditions set forth in this Agreement, the
obligations of the Partnership and DFWGP to consummate the Closing are subject
to the timely satisfaction of the respective conditions and requirements set
forth in this Article 9, which shall be conditions precedent to the respective
party's obligations under this Agreement.
9.1 Conditions to Obligations of the Partnership.
--------------------------------------------
(a) DFWGP's Obligations. DFWGP shall have performed all material
-------------------
obligations of DFWGP hereunder which are to be performed at or prior to Closing.
(b) DFWGP's Representations and Warranties. DFWGP's representations
--------------------------------------
and warranties set forth in this Agreement shall be true and correct in all
material respects as if made again on the Closing Date.
(c) Title Policy. Partnership shall have received or have an
------------
irrevocable right to receive the Title Commitment issued by the Title Company to
DFWS insuring good and indefeasible fee simple title to the Land and
Improvements, subject only to the Permitted Exceptions, in an amount equal to
$25,132,000.
(d) Hart Act. The expiration or termination of the applicable
--------
waiting period under the Hart Act with no action pending for the Department of
Justice or Federal Trade Commission to prohibit or enjoin this sale.
(e) Required Deliveries. DFWGP shall have made all required
-------------------
deliveries under Section 10.3.
(f) Bank Consents. The Partnership shall have received an executed
-------------
consent from the Bank consenting to the transfer of the Interests and to the
lease of the Hotel to Lessee (as such term is defined in the Registration
Statement).
(g) No Injunction. There shall be no injunction, judgment, order,
-------------
action or proceeding which would prevent or limit the consummation of this
transaction.
(h) Limited Partners. The Limited Partners shall have (i)
----------------
unanimamously consented to the sale of the Interests, (ii) executed and
delivered the Other Contracts, and (iii) contributed each of their respective
Interests.
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<PAGE>
(i) Deliveries. Partnership shall have received the following
----------
documents:
(i) The Registration Rights Agreement, the Lock-Up Agreement,
the Exchange Rights Agreement and the Pledge Agreement, duly executed by
Sellers;
(ii) An affidavit from Sellers in form and substance acceptable
to Partnership, as required by Section 1445 of the Internal Revenue Code,
specifying (i) that Sellers are not foreign partnerships (as defined in the
Internal Revenue Code and Income tax regulations), (ii) Sellers' taxable
identification numbers, (iii) Sellers' office addresses, and (iv) such
other matters as Partnership may reasonably require in order to satisfy
itself that no withholding is required under Section 1445 of the Internal
Revenue Code; and
(iii) The Partnership Amendment duly executed by Sellers, which
shall evidence the admission of those Sellers who will be receiving
consideration in the form of Units ("Unit Sellers") as limited partners in
the Partnership and contain an acceptance of the terms and conditions of
the Partnership Agreement, and such other documents or instruments as REIT
may reasonably require for the issuance of the Units to Unit Sellers and
the admission of Unit Sellers as limited partners in the Partnership.
(j) Consents and Opinions. There shall be delivered to the
---------------------
Partnership, from DFWGP or DFWGP's counsel, such consents and legal opinions as
are reasonably and customarily required by counsel to the Partnership or counsel
to the lead underwriters of the IPO regarding this Agreement to the effect that
each of the documents executed and delivered by DFWGP have been duly authorized,
executed and delivered by, and constitute the valid and legally binding
obligation of, the parties thereto and are enforceable in accordance with their
terms, subject to general principles of equity and to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and except that
enforceability or indemnification and contribution provisions may be limited, in
whole or in part, by applicable securities laws or public policy.
(k) New License. Holiday Inns Franchising, Inc. ("Franchisor") shall
-----------
have approved the granting of a new license to DFWS or has approved the transfer
of the Interests to the Partnership and/or its affiliate.
9.2 Conditions to DFWGP's Obligations.
---------------------------------
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<PAGE>
(a) AGH's and Partnership's Obligations. AGH and Partnership shall
-----------------------------------
have performed all of their material obligations hereunder which are to be
performed at or prior to Closing.
(b) Representations and Warranties by the Partnership and REIT. The
----------------------------------------------------------
representations and warranties by the Partnership and the REIT set forth in this
Agreement shall be true and correct in all material respects as if made again on
the Closing Date.
(c) Hart Act. The expiration or termination of the applicable
--------
waiting period under the Hart Act with no action pending for the Department of
Justice or Federal Trade Commission to prohibit or enjoin this sale.
(d) Required Deliveries. The Partnership shall have made all
-------------------
required deliveries under Section 10.4.
(e) No Injunction. There shall be no injunction, judgment, order,
-------------
action or proceeding which would prevent the consummation of this transaction.
(f) IPO. The IPO shall have been consummated before the Termination
---
Date.
(g) Other Contracts. The Limited Partners shall have executed and
---------------
delivered the Other Contracts.
(h) Bank Consents. Bank shall have consented to the transfer of the
-------------
Interests and to the lease of the Hotel to Lessee (as such term is defined in
the Registration Statement).
(i) Bank Releases. Bank shall have released Hervey A. Feldman
-------------
("Feldman"), Thomas J. Corcoran, Jr. ("Corcoran") and DFWGP from all obligations
under those certain Indemnity and Guarantee and Hazardous Substances Indemnity
Agreements, each dated January 30, 1996. Bank shall have released DFWGP from
any liability on the Debt.
(j) Franchisor Release. Franchisor shall have released Feldman,
------------------
Corcoran and DFWGP from all liability under that certain License Agreement dated
July 13, 1992.
(k) Management Agreement Release. AGH shall have caused the release
----------------------------
of DFWGP from all liability under that certain Management Agreement dated May 1,
1992 (the "Management Agreement").
(l) Operating Agreements Indemnity. AGH shall have indemnified DFWGP
------------------------------
from all operating liabilities following Closing, including those relating to
the FF&E Leases, the Service
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<PAGE>
Contracts and other operating agreements (collectively, the "Operating
Agreements").
(m) Guarantee Indemnity. AGH shall have indemnified Feldman and
-------------------
Corcoran from any liability on any guarantee relating to the Operating
Agreements made by Feldman and/or Corcoran.
(n) Easement Amendment. Partnership and the parties to that certain
------------------
Reciprocal Easement Agreement (the "Easement") dated January 30, 1996 shall have
executed an amendment to the Easement clarifying the parties rights thereunder
in form and content reasonably satisfactory to the parties thereto.
ARTICLE 10
CLOSING AND CLOSING DOCUMENTS
-----------------------------
10.1 Closing. The closing (the "Closing") shall occur at the offices
-------
of AGH or at the offices of the attorneys for the lead underwriter of the IPO on
a date (the "Closing Date") to be specified by notice from the Partnership to
DFWGP, such date to be not later than the Termination Date. The Closing shall
take place concurrently with the consummation of the IPO or not later than five
(5) business days thereafter, at the Partnership's election but in any event no
later than the Termination Date.
10.2 Escrow. It is anticipated that the Closing and the closing of
------
the Other Contracts and the consummation of the IPO shall occur simultaneously
or substantially simultaneously. To effect the Closing, at such time as AGH
reasonably anticipates the completion of the IPO to occur, AGH or the
Partnership within twenty (20) days thereafter, shall have the right to send
notice to DFWGP requesting that all parties (including the Limited Partners)
endeavor in good faith to (a) enter into a mutually satisfactory escrow
agreement with a mutually satisfactory escrow agent pursuant to which the
Closing and the closing of the Other Contracts shall occur on the Closing Date
through an escrow-style closing and (b) prior to the Closing Date, place in
escrow with said escrow agent pursuant to said escrow agreement (i) the
documents to be delivered pursuant to this Section 10.2 and (ii) the proration
funds estimated pursuant to Section 10.12.
10.3 DFWGP's Deliveries. At the Closing and at DFWGP's sole cost and
------------------
expense, DFWGP shall deliver the following to the Partnership:
(a) Assignments. Assignments of the Interests (the "Assignments") in
-----------
a form reasonably acceptable to DFWGP and the Partnership conveying the
Interests free and clear of any liens encumbrances security interests, prior
assignments or conveyances and original, executed counterparts of the Formation
Documents, to the extent in the possession and control of DFWGP;
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<PAGE>
(b) Registration Rights, Lock-Up, Exchange Rights and Pledge
--------------------------------------------------------
Agreements. The Registration Rights Agreement, the Lock-Up Agreement, the
- ----------
Exchange Rights Agreement and the Pledge Agreement, duly executed by DFWGP;
(c) FIRPTA Affidavit. An affidavit from DFWGP in form and substance
----------------
acceptable to Partnership, as required by Section 1445 of the Internal Revenue
Code, specifying (i) that DFWGP is not a foreign partnership (as defined in the
Internal Revenue Code and Income tax regulations), (ii) DFWGP's taxable
identification numbers, (iii) DFWGP's office addresses, and (iv) such other
matters as Partnership may reasonably require in order to satisfy itself that no
withholding is required under Section 1445 of the Internal Revenue Code;
(d) Authority Documents. Evidence satisfactory to Partnership that
-------------------
the person or persons executing the closing documents on behalf of DFWGP has
full right, power and authority to do so;
(e) Partnership Documents. The Partnership Amendment duly executed
---------------------
by DFWGP, which shall evidence the admission of the Unit Sellers as limited
partners in the Partnership and contain an acceptance of the terms and
conditions of the Partnership Agreement, and such other documents or instruments
as REIT may reasonably require for the issuance of the Units to Unit Sellers and
the admission of Unit Sellers as limited partners in the Partnership;
(f) Closing Certificate. A certificate duly executed by DFWGP dated
-------------------
as of the Closing Date to the effect that all of the representations and
warranties herein of DFWGP are true and correct as of the Closing;
(g) Plans, Keys and Records. To the extent not previously delivered
-----------------------
to and in the possession of Partnership or AGH, all Plans and Specs, all keys
for the Hotel, all Records, and all Licenses; and
(h) Title Affidavits. Any affidavits as to judgments and other
----------------
matters reasonably required by the Title Company in connection with the issuance
of the Title Policy.
On the Closing Date, DFWGP shall cause to be delivered to Partnership
possession of the Hotel free and clear of all tenancies of every kind and
parties in possession, except for the Tenants under Leases and guests in the
Hotel, and with all parts of the Hotel (including, without limitation, the
Improvements and FF&E) in substantially the same condition as the same were on
the date Of this Agreement, normal wear only excepted.
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<PAGE>
10.4 Deliveries by Partnership and REIT. At the Closing and at the
----------------------------------
sole cost and expense of Partnership and REIT, Partnership and REIT shall
deliver the following to DFWGP:
(a) Partnership Amendment. The Partnership Amendment duly executed
---------------------
by REIT reflecting the issuance of the Units to the Unit Sellers;
(b) Registration Rights, Lock-Up and Exchange Agreements. The
----------------------------------------------------
Registration Rights Agreement, Lock-Up Agreement and Exchange Agreement duly
executed by the Partnership and/or the REIT, as appropriate;
(c) Authority Documents. Evidence satisfactory to DFWGP that the
-------------------
person or persons executing the closing documents on behalf of Partnership and
the REIT have full right, power and authority to do so; and
(d) Closing Certificate. Certificates duly executed by Partnership
-------------------
and the REIT to the effect that all of the representations and warranties herein
of the Partnership and the REIT are true and correct as of the Closing.
10.5 Amendment of Formation Documents. Simultaneously with the
--------------------------------
delivery of the Assignments, DFWGP, the Partnership and any designee of the
Partnership will execute amendments to the Formation Documents in form and
substance reasonably satisfactory to the Partnership and DFWGP to reflect the
withdrawal of DFWGP, the substitution of the Partnership and its designee in
their stead, and the Partnership's indemnification of DFWGP relating to DFWGP's
post-Closing obligations relating to the Hotel and the Partnership's assumption
of such post-Closing obligations.
10.6 Concurrent Transactions. All documents or other deliveries
-----------------------
required to be made by the Partnership, the REIT, DFWGP, the Limited Partners
and DFWS at or prior to Closing, and all transactions required to be consummated
concurrently with Closing, shall be deemed to have been delivered and to have
been consummated simultaneously with all other transactions and all other
deliveries, and no delivery shall be deemed to have been made, and no
transaction shall be deemed to have been consummated, until all deliveries
required by the Partnership, the REIT, DFWGP and DFWS shall have been made or
waived, and all concurrent or other transactions shall have been consummated.
10.7 Further Assurances. DFWGP and the Partnership, at any time
------------------
after Closing, upon request of either party, will execute (or cause any
appropriate entity to execute and to use reasonable efforts to cause such
parties to execute) such additional instruments, documents or certificates as
either party deems reasonably necessary in order to effect the transactions
contemplated hereby.
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<PAGE>
10.8 Prorations and Adjustments. It is the parties' intention that
--------------------------
the prorations and adjustments conform in substance to those that would be made
in a sale of real property as set forth herein. All such prorations shall be
netted against each other and the new amount shall be paid in cash to Sellers
(in which case, DFWGP shall receive such amount and shall distribute to Sellers
each Seller's Share of such amount) or to the Partnership (in which case, DFWGP
shall pay such amount and shall seek reimbursement of each Seller's Share from
each of the Sellers), as the case may be, by the wire transfer of Federal funds
on the Closing Date. As used in this Article 10, Seller's Share shall mean each
Seller's percentage share equal to its percentage share of the Aggregate
Purchase Price as determined pursuant to the applicable provisions of the
Amended and Restated Agreement of Limited Partnership of DFWS. At Closing, the
following items of revenue and expense shall be prorated as of 12:01 A.M. on the
Closing Date:
(a) Hotel Taxes. Real estate taxes, personal property or use taxes
-----------
and sewer rents, on the basis of the best available estimates for such taxes and
rents that will be due and payable on the Hotel for the calendar year in which
the Closing occurs;
(b) Operating Costs. All utility costs and expenses and other costs
---------------
and expenses of operating the Hotel which are reasonably capable of proration,
including but not limited to all salaries, compensation, sick pay, vacation pay,
other accrued benefits of Hotel employees and other expenses which are charged
to Sellers under the Managing Agreement;
(c) Service Contracts and FF&E Leases. Amounts paid or payable under
---------------------------------
the Service Contracts and FF&E Leases;
(d) Lease Rents. Rents and other revenues under Leases;
-----------
(e) Debt Interest. Interest due and payable on the Debt;
-------------
(f) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service and
restaurant revenue shall be read, measured (and tapes preserved) and apportioned
as of 2:00 a.m. on the Closing Date. Each Seller's Share of the final night's
room revenue (revenue from rooms occupied on the evening preceding the Closing
Date) less a sum equal to all room maid services with respect thereto shall be
the property of each of Sellers. All cash, checks, and other funds, and all
other notes, security and
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<PAGE>
other evidence of indebtedness located at the Hotel as of 2:00 a.m. on the
Closing Date and balances on deposit to the credit of DFWS with banking
institutions are and shall remain the property of Sellers and are not included
in this sale (except for the guest (tray) ledger for guests staying in the Hotel
on the Closing Date which will be paid for by the Partnership);
(g) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade, newspaper and other periodical subscriptions, coin
machine income, and washroom and checkroom income;
(h) Food and Liquor. The value of the food and liquor inventory in
---------------
unopened containers;
(i) Deposits. Deposits as provided in Section 2.1(g);
--------
(j) Escrow and Operating Accounts. The amount, if any, held in any
-----------------------------
tax and insurance escrow with Bank relating to the Debt, and the amount of the
net balance, if any, in any operating account maintained (and retained) by the
Partnership relating to the Hotel; and
(k) Current Assets and Liabilities. If, after the prorations to be
------------------------------
made pursuant to the preceding subparagraphs, (x) the sum of all cash and cash
equivalents, investments, accounts receivable, prepaid expenses and deposits and
other assets generally recognized as current assets owned by Sellers, exceeds or
is less than (y) the sum of all accounts payable, accrued real estate taxes,
accrued interest, other accrued expenses and other liabilities generally
recognized as current liabilities owed by Sellers, the net cash prorations under
this Section shall be increased or decreased, as the case may be, by such excess
or deficiency; provided, however, that each of Sellers shall remain responsible
for each Seller's Share of the payment of all accounts payable and other pre-
Closing liabilities of DFWS relating exclusively to periods prior to the Closing
Date and each of Sellers shall be entitled to receive each Seller's Share of all
accounts receivable relating exclusively to such period, and no prorations will
be made with respect thereto.
10.9 Capital Improvement Plan. The parties acknowledge that there is
------------------------
currently in place a capital improvement plan ("CIP") at the Hotel to which DFWS
has committed to spending $800,000. The portion of that $800,000 that has not
been expended or placed in escrow in accordance with the CIP by the Closing Date
shall be credited at Closing to the Partnership as part of the prorations
provided for in the preceding Section.
10.10 Sales Tax. Each Seller's Share of all sales, use and occupancy
---------
taxes, if any, due or to become due in connection with revenues received from
the Hotel prior to the
-30-
<PAGE>
Closing Date will be paid by each of Sellers. All sales, use and other transfer
taxes, if any, payable as a result of the conveyance of the Interest to
Partnership will be paid by the Partnership. Each of Sellers shall be entitled
to receive each Seller's Share of any rebates or refunds on taxes paid by DFWS
prior to the Closing.
10.11 Document Recordation and Transfer Costs. Sellers and
---------------------------------------
Partnership shall bear equally the escrow fee and other charges payable to the
Title Company, except that the premium payable to the Title Company for the
Revised Coverage shall be paid pursuant to the terms of Article 4, above. Each
of Sellers shall pay each Seller's Share of any costs or transfer taxes in
conjunction with the conveyance of the Interests. The cost of preparing or
obtaining documents to be delivered by Partnership or REIT to DFWGP pursuant to
this Agreement shall be paid by Partnership. The cost of preparing or obtaining
other documents to be delivered by Sellers to Partnership pursuant to this
Agreement shall be paid by Sellers. Any other costs of Closing shall be borne
in accordance with local custom in Dallas, Texas.
10.12 Reconciliation and Final Payment. Prior to Closing, Sellers
--------------------------------
and Partnership shall reasonably cooperate to make a preliminary determination
of the prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. After Closing, Sellers
and Partnership shall reasonably cooperate to make a final determination of such
prorations. Upon the final reconciliation of the prorations under this Article,
but in any event not later than ninety (90) days following Closing, the party
which owes the other party any sums hereunder shall pay such party such sums
within ten (10) days after the reconciliation of such sums. The obligations to
calculate such prorations, make such reconciliations and pay any such sums shall
survive the Closing.
ARTICLE 11
CASUALTY AND CONDEMNATION
-------------------------
11.1 Risk of Loss Notice. In the event that (a) any loss or damage
-------------------
to the Hotel shall occur prior to the Closing Date as a result of fire or other
casualty, or (b) DFWGP receives notice that a governmental authority has
initiated or threatened to initiate a condemnation proceeding affecting the
Hotel, DFWGP shall give the Partnership immediate written notice of such loss,
damage or condemnation proceeding.
11.2 Partnership's Termination Right. If, prior to Closing and the
-------------------------------
delivery of possession of the Hotel in accordance with this Agreement, (a) any
condemnation proceeding shall be pending against any portion of the Hotel or (b)
there is any
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<PAGE>
substantial loss or damage to the Hotel, the Partnership shall have the option
to terminate this Agreement provided it delivers written notice to DFWGP of its
election so to terminate this Agreement within thirty (30) days after the date
DFWGP has delivered to the Partnership written notice of any such loss, damage
or condemnation, and in such event all Earnest Money shall be delivered to AGH
and thereafter no party shall have further obligation or liability to the other
under this Agreement. "Substantial" condemnation or loss shall mean a
condemnation or loss in excess of $100,000 in value.
11.3 Procedure for Closing. If, after a substantial loss or damage
---------------------
or substantial condemnation, Partnership shall not timely elect to terminate
this Agreement, or if the loss or condemnation is not substantial, DFWGP agrees
to pay to Partnership at the Closing all insurance proceeds or condemnation
awards which DFWGP or DFWS has received as a result of the same, and assign to
Partnership all insurance proceeds and condemnation awards payable as a result
of the same in which event the Closing shall occur without DFWGP or DFWS
replacing or repairing such damage.
ARTICLE 12
DEFAULT AND REMEDIES
--------------------
12.1 Default by Partnership or REIT. If, at or prior to Closing (i)
------------------------------
the Partnership refuses or fails to consummate the transactions contemplated by
this Agreement for any reason (including an election not to close because the
IPO is not consummated) other than termination hereof pursuant to a right
granted to the Partnership hereunder to do so, a failure of a condition to the
obligations of the Partnership to consummate such transactions, or a default by
DFWGP, or (ii) any representation or warranty made by or on behalf of the
Partnership herein shall have been materially incorrect when made or shall
become incorrect in any material respect, or (iii) the Partnership shall
otherwise fail in any material respect to perform any of its material
obligations as and when required hereunder, then DFWGP shall give the
Partnership and the Escrow Agent written notice specifying the nature of the
default, and the Partnership shall have thirty (30) days from receipt of DFWGP's
notice within which to cure the specified default; provided, however, if at the
end of said thirty (30) day period the Partnership is diligently pursuing the
cure of the default but the default has not been cured, the Partnership shall
have an additional period not to exceed thirty (30) days within which to
complete the cure of the default. If at the end of the initial thirty (30) day
period or, if applicable, the additional thirty (30) day period, the default is
not still cured, DFWGP as their sole and exclusive remedy, shall have the right
to terminate this Agreement by giving the Partnership and Escrow Agent written
notice thereof, in which event neither party shall have further
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<PAGE>
rights, duties or obligations hereunder (except to the extent this Agreement
specifically provides for the survival of certain obligations of Partnership)
and DFWGP shall be entitled to receive the Earnest Money (together with all
interest earned thereon), as liquidated damages, as well as DFWGP's out-of-
pocket costs related solely to the negotiation of the Agreement, the execution
and delivery of the documents, and preparation for the Closing and acquisition
of the Hotel, (DFWGP, AGH and the Partnership hereby acknowledging that the
amount of damages resulting from breach of this Agreement by AGH or the
Partnership would be difficult or impossible to accurately ascertain), and the
Partnership shall instruct Escrow Agent to immediately deliver the Earnest Money
to DFWGP (together with all interest earned thereon). Notwithstanding the
foregoing, in the event of any default by the Partnership under this Agreement
due to a breach after Closing or any termination hereof of any covenant or
indemnity which survives the Closing or any termination hereof or if DFWGP shall
discover after Closing that any warranty or representation made by the
Partnership herein or in connection with the transaction contemplated herein was
materially incorrect or breached when made, DFWGP shall have any and all rights
and remedies available at law or in equity by reason of such default. If the
Partnership terminates this Agreement pursuant to a right granted to the
Partnership hereunder to do so, then none of the parties shall have any further
rights, duties or obligations hereunder (except to the extent this Agreement
specifically provides for the survival of certain obligations of the
Partnership), and DFWGP shall instruct Escrow Agent to return the Earnest Money
(together with all interest earned thereon) to AGH.
12.2 DFWGP's Default. If DFWGP (i) refuses or fails to consummate
---------------
the transactions contemplated by this Agreement, or (ii) otherwise wrongfully
fails to perform any of its obligations or agreements hereunder, either prior to
or at Closing, for any reason other than termination hereof pursuant to a right
granted to DFWGP hereunder to do so, a failure of condition to the obligation of
DFWGP to consummate such transactions or a default by AGH, the Partnership or
the REIT then the Partnership shall give DFWGP and Escrow Agent written notice
specifying the nature of the default, and DFWGP shall have thirty (30) days from
receipt of the Partnership's notice within which to cure the specified default;
provided, however, if at the end of said thirty (30) day period DFWGP is
diligently pursuing the cure of the default but the default has not been cured,
DFWGP shall have an additional period not to exceed thirty (30) days within
which to complete the cure of the default. If at the end of the initial thirty
(30) day period or, if applicable, the additional thirty (30) day period, the
default is still not cured, AGH and the Partnership as their sole remedy, shall
have the right to do any one or more of the following:
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<PAGE>
(a) Terminate this Agreement by written notice given to DFWGP and
Escrow Agent within fifteen (15) days of the expiration of the initial thirty
(30) or additional thirty (30) day cure period (whichever is applicable), in
which event AGH shall be entitled to a return of the Earnest Money (together
with all interest earned thereon), promptly upon receipt of such notice, and
DFWGP shall be obligated (i) to instruct Escrow Agent to return the Earnest
Money (together with all interest earned thereon) to AGH, and (ii) to pay and
reimburse AGH and the Partnership for their out-of-pocket costs related solely
to the negotiation of this Agreement, the Other Contracts the execution and
delivery of the documents, and preparation for the Closing, and the acquisition
of the Hotel; or
(b) Seek specific performance of this Agreement.
Notwithstanding the foregoing, in the event of any default by DFWGP under this
Agreement due to a breach after Closing or any termination hereof of any
covenant or indemnity which survives the Closing or any termination hereof, or
if Partnership shall discover after Closing that any warranty or representation
made by DFWGP herein or in connection with the transaction contemplated herein
was materially incorrect or breached when made, Partnership shall have any and
all rights and remedies available at law or in equity by reason of such default.
Neither Partnership's nor DFWGP's attendance or appearance at Closing shall be
deemed to nullify or void the provisions of this Section.
ARTICLE 13
INDEMNITIES
13.1 DFWGP's Indemnity. (a) After Closing, DFWGP agrees to
-----------------
indemnify and hold DFWS, the Partnership and the REIT and any other entity
designated to be a partner in DFWS (the "OP Indemnified Parties") harmless of
and from all liabilities, losses, damages, costs, expenses (including reasonable
attorneys' fees) which the OP Indemnified Parties may suffer or incur to the
extent caused by (i) any act or cause of action occurring or accruing prior to
the Closing Date and arising from the ownership or operation of the Hotel prior
to the Closing Date, including but not limited to any claims by employees of
DFWS or third parties under insurance carried by DFWS (or its management
company), (ii) breach of any representation, warranty or covenant made by DFWGP
in this Agreement or any instrument delivered at the Closing (provided that this
clause (ii) shall survive the Closing for one year, only), and (iii) actions and
claims instituted against any of the OP Indemnified Parties based upon the
inclusion in the Registration Statement of information describing the Project
(limited to the name of the Project, the year built, flag, the number of rooms,
occupancy rates and
-34-
<PAGE>
similar data for a five (5) year period) provided or approved by DFWGP
specifically for inclusion in the Registration Statement.
(b) At Closing, DFWGP shall enter into a pledge and security
agreement (the "Pledge Agreement"), pursuant to which DFWGP shall pledge the
Units to the Partnership to secure DFWGP's obligations pursuant to subparagraph
13.1(a) for one year. The Pledge Agreement shall be in form reasonably
satisfactory to the parties.
13.2 Partnership's Indemnity. (a) The Partnership agrees to
-----------------------
indemnify and hold DFWGP harmless of and from all liabilities, losses, damages,
costs, expenses (including reasonable attorneys' fees) which DFWGP may suffer or
incur by reason of (i) any act or cause of action occurring or accruing
subsequent to the Closing Date and arising from the ownership or operation of
the Hotel subsequent to the Closing Date, including but not limited to any
claims by employees of DFWS (or its management company) or third parties under
insurance carried by DFWS (or its management company), or (ii) breach of any
representation, warranty or covenant made by the Partnership or the REIT in this
Agreement or any instrument delivered at the Closing.
(b) The parties acknowledge that this Agreement and all documents,
agreements, understandings and arrangements relating to the transactions
contemplated by this Agreement to be executed or undertaken by the Partnership
which have been executed by one or more officers of the REIT which is the sole
general partner of the Partnership, have been or will be so executed in his/her
capacity as an officer of the REIT, and not individually, and none of the
partners, officers or employees of the Partnership nor any of the directors,
officers, shareholders or employees of the REIT (in their capacities as
directors, officers, shareholders or employees) shall be bound or have any
personal liability hereunder or thereunder except as otherwise provided under
applicable law. DFWGP shall look solely to the assets of the Partnership for
satisfaction of any liability of the Partnership in respect of this Agreement
and all documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of the
partners, officers or employees of the Partnership nor any of the directors,
officers, shareholders, or employees of the REIT or any of their personal assets
for the performance or payment of any obligation hereunder or thereunder except
as otherwise provided under applicable law. AGH, the Partnership and the REIT
shall look solely to the assets of DFWGP for satisfaction of any liability of
DFWGP in respect of this Agreement and all documents, agreements, understandings
and arrangements relating to this transaction and will not seek recourse or
commence any action against any of the partners, shareholders, directors or
officers of DFWGP or any of their
-35-
<PAGE>
personal assets for the performance or payment of any obligation hereunder or
thereunder except as otherwise provided under applicable law.
ARTICLE 14
BROKERS
-------
14.1 No Broker. The parties hereto represent to each other that they
---------
dealt with no finder, broker or consultant in connection with this Agreement or
the transactions contemplated hereby.
14.2 Indemnification by DFWGP. DFWGP agrees to, and hereby does,
------------------------
indemnify and save harmless AGH, the Partnership, the REIT and their affiliates,
and their respective successors and assigns against and from any loss, liability
or expense, including reasonable attorneys' fees, arising out of any claim or
claims for commissions or other compensation for bringing about this Agreement
or the transactions contemplated hereby made by any broker, finder, consultant
or like agent if such claim or claims made by any such broker, finder,
consultant or like agent are based in whole or in part on any agreements entered
into with DFWGP or its representatives for a commission or other compensation.
DFWGP shall likewise indemnify and save harmless AGH, Partnership and the REIT
and their affiliates and their respective successors and assigns against and
from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation
relating to the Leases.
14.3 Indemnification by AGH. AGH, prior to Closing and the
----------------------
Partnership thereafter, agrees to, and hereby does, indemnify and save harmless
DFWGP and its affiliates and its respective successors and assigns against and
from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation for
bringing about this Agreement or the transactions contemplated hereby made by
any broker, finder, consultant or like agent if such claim or claims made by any
such broker, finder, consultant or like agent are based in whole or in part on
any agreements entered into with AGH or its representatives for a commission or
other compensation.
ARTICLE 15
DEFINITIONS
-----------
15.1 Definitions. As used herein, the following terms shall have the
-----------
respective meanings indicated below:
Aggregate Purchase Price: As defined in Section 3.1.
------------------------
-36-
<PAGE>
AGH: As defined in the opening paragraph.
---
Assignments: As defined in Section 10.3.
-----------
Bank: As defined in Section 8.3.
----
CIP: As defined in Section 10.8.
---
Closing: As defined in Section 10.1.
-------
Closing Date: As defined in Section 10.1.
------------
Common Stock: As defined in the Recitals.
------------
Debt: As defined in Section 8.3.
----
Delaware Act: As defined in Section 3.3.
------------
Deposits: As defined in Article 2.
--------
DFWGP: As defined in the Recitals.
-----
DFWS: As defined in the Recitals.
----
Document Review Period: As defined in Section 5.2.
----------------------
Earnest Money: As defined in Section 1.2.
-------------
Easement: As defined in Section 9.2.
--------
Environmental Laws: As defined in Section 8.3.
------------------
Environmental Report: As defined in Section 8.3.
--------------------
Escrow Agent: As defined in Section 1.2.
------------
Escrow Agreement: As defined in Section 1.2.
----------------
Exchange Rights Agreement: As defined in Section 3.2.
-------------------------
Feasibility Review Period: As defined in Section 5.6.
-------------------------
FF&E: As defined in Article 2.
----
FF&E Leases: As defined in Article 2.
-----------
Formation Documents: As defined in Section 8.3.
-------------------
Guest Bookings: As defined in Article 2.
--------------
Hart Act: As defined in Section 8.3.
--------
-37-
<PAGE>
Hazardous Substance: As defined in Section 8.3.
-------------------
Hotel: As defined in Article 2.
-----
Improvements: As defined in Article 2.
------------
Inspections: As defined in Section 5.3.
-----------
Interest: As defined in Section 1.1.
--------
IPO: As defined in the Recitals.
---
Land: As defined in Article 2.
----
Lease and Leases: As defined in Article 2.
----------------
Licenses: As defined in Article 2.
--------
Limited Partners: As defined in the Recitals.
----------------
Lock-Up Agreement: As defined in Section 3.2.
-----------------
Note: As defined in Section 8.3.
----
Operating Agreements: As defined in Section 9.2.
--------------------
Other Contracts: As defined in the Recitals.
---------------
Other Personalty: As defined in Article 2.
----------------
Partnership: As defined in the opening paragraph.
-----------
Partnership Agreement: As defined in Section 3.1.
---------------------
Partnership Amendment: As defined in Section 3.1.
---------------------
Permitted Exceptions: As defined in Section 6.1.
--------------------
Personal Property: As defined in Article 2.
-----------------
Plans and Specs: As defined in Article 2.
---------------
Pledge Agreement: As defined in Section 13.1.
----------------
Prior Title: As defined in Section 4.1.
-----------
Purchase Price: As defined in Section 3.1.
--------------
Records: As defined in Article 2.
-------
Registration Statement: As defined in the Recitals.
----------------------
-38-
<PAGE>
Registration Rights Agreement: As defined in Section 3.2.
-----------------------------
REIT: As defined in the Recitals.
----
Revised Coverage: As defined in Section 4.1.
----------------
SEC: As defined in the Recitals.
---
Securities Act: As defined in Section 3.4.
--------------
Security Documents: As defined in Section 8.3.
------------------
Sellers: As defined in Section 2.1.
-------
Seller's Share: As defined in Section 10.8.
--------------
Service Contracts: As defined in Article 2.
-----------------
Shares: As defined in the Recitals.
------
Tenants: As defined in Section 8.3.
-------
Termination Date: As defined in Section 5.4.
----------------
Title Commitment: As defined in Section 4.1.
----------------
Title Company: As defined in Section 4.1.
-------------
Title Policy: As defined in Section 4.1.
------------
Tradenames: As defined in Article 2.
----------
UCC Searches: As defined in Section 4.2.
------------
Unit Sellers: As defined in Section 9.1.
------------
Units: As defined in the Recitals.
-----
Warranties: As defined in Article 2.
----------
ARTICLE 16
MISCELLANEOUS
-------------
16.1 Notice. Any notice provided for by this Agreement and any other
------
notice, demand or communication which any party may wish to send to another
shall be in writing and either delivered in person or sent by registered or
certified mail or overnight courier, return receipt requested, in a sealed
envelope, postage prepaid, and addressed to the party for which such notice,
demand or communication is intended at such party's address as set forth in this
Section. The address for AGH, the
-39-
<PAGE>
Partnership or the REIT for all purposes under this Agreement shall be the
following:
American General Hospitality, Inc.
3860 W. Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Bruce G. Wiles
with a copy to:
Battle Fowler, L.L.P.
75 East 55th Street
New York, New York 10022
Attention: Peter M. Fass, Esq.
DFWGP's address for all purposes under this Agreement shall be the following:
DFW South Acquisition Corporation
Williams Square, Suite 330
5215 North O'Connor Boulevard
Irving, Texas 75039
Attention:
with a copy to:
Bracewell & Patterson L.L.P.
Lincoln Plaza
500 N. Akard Street, Suite 4000
Dallas, Texas 75201
Attention: Thomas E. Davis, Esq.
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall
be deemed given and effective as of the date of delivery in person or receipt
set forth on the return receipt. The inability to deliver because of changed
address of which no notice was given, or rejection or other refusal to accept
any notice, demand or other communication, shall be deemed to be receipt of
notice, demand or other communication as of the date of such attempt to deliver
or rejection or refusal to accept.
16.2 Entire Agreement; Modifications and Waivers; Cumulative
-------------------------------------------------------
Remedies. This Agreement constitutes the entire agreement between the parties
- --------
hereto and may not be modified or amended except by instrument in writing signed
by the parties hereto, and no provisions or conditions may be waived other than
by a writing signed by the party waiving such provisions or conditions. No
delay or omission in the exercise of any right or remedy accruing to DFWGP, AGH
or Partnership upon any breach
-40-
<PAGE>
under this Agreement shall impair such right or remedy or be construed as a
waiver of any such breach theretofore or thereafter occurring. The waiver by
DFWGP, AGH or Partnership of any breach of any term, covenant or condition
herein stated shall not be deemed to be a waiver of any other breach, or of a
subsequent breach of the same or any other term, covenant or condition herein
contained. All rights, powers, options or remedies afforded to DFWGP, AGH or
Partnership either hereunder or by law shall be cumulative and not alternative,
and the exercise of one right, power, option or remedy shall not bar other
rights, powers, options or remedies allowed herein or by law, unless expressly
provided to the contrary herein.
16.3 Exhibits. All exhibits referred to in this Agreement and
--------
attached hereto are hereby incorporated in this Agreement by reference.
16.4 Successors and Assigns. Except as set forth in this Article,
----------------------
this Agreement may not be assigned by AGH or the Partnership without the prior
approval of DFWGP. This Agreement shall be binding upon, and inure to the
benefit of, DFWGP, AGH and the Partnership and their respective legal
representatives, successors, and permitted assigns. Whenever a reference is
made in this Agreement to AGH or the Partnership, it shall include their
respective successors and permitted assigns under this Agreement. Neither the
Partnership nor AGH may assign its rights under the Agreement without the prior
written consent of DFWGP, which consent shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, so long as AGH agrees to
remain liable under this Agreement, the Partnership or AGH may assign its rights
and obligations under this Agreement to an affiliate without DFWGP's prior
consent.
16.5 Article Headings. Article headings and article and section
----------------
numbers are inserted herein only as a matter of convenience and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
thereof and shall not be considered in interpreting or construing this
Agreement.
16.6 Governing Law. This Agreement shall be construed and
-------------
interpreted in accordance with the laws of the State of Texas.
16.7 Time Periods. If the final day of any time period or limitation
------------
set out in any provision of this Agreement falls on a Saturday, Sunday or legal
holiday under the laws of the State of Texas or the federal government, then and
in such event the time of such period shall be extended to the next day which is
not a Saturday, Sunday or legal holiday.
16.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on a
-41-
<PAGE>
separate counterpart, each of which when so executed and delivered shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument.
16.9 Survival. All covenants and agreements contained in the
--------
Agreement which contemplate performance after the Closing Date and all
representations, warranties and indemnities contained in this Agreement shall
expressly survive the Closing for a period of one (1) year, and shall not be
deemed to merge into, or be waived by, DFWGP or by any other closing documents.
16.10 Further Acts. In addition to the acts, deeds, instruments and
------------
agreements recited herein and contemplated to be performed, executed and
delivered by REIT, Partnership and DFWGP, REIT, Partnership and DFWGP shall
perform, execute and deliver or cause to be performed, executed and delivered at
the Closing or after the Closing, any and all further acts, deeds, instruments
and agreements and provide such further assurances as the other party or the
Title Company may reasonably require to consummate the transactions contemplated
hereunder. However, the foregoing shall not be deemed to (i) require DFWGP to
expend a sum of money which it could not reasonably have anticipated on the date
of execution of this Agreement, or (ii) require Partnership or REIT to expend a
sum of money which it could not reasonably have anticipated on the date of
execution of this Agreement.
16.11 Severability. In case any one or more of the provisions
------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
16.12 Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, or to recover damages for breach of
this Agreement the nonprevailing party in any action pursued in a court of
competent jurisdiction (the finality of which is not legally contested) agrees
to pay to the prevailing party all reasonable costs, damages, and expenses,
including attorneys' fees, expended or incurred in connection therewith.
-42-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into effective as
of the day and year first above written.
DFWGP:
DFW SOUTH ACQUISITION CORPORATION,
a Texas corporation
By: /s/ Thomas Corcoran, Jr.
----------------------------
Name: Thomas Corcoran, Jr.
--------------------------
TITLE: PRESIDENT
-------------------------
AGH:
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
By: /s/ Bruce G. Wiles
---------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
THE PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada Corporation,
General Partner
By: /s/ Bruce G. Wiles
---------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-43-
<PAGE>
SCHEDULE 1
The Purchase Price (prior to any adjustments pursuant to Article 10) shall
be adjusted and paid to DFWGP in Units as follows:
At the Closing, DFWGP shall receive a number of Units equal to (i) the
Purchase Price (subject to adjustment as set forth below), divided by (ii) the
mid-point of the proposed per Share offering prices (the "Mid-Point Price") set
forth in the final red herring included in the REIT's Registration Statement on
Form S-11 (the "Red Herring"). In the event that the initial yield per Share set
forth in the Red Herring (the "Initial Yield"; calculated by dividing the
estimated annual distribution per Share for the 12-month period following the
IPO, as set forth in the Red Herring by the Mid-Point Price) is a percentage
greater or less than 8.00%, then the Purchase Price shall decrease or increase
accordingly by an amount equal to the Applicable Percentage (as defined below)
times the resulting change in the value of the Partnership; provided, however,
in no event shall the Purchase Price be reduced by more than 7.5%. As used in
this Schedule 1, the "value of the Partnership" shall be determined by taking
the product of the "Pro Forma Cash Available for Distribution" as defined in the
Red Herring ("CAD") times the percentage of CAD (expresssed as a decimal
fraction) to be distributed to the partners in the Partnership or the
shareholders in the REIT (as the case may be) as et forth in the Red Herring,
and dividing that product by the Initial Yield. While the Purchase Price may
never be reduced by more than 7.5%, there shall be no cap on increases in the
Purchase Price as a result of any positive pricing adjustment described in this
Schedule 1. For purposes of the Agreement, "Applicable Percentage" shall mean
the fraction (expressed as a decimal fraction), the numerator of which is the
percentage interest being conveyed under this Agreement for Units times and sum
of the Aggregate Purchase Price and the value of the Debt and the denominator of
which is the value of the total portfolio of hotel assets acquired by the
Partnership upon the consummation of the IPO as determined in good faith by the
REIT.
<PAGE>
May 1, 1996
DFW South Acquisition Corporation
Williams Square, Suite 330
5215 North O'Connor Boulevard
Irving, Texas 75039
Attention: Thomas J. Corcoran, Jr.
Re: DFW South Holiday Inn
----------------------
Gentlemen:
Reference is hereby made to the Contribution Agreement (the "Agreement")
made as of April 26, 1996 by and among DFW South Acquisition Corporation, a
Texas corporation ("DFWGP"), AMERICAN GENERAL HOSPITALITY, INC., a Texas
corporation ("AGH") and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "Partnership"). Capitalized terms not
otherwise defined in this letter agreement shall have the meanings ascribed to
them in the Agreement. This will evidence and confirm certain further
understandings and agreements between Grantor and Grantee with respect to the
Agreement as follows:
1. The first paragraph of Section 3.1 of the Agreement shall be restarted
and amended in its entirety:
3.1 Purchase Price. The aggregate purchase price for all the Interests
--------------
shall be $25,132,000 ("Aggregate Purchase Price"). The Aggregate Purchase
Price less the original principal amount of the Debt is $10,882,000 ("Net
Aggregate Purchase Price"). The purchase price ("Purchase Price") to be
received by DFWGP in respect of the contribution of DFWGP's Interest shall
be determined by applying the applicable provisions of the Amended and
Restated Agreement of Limited Partnership of DFWS dated May 1, 1992 to
the proceeds of the sale of all the Interests based upon
<PAGE>
the Net Aggregate Purchase Price. Thirty (30%) percent of the Purchase
Price as adjusted pursuant to Article 10 shall be paid to DFWGP at Closing
by wire transfer. Seventy (70%) percent of the Purchase Price (the "Unit
----
Component of the Purchase Price") as adjusted pursuant to Article 10 and as
-------------------------------
set forth below shall be paid to DFWGP at the Closing in Units. The Unit
Component of the Purchase Price shall be adjusted and the total number of
Units to be delivered to DFWGP shall be determined in accordance with
Schedule I annexed hereto. The parties agree that the Purchase Price (after
adjustment pursuant to Schedule 1, but before any adjustment pursuant to
Article 10) will be allocated 5% to the Land, 90% to the Improvements and
5% to the Personal Property.
2. Schedule 1 of the Agreement shall be deemed deleted and substituted by
Schedule 1 annexed hereto.
3. All terms, covenants and conditions of the Agreement, except as
specifically amended in this letter agreement, are hereby ratified and
confirmed in all respects by DFWGP, AGH and Partnership.
4. The terms and provisions of this letter agreement may not be amended,
modified or terminated, except by an agreement in writing signed by the parties
hereto. The provisions of this letter agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
<PAGE>
Please acknowledge your agreement to the terms and provisions of this letter
agreement by signing where indicated below and returning this letter agreement
to the undersigned.
Sincerely yours,
AMERICAN GENERAL, HOSPITALITY, INC.
a Texas certification
By: /s/ BRUCE G. WILES
--------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
a Delaware limited partnership
By: AGH GP, Inc., a Nevada Corporation
General Partner
By: /s/ BRUCE G. WILES
--------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
Accepted and Agreed:
DFW SOUTH ACQUISITION CORPORATION,
a Texas Corporation
/s/ THOMAS J. CORCORON
- ----------------------------------
By: Thomas J. Corcoron
Name: Thomas J. Corcoron
Title: President
<PAGE>
Schedule 1
----------
The Purchase Price (prior to any adjustments pursuant to Article 10) shall
be adjusted and paid to DFWGP in Units as follows:
At the Closing, DFWGP shall receive a number of Units equal to (i) the Purchase
Price (subject to adjustment as set forth below), divided by (ii) the mid-point
of the proposed per Share offering prices (the "Mid-Point Price") set forth in
the final red herring included in the REIT's Registration Statement on Form S-11
(the "Red Herring"). In the event that the initial yield per Share set forth in
the Red Herring (the "Initial Yield"; calculated by dividing the estimated
annual distribution per Share for the 12-month period following the IPO, as set
forth in the Red Herring by the Mid-Point Price) is a percentage greater or less
than 8.00%, then the Purchase Price shall decrease or increase accordingly by an
amount equal to the Applicable Percentage (as defined below) times the resulting
change in the value of the Partnership; provided, however, in no event shall the
Purchase Price be reduced by more than 7.5%. As used in this Schedule 1, the
"value of the Partnership" shall be determined by taking the product of the "Pro
Forma Cash Available for Distribution" as defined in the Red Herring ("CAD")
times the percentage of CAD (expressed as a decimal fraction) to be distributed
to the partners in the Partnership or the shareholders in the REIT (as the case
may be) as set forth in the Red Herring, and dividing that product by the
Initial Yield. While the Purchase Price may never be reduced by more than 7.5%,
there shall be no cap on increases in the Purchase Price as a result of any
positive pricing adjustment described in this Schedule 1. For purposes of the
Agreement, "Applicable Percentage" shall mean the fraction (expressed as a
decimal fraction), the numerator of which is the percentage interest being
conveyed under this Agreement for Units times the sum of the Aggregate Purchase
Price and the value of the Debt and the denominator of which is the value of the
total portfolio of hotel assets acquired by the Partnership upon the
consummation of the IPO as determined in good faith by the REIT.
-iv-
<PAGE>
Exhibit 10.23
CONTRIBUTION AGREEMENT
among
THE CONTRIBUTORS:
Virtual Hospitality, Inc.
Jackson-Shaw Partners No. 51, Ltd.
3005 Hotel Associates, Ltd.
3100 Hotel Associates, L.P.
3860 Investors Joint Venture
Steven D. Jorns
Jim Sowell Construction Co., Inc.
James E. Sowell
Lewis W. Shaw II
Kenneth W. Shaw
Monica Jorns
Bruce G. Wiles
282 Almaden Hotel Associates, L.P.
THE OP:
American General Hospitality Operating Partnership, L.P.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS............................................................................. 2
1.1 Definitions....................................................................... 2
1.2..................................................................................... 6
ARTICLE 2
CONTRIBUTIONS AND CONVEYANCES........................................................... 6
2.1 Contribution...................................................................... 6
ARTICLE 3
CONSIDERATION........................................................................... 7
3.1 Calculation and Payment of Consideration.......................................... 7
3.2 Lock-Up Agreement................................................................. 7
3.3 Other Agreement................................................................... 7
ARTICLE 4
COVENANTS, REPRESENTATIONS AND WARRANTIES............................................... 7
4.1 Covenants, Representations and Warranties......................................... 7
4.2 Additional Representations of Certain Contributors................................ 13
4.3 Covenants, Representations and Warranties of the OP............................... 14
ARTICLE 5
CLOSING AND TITLE MATTERS............................................................... 16
5.1 Closing........................................................................... 16
5.2 Escrow............................................................................ 16
5.3 Title Commitment, Searches and Policies........................................... 16
ARTICLE 6
CLOSING DELIVERIES...................................................................... 17
6.1 Contributors' Documents........................................................... 17
6.2 OP's Deliveries................................................................... 19
6.3 Amendment of Partnership's Formation Documents.................................... 20
6.4 Concurrent Transactions........................................................... 20
6.5 Further Assurances................................................................ 21
ARTICLE 7
APPORTIONMENTS.......................................................................... 21
7.1 Apportionments.................................................................... 21
7.2 Reconciliation.................................................................... 23
7.3 Other Costs....................................................................... 23
7.4 Estimate and Final Reconciliation................................................. 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 8 Page
<S> <C> <C>
CONDITIONS TO CLOSING.................................................................... 24
8.1 Contributor's Conditions Precedent................................................ 24
8.2 Conditions to the OP's and REIT's Obligations..................................... 25
8.3 OP Rights......................................................................... 26
ARTICLE 9
ACTIONS AND OPERATIONS PENDING CLOSING................................................... 27
9.1 Actions and Operations of the Interest Contributors and the Partnerships
Pending Closing................................................................... 27
9.2 Licenses.......................................................................... 28
9.3 Contract.......................................................................... 28
9.4 Right of Entry.................................................................... 29
ARTICLE 10
DAMAGE OR DESTRUCTION; CONDEMNATION; INSURANCE........................................... 29
10.1 Termination of Agreement.......................................................... 29
10.2 No Termination of Agreement....................................................... 29
ARTICLE 11
LIABILITIES; ASSIGNMENT AND
ASSUMPTION OF CERTAIN OBLIGATIONS........................................................ 30
11.1 Assumption of Liabilities by the OP............................................... 30
ARTICLE 12
INDEMNITIES.............................................................................. 30
12.1 The OP's Indemnity................................................................ 30
12.2 Limitation on Liability........................................................... 31
12.3 Contributors' Indemnity........................................................... 31
12.4 Notice of Claims.................................................................. 31
ARTICLE 13
NOTICES.................................................................................. 32
13.1 Notices........................................................................... 32
ARTICLE 14
POWER OF ATTORNEY........................................................................ 32
14.1 Grant of Power of Attorney........................................................ 32
14.2 Limitation on Liability........................................................... 34
14.3 Ratification; Third Party Reliance................................................ 34
ARTICLE 15
MISCELLANEOUS............................................................................ 34
15.1 Expenses.......................................................................... 34
15.2 Brokerage......................................................................... 34
15.3 Books and Records................................................................. 35
15.4 Hart-Scott-Rodino Act............................................................. 35
15.5 Survival.......................................................................... 35
15.6 The OP's Investigation and Inspections............................................ 35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
15.7 Construction.................................................................... 36
15.8 General......................................................................... 36
15.9 Headings........................................................................ 36
15.10 Governing Law; Parties at Interest.............................................. 36
15.11 Computation of Time............................................................. 36
15.12 Time of the Essence............................................................. 36
15.13 Counterparts.................................................................... 36
15.14 Mutual Waivers, Consents and Acknowledgments.................................... 37
</TABLE>
EXHIBITS
Exhibit A Form of Lock-Up Agreement
Exhibit B Form of Partnership Agreement
Exhibit C Form of Exchange Rights Agreement
Exhibit D Form of Registration Rights Agreement
SCHEDULES
Schedule 1 Contributors and their Addresses
Schedule 2 Hotels, Partnerships and Partnership Interests of Contributors and
Other Partners and Other Contributors
Schedule 3 Contract Hotel
Schedule 4 [deleted]
Schedule 5 Allocation and Valuation of Units
Schedule 6 Other Hotels
The exhibits and/or schedules of Exhibit 10.23, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT dated the ____ day of ________, 1996 among
Virtual Hospitality, Inc., Jackson-Shaw Partners No. 51, Ltd., 3005 Hotel
Associates, Ltd., 3100 Hotel Associates, L.P., Steven D. Jorns, Jim Sowell
Construction Co., Inc., James E. Sowell, Lewis W. Shaw, II, Kenneth W. Shaw,
Monica Jorns, Bruce G. Wiles, 3860 Investors Joint Venture, and 282 Almaden
Hotel Associates, L.P. each having the address stated on Schedule 1
(collectively, the "Contributors"), and AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership having an address at 3860 West
Northwest Highway, Dallas, Texas, 75220 (the "OP").
R E C I T A L S:
- - - - - - - -
A. The Contributors own or expect to acquire Partnership Interests
in Partnerships which own certain Hotels or hold the Contract to acquire the
Contract Hotel (such terms and all other capitalized terms used in these
Recitals and not otherwise defined shall have the meanings ascribed to such
terms in Article 1 of this Agreement).
B. The sole general partner of the OP is a wholly-owned subsidiary
of American General Hospitality Corporation (the "REIT"), a corporation
organized under the laws of the State of Maryland which intends to qualify as a
real estate investment trust. The REIT intends to file with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-11 (as amended
from time to time through the date of closing, the "Registration Statement" or
"S-11") relating to an underwritten initial public offering (the "Offering" or
the "IPO") of shares of the REIT's common stock, par value $.01 per share
("Shares").
C. The Contributors intend to contribute their Partnership Interests
in the Partnerships and the Contract, all as more particularly described
hereafter, to the OP in exchange for units of limited partnership interests in
the OP ("Units"), as hereinafter set forth in this Agreement.
<PAGE>
A G R E E M E N T S
- - - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, all of the parties
to this Agreement hereby agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 DEFINITIONS. As used herein, the following terms shall have the
-----------
respective meanings indicated below:
ACT: The Tax Reform Act of 1984 and the regulations promulgated
---
thereunder that are imposed by FIRPTA.
AGREEMENT: This Contribution Agreement, including the Schedules and
---------
Exhibits attached hereto and incorporated herein, as this Contribution Agreement
may be modified from time to time.
ACQUIRED HOTELS: The Hotels and the Contract Hotel acquired directly
---------------
or indirectly by the OP at the Closing.
ACQUIRED HOTEL OWNERS: Each entity (whether a Partnership, the OP
---------------------
itself or any other affiliate) which owns an Acquired Hotel immediately after
the Closing.
AGH: American General Hospitality, Inc., an affiliate of the
---
Contributors.
ASSETS: Collectively, the Partnership Interests and the Contract.
------
ASSIGNMENTS: As defined in Section 6.1.A.
-----------
CLOSING: As defined in Section 5.1 hereof.
-------
CLOSING DATE: As defined in Section 5.1 hereof.
------------
CODE: The Internal Revenue Code of 1986, as amended from time to
----
time.
CONTRACT: The contract of sale held by the Contract Contributor to
--------
acquire the Contract Hotel, as described on Schedule 3.
-2-
<PAGE>
CONTRACT CONTRIBUTOR: 282 Almaden Hotel Associates, L.P., the
--------------------
Contributor holding the Contract as described on Schedule 3.
CONTRACT HOTEL: The hotel property described on Schedule 3 hereto
--------------
which the Contract Contributor holds a Contract to acquire.
CONTRIBUTION VALUE: As defined in Section 3.1 hereof.
------------------
CONTRIBUTOR ENTITY: As defined in Section 4.1.A.
------------------
CONTRIBUTORS: As defined in the recitals to the Agreement (and
------------
including the Interest Contributors and the Contract Contributor).
DELAWARE ACT: As defined in Section 4.3.
------------
DFW SOUTH CONTRIBUTION AGREEMENT: The Other Contribution Agreements
--------------------------------
to be entered into between the OP and the Other Contributors holding Partnership
Interests in the DFW South Hotel shown on Schedule 2.
ENCUMBRANCES: Any voting agreement, option, charge, security
------------
interest, pledge, mortgage, deed of trust, encumbrance, right of assignment,
purchase right, lien, claim or restriction of any kind.
ENDORSEMENTS: As defined in Section 5.3.
------------
EXCHANGE RIGHTS AGREEMENT: The Exchange Rights Agreement,
-------------------------
substantially in the form of Exhibit C hereto, to be entered into at or prior to
Closing by the REIT and each Contributor.
FIRPTA: The Foreign Investment in Real Property Tax Act.
------
FIRPTA CERTIFICATE: As defined in Section 6.1.B hereof.
------------------
FORMATION DOCUMENTS: As defined in Section 4.1.A.4.
-------------------
FORMATION TRANSACTIONS: As defined in the Registration Statement.
----------------------
HART ACT: As defined in Section 15.4 hereof.
--------
HOTEL OR HOTELS: The hotel properties identified on Schedule 2.
---------------
INDEMNITOR: As defined in Section 4.2 hereof.
----------
-3-
<PAGE>
INTEREST CONTRIBUTORS: The Contributors contributing Partnership
---------------------
Interests in the Partnerships as shown on Schedule 2.
IPO: As defined in the recitals to this Agreement.
---
IPO PERIOD: The period ending on October 31, 1996.
----------
LICENSES: means licenses, permits, franchises, certificates of
--------
occupancy, and similar documents issued by any federal, state, or municipal
authority or by any private party, including without limitation the liquor
license and the franchise or license agreement permitting the operation of any
restaurant at the Hotel, if any;
LOCK-UP AGREEMENT: The Lock-Up Agreement to be executed at Closing
-----------------
substantially in the form attached as Exhibit A to this Agreement among the OP,
each Contributor and others.
OPTION AGREEMENTS: The option agreements to be entered into at or
-----------------
prior to Closing between the OP and certain Contributors as shown on Schedule 4
as described in the Registration Statement.
OP PARTNERSHIP AGREEMENT: The Agreement of Limited Partnership of the
------------------------
OP in the form attached as an exhibit to the Registration Statement.
OP PARTNERSHIP AMENDMENT: As defined in Section 6.2.E.
------------------------
OTHER CONTRIBUTORS: Certain persons or entities other than the
------------------
Contributors holding Partnership Interests in the Partnerships as shown on
Schedule 2 and which Partnership Interests will be acquired by the OP (or its
Affiliate) at Closing.
OTHER CONTRIBUTION AGREEMENTS: The agreements executed or to be
-----------------------------
executed between the OP and certain Other Contributors pursuant to which the OP
will acquire the Partnership Interests of the Other Contributors in the
Partnerships at Closing.
OTHER HOTELS: The hotels identified on Schedule 6 which the OP or an
------------
affiliate will acquire at Closing in addition to the Hotels and the Contract
Hotel.
PARTNERSHIP INTEREST: All of a person's or entity's right, title and
--------------------
interest in a Partnership, including his or its right, title and interest in
capital profits and distributions.
PARTNERSHIPS: The general or limited partnerships, which hold fee
------------
title to or a leasehold interest in the Hotels, as described on Schedule 2, each
of which may be individually referred to as a Partnership.
-4-
<PAGE>
PERMITTED EXCEPTIONS: As defined in Section 5.3.
--------------------
PERSON: An individual, corporation, partnership, association,
------
joint-stock company, trust unincorporated organization, joint venture or other
entity or a governmental authority.
RECORDS: All books and records maintained by each Partnership and its
-------
agents or affiliates relating to receipts and expenditures pertaining to each
Affiliated Hotel for the three (3) most recent full calendar years and the
current calendar year, as well as all other promotional material, tenant data,
marketing and leasing material and forms, market studies, keys and other
materials in possession or control of each Partnership.
RED HERRING: The final preliminary prospectus attached as part of the
-----------
Registration Statement.
REGISTRATION RIGHTS AGREEMENT: The Registration Rights Agreement
-----------------------------
substantially in the form attached as Exhibit D hereto to be entered into at or
prior to Closing by the REIT, each Contributor and certain other parties.
REGISTRATION STATEMENT: As defined in the Recitals hereto.
----------------------
REIT DOCUMENTS: All documents evidencing or to be entered into in
--------------
connection with the transfer to the OP or an affiliate of the Assets, including,
but not limited to, the Assignments, the Supplemental Representations and
Warranties Agreement and this Contribution Agreement.
S-11: As defined in the Recitals hereto.
----
SEARCHES: As defined in Section 5.3.
--------
SECURITIES ACT: Securities Act of 1933, as amended.
--------------
SELLER: The persons or entities identified on Schedule 3 which are
------
the sellers under the Contract.
SMITH BARNEY: Smith, Barney, Inc., the representative of the
------------
underwriters in connection with the IPO.
SHARES: As defined in the recitals to this Agreement.
------
SUBSCHEDULE OR SUBSCHEDULE(S): As defined in Section 4.1.A.
-----------------------------
SUPPLEMENTAL REPRESENTATIONS AND WARRANTIES AGREEMENT: That certain
-----------------------------------------------------
Supplemental Representations and Warranties Agreement entered into, or to be
entered into, among the Indemnitors in favor of the REIT and the OP, as the same
may be
-5-
<PAGE>
modified from time to time and any pledge agreements entered into to secure the
obligations under such Agreement.
TITLE COMMITMENT: As defined in Section 5.3 hereof.
----------------
TITLE COMPANY: Chicago Title Insurance Company or any other title
-------------
insurer selected by the OP.
TITLE DOCUMENTS: As defined in Section 5.3.
---------------
TITLE POLICIES: The policies of title insurance to be issued in
--------------
accordance with Section 5.3 hereof.
UCC SEARCHES: As defined in Section 5.3.
------------
UNDERWRITING AGREEMENT: The Agreements for the purchase of the Shares
----------------------
of the REIT, as more particularly described in the Registration Statement.
UNITS: As defined in the recitals to this Agreement.
-----
1.2 Except as otherwise specifically indicated, all references to
Section and Subsection numbers refer to Sections and Subsections of this
Agreement, all references to Exhibits refer to the Exhibits attached hereto.
The words "hereby," "hereof," "herein," "hereto," "hereunder," "hereinafter,"
and words of similar import refer to this Agreement as a whole and not to any
particular Section or Subsection hereof. The word "hereafter" shall mean after,
and the term "heretofore" shall mean before, the date of this Agreement. The
word "including" shall mean "including, without limitation". Captions used
herein are for convenience only and shall not be used to construe the meaning of
any part of this Agreement.
ARTICLE 2
CONTRIBUTIONS AND CONVEYANCES
-----------------------------
2.1 CONTRIBUTIONS. Subject to the terms and conditions contained in
-------------
this Agreement, at the Closing, the Contributors shall contribute, assign and
transfer to the OP or its designee, and the OP or its designee shall accept as a
contribution to capital from such Contributors, all of their right, title and
interest in and to their Partnership Interests and the Contract, pursuant to
valid Assignments, free and clear of all Encumbrances on such Partnership
Interests or Contract.
-6-
<PAGE>
ARTICLE 3
CONSIDERATION
-------------
3.1 CALCULATION AND PAYMENT OF CONSIDERATION. In consideration of
----------------------------------------
the contributions, assignments and transfers to be made by the Contributors
pursuant to Article 2 hereof, the OP agrees to pay to or for the benefit of 3100
Hotel Associates, L.P., in accordance herewith the amount of cash required by
Section 4.1.A.2(a) in the Toledo transaction and otherwise to pay to the
Contributors an amount of Units calculated in accordance with Schedule 5 hereof
(the "Contribution Value"). The OP will allocate the Units among the
Contributors as directed by the Contributors prior to Closing.
3.2 LOCK-UP AGREEMENT. The Units to be issued to the Contributors
-----------------
hereunder shall be subject to a Lock-Up Agreement to be executed at Closing by
the OP, Smith Barney, Inc. and each of the Contributors, whereby no Contributor
will be permitted to transfer Units received hereunder for one year after
Closing, except as otherwise permitted under such agreement (and which permitted
transfers shall include distribution by Contributor Entities to its partners as
described in Section 4.1.C.4(g).
3.3 OTHER AGREEMENTS. At or prior to Closing, in addition to those
----------------
other agreements listed in Section 6.2 hereof and in the Registration Statement
to be executed by certain Contributors or their affiliates, the REIT,
Contributors and the other parties thereto shall enter into the Registration
Rights Agreement and Exchange Rights Agreement.
ARTICLE 4
COVENANTS, REPRESENTATIONS AND WARRANTIES
-----------------------------------------
4.1 COVENANTS, REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS. To
---------------------------------------------------------
induce the OP to execute, deliver and perform this Agreement, each of the
Contributors, for himself, herself, or itself and not with respect to any other
Contributor, covenants, represents and warrants to the OP as set forth below.
Further, the representations made with respect to each Partnership (and the
Hotel owned or leased by such Partnership) are deemed to be made only by those
Contributors which are the general partners in such Partnership. Unless a
Contributor notifies the OP in writing that any of the following have changed,
each Contributor also covenants, represents and warrants as set forth below as
of the Closing or earlier establishment of an escrow pursuant to Section 5.2.
-7-
<PAGE>
A. PARTNERSHIPS.
------------
1. Schedule 2 sets forth a true and correct identification of
each Hotel, the name of the Partnership which owns or ground leases such Hotel
(or, in the case of Toledo, will ground lease such Hotel prior to Closing), each
Contributor's Partnership Interests in each Partnership, as well as the identity
of any Other Contributors and their respective Partnership Interests. Where the
Contributor is an entity ("Contributor Entity"), Schedule 2 also identifies the
person or entities owning the stock or partnership interests therein.
2. The Contributors and Other Contributors listed on Schedule 2
are the only individuals and entities which have any interest in or right to
receive the profits and distributions of the Partnerships. Prior to or at
Closing (which may be immediately prior to the execution and delivery of the
Assignments) the following shall occur:
(a) With respect to Toledo, 3100 Hotel Associates, L.P.
("3100"), the Contributor which holds a Partnership Interest in the Toledo
Partnership (as shown on Schedule 2), will exercise its right to buy out the
Other Contributor in such Partnership pursuant to the Formation Documents for
Toledo (the cash purchase price for which shall be paid by the OP) and direct
the Other Contributor to assign its Partnership Interest directly to the OP or
its designee.
(b) With respect to the Contributor Entities identified on
Schedule 2 as 3005 Hotel Associates, Ltd. ("3005") (a partner in 183 Hotel
Associates, Ltd. ("183")) and 3100 (a partner in 3100 Glendale Joint Venture
("3100 Glendale")), American General Hospitality, Inc. Retirement Savings Plan
(the "Plan") will withdraw from 3005 and 3100 (having exercised its conversion
right with respect to 3100 as described on Schedule 2) and in consideration
thereof, 3005 and 3100 will each assign to the Plan, that portion of their
Partnership Interests in 183 and 3100 Glendale respectively equal to the
interest that the Plan had (on a look-through basis) in 183 and 3100 (assuming
it exercised its conversion right), thus reducing 3005's and 3100's Partnership
Interests in 183 and 3100 Glendale. The Plan would thus become an Other
Contributor with respect to each of such Partnerships.
(c) Further, with respect to 3005, Devlo, Inc. will
withdraw from 3005 and, in consideration thereof, 3005 will assign to Devlo,
Inc. that portion of its Partnership Interest in 183 equal to the interest
Devlo, Inc. had (on a look-through basis) in 183, thus further reducing 3005's
Partnership Interest in 183. Devlo, Inc. will thus become an Other Contributor
with respect to 183.
-8-
<PAGE>
At Closing, if requested by the OP, the Contributors shall certify to the OP, to
their knowledge, the aggregate Partnership Interests held by the Contributors
(and Other Contributors) in each Partnership. It is intended that upon
consummation of the assignments contemplated by this Agreement and the
assignments from the Other Contributors identified on Schedule 2, the OP (or its
designee) will acquire good and valid title to 100% of the legal and beneficial
interests in the Partnerships.
3. Each Contributor is the lawful owner of legal and beneficial
title to its respective Partnership Interest(s) as set forth on Schedule 2, and
will have on the Closing Date, good and valid title to such Partnership
Interests (as such may be reduced in the case of 3005 and 3100 as described
above) and on the Closing Date all such Partnership Interests will be free and
clear of all Encumbrances.
4. Each Partnership is a duly formed, validly existing general
or limited partnership in good standing under the laws of the state of its
organization (and qualified to do business in the State where the respective
Hotel is located if other than the State of its organization), with full power
and authority to own and operate its Hotel. The following subschedules to
Schedule 2 (each a "Subschedule" and collectively the "Subschedules") identifies
each and every document pursuant to which the respective Partnership is
organized and governed, including all certificates of partnership and agreements
of partnership (including all amendments thereto) (collectively, "Formation
Documents"). All Formation Documents are in full force and effect. True and
complete copies of all Formation Documents have been delivered to the OP:
Schedule 2.1 DFW South
Schedule 2.2 DFW West
Schedule 2.3 Secaucus
Schedule 2.4 Richmond Airport
Schedule 2.5 Toledo
Schedule 2.6 Maison de Ville
B. CONTRACTS.
---------
Schedule 3 identifies the Contract Hotel, sets forth a true and
correct description of the Contract for such Contract Hotel, and the identity of
the Seller and the Contract Contributor. The Contract Contributor has good and
valid title to the Contract, and has not pledged, assigned or otherwise
encumbered the Contract. Schedule 3 identifies any consents required from
Seller to assign the Contract. To the extent the Sellers' consent is required
to assign the Contract, the Contract Contributor will use best efforts to obtain
such consent. At Closing, upon consummation of the assignments contemplated by
this Agreement, the OP (or its designee) will hold the Contract,
-9-
<PAGE>
free and clear of any Encumbrances. A copy of each Contract has been provided to
the OP. The Contract is in full force and effect and has not been modified or
amended (except as shown on Schedule 3). No party is known to be in default
under the Contract and the Contract Contributor has not waived any of its rights
under the Contract (though most review and approval periods have expired).
C. CONTRIBUTORS.
------------
1. Each Contributor that is a Contributor Entity is duly
organized, validly existing and in good standing under the laws of the State of
its organization, and each has full right, power and authority to enter into
this Agreement and to assume and perform all of its obligations under this
Agreement; and the execution and delivery of this Agreement and the performance
by each of such Contributors of its obligations under this Agreement requires no
further action or approval of such Contributor's partners, members,
shareholders, directors, or officers, or of any other individuals or entities,
in order to constitute this Agreement a binding and enforceable obligation of
such Contributor. Except for the filing of any requisite pre-merger notification
report under the Hart Act, and except as shown on the applicable Subschedule for
each Hotel and Partnership or on Schedule 3 as to the Contract Hotel, and except
for consents required from the Other Contributors, each Contributor has obtained
each and every consent, approval, permit or order of, and has made each and
every filing with, any individual, partnership, corporation, trust or other
entity, government agency or political subdivision known to be required to be
obtained or made in connection with: (A) its execution, delivery and performance
of this Agreement and (B) its consummation of the transactions contemplated
hereby. This Agreement is the legal, valid and binding obligation of each
Contributor, enforceable in accordance with its terms.
2. Neither the entry into nor the performance of, or compliance
with, this Agreement by any Contributor has resulted, or will result, in any
violation of, or default under, or result in the acceleration of, any
obligation under the organization documents of any Contributor Entity, or any
existing mortgage indenture, note, contract, permit, judgment, decree, order,
restrictive covenant, statute, rule or regulation applicable to the Contributor
or the Partnership or the Hotel, except as shown on the applicable Subschedule
for each Hotel and which violations or defaults can be cured by Closing.
3. No Contributor (and no Partnership) (i) is in receivership
or dissolution, (ii) has made a currently effective general assignment for the
benefit of creditors or is currently subject to a written admission of its
inability to pay its debts as they mature, or (iii) is currently an adjudicated
bankrupt or currently has on file a petition in voluntary bankruptcy or a
-10-
<PAGE>
petition or answer seeking reorganization or an arrangement with creditors under
the Federal bankruptcy law or any other similar law or statute of the United
States or any jurisdiction and no such petition is currently on file against any
Contributor or any Partnership.
4. (a) Each Contributor has received and reviewed a copy of
the draft Registration Statement and draft financial statement for the REIT, and
understands the risks of, and other considerations relating to, an investment in
Units. Each Contributor, by reason of its business and financial experience,
together with the business and financial experience of those persons, if any,
retained by it to represent or advise it with respect to its investment in
Units, (A) has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that it is
capable of evaluating the merits and risks of and of making an informed
investment decision with respect to an investment in Units, (B) is capable of
protecting its own interests or has engaged representatives or advisors to
assist it in protecting its interests and (C) is capable of bearing the economic
risk of such investment including the loss of its entire investment. Each
Contributor is an "accredited investor" as defined in Rule 501 of the
regulations promulgated under the Securities Act. If any Contributor has
retained or retains a person to represent or advise it with respect to its
investment in Units, each such Contributor will advise the OP, of such retention
and, at the request of the issuer of such securities, each Contributor shall,
prior to or at the Closing, (X) acknowledge in writing such representation and
(Y) cause such representative or advisor to deliver a certificate to the OP, as
the case may be, with respect to such representation, in the form reasonably
requested by the OP.
(b) Each Contributor understands that an investment in the
OP involves substantial risks. Each Contributor has been given the opportunity
to make a thorough investigation of the proposed activities of the OP, and has
been furnished with materials relating to the OP and its proposed activities,
including, without limitation, the draft Registration Statement. Each has been
afforded the opportunity to obtain any additional information requested by it.
Each had an opportunity to ask questions of and receive answers from
representatives of the OP concerning the OP, and its proposed activities and the
terms and conditions of an investment in Units. Each Contributor has relied and
is making its investment decision based upon the draft Registration Statement.
(c) The Units to be issued to each Contributor at the
Closing will be acquired by such Contributor for its own account, for investment
only and not with a view to, or with any intention of, a resale thereof, in
whole or in part, or the grant of any participation therein (except for
-11-
<PAGE>
distributions to partners in accordance with paragraph (g) below). None of the
Contributors was formed for the specific purpose of acquiring an interest in the
OP.
(d) Each Contributor acknowledges that (A) the Units to be
issued to such Contributor at the Closing have not been registered under the
Securities Act or state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and applicable state
securities laws and, if such Units are represented by certificates, such
certificates will bear a legend to such effect, (B) the OP's reliance on such
exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Contributor contained herein, (C) the
Units to be issued to such Contributor at the Closing may not be resold or
otherwise distributed unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from registration is available,
(D) there is no public market for such Units, and (E) the OP has no obligation
or intention to register such Units under the Securities Act or any state
securities laws or to take any action that would make available any exemption
from the registration requirements of such laws, except as provided in the
Exchange Rights Agreement and the Registration Rights Agreement. Each
Contributor hereby acknowledges that because of the restrictions on transfer or
assignment of such Units to be issued hereunder which will be set forth in the
OP Partnership Agreement, the certificates and/or in the Lock-Up Agreement, each
Contributor may have to bear the economic risk of any securities issued pursuant
to the investment commitment contained in this Agreement for an indefinite
period of time, although (x) under the terms of the OP Partnership Agreement, as
it will be in effect at the time of the IPO, Units will be exchangeable at the
request of the holder thereof at any time after the first anniversary of their
issuance for cash or, at the option of the REIT for shares and (y) the holder of
any such Shares issued pursuant to such exchange will be afforded certain rights
to have such Shares registered under the Securities Act and applicable state
securities laws pursuant to the Registration Rights Agreement.
(e) The address set forth after each Contributor's name on
Schedule 1 hereto is the address of the Contributor's principal place of
business or, if a natural person, the address of the Contributor's residence,
and each Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business or residence is presently located.
(f) The Units are being acquired for each Contributor's
investment and not for resale to others. Each Contributor agrees that it will
not sell or otherwise transfer the Units unless they are registered under the
Securities Act or
-12-
<PAGE>
unless an exemption from such registration is available. Each Contributor
represents that it has adequate means of providing for its current needs and
possible contingencies, and that it has no need for liquidity of the investment.
(g) Each Contributor Entity further agrees that it will not
distribute its Units or any fraction thereof to any of its partners or
shareholders whether voluntarily or by operation of law or at judicial sale or
otherwise, unless such person makes the representations and warranties to the OP
set forth in this Section 4.1.C.4 and similarly agrees not to distribute such
Units or fraction thereof to any person who does not similarly represent,
warrant and agree.
(h) It is understood that all documents, records and books
pertaining to the investment have been made available for inspection by the
Contributor's attorney or the Contributor's accountant or the Contributor's
offeree representative and the Contributors, and that the books and records of
the OP will be available upon reasonable notice, for inspection by each
Contributor at reasonable hours at its principle place of business.
D. LIMITED SURVIVAL. It is a condition to the Closing hereunder
----------------
that the representations and warranties of the Contributors set forth in this
Section 4.1 shall be true and correct on the Closing Date and remedies with
respect thereto shall survive the Closing for a period of one (1) year from the
date of the Closing, and shall expire at such time, except for claims asserted
by written notice given by or on behalf of the OP at any time during the one
year period to any Contributor or Contributors alleged to have breached any
representation or warranty. Covenants shall survive Closing for a period of one
(1) year.
E. SCHEDULES. To the extent any of the Schedules or Subschedules
---------
referred to in this Section 4.1, or portions thereof, are unavailable at the
time of execution of this agreement, they shall be provided, to the OP's
reasonable satisfaction, prior to the Red Herring.
4.2 ADDITIONAL REPRESENTATIONS OF CERTAIN CONTRIBUTORS. At Closing,
--------------------------------------------------
certain of the Contributors (as agreed to among the Contributors and Smith
Barney) (each, an "Indemnitor" and collectively, the "Indemnitors") shall enter
into the Supplemental Representations and Warranties Agreement on terms mutually
acceptable to the Indemnitors and the OP in which the Indemnitors will make
current knowledge representations, warranties and covenants with respect to
matters relating to the Partnerships, the Hotels and certain other matters which
will survive Closing to the extent set forth therein.
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4.3 COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE OP. The OP
---------------------------------------------------
covenants, represents and warrants to the Contributors as follows, which
representations and warranties are true and correct on the date hereof (unless
the same refers only to the Closing Date) and in any event will be true and
correct at Closing:
1. The OP is a partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware and the OP has the
requisite power and authority to execute and deliver this Agreement and all
Closing Documents now or hereafter to be executed by the OP. The execution,
delivery and performance of this Agreement by the OP has been duly and validly
authorized by all necessary action of the OP. This Agreement has been duly
executed and delivered by the OP or an authorized representative of the OP. This
Agreement constitutes a legal, valid and binding obligation of the OP,
enforceable in accordance with its terms.
2. The execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default under, any agreement of the OP or any instrument to
which the OP is a party or by which the OP is bound, or any judgment, decree or
order of any court or governmental body, or any law, rule or regulation
applicable to the OP.
3. The Units to be issued to the Contributors at Closing will
have been duly and validly authorized and issued, free of any preemptive or
similar rights, and be fully paid and nonassessable, without any obligation to
restore capital except as required by the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act"). As a holder thereof, each Contributor
shall be admitted as a limited partner of the Partnership entitled to all of the
rights and protections of a limited partner under the Delaware Act and the
provisions of the OP Partnership Agreement, with the same rights, preferences
and privileges as all existing limited partners on a pari passu basis.
4. Except as set forth in the OP Partnership Agreement, the
Lock-Up Agreement and the Supplemental Representations and Warranties Agreement
or any pledge agreement required to be executed thereunder, and subject to
federal and state securities laws, none of the Units, when delivered to the
Contributors, will be subject to any Encumbrance.
5. At Closing, the REIT will have the full legal right, power
and authority to enter into the Registration Rights Agreement and the Exchange
Rights Agreement and to consummate the transactions contemplated therein. The
Registration Rights Agreement and the Exchange Rights Agreement will be duly
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authorized by all necessary corporate action on the part of and will constitute
the valid and binding obligation of the REIT, enforceable in accordance with its
terms. The OP will have the full right, power and authority to enter into the
Lock-Up Agreement and its execution will be duly authorized by all necessary
partnership action.
6. The OP Partnership Agreement and any OP Partnership
Amendment will constitute valid and binding obligations of affiliates of the
REIT who will be partners therein, enforceable in accordance with their terms.
7. Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery by the OP of the Units, the valid authorization, issuance,
sale and delivery of any shares of Common Stock that may be issued by the REIT
upon any exchange of the Units, and the execution, delivery and performance of
the Registration Rights Agreement by the REIT (other than complying with
applicable securities laws and regulations), will have been made or obtained and
will be full force and effect.
8. Neither the issuance or sale and delivery by Partnership of
the Units, nor the issuance, sale and delivery by REIT of any shares of Common
Stock that may be issued upon any exchange of the Units, nor the execution,
delivery and performance of the Registration Rights Agreement, will conflict
with or result in a breach or violation of any of the terms and provisions of,
or (with or without the giving of notice or passage of time or both) constitute
a default under the certificate of incorporation or by-laws of the REIT or the
certificate of limited partnership or the OP Partnership Agreement of the OP;
any indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or the OP is a party or to which any
of them, any of their respective properties or other assets or any hotel is
subject; or any applicable statute, judgment, decree, rule or regulation of any
court or governmental agency or body applicable to any of the foregoing or any
of their respective properties (other than compliance with the securities laws
and regulations); or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of the REIT or the OP.
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ARTICLE 5
CLOSING AND TITLE MATTERS
-------------------------
5.1 Closing. The closing of the transactions contemplated hereby
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(the "Closing") shall take place at the offices of one of the OP's attorneys or
the attorneys for the lead underwriter of the IPO concurrently with the
consummation of the IPO or on a date to be selected by the OP, but not later
than 5 days after the Closing of the IPO (the "Closing Date"), and in any event
immediately prior to closing under the Contracts.
5.2 ESCROW. It is anticipated that the Closing and the consummation
------
of the IPO shall occur simultaneously or substantially simultaneously. To
effect the Closing, the OP, if the OP reasonably anticipates the completion of
the IPO to occur within twenty (20) days, shall have the right but not the
obligation to send notice to the Contributors requesting that both parties
endeavor in good faith to (i) enter into a mutually satisfactory escrow
agreement with a mutually satisfactory escrow agent pursuant to which the
Closing shall occur on the Closing Date through an escrow-style closing and (ii)
prior to the Closing Date, place in escrow with said escrow agent pursuant to
said escrow agreement the documents to be delivered pursuant to Article 6 (or
otherwise pursuant to this Agreement).
5.3 TITLE COMMITMENT, SEARCHES AND POLICIES. The OP shall order the
---------------------------------------
following (collectively hereinafter referred to as the "Title Documents") within
ten (10) days from the date hereof with regard to all the Hotels:
1. A title commitment for an ALTA Form Owner's or Leasehold (as
appropriate) Policy to be issued by the Title Company in an amount to be
determined by the OP for each Hotel and the Contract Hotel ("Title Commitment"),
subject only to the Permitted Exceptions for such Hotel or Contract Hotel, as
the case may be, which Title Commitments shall include such insurance and
affirmative insurance as is reasonably requested by the OP, to the extent
permissible, applicable and available in the state in which such Hotel or the
Contract Hotel is located, including but not limited to a non-imputation
endorsement and "Fairway" endorsement as to the Hotels (the "Endorsements") in
form and substance satisfactory to the OP, together with copies of all documents
and instruments referred to in the Title Commitment. As used herein, for each
Hotel, Permitted Exceptions shall be those matters identified on the respective
Subschedules and any other matters which the OP agrees to take subject to.
"Permitted Exceptions" for the Contract Hotel shall be those matters identified
as such (or by words of similar import) in the Contract and any other matters
which the OP agrees to take subject to.
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2. UCC, judgment and tax lien searches on the names of the
Contributors and the Partnerships (the "Searches") showing no liens or
encumbrances as to such persons or entities unless the same is to be paid and
released at or prior to Closing.
3. A survey prepared by a surveyor licensed by the state in
which each Hotel as well as the Contract Hotel is located in conformity with
such standards as are reasonably required by the lead underwriter of the IPO,
certified to the OP, each Partnership, each other Acquired Hotel Owner, the
Title Company and such other parties as the OP shall designate.
4. If, with respect to the Hotels, the Title Documents indicate
any lien or encumbrance which is not a Permitted Exception and which the OP
elects not to accept, the Contributors shall have until the Closing Date to
remove such exception (or to have the Title Company commit to affirmatively
insure against such Title Defect and provide evidence thereof to the OP), though
the Contributors will be under no obligation to expend funds to do so, or with
respect to the Contract Hotel, to have the Seller remove such exception or
arrange for affirmative insurance in accordance with such Contract, though the
Contract Contributor will be under no obligation to expend funds to do so. If
such lien or encumbrance is not removed (or affirmatively insured), the OP may
elect, as its sole remedy, to either: (i) terminate this Agreement with respect
to the Hotel (or the Contract Hotel, as the case may be) with a commensurate
reduction in the Contribution Value, in which event the parties shall have no
further obligation or liability to each other hereunder with respect thereto
except as otherwise provided herein or (ii) accept the Title Commitment or
Searches as is.
5. At Closing, the OP shall receive an ALTA Form Owner's or
Leasehold Policy of title insurance ("Title Policy") issued as of the Closing
Date for (i) each Hotel as well as the Contract Hotel, in favor of the Acquired
Hotel Owner pursuant to and in accordance with the Title Commitments (and with
the Endorsements) and insuring that such Acquired Hotel Owner has fee title to
the land and improvements with respect to such Hotel or Contract Hotel (or a
valid leasehold interest in the case of the Hotels as well as the Contract Hotel
on ground leases or the "Restaurant Lease" in the case of Maison de Ville)
subject only to the Permitted Exceptions.
ARTICLE 6
CLOSING DELIVERIES
------------------
6.1 CONTRIBUTORS' DOCUMENTS. At the Closing, or earlier upon the
-----------------------
establishment of an escrow pursuant to Section
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5.2, the Contributors shall cause the following documents to be delivered to the
OP:
A. Assignments from the Contributors to the OP of all of their
right, title and interest in the Partnership Interests as well as the Contract
in form satisfactory to the OP (the "Assignments").
B. A written certification ("FIRPTA Certificate") dated no
earlier than ninety (90) days prior to the date of Closing for each Contributor,
which certification shall be in compliance with the Act and the regulations
thereunder that are imposed by FIRPTA and certifying that the Contributor is not
a person or entity subject to withholding under FIRPTA and the Act, and
containing the Contributor's social security number or tax identification number
and address. Alternatively, each Contributor hereby certifies in compliance with
FIRPTA (i) that he, she, or it is not a foreign person, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are defined
in the Act of FIRPTA, (ii) that his, her or its Taxpayer Identification or
Social Security Number is as set forth in Schedule 1 (or will be furnished prior
to Closing), (iii) that his, her, or its address set forth in Schedule 1 is
correct, (iv) that he, she or it understands that this certification may be
disclosed to the Internal Revenue Service, (v) that any false statement
contained herein could be punished by fine, imprisonment, or both, and (vi) that
he, she, or it, under penalties of perjury, hereby declares that he, she or it
has examined this certification and to the best of his, her, or its knowledge
and belief it is true, correct, and complete.
C. Any state, county and city documentary stamp declarations or
transfer or "gains" tax forms required in connection with the transfer of any of
the Assets.
D. Such evidence as may be reasonably required by the Title
Company or the OP of the due authorization, execution and delivery of the
documents executed by the Contributors.
E. Any affidavits as to judgments and other matters reasonably
required by the Title Company in connection with the issuance of the Title
Policies.
F. Any documents customary or required in assigning the Assets
or any of the other assignments involved in this transaction.
G. Payoff letters and mortgage satisfactions with respect to
all mortgages, and appropriate consents and estoppels with respect to the DFW
South mortgage.
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H. Estoppel letters and required consents from ground lessors
for those Hotels as well as the Contract Hotel on ground leases.
I. If necessary and if required by counsel to the OP or counsel
to the lead underwriters of the IPO, legal opinions that this Agreement and each
of the closing documents have been duly authorized, and if counsel is available
for witnessing, executed and delivered by, the Contributors.
J. The Lock-Up Agreement, Registration Rights Agreement,
Exchange Rights Agreement and the OP Partnership Agreement (or OP Partnership
Amendment) duly executed by the Contributors.
K. The Supplemental Representations and Warranties Agreement
executed by the Indemnitors.
L. To the extent in the Contributors', Partnerships' or any of
their affiliates' possession, or control, the originals of all existing
contractor, architectural and engineering agreements and all other assignable
documents, guarantees and warranties issued or entered into in connection with
the construction of the buildings, structures and other improvements comprising
the Hotels, as well as originals (or copies to the extent that originals are not
available) of licenses, permits, authorizations, consents and approvals relating
to the Hotels which are required by law and issued by any governmental or quasi-
governmental authority having jurisdiction over the Hotels, and copies of all
certificates, if any relating to the Hotels issued by the local board of fire
underwriters (or other body exercising similar functions), as well as a complete
set of architectural and engineering drawings, utilities layout plans,
topographical plans and the like currently used in the construction of the
buildings, structures and other improvements on the Hotels.
M. To the extent not previously delivered to and in the
possession of the OP for each Hotel, all plans and specification, Records, and
all Licenses.
N. On the Closing Date, each Partnership shall continue to have
possession of its Hotel free and clear of all tenancies of every kind and
parties in possession, except for guests in the Hotel and tenants under space
leases and with all parts of the Hotel (including, without limitation, the
fixtures, and equipment, in substantially the same condition as the same were on
the date of this Agreement, normal wear only excepted.
6.2 OP'S DELIVERIES. At the Closing, or earlier upon the
---------------
establishment of an escrow pursuant to Section 5.2, the OP and/or the REIT shall
cause the following to be delivered to the Contributors:
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A. the Units, in accordance with Section 3.1 hereof and the
cash for which provision is made in Section 4.1.A.2(a) above;
B. the Lock-Up Agreement duly executed by the OP and Smith
Barney;
C. the Registration Rights Agreement, duly executed by the
REIT;
D. the Exchange Rights Agreement, duly executed by the REIT and
the OP;
E. the OP Partnership Agreement (and any required amendment
thereto (the "OP Partnership Amendment"), duly executed by each of the
Contributors, affiliates of the REIT and others, which shall state that each
Contributor is a limited partner of the OP and specify the number of Units held
by each Contributor, together with, if such Units are represented by
certificates, a certificate or certificates in the name of each Contributor
representing the number of Units to which such Contributor is entitled;
F. countersigned copies of any documents listed in Section 6.1
and 6.3 which are required to be signed by the OP or the REIT (or its
affiliates), as the case may be;
G. evidence satisfactory to Contributors that the person or
persons executing the closing documents on behalf of Partnership and the REIT
(or its affiliates) have full right, power and authority to do so; and
H. certificates duly executed by the OP and the REIT to the
effect that all of the representations and warranties herein of the OP and the
REIT are true and correct as of the Closing.
6.3 AMENDMENT OF PARTNERSHIP'S FORMATION DOCUMENTS. At Closing, the
----------------------------------------------
applicable Contributors, the OP and any designees of the OP will execute
amendments to the Partnerships' respective Formation Documents and other
formation documents as required, in form and substance satisfactory to the OP,
to reflect the withdrawal of such Contributors and the substitution of the OP or
its designee in their stead and containing such other provisions as the OP shall
determine.
6.4 CONCURRENT TRANSACTIONS. All documents or other deliveries
-----------------------
required to be made by the OP, the REIT and the Contributors at or prior to
Closing, and all transactions required to be consummated concurrently with the
Closing, shall be deemed to have been delivered and to have been consummated
simultaneously with all other transactions and all other deliveries under the
REIT Documents and other Formation
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Transactions, and no delivery shall be deemed to have been made, and no
transaction shall be deemed to have been consummated, until all deliveries
required by the OP and the REIT shall have been made, and all concurrent or
other transactions shall have been consummated.
6.5 FURTHER ASSURANCES. The parties hereto will, at or prior to the
------------------
Closing, or at any time or from time to time thereafter, upon request of either
party, execute such additional instruments, documents or certificates as either
party deems reasonably necessary in order to effectuate the transactions
contemplated hereby.
ARTICLE 7
APPORTIONMENTS
--------------
7.1 APPORTIONMENTS. With respect to each Hotel, the Contribution
--------------
Value reflects a deduction for all mortgage indebtedness on the Hotels. With
respect to each Partnership, the following adjustments and apportionments shall
be made in cash among the Contributors in each Partnership, and the OP. It is
the parties' intention that the prorations and adjustments conform in substance
to those that would be made in a sale of real property as set forth herein. All
such prorations for a Partnership shall be netted against each other proration
for such Partnership and the net amount, if in favor of such Partnership's
Contributors, shall be paid in cash to each Contributor and each Other
Contributor who or which is a partner in such Partnership, with each such
Contributor (and each such Other Contributor) to receive its "Allocable Share"
of such amount; or, if in favor of the OP, to the OP, in which case, each such
Contributor (and each such Other Contributor) shall pay its Allocable Share
thereof. As used in this Article 7, Allocable Share shall mean each
Contributor's (and Other Contributor's) pro rata share commensurate with its
Partnership Interest in the Partnership at Closing in accordance with the
partnership agreement for such Partnership. At Closing, the following items of
revenue and expense shall be prorated as of 12:01 a.m. on the Closing Date
except as otherwise expressly provided herein:
A. Real estate taxes, personal property or use taxes and sewer
rents, on the basis of the best available estimates for such taxes and rents
that will be due and payable on the Hotel for the calendar year in which the
Closing occurs.
B. All utility costs and expenses and other costs and expenses of
operating the Hotel which are reasonably capable of proration, including, but
not limited to, all salaries, compensation, sick pay, vacation pay and other
accrued benefits of Hotel employees.
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C. Amounts paid or payable under the service contracts and equipment
leases.
D. Rents and other revenues under space leases as and when
collected. If the Partnership receives any rents from tenants under space
leases after the Closing Date then such collections shall first be applied to
rents accruing on or after the Closing Date, and OP shall cause the Partnership
to remit the balance, if any, to the applicable Contributors to the extent any
pre-Closing Date rental obligation under such tenant's lease remains unpaid.
Upon request of the applicable Contributors (at their expense), the Partnership
will use reasonable efforts to collect delinquent rents directly from a tenant
on such Contributors' behalf.
E. The applicable Contributors will be charged with all interest to
date of Closing on any mortgage other than DFW South. With respect to DFW
South, interest thereon and all escrows held by lender shall be adjusted at
Closing.
F. Rents due under any ground leases shall be prorated.
G. Guest, convention, room, food, beverage, and all other charges
and revenues for services rendered and from the operation of the Hotel,
including, but not limited to, advance payments under booking agreements for
rooms, facilities and services of the Hotel and any other revenues, as and when
collected, provided, however, that (i) food, room service and restaurant revenue
shall be read, measured (and tapes preserved) and apportioned as of 2:00 a.m. on
the Closing Date, and (ii) the final night's room revenues (revenue from rooms
occupied on the evening preceding the Closing Date) less a sum equal to all room
maid services with respect thereto shall be allocated to the applicable
Contributors. All cash, checks, and other funds, and all other notes, security,
accounts receivable and other evidence of indebtedness located at the Hotel and
balances on deposit to the credit of the Partnership with banking institutions
(as well as the guest (tray) ledger for guests staying at the Hotel on the
Closing Date) shall be credited to the applicable Contributors.
H. Fees and expenses for music, entertainment, trade association
dues, trade, newspaper and other periodical subscriptions, coin machine income,
and washroom and checkroom income.
I. The value of food and liquor inventory in unopened cases.
J. With respect to all prepaid rents and deposits, including but not
limited to, utility deposits, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services or
made in
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connection with the space leases or the guest bookings (collectively, the
"Deposits"), the OP shall be entitled to a credit for the amount of the Deposits
which do not remain in possession of the Partnership, and the Partnership will
remain liable for all of the post-Closing liability and obligations, if any,
with regard to such Deposits;
7.2 RECONCILIATION. If, after the prorations to be made pursuant to
--------------
7.1, (x) the sum of all cash and cash equivalents, investments, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by the Partnership, exceeds or is less than (y) the sum
of all accounts payable, accrued real estate taxes, accrued interest, other
accrued expenses and other liabilities generally recognized as current
liabilities owed by the Partnership, any excess amount shall be paid by the OP
to the Contributors (and Other Contributors) in such Partnership (based on their
Allocable Shares), or such Contributors (and Other Contributors) shall each pay
their Allocable Shares of any shortfall to the OP, as the case may be; provided,
however, that, except as expressly set forth herein, the Contributors (and the
Other Contributors) in each Partnership shall each remain responsible for their
Allocable Shares of the payment of all accounts payable and other pre-Closing
liabilities to the extent the OP did not receive a current asset in an amount
intended to offset such liability.
7.3 OTHER COSTS. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by the applicable Contributors. All sales, use and
other transfer taxes, if any, payable as a result of the contribution of the
Partnership Interests to the OP will be paid by the OP. The Contributors shall
be entitled to receive any rebates or refunds on taxes or other payments paid to
the Partnerships for periods prior to the Closing. The costs of Title Policies
and recordation of all instruments, surveys, environmental investigations,
travel expenses, professional fees and all other out-of-pocket costs incurred in
conveying the assets shall be borne by the OP.
7.4 ESTIMATE AND FINAL RECONCILIATION. Prior to Closing, the
---------------------------------
Contributors and the OP shall reasonably cooperate to make a preliminary
determination of the prorations required hereunder. As soon as reasonably
possible after Closing, the Contributors (and Other Contributors) in each
Partnership shall cooperate with the OP to make a final determination of such
prorations in accordance with this Article 7. Upon the final reconciliation of
the prorations under this Article, but in any event not later than thirty days
following Closing (or as soon thereafter as possible), any party which owes
another party any sums hereunder shall pay such party such sums within ten (10)
days after the reconciliation of such sums. The obligations to
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calculate such prorations, make such reconciliations and pay such sums shall
survive Closing.
7.5 CONTRACT HOTEL. The prorations, adjustments and costs in
--------------
connection with the acquisition of the Contract Hotel shall be allocated between
the Seller and the Acquired Hotel Owner in accordance with the Contract. At
Closing, the Contract Contributor shall be reimbursed in cash for all of its
costs and expenses incurred in negotiation, execution, and subsequent amendment
of, and performance under the Contract, including, without limitation, the cost
of any deposits, title searches, surveys, travel expenses, professional fees, or
any other out-of-pocket costs it incurred in connection with the Contract.
ARTICLE 8
CONDITIONS TO CLOSING
---------------------
8.1 CONTRIBUTOR'S CONDITIONS PRECEDENT. The obligation of the
----------------------------------
Contributors to close the transactions contemplated hereby is subject to:
A. All representations and warranties of the OP contained in
this Agreement being true and correct in all material respects at and as of the
Closing Date;
B. The OP and REIT have made all deliveries contemplated by
Section 4.3.9 and Section 6.2 and other obligations and covenants of the OP to
have been performed on or before the Closing Date having been timely and duly
performed in all material respects;
C. The consummation of the IPO on or before the end of the IPO
Period;
D. Each of the Shares shall entitle the holder thereof to one
(1) vote on all matters which are the subject of a vote by any holder of Shares
and there shall not be a class of shares in the REIT which shall entitle any
holder thereof to any greater voting rights than any other holder of Shares
whether by cumulative voting rights or otherwise;
E. If applicable, the expiration or termination of the
applicable waiting period under the Hart Act with no action pending by the
Department of Justice or Federal Trade Commission to prohibit or enjoin the
sale;
F. Execution of the Underwriting Agreement by the Chairman of
the REIT.
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Upon failure of any condition precedent set forth in this Section 8.1, the
Contributors' rights and remedies under this Agreement shall be limited to the
termination of this Agreement.
8.2 CONDITIONS TO THE OP'S AND REIT'S OBLIGATIONS. In addition to
---------------------------------------------
the conditions to Closing set forth below, the obligation of the OP to close the
transactions contemplated hereby with respect to each Partnership Interest is
subject to the following conditions, as well as to the Contributors having
performed all of their other obligations under this Agreement, including, but
not limited to, delivery to the OP within 30 days of the date hereof, of all of
the Schedules and Exhibits. If the OP in its reasonable discretion, is not
satisfied with any of the covenants, representations and warranties made by the
Contributors pursuant to this Agreement, or with any information disclosed in
any schedules or documents delivered pursuant hereto, the OP may elect not to
accept the Partnership Interests in such Partnership, and, in such event, the
Contribution Value shall be adjusted accordingly.
A. The Registration Statement shall have become effective under
the Act and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or shall have been threatened by the SEC.
B. The IPO has been consummated on or before the end of the IPO
Period by sale of all or substantially all of the capital stock of the REIT
registered for sale in the IPO, but excluding the capital stock registered for
sale upon the exercise of the underwriters' overallotment option. Further the
portion of the net proceeds from the IPO which is to be contributed to the OP by
the REIT shall be sufficient, as determined by the OP in its reasonable
discretion, to enable the OP (i) to acquire all the Partnership Interests of
each Contributor, and (ii) to apply such portion of the net proceeds to acquire
such other properties or interests, to repay principal, interest and other
amount due with respect to indebtedness and to meet such other obligations as
may be described herein in the Registration Statement as the same shall be in
effect on the Closing Date.
C. The Shares shall have been duly listed, subject to notice of
issuance, on the New York Stock Exchange at the time the Offering commenced.
D. The Contributors' representations and warranties set forth
in this Agreement shall be true and correct in all material respects on the
Closing Date.
E. The OP shall have received or have an irrevocable right to
receive the Title Policy for each Hotel. The OP shall be satisfied that the
Partnership has good and valid
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title to, or leasehold estate in (where applicable), all of the Hotels, personal
property, subject to no Encumbrances except the equipment leases and other
Permitted Exceptions.
F. If required, the expiration or termination of the applicable
waiting period under the Hart Act with no action pending for the Department of
Justice or Federal Trade Commission to prohibit or enjoin this sale.
G. The Contributors have made all required deliveries under
Section 6.1.
H. There is no injunction, judgment, order, action or
proceeding which would prevent or limit the consummation of this transaction.
I. The concurrent closing of all of the other Formation
Transactions contemplated by the Registration Statement, including the
following:
1. Consummation of the closings of the Other Hotels as
contemplated by the Registration Statement and pursuant to all contractual
arrangements entered into by the OP.
2. The OP shall acquire the Contract and immediately
thereafter, acquire the Contract Hotel in accordance with the Contract and this
Agreement. It is a condition to the OP's acquisition of Contract (and closing
thereunder) that the seller under the Contract shall have fulfilled all
obligations under the Contract and all other conditions to the "Purchaser's"
obligations under the Contract shall have been fulfilled to the satisfaction of
the OP, and all representations and warranties with respect to the Contract
Hotel contained in the Contract shall be true and correct in all material
respects.
3. The OP shall acquire the Partnership Interests of all
Other Contributors.
4. The Franchise Agreements contemplated by the
Registration Statement for each of the Acquired Hotels shall either be committed
by a binding franchisor commitment or shall then be in full force and effect and
all permits, licenses and other operating agreements necessary for the continued
operation of all the Acquired Hotels shall be in full force and effect.
5. Execution of the Option Agreements.
8.3 OP RIGHTS. If any of the conditions set forth in Section 8.2
---------
above are not satisfied as of the Closing, the OP shall have the right, at its
sole option, to (a) waive the condition and close the acquisition of the Assets
in accordance with the terms of this Agreement or (b) terminate this Agreement.
Nothing herein shall limit the OP's and REIT's rights and
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<PAGE>
remedies under the Supplemental Representations and Warranties Agreement. In
absence of election by the OP of option (b) above, option (a) shall be deemed to
have been chosen. If the OP elects to terminate this Agreement, then neither
party shall have any further liability hereunder.
ARTICLE 9
ACTIONS AND OPERATIONS PENDING CLOSING
--------------------------------------
9.1 ACTIONS AND OPERATIONS OF THE INTEREST CONTRIBUTORS AND THE
-----------------------------------------------------------
PARTNERSHIPS PENDING CLOSING. The Contributors covenant and agree that from the
- ----------------------------
date hereof through the Closing Date with respect to the Partnerships and the
Hotels, to the extent Contributors exercise such control over the Partnerships,
they will comply with the following covenants:
A. Operate, manage, and maintain the Hotel consistent with
prior practice, including, without limitation, (i) using reasonable efforts to
keep available the services of its present employees and to preserve its
relations with guests, suppliers and other parties doing business with the
Hotel, (ii) accepting booking contracts for the use of the Hotel facilities on
terms not less favorable than the terms typically arranged as of the date of
this Agreement and retaining such bookings, (iii) maintaining the current level
of advertising and other promotional activities for Hotel facilities, and (iv)
remaining in substantial compliance with all current Licenses;
B. Not commit waste of any portion of the Hotel;
C. Keep and maintain the Hotel in accordance with clause A
above, reasonable and ordinary wear and tear excepted;
D. Keep, observe, and perform all its obligations under the
space leases, equipment leases, the service contracts, and all other applicable
contractual arrangements relating to the Hotel;
E. Timely make all repairs, maintenance, and replacements to
keep the Hotel and all furnishings, fixtures and equipment in accordance with
clause A above, and not cause or permit the removal of furnishings, fixtures and
equipment from the Hotel except for the purpose of discarding worn and valueless
items;
F. Keep merchandise, supplies, inventory and other personal
property adequately stocked, consistent with good business practice, as if the
conveyance of the Partnership Interests hereunder were not to occur;
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<PAGE>
G. Advise the OP promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is instituted or threatened after the date of this
Agreement or if any representation or warranty contained in this Agreement shall
become false;
H. Not take, or omit to take, any action that would have the
effect of violating any of the representations, warranties, covenants or
agreements of Contributors contained in this Agreement or in the Contract as the
case may be;
I. Comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
J. Not sell or assign, or enter into any agreement to sell or
assign, or create or permit to exist any Encumbrance (other than a Permitted
Exception) on, the Hotel or any portion thereof;
K. Not allow any permit, receipt, license, franchise or right
currently in existence with respect to the operation, use, occupancy or
maintenance of the Hotel to expire, be canceled or otherwise terminated;
L. Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due;
M. Maintain in full force and effect the present policies and
level of insurance with respect to the Hotel until the Closing Date;
N. Comply with all mortgages and ground leases;
O. All notices of violation of federal, state or municipal
laws, ordinances, orders, regulations or requirements issued by, or filed by, or
served by, any governmental agency having jurisdiction over the Hotel against or
affecting the Hotel on or before the Closing Date shall be promptly disclosed to
the Partnership.
9.2 LICENSES. The Contributors shall cooperate with the OP in its
--------
efforts to obtain new liquor licenses or permits for the Hotel to the extent
required. If such licenses or permits have not been obtained prior to Closing,
the Contributors shall cooperate with the OP in making arrangements so that the
Hotel may continue to operate under existing licenses or permits to the extent
permitted by law until new ones are obtained.
9.3 CONTRACT. The Contract Contributor shall not amend or terminate
--------
the Contract without the consent of the OP nor
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<PAGE>
waive any material provision thereof, or grant any consents thereunder without
approval of the OP. The Contract Contributor shall not assign the Contract
(except to the OP or its designee).
9.4 RIGHT OF ENTRY. At any time prior to Closing, the OP shall have
--------------
the right to enter upon any of the land and improvements of each Hotel to
inspect such Hotels and to conduct tests and investigations at its sole cost and
expense. In addition, the Contributors shall allow the OP to review all Records
relating to the Hotels. The Contributors shall cooperate with the OP, and its
agents, in arranging such inspections and reviews. The OP shall conduct all
such inspections and reviews so as not to interfere unreasonably with the
operation of the Hotels. The OP may order engineer's reports and environmental
reports for all Hotels and the Partnerships, at the OP's sole cost and expense,
to be conducted by engineering firms and environmental consultants selected by
the OP. The Contract Contributor shall cooperate with the OP to coordinate and
facilitate site inspections, document review and testing with respect to the
Contract Hotel.
ARTICLE 10
DAMAGE OR DESTRUCTION; CONDEMNATION; INSURANCE
----------------------------------------------
10.1 TERMINATION OF AGREEMENT. If at any time prior to the Closing
------------------------
Date, (a) all or any material portion of a Hotel is destroyed or damaged as a
result of fire or any other casualty whatsoever as determined by the OP or (b)
if any proceeding relating to the proposed taking of all or any material portion
of a Hotel by condemnation or eminent domain is instituted or threatened by any
public authority, then, at the option of the OP, (i) the OP may close the
purchase of the Hotel otherwise in accordance with the terms of this Agreement
(or, if the Contract Hotel, in accordance with the Contract), or (ii) elect not
to acquire the Partnership Interests with respect to such Hotel or the Contract
if the Contract Hotel, and adjust the Contribution Value accordingly. The
Contributors shall give the OP written notice of any such casualty or instituted
or threatened proceeding within three (3) days after the occurrence thereof (or
in the case of the Contract Hotel after learning of such event), the OP shall
notify the Contributors of its election within ten (10) business days of the
OP's notice.
10.2 NO TERMINATION OF AGREEMENT. If there is any partial or total
---------------------------
damage or destruction or condemnation or taking, other than as set forth above,
and if the OP elects to acquire the Asset, then (x) if the Contract Hotel, the
provisions of the Contract will govern (y) if a Hotel, all condemnation and
insurance proceeds paid or payable to the Contributors applicable thereto shall
remain with the Partnership (to the credit of the OP) at Closing (except to the
extent utilized to repair before
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<PAGE>
Closing), and the Contributors shall further execute all assignments and any
other documents or other instruments as the OP may reasonably request or as may
be necessary to transfer all interest in all such proceeds to the OP or to
whomever the OP shall direct. The Contract and other documents executed at the
closing of the Contract with the Seller shall govern the ongoing relationship,
if any, between the Seller and the Acquired Hotel Owner.
ARTICLE 11
LIABILITIES; ASSIGNMENT AND
ASSUMPTION OF CERTAIN OBLIGATIONS
---------------------------------
11.1 ASSUMPTION OF LIABILITIES BY THE OP. With respect to the
-----------------------------------
Hotels, from and after the Closing Date, except as otherwise herein expressly
provided and subject to the provisions hereof which survive the Closing, as
between the Contributors, on the one hand, and the OP and the REIT, on the
other, the OP shall be responsible for all liabilities and obligations relating
to the Hotel (even if accrued or attributable to a period prior to the Closing
Date provided they are disclosed in the Registration Statement (or exhibits
thereto), this Agreement, the Exhibits or Schedules to this Agreement (whether
currently attached or added prior to the Red Herring) or the Supplemental
Representations and Warranties Agreement (including schedules and exhibits
thereto) or otherwise incurred in the ordinary course of business between the
Red Herring and the Closing, provided they are disclosed in writing to the OP
prior to the Closing. The provisions of this Section survive Closing.
ARTICLE 12
INDEMNITIES
-----------
12.1 THE OP'S INDEMNITY. Subject to the limitation on liability set
------------------
forth in Section 12.2 hereof, the OP agrees to indemnify, defend (with counsel
mutually acceptable to the OP and Contributors) and hold Contributors harmless
against and with respect to the following and the provisions of this Section
survive Closing:
(i) any loss or damage to Contributors, subsequent to the
Closing Date, resulting from any inaccuracy in or breach of any representation
or warranty of the OP or resulting from any breach or default by the OP of any
obligation of the OP under this Agreement or from liabilities incurred by the
OP, the Partnerships, or the Acquired Hotels after the Closing;
-30-
<PAGE>
(ii) any injury or damage to person, property, or the
businesses of the Partnerships causing any loss or damage resulting from or
arising out of work performed by the OP pursuant to Section 9.4 hereof; and
(iii) all costs and expenses, including reasonable attorneys'
fees, related to any actions, suits or judgments incident to any of the
foregoing.
12.2 LIMITATION ON LIABILITY. The parties acknowledge that this
-----------------------
Agreement and all documents, agreements, understandings and arrangements
relating to the transactions contemplated by this Agreement to be executed or
undertaken by the OP which have been executed by one or more officers of its
general partner have been or will be so executed in his/her capacity as an
officer of its general partner, and not individually, and none of the partners,
officers or employees of the OP nor any of the directors, officers, shareholders
or employees of its general partner or the REIT (in their capacities as
directors, officers, shareholders or employees of such corporation) shall be
bound or have any personal liability hereunder or thereunder except as shall
arise from the gross negligence or willful misconduct thereof. Contributors
shall look solely to the assets of the OP for satisfaction of any liability of
the OP in respect of this Agreement and all documents, agreements,
understandings and arrangements relating to this transaction and will not seek
recourse or commence any action against any of the partners, officers or
employees of the OP nor any of the director, officers, shareholders or employees
of the REIT or any of their personal assets for the performance or payment of
any obligation hereunder or thereunder except as shall arise from the gross
negligence or wilful misconduct thereof.
12.3 CONTRIBUTORS' INDEMNITY. Subject to the limitation on liability
-----------------------
set forth in Section 4.1.D. hereof, each Contributor agrees to indemnify, defend
(with counsel mutually acceptable to the OP and such Contributor) and hold the
OP harmless against and with respect to any loss or damage to the OP subsequent
to the Closing Date, resulting from any inaccuracy in or breach of any
representation or warranty of such Contributor or resulting from any breach or
default by such Contributor of any obligation of such Contributor under this
Agreement, as well as all costs and expenses, including reasonable attorneys'
fees, related to any actions, suits or judgments incident to any of the
foregoing. The provisions of this Section survive Closing.
12.4 NOTICE OF CLAIMS. Contributors and the OP, as applicable, shall
----------------
promptly notify the other in the event any claim is made against Contributors or
the OP as to which the other party has agreed to indemnify and the indemnitor
shall thereupon undertake to defend and hold the indemnitee harmless therefrom.
This provision shall survive Closing.
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<PAGE>
ARTICLE 13
NOTICES
-------
13.1 NOTICES. Except as otherwise provided in this Agreement, all
-------
notices, demands, requests, consents, approvals and other communications (herein
collectively called "Notices") required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing, shall
be deemed to have been properly given when received by the party to whom such
notice is addressed, and shall be personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by overnight
express courier, postage prepaid, addressed to the party to be so notified as
follows: if intended for the OP, to the address listed in the Recitals, and if
intended for the Contributors, to the addresses listed on Schedule 1 hereto.
ARTICLE 14
POWER OF ATTORNEY
-----------------
14.1 GRANT OF POWER OF ATTORNEY. Each Contributor does hereby
--------------------------
irrevocably appoint Steven D. Jorns, Bruce G. Wiles and Kenneth E. Barr and the
OP and each of them individually, with full power of substitution (such person
or the OP or any such successor of any of them acting in his, her or its
capacity as attorney-in-fact pursuant hereto, the "Attorney-in-Fact"), as the
true and lawful attorney-in-fact and agent of such Contributor, to act in the
name, place and stead of the Contributor:
(a) To enter into (i) a Registration Rights Agreement, (ii) the Lock-
Up Agreement, (iii) the Exchange Rights Agreement, (iv) the OP Partnership
Agreement (or any OP Partnership Amendment) in order to admit such Contributor
as a Partner in the OP, (v) and the Supplemental Representations and Warranties
Agreement (if the Contributor is an Indemnitor and has approved such agreement).
(b) To take for such Contributor all steps deemed necessary or
advisable by the Attorney-in-Fact in connection with the IPO, including without
limitation (i) filing a registration statement and amendments thereto (the
"Registration Statement") under the Securities Act which describes the benefit
to be received by such Contributor in connection with the formation of the REIT
and the offering of the REIT's Shares, (ii) distributing a preliminary
prospectus and prospectus regarding the offering of the REIT's Shares (the
"Preliminary Prospectus" and "Prospectus") which contain such information as is
deemed necessary or desirable to lawfully effect the IPO, and (iii) to take such
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<PAGE>
other steps as the Attorney-in-Fact may deem necessary or advisable.
(c) To make, acknowledge, verify and file on behalf of such
Contributor applications, consents to service of process and such other
undertakings or reports as may be required by law with state commissioners or
officers administering state securities or Blue Sky laws and to take any other
action required to facilitate the exemption from registration of the Units and
the qualification of the Shares under the securities or Blue Sky laws of the
jurisdictions in which the Units are to be offered.
(d) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the Closing
Documents and any other documents relating to the contribution of the
Contributor's Assets to the OP) and, in general, to do all things and to take
all actions which the Attorney-in-Fact in its sole discretion may consider
necessary or proper in connection with or to carry out the transactions
contemplated by this Agreement as fully as could the Contributor if personally
present and acting.
The Power of Attorney granted by the Contributor pursuant to this
Article 14 and all authority conferred hereby is granted and conferred subject
to and in consideration of the interest of the OP and the REIT and is for the
purpose of completing the transactions contemplated by this Agreement. The
Power of Attorney of the Contributor granted hereby and all authority conferred
hereby is coupled with an interest and therefore shall to the extent allowed by
law be irrevocable and shall not be terminated by any act of the Contributor or
by operation of law, whether by the death, disability, incapacity or liquidation
of the Contributor or by the occurrence of any other event or events (including
without limitation the termination of any trust or estate for which the
Contributor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, the Contributor shall die or become disabled or incapacitated
or is liquidated, or if any other such event or events shall occur before the
completion of the transactions contemplated by this Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. The
Contributor acknowledges that Steven D. Jorns, Bruce G. Wiles and Kenneth E.
Barr and the OP have, and any successor thereof acting as Attorney-in-Fact may
have, an economic interest in the transaction contemplated by this Agreement.
The Contributor agrees that, at the request of the OP or any Attorney-in-Fact,
it will promptly execute a separate power of attorney on the same terms set
forth in this Article 14, such execution to be witnessed and notarized.
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<PAGE>
14.2 LIMITATION ON LIABILITY. It is understood that the Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by the Contributor hereby. The Attorney-in-Fact, acting in
such capacity, makes no representations with respect to and shall have no
responsibility for the formation of the REIT, the contribution of the Assets to
the OP, the Registration Statement, the Prospectus or any Preliminary
Prospectus, nor for any aspect of the IPO, and it shall not be liable for any
error of judgment or for any act done or omitted or for any mistake of fact or
law except for its own gross negligence or bad faith. The Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred or in part arising out of
or in connection with its acting as the Attorney-in-Fact under the Power of
Attorney created by the Contributor hereby, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or liability,
except to the extent such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. The Contributor agrees that
the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for the OP and/or the REIT) and it shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel.
14.3 RATIFICATION; THIRD PARTY RELIANCE. The Contributor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by the
Contributor hereunder, and the Contributor authorizes the reliance of third
parties on this Power of Attorney and waives its right, if any, as against any
such third party for its reliance hereon.
ARTICLE 15
MISCELLANEOUS
-------------
15.1 EXPENSES. The OP shall be responsible for all costs incurred by
--------
Contributors, the REIT and the OP directly or indirectly relating to the
planning and formation of the REIT and the OP and the planning, formation and
closing of the IPO and the transactions contemplated hereby, including, but not
limited to, legal, accounting and consulting fees, and travel (including room
and board). The OP shall be responsible for the cost of all surveys, title
insurance premiums and charges for the issuance of the Title Policies (except to
the extent specified in the Contract), all expenses resulting from any New York
style closing and all testing and inspection costs.
15.2 BROKERAGE. The Contributors and the OP each hereby represent
---------
and warrant to the other that neither has dealt
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<PAGE>
with any broker or finder in connection with the transactions contemplated
hereby (except as specified in the Contract and except for the underwriter in
connection with the IPO who will be paid by the OP or the REIT); and each hereby
agrees to indemnify, defend and hold the other harmless of and from any and all
manner of claims, liabilities, loss, damage, reasonable attorneys' fees and
expenses, incurred by either party and arising out of, or resulting from, any
claim by and such broker or finder in contravention of its representation and
warranty herein contained in this Section 15.2.
15.3 BOOKS AND RECORDS. The transactions contemplated hereby include
-----------------
the retention by the Partnerships of the Records of the Partnerships. The OP
covenants and agrees that such Records will remain at the Hotels or will be
retained by the Partnership for examination, audit and copying by the
Contributors after the Closing as provided in this Section 15.3. The OP agrees
to provide access to the Contributors and their representatives to such books,
records, files and correspondence at all reasonable times and after reasonable
notice.
15.4 HART-SCOTT-RODINO ACT. If it shall be determined that the
---------------------
transaction contemplated herein is subject to the reporting requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Hart Act"), then each
party shall forthwith proceed to make the necessary filings, and take all other
actions necessary to comply with the Hart Act and the rules and regulations
thereunder. If such requirements have not been fulfilled by the Closing Date,
then the Closing Date shall be adjourned until such requirements have been
fulfilled, but such adjournment shall not be for more than sixty (60) days and
in no event shall the Closing be extended beyond the IPO Period. If such
requirements have not been fulfilled prior to the expiration of such sixty (60)-
day period, Contributors or the OP, by notice to the other, may terminate this
Agreement, in which event neither party shall have any further Obligation or
liability to the other party hereunder.
15.5 SURVIVAL. Except as expressly provided or limited to the
--------
contrary herein or in any instrument delivered pursuant hereto, the
representations, warranties, obligations, covenants, agreements, undertakings
and indemnifications of the parties contained herein or in any instrument
required to be delivered pursuant hereto shall not survive the Closing.
15.6 THE OP'S INVESTIGATION AND INSPECTIONS. Any investigation or
--------------------------------------
inspection conducted by the OP, or any agent or representative of the OP,
pursuant to this Agreement, in order to verify independently Contributors'
satisfaction of any conditions precedent to the OP's Obligations hereunder or to
determine whether Contributors' warranties are true and accurate, shall not
affect (or constitute a waiver by the OP of) any of Contributors' Obligations
hereunder or the OP's reliance thereon.
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<PAGE>
15.7 CONSTRUCTION. This Agreement shall not be construed more
------------
strictly against one party than against the other merely by virtue of the fact
that it may have been prepared primarily by counsel for one of the parties, it
being recognized that the OP and Contributors have contributed substantially and
materially to the preparation of this Agreement.
15.8 GENERAL. This Agreement may be executed in any number of
-------
counterparts, each of which shall constitute an original but all of which, taken
together, shall constitute but one and the same instrument. This Agreement
(including all Schedules and Exhibits hereto) contains the entire agreement
between the parties with respect to the subject matter hereof, supersedes all
prior understandings, if any, with respect thereto and may not be amended,
supplemented or terminated except by written agreement between the parties
hereto, nor shall any Obligation hereunder or condition hereof be deemed waived,
except by a written instrument to such effect signed by the party to be charged.
The warranties, representations, agreements and undertakings contained herein
shall not be deemed to have been made for the benefit of any person or entity,
other than the parties hereto and their permitted successors and assigns.
15.9 HEADINGS. The headings preceding the text of the paragraphs and
--------
subparagraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
15.10 GOVERNING LAW; PARTIES AT INTEREST. This Agreement will be
----------------------------------
governed by the law of the State of New York without giving effect to the
conflicts of laws principles thereof, and will bind and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors, permitted assigns and personal representatives.
15.11 COMPUTATION OF TIME. In computing any period of time pursuant
-------------------
to this Agreement, the day of the act or event from which the designated period
of time begins to run will not be included. The last day of the period so
computed will be included, unless it is a Saturday, Sunday or legal holiday, in
which event the period runs until the end of the next day which is not a
Saturday, Sunday or such legal holiday.
15.12 TIME OF THE ESSENCE. All times, wherever specified herein for
-------------------
the performance by Contributors or the OP of their respective obligations
hereunder, are of the essence of this Agreement.
15.13 COUNTERPARTS. This Agreement may executed in any number of
------------
counterparts, each of which when taken together shall constitute one Agreement.
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<PAGE>
15.14 MUTUAL WAIVERS, CONSENTS AND ACKNOWLEDGMENTS.
--------------------------------------------
(a) Conditioned upon execution by all Other Contributors (other than
Diversified in Toledo) of an agreement (i.e., the Other Contribution Agreements)
containing waivers, consents, and acknowledgements similar in substance to the
form of this Section 15.14, each Contributor hereby (i) waives any and all
restrictions on transfers of partnership interests and rights of acquisition
thereof as set forth in their respective Formation Documents (ii) consents to
the contribution by each Contributor and Other Contributors of their respective
Partnership Interests to the OP or the REIT (as their designees), (iii)
acknowledges full accounting and reconciliation of all Partnership accounts and
books and records, and (iv) waives, releases and relinquishes any and all claims
against the Partnerships and against one another and against the Other
Contributors with respect to Partnership affairs.
(b) By execution of this agreement, each Contributor who is also a
partner in a Contributor Entity consents to the execution of this agreement by
such Contributor Entity and the contribution of its Partnership Interest. In
addition, those persons or entities who are partners in Contributor Entities,
but are not otherwise Contributors (or Other Contributors) are executing this
Agreement for the sole purpose of granting their consent to the execution of
this agreement by such Contributor Entity and the contribution of its
Partnership Interest. Further, the Contributors who are also partners in the
Contract Contributor hereby consent to assignment of the Contract to the OP.
Those persons who are partners in the Contract Contributor (but are not
otherwise Contributors) are also executing this agreement to signify their
consent to such assignment.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
THE OP
------
American General Hospitality Operating
Partnership, L.P.
By: AGH LP, Inc.
By: /s/ AGH LP, Inc.
-------------------------------------
THE CONTRIBUTORS
----------------
Virtual Hospitality, Inc.
By: /s/ Virtual Hospitality, Inc.
-------------------------------------
Jackson-Shaw Partners No. 51, Ltd.
By: James E Sowell Oil & Gas, Inc.
By: /s/ James E. Sowell
--------------------------------------
President
3005 Hotel Associates, Ltd.
By: Virtual Hospitality, Inc.
By: /s/ Virtual Hospitality, Inc.
--------------------------------
3100 Hotel Associates, L.P.
By: Virtual Hospitality, Inc.
By: /s/ Steven D. Jorns
-----------------------------------
--------------------------------------------------
Steven D. Jorns
Jim Sowell Construction Co., Inc.
By:
/s/ James E. Sowell
---------------------------------------------
James E. Sowell, Chairman
/s/ James E. Sowell
--------------------------------------------------
James E. Sowell
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<PAGE>
/s/ Monica Jorns
--------------------------------------------------
Monica Jorns
/s/ Lewis W. Shaw, II
--------------------------------------------------
Lewis W. Shaw, II
/s/ Kenneth W. Shaw
--------------------------------------------------
Kenneth W. Shaw
/s/ Bruce G. Wiles
--------------------------------------------------
Bruce G. Wiles
3860 Investors Joint Venture
By: /s/ Investors Joint Venture
-----------------------------------------------
Managing Partner
282 Almaden Associates, L.P.
By: Virtual Hospitality, Inc.
By: /s/ Virtual Hospitality, Inc.
------------------------------------
The following persons and
entities are executing this
agreement for purposes of
(S)15.14(b) only:
/s/ Carole C. Shaw
- -----------------------------
Carole C. Shaw
/s/ Kenneth E. Barr
- -----------------------------
Kenneth Barr
Matlock I-20, Inc.
By: /s/ Matlock I-20, |nc.
--------------------------
JES Hotel Associates, L.P.
By: James E Sowell Oil & Gas, Inc.
By: /s/ James E. Sowell
-------------------------------
President
-39-
<PAGE>
The Arlington Antigua Club,
Inc.
By: /s/ The Arlington Antigua Club, Inc.
--------------------------------------
SPHI, Inc.
By: /s/ Kenneth W. Shaw, President
---------------------------------------
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<PAGE>
SCHEDULE 5
(CALCULATION OF CONTRIBUTION VALUE)
A. The Contribution Value will be determined as follows:
CV = (CAD x POR)-TPSU
---------
IY
Where:
CV = The aggregate Contribution Value of the Partnership Interests and
the Contract.
CAD = Pro forma Cash Available for Distribution (as such term is
defined in the Registration Statement) from the OP as set forth
in the final red herring included in the Registration Statement.
POR = The percentage of CAD (expressed as a decimal fraction) that will
be distributed to partners in the OP or stockholders in the REIT
(as the case may be) as set forth in the final red herring
included in the Registration Statement.
IY = The initial yield (expressed as a decimal fraction) as set forth
in the final red herring included in the Registration Statement
calculated by dividing the estimated annual distribution per
share for the 12-month period following the IPO by the mid-point
of the proposed offering prices per share as set forth in the
final red herring included in the Registration Statement.
TPSU = The sum of (i) the value of the Shares (based on the mid-point of
the proposed offering prices per share as set forth in the final
red herring in the Registration Statement) issued in connection
with the IPO and (ii) the value of the Shares and Units (based on
the mid-point of the proposed offering prices per share as set
forth in the final red herring included in the Registration
Statement) issued to persons or entities other than the
Contributors as set forth in the applicable contracts of sale or
contribution agreements.
B. The number of units to be received by the Contributors will be determined as
follows:
CV
---
MP
Where:
MP = The mid-point of the proposed offering prices per share as set
forth in the final red herring included in the Registration
Statement.
C. Notwithstanding anything to the contrary set forth herein, the Contributors
shall have no obligation to consummate the transactions contemplated by this
Agreement if IY exceeds 8.75%.
<PAGE>
Exhibit 10.24
OPTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTOR NAMED BELOW
DEVLO, INC.
Dated as of April 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
ARTICLE I: THE OPTION.......................................................... 1
1.1 Grant of Option..................................................... 1
1.2 Term and Exercise of Option......................................... 1
1.3 Acquisition Consideration........................................... 1
1.4 Lock-Up Agreement................................................... 2
1.5 Other Agreements.................................................... 2
1.6 Adjustments to Acquisition Consideration............................ 2
ARTICLE II: CLOSING PROCEDURES.................................................. 2
2.1 Contribution of Property Interests................................. 2
2.2 Closing; Conditions to Obligations................................. 2
2.3 Documents to Be Delivered at the Closing........................... 4
2.4 Cessation of Public Offering....................................... 5
2.5 Closing Costs...................................................... 5
2.6 Default............................................................ 5
2.7 Further Assurances................................................. 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR............... 5
3.1 Title to Interests................................................. 5
3.2 Organization; Authority; No Conflicts.............................. 6
3.3 Litigation......................................................... 7
3.4 No Other Agreements................................................ 7
3.5 No Brokers......................................................... 7
3.6 Investment Representations and Warranties.......................... 7
3.7 Private Placement Memorandum....................................... 8
3.8 Covenant to Remedy Breaches........................................ 8
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP........................................................ 9
4.1 Authority.......................................................... 9
4.2 No Brokers......................................................... 9
4.3 Exercise of Options................................................ 9
ARTICLE V: POWER OF ATTORNEY.................................................. 9
5.1 Grant of Power of Attorney......................................... 9
5.2 Limitation on Liability............................................ 11
5.3 Ratification; Third Party Reliance................................. 11
ARTICLE VI: MISCELLANEOUS...................................................... 11
6.1 Amendment.......................................................... 11
6.2 Entire Agreement; Counterparts; Applicable Law..................... 11
6.3 Assignability...................................................... 11
6.4 Titles............................................................. 11
6.5 Third Party Beneficiary............................................ 12
6.6 Severability....................................................... 12
6.7 Equitable Remedies................................................. 12
6.8 Notices; Exercise of Option........................................ 12
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6.9 Waiver of Rights; Consents with Respect to Partnership Interests... 13
6.10 Confidentiality.................................................... 14
6.11 Computation of Time................................................ 14
6.12 Survival........................................................... 14
6.13 Time of the Essence................................................ 14
</TABLE>
Exhibits
A. Grantor
B. Partnerships & Interests
C. Form of Lock-Up Agreement
D. Form of Exchange Rights Agreement
E. Form of Registration Rights Agreement
F. Adjustment Provisions
Schedule 1.3
The exhibits and/or schedules of Exhibit 10.24, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OPTION AGREEMENT
----------------
This Option Agreement (this "AGREEMENT") dated as of the 26th day of
April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the
Grantor listed on Exhibit A attached hereto (the "GRANTOR").
R E C I T A L S:
- - - - - - - -
A. The Grantor owns an indirect interest in the partnership as
described on Exhibit B (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire on the terms and conditions set
forth herein, all of the interest owned by the Grantor and set forth on Exhibit
B and any other direct or indirect interest the Grantor may have, whether now
owned or hereinafter acquired, in the Partnership and/or in the property owned
thereby. (Such property and all personal property related thereto or to the
operation thereof is hereinafter referred to as such Partnership's "PROPERTY,"
and all of such direct or indirect interests of the Grantor in such Partnership
or Property, including, without limitation, the interest shown on Exhibit B, are
referred to collectively as the Grantor's "PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, par value $.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantor agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to capital all the Grantor's right, title and interest in the
Grantor's Property Interests on the terms and conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (as such
term is defined in Section 2.4) (the earlier of such dates, the "OPTION
TERMINATION DATE"); provided, that if on the Option Termination Date the
Operating Partnership or the Grantor is prohibited by applicable law, or the
Operating Partnership or the Grantor is subject to a stay, order, injunction, or
similar limitation or any pending or threatened action or proceeding to enjoin,
restrain, prohibit or assess substantial damages in respect of the exercise by
the Operating Partnership of the Option, then the Option may be exercised by the
Operating Partnership during the 10 business day period commencing on the first
business day following the removal of each such prohibition, stay, order,
injunction, action, proceeding or similar limitation in effect at that time.
Subject to the foregoing, if the Operating Partnership does not exercise the
Option by the Option Termination Date, then the Option shall be deemed
terminated and shall be of no further force or effect and the Grantor shall have
no further obligations hereunder.
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
-------------------------
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Property Interests to the Operating
<PAGE>
Partnership shall be determined in accordance with Schedule 1.3 annexed hereto,
prior to any adjustments pursuant to Section 1.6. The Acquisition Consideration
shall be paid in units of limited partnership interests in the Operating
Partnership ("OP UNITS"). All adjustments under Section 1.6 shall be paid in
cash. The Acquisition Consideration will be allocated 95% to buildings,
fixtures and other improvements and 5% to personal property.
1.4 Lock-Up Agreement. The Units to be issued to the Grantor
-----------------
hereunder shall be subject to a Lock-Up Agreement to be executed at Closing by
the Operating Partnership and the Grantor, substantially in the form attached as
Exhibit C, whereby the Grantor will not be permitted to transfer Units for one
year after Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to Closing, the Company, the
----------------
Grantor and the other parties thereto shall enter into a Registration Rights
Agreement and Exchange Rights Agreement, as described in Section 5.1(a) and
substantially in the forms attached hereto as Exhibits D and E, respectively.
1.6 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to the Grantor and the Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for the Partnership in
accordance with the provisions of Exhibit F. For purposes of this Section 1.6
and Exhibit F, the Grantor shall be considered an "Other Contributor" within the
meaning of Exhibit F and agrees to be bound by Exhibit F and fulfill all
obligations thereunder, including the obligation to make payments prescribed
thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Contribution of Property Interests. Upon the Operating
----------------------------------
Partnership's exercise of the Option, the Grantor shall, in accordance with
Section 2.2 hereof, transfer, assign, and convey to the Operating Partnership
and the Operating Partnership shall accept as a contribution to capital from the
Grantor, all right, title and interest in the Grantor's Property Interests, free
and clear of all Encumbrances in exchange for the Grantor's Acquisition
Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Operating Partnership shall exercise the Option by delivering
to the Grantor a notice (the "OPTION NOTICE"), which notice shall state the date
(the "CLOSING DATE") of the closing of the transactions contemplated by Section
2.1 (the "CLOSING"), which date shall be no more than 30 days following the date
of such Option Notice. The Closing shall be held within such 30 day period at
the offices of Battle Fowler LLP, 75 East 55th Street, New York, New York or at
such other place to be determined by the Operating Partnership in its sole
discretion. Following delivery of an Option Notice, the Operating Partnership
and the Grantor will at or prior to the Closing execute and deliver all closing
documents (the "CLOSING DOCUMENTS") required by the Operating Partnership
pursuant to Section 2.3 and, pending the Closing, deposit such Closing Documents
in escrow with Battle Fowler LLP, as escrow agent of the Operating Partnership
(the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to acquire all the Property Interests of the
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO, as the same shall be in effect on the day of the IPO
Closing.
-2-
<PAGE>
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to the Grantor where the Grantor's Option has
been exercised, (x) a certificate of the general partner of the Operating
Partnership (the "GENERAL PARTNER") certifying that the Grantor has been or will
be, effective as of the Closing, admitted as a limited partner of the Operating
Partnership and that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of OP Units that
represents the Grantor's Acquisition Consideration and (y) if such OP Units are
represented by certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the Grantor is entitled;
and
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor where the Grantor's Option has been
exercised, the certificates, if any, representing the Grantor's OP Units and, if
requested by the Grantor, a copy of the General Partner's certificate referred
to in clause (i).
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Property Interests of the Grantor as
follows:
(i) in the event that the Grantor either identifies in
its Assignment delivered pursuant to Section 2.3(a) a breach of or other
exception with respect to any of the representations, warranties or covenants
contained in Article III or has otherwise breached this Agreement,
(ii) in the event the Grantor shall not have obtained
assignments of the limited partner interest ("Assigned Interest") in the
Partnership listed on Exhibit A in proportion to the Grantor's interests in the
partnership previously holding such Assigned Interest, or
(iii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of the Grantor's
Property Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess substantial
damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
- ----
the Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to consummate the contribution of all of the Grantor's Property
Interests, notify the Escrow Agent of such election and direct the Escrow Agent
to return the Grantor's Closing Documents to the Grantor, or (B) in all other
cases, equitably adjust the delivery with respect to the Grantor pursuant to
clause (c)(i) above to reflect the portion of the Grantor's Property Interests
with respect to which the contribution is actually being consummated, which
adjustment shall be determined in the Operating Partnership's reasonable
discretion, and shall in all events be binding upon the Grantor. The election
of the Operating Partnership not to purchase all or any portion of the property
interests of any other grantor contributing property in connection with the IPO
shall not affect the obligations of any other Grantor hereunder.
(e) Except as the result of a default by the Grantor hereunder, if
the Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise the Option again at
any time before the Option Termination Date.
-3-
<PAGE>
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Operating
Partnership, shall contain a warranty of title that the Grantor owns the
Property Interests free and clear of all Encumbrances (as defined below) and
shall either (i) reaffirm the accuracy of all representations and warranties and
the satisfaction of all covenants contained in Article III hereof, or (ii) if
such reaffirmation cannot be made, identify those representations, warranties
and/or covenants contained in Article III hereof (other than Section 3.9) which
the Grantor can no longer make or comply with, represent that the Grantor has
used reasonable efforts to take such actions as would permit the Grantor to make
such representations and warranties and/or to comply with such covenants, and
reaffirm the accuracy of all other representations and warranties and the
satisfaction of all other covenants contained in Article III hereof.
(b) If requested by the Operating Partnership a certified copy of all
appropriate partnership actions authorizing the execution, delivery and
performance by the Grantor of this Agreement and the Closing Documents.
(c) If requested by the Operating Partnership an opinion from counsel
for the Grantor in form and content reasonably acceptable to the Operating
Partnership substantially to the effect that:
(i) the Grantor is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to execute,
deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of the
Grantor's charter and/or bylaws, or, to the knowledge of such counsel, any
indenture, deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party or by
which it or its assets or properties are bound or affected, except for such
breach or violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid prior to or
contemporaneously with the Closing; (y) to the knowledge of such counsel,
constitute a violation of any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or properties are
bound or affected; or (z) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the Grantor's
assets or properties, except for Permitted Pledges (as defined below); and
(iii) all applicable corporate action necessary for the
Grantor to execute and deliver this Agreement and the Closing Documents and
to perform the transactions contemplated hereby and thereby has been taken
and that the same have been validly executed and delivered and are the
valid and binding obligations of the Grantor enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event the Grantor fails to provide such an affidavit, the
Operating Partnership shall be entitled to withhold from the Acquisition
Consideration and pay to the Internal Revenue Service the sums required to be
withheld pursuant to FIRPTA (and the amount so withheld shall be paid by the
Operating Partnership to the Internal Revenue Service, in order for the
Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
-4-
<PAGE>
(e) The Lock-up Agreement, the Exchange Rights Agreement, the
Registration Rights Agreement the Partnership Agreement of the Operating
Partnership (the "Partnership Agreement").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Property Interests to the Operating Partnership as a contribution to
capital and to otherwise effectuate the transactions contemplated hereby,
including filings with any applicable governmental jurisdiction in which the
Operating Partnership is required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Operating Partnership will so advise the Grantor in
writing and thereupon all parties hereto will be relieved of all obligations
under this Agreement and all Closing Documents (except for obligations arising
under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
-------------
the closing costs, other than Grantor's legal fees, arising from the
contribution of the Property Interests of the Grantor to the Operating
Partnership pursuant to the exercise by the Operating Partnership of the
Grantor's Option.
2.6 Default.
-------
(a) If after having exercised the Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to the Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of the Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
the Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
------------------
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the contribution of the Grantor's Property Interests to the Operating
Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF GRANTOR
---------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby severally makes to the Operating Partnership each of the
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to consummate
the contribution of the Grantor's Property Interests to the Operating
Partnership after the exercise of the Grantor's Option, such representations and
warranties must be true as of the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit B, the
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
-5-
<PAGE>
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by the Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will acquire as a
contribution to capital good and valid title thereto, free and clear of any
Encumbrance, except Encumbrances created in favor of the Operating Partnership
by the transactions contemplated hereby. Each of the Grantor's Property
Interests representing an interest in a Partnership has been validly issued and
the Grantor has funded (or will fund before the same is past due) all capital
contributions and advances to the Partnership in which such Property Interest
represents an interest that are required to be funded or advanced prior to the
date hereof and the date of the Closing. There are no agreements, instruments
or understandings with respect to any of the Grantor's Property Interests
except, in the case of any Property Interest constituting an interest in a
Partnership, as set forth in the partnership agreement of such Partnership. The
Grantor has no interest, either direct or indirect, in any of the Partnership or
Properties except for the Property Interests identified on Exhibit B which are
the subject of this Agreement. No Permitted Pledge will be in existence as of
the date of the Closing, and the Grantor shall provide, at the Closing, such
documentary evidence of the release of any Permitted Pledge as the Operating
Partnership may reasonably request. In making the representations in this
Section 3.1 regarding the absence of Encumbrances, the Grantor may assume that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of any Partnership in which the Grantor's Property
Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. The Grantor is a
-------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization. The Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of the Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of the Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable corporate action
necessary for the Grantor to execute and deliver this Agreement, the Closing
Documents and each other agreement, document and instrument executed by or on
behalf of the Grantor pursuant to this Agreement, and to perform the
transactions contemplated hereby and thereby, has been taken, or will be taken
prior to the Closing Date. This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of the
Grantor pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms. Except for any breaches,
violations or defaults which will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing, the execution, delivery and
performance of this Agreement, the Closing Documents and each other agreement,
document and instrument to be executed and delivered by or on behalf of the
Grantor: (x) does not and will not violate the Grantor's charter and/or bylaws;
(y) does not and will not violate any foreign, federal, state, local or other
laws applicable to the Grantor or require the Grantor to obtain any approval,
consent or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and which does
not remain in effect; and (z) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement or any other agreement, contract, instrument, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which the Grantor is a party or by which the property of
the Grantor is bound or affected, or result in the creation of any Encumbrance
on any of the property or assets of any Partnership in which any Property
Interest of the Grantor represents an interest. In making the representations
set forth in this Section 3.2, the Grantor may assume (i) that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership in which the Grantor's Property Interests represent
direct or indirect interests and (ii) that, for purposes of making such
representation as of the date hereof, any Permitted Pledge has been released.
-6-
<PAGE>
3.3 Litigation. There is no litigation or proceeding, either
----------
judicial or administrative, pending or overtly threatened, affecting all or any
portion of the Grantor's Property Interests or the Grantor's ability to
consummate the transactions contemplated hereby. The Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair the
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. The Grantor has made no agreement with, and
-------------------
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Grantor's Property Interests or restricting in any
way the Grantor's ability to contribute the Grantor's Property Interests to the
Operating Partnership or to enter into any agreement with respect to the
Grantor's Property Interests. In making the representations set forth in this
Section 3.4, the Grantor may assume (i) that the consents and waivers of rights
set forth in Section 6.9 hereof have been given by all partners of the
Partnership in which the Grantor's Property Interests represent direct or
indirect interests and (ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
----------
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
-----------------------------------------
(a) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in connection
with the contribution of Property Interests to the Operating Partnership (which
Private Placement Memorandum includes a draft Registration Statement on Form S-
11 prepared in connection with the IPO), the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters (the "TAX
MATTERS SUMMARY"), and understands the risks of, and other considerations
relating to, an investment in OP Units. The Grantor, by reason of its business
and financial experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with respect to
its investment in OP Units, (i) has such knowledge, sophistication and
experience in financial and business matters and in making investment decisions
of this type that it is capable of evaluating the merits and risks of and of
making an informed investment decision with respect to an investment in OP
Units, (ii) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests and (iii)
is capable of bearing the economic risk of such investment. The Grantor is an
"accredited investor" as defined in Rule 501 of the regulations promulgated
under the Securities Act. If the Grantor has retained or retains a person to
represent or advise it with respect to its investment in OP Units, the Grantor
will advise the Operating Partnership of such retention and, at the Operating
Partnership's request, the Grantor shall, prior to or at the Closing, (i)
acknowledge in writing such representation and (ii) cause such representative or
advisor to deliver a certificate to the Operating Partnership containing such
representations as may be reasonably requested by the Operating Partnership.
(b) The Grantor understands that an investment in the Operating
Partnership involves substantial risks. The Grantor has been given the
opportunity to make a thorough investigation of the proposed activities of the
Operating Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary and the
Tax Matters Summary. The Grantor has been afforded the opportunity to obtain
any additional information requested by it. The Grantor has had an opportunity
to ask questions of and receive answers from representatives of the Operating
Partnership concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units. The Grantor has relied
and is making its investment decision based upon the Private Placement
Memorandum, the Partnership Summary, the Tax Matters Summary and other written
-7-
<PAGE>
information provided to the Grantor by or on behalf of the Operating Partnership
and/or, as applicable, the Grantor's position as a director and/or executive
officer of the Company.
(c) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and not with a
view to, or with any intention of, a distribution or resale thereof, in whole or
in part, or the grant of any participation therein. The Grantor was not formed
for the specific purpose of acquiring an interest in the Operating Partnership.
(d) The Grantor acknowledges that (i) the OP Units to be issued to
the Grantor at the Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and,
if such OP Units are represented by certificates, such certificates will bear a
legend to such effect, (ii) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of the Grantor contained
herein, (iii) the OP Units to be issued to the Grantor at the Closing may not be
resold or otherwise distributed unless registered under the Securities Act and
applicable state securities laws, or unless an exemption from registration is
available, (iv) there is no public market for such OP Units, and (v) the
Operating Partnership has no obligation or intention to register such OP Units
under the Securities Act or any state securities laws or to take any action that
would make available any exemption from the registration requirements of such
laws, except as provided in the Registration Rights Agreement (as defined
below). The Grantor hereby acknowledges that because of the restrictions on
transfer or assignment of such OP Units to be issued hereunder which will be set
forth in the Partnership Agreement and in the Lock-up Agreement, the Grantor may
have to bear the economic risk of the investment commitment evidenced by this
Agreement and any OP Units issued hereunder for an indefinite period of time,
although (x) under the terms of the Exchange Rights Agreement, as it will be in
effect at the time of the IPO, OP Units will be exchangeable at the request of
the holder thereof at any time after the first anniversary of their issuance for
cash based on their fair market value or, at the option of the Company, for
Common Stock and (y) the holder of any such Common Stock issued upon exchange of
OP Units will be afforded certain rights to have such Common Stock registered
under the Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement (as described in Section 5.1(a)).
(e) The address set forth under the Grantor's name in Exhibit A is
the address of the Grantor's principal place of business or, if a natural
person, the address of the Grantor's residence, and the Grantor has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal place of business or
residence is sited.
3.7 Private Placement Memorandum. The Grantor understands and
----------------------------
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor. Without limiting the foregoing,
such changes may include the deletion (or addition) of one or more properties
expected to be acquired by the Operating Partnership and changes in the amount
of the indebtedness expected to be repaid with the proceeds of the IPO. The
Operating Partnership shall not be obligated to obtain the Grantor's consent as
a result of such changes, although such changes could affect the nature and
value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of the Grantor hereunder, (ii) to satisfy all
covenants the Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of the Grantor hereunder upon its learning
of same.
-8-
<PAGE>
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; (ii) to
perform the transactions contemplated hereby and thereby; and (iii) to issue OP
Units to the Grantor pursuant to and in accordance with the terms of this
Agreement. This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms. The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership: (x) does
not and will not violate the Partnership Agreement; (y) does not and will not
violate any foreign, federal, state, local or other laws applicable to the
Operating Partnership or require the Operating Partnership to obtain any
approval, consent or waiver of, or make any filing with, any person or authority
(government or otherwise) that has not been obtained or made and which does not
remain in effect; and (z) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement, any other material agreement, contract, instrument,
lease, permit or authorization, or any order, writ, judgment, injunction,
decree, determination or arbitration award to which the Operating Partnership is
a party or by which the property of the Operating Partnership is bound or
affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
----------
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
option of any other grantor contributing property in connection with the IPO, it
will exercise the Option of the Grantor hereunder, but this covenant shall in no
way affect the Operating Partnership's right, pursuant to Section 2.2(c), to
elect not to accept the contribution of all or any portion of the Property
Interests of the Grantor where the Grantor is not in compliance with the terms
of this Agreement.
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. The Grantor does hereby irrevocably
--------------------------
appoint Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the Operating
Partnership, and each of them individually, with full power of substitution
(such person or the Operating Partnership or any such successor of any of them
acting in his, her or its capacity as attorney-in-fact pursuant hereto, the
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of the
Grantor, to act in the name, place and stead of the Grantor:
(a) To enter into (i) the Exchange Rights Agreement, as well as the
(ii) Registration Rights Agreement, which provides the Grantor certain
rights to have the Common Stock which may be issued to
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<PAGE>
the Grantor upon exchange of the Grantor's OP Units registered under the
Securities Act, and (iii) the Lock-up Agreement.
(b) To take for the Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the IPO, including without
limitation (i) filing a registration statement and amendments thereto (the
"REGISTRATION STATEMENT") under the Securities Act which describes the
benefit to be received by the Grantor in connection with the formation of
the Company and the offering of the Company's Common Stock, (ii)
distributing a preliminary prospectus and prospectus regarding the offering
of the Company's Common Stock (the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and (iii) to take such other steps as
the Attorney-in-Fact may deem necessary or advisable.
(c) To make, acknowledge, verify and file on behalf of the Grantor
applications, consents to service of process and such other undertakings or
reports as may be required by law with state commissioners or officers
administering state securities or Blue Sky laws and to take any other
action required to facilitate the exemption from registration of the OP
Units and the qualification of the Company's Common Stock under the
securities or Blue Sky laws of the jurisdictions in which the OP Units and
the Company's Common Stock are to be offered.
(d) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the contribution of the Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could the Grantor if personally present
and acting.
The Power of Attorney granted by the Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other grantors contributing property in connection with the IPO and is for the
purpose of completing the transactions contemplated by this Agreement. The
Power of Attorney of the Grantor granted hereby and all authority conferred
hereby is coupled with an interest and therefore shall be irrevocable and shall
not be terminated by any act of the Grantor or by operation of law, whether by
the liquidation of the Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
the Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, the Grantor is liquidated, or if any other such event or
events shall occur before the completion of the transactions contemplated by
this Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death, disability,
incapacity, liquidation or other event or events had not occurred and regardless
of notice thereof. The Grantor acknowledges that Steven D. Jorns, Bruce G.
Wiles, Kenneth E. Barr and the Operating Partnership have, and any successor
thereof acting as Attorney-in-Fact may have, an economic interest in the
transaction contemplated by this Agreement. The Grantor agrees that, at the
request of the Operating Partnership, it will promptly execute a separate power
of attorney on the same terms set forth in this Article V, such execution to be
witnessed and notarized.
The Grantor hereby acknowledges and confirms that the Power of
Attorney granted by the Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of the Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the aggregate number of OP Units that
the Grantor will receive in connection with the exercise by the Operating
Partnership of the Grantor's Option, provided that such power is used for such
purpose only in connection with a change in the anticipated range of initial
offering prices of the Company's Common Stock or if
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<PAGE>
the actual initial offering price of the Company's Common Stock is different
from that which was originally anticipated in determining the Acquisition
Consideration.
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by the Grantor hereby. Each Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the contribution of the Property Interests to the
Operating Partnership, the Registration Statement, the Prospectus or any
Preliminary Prospectus, nor for any aspect of the IPO, and it shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. The
Grantor agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-
in-Fact harmless against any loss, claim, damage or liability incurred or in
part arising out of or in connection with its acting as the Attorney-in-Fact
under the Power of Attorney created by the Grantor hereby, as well as the cost
and expense of investigating and defending against any such loss, claim, damage
or liability, except to the extent such loss, claim, damage or liability is due
to the gross negligence or bad faith of the Attorney-in-Fact. The Grantor
agrees that the Attorney-in-Fact may consult with counsel of its own choice (who
may be counsel for the Operating Partnership and/or the Company) and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that each Attorney-in-Fact may, without
breaching any express or implied obligation to the Grantor hereunder, release,
amend or modify any other Power of Attorney granted by any other grantor
contributing property in connection with the IPO hereunder or by any other
person under any related agreement.
5.3 Ratification; Third Party Reliance. The Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
-------------
6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment. No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
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<PAGE>
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 6.3 and 6.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of the notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Exhibit A hereto.
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<PAGE>
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) The Grantor acknowledges that the agreements contained herein and
the transactions contemplated hereby and any actions taken in contemplation of
the transactions contemplated hereby (including the declaration of any dividend
or distribution in the form of Property Interests) may conflict with, and may
not have been contemplated by, the partnership agreement of the Partnership in
which the Grantor's Property Interests represent a direct or indirect interest
or another agreement among one or more holders of other property interests in
the Partnership or one or more of the partners of the Partnership. With respect
to the Partnership in which a Property Interest of the Grantor represents a
direct or indirect interest, the Grantor expressly gives all Consents (and any
consent necessary to authorize the proper parties in interest to give all
Consents) and Waivers necessary or desirable to facilitate any Conveyance Action
relating to such partnership (as such terms are defined below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
the Partnership having a direct or indirect ownership interest in the Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is the
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company as described in the
Private Placement Memorandum, or (ii) the entering into by any such partner or
holder of any agreement relating to (x) the formation of the Operating
Partnership or the Company as described in the Private Placement Memorandum, (y)
the direct or indirect acquisition by to the Operating Partnership or the
Company of any such direct or indirect interest, or (z) the transactions
described in or contemplated by the Private Placement Memorandum, or (iii) the
taking by any such partner or holder of any action necessary or desirable to
facilitate any of the foregoing, including, without limitation, the following
(provided that the same are taken in furtherance of the foregoing): any sale or
distribution to any person of a direct or indirect interest in such partnership,
the entering into any agreement with any person that grant to such person the
right to purchase a direct or indirect interest in such partnership, and the
giving of the Consents and Waivers contained in this Section 6.9 or consent or
waivers similar thereto in form or purpose. As used herein, the term "CONSENTS"
means, with respect to any such partnership, any consent necessary or desirable
under the partnership agreement of such partnership or any other agreement among
all or any of the holders of interests therein or any other agreement relating
thereto or referred to therein (i) to permit any and all Conveyance Actions
relating to such partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs or
interferes with any Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default under such
agreement if interests therein are transferred for other than cash), (ii) to
admit the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section 6.3 above) as a
substitute limited partner or general partner of such partnership upon the
Operating Partnership's acquisition of a limited or general partner interest
therein, respectively, and to adopt such amendment as is necessary or desirable
to effect such admission, (iii) to adopt any amendment as may be deemed
desirable by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general partnership
interest therein, and (iv) to continue such partnership following the transfer
of interests therein to the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance with Section
6.3 above). As used herein, the term "WAIVERS" means, with respect to the
partnership of which a Property Interest of the Grantor represents a direct or
indirect interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may have
with respect to, or that may accrue to the Grantor or other person upon the
occurrence of, a Conveyance Action relating to such partnership, including, but
not limited to, the following rights: rights of notice, rights to response
periods, rights to purchase the direct or indirect interest of another partner
in such partnership or to sell the Grantor's or other person's direct or
indirect interest therein to another partner, rights to sell the Grantor's or
other person's direct or indirect interest therein at a price other than as
provided herein, or rights to prohibit, limit, invalidate, otherwise restrict or
impair any such Conveyance Action or to cause a termination or dissolution of
such partnership because of such Conveyance Action. The Grantor further agrees
that the Grantor will take no action to enjoin, or seek damages resulting from,
any Conveyance Action by any holder of a direct or indirect interest in the
partnership in which a Property Interest of the Grantor
-13-
<PAGE>
represents a direct or indirect interest. The Waivers and Consent contained in
this Section 6.9 shall terminate upon the termination of this Agreement, except
as to transactions completed hereunder prior to termination.
(b) The Grantor by its execution hereof (i) with respect to the
Partnership in which a Property Interest owned by the Grantor represents a
direct or indirect interest therein, gives such consent as is necessary to cause
the Partnership to have authority to transfer all or substantially all of the
assets of such Partnership to the Operating Partnership on such terms and
conditions as the Partnership and the Operating Partnership may agree; and (ii)
agrees that the Grantor's Acquisition Consideration may be reduced to reflect
such direct transfer of assets and the consequent receipt of OP Units directly
by such Partnership, provided that the total consideration to be received by the
Grantor either directly hereunder or indirectly through the receipt of OP Units
by the Partnership shall equal the Grantor's Acquisition Consideration.
(c) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of the Partnership
in which a Property Interest of the Grantor represents directly or indirectly, a
limited partner or general partner interest, an amendment thereto to enable such
partnership, to the extent permissible under applicable law, (i) to admit the
Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner therein if the
Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by the exercise
of the Grantor's Option acquires a limited partnership interest or a general
partnership interest in such partnership, (ii) to redeem the interest of any
other partner therein who has not agreed to become a party to this Agreement,
(iii) to distribute to all partners thereof, including any partner who has not
agreed to become a party to this Agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a result of all
such distributions and the direct payment of consideration hereunder, that
number of OP Units that is in conformity with the Acquisition Consideration of
the Grantor provided for herein), and thereafter, at the Operating Partnership's
option, to dissolve, and (iv) any such other amendment as the Operating
Partnership may deem desirable, provided that such amendment occurs
simultaneously with or immediately prior to the acquisition of the applicable
partnership interest and, provided further, that such amendment will not result
in any increased liability on the part of the Grantor hereunder or under the
applicable partnership agreement. The Attorney-in-Fact may on behalf of the
Grantor execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. The Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to the Grantor
who agree to keep such terms confidential. The Grantor shall treat all
information received from the Operating Partnership or its counsel or advisors
pertaining to the Operating Partnership or the Company confidential and shall
disseminate same only to counsel to the Grantor who agree to keep such
information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of the Grantor
set forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of the Grantor under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
By: /s/ Bruce G. Wiles
------------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
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<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become the named Grantor to that certain
Option Agreement by and among American General Hospitality Operating
Partnership, L.P. and the Grantor, dated as of April 26, 1996 hereby becomes a
party to such Option Agreement. The undersigned agrees that this signature page
may be attached to any counterpart of said Option Agreement.
Signature line for Grantor
who is a natural persons:
-------------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: /s/ Devlo, Inc.
--------------------------------------
Name of Grantor
By: /s/ James Pruett
--------------------------------------
Name: James Pruett
Title: President
Address of Grantor: 4381 Green Oaks Blvd., West
--------------------------------------
Suite 100
--------------------------------------
Arlington, Texas 76016
--------------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
<PAGE>
EXHIBIT F
The Adjustment Provisions set forth below herein are substantially in the
form as Article ("Article 7") of that certain Contribution Agreement, among
Virtual Hospitality, Inc., Jackson-Shaw Partners No. 51, Ltd., 3005 Hotel
Associates, Ltd., 3100 Hotel Associates, L.P., Stephen D. Jorns, James E.
Sowell, Lewis W. Shaw, II, Kenneth W. Shaw, Monica Jorns, Bruce G. Wiles, 3860
Investors Joint Venture, and 282 Almaden Hotel Associates, L.P. and the
Operating Partnership, dated on or about the 26th day of April, 1996. It is the
intention of the parties that the adjustments contemplated in Section 1.6 shall
be made in accordance with Article 7.
ADJUSTMENT PROVISIONS
- ---------------------
7.1 APPORTIONMENTS. With respect to each Hotel, the Contribution
--------------
Value reflects a deduction for all mortgage indebtedness on the Hotels. With
respect to each Partnership, the following adjustments and apportionments shall
be made in cash among the Contributors in each Partnership, and the OP. It is
the parties' intention that the prorations and adjustments conform in substance
to those that would be made in a sale of real property as set forth herein. All
such prorations for each Partnership shall be netted against each other and the
net amount, if in favor of the Contributors, shall be paid in cash to each
Contributor (and each Other Contributor) in such Partnership with each such
Contributor (and each Other Contributor) to receive its "Allocable Share" of
such amount; or, if in favor of the OP, to the OP, in which case, each
Contributor (and each Other Contributor) shall pay its Allocable Share thereof.
As used in this Article 7, Allocable Share shall mean each Contributor's (and
Other Contributor's) pro rata share commensurate with its Partnership Interest
in the Partnership at Closing. At Closing, the following items of revenue and
expense shall be prorated as of 12:01 A.M. on the Closing Date:
A. Real estate taxes, personal property or use taxes and sewer
rents, on the basis of the best available estimates for such taxes and rents
that will be due and payable on the Hotel for the calendar year in which the
Closing occurs.
B. All utility costs and expenses and other costs and expenses of
operating the Hotel which are reasonably capable of proration, including, but
not limited to, all salaries, compensation, sick pay, vacation pay and other
accrued benefits of Hotel employees.
C. Amounts paid or payable under the service contracts and equipment
leases.
D. Rents under space leases and other revenues as and when
collected. If the Partnership receives any rents from tenants under space
leases after the Closing Date then such collections shall first be applied to
rents accruing on or after the Closing Date, and OP shall cause the Partnership
to remit the balance, if any, to the applicable Contributors to the extent any
pre-Closing Date rental obligation under such tenant's lease remains unpaid.
Upon request of the Contributors (at their expense), the Partnership will use
reasonable efforts to collect delinquent rents directly from a tenant on such
Contributors' behalf.
E. The Contributors will be charged with all interest to date of
Closing on any mortgage other than DFW South. With respect to DFW South,
interest thereon and all escrows held by lender shall be adjusted at Closing.
F. Rents due under any ground leases shall be prorated.
G. Guest, convention, room, food, beverage, and all other charges
and revenues for services rendered and the operation of all departments of the
Hotel, including, but not limited to, advance payments under booking agreements
for rooms, facilities and services of the Hotel and any other revenues, as and
when collected, provided, however, that food, room service and restaurant
revenue shall be read, measured (and tapes preserved) and apportioned as of 2:00
a.m. on the Closing Date. The final night's room revenue (revenue from rooms
<PAGE>
occupied on the evening preceding the Closing Date) less a sum equal to all room
maid services with respect thereto shall be allocated to the applicable
Contributors. All cash, checks, and other funds, and all other notes, security,
accounts receivable and other evidence of indebtedness located at the Hotel as
of 2:00 a.m. on the Closing Date and balances on deposit to the credit of the
Partnership with banking institutions are and shall be credited to the
applicable Contributors (except for the guest (tray) ledger for guests staying
in the Hotel on the Closing Date which will be paid for by the OP).
H. Fees and expenses for music, entertainment, trade association
dues, trade, newspaper and other periodical subscriptions, coin machine income,
and washroom and checkroom income.
I. The value of food and liquor inventory in unopened cases.
J. With respect to all prepaid rents and deposits, including but not
limited to, utility deposits, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services or
made in connection with the space leases or the guest bookings (collectively,
the "Deposits"), the OP shall be entitled to a credit for the amount of the
Deposits which do not remain in possession of the Partnership, and the
Partnership will remain liable for all of the post-Closing liability and
obligations, if any, with regard to such Deposits;
7.2 RECONCILIATION. If, after the prorations to be made pursuant to
--------------
7.1, (x) the sum of all cash and cash equivalents, investments, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by the Partnership, exceeds or is less than (y) the sum
of all accounts payable, accrued real estate taxes, accrued interest, other
accrued expenses and other liabilities generally recognized as current
liabilities owed by the Partnership, any excess amount shall be paid by the OP
to the Contributors (and Other Contributors) in such Partnership (based on their
Allocable Shares), or such Contributors (and Other Contributors) shall each pay
their Allocable Shares of any shortfall to the OP, as the case may be; provided,
however, that the Contributors (and the Other Contributors) in each Partnership
shall remain each responsible for their Allocable Shares of the payment of all
accounts payable and other pre-Closing liabilities of each Partnership relating
exclusively to periods prior to the Closing Date and each of the Contributors
(and the Other Contributors) in each Partnership shall be entitled to receive
their Allocable Shares of all accounts receivable relating exclusively to such
period, and no prorations will be made with respect thereto.
7.3 OTHER COSTS. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by the applicable Contributors. All sales, use and
other transfer taxes, if any, payable as a result of the contribution of the
Partnership Interests to the OP will be paid by the OP. The Contributors shall
be entitled to receive any rebates or refunds on taxes or other payments paid by
the Partnerships for periods prior to the Closing. The costs of Title Policies
and recordation of all instruments as well as all surveys, environmental
investigations, and the like shall be borne by the OP.
7.4 ESTIMATE AND FINAL RECONCILIATION. Prior to Closing, the
---------------------------------
Contributors and Partnership shall reasonably cooperate to make a preliminary
determination of the prorations required hereunder, and upon closing in escrow
pursuant to Section 5.2, all such adjustments and prorations shall be paid into
escrow based on those estimated numbers. After Closing, the Contributors (and
Other Contributors) in each Partnership shall reasonably cooperate to make a
final determination of such prorations in accordance with this Article 7. Upon
the final reconciliation of the prorations under this Article, but in any event
not later than thirty days following Closing, any party which owes another party
any sums hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay such sums shall survive Closing.
7.5 CONTRACT HOTEL. The prorations, adjustments and costs in
--------------
connection with the acquisition of the Contract Hotel shall be allocated between
the Seller and the Acquired Hotel Owner in accordance with the
<PAGE>
Contract. At
Closing, the Contract Contributor shall be reimbursed in cash for the cost of
any deposit, title search, survey or any other out-of-pocket costs it incurred
in connection with the Contract.
<PAGE>
Schedule 1.3
------------
At the Closing, each Grantor, who has elected to receive OP Units
shall receive a number of OP Units equal to (i) the value of the Equity Interest
(as defined below) (subject to adjustment as set forth below) divided by (ii)
the mid-point of the proposed per share offering prices (the "Mid-Point") set
forth in the final red herring prospectus (the "RED HERRING") included in the
Company's Registration Statement on Form S-11 prepared and filed in connection
with the IPO (the "REGISTRATION STATEMENT"). In the event the initial yield
(the "Initial Yield") (calculated by dividing the estimated annual distribution
per share for the 12-month period following the IPO, as set forth in the Red
Herring, by the Mid-Point) is a percentage greater or less than 8.0%, then the
value of the Equity Interest shall increase or decrease accordingly by an amount
equal to the Applicable Percentage (as defined below) times the resulting change
in the value of the Operating Partnership; provided, however, in no event shall
the value of the Equity Interest be reduced by more than 12.5%. As used herein,
the "value of the Operating Partnership" shall be determined by taking the
product of the "Pro Forma Cash Available for Distribution" as defined in the Red
Herring ("CAD") times the percentage of CAD (expressed as a decimal fraction) to
be distributed to the partners in the Operating Partnership or the shareholders
in the Company (as the case may be) as set forth in the Red Herring, and
dividing that product by the Initial Yield. While the value of the Equity
Interest may never be reduced by more than 12.5%, there shall be no cap on
increases in the value of the Equity Interest as a result of any positive
pricing adjustment described in this Schedule 1.3. For purposes of this
Schedule 1.3, "Applicable Percentage" shall mean the fraction (expressed as a
decimal fraction), the numerator of which is the value of the Equity Interests
(plus each Grantor's pro rata share of the mortgage debt) which are the subject
of the Agreement and the denominator of which is the value of all the assets
acquired by the Operating Partnership upon the consummation of the IPO as
determined in good faith by the Company. For purposes of this Agreement, the
value of the Equity Interests shall be equal to the principal amount of
$335,524.
<PAGE>
Exhibit 10.25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
BY AND AMONG
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership,
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
AND
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation,
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of April 25, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 The Contract ................................................. 2
1.1 Agreement to Contribute ...................................... 2
1.2 Earnest Money ................................................ 2
ARTICLE 2 Hotel ........................................................ 3
ARTICLE 3 Purchase Price; Payment;
Issuance of Limited Partner Units .......................... 6
3.1 Registration Rights .......................................... 7
3.2 Covenants, Representations and Warranties
With Respect to Units and Shares ........................... 7
3.3 Securities Covenants, Representations and
Warranties of Owners ....................................... 8
ARTICLE 4 Title Deliveries ............................................. 11
4.1 Title Commitment ............................................. 11
4.2 UCC Search ................................................... 12
4.3 Survey ....................................................... 12
ARTICLE 5 Hotel Documents, Inspection and Objections ................... 13
5.1 Hotel Documents .............................................. 13
5.2 Procedure for Objections ..................................... 14
5.3 Inspection of Hotel and Environmental Report ................. 14
5.4 Feasibility Determination .................................... 14
5.5 Financial Information ........................................ 15
5.6 Termination Right of Owners .................................. 15
ARTICLE 6 Permitted Exceptions ......................................... 15
6.1 Permitted Exceptions ......................................... 15
ARTICLE 7 Operation of Hotel ........................................... 16
7.1 Interim Operation ............................................ 16
7.2 Notices of Violation ......................................... 18
7.3 Compliance Under Management Agreement ........................ 18
ARTICLE 8 Representations and Covenants ................................ 18
8.1 Representations by Partnership ............................... 18
8.2 Representations by Owners .................................... 19
8.3 [Intentionally Omitted] ...................................... 24
8.4 [Intentionally Omitted] ...................................... 24
8.5 Liquor License ............................................... 24
ARTICLE 9 Conditions Precedent to the Closing .......................... 24
9.1 Conditions to Obligations of the Partnership ................. 24
9.2 Conditions to Owners' Obligations ............................ 26
ARTICLE 10 Closing and Closing Documents ................................ 26
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.1 Closing ...................................................... 26
10.2 Escrow ....................................................... 27
10.3 Owners' Deliveries ........................................... 27
10.4 Deliveries by Partnership and REIT ........................... 29
10.5 Amendment of Formation Documents ............................. 29
10.6 Concurrent Transactions ...................................... 30
10.7 Further Assurances ........................................... 30
10.8 Prorations and Adjustments ................................... 30
10.9 Sales Tax .................................................... 32
10.10 Document Recordation and Transfer Costs ...................... 32
10.11 Reconciliation and Final Payment ............................. 32
ARTICLE 11 Casualty And Condemnation .................................... 32
11.1 Risk of Loss Notice .......................................... 32
11.2 Partnership's Termination Right .............................. 32
11.3 Procedure for Closing ........................................ 33
ARTICLE 12 Default And Remedies ......................................... 33
12.1 Default by Partnership or REIT ............................... 33
12.2 Owners' Default .............................................. 34
ARTICLE 13 Indemnities .................................................. 35
13.1 Owners' Indemnity ............................................ 35
13.2 Partnership's Indemnity ...................................... 36
ARTICLE 14 Broker ....................................................... 36
14.1 No Broker .................................................... 36
14.2 Indemnification by Owners .................................... 36
14.3 Indemnification by AGH ....................................... 37
ARTICLE 15 Definitions .................................................. 37
15.1 Definitions .................................................. 37
ARTICLE 16 Miscellaneous ................................................ 40
16.1 Notice ....................................................... 40
16.2 Entire Agreement; Modifications and Waivers;
Cumulative Remedies .......................................... 41
16.3 Exhibits ..................................................... 42
16.4 Successors and Assigns ....................................... 42
16.5 Article Headings ............................................. 42
16.6 Governing Law ................................................ 42
16.7 Time Periods ................................................. 42
16.8 Counterparts ................................................. 42
16.9 Survival ..................................................... 43
16.10 Further Acts ................................................. 43
16.11 Severability ................................................. 43
16.12 Attorneys' Fees .............................................. 43
16.13 Limitation on Owners' Liability .............................. 43
</TABLE>
<PAGE>
Schedule 1 Unit Determination
EXHIBITS
- --------
Exhibit A Legal Description
Exhibit B Service Contracts
Exhibit C FF&E Leases
Exhibit D Security Documents
Exhibit E Leases
Exhibit F Insurance Policies
Exhibit G Licenses
Exhibit H Violations
Exhibit I Warranties
Exhibit J [Intentionally Omitted]
Exhibit K Environmental Reports
Exhibit L [Intentionally Omitted]
Exhibit M Pending Claims
The exhibits and/or schedules of Exhibit 10.25, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of April 25,
1996 by and among CORPORATE PROPERTY ASSOCIATES 4, a California limited
partnership ("CPA4"), CORPORATE PROPERTY ASSOCIATES 8, L.P., a Delaware limited
partnership ("CPA8"), AMERICAN GENERAL HOSPITALITY, INC., a Texas corporation
("AGH") and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership (the "Partnership"). CPA4 and CPA8 are collectively referred
to as "Owners."
R E C I T A L S:
- - - - - - - -
WHEREAS, Owners, as tenants in common, are the sole owners of the
Hotel (as hereinafter defined), which is currently licensed and operated as a
"Holiday Inn" hotel; and
WHEREAS, prior to the Closing, Owners will convey the Hotel to a
limited partnership or limited liability company owned by them (collectively,
"LLC"); and
WHEREAS, the sole general partner and majority owner of the
Partnership is an entity owned and controlled by American General Hospitality
Corporation (the "REIT"), a corporation organized under the laws of the State of
Maryland which intends to be qualified as a real estate investment trust under
the Internal Revenue Code to continue and expand the hotel acquisition,
development, repositioning and ownership operations of AGH and its affiliates;
and
WHEREAS, AGH and the REIT intend to file with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-11 (as amended
from time to time through the date of the offering, the "Registration
Statement") relating to an underwritten initial public offering (the "IPO") of
its shares (collectively, the "Shares") of common stock, par value $.01 per
share ("Common Stock"); and
WHEREAS, at the Closing, the Owners wish to contribute all of their
partnership interests in LLC to the Partnership in exchange for units of limited
partnership interest in the Partnership ("Units") as hereinafter set forth in
this agreement;
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE 1
THE CONTRACT
------------
1.1 Agreement to Contribute. (a) For and in consideration of the
-----------------------
mutual benefits enjoyed by one another under this Agreement and the terms and
conditions hereof, CPA4 agrees to contribute, assign and transfer its Interest
(the "CPA4 Interest") and CPA8 agrees to contribute, assign and transfer its
Interest (the "CPA8 Interest") to the Partnership (and/or such affiliates of the
Partnership as it may designate, in such percentage allocations as the
Partnership may designate), and the Partnership (or its designee) agrees to
accept the CPA4 Interests and the CPA8 Interests. As used herein, "Interest"
shall mean all of a person or entity's right, title and interest in LLC,
including his or its right, title and interest in capital, profits and
distributions.
(b) Promptly after the expiration of the Document Review Period,
if this Agreement has not been terminated pursuant to the provisions of Section
5.2, Owners shall convey the Hotel to LLC.
1.2 Earnest Money. For the purpose of securing the performance of
-------------
the Partnership and the REIT under the terms and provisions of this Agreement
and as a condition precedent to Owners' obligations hereunder, AGH has
delivered, prior to or contemporaneously with the execution hereof, the Initial
Earnest Money to the Title Company ("Escrow Agent") in current funds. The term
"Initial Earnest Money" shall mean $50,000, and the term "Earnest Money" shall
mean the Initial Earnest Money and any other sums which may from time to time be
deposited as "Additional Earnest Money" hereunder. All interest accruing on
Earnest Money deposited under this Agreement shall become a part of and be added
to the Earnest Money so that it shall be subject to disbursement or application
in the same manner as is the principal of the Earnest Money. The Earnest Money
shall be held in escrow pursuant to the terms of an escrow agreement (the
"Escrow Agreement") executed contemporaneously herewith. The Escrow Agent shall
deposit the Earnest Money in an interest bearing account at a bank or savings
institution reasonably acceptable to Owners and Partnership, and all interest
accrued thereon shall be reported under Partnership's federal tax identification
number. If the transactions contemplated by this Agreement are not consummated
in accordance with the terms hereof, the Earnest Money shall be disbursed
pursuant to the terms of this Agreement and the terms of the Escrow Agreement.
If the transactions contemplated by this Agreement are consummated in accordance
with the terms hereof, the Earnest Money shall be returned to AGH.
-2-
<PAGE>
ARTICLE 2
HOTEL
-----
As used in this Agreement, the term "Hotel" shall mean and refer to
the following:
(a) The parcel or parcels of real property located at 2929 Williams
Boulevard, Kenner, Louisiana and more particularly described on Exhibit A
---------
attached hereto (collectively the "Land");
(b) The 305-room hotel and all other buildings, structures, parking
areas, and other improvements presently located upon the Land (collectively, the
"Improvements");
(c) All tangible personal property and fixtures (collectively, the
"FF&E") of any kind attached to, or located upon and used in connection with the
ownership, maintenance, use or operation of the Land or Improvements on the
Closing Date, including, but not limited to, all furniture, fixtures, equipment,
signs, personal property; all heating, lighting, plumbing, drainage, electrical,
air conditioning, and other mechanical fixtures and equipment and systems; all
elevators, escalators, and related motors and electrical equipment and systems;
all hot water heaters, furnaces, heating controls, motors and boiler pressure
systems and equipment, all shelving and partitions, all ventilating equipment;
and all incinerating and disposal equipment; all health club and fitness
equipment; all vans, automobiles and other motor vehicles; all carpet, drapes,
beds, furniture, televisions and other furnishings; all stoves, ovens, freezers,
refrigerators, dishwashers, disposals, kitchen equipment and utensils, tables,
chairs, plates and other dishes, glasses, silverware, serving pieces and other
restaurant and bar equipment, apparatus and utensils;
(d) All merchandise, supplies, inventory and other items used for the
operation and maintenance of guest rooms, restaurants, lounges, swimming pools,
health clubs, and other common areas and recreational areas located within or
relating to the Improvements, including, without limitation, all food and
beverage (alcoholic and non-alcoholic) inventory, office supplies and
stationery, advertising and promotional materials, towels, linen and bedding,
guest cleaning, paper and other supplies, upholstery material, carpets, rugs,
furniture, engineers' supplies, paint and painters' supplies, employee uniforms,
and pool, tennis court and other recreational area cleaning and maintenance
supplies (collectively, the "Other Personalty");
(e) All leases, licenses (exclusive of the existing Holiday Inns
license agreement), occupancy agreements, "trade-out" agreements or other
agreements demising space in, providing for the use or occupancy of, or
otherwise similarly affecting or relating to the use or occupancy of, the
Improvements or Land,
-3-
<PAGE>
together with all amendments, modifications, renewals and extensions thereof,
and all guaranties by third parties of the obligations of the tenants,
licensees, franchisees, concessionaires or other entities thereunder
(collectively, the "Leases" and individually, the "Lease");
(f) All advance bookings, convention reservations and other guest,
room and other booking and reservation contracts (collectively, the "Guest
Bookings");
(g) All prepaid rents and deposits, including but not limited to,
utility deposits, refundable security deposits and rental deposits, and all
other deposits for advance reservations, banquets or future services made in
connection with the Leases or the Guest Bookings (collectively the "Deposits");
provided, however, that Partnership shall be entitled to a proration credit
under Section 10.8 hereof for the amount of the Deposits which are not
transferred to or for the account of the Partnership at Closing, and the
Partnership will assume all of Owners' post-Closing liabilities and obligations
with regard to such Deposits;
(h) Any and all of the following that relate to or affect in any way,
the design, construction, ownership, use, occupancy, leasing, maintenance,
service, or operation of the Land, Improvements, Leases, Deposits, Guest
Bookings, Other Personalty, or FF&E:
(i) The contracts or agreements described on Exhibit B
---------
attached hereto, and all other contracts or agreements, such as
maintenance, supply, service, parking or utility contracts, (collectively,
the "Service Contracts");
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of LLC relating to the Hotel (collectively the "Warranties");
(iii) Licenses, permits, certificates of occupancy, and similar
documents issued by any federal, state, or municipal authority or by any
private party, including without limitation all of the Owners' rights in
and to the liquor license (collectively the "Licenses");
(iv) Telephone exchanges, trade names, trade styles, trade
marks, and other identifying material, and all variations thereof, together
with all related goodwill (collectively, the "Tradenames") (it being
understood and agreed that the name of the hotel chain to which the Hotel
is affiliated by franchise or other license agreement is a protected name
or registered service mark of such hotel chain);
-4-
<PAGE>
(v) Plans, drawings, specifications, surveys, soil reports,
environmental reports, engineering reports, inspection reports, and other
technical descriptions and reports to the extent in Owners' possession or
control (collectively, the "Plans and Specs"); and
(vi) The leases and other contracts permitting the use of any
FF&E at the Improvements described on Exhibit C attached hereto and all
---------
other leases and other contracts permitting the use of any FF&E at the
Improvements, (collectively, the "FF&E Leases").
(i) LLC's interest in the right to receive immediately on and after
Closing and continuously consume thereafter water service, sanitary and storm
sewer service, electrical service, gas service, and telephone service on and for
the Land and Improvements, free and clear of all qualifications and encumbrances
other than the obligation to pay the applicable utility company the published
rate for utility consumption after Closing, and the foregoing right shall
include, but not be limited to (i) the right to the present and future use of
wastewater, drainage, water and other utility facilities to the extent such use
benefits the Land or Improvements, (ii) all reservations of or commitments
covering any such use in the future, and (iii) all wastewater capacity
reservations ever issued in favor of the Land or Improvements (all of the
foregoing are referred to in this Agreement collectively as the "Utility
Reservations");
(j) All rights, titles and interests of LLC appurtenant to the Land
and Improvements (collectively, the "Appurtenances"), including, but not limited
to, (i) all easements, rights of way, rights of ingress and egress, tenements,
hereditaments, privileges, and appurtenances in any way belonging to the Land or
Improvements, (ii) any land lying in the bed of any alley, highway, street, road
or avenue, open or proposed, in front of or abutting or adjoining the Land,
(iii) any strips or gores of real estate adjacent to the Land, (iv) all leases
of adjacent land or facilities used in connection with the operation of the
Hotel, and (v) the use of all alleys, easements and rights-of-way, if any,
abutting, adjacent, contiguous to or adjoining the Land; and
(k) All books, records, promotional material, tenant data, marketing
and leasing material and forms, market studies, keys, and other materials of any
kind owned by LLC and in LLC's possession or control, or which LLC has access to
or may obtain and has the right to convey and deliver which are or may be used
in LLC's ownership or use of the Land, the Improvements or the FF&E
(collectively, the "Records"); provided, however, that a copy of any such
material which constitutes a part of Owners'
-5-
<PAGE>
continuing business or financial records may be retained by Owners.
All of the property and rights constituting the Hotel except for the
Land and Improvements are hereinafter referred to as the "Personal Property." It
is understood that the property constituting the Hotel does not include any
claims of Owners in the bankruptcy case entitled In re Integra-A Hotel and
-------------------------
Restaurant Company, Case No. 92-1885Y-PAC, United States Bankruptcy Court for
- ------------------
the District of Columbia, which claims are specifically reserved unto Owners. It
is also understood that such property does not include the existing Holiday Inns
license agreement, unless the transfer thereof has been approved by the
licensor.
ARTICLE 3
PURCHASE PRICE; PAYMENT;
------------------------
ISSUANCE OF LIMITED PARTNER UNITS
---------------------------------
3.1 Purchase Price. The purchase price for the Interests shall be
--------------
the sum of Twenty Five Million Eight Hundred Sixty Eight Thousand Dollars
($25,868,000) (the "Purchase Price"), payable as follows: (i) an amount equal to
the Debt Pay-Off Amount shall be paid by acquiring the Interests in the LLC
subject to the obligation of the LLC to repay the Debt, and (ii) the balance of
the Purchase Price (before any adjustments pursuant to Section 10.8 below) shall
be paid to the Owners at the Closing in Units. The Purchase Price shall be
adjusted and the total number of Units to be delivered to the Owners shall be
determined in accordance with Schedule 1 annexed hereto. The Purchase Price
shall be further adjusted as provided in Section 10.8 below, but all adjustments
under Section 10.8 shall be settled in cash. The Purchase Price shall be
allocated (and the Units shall be delivered) 46.383% to CPA4 (the "CPA4 Share")
and 53.617% to CPA8 (the "CPA8 Share"). The parties agree that the Purchase
Price (after adjustment pursuant to Schedule 1, but before any adjustment
pursuant to Section 10.8) will be allocated 5% to the Land, 92% to the
Improvements and 3% to the Personal Property.
Owners hereby subscribe for and agree to accept the issuance of the
Units and the terms and conditions of the partnership agreement for the
Partnership to be executed at or prior to Closing (the "Partnership Agreement"),
including without limitation the power of attorney granted in the Partnership
Agreement, and to execute and deliver at the Closing such other documents or
instruments as may be required by the REIT under the Partnership Agreement to
effect the admission of Owners as limited partners in the Partnership. At the
Closing, Owners and the REIT shall execute and deliver the Partnership Agreement
(or an amendment thereto) by which Owners are issued their Units and admitted as
limited partners to the Partnership (the "Partnership Amendment"). The
Partnership Agreement, as amended, shall be
-6-
<PAGE>
substantially similar to the form of the draft Partnership Agreement dated
4/8/96 previously delivered to Owners.
3.1 Registration Rights. Owners shall have certain rights, after a
-------------------
one-year "lock-out period", to exchange the Units for shares of the Common Stock
and to register the shares with the Securities and Exchange Commission (the
"SEC"). Such rights will be set forth in a lock-out agreement (the "Lock-Out
Agreement"), an exchange rights agreement (the "Exchange Rights Agreement") and
a registration rights agreement (the "Registration Rights Agreement") to be
executed by Owners and the REIT at the Closing. The Lock-Out Agreement, Exchange
Rights Agreement and Registration Rights Agreement shall be substantially
similar to the forms of the draft agreements dated 4/8/96 previously submitted
to Owners.
3.2 Covenants, Representations and Warranties With Respect to Units
---------------------------------------------------------------
and Shares. The Partnership hereby covenants, represents and warrants to Owners
- ----------
that, as of the Closing, the following will be true and correct:
(a) The REIT will have the full legal right, power and authority to
enter into the Registration Rights Agreement and the Exchange Rights Agreement
and to consummate the transactions contemplated therein. The Registration Rights
Agreement and the Exchange Rights Agreement will be duly authorized by all
necessary corporate action on the part of and will constitute the valid and
binding obligation of the REIT, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting the
enforcement thereof or relating to creditors' rights generally. The Partnership
will have the full right, power and authority to enter into the Lock-Out
Agreement and its execution will be duly authorized by all necessary partnership
action.
(b) The Partnership Agreement and any Partnership Amendment will
constitute valid and binding obligations of the REIT, enforceable in accordance
with their terms.
(c) The Units to be issued to Owners will have been duly and validly
authorized and issued, free of any preemptive or similar rights, and be fully
paid and nonassessable, without any obligation to restore capital except as
required by the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act"). As a holder thereof, Owners shall be admitted as limited partners of the
Partnership entitled to all of the rights and protections of limited partners
under the Delaware Act and the provisions of the Partnership Agreement, with the
same rights, preferences and privileges as all existing limited partners on a
pari passu basis.
-7-
<PAGE>
(d) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery by the Partnership of the Units, the valid authorization,
issuance, sale and delivery of any shares of Common Stock that may be issued by
the REIT upon any exchange of the Units, and the execution, delivery and
performance of the Registration Rights Agreement by the REIT (other than
complying with applicable securities laws and regulations), will have been made
or obtained and will be full force and effect.
(e) Neither the issuance or sale and delivery by Partnership of the
Units, nor the issuance, sale and delivery by REIT of any shares of Common Stock
that may be issued upon any redemption of the Units, nor the execution, delivery
and performance of the Registration Rights Agreement, will conflict with or
result in a breach or violation of any of the terms and provisions of, or (with
or without the giving of notice or passage of time or both) constitute a default
under the certificate of incorporation or by-laws of the REIT or the certificate
of limited partnership or the Partnership Agreement of the Partnership; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or the Partnership is a party or to
which any of them, any of their respective properties or other assets or any
hotel is subject; or any applicable statute, judgment, decree, rule or
regulation of any court or governmental agency or body applicable to any of the
foregoing or any of their respective properties (other than compliance with the
securities laws and regulations); or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the REIT or the
Partnership.
(f) There will be no pending or threatened litigation claims,
charges, complaints, petitions or unsatisfied orders against the Partnership or
the REIT by or before any administrative agency or court which would have a
materially adverse impact on the value of the Units or the Shares.
The foregoing representations and warranties shall be true and
accurate on the Closing Date, and the Partnership and the REIT shall execute and
deliver to Owners at the Closing a certificate confirming the accuracy of the
foregoing representations and warranties.
3.3 Securities Covenants, Representations and Warranties of Owners.
--------------------------------------------------------------
(a) Each of the Owners represents that it has received and reviewed a
copy of the draft Registration Statement dated as of April 24, 1996 prepared in
connection with the contribution of
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Interests to the Partnership hereunder and the draft financial statements for
the REIT describing the property and interests which are currently expected to
be owned directly or indirectly by the REIT upon consummation of the IPO. Each
Owner understands that an investment in the Units involves risks. Each Owner, by
reason of its business and financial experience, together with the business and
financial experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in Units, (i) has such knowledge,
sophistication and experience in financial and business matters and in making
investment decisions of this type that it is capable of evaluating the merits
and risks of and of making an informed investment decision with respect to an
investment in Units, (ii) is capable of protecting its own interests or has
engaged representatives or advisors to assist it in protecting its interests and
(iii) is capable of bearing the economic risk of such investment including the
loss of its entire investment. It is an "accredited investor" as defined in Rule
501 of the regulations promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). If it has retained or retains a person to represent or
advise it with respect to its investment in Units, Owners will advise the
Partnership of such retention and, at the Partnership's request, Owners shall,
prior to or at the Closing, (i) acknowledge in writing such representation and
(ii) cause such representative or advisor to deliver a certificate to the
Partnership containing such representations as may be reasonably requested by
the Partnership.
(b) Each of the Owners understands that an investment in the
Partnership involves substantial risks. It has been given the opportunity to
make a thorough investigation of the proposed activities of the Partnership and
has been furnished with materials relating to the Partnership and its proposed
activities, including, without limitation, the draft Registration Statement. It
has been afforded the opportunity to obtain any additional information requested
by it. It has had an opportunity to ask questions of and receive answers from
representatives of the Partnership concerning the Partnership and its proposed
activities and the terms and conditions of an investment in Units. It has relied
and is making its investment decision based upon the draft Registration
Statement and other written information provided to Owner by or on behalf of the
Partnership.
(c) The Units to be issued to each of the Owners at the Closing will
be acquired by such Owner for its own account, for investment only and not with
a view to, or with any intention of, a distribution or resale thereof, in whole
or in part, or the grant of any participation therein (whether to the
constituent partners of Owners or otherwise; but same shall not be deemed to
prohibit transfers of limited partnership interests in CPA 4 and
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CPA 8). Such Owner was not formed for the specific purpose of acquiring an
interest in the Partnership.
(d) Each of the Owners acknowledges that (i) the Units to be issued
to it at the Closing have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and,
if such Units are represented by certificates, such certificates will bear a
legend to such effect, (ii) the REIT's and the Partnership's reliance on such
exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of Owner contained in this section, (iii) the
Units to be issued to it at the Closing may not be resold or otherwise
distributed unless registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is available, (iv)
there is no public market for such Units, and (v) it has no obligation or
intention to register such Units under the Securities Act or any state
securities laws or to take any action that would make available any exemption
from the registration requirements of such laws, except as provided in the
Registration Rights Agreement. Each of the Owners hereby acknowledges that it
may have to bear the economic risk of the investment commitment evidenced by
this Agreement and any Units issued hereunder for an indefinite period of time,
although (x) subject to the Lock-Up Agreement and under the terms of the
Partnership Agreement and Exchange Rights Agreement, as they will be in effect
at the time of the IPO, Units will be exchangeable at the request of the holder
thereof at any time after the first anniversary of their issuance for Shares or,
at the option of the REIT, cash, and (y) subject to the Lock-Up Agreement, the
holder of any such Shares issued upon exchange of Units will be afforded certain
rights to have such Shares registered under the Securities Act and applicable
state securities laws pursuant to the Registration Rights Agreement.
(e) The address set forth under each Owner's name in Section 8.2 is
the address of such Owner's principal place of business and it has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal place of business or
residence is located.
(f) Each of the Owners acknowledges that after Closing of the IPO, it
will be provided annually with financial statements of the Partnership including
a balance sheet and the related statements of income and retained earnings,
changes in financial position and statement of cash flow accompanied by a report
of an independent public accountant stating that an audit of such financial
statements has been made in accordance with generally accepted accounting
principles, stating the opinion of the accountant with respect to the financial
statements and the
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accounting principles and practices reflected therein and with respect to the
consistency of the application of the accounting principles, and identifying any
matters to which the accountant takes exception and stating, to the extent
practicable, the effect of each such exception on such financial statements.
(g) Each Owner agrees that it will not sell or otherwise transfer the
Units unless they are registered under the Federal Securities Act of 1933
(pursuant to the Registration Rights Agreement or otherwise) or unless an
exemption from such registration is available. Each Owner represents that it has
adequate means of providing for its current needs and possible contingencies,
and that it has no need for liquidity of the investment.
(h) It is understood that all documents, records and books pertaining
to the investment have been made available for inspection by Owners' attorney or
accountant or offeree representative and Owners, and that the books and records
of the Partnership will be available upon reasonable notice, for inspection by
Owners at reasonable hours at its principal place of business.
(i) The foregoing representations and warranties shall be true and
accurate as of the Closing Date.
ARTICLE 4
TITLE DELIVERIES
----------------
4.1 Title Commitment. Within twenty (20) days after the execution of
----------------
this Agreement, Owners shall obtain and deliver to the Partnership, at Owners'
sole cost and expense (subject to the limitations in Section 10.10 below), the
following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by a title company designated by the Partnership and acceptable to Owners (the
"Title Company"), for the most recent form of ALTA Owners' policy (with
"Fairway" and non-imputation, zoning and such other endorsements as are
customarily available in the region of the Hotel) covering the Land and
Improvements, setting forth the current status of the title to the Land and
Improvements, showing all liens, claims, encumbrances, easements, rights of way,
encroachments, reservations, restrictions, and any other matters affecting the
Land and Improvements, and pursuant to which the Title Company agrees to issue
to LLC at Closing an Owner Policy of Title Insurance (the "Title Policy") on the
most recent form of ALTA Owners' policy. Owners agree that Chicago Title
Insurance Company is acceptable to Owners; and
(b) A true, complete, legible and, where applicable, recorded copy of
all documents and instruments (the "Supporting
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Documents") referred to or identified in the Title Commitment, including, but
not limited to, all deeds, lien instruments, leases, plats, surveys,
reservations, restrictions, and easements.
4.2 UCC Search. Within twenty (20) days after the execution hereof,
----------
Owners shall obtain and deliver to the Partnership, at Owners' sole cost and
expense, current written reports (the "UCC Searches") (a) from the Offices of
the New York and Louisiana Secretaries of State and the deed recording offices
of Jefferson Parish, Louisiana, reflecting the results of current searches of
the Uniform Commercial Code Records maintained by such offices, said UCC
Searches to be made under the names of Owners and under the Tradename used by
Owners at the Hotel, (b) of any judgment or tax liens against either of the
Owners or the Hotel, and (c) of any bankruptcy filing by or against either of
the Owners.
4.3 Survey. Within twenty (20) days after the execution hereof, the
------
Partnership shall obtain from Landmark Surveying, Inc., at Owners' sole cost and
expense, an updated ALTA/ACSM survey (the "Survey") of the Land and Improvements
made on the ground and certified by a professional land surveyor licensed in the
state in which the Hotel is located (the "Surveyor"). The Survey must (i)
accurately show the locations of all existing easements, fences, encroachments,
conflicts, protrusions, alleys, streets, roads, and rights-of-way on or adjacent
to the Land which are visible on the ground or listed in the Title Commitment
(with recording information shown if applicable); (ii) accurately show the
locations of all existing improvements, monuments, sidewalks, driveways, parking
lots and other visible items on the Land; (iii) accurately show all areas
designated as being flood prone or subject to special flood hazards or other
hazardous conditions according to the most current official maps of the Flood
Insurance Administration, the Federal Emergency Management Agency or any other
public or semi-public body charged with determining the existence of such
conditions which has jurisdiction over the Hotel; (iv) set forth a metes and
bounds description of the Land and, if applicable, a description by reference to
a recorded plat or map; and (v) contain a certification by the Surveyor in form
reasonably acceptable and addressed to LLC, the Partnership, the REIT and the
Title Company, indicating that the Survey was made on the ground and accurately
shows all the matters required above. If different from the description
contained in Exhibit A attached to this Agreement, the legal description of the
---------
Land contained in the Survey, once the correctness thereof has been confirmed by
Owners, Partnership and the Title Company, shall be substituted for the
description of the Land contained in said Exhibit A and this Agreement shall be
---------
deemed amended by the substitution of the legal description of the Land
contained in the Survey as a new Exhibit A without the necessity of the parties
---------
executing any
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additional written amendments to this Agreement. In addition, such description
shall be used in the Owner Policy of Title Insurance to be delivered by Owners
to Partnership at Closing.
ARTICLE 5
HOTEL DOCUMENTS, INSPECTION AND OBJECTIONS
------------------------------------------
5.1 Hotel Documents. As soon as practicable but in no event later
---------------
than twenty (20) days after the execution hereof and to the extent not
previously delivered to AGH, Owners, at Owners' sole cost and expense, will
deliver to AGH true, correct and complete copies (or where specifically
indicated, original counterparts) of the following together with all amendments,
modifications, renewals or extensions thereof:
(i) All Warranties relating to the Hotel or any part thereof
which are still in effect;
(ii) All Licenses;
(iii) All agreements relating to the operation of the Hotel
(including leases of adjacent land or facilities);
(iv) All documentation (including the Pension Plans) relating
to the terms of employment of any employees of LLC;
(v) All of the Plans and Specs;
(vi) All Service Contracts;
(vii) All Leases and all agreements for real estate commissions,
brokerage fees, finder's fees or other compensation payable by Owners in
connection therewith;
(viii) To the extent in the possession or control of Owners, all
notices received from governmental authorities in connection with the Hotel
since January 1, 1994; and
(ix) A rent roll including for each Lease (1) the name of the
Tenant; (2) the portion of Hotel leased; (3) the base rental rate; (4) the
amount of prepaid rent; (5) to the extent determinable and in the
possession or control of LLC, the amount of each Tenant's security deposit;
(6) the applicable percentage rental rate, if any, and the means of
calculation thereof; (7) the date of the Lease; and (8) the expiration date
of the Lease.
AGH, as manager of the Hotel, shall assist Owners in the assembly of the
documents referred to in subparagraphs (ii), (iii), (iv), (vi) and (ix).
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5.2 Procedure for Objections. The Partnership shall have until
------------------------
twenty-eight (28) days following the completion of all deliveries required by
Owners to the Partnership under Sections 4.1, 4.2, 4.3 and 5.1 hereof (the
"Document Review Period") to notify Owners in writing of any objections the
Partnership may have to matters reflected in or concerning the Title Commitment,
the Survey, the UCC Searches or any documents or items delivered by Owners to
the Partnership pursuant to those Sections. If the Partnership shall so notify
Owners of any objections, Owners may elect to cure such objections within
fourteen (14) days from the date on which Owners receives the Partnership's
objections. If the Partnership is not reasonably satisfied with the results of
any cure efforts by Owners, the Partnership may terminate this Agreement by
giving written notice of termination to Owners within ten (10) days after the
end of Owners' fourteen (14) day cure period. If the Partnership terminates this
Agreement pursuant to this Section, the Earnest Money shall be returned to AGH
within five (5) days after any such termination, and neither party shall have
any further rights or obligations one to the other. Owners agree to provide any
necessary written directions to Escrow Agent to release the Earnest Money to the
AGH. Partnership may elect to waive the cure of such objections and to proceed
to Closing in lieu of terminating this Agreement.
5.3 Inspection of Hotel and Environmental Report. Owners shall give
--------------------------------------------
the agents and representatives of AGH and Partnership full, free access to the
Hotel prior to Closing, to inspect the Hotel's physical plant, accounting
records, and correspondence. Owners shall give the agents and representatives of
AGH and Partnership the right to physically inspect the Hotel and to conduct
soil tests and other inspections (the "Inspections") (so long as such
Inspections do not unreasonably interfere with the use and occupancy of the
Hotel by Owners, by guests or patrons of the Hotel, or by Tenants). The costs
and expenses of any investigations by AGH and Partnership shall be borne solely
by them. Partnership and AGH shall have the obligation to restore the Hotel to
its condition prior to the Inspections, which obligation shall survive any
termination of this Agreement. AGH covenants and agrees that the Hotel shall not
be damaged or impaired in any way as the result of the Inspections, and hereby
agrees to indemnify and hold Owners harmless from and against any claims, causes
of action, damages and expenses (including attorneys' fees) to the extent
incident to, resulting from or in any way arising out the presence in, on or
about the Hotel of AGH or Partnership, or their agents or representatives, or
out of any such Inspection. Such indemnity shall survive the Closing or any
termination of this Agreement.
5.4 Feasibility Determination. The underwriter(s) of the IPO shall
-------------------------
have forty-five (45) days from the date of this Agreement to evaluate the
feasibility of the transaction contemplated herein and to review the results of
the Inspections
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under Section 5.3 hereof (the "Feasibility Review Period"). Such underwriter(s),
in their sole discretion, shall determine the acceptability of the Hotel and
feasibility of the transaction. In the event such underwriter(s) determine that
the transaction is unfeasible, AGH may elect to terminate this Agreement,
whereupon the Earnest Money (and accrued interest) shall be first paid to
reimburse Owners for any out-of-pocket expenses for the Title Commitment, the
UCC Searches, the Survey and reasonable legal fees and disbursements of Owners'
and Lender's counsel incurred in connection with this transaction, with the
balance, if any, to be returned to AGH, whereupon neither party shall have any
further rights or obligations one to the other, except for the indemnity set
forth in Section 5.3. Owners and AGH agree to provide any necessary written
directions to Escrow Agent to release the Earnest Money in accordance with this
Section 5.4.
5.5 Financial Information. Representatives of the Partnership and
---------------------
the REIT shall have access to all financial and other information reasonably
available to Owners relating to Owners and the Hotel sufficient to enable them
to prepare audited financial statements in conformity with Regulation S-X of the
SEC and to enable them to complete and file the Registration Statement. The
foregoing financial information shall include, without limitation, the financial
records for each of the five calendar-year periods ending 1991, 1992, 1993, 1994
and 1995 and the information available for 1996. Owners shall also provide to
representatives of the Partnership and the REIT a signed representation letter
in a form reasonably acceptable to Owners.
5.6 Termination Right of Owners. Owners shall have the right to
---------------------------
terminate this Agreement by notice of such termination to the Partnership if the
Closing has not occurred by October 1, 1996 (the "Termination Date"), whereupon
the Owners shall be released from all obligations hereunder.
ARTICLE 6
PERMITTED EXCEPTIONS
--------------------
6.1 Permitted Exceptions. Any title exceptions to which the
--------------------
Partnership does not object in accordance with Section 5.2 and any title
exceptions to which the Partnership objects that are not cured and which the
Partnership is deemed to have accepted and approved in accordance with Section
5.2 shall be herein referred to as the "Permitted Exceptions." The Security
Documents shall be included as Permitted Exceptions, provided that the Security
Documents are amended as provided in Section 9.1.
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ARTICLE 7
OPERATION OF HOTEL
------------------
7.1 Interim Operation. Owners hereby covenant and agree that between
-----------------
the date of this Agreement and the Closing Date, Owners shall (or shall cause
LLC to):
(a) Operate, manage, and maintain the Hotel consistent with Owners'
prior practice and as a reasonable and prudent hotel operator would operate,
manage, and maintain the Hotel, including, without limitation, (i) using
reasonable efforts to keep available the services of the present employees at
the Improvements and to preserve its relations with guests, suppliers and other
parties doing business with Owners with respect to the Hotel, (ii) accepting
booking contracts for the use of the Hotel facilities on terms not less
favorable than the terms typically arranged by Owners as of the date of this
Agreement and retaining such bookings, (iii) maintaining the current level of
advertising and other promotional activities for Hotel facilities, and (iv)
remaining in substantial compliance with all current license and franchise
agreements;
(b) Not commit waste of any portion of the Hotel;
(c) Keep and maintain the Hotel in a good state of repair and
condition, reasonable and ordinary wear and tear excepted;
(d) Keep, observe, and perform all its obligations under the Leases,
FF&E Leases, the Service Contracts, the Security Documents and all other
applicable contractual arrangements relating to the Hotel;
(e) Not enter into any new Leases or amendments, modifications,
renewals or extensions of any existing Leases without AGH's prior written
consent, except that Owners shall not be required to obtain AGH's consent to any
renewal or extension specifically permitted under the terms of an existing Lease
or on terms at least as favorable to Owners as set forth in such existing
agreement, provided that any such renewal or extension shall not exceed a term
of six (6) months without AGH's prior written consent, such consent not to be
unreasonably withheld or delayed;
(f) Not amend, modify, renew or extend any of the FF&E Leases or
Service Contracts or enter into any new contractual relationships with any party
to provide services or goods to the Hotel without the Partnership's prior
written consent;
(g) Timely make all repairs, maintenance, and replacements to keep
the Hotel and all FF&E in good operating condition, and not cause or permit the
removal of FF&E from the
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Hotel except for the purpose of discarding worn and valueless items;
(h) Keep merchandise, supplies, inventory and Other Personalty
adequately stocked, consistent with good business practice, as if the conveyance
of the Hotel hereunder were not to occur, including without limitation,
maintaining linens and bath towels for at least three (3) turns for all 305
rooms of the Hotel;
(i) Not grant any bonus, free rent, rebate or other concession to any
present or future Tenant, without AGH's prior written consent;
(j) Advise AGH promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is instituted or threatened after the date of this
Agreement or if any representation or warranty contained in this Agreement shall
become false;
(k) Not take, or omit to take, any action that would have the effect
of violating any of the representations, warranties, covenants or agreements of
Owners contained in this Agreement;
(l) Comply with all federal, state, and municipal laws, ordinances,
regulations, and orders relating to the Hotel;
(m) Not sell or assign, or enter into any agreement to sell or
assign, or create or permit to exist any lien or encumbrance (other than a
Permitted Encumbrance) on, the Hotel or any portion thereof;
(n) Not allow any permit, receipt, license, franchise or right
currently in existence with respect to the operation, use, occupancy or
maintenance of the Hotel to expire, be cancelled or otherwise terminated;
(o) Not cancel any existing Guest Booking or new Guest Booking
obtained by Owners or LLC after the date of this Agreement;
(p) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due;
(q) Maintain in full force and effect the present policies and level
of insurance with respect to the Hotel until the Closing Date; and
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(r) Not amend or modify any of the Security Documents, except to the
extent expressly permitted or required hereunder.
7.2 Notices of Violation. Owners hereby covenant and agree that all
--------------------
notices of violation of federal, state or municipal laws, ordinances, orders,
regulations or requirements ("Notices of Violation") issued by, or filed by, or
served by, any governmental agency having jurisdiction over the Hotel against or
affecting the Hotel on or before the Closing Date of which Owners have actual
knowledge shall be promptly disclosed to AGH and Partnership.
7.3 Compliance Under Management Agreement. AGH hereby covenants and
-------------------------------------
agrees that to the extent any of the Owners' covenants and agreements under
Sections 7.1 and 7.2 are within the scope to its duties and obligations as
manager of the Hotel, AGH shall be responsible for their compliance.
ARTICLE 8
REPRESENTATIONS AND COVENANTS
-----------------------------
8.1 Representations by Partnership. The Partnership represents and
------------------------------
warrants unto Owners that each and every one of the following statements are
true, correct and complete and will be true, correct and complete as of the
Closing Date:
(a) The Partnership is duly formed, validly existing and in good
standing under the laws of the State of Delaware, and has full right, power and
authority to assume and perform all of its obligations under this Agreement; the
performance by Partnership of its obligations under this Agreement will require
no further action or approval of Partnership's partners or of any other
individuals or entities in order to constitute this Agreement as a binding and
enforceable obligation of Partnership, however such performance will require
consummation of the IPO and compliance with the securities laws in connection
therewith.
(b) Partnership will not be a foreign partnership (as that term is
defined in the Internal Revenue Code and income tax regulations).
(c) The performance of, or compliance with, this Agreement by
Partnership will not result in any violation of, or default under, or result in
the acceleration of, any obligation under the Partnership Agreement or any
existing mortgage indenture, lien agreement, note, contract, permit, judgment,
decree, order, restrictive covenant, statute, rule or regulation applicable to
Partnership.
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(d) The REIT is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland.
(e) The REIT will not be a foreign corporation (as that term is
defined in the Internal Revenue Code and income tax regulations).
8.2 Representations by Owners. Owners hereby represent and warrant
-------------------------
unto the Partnership that each and every one of the following statements is
true, correct and complete in every material respect as of the date of this
Agreement and will be true, correct and complete as of the Closing Date;
provided, however, CPA4's representations with respect to CPA4 are limited to
CPA4, and CPA8's representations with respect to CPA8 are limited to CPA8:
(a) CPA4 is a limited partnership duly organized and validly existing
under the laws of the State of California and is duly qualified to do business
in the State of Louisiana. CPA8 is a limited partnership duly organized and
validly existing under the laws of the State of Delaware and is duly qualified
to do business in the State of Louisiana. Each of the Owners has full right,
power and authority to enter into this Agreement and to assume and perform all
of its obligations under this Agreement; and the execution and delivery of this
Agreement and the performance by each of the Owners of its obligations under
this Agreement require no further action or approval of such Owner's partners or
of the shareholders or directors of any corporate partner, or of any other
individuals or entities in order to constitute this Agreement a binding and
enforceable obligation of Owners. Each Owner has obtained each and every
consent, approval, permit or order of, and has made each and every filing with,
any individual, partnership, corporation, trust or other entity, government
agency or political subdivision required to be obtained or made in connection
with: (A) its execution, deliver and performance of this Agreement and (B) its
consummation of the transactions contemplated hereby. The general partners of
Owners have full power and authority to execute this Agreement on behalf of
Owners without consent of any limited partner in Owner. This Agreement is the
legal, valid and binding obligation of each Owner, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the enforcement thereof or relating to creditors' rights
generally.
(b) Neither Owner is a foreign partnership (as that term is defined
in the Internal Revenue Code and Income tax regulations).
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(c) Neither the entry into nor the performance of, or compliance
with, this Agreement by Owners has resulted, or will result, in any violation
of, or default under, or result in the acceleration of, any obligation under the
articles of incorporation of Owners, or any existing mortgage indenture, lien
agreement, note, contract, permit, judgment, decree, order, restrictive
covenant, statute, rule or regulation applicable to Owners or LLC or to the
Hotel.
(d) Upon consummation of the assignments contemplated by this
Agreement, the Partnership (or its designee) will acquire good and valid title
to 100% of the legal and beneficial interests in LLC, free and clear of any
liens, encumbrances, equities, restrictions and claims of every kind.
(e) At Closing, LLC will be a limited partnership or limited
liability company, duly formed and validly existing with full power and
authority to own and operate the Hotel. The documents pursuant to which LLC will
be organized and governed, including all certificates of partnership and
agreements of partnership and operating agreements (collectively, "Formation
Documents") will be in form reasonably acceptable to the parties, and will be in
full force and effect.
(f) Except us set forth in the next succeeding sentence, no party has
any right or option to acquire the Interests or the Hotel or any portion
thereof, other than AGH and Partnership under this Agreement. Each Owner has a
right of first refusal with respect to the other, which rights, by execution of
this Agreement, they hereby waive as they apply to this transaction.
(g) Neither LLC nor either Owner (i) is in receivership or
dissolution, (ii) has made an assignment for the benefit of creditors or
admitted in writing its inability to pay its debts as they mature, or (iii) has
been adjudicated a bankrupt or filed a petition in voluntary bankruptcy or a
petition or answer seeking reorganization or an arrangement with creditors under
the Federal bankruptcy law or any other similar law or statue of the United
States or any jurisdiction and, to the knowledge of the Owners, no such petition
has been filed against LLC or either Owner.
(h) To the best of Owners' knowledge and belief, there are no:
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial orders respecting awards, with respect to the Hotel;
(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice or judicial
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proceedings or orders with respect thereto, with respect to the Hotel;
(iii) pending charges or complaints with or by the city, state
or federal civil or human rights agencies, unremedied orders by such
agencies or judicial proceedings or orders with respect to obligations
under city, state or federal civil or human rights or antidiscrimination
laws or executive orders, with respect to the Hotel; or
(iv) other pending, or threatened or actual litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affect the Hotel, except as set forth
on Exhibit M annexed hereto (collectively, the "Pending Claims").
---------
(i) Annexed hereto as Exhibit D is a list of all of the security
---------
documents ("Security Documents") evidencing and/or securing the debt owed to
Finova (the "Lender") secured by a mortgage on the Hotel (the "Debt"), and there
have been no modifications or amendments thereto except as set forth in said
Exhibit D or as otherwise expressly permitted or required in this Agreement.
- ---------
The outstanding principal balance due on the Debt is approximately $7,365,000
and, to the best of Owner's knowledge, there are no outstanding material
defaults under any of the Security Documents.
(j) Exhibit E is a true, correct and complete list of all Leases in
---------
effect and that the Leases to be delivered to the Partnership hereunder are and
will be true, complete and correct copies of such Leases (including, without
limitation, all amendments, modifications, renewals, and extensions thereof) and
that there are and will be no other written or oral agreements binding on the
Partnership with any tenant, licensees, franchisees, concessionaires or other
persons or entities (collectively, "Tenants", and individually, "Tenant") or any
guarantors of the Tenants' obligations relating to their use or occupancy other
than those permitted under Section 7.1(e) of this Agreement. The term Tenant
shall refer only to tenants under Leases. To the extent that there may be any
discrepancy between any Lease and its identification or description in the
Exhibit of Leases, the Lease itself shall control. Owners represent that except
as disclosed on the Exhibit of Leases, no tenant has made any claim of default
on the part of the landlord nor any right of offset.
(k) The insurance covering the Hotel is listed in the insurance
schedule annexed hereto as Exhibit F. Each of said policies is in full force
---------
and effect. No notice has been received by Owners or LLC from the insurance
company which issued any of such policies stating that any of such policies is
not in full force and effect, will not be renewed or will be renewed
-21-
<PAGE>
only at a higher premium rate than is presently payable therefor.
(l) The Service Contracts are in full force and effect and there are
no defaults thereunder by any party thereto and all amounts now due thereunder
have been paid.
(m) All FF&E (other than that covered by the FF&E Leases) and Other
Personalty included in this sale has been fully paid for and is owned by Owners
or LLC free and clear of all liens and encumbrances, except for the Permitted
Encumbrances.
(n) A list of the Licenses is annexed hereto as Exhibit G. No
---------
default has occurred in the due observance of any condition to any license,
permit or certificate relating to the Hotel.
(o) Owners have no knowledge of any pending or threatened
condemnation affecting any of the Hotel or of any improvement liens or special
assessments to be made against the Hotel by any governmental authority.
(p) The FF&E Leases are in full force and effect and there are no
defaults thereunder, nor have there occurred any events which with the passage
of time or the giving of notice or both would constitute a default thereunder.
(q) Except as set forth in Exhibit H, neither Owners nor LLC have
---------
received any notice of any violation of law or municipal ordinance, order or
requirement noted in or issued by any governmental entity asserting jurisdiction
against or affecting the Hotel which have not been corrected.
(r) The only Warranties still in effect for any portion of the Hotel
are described on Exhibit I.
---------
(s) The principal place of business of each Owner for purposes of the
UCC searches is New York County, New York.
(t) [Intentionally Omitted]
(u) As of Closing, LLC will have no liabilities except (i) real
estate taxes or assessments not yet due and payable and adjusted for to the
extent of periods prior to Closing, (ii) obligations under the Security
Documents, (iii) obligations arising under Leases, FF&E Leases and Service
Contracts permitted under this Agreement, and under insurance policies and
utilities for periods prior to Closing and adjusted at Closing, (iv) obligations
under Leases, FF&E Leases and Service Contracts attributable to any period after
Closing, (v) obligations arising in connection with contracts and other
agreements to be entered into in the ordinary course of business which are not
in contravention of this Agreement, and (vi) other liabilities
-22-
<PAGE>
specifically identified in this Section and the Exhibits attached hereto for
periods prior to Closing and to be adjusted at Closing.
(v) For the purpose of this Section 8.2(v), the term "Hazardous
Substances" shall mean substances defined as a "hazardous waste," "hazardous
substance," "toxic substance" or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxins, or urea formaldehyde
insulation. As used herein, "Environmental Laws" shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, 42 U.S.C. (S) 9601, et seq., the Resource Conservation and
-- ---
Recovery Act, 42 U.S.C. (S) 6901, et seq., the Clean Air Act, 42 U.S.C. (S)
-- ---
7401, et seq., the Clean Water Act, 33 U.S.C. (S) 1251, et seq., the Toxic
-- --- -- ---
Substance Control Act, 15 U.S.C. (S) 2601, et seq., and the Occupational Safety
-- ---
and Health Act, 29 U.S.C. (S) 651, et seq., as any of the preceding have been
-- ---
amended prior to the date hereof, and any other federal, state, or local law,
ordinance, regulation, rule, order, decision or permit relating to the
protection of the environment or of human health from environmental effects of
Hazardous Substances and which are applicable to the Hotel.
(w) To the Owners' knowledge, and except for those conditions
specifically described in the environmental reports which are listed on Exhibit
-------
K (the "Environmental Reports"), and without independent investigation other
- -
than the Environmental Reports, (i) no Hazardous Substances have been spilled or
released in, on or under the Hotel so as to impose liability or require
remediation under any Environmental Law and (ii) no liability under or violation
of any Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel,
except in each case for remediation obligations, liabilities or violations that
would not, individually or in the aggregate, have a material adverse effect on
the business or financial condition of Owners, LLC or the Hotel. To Owners'
knowledge, there are no other environmental reports relating to the Hotel
currently in the possession of Owners or LLC.
(x) Owners have no employees with respect to the Hotel.
(y) New Orleans License Corp. is a Louisiana corporation and has no
obligations, debts or liabilities of any kind and 100% of all of the issued and
outstanding stock thereof is owned by Owners.
-23-
<PAGE>
Each of the foregoing representations and warranties shall be deemed
remade at and as of the Closing and the representations shall survive the
Closing for the period of one year.
8.3 [Intentionally Omitted].
8.4 [Intentionally Omitted].
8.5 Liquor License. Owners shall cooperate with the efforts of LLC
--------------
as well as the Partnership or its lessee or management company in obtaining new
liquor licenses or permits for the Hotel to the extent required. If such
licenses or permits have not been obtained prior to Closing, LLC may continue to
operate under existing licenses or permits to the extent permitted by law until
new ones are obtained provided LLC or its lessee or management company shall
indemnify Owners from any liabilities arising after the Closing with respect to
the liquor operations of the Hotel. The Partnership, on behalf of LLC or its
management company, shall use reasonable efforts to obtain the necessary
licenses and permits as soon as practicable after Closing.
ARTICLE 9
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
In addition to any other conditions set forth in this Agreement, the
obligations of the Partnership and Owners to consummate the Closing are subject
to the timely satisfaction of the respective conditions and requirements set
forth in this Article 9, which shall be conditions precedent to the respective
party's obligations under this Agreement.
9.1 Conditions to Obligations of the Partnership.
--------------------------------------------
(a) Owners' Obligations. Owners shall have performed all material
-------------------
obligations of Owners hereunder which are to be performed at or prior to
Closing.
(b) Owners' Representations and Warranties. Owners' representations
--------------------------------------
and warranties set forth in this Agreement shall be true and correct in all
material respects as if made again on the Closing Date.
(c) Title Policy. Partnership shall have received or have an
------------
irrevocable right to receive the Title Policy issued by the Title Company to LLC
insuring good and indefeasible fee simple title to the Land and Improvements,
subject only to the Permitted Exceptions, in an amount equal to the portion of
the Purchase Price allocable to the Land and the Improvements, with "Fairway,"
non-imputation and zoning endorsements and such other
-24-
<PAGE>
endorsements as are customarily available in the region of the Hotel.
(d) Consent of Lender. Lender shall have agreed in writing to (i)
-----------------
consent to the conveyance of the Hotel to LLC subject to the Debt, (ii) enter
into an agreement with the Owners and LLC pursuant to which the LLC will assume
the borrower's obligations under the Security Documents, (iii) consent to the
transfer of the Interests to the Partnership, (iv) amend the Security Documents,
or waive any conflicting provisions of the Security Documents, to permit
prepayment of the Debt at any time on only one (1) day's prior facsimile notice
in connection with the transactions described herein, and (v) deliver the
Estoppel Certificate described in Section 10.3 below (the "Lender Consent"). It
shall be acceptable to all parties if the Security Documents are further amended
to give Lender the right to accelerate the maturity of the Debt on one (1) days'
prior facsimile notice to LLC following the transfer of the Interests. It is
understood and agreed that the Partnership shall have the responsibility for the
satisfaction of any "credit underwriting" or "document approval" conditions that
the Lender may insist upon as a precondition to the issuance or the
effectiveness of its consent.
(e) Required Deliveries. The Owners shall have made all required
-------------------
deliveries under Section 10.3.
(f) No Injunction. There is no injunction, judgment, order, action or
-------------
proceeding which would prevent or limit the consummation of this transaction.
(g) Consents and Opinions. There shall be delivered to the
---------------------
Partnership, from Owners or Owners' counsel, such consents and legal opinions as
are reasonably and customarily required by counsel to the Partnership or counsel
to the underwriter(s) of the IPO regarding this Agreement, to the effect that
the Agreement and each of the other documents executed and delivered by Owners
have been duly authorized, executed and delivered by each of the Owners.
(h) Consent of Franchisor. Holiday Inns, Inc. shall have agreed to
---------------------
the conveyance of the Hotel to LLC and the subsequent transfer of the Interests
to the Partnership subject to the existing license agreement, or to the issuance
of a new license agreement to LLC, without in either event the payment by Owners
of any transfer or termination fee, other than the payment of all royalties,
reservation fees, marketing fees and other similar fees payable to the licensor
under the terms of the existing license agreement to and including the date of
the transfer or termination (the "Franchisor Consent"). AGH shall have the
obligation of obtaining the Franchisor Consent. In the event it is not obtained
and, solely as a result thereof, the
-25-
<PAGE>
transfer of the Interests fails to close, the Earnest Money shall be applied in
the same manner as provided in Section 5.4 hereof.
9.2 Conditions to Owners' Obligations.
---------------------------------
(a) AGH's and Partnership's Obligations. AGH and Partnership shall
-----------------------------------
have performed all of their material obligations hereunder which are to be
performed at or prior to Closing.
(b) Representations and Warranties by the Partnership. The
-------------------------------------------------
representations and warranties by the Partnership set forth in this Agreement
shall be true and correct in all material respects as if made again on the
Closing Date.
(c) Consent of Lender. The Lender Consent shall have been obtained.
-----------------
(d) Required Deliveries. The Partnership shall have made all required
-------------------
deliveries under Section 10.4.
(e) No Injunction. There is no injunction, judgment, order, action or
-------------
proceeding which would prevent the consummation of this transaction.
(f) Consents and Opinions. There shall be delivered to Owners, from
---------------------
the Partnership or Partnership's counsel, such consent and legal opinions as are
reasonably required by counsel to the Owners to the effect that this Agreement
and each of the other documents executed and delivered by the Partnership and
AGH have been duly authorized, executed and delivered by the Partnership and
AGH.
(g) IPO. The IPO shall have been consummated before the Termination
---
Date.
(h) Consent of Franchisor. The Franchisor Consent shall have been
---------------------
obtained.
ARTICLE 10
CLOSING AND CLOSING DOCUMENTS
-----------------------------
10.1 Closing. The closing (the "Closing") shall occur at the offices
-------
of the Partnership's attorney or the attorneys for the lead underwriter of the
IPO on a date (the "Closing Date") to be specified by notice from the
Partnership to the Owners, such date to be not later than the Termination Date
(defined below). The Closing shall take place concurrently with the consummation
of the IPO or not later than five (5) business days thereafter, at the
Partnership's election but in any event no later than the Termination Date. As
used in this Section 10.1, the term "Termination Date" shall mean July 1, 1996;
provided however,
-26-
<PAGE>
that if AGH or the Partnership delivers to Escrow Agent the Additional Earnest
Money in the sums set forth below on or before the dates set forth below, the
Termination Date shall be extended as follows:
<TABLE>
<CAPTION>
Amount of Additional On or before: Termination Date
Earnest Money: extended to:
<S> <C> <C>
$50,000 June 30, 1996 August 1, 1996
$50,000 July 31, 1996 September 1, 1996
$50,000 August 31, 1996 October 1, 1996
</TABLE>
10.2 Escrow. It is anticipated that the Closing and the consummation
------
of the IPO shall occur simultaneously or substantially simultaneously. To effect
the Closing, at such time as AGH reasonably anticipates the completion of the
IPO to occur, AGH or the Partnership shall have the right to send notice to the
Owners requesting that all parties endeavor in good faith to (a) enter into a
mutually satisfactory escrow agreement with a mutually satisfactory escrow agent
pursuant to which the Closing shall occur on the Closing Date through an escrow-
style closing and (b) prior to the Closing Date, place in escrow with said
escrow agent pursuant to said escrow agreement (i) the documents to be delivered
pursuant to this Section 10.2 and (ii) the proration funds estimated pursuant to
Section 10.11.
10.3 Owners' Deliveries. At the Closing and at Owners' sole cost and
------------------
expense, Owners shall deliver the following to the Partnership:
(a) Assignments. Assignments of the Interests (the "Assignments") in
-----------
a form reasonably acceptable to the Owners and the Partnership conveying the
Interests free and clear of any liens encumbrances security interests, prior
assignments or conveyances and original, executed counterparts of the Formation
Documents, together with all seals, books, minutes, records and other
partnership or corporate documents and records pertaining to the LLC;
(b) Registration Rights, Lock-Up, Exchange Rights and Pledge
--------------------------------------------------------
Agreements. The Registration Rights Agreement, the Lock-Up Agreement, the
- ----------
Exchange Rights Agreement and the Pledge Agreement, duly executed by Owners;
(c) FIRPTA Affidavit. An affidavit from Owners in form and substance
----------------
acceptable to Partnership, as required by Section 1445 of the Internal Revenue
Code, specifying (i) that Owners are not foreign partnerships (as defined in the
Internal Revenue Code and Income tax regulations), (ii) Owners' taxable
identification numbers, (iii) Owners' office addresses, and (iv)
-27-
<PAGE>
such other matters as Partnership may reasonably require in order to satisfy
itself that no withholding is required under Section 1445 of the Internal
Revenue Code including an indemnity against any claim for taxes which should
have been withheld;
(d) Authority Documents. The consents and/or legal opinions referred
-------------------
to in Section 9.1(g).
(e) Title Policy. The Title Policy.
------------
(f) Partnership Documents. The Partnership Amendment duly executed by
---------------------
Owners, which shall evidence the admission of Owners as limited partners in the
Partnership and contain an acceptance of the terms and conditions of the
Partnership Agreement, and such other documents or instruments as REIT may
require for the issuance of the Units to Owners and the admission of Owners as
limited partners in the Partnership;
(g) Termination of Agreements. Evidence satisfactory to Partnership
-------------------------
in its sole discretion that the management agreement between Owners and AGH and
any other agreements that AGH objected to pursuant to Section 5.2 and which
Owners agreed to terminate have been terminated on or prior to the Closing Date.
By its execution of this Agreement, AGH hereby agrees to the termination of the
existing management agreement with Owners effective as of the Closing Date
without the payment of any termination fee, but subject to the payment and
proration of all other fees and expenses as provided therein. Owners agree to
leave in the operating accounts sufficient funds to cover outstanding accounts
payable and other liabilities of the Owners with respect to the Hotel up to the
Closing Date;
(h) Closing Certificate. A certificate duly executed by Owners dated
-------------------
as of the Closing Date to the effect that all of the representations and
warranties herein of Owners are true and correct as of the Closing;
(i) Plans, Keys and Records. To the extent not previously delivered
-----------------------
to and in the possession of Partnership, all Plans and Specs, all keys for the
Hotel (which keys shall be properly tagged for identification), all Records, and
all Licenses;
(j) Title Affidavits. Any affidavits as to judgments and other
----------------
matters reasonably required by the Title Company in connection with the issuance
of the Title Policy; and
(k) Assignment of Stock. An assignment of all of the issued and
-------------------
outstanding shares of stock of New Orleans License Corp., a Louisiana
corporation, and all minute books, records, corporate seals and other items
relating thereto.
-28-
<PAGE>
(l) Lender Consent and Estoppel Certificate. The Lender Consent
---------------------------------------
referred to in Section 9.1 above, together with a certificate dated not more
than two (2) days prior to the Closing Date stating (a) the outstanding
principal balance of the Debt, accrued interest, applicable prepayment premium
and any other sums due in connection with the prepayment of the Debt (the "Debt
Pay-Off Amount") at any time during the next five (5) days (including wiring
instructions), (b) that the Debt is in good standing and that there are no
defaults under any of the Security Documents, and (c) the amount of any reserves
or escrows held by Lender, if any (the "Estoppel Certificate").
On the Closing Date, Owners shall cause to be delivered to Partnership
possession of the Hotel free and clear of all tenancies of every kind and
parties in possession, except for the Tenants under Leases and guests in the
Hotel, and with all parts of the Hotel (including, without limitation, the
Improvements and FF&E) in substantially the same condition as the same were on
the date Of this Agreement, normal wear and tear only excepted, and subject to
the provisions of Article 11.
10.4 Deliveries by Partnership and REIT. At the Closing and at the
----------------------------------
sole cost and expense of Partnership and REIT, Partnership and REIT shall
deliver the following to Owners:
(a) Partnership Amendment. The Partnership Amendment duly executed by
---------------------
REIT reflecting the issuance of the Units to Owners;
(b) Registration Rights, Lock-Up and Exchange Agreements. The
----------------------------------------------------
Registration Rights Agreement, Lock-Up Agreement and Exchange Agreement duly
executed by the Partnership and/or the REIT, as appropriate;
(c) Authority Documents. The consents and/or legal opinions referred
-------------------
to in Section 9.2(f);
(d) Closing Certificate. Certificates duly executed by Partnership to
-------------------
the effect that all of the representations and warranties herein of the
Partnership are true and correct as of the Closing; and
(e) Franchisor Consent. The Franchisor Consent.
------------------
10.5 Amendment of Formation Documents. Simultaneously with the
--------------------------------
delivery of the Assignments, Owners, the Partnership and any designee of the
Partnership will execute amendments to the Formation Documents in form and
substance satisfactory to the Partnership to reflect the withdrawal of Owners
and the substitution of the Partnership and its designee in their stead, and
containing such other provisions as the Partnership shall determine.
-29-
<PAGE>
10.6 Concurrent Transactions. All documents or other deliveries
-----------------------
required to be made by the Partnership, the REIT, Owners and LLC at or prior to
Closing, and all transactions required to be consummated concurrently with
Closing, shall be deemed to have been delivered and to have been consummated
simultaneously with all other transactions and all other deliveries, and no
delivery shall be deemed to have been made, and no transaction shall be deemed
to have been consummated, until all deliveries required by the Partnership, the
REIT, Owners and LLC shall have been made, and all concurrent or other
transactions shall have been consummated.
10.7 Further Assurances. Owners and the Partnership, at any time
------------------
after Closing, upon request of either party, will execute (or cause any
appropriate entity to execute and to use reasonable efforts to cause such
parties to execute) such additional instruments, documents or certificates as
either party deems reasonably necessary in order to effect the transactions
contemplated hereby.
10.8 Prorations and Adjustments. It is the parties' intention that
--------------------------
the prorations and adjustments conform in substance to those that would be made
in a sale of real property as set forth herein. All such prorations shall be
netted against each other and the net amount shall be paid in cash to Owners or
to the Partnership, as the case may be, by the wire transfer of federal funds on
the Closing Date. At Closing, the following items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date.
(a) Hotel Taxes. Real estate taxes, personal property or use taxes
-----------
and sewer rents, on the basis of the best available estimates for such taxes and
rents that will be due and payable on the Hotel for the calendar year in which
the Closing occurs;
(b) Operating Costs. All utility costs and expenses and other costs
---------------
and expenses of operating the Hotel which are reasonably capable of proration,
including, but not limited to, all salaries, compensation, sick pay, vacation
pay and other accrued benefits of the Hotel employees and other expenses which
are charged to the Owners under the terms of the existing management agreement
with AGH;
(c) Service Contracts and FF&E Leases. Amounts paid or payable under
---------------------------------
the Service Contracts and FF&E Leases;
(d) Lease Rents. Rents and other revenues under Leases;
-----------
(e) Cash. All sums on deposit in the Owners' operating and
----
replacement reserve accounts (less reasonable reserves for outstanding checks,
accounts payable and other pre-
-30-
<PAGE>
Closing liabilities of Owners) shall be transferred to and purchased by the
Partnership, for which the Partnership shall pay the Owners cash in an amount
equal to the aggregate amount so transferred;
(f) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service and
restaurant revenue shall be read, measured (and tapes preserved) and apportioned
as of 2:00 a.m. on the Closing Date. The final night's room revenue (revenue
from rooms occupied on the evening preceding the Closing Date) less a sum equal
to all room maid services with respect thereto shall be the property of Owners.
Except as provided in Section 10.8(e) above, all cash, checks, and other funds,
and all other notes, security and other evidence of indebtedness located at the
Hotel as of 2:00 a.m. on the Closing Date and balances on deposit to the credit
of the Owners with banking institutions are and shall remain the property of the
Owners and are not included in this sale (except for the guest (tray) ledger for
guests staying in the Hotel on the Closing Date which will be paid for by the
Partnership);
(g) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade, newspaper and other periodical subscriptions, coin
machine income, and washroom and checkroom income;
(h) Deposits. The Partnership will be credited in an amount equal to
--------
the sum of all Deposits not transferred and delivered to Partnership at the
Closing; and
(i) Current Assets and Liabilities. If, after the prorations to be
------------------------------
made pursuant to the preceding subparagraphs, (x) the sum of all cash and cash
equivalents, investments, accounts receivable, prepaid expenses and deposits and
other assets generally recognized as current assets owned by Owners, exceeds or
is less than (y) the sum of all accounts payable, accrued real estate taxes,
accrued interest, other accrued expenses and other liabilities generally
recognized as current liabilities owed by Owners, the net cash prorations under
this Section 10.8 shall be increased or decreased, as the case may be, by such
excess or deficiency; provided, however, that Owners shall remain responsible
for the payment of all accounts payable and other pre-Closing liabilities of
Owners relating exclusively to periods prior to the Closing Date and Owners
shall be entitled to receive all accounts receivable relating exclusively to
such period, and no prorations shall be made with respect thereto.
-31-
<PAGE>
10.9 Sales Tax. All sales, use and occupancy taxes, if any, due or
---------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by Owners. All sales, use and other transfer taxes, if
any, payable as a result of the conveyance of the Interests to Partnership will
be paid by Owners. Owner shall be entitled to received any rebates or refunds on
taxes paid by LLC prior to the Closing.
10.10 Document Recordation and Transfer Costs. Owners and
---------------------------------------
Partnership shall bear equally the escrow fee and other charges payable to the
Title Company, except that the premium payable to the Title Company for the
Title Policy (and the cost of the "Fairway", non-imputation and zoning
endorsements and any other endorsements that are available for a nominal fee)
shall be paid by Owners up to the amount of $37,250, with any portion of the
premium in excess of that amount to be paid by the Partnership. Owners shall
also pay any costs of the Survey and any costs or transfer taxes in conjunction
with the conveyance of the Hotel to LLC. The cost of preparing or obtaining
documents to be delivered by Partnership to Owners pursuant to this Agreement
shall be paid by Partnership. The cost of preparing or obtaining documents to be
delivered by Owners to Partnership pursuant to this Agreement shall be paid by
Owners.
10.11 Reconciliation and Final Payment. Prior to Closing, Owners and
--------------------------------
Partnership shall reasonably cooperate to make a preliminary determination of
the prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. Owners and Partnership
shall reasonably cooperate after Closing to make a final determination of the
prorations required hereunder. Upon the final reconciliation of the prorations
under this Article, the party which owes the other party any sums hereunder
shall pay such party such sums within ten (10) days after the reconciliation of
such sums. The obligations to calculate such prorations, make such
reconciliations and pay any such sums shall survive the Closing.
ARTICLE 11
CASUALTY AND CONDEMNATION
-------------------------
11.1 Risk of Loss Notice. In the event that (a) any loss or damage
-------------------
to the Hotel shall occur prior to the Closing Date as a result of fire or other
casualty, or (b) Owners receive notice that a governmental authority has
initiated or threatened to initiate a condemnation proceeding affecting the
Hotel, Owners shall give the Partnership immediate written notice of such loss,
damage or condemnation proceeding.
11.2 Partnership's Termination Right. If, prior to Closing and the
-------------------------------
delivery of possession of the Hotel in accordance with this Agreement, (a) any
condemnation proceeding shall be
-32-
<PAGE>
pending against any portion of the Hotel or (b) there is any substantial loss or
damage to the Hotel, the Partnership shall have the option to terminate this
Agreement provided it delivers written notice to Owners of its election so to
terminate this Agreement within thirty (30) days after the date Owners have
delivered to AGH written notice of any such loss, damage or condemnation, and in
such event all Earnest Money shall be delivered to AGH and thereafter no party
shall have further obligation or liability to the other under this Agreement.
"Substantial" condemnation or loss shall mean a condemnation or loss in excess
of $100,000 in value.
11.3 Procedure for Closing. If, after a substantial loss or damage
---------------------
or substantial condemnation, Partnership shall not timely elect (within 30 days
after the occurrence of the damage) to terminate this Agreement, or if the loss
or condemnation is not substantial, Owners agree to pay to Partnership at the
Closing all insurance proceeds or condemnation awards which Owners or LLC have
received as a result of the same plus an amount equal to the insurance
deductible, if any, and assign to Partnership all insurance proceeds and
condemnation awards payable as a result of the same in which event the Closing
shall occur without Owners or LLC replacing or repairing such damage.
ARTICLE 12
DEFAULT AND REMEDIES
--------------------
12.1 Default by Partnership or REIT. If, at or prior to Closing (i)
------------------------------
the Partnership refuses or fails to consummate the transactions contemplated by
this Agreement for any reason (including an election not to close because the
IPO is not consummated) other than termination hereof pursuant to a right
granted to the Partnership hereunder to do so, a failure of a condition to the
obligations of the Partnership to consummate such transactions, or a default by
Owners, or (ii) any representation or warranty made by or on behalf of the
Partnership herein shall have been materially incorrect when made or shall
become incorrect in any material respect, or (iii) the Partnership shall
otherwise fail in any material respect to perform any of its material
obligations as and when required hereunder, then Owners shall give AGH and the
Escrow Agent written notice specifying the nature of the default, and the
Partnership shall have thirty (30) days from receipt of Owners' notice within
which to cure the specified default; provided, however, if at the end of said
thirty (30) day period the Partnership is diligently pursuing the cure of the
default but the default has not been cured, the Partnership shall have an
additional period not to exceed thirty (30) days within which to complete the
cure of the default. If at the end of the initial thirty (30) or, if applicable,
additional thirty (30) day period, the default is not still cured, Owners as
their sole and exclusive remedy, shall have the right to terminate this
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<PAGE>
Agreement by giving AGH and Escrow Agent written notice thereof, in which event
neither party shall have further rights, duties or obligations hereunder (except
to the extent this Agreement specifically provides for the survival of certain
obligations of Partnership) and Owners shall be entitled to receive the Earnest
Money (together with all interest earned thereon), as liquidated damages
(Owners, AGH and the Partnership hereby acknowledging that the amount of damages
resulting from breach of this Agreement by AGH or the Partnership would be
difficult or impossible to accurately ascertain), and AGH shall instruct Escrow
Agent to immediately deliver the Earnest Money to Owners (together with all
interest earned thereon). Notwithstanding the foregoing, in the event of any
default by the Partnership under this Agreement due to a breach after Closing or
any termination hereof of any covenant or indemnity which survives the Closing
or any termination hereof or if Owners shall discover after Closing that any
warranty or representation made by the Partnership herein or in connection with
the transaction contemplated herein was materially incorrect or breached when
made, Owners shall have any and all rights and remedies available at law or in
equity by reason of such default. If the Partnership terminates this Agreement
pursuant to a right granted to the Partnership hereunder to do so, then none of
the parties shall have any further rights, duties or obligations hereunder
(except to the extent this Agreement specifically provides for the survival of
certain obligations of the Partnership), and Owners shall instruct Escrow Agent
to return the Earnest Money (together with all interest earned thereon) to AGH.
12.2 Owners' Default. If Owners (i) refuse or fail to consummate the
---------------
transactions contemplated by this Agreement, or (ii) otherwise wrongfully fail
to perform any of their obligations or agreements hereunder, either prior to or
at Closing, for any reason other than termination hereof pursuant to a right
granted to Owners hereunder to do so, a failure of condition to the obligation
of Owners to consummate such transactions or a default by AGH, the Partnership
or the REIT then the Partnership shall give Owners and Escrow Agent written
notice specifying the nature of the default, and Owners shall have thirty (30)
days from receipt of the Partnership's notice within which to cure the specified
default; provided, however, if at the end of said thirty (30) day period Owners
are diligently pursuing the cure of the default but the default has not been
cured, Owners shall have an additional period not to exceed thirty (30) days
within which to complete the cure of the default. If at the end of the initial
thirty (30) or, if applicable, additional thirty (30) day period, the default is
still not cured, AGH and the Partnership as their sole remedy, shall have the
right to do any one or more of the following:
(a) Terminate this Agreement by written notice given to Owners and
Escrow Agent within fifteen (15) days of the
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<PAGE>
expiration of the initial thirty (30) or additional thirty (30) day cure period
(whichever is applicable), in which event AGH shall be entitled to a return of
the Earnest Money (together with all interest earned thereon), promptly upon
receipt of such notice, and Owners shall be obligated (i) to instruct Escrow
Agent to return the Earnest Money (together with all interest earned thereon) to
AGH, and (ii) to pay and reimburse AGH and the Partnership for their out-of-
pocket costs in connection with this Agreement; or
(b) Seek specific performance of this Agreement, but only in the
event of Owners' willful refusal to close or to perform any of their other
obligations hereunder.
Notwithstanding the foregoing, in the event of any default by Owners under this
Agreement due to a breach after Closing or any termination hereof of any
covenant or indemnity which survives the Closing or any termination hereof, or
if Partnership shall discover after Closing that any warranty or representation
made by Owners herein or in connection with the transaction contemplated herein
was materially incorrect or breached when made, Partnership shall have any and
all rights and remedies available at law or in equity by reason of such default.
Neither Partnership's or Owners' attendance or appearance at Closing shall be
deemed to nullify or void the provisions of this Section.
ARTICLE 13
INDEMNITIES
-----------
13.1 Owners' Indemnity. (a) After Closing, Owners agree to
-----------------
indemnify and hold LLC, the Partnership and the REIT and any other entity
designated to be a partner in LLC (the "OP Indemnified Parties") harmless of and
from all liabilities, losses, damages, costs, expenses (including reasonable
attorneys' fees) which the OP Indemnified Parties may suffer or incur by reason
of (i) any act or cause of action occurring or accruing prior to the Closing
Date and arising from the ownership or operation of the Hotel prior to the
Closing Date, including but not limited to Pending Claims and any claims by
employees of LLC (or its management company) or third parties under insurance
carried by LLC (or its management company), or (ii) breach of any
representation, warranty or covenant made by Owners in this Agreement or any
instrument delivered at the Closing (provided that this clause (ii) shall
survive the Closing for one year, only).
(b) At Closing, Owners shall enter into a pledge and security
agreement (the "Pledge Agreement"), pursuant to which Owners shall pledge the
Units to the Partnership to secure Owners' obligations pursuant to subparagraph
13.1(a). The Pledge
-35-
<PAGE>
Agreement shall be in form reasonably satisfactory to the parties.
13.2 Partnership's Indemnity. (a) The Partnership agrees to
-----------------------
indemnify and hold Owners harmless of and from all liabilities, losses, damages,
costs, expenses (including reasonable attorneys' fees) which the Owners may
suffer or incur by reason of (i) any act or cause of action occurring or
accruing subsequent to the Closing Date and arising from the ownership or
operation of the Hotel subsequent to the Closing Date, including but not limited
to (x) any claims by employees of LLC (or its management company) or third
parties under insurance carried by LLC (or its management company), but such
indemnity is subject to the representations of Owners made herein, and (y) any
claims or damages resulting from any default under the Security Documents from
and after the Closing Date, or (ii) breach of any representation, warranty or
covenant made by the Partnership in this Agreement or any instrument delivered
at the Closing.
(b) The parties acknowledge that this Agreement and all documents,
agreements, understandings and arrangements relating to the transactions
contemplated by this Agreement to be executed or undertaken by the Partnership
which have been executed by one or more officers of the REIT which is the sole
general partner of the Partnership, have been or will be so executed in his/her
capacity as an officer of the REIT, and not individually, and none of the
partners, officers or employees of the Partnership nor any of the directors,
officers, shareholders or employees of the REIT (in their capacities as
directors, officers, shareholders or employees) shall be bound or have any
personal liability hereunder or thereunder except as otherwise provided under
applicable law. Owners shall look solely to the assets of the Partnership for
satisfaction of any liability of the Partnership in respect of this Agreement
and all documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of the
partners, officers or employees of the Partnership nor any of the directors,
officers, shareholders, or employees of the REIT or any of their personal assets
for the performance or payment of any obligation hereunder or thereunder except
as otherwise provided under applicable law.
ARTICLE 14
BROKERS
-------
14.1 No Broker. The parties hereto represent to each other that they
---------
dealt with no finder, broker or consultant in connection with this Agreement or
the transactions contemplated hereby.
14.2 Indemnification by Owners. Owners agree to, and hereby do,
-------------------------
indemnify and save harmless AGH, the Partnership, the
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<PAGE>
REIT and their affiliates, and their respective successors and assigns against
and from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation for
bringing about this Agreement or the transactions contemplated hereby made by
any broker, finder, consultant or like agent if such claim or claims made by any
such broker, finder, consultant or like agent are based in whole or in part on
any agreements entered into with Owners or their representatives for a
commission or other compensation. Owners shall likewise indemnify and save
harmless AGH, Partnership and the REIT and their affiliates and their respective
successors and assigns against and from any loss, liability or expense,
including reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation relating to the Leases.
14.3 Indemnification by AGH. AGH, prior to Closing and the
----------------------
Partnership thereafter, agrees to, and hereby does, indemnify and save harmless
Owners and their affiliates and their respective successors and assigns against
and from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation for
bringing about this Agreement or the transactions contemplated hereby made by
any broker, finder, consultant or like agent if such claim or claims made by any
such broker, finder, consultant or like agent are based in whole or in part on
any agreements entered into with AGH or its representatives for a commission or
other compensation.
ARTICLE 15
DEFINITIONS
-----------
15.1 Definitions. As used herein, the following terms shall have the
-----------
respective meanings indicated below:
Additional Earnest Money: As defined in Section 10.1.
------------------------
AGH: As defined in the opening paragraph.
---
Appurtenances: As defined in Article 2.
-------------
Assignments: As defined in Article 10.3.
-----------
Closing: As defined in Section 10.1.
-------
Closing Date: As defined in Section 10.1.
------------
Common Stock: As defined in the Recitals.
------------
CPA4: As defined in the opening paragraph.
----
CPA4 Interests: As defined in Section 1.1.
--------------
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<PAGE>
CPA4 Share: As defined in Section 3.1.
----------
CPA8: As defined in the opening paragraph.
----
CPA8 Interests: As defined in Section 1.1.
--------------
CPA8 Share: As defined in Section 3.1.
----------
Debt: As defined in Section 8.2.
----
Debt Pay-Off Amount: As defined in Section 10.3.
-------------------
Delaware Act: As defined in Section 3.3.
------------
Document Review Period: As defined in Section 5.2.
----------------------
Earnest Money: As defined in Section 1.2.
-------------
Environmental Report: As defined in Section 8.2.
--------------------
ERISA: As defined in Section 8.2.
-----
Escrow Agent: As defined in Section 1.2.
------------
Escrow Agreement: As defined in Section 1.2.
----------------
Estoppel Certificate: As defined in Section 10.3.
--------------------
Exchange Rights Agreement: As defined in Section 3.2.
-------------------------
Feasibility Review Period: As defined in Section 5.4.
-------------------------
FF&E: As defined in Article 2.
----
FF&E Leases: As defined in Article 2.
-----------
Formation Documents: As defined in Section 8.2.
-------------------
Franchisor Consent: As defined in Section 9.1.
------------------
Guest Bookings: As defined in Article 2.
--------------
Hazardous Substance: As defined in Section 8.2.
-------------------
Hotel: As defined in Article 2.
-----
Improvements: As defined in Article 2.
------------
Initial Earnest Money: As defined in Section 1.2.
---------------------
Inspections: As defined in Section 5.3.
-----------
-38-
<PAGE>
Interests: As defined in Section 1.1.
---------
IPO: As defined in the Recitals.
---
IRS: As defined in Section 8.2.
---
Land: As defined in Article 2.
----
Lease and Leases: As defined in Article 2.
----------------
Lender: As defined in Section 8.2.
------
Lender Consent: As defined in Section 9.1.
--------------
Licenses: As defined in Article 2.
--------
LLC: As defined in the Recitals.
---
Lock-Out Agreement: As defined in Section 3.2.
------------------
Multiemployer Plan: As defined in Section 8.2.
------------------
Notices of Violation: As defined in Section 7.2.
--------------------
Other Personalty: As defined in Article 2.
----------------
Owners: As defined in the opening paragraph.
------
Partnership: As defined in the opening paragraph.
-----------
Partnership Agreement: As defined in Section 3.1.
---------------------
Partnership Amendment: As defined in Section 3.1.
---------------------
Pending Claims: As defined in Section 8.2.
--------------
Pension Plan: As defined in Section 8.2.
------------
Permitted Exceptions: As defined in Section 6.1.
--------------------
Personal Property: As defined in Article 2.
-----------------
Plans and Specs: As defined in Article 2.
---------------
Pledge Agreement: As defined in Section 13.1.
----------------
Purchase Price: As defined in Section 3.1.
--------------
Records: As defined in Article 2.
-------
Registration Statement: As defined in the Recitals.
----------------------
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<PAGE>
REIT: As defined in the Recitals.
----
Schedule of Leases: As defined in Section 5.1.
------------------
SEC: As defined in the Recitals.
---
Securities Act: As defined in Section 3.4.
--------------
Security Documents: As defined in Section 8.2.
------------------
Service Contacts: As defined in Article 2.
----------------
Shares: As defined in the Recitals.
------
Supporting Documents: As defined in Section 4.1.
--------------------
Survey: As defined in Section 4.3.
------
Surveyor: As defined in Section 4.3.
--------
Tenants: As defined in Section 8.2.
-------
Termination Date: As defined in Section 10.1.
----------------
Title Commitment: As defined in Section 4.1.
----------------
Title Company: As defined in Section 4.1.
-------------
Title Policy: As defined in Section 9.1.
------------
Tradenames: As defined in Article 2.
----------
UCC Searches: As defined in Section 4.2.
------------
Units: As defined in the Recitals.
-----
Utility Reservations: As defined in Article 2.
--------------------
Warranties: As defined in Article 2.
----------
ARTICLE 16
MISCELLANEOUS
-------------
16.1 Notice. Any notice provided for by this Agreement and any other
------
notice, demand or communication which any party may wish to send to another
shall be in writing and either delivered in person or sent by registered or
certified mail or overnight courier, return receipt requested, in a sealed
envelope, postage prepaid, and addressed to the party for which such notice,
demand or communication is intended at such party's address as set forth in this
Section. The address for AGH, the
-40-
<PAGE>
Partnership or the REIT for all purposes under this Agreement shall be the
following:
American General Hospitality, Inc.
3860 W. Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Bruce G. Wiles,
Executive Vice President
with a copy to:
Battle Fowler, L.L.P.
75 East 55th Street
New York, New York 10022
Attention: Peter M. Fass, Esq.
Owners' address for all purposes under this Agreement shall be the following:
W. P. Carey & Co., Inc.
50 Rockefeller Plaza
New York, New York 10029
Attention: Anthony Mohl
with a copy to:
Reed Smith Shaw & McClay
375 Park Avenue
New York, New York 10157
Attention: Ruth Perfido, Esq.
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall be
deemed given and effective as of the date of delivery in person or receipt set
forth on the return receipt. The inability to deliver because of changed address
of which no notice was given, or rejection or other refusal to accept any
notice, demand or other communication, shall be deemed to be receipt of notice,
demand or other communication as of the date of such attempt to deliver or
rejection or refusal to accept. Notices may be given by any party's counsel on
behalf of such party.
16.2 Entire Agreement; Modifications and Waivers; Cumulative
-------------------------------------------------------
Remedies. This Agreement constitutes the entire agreement between the parties
- --------
hereto and may not be modified or amended except by instrument in writing signed
by the parties hereto, and no provisions or conditions may be waived other than
by a writing signed by the party waiving such provisions or conditions. No delay
or omission in the exercise of any right or
-41-
<PAGE>
remedy accruing to Owners, AGH or Partnership upon any breach under this
Agreement shall impair such right or remedy or be construed as a waiver of any
such breach theretofore or thereafter occurring. The waiver by Owners, AGH or
Partnership of any breach of any term, covenant or condition herein stated shall
not be deemed to be a waiver of any other breach, or of a subsequent breach of
the same or any other term, covenant or condition herein contained. All rights,
powers, options or remedies afforded to Owners, AGH or Partnership either
hereunder or by law shall be cumulative and not alternative, and the exercise of
one right, power, option or remedy shall not bar other rights, powers, options
or remedies allowed herein or by law, unless expressly provided to the contrary
herein.
16.3 Exhibits. All exhibits referred to in this Agreement and
--------
attached hereto are hereby incorporated in this Agreement by reference.
16.4 Successors and Assigns. Except as set forth in this Article,
----------------------
this Agreement may not be assigned by AGH or the Partnership without the prior
approval of Owners. This Agreement shall be binding upon, and inure to the
benefit of, Owners, AGH and the Partnership and their respective legal
representatives, successors, and permitted assigns. Whenever a reference is made
in this Agreement to AGH or the Partnership, it shall include their respective
successors and permitted assigns under this Agreement. The Partnership or AGH
may assign its rights and obligations under this Agreement to an affiliate.
16.5 Article Headings. Article headings and article and section
----------------
numbers are inserted herein only as a matter of convenience and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
thereof and shall not be considered in interpreting or construing this
Agreement.
16.6 Governing Law. This Agreement shall be construed and
-------------
interpreted in accordance with the laws of the State of New York.
16.7 Time Periods. If the final day of any time period or limitation
------------
set out in any provision of this Agreement falls on a Saturday, Sunday or legal
holiday under the laws of the State of Louisiana or the federal government, then
and in such event the time of such period shall be extended to the next day
which is not a Saturday, Sunday or legal holiday.
16.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on a separate counterpart, each of which
when so executed and delivered shall be deemed an original and all of which
taken together shall constitute but one and the same instrument.
-42-
<PAGE>
16.9 Survival. All covenants and agreements contained in the
--------
Agreement which contemplate performance after the Closing Date and all
representations, warranties and indemnities contained in this Agreement shall
expressly survive the Closing for a period of five (5) years, and shall not be
deemed to merge into, or be waived by, the Owners or any other closing
documents.
16.10 Further Acts. In addition to the acts, deeds, instruments and
------------
agreements recited herein and contemplated to be performed, executed and
delivered by REIT, Partnership and Owners, REIT, Partnership and Owners shall
perform, execute and deliver or cause to be performed, executed and delivered at
the Closing or after the Closing, any and all further acts, deeds, instruments
and agreements and provide such further assurances as the other party or the
Title Company may reasonably require to consummate the transactions contemplated
hereunder. However, the foregoing shall not be deemed to (i) require Owners to
expend a sum of money which it could not reasonably have anticipated on the date
of execution of this Agreement, or (ii) require Partnership or REIT to expend a
sum of money which it could not reasonably have anticipated on the date of
execution of this Agreement.
16.11 Severability. In case any one or more of the provisions
------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
16.12 Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, or to recover damages for breach of
this Agreement, the nonprevailing party in any action pursued in a court of
competent jurisdiction (the finality of which is not legally contested) agrees
to pay to the prevailing party all reasonable costs, damages, and expenses,
including attorneys' fees, expended or incurred in connection therewith.
16.13 Limitation on Owners' Liability. Anything contained herein to
-------------------------------
the contrary notwithstanding, any claim based on or in respect of any liability
of Owners under this Agreement shall be enforced only against the Units and not
against any other assets, properties or funds of (a) Owners or any director,
officer, general partner, limited partner, employee or agent of Owners or either
of them or their general partners (or any legal representative, heir, estate,
successor or assign of any thereof), (b) any predecessor or successor
partnership or corporation (or other entity) of Owner or either of their or
their general partners, either directly or through Owner or
-43-
<PAGE>
either of their or its general partners or any predecessor or successor
partnership or corporation (or other entity) of Owner or either of their, or (c)
any other person or entity affiliated with any of the foregoing, or any
director, officer, employee or agent of any thereof.
-44-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into effective as
of the day and year first above written.
OWNERS:
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership
By: Carey Corporate Property, Inc.,
General Partner
By: /s/ Anthony Mohl
------------------------------------
Name: Anthony Mohl
Title: Senior Vice President
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
By: Eighth Carey Corporate Property,
Inc., as Managing General Partner
By: /s/ Anthony Mohl
------------------------------------
Name: Anthony Mohl
Title: Senior Vice President
AGH:
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
By: /s/ Bruce G. Wiles
------------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-45-
<PAGE>
PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada
corporation, General Partner
By: /s/ Bruce G. Wiles
-------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-46-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into effective
as of the day and year first above written.
OWNERS
CORPORATE PROPERTY ASSOCIATES 4,
a California limited partnership
By: Carey Corporate Property, Inc.,
General Partner
By: /s/ Anthony Mohl
-------------------------------
Name: Anthony Mohl
Title: Senior Vice President
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership
By: Eighth Carey Corporate Property,
Inc., as Managing General Partner
By: /s/ Anthony Mohl
--------------------------------
Name: Anthony Mohl
Title: Senior Vice President
AGH:
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
By: /s/ Bruce G. Wiles
---------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-45-
<PAGE>
SCHEDULE 1
UNIT DETERMINATION
------------------
The Purchase Price (prior to any adjustments pursuant to Section 10.8),
less the Debt Pay-Off Amount (the resulting remainder being hereinafter referred
to as the "Unit Component of the Purchase Price" or the "Unit Component"), shall
be adjusted and, as adjusted, shall be paid to the Owners in Units, as follows:
At the Closing, the Owners shall receive a number of Units equal to (i) the
Unit Component of the Purchase Price (subject to adjustment as set forth below),
divided by (ii) the mid-point of the proposed per Share offering prices (the
"Mid-Point") set forth in the final red herring included in the REIT's
Registration Statement on Form S-11 (the "Red Herring"). In the event that the
initial yield per Share set forth in the Red Herring (the "Initial Yield";
calculated by dividing the estimated annual distribution per Share for the 12-
month period following the IPO, as set forth in the Red Herring by the Mid-
Point) is a percentage greater or less than 8.00%, then the Unit Component of
the Purchase Price shall decrease or increase accordingly by an amount equal to
the Applicable Percentage (as defined below) times the resulting change in the
value of the Partnership; provided, however, in no event shall the Unit
Component Purchase Price be reduced by more than 7%. As used in this Schedule 1,
the "value of the Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Partnership or the shareholders in the REIT
(as the case may be) as set forth in the Red Herring, and dividing that product
by the Initial Yield. While the Unit Component may never be reduced by more than
7%, there shall be no cap on increases in the Unit Component as a result of any
positive pricing adjustment described in this Schedule 1. For purposes of the
Agreement, "Applicable Percentage" shall mean the fraction (expressed as a
decimal fraction), the numerator of which is the Purchase Price (prior to any
adjustment) and the denominator of which is the value of the total portfolio of
hotel assets acquired by the Partnership upon the consummation of the IPO as
determined in good faith by the REIT.
The increased or decreased Unit Component shall then be added to the Debt
Pay-Off Amount to obtain the full Purchase Price adjusted in accordance with
this Schedule 1.
<PAGE>
Exhibit 10.26
================================================================================
SALE AND CONTRIBUTION AGREEMENT
BY AND AMONG
MADISON MOTOR INNS, INC.,
a Delaware corporation,
CRAIG STARK, INC.,
a Wisconsin corporation
AND
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation,
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of April 30, 1996
--------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 The Contract...................................................... 2
1.1 Agreement to Contribute or Sell................................... 2
1.2 Earnest Money..................................................... 2
ARTICLE 2 Hotel............................................................. 3
ARTICLE 3 Purchase Price; Payment; Issuance of Limited
Partner Units.................................................. 6
3.1 Purchase Price.................................................... 6
3.2 Registration Rights............................................... 7
3.3 Covenants, Representations and Warranties With
Respect to Units and Shares.................................... 7
3.4 Securities Covenants, Representations and
Warranties of CSI.............................................. 9
ARTICLE 4 Title Deliveries.................................................. 12
4.1 Title Commitment.................................................. 12
4.2 Searches.......................................................... 12
4.3 Survey............................................................ 12
ARTICLE 5 Hotel Documents and Objections.................................... 13
5.1 Hotel Documents................................................... 13
5.2 Procedure for Objections.......................................... 14
5.3 Financial Information............................................. 15
5.4 Termination Right of Owners....................................... 15
ARTICLE 6 Permitted Exceptions.............................................. 15
6.1 Permitted Exceptions.............................................. 15
ARTICLE 7 Operation of Hotel................................................ 15
7.1 Interim Operation................................................. 15
7.2 Notices of Violation.............................................. 18
ARTICLE 8 Representations and Covenants..................................... 18
8.1 Representations by Partnership, AGH and AGHGP..................... 18
8.2 Representations by Owners......................................... 19
8.3 Shadow Management................................................. 26
8.4 Access to Hotel Books and Records................................. 27
8.5 Liquor License.................................................... 27
8.6 Hart Act.......................................................... 27
8.7 Confidentiality................................................... 27
ARTICLE 9 Conditions Precedent to the Closing............................... 28
9.1 Conditions to Obligations of the AGH Parties...................... 28
9.2 Conditions to Owners' Obligations................................. 29
ARTICLE 10 Closing and Closing Documents.................................... 30
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.1 Closing.......................................................... 30
10.2 Escrow........................................................... 31
10.3 Owner's Deliveries............................................... 31
10.4 Deliveries by Partnership, AGHGP and REIT........................ 32
10.5 Amendment of Organizational Documents............................ 33
10.6 Concurrent Transactions.......................................... 33
10.7 Further Assurances............................................... 33
10.8 Prorations and Adjustments....................................... 34
10.9 Sales Tax........................................................ 35
10.10 Document Recordation and Transfer Costs......................... 35
10.11 Reconciliation and Final Payment................................ 36
10.12 Failure of IPO.................................................. 36
ARTICLE 11 Casualty And Condemnation........................................ 36
11.1 Risk of Loss Notice.............................................. 36
11.2 Partnership's Termination Right.................................. 36
11.3 Procedure for Closing............................................ 37
ARTICLE 12 Default And Remedies............................................. 37
12.1 Default by AGH Parties........................................... 37
12.2 Owners' Default.................................................. 38
ARTICLE 13 Indemnities...................................................... 39
13.1 Owners' Indemnity................................................ 39
13.2 Partnership's Indemnity.......................................... 40
13.3 Defense of Actions............................................... 40
ARTICLE 14 Brokers.......................................................... 41
14.1 No Broker........................................................ 41
14.2 Indemnification by Owners........................................ 41
14.3 Indemnification by AGH Parties................................... 41
ARTICLE 15 Definitions...................................................... 41
15.1 Definitions...................................................... 41
ARTICLE 16 Miscellaneous.................................................... 45
16.1 Notice........................................................... 45
16.2 Entire Agreement; Modifications and Waivers;
Cumulative Remedies............................................ 46
16.3 Exhibits......................................................... 46
16.4 Successors and Assigns........................................... 46
16.5 Article Headings................................................. 46
16.6 Governing Law.................................................... 47
16.7 Time Periods..................................................... 47
16.8 Counterparts..................................................... 47
16.9 Survival......................................................... 47
16.10 Further Acts.................................................... 47
16.11 Severability.................................................... 47
16.12 Attorneys' Fees................................................. 47
</TABLE>
-ii-
<PAGE>
EXHIBITS
Exhibit A Legal Description
Exhibit B Service Contracts
Exhibit C FF&E Leases
Exhibit D Organizational Documents
Exhibit D-1 Pending Litigation
Exhibit E Leases
Exhibit F Insurance Policies
Exhibit G Licenses
Exhibit H Violations
Exhibit I Warranties
Exhibit J Environmental Reports
Exhibit K Stark Employment Agreement
Exhibit L Product Improvement Plan
Exhibit M Employee Agreements
SCHEDULES
Schedule 1 Partnership Agreement
Schedule 2 Lock-Up Agreement
Schedule 3 Exchange Rights Agreement
Schedule 4 Registration Rights Agreement
Schedule 5 Unit Pricing
Schedule 6 Separate Agreement
The exhibits and/or schedules of Exhibit 10.26, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
-iii-
<PAGE>
SALE AND CONTRIBUTION AGREEMENT
-------------------------------
THIS SALE AND CONTRIBUTION AGREEMENT (this "Agreement") is made as of
April 30, 1996 by and among MADISON MOTOR INNS, INC., a Delaware
- -------------------, --
corporation ("MMI"), CRAIG STARK, INC., a Wisconsin corporation ("CSI"),
AMERICAN GENERAL HOSPITALITY, INC., a Texas corporation ("AGH"), AMERICAN
GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
(the "Partnership") and AGH GP, Inc., a Nevada corporation ("AGHGP"). MMI and
CSI are collectively referred to as "Owners."
R E C I T A L S:
- - - - - - - -
WHEREAS, Owners are the owners of 100% of the Interests (as defined
below) in Madison Motel Associates ("Associates"), a Wisconsin general
partnership that owns the Hotel (as hereinafter defined), which is currently
licensed and operated as a "Holiday Inn Select" hotel; and
WHEREAS, the indirect majority owner of the Partnership is American
General Hospitality Corporation (the "REIT"), a corporation organized under the
laws of the State of Maryland which intends to be qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code") to continue and expand the hotel acquisition, development, repositioning
and ownership operations of AGH and its affiliates; and
WHEREAS, AGHGP is the sole general partner of the Partnership and a
subsidiary of the REIT (AGHGP, AGH, the Partnership and the REIT are hereinafter
collectively referred to as the "AGH Parties"); and
WHEREAS, AGH and the REIT intend to file with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-11 (as amended
from time to time through the date of the Offering, the "Registration
Statement") relating to an underwritten initial public offering (the "IPO") of
the REIT's shares (collectively, the "Shares") of common stock, par value $.01
per share ("Common Stock"); and
WHEREAS, at the Closing, the Owners wish to sell or contribute all of
their Interests in Associates to the Partnership in exchange for units of
limited partnership interest in the Partnership ("Units") and/or cash as
hereinafter set forth in this agreement;
<PAGE>
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
THE CONTRACT
------------
1.1 Agreement to Contribute or Sell. For and in consideration of the
-------------------------------
mutual benefits enjoyed by one another under this Agreement, upon and subject to
the terms and conditions hereof, MMI agrees to sell, assign and transfer its
Interest (the "MMI Interest") and CSI agrees to sell and/or contribute, assign
and transfer its Interest (the "CSI Interest") to the Partnership (and/or such
affiliates of the Partnership as it may designate, in such percentage
allocations as the Partnership may designate), and the Partnership agrees to
accept and/or to cause its designee(s) to accept the MMI Interests and the CSI
Interests. As used herein, "Interest" shall mean all of a person or entity's
right, title and interest in Associates, including his or its right, title and
interest in capital, profits and distributions.
1.2 Earnest Money. For the purpose of securing the performance of
-------------
AGH and Partnership under the terms and provisions of this Agreement and as a
condition precedent to Owners' obligations hereunder, AGH has delivered, prior
to or contemporaneously with the execution hereof, the Earnest Money to the
Title Company ("Escrow Agent") in current funds. The term "Earnest Money" shall
mean $100,000, and any other sums which may from time to time be deposited as
"Earnest Money" or "Additional Earnest Money" under the terms of any addendum or
amendment hereto. All interest accruing on Earnest Money deposited under this
Agreement shall become a part of and be added to the Earnest Money so that it
shall be subject to disbursement or application in the same manner as is the
principal of the Earnest Money. The Earnest Money shall be held in escrow
pursuant to the terms of an escrow agreement (the "Escrow Agreement") executed
contemporaneously herewith. The Escrow Agent shall deposit the Earnest Money in
an interest bearing account at a bank or savings institution reasonably
acceptable to Owners and Partnership, and all interest accrued thereon shall be
reported under Partnership's federal tax identification number. If the
transactions contemplated by this Agreement are not consummated in accordance
with the terms hereof, the Earnest Money shall be disbursed pursuant to the
terms of this Agreement and the terms of the Escrow Agreement. If the
transactions contemplated by this Agreement are consummated in accordance with
the terms hereof, the Earnest Money shall be returned to AGH.
-2-
<PAGE>
ARTICLE 2
HOTEL
-----
As used in this Agreement, the term "Hotel" shall mean and refer to
the following:
(a) The parcel or parcels of real property located at 4402 East
Washington, Madison, Wisconsin and more particularly described on Exhibit A
---------
attached hereto (collectively the "Land");
(b) The 227-room hotel and all other buildings, structures, parking
areas, and other improvements presently located upon the Land (collectively, the
"Improvements");
(c) All tangible personal property and fixtures (collectively, the
"FF&E") of any kind that are owned by Associates and attached to, or located
upon and used in connection with the ownership, maintenance, use or operation of
the Land or Improvements as of the date hereof (or acquired by Associates and so
employed prior to Closing, as defined below, subject to such depletions,
resupplies, substitutions, and replacements as occur and are made in the
ordinary course of business), including, but not limited to, furniture,
fixtures, equipment, signs, personal property; heating, lighting, plumbing,
drainage, electrical, air conditioning, and other mechanical fixtures and
equipment and systems; elevators, escalators, and related motors and electrical
equipment and systems; hot water heaters, furnaces, heating controls, motors and
boiler pressure systems and equipment, shelving and partitions, ventilating
equipment; and incinerating and disposal equipment; health club and fitness
equipment; vans, automobiles and other motor vehicles; carpet, drapes, beds,
furniture, televisions and other furnishings; stoves, ovens, freezers,
refrigerators, dishwashers, disposals, kitchen equipment and utensils, tables,
chairs, plates and other dishes, glasses, silverware, serving pieces and other
restaurant and bar equipment, apparatus and utensils;
(d) All merchandise, supplies, inventory and other items that are
owned by Associates and used for the operation and maintenance of guest rooms,
restaurants, lounges, swimming pools, health clubs, and other common areas and
recreational areas located within or relating to the Improvements as of the date
hereof (subject to such depletions, resupplies, substitutions, and replacements
as occur and are made in the ordinary course of business), including, without
limitation, food and beverage (alcoholic and non-alcoholic) inventory, office
supplies and stationery, advertising and promotional materials, towels, linen
and bedding, guest cleaning, paper and other supplies, upholstery material,
carpets, rugs, furniture, engineers' supplies, paint and painters' supplies,
employee uniforms, and pool, tennis court and other recreational area cleaning
and maintenance supplies (collectively, the "Other Personalty");
-3-
<PAGE>
(e) All leases, franchises, licenses, occupancy agreements, "trade-
out" agreements or other agreements, now in existence (other than those that
have terminated or expired in accordance with their terms and the terms hereof)
or entered into hereafter in accordance with the provisions of Section 7.1(d) to
which Associates is a party and which demise space in, provide for the use or
occupancy of, or which otherwise similarly affect or relate to the use or
occupancy of, the Improvements or Land, together with all amendments,
modifications, renewals and extensions thereof, and all guaranties in favor of
Associates by third parties of the obligations of the tenants, licensees,
franchisees, concessionaires or other entities thereunder (collectively, the
"Leases" and individually, the "Lease");
(f) All advance bookings, convention reservations and other guest,
room and other booking and reservation contracts from time to time
(collectively, the "Guest Bookings");
(g) All prepaid rents and deposits, including but not limited to,
utility deposits, refundable security deposits and rental deposits, and all
other deposits for advance reservations, banquets or future services
(collectively the "Deposits"), made in connection with the Leases or the Guest
Bookings from time to time; provided, however, that Partnership shall be
entitled to a proration credit under Section 10.8 hereof with respect to the
Deposits;
(h) Any and all of the following that, now in existence (other than
those that have terminated or expired in accordance with their terms and the
terms hereof) or entered into hereafter in accordance with the provisions of
Section 7.1(e), are owned by Associates and relate to or affect in any way, the
design, construction, ownership, use, occupancy, leasing, maintenance, service,
or operation of the Land, Improvements, Leases, Deposits, Guest Bookings, Other
Personalty, or FF&E:
(i) The contracts or agreements described on Exhibit B attached
---------
hereto, and all other contracts or agreements, such as maintenance, supply,
service, parking or utility contracts (collectively, the "Service
Contracts");
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of Associates relating to the Hotel (collectively the
"Warranties");
(iii) Licenses, permits, franchises, certificates of occupancy,
and similar documents issued by any federal, state, or municipal authority
or by any private party, including without limitation the liquor license
and the franchise or license agreement (if it does not automatically
continue on a change of control, Owners agree to use
-4-
<PAGE>
reasonable efforts to obtain any necessary consents to the continuation of
the license) (collectively the "Licenses");
(iv) Telephone exchanges, trade names, trade styles, trade marks,
and other identifying material, and all variations thereof, together with
all related goodwill of Associates (collectively, the "Tradenames") (it
being understood and agreed that the name of the hotel chain to which the
Hotel is affiliated by franchise or other license agreement is a protected
name or registered service mark of such hotel chain);
(v) Plans, drawings, specifications, surveys, soil reports,
environmental reports, engineering reports, inspection reports, and other
technical descriptions and reports of Associates to the extent in
Associates' possession or control (collectively, the "Plans and Specs");
and
(vi) The leases and other contracts permitting the use of any
furniture, fixtures or equipment at the Improvements described on Exhibit C
---------
attached hereto and all other leases and other contracts to which
Associates is a party permitting the use of any furniture, fixtures or
equipment at the Improvements, (collectively, the "FF&E Leases").
(i) Associates' interest, if any, in the right to receive immediately
on and after Closing and continuously consume thereafter water service, sanitary
and storm sewer service, electrical service, gas service, and telephone service
on and for the Land and Improvements, and the foregoing right shall include, but
not be limited to (i) the right to the present and future use of wastewater,
drainage, water and other utility facilities to the extent such use benefits the
Land or Improvements, (ii) all reservations of or commitments covering any such
use in the future, if any and (iii) all wastewater capacity reservations ever
issued in favor of the Land or Improvements, if any (all of the foregoing are
referred to in this Agreement collectively as the "Utility Reservations");
(j) All rights, titles and interests of Associates, if any,
appurtenant to the Land and Improvements (collectively, the "Appurtenances"),
including, but not limited to, (i) all easements, rights of way, rights of
ingress and egress, tenements, hereditaments, privileges, and appurtenances in
any way belonging to the Land or Improvements, (ii) any land lying in the bed of
any alley, highway, street, road or avenue, open or proposed, in front of or
abutting or adjoining the Land, (iii) any strips or gores of real estate
adjacent to the Land, (iv) any leases of adjacent land or facilities used in
connection with the operation of the Hotel, and (v) the use of all alleys,
easements
-5-
<PAGE>
and rights-of-way, if any, abutting, adjacent, contiguous to or adjoining the
Land; and
(k) All books, records, promotional material, tenant data, marketing
and leasing material and forms, market studies, keys, and other materials of any
kind owned by Associates and in Associates' possession or control, or which
Associates has access to or may obtain and has the right to convey and deliver
which are or may be used in Associates' ownership or use of the Land, the
Improvements or the FF&E (collectively, the "Records"); provided, however, that
a copy of any such material may be retained by Owners and, after Closing, Owners
may inspect and copy the same (at Owners' expense) during normal business hours.
Partnership shall maintain the Records for five years from the Closing Date, and
Partnership shall notify Owners in writing prior to disposal of any Records and
deliver to Owners (at Owners' expense) any of such Records that Owners request
within twenty (20) days of receipt of such notice from the Partnership. All of
the property and rights constituting the Hotel except for the Land and
Improvements are hereinafter referred to as the "Personal Property."
ARTICLE 3
PURCHASE PRICE; PAYMENT;
------------------------
ISSUANCE OF LIMITED PARTNER UNITS
---------------------------------
3.1 Purchase Price. The purchase price for the Interests shall be
--------------
$21,750,000, subject to adjustment in accordance with Section 10.8 (the
"Purchase Price"). The parties agree that the Purchase Price will be allocated
98% to the Land and the Improvements and 2% to the Personal Property. The
Partnership shall pay the Purchase Price to each of the Owners at Closing as
follows:
(i) the Purchase Price shall be allocated between MMI (the "MMI
Share") and CSI (the "CSI Share") as specified in a written notice
delivered by Owners to the Partnership prior to Closing.
(ii) the MMI Share shall be paid in cash, by wire transfer to an
account designated by MMI prior to Closing.
(iii) Twenty-Three Thirty-Sixths (23/36) of the CSI share
shall be paid in cash, by wire transfer to an account designated by CSI
prior to Closing, and the remaining Thirteen Thirty-Sixths (13/36) in Units
("CSI Unit Component").
The CSI Unit Component shall be adjusted, and the number of Units for
CSI shall be determined, in accordance with Schedule 5 annexed hereto. All
----------
adjustments under Section 10.8 shall be settled in cash.
-6-
<PAGE>
Effective as of and subject to the occurrence of the Closing, CSI
hereby subscribes for and agrees to accept the issuance of the Units and to be
bound by the terms and conditions of the partnership agreement for the
Partnership in substantially the form annexed hereto as Schedule 1 (the
----------
"Partnership Agreement"), including without limitation the power of attorney
granted in the Partnership Agreement, and to execute and deliver at the Closing
such other documents or instruments as may be required by the REIT under the
Partnership Agreement to effect the admission of CSI as a limited partner in the
Partnership. At the Closing, CSI and AGHGP shall execute and deliver the
Partnership Agreement (or an amendment thereto) by which CSI is issued its Units
and admitted as a limited partner to the Partnership (the "Partnership
Amendment").
3.2 Registration Rights. CSI shall have the right, after a one-year
-------------------
"lock-up period", to exchange the Units for cash or, at the option of AGHGP,
shares of the Common Stock on a one-for-one basis (subject to customary anti-
dilution and adjustment provisions) and to register the shares with the
Securities and Exchange Commission (the "SEC") pursuant to a "shelf"
registration which the Partnership will cause to be effected within 90 days
after the lock-up period. Such rights will be set forth in a lock-up agreement
(the "Lock-Up Agreement"), an exchange rights agreement (the "Exchange Rights
Agreement") and a registration rights agreement (the "Registration Rights
Agreement"), as modified by an agreement (the "Separate Agreement"), all to be
executed by CSI and one or more of the AGH Parties, as the case may be, at the
Closing. The Lock-Up Agreement, Exchange Rights Agreement and Registration
Rights Agreement shall be substantially in the forms annexed hereto as Schedules
---------
2, 3, and 4, respectively. The Separate Agreement shall be in the form annexed
- -----------
hereto as Schedule 6.
----------
3.3 Covenants, Representations and Warranties With Respect to Units
---------------------------------------------------------------
and Shares. The Partnership, AGH and AGHGP hereby covenant, represent and
- ----------
warrant to CSI that, as of the Closing the following will be true and correct:
(a) The Partnership, AGHGP and the REIT will have the full legal
right, power and authority to enter into the Partnership Agreement, the
Partnership Amendment, the Registration Rights Agreement and the Exchange Rights
Agreement and to consummate the transactions contemplated therein. Each of the
Partnership Agreement, the Partnership Amendment, the Registration Rights
Agreement and the Exchange Rights Agreement will be duly authorized by all
necessary action on the part of, will be duly executed by, and will constitute
the valid and binding obligation of the Partnership, AGHGP and the REIT, as the
case may be, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or
-7-
<PAGE>
similar laws affecting the enforcement thereof or relating to creditors' rights
generally.
(b) The Partnership Agreement and any Partnership Amendment will
constitute valid and binding obligations of AGHGP and the REIT, enforceable in
accordance with their terms.
(c) The Units to be issued to CSI will have been duly and validly
authorized and issued, free of any preemptive or similar rights, and be fully
paid and nonassessable, without any obligation to restore capital or contribute
additional capital except as required by the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act"). As a holder thereof, CSI shall be
admitted as a limited partner of the Partnership entitled to all of the rights
and protections of a limited partner under the Delaware Act and the provisions
of the Partnership Agreement, with the same rights, preferences and privileges
as all existing limited partners on a pari passu basis.
(d) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing of, by or with any
governmental agency or body necessary for the valid authorization, issuance,
sale and delivery by the Partnership of the Units, the valid authorization,
issuance, sale and delivery of any shares of Common Stock that may be issued by
the REIT upon any exchange of the Units, and the execution, delivery and
performance of the Partnership Agreement, the Partnership Amendment, the
Exchange Rights Agreement, and the Registration Rights Agreement by the
Partnership, AGHGP and the REIT, as the case may be (other than complying with
applicable securities laws and regulations upon an exercise of the registration
rights thereunder), will have been made or obtained and will be in full force
and effect.
(e) Neither the issuance or sale and delivery by Partnership of the
Units, nor the issuance, sale and delivery by REIT of any shares of Common Stock
that may be issued upon any exchange of the Units, nor the execution, delivery
and performance by the Partnership, AGHGP or the REIT of any of the Registration
Rights Agreement, Partnership Agreement, the Partnership Amendment or the
Exchange Rights Agreement will (with or without the giving of notice or passage
of time or both) conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under the certificate of
incorporation or by-laws of AGHGP or of the REIT or the certificate of limited
partnership or the Partnership Agreement of the Partnership; any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument to which AGHGP. the REIT or the Partnership is a party or to which
any of them, any of their respective properties or other assets or any hotel is
subject; or any applicable statute,
-8-
<PAGE>
judgment, decree, rule or regulation of any court or governmental agency or body
applicable to any of the foregoing or any of their respective properties; or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of AGHGP, the REIT or the Partnership or loss of
rights under any of the foregoing documents.
The foregoing representations and warranties shall be true and
accurate on the Closing Date, and the Partnership, AGHGP and the REIT shall
execute and deliver to CSI at the Closing a certificate confirming the accuracy
of the foregoing representations and warranties.
3.4 Securities Covenants, Representations and Warranties of CSI. CSI
-----------------------------------------------------------
represents and warrants to the Partnership as follows:
(a) CSI has received and reviewed a copy of the draft Registration
Statement and the draft financial statements for the REIT describing the
property and interests which are currently expected to be owned directly or
indirectly by the REIT upon consummation of the IPO (the "Formation
Transactions"). CSI understands that an investment in the Units involves risks.
CSI, by reason of its business and financial experience, together with the
business and financial experience of those persons, if any, retained by it to
represent or advise it with respect to its investment in Units, (i) has such
knowledge, sophistication and experience in financial and business matters and
in making investment decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment decision with respect
to an investment in Units, (ii) is capable of protecting its own interests or
has engaged representatives or advisors to assist it in protecting its interests
and (iii) is capable of bearing the economic risk of such investment including
the loss of its entire investment. CSI is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). If CSI has retained or retains a person to
represent or advise it with respect to its investment in Units, CSI will advise
the Partnership of such retention and, at the Partnership's request, CSI shall,
prior to or at the Closing, (i) acknowledge in writing such representation and
(ii) cause such representative or advisor to deliver a certificate to the
Partnership containing such representations as may be reasonably requested by
the Partnership.
(b) CSI understands that an investment in the Partnership involves
substantial risks. CSI has been given the opportunity to make a thorough
investigation of the proposed activities of the Partnership and has been
furnished with materials relating to the Partnership and its proposed
activities, including, without limitation, the draft Registration
-9-
<PAGE>
Statement. CSI has been afforded the opportunity to obtain any additional
information requested by it. CSI has had an opportunity to ask questions of and
receive answers from representatives of the Partnership concerning the
Partnership and its proposed activities and the terms and conditions of an
investment in Units. CSI has relied and is making its investment decision based
upon the draft Registration Statement and other written information provided to
CSI by or on behalf of the Partnership.
(c) The Units to be issued to CSI at the Closing will be acquired by
CSI for its own account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or the
grant of any participation therein (other than distribution to shareholders of
CSI). CSI was not formed for the specific purpose of acquiring an interest in
the Partnership.
(d) CSI acknowledges that (i) the Units to be issued to it at the
Closing have not been registered under the Securities Act or state securities
laws by reason of a specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, if such Units are
represented by certificates, such certificates will bear a legend to such
effect, (ii) the REIT's and the Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of CSI contained in this section, (iii) the Units to be issued to CSI
at the Closing may not be resold or otherwise distributed unless registered
under the Securities Act and applicable state securities laws, or unless an
exemption from registration is available, (iv) there is no public market for
such Units, and (v) the Partnership has no obligation or intention to register
such Units under the Securities Act or any state securities laws or to take any
action that would make available any exemption from the registration
requirements of such laws, except as provided in the Exchange Rights Agreement
and the Registration Rights Agreement. CSI hereby acknowledges that it may have
to bear the economic risk of the investment commitment evidenced by this
Agreement and any Units issued hereunder for an indefinite period of time,
although (x) subject to the Lock-Up Agreement and under the terms of the
Partnership Agreement and Exchange Rights Agreement, as they will be in effect
at the time of the IPO, Units will be exchangeable at the request of the holder
thereof at any time after the first anniversary of their issuance for Shares or,
at the option of the REIT, cash, and (y) subject to the Lock-Up Agreement, the
holder of any such Shares issued upon exchange of Units will be afforded certain
rights to have such Shares registered under the Securities Act and applicable
state securities laws pursuant to the Registration Rights Agreement.
-10-
<PAGE>
(e) The address set forth under CSI's name in Section 8.2 is the
address of CSI's principal place of business and CSI has no present intention of
relocating such place of business.
(f) CSI acknowledges that after Closing of the IPO, it will be
provided annually with financial statements of the Partnership including a
balance sheet and the related statements of income and retained earnings and
changes in financial position, accompanied by a report of an independent public
accountant stating that an audit of such financial statements has been made in
accordance with generally accepted accounting principles, stating the opinion of
the accountant with respect to the financial statements and the accounting
principles and practices reflected therein and with respect to the consistency
of the application of the accounting principles, and identifying any matters to
which the accountant takes exception and stating, to the extent practicable, the
effect of each such exception on such financial statements.
(g) CSI agrees that it will not sell, assign or otherwise transfer
its Units or any fraction thereof, whether voluntarily or by operation of law or
at judicial sale or otherwise, to any person who does not make the
representations and warranties to the Partnership set forth in this Section 3.4
and similarly agree not to sell, assign or transfer such Units or fraction
thereof to any person who does not similarly represent, warrant and agree.
The Units are being acquired for CSI's account for investment, and not
for distribution or resale to others (other than distribution to shareholders of
CSI). CSI agrees that it will not sell or otherwise transfer the Units unless
they are registered under the Securities Act or unless an exemption from such
registration is available. CSI represents that it has adequate means of
providing for its current needs and possible contingencies, and that it has no
need for liquidity of the investment.
It is understood that all documents, records and books pertaining to
the investment have been made available for inspection by CSI's attorney or
accountant or offeree representative and CSI, and that the books and records of
the Partnership will be available upon reasonable notice, for inspection by CSI
at reasonable hours at its principal place of business.
-11-
<PAGE>
ARTICLE 4
TITLE DELIVERIES
----------------
4.1 Title Commitment. Within twenty (20) days after the execution of
----------------
this Agreement, Owners shall obtain and deliver to the Partnership, at Owners'
sole cost and expense, the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by a title company designated by the Partnership and acceptable to Owners (the
"Title Company"), for the most recent form of ALTA Owner's policy available in
Wisconsin (with access, zoning, subdivision, contiguity, survey, "Fairway" and
non-imputation endorsements) covering the Land and Improvements, setting forth
the current status of the title to the Land and Improvements, showing all liens,
claims, encumbrances, easements, rights of way, encroachments, reservations,
restrictions, and any other matters affecting the Land and Improvements, and
pursuant to which the Title Company agrees to issue to Associates at Closing an
Owner's Policy of Title Insurance (the "Title Policy") on the most recent form
of ALTA Owner's policy. Owners agree that Chicago Title Insurance Company is
acceptable to Owners; and
(b) A true, complete, legible (to the extent reasonable practicable)
and, where applicable, recorded copy of all documents and instruments (the
"Supporting Documents") referred to or identified in the Title Commitment,
including, but not limited to, all deeds, lien instruments, leases, plats,
surveys, reservations, restrictions, and easements.
4.2 Searches. Within twenty (20) days after the execution hereof,
--------
Owners shall obtain and deliver to the Partnership, at Owner's sole cost and
expense, current written reports (the "Searches") from the Offices of the Iowa
and Wisconsin Secretaries of State and the deed recording offices and circuit
courts of Dane County, Wisconsin, and Polk County, Iowa reflecting the results
of current searches of the Uniform Commercial Code, judgment, tax lien and
bankruptcy filing records maintained by such offices, said Searches to be made
under the names of Owners and Associates and under the Tradename used by Owners
at the Hotel.
4.3 Survey. Within twenty (20) days after the execution hereof,
------
Owners shall provide to Partnership, at Owners' sole cost and expense, a
current, on the ground, "as built" ALTA survey (the "Survey") of the Land and
Improvements made on the ground and certified by a professional land surveyor
licensed in the state in which the Hotel is located (the "Surveyor"). The
Survey must (i) accurately show the locations of all existing easements, fences,
encroachments, conflicts, protrusions, alleys, streets, roads, and rights-of-way
on the Land which are visible
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on the ground or listed in the Title Commitment (with recording information
shown if applicable); (ii) accurately show the locations of all existing
improvements, monuments, sidewalks, driveways, parking lots and other visible
items on the Land; (iii) accurately show all areas designated as being flood
prone or subject to special flood hazards or other hazardous conditions
according to the most current official maps of the Flood Insurance
Administration, the Federal Emergency Management Agency or any other public or
semi-public body charged with determining the existence of such conditions which
has jurisdiction over the Hotel; (iv) set forth a metes and bounds description
of the Land and, if applicable, a description by reference to a recorded plat or
map; and (v) contain a certification by the Surveyor in form reasonably
acceptable and addressed to Owners and Associates, the Partnership, the REIT and
the Title Company, indicating that the Survey was made on the ground and
accurately shows all the matters required above. If different from the
description contained in Exhibit A attached to this Agreement, the legal
---------
description of the Land contained in the Survey, once the correctness thereof
has been confirmed by Owners, Partnership and the Title Company, shall be
substituted for the description of the Land contained in said Exhibit A and this
---------
Agreement shall be deemed amended by the substitution of the legal description
of the Land contained in the Survey as a new Exhibit A without the necessity of
---------
the parties executing any additional written amendments to this Agreement. In
addition, such description shall be used in the Owner's Policy of Title
Insurance to be delivered by the Title Company to Partnership at Closing.
ARTICLE 5
HOTEL DOCUMENTS AND OBJECTIONS
------------------------------
5.1 Hotel Documents. As soon as practicable but in no event later
---------------
than twenty (20) days after the execution hereof and to the extent not
previously delivered to AGH or the Partnership, Owners, at Owners' sole cost and
expense, will deliver to AGH or the Partnership true, correct and complete
copies (or where specifically indicated, original counterparts) of the following
(together with all amendments, modifications, renewals or extensions thereof) as
of the date hereof:
(i) All Warranties relating to the Hotel or any part thereof
which are still in effect;
(ii) All Licenses;
(iii) All material agreements relating to the operation of the
Hotel (including leases of adjacent land or facilities);
(iv) All documentation relating to the terms of employment of any
employees of Associates;
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(v) All of the Plans and Specs;
(vi) All Service Contracts;
(vii) All Leases, a schedule of such Leases (the "Schedule of
Leases") and all agreements for real estate commissions, brokerage fees,
finder's fees or other compensation payable by Associates in connection
therewith;
(viii) To the extent in the possession or control of Associates,
all notices received from governmental authorities in connection with the
Hotel since January 1, 1994; and
(ix) A rent roll including for each Lease (1) the name of the
tenant; (2) the portion of Hotel leased; (3) the base rental rate; (4) the
amount of prepaid rent; (5) to the extent determinable and in the
possession or control of Associates, the amount of each Tenant's security
deposit; (6) the applicable percentage rental rate, if any, and the means
of calculation thereof; (7) the date of the Lease; and (8) the expiration
date of the Lease.
5.2 Procedure for Objections. The Partnership shall have until
------------------------
fourteen (14) days following the completion of all deliveries required by Owners
to the Partnership under Sections 4.1, 4.2, 4.3 and 5.1 hereof (the "Document
Review Period") to notify Owners in writing of any objections the Partnership
may have to matters reflected in or concerning the Title Commitment, the Survey,
the Searches or any documents or items delivered by Owners to the Partnership
pursuant to those Sections. If the Partnership shall so notify Owners of any
objections, Owners may elect to cure such objections on or before the Closing
Date by providing written notice of such election to the Partnership within
fourteen (14) days from the date on which Owners receive the Partnership's
objections. If the Partnership is not reasonably satisfied with the commitment
of Owners to undertake cure efforts, the Partnership may terminate this
Agreement by giving written notice of termination to Owners within ten (10) days
after receipt of Owners' notice of election, as aforesaid. If the Partnership
terminates this Agreement pursuant to this Section as a result of deliveries
pursuant to Section 5.1, the Liquidated Amount shall be delivered to Owners and
the balance of the Earnest Money shall be returned to the Partnership within
five (5) days after any such termination. Upon termination of this Agreement
and payment pursuant to the preceding sentence, neither party shall have any
further rights or obligations one to the other except as otherwise provided
herein, and, in such event, Owners, AGH and the Partnership agree to provide any
necessary written directions to Escrow Agent to release the Earnest Money as
aforesaid. If the Partnership does not object within such 14-day period or
provide written notice of
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termination within such 10-day period, the Partnership shall be deemed to have
accepted and approved all matters reflected in or concerning the Title
Commitment, the Survey, the Searches and any documents or items delivered
pursuant to Sections 4.1, 4.2, 4.3 and 5.1 hereof.
5.3 Financial Information. Representatives of the Partnership and
---------------------
the REIT shall have access at the Hotel to all financial and other information
reasonably available to Owners (at no additional cost to Owners) relating to
Associates and the Hotel sufficient to enable them to prepare audited financial
statements in conformity with Regulation S-X of the SEC and to enable them to
complete and file the Registration Statement. Owners shall also provide to
representatives of the Partnership and the REIT a signed representation letter
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Hotel. The AGH Parties shall provide to
CSI, at CSI's request, information reasonably available to the AGH Parties (at
no additional cost to them) relating to the Partnership and the REIT and the
business proposed to be conducted by them in order for Owners to make an
investigation thereof.
5.4 Termination Right of Owners. Owners shall have the right to
---------------------------
terminate this Agreement by notice of such termination to the Partnership if the
Closing has not occurred by August 1, 1996 (the "Termination Date").
ARTICLE 6
PERMITTED EXCEPTIONS
--------------------
6.1 Permitted Exceptions. Any title exceptions or survey matters to
--------------------
which the Partnership does not object in accordance with Section 5.2 and any
title exceptions or survey matters which the Partnership is deemed to have
accepted and approved in accordance with Section 5.2 shall be herein referred to
as the "Permitted Exceptions." The Security Documents shall not be Permitted
Exceptions but shall be discharged at or prior to Closing.
ARTICLE 7
OPERATION OF HOTEL
------------------
7.1 Interim Operation. Owners hereby covenant and agree that between
-----------------
the date of this Agreement and the Closing Date, Owners shall, unless otherwise
consented to by the Partnership or AGH, cause Associates to:
(a) Operate, manage, and maintain the Hotel consistent with
Associates' prior practice, including, without limitation, (i) using reasonable
efforts to keep available the services of its present employees at the
Improvements and to preserve its
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relations with guests, suppliers and other parties doing business with Owners
with respect to the Hotel, (ii) accepting booking contracts for the use of the
Hotel facilities for periods following Closing on terms substantially similar to
the terms typically arranged by Associates as of the date of this Agreement and
using reasonable efforts to retain such bookings, (iii) maintaining the current
level of advertising and other promotional activities for Hotel facilities, and
(iv) remaining in substantial compliance with all current license and franchise
agreements, subject to the right to contest whether Associates is in compliance
with such licenses and agreements, short of terminating same;
(b) Not commit waste of any portion of the Hotel;
(c) Keep, observe, and perform all its material obligations under the
Leases, FF&E Leases, the Service Contracts, and all other applicable material
contractual arrangements relating to the Hotel, subject to the right to
terminate and contest same in the ordinary course of business;
(d) Not enter into any new Leases or renewals or extensions of any
existing Leases or amend or modify any existing Lease in any material respect,
without AGH's prior written consent, except that Owners shall not be required to
obtain AGH's consent to any renewal or extension specifically permitted under
the terms of an existing Lease or on terms at least as favorable to Owners as
set forth in such existing agreement, provided that, in the latter case, any
such renewal or extension shall not exceed a term of six (6) months without
AGH's prior written consent, such consent not to be unreasonably withheld or
delayed;
(e) Not amend, modify, renew or extend any of the FF&E Leases or
Service Contracts or enter into any new contractual relationships with any party
to provide services or goods to the Hotel without the Partnership's prior
written consent, except in the ordinary course of business;
(f) Timely make all repairs, maintenance, and replacements to keep
the Hotel and all FF&E in its current operating condition, reasonable wear and
tear excepted, and Associates will not cause or permit the removal of FF&E from
the Hotel except for the purpose of discarding worn and valueless items;
(g) Keep merchandise, supplies, inventory and Other Personalty
adequately stocked, consistent with past business practice, as if the conveyance
of the Hotel hereunder were not to occur, including without limitation,
maintaining linens and bath towels for at least 2 3/4 turns for all 227 rooms of
the Hotel;
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<PAGE>
(h) Not grant any material bonus, free rent, rebate or other
concession to any present or future Tenant without AGH's prior written consent;
(i) Advise AGH promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is, to Owner's knowledge, instituted or threatened
after the date of this Agreement or if Owners become aware that any
representation or warranty contained in this Agreement shall become false in any
material respect;
(j) Not take any action that would have the effect of violating any
of the representations, warranties, covenants or agreements of Owners contained
in this Agreement in any material respect;
(k) Comply in all material respects and to the extent of past
practice with all federal, state, and municipal laws, ordinances, regulations,
and orders relating to the Hotel, provided that nothing herein shall prevent
Associates from contesting same in good faith and in accordance with law;
(l) Not sell or assign, or enter into any agreement to sell or
assign, or create or permit to exist any lien or encumbrance (other than a
Permitted Exception or any Lien that Owners are required to remove at or prior
to Closing unless Owners or Associates are contesting such Lien in good faith
(and such contested Lien shall be deemed to be a permitted Exception if the
Title Company insures over the same)) on, the Hotel or any portion thereof;
(m) Not allow any material permit, receipt, license, franchise or
right currently in existence with respect to the operation, use, occupancy or
maintenance of the Hotel to expire, be canceled or otherwise terminated,
provided that nothing herein shall prevent Associates from contesting same in
good faith and in accordance with law;
(n) Not cancel any existing Guest Booking or new Guest Booking
obtained by Associates after the date of this Agreement that relate to the
period post-Closing except in the ordinary course of business;
(o) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due, provided that nothing herein shall
prevent Associates from contesting same in good faith and in accordance with
law; and
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<PAGE>
(p) Maintain in full force and effect the present level of insurance
with respect to the Hotel until the Closing Date.
Where the consent or approval of the Partnership or AGH is required pursuant to
any provision of this Section 7.1, such consent or approval shall be deemed
granted if there is no response 5 business days after written request therefor.
Any such consent or approval shall not be unreasonably withheld.
7.2 Notices of Violation. Owners hereby covenant and agree that all
--------------------
notices of violation of federal, state or municipal laws, ordinances, orders,
regulations or requirements ("Notices of Violation") issued by, or filed by, or
served by, any governmental agency having jurisdiction over the Hotel against or
affecting the Hotel on or before the Closing Date of which Owners have actual
knowledge shall be promptly disclosed to AGH and Partnership.
ARTICLE 8
REPRESENTATIONS AND COVENANTS
-----------------------------
8.1 Representations by Partnership, AGH and AGHGP. The Partnership,
---------------------------------------------
AGH and AGHGP represent and warrant unto Owners that each and every one of the
following statements are true, correct and complete as of the date hereof;
provided, however, the Partnership's representations with respect to the
Partnership are limited to the Partnership, AGH's representations with respect
to AGH are limited to AGH, and AGHGP's representations with respect to AGHGP are
limited to AGHGP:
(a) Each of the Partnership, AGH and AGHGP is duly formed, validly
existing and in good standing under the laws of the States of Delaware, Texas
and Nevada, respectively, and has full right, power and authority to conduct its
business as contemplated to be conducted by it and to assume and perform all of
its obligations under this Agreement; the performance by each of them of its
obligations under this Agreement will require no further action or approval of
Partnership's partners, AGH's and AGHGP's shareholders or directors or of any
other individuals or entities in order to constitute this Agreement as a binding
and enforceable obligation of the Partnership, AGH and AGHGP, however such
performance will require consummation of the IPO and compliance with the
securities laws in connection therewith (except as otherwise provided herein);
the Partnership will be duly qualified to do business in the State of Wisconsin;
and this Agreement has been duly executed and constitutes the legal, valid and
binding obligation of AGH, AGHGP and the Partnership enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
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similar laws affecting the enforcement thereof or relating to creditors' rights
generally.
(b) Partnership will not be a foreign partnership (as that term is
defined in the Code and income tax regulations).
(c) The performance of, or compliance with, this Agreement by either
Partnership, AGH or AGHGP will not (with or without the giving of notice and/or
passage of time) result in any violation of or default under, or result in the
acceleration of any obligation or a loss of rights under, the Partnership
Agreement or any mortgage indenture, lien agreement, note, contract, permit,
judgment, decree, order, restrictive covenant, other document, statute, rule or
regulation applicable to Partnership or its assets.
(d) Except for the filing of any requisite pre-merger notification
report under and compliance with the Hart-Scott Rodino Act (the "Hart Act"), and
the Holiday-Inn Consent, each of the Partnership, AGH and AGHGP has obtained
each and every consent, approval, permit or order of, and has made each and
every filing with, any individual, partnership, corporation, trust or other
entity, government agency or political subdivision required to be obtained or
made in connection with: (A) its execution, deliver and performance of this
Agreement and (B) its consummation of the transactions contemplated hereby.
(e) The REIT is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland with full power and
authority to conduct its business contemplated to be conducted by it.
(f) The REIT will not be a foreign corporation (as that term is
defined in the Code and income tax regulations).
8.2 Representations by Owners. A. MMI hereby represents and
-------------------------
warrants unto the Partnership that each and every one of the following
statements is true, correct and complete in every material respect as of the
date of this Agreement:
(a) MMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business in the State of Wisconsin. MMI has full corporate right, power and
authority to enter into this Agreement and to assume and perform all of its
obligations under this Agreement; and the execution and delivery of this
Agreement and the performance by MMI of its obligations under this Agreement
require no further action or approval of MMI's shareholders or directors, or of
any other individuals or entities in order to constitute this Agreement a
binding and enforceable obligation of MMI. Except for the filing of any
requisite pre-merger notification report under and compliance
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<PAGE>
with the Hart Act, and the Holiday Inn Consent, MMI has obtained each and every
consent, approval, permit or order of, and has made each and every filing with,
any individual, partnership, corporation, trust or other entity, government
agency or political subdivision required to be obtained or made in connection
with: (A) its execution, delivery and performance of this Agreement and (B) its
consummation of the transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of MMI, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the enforcement thereof or relating to creditors' rights generally.
(b) MMI is not a foreign corporation (as that term is defined in the
Code and Income tax regulations).
(c) Subject to obtaining the Holiday Inn Consent and compliance with
the Hart Act, neither the entry into nor the performance of, or compliance with,
this Agreement by MMI has resulted, or will result, in any violation of, or
default under, or result in the acceleration of, any obligation under the
articles of incorporation of MMI, or any existing mortgage indenture, lien
agreement, note, contract, permit, judgment, decree, order, restrictive
covenant, statute, rule or regulation applicable to MMI or Associates or to the
Hotel.
(d) MMI has and will have at the Closing, good and valid title to its
Interest, free and clear of all liens, encumbrances, restrictions and claims of
every kind and nature whatsoever ("Liens"). The Owners are the only entities
which have any interest in or right to receive the profits and distributions of
Associates or otherwise in Associates. Upon consummation of the assignments
contemplated by this Agreement, the Partnership (or its designee) will acquire
from MMI good and valid title to its Interest, free and clear of any Liens other
than Liens created by, under or through the Partnership or its designee(s).
(e) Except as otherwise disclosed herein, no party has any right or
option to acquire the MMI Interest or any portion thereof, other than AGH and
Partnership under this Agreement.
(f) MMI (i) is not in receivership or dissolution, (ii) has not made
an assignment for the benefit of creditors or admitted in writing its inability
to pay its debts as they mature, or (iii) has not been adjudicated a bankrupt or
filed a petition in voluntary bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors under the Federal bankruptcy law
or any other similar law or statute of the United States or any jurisdiction
and, to its knowledge, no such petition has been filed against MMI.
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<PAGE>
B. CSI hereby represents and warrants unto the Partnership that each
and every one of the following statements is true, correct and complete in every
material respect as of the date of this Agreement:
(a) CSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Wisconsin. CSI has full corporate
right, power and authority to enter into this Agreement and to assume and
perform all of its obligations under this Agreement; and the execution and
delivery of this Agreement and the performance by CSI of its obligations under
this Agreement require no further action or approval of CSI's shareholders or
directors, or of any other individuals or entities in order to constitute this
Agreement a binding and enforceable obligation of CSI. Except for the filing of
any requisite pre-merger notification report under and compliance with the Hart
Act and the Holiday Inn Consent, CSI has obtained each and every consent,
approval, permit or order of, and has made each and every filing with, any
individual, partnership, corporation, trust or other entity, government agency
or political subdivision required to be obtained or made in connection with:
(A) its execution, delivery and performance of this Agreement and (B) its
consummation of the transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of CSI, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the enforcement thereof or relating to creditors' rights generally.
(b) CSI is not a foreign corporation (as that term is defined in the
Code and Income tax regulations).
(c) Subject to obtaining the Holiday Inn Consent and compliance with
the Hart Act, neither the entry into nor the performance of, or compliance with,
this Agreement by CSI has resulted, or will result, in any violation of, or
default under, or result in the acceleration of, any obligation under the
articles of incorporation of CSI, or any existing mortgage indenture, lien
agreement, note, contract, permit, judgment, decree, order, restrictive
covenant, statute, rule or regulation applicable to CSI or Associates or to the
Hotel.
(d) CSI has and will have at the Closing, good and valid title to its
Interest, free and clear of all Liens. The Owners are the only entities which
have any interest in or right to receive the profits and distributions of
Associates or otherwise in Associates. Upon consummation of the assignments
contemplated by this Agreement, the Partnership (or its designee) will acquire
from CSI good and valid title to its Interest, free and clear of any Liens other
than Liens created by, under or through the Partnership or its designee(s).
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<PAGE>
(e) Except as otherwise disclosed herein, no party has any right or
option to acquire the CSI Interest or any portion thereof, other than AGH and
Partnership under this Agreement.
(f) CSI (i) is not in receivership or dissolution, (ii) has not made
an assignment for the benefit of creditors or admitted in writing its inability
to pay its debts as they mature, or (iii) has not been adjudicated a bankrupt or
filed a petition in voluntary bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors under the Federal bankruptcy law
or any other similar law or statute of the United States or any jurisdiction
and, to its knowledge, no such petition has been filed against CSI.
C. Owners hereby represent and warrant unto the Partnership that each
and every one of the following statements is true, correct and complete in every
material respect as of the date of this Agreement:
(a) Associates is a duly formed and validly existing partnership
under the laws of Wisconsin with full power and authority to own and operate the
Hotel. Exhibit D identifies each and every document pursuant to which
---------
Associates is organized and governed, including all certificates of partnership
and agreements of partnership (including all amendments thereto) (collectively,
"Organizational Documents"). All Organizational Documents are in full force and
effect. True and complete copies of all Organizational Documents have been
delivered to the Partnership.
(b) Except as otherwise disclosed herein, no party has any right or
option to acquire the Hotel or any portion thereof, other than AGH and
Partnership under this Agreement.
(c) Associates (i) is not in receivership or dissolution, (ii) has
not made an assignment for the benefit of creditors or admitted in writing its
inability to pay its debts as they mature, or (iii) has not been adjudicated a
bankrupt or filed a petition in voluntary bankruptcy or a petition or answer
seeking reorganization or an arrangement with creditors under the Federal
bankruptcy law or any other similar law or statute of the United States or any
jurisdiction and, to the knowledge of the Owners, no such petition has been
filed against Associates.
(d) To the best of Owners' knowledge and belief except as set forth
on Exhibit D-1, there are no:
-----------
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial orders respecting awards, with respect to the Hotel;
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(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice or judicial proceedings or orders with
respect thereto, with respect to the Hotel;
(iii) pending charges or complaints with or by the city, state or
federal civil or human rights agencies, unremedied orders by such agencies
or judicial proceedings or orders with respect to obligations under city,
state or federal civil or human rights or antidiscrimination laws or
executive orders, with respect to the Hotel; or
(iv) other pending, or threatened or actual litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affects the Hotel (collectively, the
"Pending Claims").
(e) Except as set forth on Exhibit E, there are no Leases in effect
---------
or any other written or oral agreements binding on the Partnership with any
tenant, licensees, franchisees, concessionaires or other persons or entities
(collectively, "Tenants", and individually, "Tenant").
(f) The insurance covering the Hotel is listed in the insurance
schedule annexed hereto as Exhibit F. Each of said policies is in full force
---------
and effect. No written notice has been received by Associates from the
insurance company which issued any of such policies stating that any of such
policies is not in full force and effect, will not be renewed or will be renewed
only at a higher premium rate than is presently payable therefor. True and
correct copies of each policy have been furnished to Partnership. The AGH
Parties acknowledge that the property insurance listed on Exhibit F is part of a
---------
blanket insurance policy covering other properties as well as the Hotel, and
that, at Closing, said property insurance coverage for the Hotel will be
discontinued.
(g) True and complete copies of each of the Service Contracts have
been delivered to Partnership. The Service Contracts are in full force and
effect, Associates has not received any written notice that it has defaulted
thereunder and Owners have no knowledge of a default by any other party thereto.
(h) All FF&E (other than that covered by the FF&E Leases) and Other
Personalty included in this sale has been fully paid for and is owned by
Associates free and clear of all Liens, except for the Permitted Exceptions and
the Lien created by the Security Documents.
(i) A list of the Licenses are annexed hereto as Exhibit G.
---------
Associates has received no written notice that any
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material default has occurred in the due observance of any condition to any
license, permit or certificate relating to the Hotel.
(j) Owners have no knowledge of any pending or threatened
condemnation affecting the Hotel or of any improvement liens or special
assessments to be made against the Hotel by any governmental authority.
(k) True and complete copies of each of the FF&E Leases have been
delivered to Purchaser. The FF&E Leases are in full force and effect,
Associates has not received any written notice that it has defaulted thereunder
and Owners have no knowledge of a default by any other party thereto.
(l) Except as set forth in Exhibit H, neither Owners nor Associates
---------
have received any written notice of any violation of law or municipal ordinance,
order or requirement noted in or issued by any governmental entity asserting
jurisdiction against or affecting any of the Properties.
(m) To Owner's knowledge the only Warranties still in effect for any
portion of the Hotel are described on Exhibit I.
---------
(n) The principal place of business of each Owner is set forth in
Section 16.1.
(o) Except as set forth on Exhibit M, there are no employment
---------
agreements, stock option, stock purchase, incentive, bonus, pension, retirement,
profit sharing, welfare benefit, non-qualified deferred compensation, and other
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA")) covering any
employee at the Hotel to which Associates contributes or is a party.
(p) As of Closing, Associates will have no liabilities except (i)
real estate taxes or assessments not yet due and payable and adjusted for to the
extent of periods prior to Closing, (ii) obligations under the Security
Documents which will be satisfied on the Closing Date, (iii) obligations arising
under Leases, FF&E Leases and Service Contracts permitted under this Agreement
and under insurance policies and utilities or otherwise in the ordinary course
of business for periods prior to Closing and adjusted at Closing pursuant to
Section 10.8 or otherwise, (iv) obligations under Leases, FF&E Leases and
Service Contracts attributable to any period after Closing, (v) obligations
arising in connection with contracts and other agreements to be entered into and
other obligations incurred in the ordinary course of business which are not in
contravention of this Agreement, (vi) other liabilities specifically identified
in this Agreement and the Exhibits attached hereto for periods prior to
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Closing and to be adjusted at Closing, (vii) liabilities relating to events or
occurrences prior to Closing to the extent covered under the terms of insurance
policies of Associates, and (viii) to the extent their existence does not cause
a breach of the other representations of Owners herein, liabilities or
obligations arising from the physical condition of the Hotel, the Land and/or
the Improvements, including without limitation obligations to make physical
improvements in order to comply with applicable law or to cure violations of
Environmental Laws or to remediate the presence of Hazardous Substances.
(q) For the purpose of this Section 8.2C(q), the term "Hazardous
Substances" shall mean substances defined as a "hazardous waste," "hazardous
substance," "toxic substance" or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxins, or urea formaldehyde
insulation. As used herein, "Environmental Laws" shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, 42 U.S.C. (S) 9601, et seq., the Resource Conservation and
-- ---
Recovery Act, 42 U.S.C. (S) 6901, et seq., the Clean Air Act, 42 U.S.C. (S)
-- ---
7401, et seq., the Clean Water Act, 33 U.S.C. (S) 1251, et seq., the Toxic
-- --- -- ---
Substance Control Act, 15 U.S.C. (S) 2601, et seq., and the Occupational Safety
-- ---
and Health Act, 29 U.S.C. (S) 651, et seq., as any of the preceding have been
-- ---
amended prior to the date hereof, and any other federal, state, or local law,
ordinance, regulation, rule, order, decision or permit relating to the
protection of the environment or of human health from environmental effects of
Hazardous Substances and which are applicable to the Hotel.
To the Owners' knowledge, and except for those conditions specifically
described in the environmental reports which are listed on Exhibit J (the
---------
"Environmental Reports"), which were delivered to the Partnership prior to the
date hereof, and without independent investigation other than the Environmental
Reports, (i) no Hazardous Substances have been spilled or released in, on or
under the Hotel so as to impose liability or require remediation under any
Environmental Law and (ii) no liability under or violation of any Environmental
Laws or condition that could give rise to such liability or violation exists
with respect to the Hotel, including without limitation liabilities relating to
offsite disposal of waste in connection with the Hotel, except in each case for
remediation obligations, liabilities or violations that would not, individually
or in the aggregate, have a material adverse effect on the business or financial
condition of Associates or the Hotel. To Owners' knowledge, there are no
environmental reports relating to the Hotel currently in the possession of
Associates or Owners which
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<PAGE>
have not been made available to AGH or the Partnership prior to the date hereof.
Each of the foregoing representations and warranties made or remade at
and as of the Closing shall survive the Closing for a period of one year.
Except for the express representations and warranties of Owners
contained herein, the Partnership is accepting the Interests, and the Interests
shall be conveyed to the Partnership, "AS IS", "WHERE IS" and "WITH ALL FAULTS"
and specifically and expressly without any representations or warranties, either
express or implied, of any kind, nature or type whatsoever from or on behalf of
Owners. Except for the express representations and warranties of Owners
contained herein, Owners have not, do not, and will not, with respect to the
Interests, Associates or the Hotel, make any warranties or representations,
express or implied, or arising by operation of law or otherwise, including but
in no way limited to, any warranty of condition, merchantability, habitability
or fitness for particular use, or with respect to the value, profitability,
redevelopability, mortgageability or marketability of the Interests, Associates
or the Hotel or the presence of Hazardous Materials or other environmental
conditions. The Partnership and AGH have had, and will have, pursuant to this
Agreement, an adequate opportunity to make such legal, factual, and other
inquiries and investigations as it deems necessary, desirable or appropriate
with respect to Associates and the Hotel.
8.3 Shadow Management. Owners shall permit AGH to establish and
-----------------
maintain a shadow management operation with respect to the Hotel prior to the
Closing Date. Personnel from AGH's shadow management operation shall have
reasonable access during normal business hours to all books, records and other
information in the possession or control of Owners or their agents concerning
the Hotel and shall have the right (at AGH's expense) to establish duplicate
books and records in order to effect a smooth transition in the ownership and
management of the Hotel; provided, however, that AGH and its shadow management
operation and employees in exercising its rights of access and inspection in
this Section 8.2, and elsewhere in this Agreement, (a) shall not unreasonably
interfere with the normal management and operation of the Hotel; (b) shall hold
all information acquired from such books and records confidential in accordance
with the provisions of this Agreement, (c) shall repair any damage to the
physical condition of the Hotel caused by Partnership or its agents in any
shadow management operation, and (d) shall not be deemed to have assumed
management responsibilities prior to Closing by virtue of such shadow
management. The provisions of subparagraphs (b) and (c) of the preceding
sentence shall survive Closing and/or termination of this Agreement.
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<PAGE>
8.4 Access to Hotel Books and Records. Prior to Closing, Owners
---------------------------------
shall, upon request of AGH or the Partnership, make available to AGH or
Partnership and their authorized representatives and employees for inspection at
the Hotel during normal business hours and at AGH's and Partnership's sole cost,
risk and expense, all of the then existing books, records, surveys, plans,
specifications, permits, certificates of occupancy and other files that are
relevant to the management, ownership, operation, use, occupancy, construction
or leasing of the Hotel and are in Owner's or Associates' possession or control.
8.5 Liquor License. Owners shall cooperate with the efforts of
--------------
Associates as well as the Partnership or its lessee or management company in
obtaining new liquor licenses or permits for the Hotel to the extent required.
Subject to the requirements of applicable law, if such licenses or permits have
not been obtained prior to Closing, Associates may continue to operate under
existing licenses or permits to the extent permitted by law until new ones are
obtained provided the Partnership, AGH, Associates and Associates' lessee or
management company shall indemnify Owners and the holder of such license from
any liabilities arising after the Closing with respect to the liquor operations
of the Hotel. The Partnership, on behalf of Associates or its management
company, shall use reasonable efforts (including without limitation the
submission of any applications and payment of any fees) to obtain the necessary
licenses and permits as soon as practicable after Closing.
8.6 Hart Act. Each of the Owners and the Partnership will furnish
--------
all information required under the Hart Act with respect to the subject
transaction, and shall take such action as shall be required thereunder,
including the prompt filing, if required, of a pre-merger notification under the
Hart Act. Prior to Closing, the Partnership shall pay the filing fee in the
event of such filing.
8.7 Confidentiality. Each party to this Agreement agrees that all
---------------
information obtained by any of the AGH Parties concerning Owners, Associates
and/or the Hotel and the conditions and economic terms of this Agreement (all of
such information, "Transaction Information") will be kept confidential and shall
not, without the prior written consent of MMI and CSI, be disclosed by it or any
of its agents or employees in any manner whatsoever, in whole or in part to
anyone other than a "Permitted Party." A Permitted Party shall be a person who
needs to know the Transaction Information for the purpose of consummating the
transactions contemplated herein (including, without limitation, accountants,
attorneys, shareholders, potential shareholders of the REIT through the
Registration Statement and prospective lenders) who are informed of the
confidential nature of the Transaction Information. Transaction Information
will not be
-27-
<PAGE>
included in the Registration Statement (x) without Owners' prior consent, which
consent shall not be unreasonably withheld or delayed or (y) upon advice of
counsel that such Transaction Information is required by law to be disclosed
therein. Neither MMI or CSI, on the one hand, nor the AGH Parties, on the
other, shall have any obligation to maintain the confidentiality of Transaction
Information (a) to the extent such information is or becomes generally available
to the public through no fault or action of such party, (b) such Transaction
Information is in such party's possession or becomes available to such party on
a non-confidential basis from a source which is not prohibited from disclosing
such information or (c) such party or any Permitted Party becomes legally
compelled to disclose such information. If MMI or CSI, on the one hand, or any
of the AGH Parties, on the other, become legally compelled to disclose any
Transaction Information, they will provide the others with prompt written notice
thereof so that the others may seek a protective order or other appropriate
remedy. If Closing does not take place, each of Owners', on the one hand, and
the AGH Parties, on the other will return or cause to be returned to the others
all Transaction Information received from such others and will not retain any
copies thereof.
ARTICLE 9
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
In addition to any other conditions set forth in this Agreement, the
obligations of the AGH Parties and Owners to consummate the Closing are subject
to the timely satisfaction of the respective conditions and requirements set
forth in this Article 9, which shall be conditions precedent to the respective
party's obligations under this Agreement.
9.1 Conditions to Obligations of the AGH Parties. The following are
--------------------------------------------
conditions precedent to the obligations of the AGH Parties:
(a) Owners' Obligations. Owners shall have performed in all material
-------------------
respects all material obligations of Owners hereunder which are to be performed
at or prior to Closing.
(b) Owners' Representations and Warranties. Owner's representations
--------------------------------------
and warranties set forth in this Agreement shall be true and correct in all
material respects as if made again on the Closing Date except as otherwise
permitted or contemplated hereby.
(c) Title Policy. Partnership shall have received or have an
------------
irrevocable right to receive the Title Policy issued by the Title Company to
Associates insuring good and indefeasible fee simple title to the Land and
Improvements, subject only to the Permitted Exceptions, in an amount equal to
$21,750,000, with
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<PAGE>
access, zoning, subdivision, contiguity, survey, "Fairway" and non-imputation
endorsements.
(d) Hart Act. The expiration or termination of the applicable
--------
waiting period under the Hart Act with no action pending for the Department of
Justice or Federal Trade Commission to prohibit or enjoin this sale.
(e) Required Deliveries. The Owners have made all required
-------------------
deliveries under Section 10.3 (closing deliveries).
(f) No Injunction. There is no injunction, judgment, order, action
-------------
or proceeding which would prevent or limit the consummation of this transaction.
(g) Opinions. The AGH Parties have received from Owners or Owners'
--------
counsel such legal opinions as are reasonably and customarily required by
counsel to the Partnership or counsel to the lead underwriters of the IPO
regarding this Agreement to the effect that each of the documents executed and
delivered by Owners have been duly authorized, executed and delivered by, and
constitute the valid and legally binding obligation of, the parties thereto and
are enforceable in accordance with their terms, subject to general principles of
equity and to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and except that enforceability or indemnification and
contribution provisions may be limited, in whole or in part, by applicable
securities laws or public policy. The AGH Parties acknowledge that Owners shall
not be required by the terms of this subsection to deliver an opinion of
Wisconsin counsel.
(h) Holiday Inn Consent. Holiday Inns, Inc. ("Holiday Inn") has
-------------------
approved the granting of a new license to Associates or has approved the
transfer of the Interests to the Partnership and/or affiliate (the "Holiday Inn
Consent").
9.2 Conditions to Owners' Obligations. The following are conditions
---------------------------------
precedent to the obligations of Owners:
(a) AGH Parties' Obligations. The AGH Parties shall have performed
------------------------
in all material respects all of their material obligations hereunder which are
to be performed at or prior to Closing.
(b) Representations and Warranties by the AGH Parties. The
-------------------------------------------------
representations and warranties by the AGH Parties set forth in this Agreement
shall be true and correct in all material respects as if made again on the
Closing Date except as otherwise permitted or contemplated hereby.
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<PAGE>
(c) Hart Act. The expiration or termination of the applicable
--------
waiting period under the Hart Act with no action pending for the Department of
Justice or Federal Trade Commission to prohibit or enjoin this sale.
(d) Required Deliveries. The AGH Parties have made all required
-------------------
deliveries under Section 10.4.
(e) No Injunction. There is no injunction, judgment, order, action
-------------
or proceeding which would prevent the consummation of this transaction.
(f) IPO. The Formation Transactions and the IPO shall have occurred
---
substantially as described in the draft Registration Statement delivered to CSI
prior to the date hereof and the forms of the Partnership Agreement, the
Registration Rights Agreement, the Exchange Rights Agreement and Lock-Up
Agreement shall be substantially in the forms attached hereto.
(g) Opinions. Owners have received from the AGH Parties or their
--------
counsel such legal opinions as are reasonably and customarily required by
counsel to Owners regarding this Agreement to the effect that each of the
documents executed and delivered by the AGH Parties have been duly authorized,
executed and delivered by, and constitute the valid and legally binding
obligation of, the parties thereto and are enforceable in accordance with their
terms, subject to general principles of equity and to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and except that
enforceability or indemnification and contribution provisions may be limited, in
whole or in part, by applicable securities laws or public policy.
(h) Holiday Inn Consent. The Holiday Inn Consent and releases of the
-------------------
personal guarantees of Martin Bucksbaum and Craig Stark in favor of Holiday Inn
shall have been obtained.
(i) Assumptions by Assignee. Any assignee or designee of the
-----------------------
Partnership who acquires all or a portion of the Interests shall deliver at
Closing such assumptions of the obligations, representations and warranties of
the AGH Parties herein contained as the Owners may reasonably request.
ARTICLE 10
CLOSING AND CLOSING DOCUMENTS
-----------------------------
10.1 Closing. The closing (the "Closing") shall occur at the offices
-------
of the Partnership's attorney or the attorneys for the lead underwriter of the
IPO in New York City, New York on a date (the "Closing Date") to be specified by
20 days advance
-30-
<PAGE>
written notice from the Partnership to the Owners, such date to be not later
than the Termination Date. The Closing shall take place concurrently with the
consummation of the IPO or not later than five (5) business days thereafter, at
the Partnership's election but in any event no later than the Termination Date.
10.2 Escrow. It is anticipated that the Closing and the consummation
------
of the IPO shall occur simultaneously or substantially simultaneously. To
effect the Closing, AGH shall have the right to send notice to the Owners at
least 20 days prior to the estimated Closing Date requesting that all parties
endeavor in good faith to (a) enter into a mutually satisfactory escrow
agreement with a mutually satisfactory escrow agent pursuant to which the
Closing shall occur on the Closing Date through an escrow-style closing and (b)
at least one business day prior to the Closing Date, place in escrow with said
escrow agent pursuant to said escrow agreement the documents to be delivered
pursuant to this Section 10.2.
10.3 Owner's Deliveries. At the Closing and at Owners' sole cost and
------------------
expense, Owners shall deliver the following to the Partnership:
(a) Assignments. Assignments of the Interests (the "Assignments") in
-----------
a form reasonably acceptable to the Owners and the Partnership, and original,
executed counterparts of the Organizational Documents;
(b) Registration Rights, Lock-Up, Exchange Rights and Separate
----------------------------------------------------------
Agreements. The Registration Rights Agreement, the Lock-Up Agreement, the
- ----------
Exchange Rights Agreement and the Separate Agreement, duly executed by CSI;
(c) FIRPTA Affidavit. An affidavit from Owners in form and substance
----------------
acceptable to Partnership, as required by Section 1445 of the Internal Revenue
Code, specifying (i) that Owners are not foreign persons (as defined in the
Internal Revenue Code and Income tax regulations), (ii) Owners' tax
identification numbers, (iii) Owners' office addresses, and (iv) such other
matters as Partnership may reasonably require in order to satisfy itself that no
withholding is required under Section 1445 of the Internal Revenue Code
including an indemnity against any claim for taxes which should have been
withheld;
(d) Authority Documents. Evidence satisfactory to Partnership that
-------------------
the person or persons executing the closing documents on behalf of Owners have
full right, power and authority to do so, together with evidence of Owners' due
formation, existence, good standing and authorization;
(e) Title Policy. The Title Policy or a marked-up Title Commitment
------------
evidencing the issuance of title insurance;
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<PAGE>
(f) Partnership Documents. The Partnership Amendment duly executed
---------------------
by CSI, which shall evidence the admission of CSI as a limited partner in the
Partnership and contain an acceptance of the terms and conditions of the
Partnership Agreement, and such other documents or instruments as REIT
reasonably may require for the issuance of the Units to CSI and the admission of
CSI as a limited partner in the Partnership;
(g) Termination of Agreements. Evidence satisfactory to Partnership
-------------------------
in its reasonable discretion that Owners have performed any cures that they
agreed to perform pursuant to Section 5.2 hereof;
(h) Closing Certificate. A certificate duly executed by Owners dated
-------------------
as of the Closing Date to the effect that all of the representations and
warranties herein of Owners are true and correct in all material respects as of
the Closing or stating the specific respects, if any, in which they are untrue;
(i) Plans, Keys and Records. To the extent not previously delivered
-----------------------
to and in the possession of Partnership, all Plans and Specs, all keys for the
Hotel (which keys shall be properly tagged for identification), all Records, and
all Licenses;
(j) Title Affidavits. Any affidavits as to judgments and other
----------------
matters reasonably and customarily required by the Title Company in connection
with the issuance of the Title Policy;
(k) Satisfactions. Executed satisfactions of the Security Documents
-------------
or, if the Security Documents have not theretofore been satisfied, pay-off
letters from the Bank; and
(l) Closing Statement.
-----------------
On the Closing Date, Owners shall cause to be delivered to Partnership
possession of the Hotel free and clear of all tenancies of every kind and
parties in possession, except for guests in the Hotel and Tenants under Leases,
and with all parts of the Hotel (including, without limitation, the Improvements
and FF&E) in substantially the same condition as the same were on the date of
this Agreement, normal wear and tear only excepted (subject to the provisions of
Article 11 hereof).
10.4 Deliveries by the AGH Parties. At the Closing and at the sole
-----------------------------
cost and expense of the AGH Parties, the AGH Parties shall deliver the following
to Owners:
(a) Cash Portion. Payment of the Cash Portion of the Purchase Price;
------------
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<PAGE>
(b) Partnership Amendment. The Partnership Amendment duly executed
---------------------
by AGHGP reflecting the issuance of the CSI Unit Component to CSI;
(c) Registration Rights, Lock-Up, Exchange Rights, and Separate
-----------------------------------------------------------
Agreements. The Registration Rights Agreement, Lock-Up Agreement, Exchange
- ----------
Rights Agreement and Separate Agreement duly executed by the Partnership, AGHGP
and/or the REIT, as appropriate;
(d) Authority Documents. Evidence satisfactory to Owners that the
-------------------
person or persons executing the closing documents on behalf of the AGH Parties
have full right, power and authority to do so, together with evidence of the due
formation, existence and authorization of the AGH Parties and evidence of the
good standing of the AGH Parties;
(e) Closing Certificate. Certificates duly executed by the AGH
-------------------
Parties to the effect that all of the representations and warranties herein of
the AGH Parties are true and correct in all material respects as of the Closing
or stating the specific respects, if any, in which they are untrue;
(f) Employment Agreement. Employment Agreement with Craig Stark in
--------------------
the form annexed hereto as Exhibit K; and
---------
(g) Closing Statement.
-----------------
10.5 Amendment of Organizational Documents. Simultaneously with the
-------------------------------------
delivery of the Assignments, Owners, the Partnership and any designee of the
Partnership will execute amendments to the Organizational Documents in form and
substance reasonably satisfactory to them to reflect the withdrawal of Owners
from Associates.
10.6 Concurrent Transactions. All documents or other deliveries
-----------------------
required to be made by the AGH Parties, Owners and Associates at or prior to
Closing, and all transactions required to be consummated concurrently with
Closing, shall be deemed to have been delivered and to have been consummated
simultaneously with all other transactions and all other deliveries, and no
delivery shall be deemed to have been made, and no transaction shall be deemed
to have been consummated, until all deliveries required by the AGH Parties,
Owners and Associates shall have been made, and all concurrent or other
transactions shall have been consummated.
10.7 Further Assurances. Owners and the AGH Parties, at any time
------------------
after Closing, upon request of either party, will execute (or cause any
appropriate entity to execute and to use reasonable efforts to cause such
parties to execute) such additional instruments, documents or certificates as
either party
-33-
<PAGE>
deems reasonably necessary in order to effect the transactions contemplated
hereby; provided that no such additional instrument, document or certificate
shall impose additional obligations not expressly contemplated herein.
10.8 Prorations and Adjustments. It is the parties' intention that
--------------------------
the prorations and adjustments conform in substance to those that would be made
in a sale of real property as set forth herein. At Closing, the following items
of revenue and expense shall be prorated as of 12:01 A.M. on the Closing Date
and the cash portion of the Purchase Price shall be adjusted to account for such
prorations. Such prorations shall be based on actual receipts and expenses, if
known, and, if not, on reasonable estimates thereof with reconciliation of such
estimates after Closing pursuant to Section 10.12.
(a) Hotel Taxes. Real estate taxes, personal property or use taxes
-----------
and sewer rents, on the basis of the best available estimates for such taxes and
rents;
(b) Operating Costs. All utility costs and expenses and other costs
---------------
and expenses of operating the Hotel, including employee salaries and benefits,
which are reasonably capable of proration;
(c) Service Contracts and FF&E Leases. Amounts paid or payable under
---------------------------------
the Service Contracts and FF&E Leases;
(d) Lease Rents. Rents under Leases and other revenues;
-----------
(e) Debt. If the Owners have requested that the Debt be discharged
----
by the Partnership as an adjustment to the Purchase Price, then the Purchase
Price shall be reduced by the unpaid principal balance, accrued and unpaid
interest, and all other amounts due to Bank in accordance with the pay-off
letter;
(f) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service, bar
and restaurant revenue shall be read, measured (and tapes preserved) and
apportioned as of 2:00 a.m. on the Closing Date. The final night's room revenue
(revenue from rooms occupied on the evening preceding the Closing Date) less a
sum equal to all room maid services with respect thereto shall be the property
of Owners. All cash, checks, and other funds, and all other notes, security and
other evidence of indebtedness located at the Hotel as of 2:00 a.m. on the
Closing Date and balances on deposit to the credit of the Owners or
-34-
<PAGE>
Associates with banking and other institutions are and shall remain the property
of the Owners and are not included in this sale (except for the guest (tray)
ledger for guests staying in the Hotel on the Closing Date which will be paid
for by the Partnership) and such assets will be distributed by Associates
immediately prior to Closing;
(g) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade, newspaper and other periodical subscriptions, coin
machine income, and washroom and checkroom income;
(h) Deposits. The Purchase Price will be reduced in an amount equal
--------
to the sum of all Deposits (which are Partnership liabilities) not transferred
and delivered to Partnership, or retained by Associates, at the Closing to the
extent that the same relate to periods from and after the Closing and increased
for Deposits that are Partnership assets to the extent the same relate to
periods from and after the Closing;
(i) Product Improvement Plan. Annexed hereto as Exhibit L is the
------------------------ ---------
"product improvement plan" requested by Holiday Inn in connection with the sale
of the Interests and the transfer of the franchise agreement for the Hotel as a
Holiday Inn "Select". At Closing, the Purchase Price shall be reduced by
$300,000, less the amounts indicated on Exhibit L for any items of work shown
---------
thereon that have theretofore been completed; and
(j) Current Assets and Liabilities. If, after the prorations to be
------------------------------
made pursuant to the preceding subparagraphs and without duplication thereof,
(x) the sum of all cash and cash equivalents, investments, inventory, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by Associates, exceeds or is less than (y) the sum of
all accounts payable, accrued real estate taxes, accrued interest, other accrued
expenses and other liabilities generally recognized as current liabilities owed
by Associates (but excluding those liabilities referred to in Sections
8.2C(p)(vii) and (viii)), the Purchase Price shall be increased or decreased, as
the case may be, by such excess or deficiency.
10.9 Sales Tax. All sales, use and occupancy taxes, if any, due or
---------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by Owners. All sales, use and other transfer taxes,
if any, payable as a result of the conveyance of the Interests to Partnership
will be borne equally by Owners and the Partnership. Owners shall be entitled
to received any rebates or refunds on taxes paid by Associates prior to the
Closing.
10.10 Document Recordation and Transfer Costs. Owners and
---------------------------------------
Partnership shall bear equally the escrow fee and other
-35-
<PAGE>
charges payable to the Title Company, except that the premium payable to the
Title Company for the Title Policy (but not the cost of endorsements, which
shall be paid fully by the Partnership) shall be paid fully by Owners who shall
also pay any costs of the Survey. The cost of preparing or obtaining documents
to be delivered by Partnership to Owners pursuant to this Agreement shall be
paid by Partnership. The cost of preparing or obtaining documents to be
delivered by Owners to Partnership pursuant to this Agreement shall be paid by
Owners. Any other costs of Closing shall be borne in accordance with local
custom.
10.11 Reconciliation and Final Payment. Prior to Closing, Owners and
--------------------------------
the Partnership shall reasonably cooperate to make a preliminary determination
of the prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. After Closing, Owners and
Partnership shall reasonably cooperate after Closing to make a final
determination of the prorations required hereunder. The parties shall have a
final reconciliation of the prorations under this Article within 180 days after
Closing, at which time the party which owes the other party any sums hereunder
shall pay such party such sums within ten (10) days after the reconciliation of
such sums. The obligations to calculate such prorations, make such
reconciliations and pay any such sums shall survive the Closing.
10.12 Failure of IPO. Owners acknowledge that if for any reason the
--------------
IPO does not close, none of the AGH Parties or Owners shall have any obligation
to close hereunder, but in such event the provisions with respect to return of
the Earnest Money shall be governed by Section 12.1. Notwithstanding the
foregoing, if the IPO does not close, AGH (and/or its designee) shall have the
right to acquire the Interests for all cash in accordance with the provisions
hereof (except those relating to the IPO and the CSI Unit Component).
ARTICLE 11
CASUALTY AND CONDEMNATION
-------------------------
11.1 Risk of Loss Notice. In the event that (a) any loss or damage
-------------------
to the Hotel shall occur prior to the Closing Date as a result of fire or other
casualty, or (b) Owners receive notice that a governmental authority has
initiated or threatened to initiate a condemnation proceeding affecting the
Hotel, Owners shall give the Partnership immediate written notice of such loss,
damage or condemnation proceeding.
11.2 Partnership's Termination Right. If, prior to Closing and the
-------------------------------
delivery of possession of the Hotel in accordance with this Agreement, (a) any
substantial condemnation proceeding shall be pending against any portion of the
Hotel or (b) there is
-36-
<PAGE>
any substantial loss or damage to the Hotel, the Partnership shall have the
option to terminate this Agreement provided it delivers written notice to Owners
of its election so to terminate this Agreement within thirty (30) days after the
date Owners have delivered to AGH written notice of any such loss, damage or
condemnation, and in such event all Earnest Money shall be delivered as
specified in Article XII and thereafter no party shall have further obligation
or liability to the other under this Agreement other than as provided herein.
"Substantial" condemnation or loss shall mean a condemnation or loss in excess
of $500,000 in value.
11.3 Procedure for Closing. If, after a substantial loss or damage
---------------------
or substantial condemnation, Partnership shall not timely elect to terminate
this Agreement, or if the loss or condemnation is not substantial, Owners agree
to pay to Partnership at the Closing all insurance proceeds or condemnation
awards which Owners or Associates have received as a result of the same (less
any portion thereof applied to repairs or restoration) plus an amount equal to
the insurance deductible, if any, and assign to Partnership all insurance
proceeds and condemnation awards payable as a result of the same in which event
the Closing shall occur without Owners or Associates completing such repairs.
ARTICLE 12
DEFAULT AND REMEDIES
--------------------
12.1 Default by AGH Parties; Other Failure to Close. If, at or prior
----------------------------------------------
to Closing (i) any of the AGH Parties refuses or fails to consummate the
transactions contemplated by this Agreement in violation hereof, or (ii) any
representation or warranty made by or on behalf of any of the AGH Parties herein
shall have been materially incorrect when made or shall become incorrect in any
material respect, or (iii) any of the AGH Parties shall otherwise fail in any
material respect to perform any of its material obligations as and when required
hereunder, then Owners shall give AGH and the Escrow Agent written notice
specifying the nature of the default, and the Partnership shall have thirty (30)
days from receipt of Owners' notice within which to cure the specified default;
provided, however, if at the end of said thirty (30) day period the AGH Parties
are diligently pursuing the cure of the default but the default has not been
cured, the AGH Parties shall have an additional period not to exceed thirty (30)
days within which to complete the cure of the default. If at the end of the
initial thirty (30) or, if applicable, additional thirty (30) day period, the
default is not still cured, Owners as their sole and exclusive remedy, shall
have the right to terminate this Agreement by giving AGH and Escrow Agent
written notice thereof, in which event neither party shall have further rights,
duties or obligations hereunder (except to the extent this Agreement
specifically provides for
-37-
<PAGE>
the survival of certain obligations of Partnership). In such event or if the
transactions contemplated hereby otherwise do not close by the Termination Date
as the result of the failure of any conditions to have been satisfied (other
than as the result of a default by Owners), Owners shall be entitled to receive,
as liquidated damages or as compensation for having committed to sell or
contribute the Interests, subject to the conditions contained herein, as the
case may be (Owners and the AGH Parties hereby acknowledging that the amount of
damages resulting from breach of this Agreement by the AGH Parties would be
difficult or impossible to accurately ascertain), a portion of the Earnest Money
(the "Liquidated Amount") (together with all interest earned thereon), and AGH
(on behalf of the AGH Parties) shall instruct Escrow Agent to immediately
deliver to Associates the Liquidated Amount (together with all interest earned
on the Liquidated Amount.) The "Liquidated Amount" shall be equal to the lesser
of (x) the amount of the Earnest Money, and (y) the product of $25,000 times the
number of months (including partial months) that have elapsed from and after
April 1, 1996 through the date of termination of this Agreement.
Notwithstanding the foregoing, in the event of any default by the AGH Parties
under this Agreement due to a breach after Closing or any termination hereof of
any covenant or indemnity which survives the Closing or any termination hereof
or if Owners shall discover after Closing that any warranty or representation
made by the AGH Parties herein or in connection with the transaction
contemplated herein was materially incorrect or breached when made, Owners shall
have any and all rights and remedies available at law or in equity by reason of
such default.
12.2 Owners' Default. If Owners (i) refuse or fail to consummate the
---------------
transactions contemplated by this Agreement, or (ii) otherwise wrongfully fail
to perform any of their obligations or agreements hereunder, either prior to or
at Closing, for any reason other than termination hereof pursuant to a right
granted to Owners hereunder to do so, a failure of condition to the obligation
of Owners to consummate such transactions or a default by any of the AGH Parties
then the Partnership shall give Owners and Escrow Agent written notice
specifying the nature of the default, and Owners shall have thirty (30) days
from receipt of the Partnership's notice within which to cure the specified
default; provided, however, if at the end of said thirty (30) day period Owners
are diligently pursuing the cure of the default but the default has not been
cured, Owners shall have an additional period not to exceed thirty (30) days
within which to complete the cure of the default. If at the end of the initial
thirty (30) or, if applicable, additional thirty (30) day period, the default is
still not cured, AGH and the Partnership as their sole remedy, shall have the
right to do any one or more of the following:
-38-
<PAGE>
(a) Terminate this Agreement by written notice given to Owners and
Escrow Agent within fifteen (15) days of the expiration of the initial thirty
(30) or additional thirty (30) day cure period (whichever is applicable), in
which event Partnership shall be entitled to a return of the Earnest Money
(together with all interest earned thereon), promptly upon receipt of such
notice, and Owners shall be obligated (i) to instruct Escrow Agent to return the
Earnest Money (together with all interest earned thereon) to the Partnership,
and (ii) to pay and reimburse AGH and the Partnership for their out-of-pocket
costs in connection with this Agreement; or
(b) Seek specific performance of this Agreement.
Notwithstanding the foregoing, in the event of any default by Owners under this
Agreement due to a breach after Closing or of any covenant or indemnity which
survives the Closing, or if Partnership shall discover after Closing that any
warranty or representation made by Owners herein or in connection with the
transaction contemplated herein was materially incorrect or breached when made,
Partnership shall have any and all rights and remedies available at law or in
equity by reason of such default, subject to the limitations contained herein.
Neither Partnership's or Owners' attendance or appearance at Closing shall be
deemed to nullify or void the provisions of this Section.
ARTICLE 13
INDEMNITIES
13.1 Owners' Indemnity. After Closing, each Owner agrees to
-----------------
indemnify and hold Associates, the AGH Parties and any other entity designated
to be a partner in Associates (the "OP Indemnified Parties") harmless of and
from all liabilities, losses, damages, costs, expenses (including reasonable
attorneys' fees) ("Losses") which the OP Indemnified Parties may suffer or incur
by reason of (i) breach of any representation, warranty or covenant made by
Owners in this Agreement or any instrument or document delivered at the Closing
(provided that this clause (i) shall survive the Closing for one year, only),
and (ii) actions and claims instituted against any of the OP Indemnified Parties
based upon the inclusion in the Registration Statement of information describing
the Project (limited to the name of the Project, the year built, the number of
rooms, occupancy rates and similar data for 5-year period) provided or approved
by the Owners specifically for inclusion in the Registration Statement but only
to the extent incorrect in any material respect as of the date of such
information. Notwithstanding the foregoing, the agreements of the Owners in
clause (i), above to indemnify and hold the OP Indemnified Parties harmless with
respect to a breach shall, in the case of a breach by one of the Owners, apply
only to that Owner and shall not apply to the non-breaching Owner.
-39-
<PAGE>
13.2 Partnership's Indemnity. (a) The Partnership and AGH agree to
-----------------------
indemnify and hold Owners harmless of and from all Losses which the Owners may
suffer or incur by reason of (i) the operation of the Hotel, whether before or
after the Closing Date, including but not limited to any claims by employees of
Associates (or its management company) or third parties under insurance carried
by Associates (or its management company), but such indemnity is subject to the
representations of Owners made herein, or (ii) breach of any representation,
warranty or covenant made by any of the AGH Parties in this Agreement or any
document or instrument delivered at the Closing.
(b) The parties acknowledge that this Agreement and all documents,
agreements, understandings and arrangements relating to the transactions
contemplated by this Agreement to be executed or undertaken by the Partnership
which have been executed by one or more officers of AGHGP which is the sole
general partner of the Partnership, have been or will be so executed in his/her
capacity as an officer of AGHGP, and not individually, and none of the officers
or employees of the Partnership nor any of the directors, officers, shareholders
or employees of AGHGP or the REIT (in their capacities as directors, officers,
shareholders or employees) shall be bound or have any personal liability
hereunder or thereunder except as otherwise provided under applicable law.
13.3 Defense of Actions. In the case of any claim relating to a
------------------
claim by a third party (a "Third Party Suit"), the indemnified party shall
control the defense of the Third Party Suit and the indemnifying party may, at
its own expense, participate in (but not control) the defense and employ counsel
separate from the counsel employed by the indemnified party; provided, however,
that the indemnifying party may assume control of the defense of the Third Party
Suit at any time during the course of the suit if the indemnifying party
confirms in writing to the indemnified party that the indemnified party is
entitled to indemnification under this Agreement with respect to the claim and
for Losses arising from the Third Party Suit. If the indemnifying party
assumes control of the defense of a Third Party Suit, (a) the indemnifying party
shall consult with the indemnified party with respect to the Third Party Suit
upon the indemnified party's reasonable request for consultation and (b) the
indemnified party may, at its expense, participate in (but not control) the
defense and employ counsel separate from the counsel employed by the
indemnifying party. Regardless of whether the indemnifying party assumes the
defense of the Third Party Suit, all parties shall provide all reasonable
assistance with the defense of the Third Party Suit and make available all
relevant books and records in their possessions. No settlement or compromise of
any Third Party Suit by the indemnified party may be made without the
indemnifying party's consent, which shall not be unreasonably withheld.
-40-
<PAGE>
ARTICLE 14
BROKERS
-------
14.1 No Broker. The parties hereto represent to each other that they
---------
dealt with no finder, broker or consultant in connection with this Agreement or
the transactions contemplated hereby.
14.2 Indemnification by Owners. Owners agree to, and hereby do,
-------------------------
indemnify and save harmless the AGH Parties and their affiliates, and their
respective successors and assigns against and from any loss, liability or
expense, including reasonable attorneys' fees, arising out of any claim or
claims for commissions or other compensation for bringing about this Agreement
or the transactions contemplated hereby made by any broker, finder, consultant
or like agent if such claim or claims made by any such broker, finder,
consultant or like agent are based in whole or in part on any agreements entered
into with Owners or Associates or their representatives for a commission or
other compensation. Owners shall likewise indemnify and save harmless the AGH
Parties and their affiliates and their respective successors and assigns against
and from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation
relating to the Leases. This provision shall survive Closing or the termination
of this Agreement.
14.3 Indemnification by AGH. AGH, prior to Closing and the
----------------------
Partnership thereafter, agrees to, and hereby does, indemnify and save harmless
Owners and their affiliates and their respective successors and assigns against
and from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation for
bringing about this Agreement or the transactions contemplated hereby made by
any broker, finder, consultant or like agent if such claim or claims made by any
such broker, finder, consultant or like agent are based in whole or in part on
any agreements entered into with any of the AGH Parties or their representatives
for a commission or other compensation. This provision shall survive Closing or
the termination of this Agreement.
ARTICLE 15
DEFINITIONS
-----------
15.1 Definitions. As used herein, the following terms shall have the
-----------
respective meanings indicated below:
AGH: As defined in the opening paragraph.
---
AGHGP: As defined in the Recitals.
-----
-41-
<PAGE>
AGH Parties: As defined in the Recitals.
-----------
Appurtenances: As defined in Article 2.
-------------
Assignments: As defined in Article 10.3.
-----------
Associates: As defined in the Recitals.
----------
Bank: The current holder of the only mortgage on the Hotel which
----
secures the Debt.
Code: As defined in the Recitals.
----
Closing: As defined in Section 10.1.
-------
Closing Date: As defined in Section 10.1.
------------
Common Stock: As defined in the Recitals.
------------
CSI: As defined in the opening paragraph.
---
CSI Interests: As defined in Section 1.1.
-------------
CSI Share: As defined in Section 3.1.
---------
CSI Unit Component: As defined in Section 3.1.
------------------
Debt: The existing debt of Associates that is secured by a mortgage
----
on the Hotel.
Delaware Act: As defined in Section 3.3.
------------
Document Review Period: As defined in Section 5.2.
----------------------
Earnest Money: As defined in Section 1.2.
-------------
Environmental Reports: As defined in Section 8.2.
---------------------
ERISA: As defined in Section 8.2.
-----
Escrow Agent: As defined in Section 1.2.
------------
Escrow Agreement: As defined in Section 1.2.
----------------
Exchange Rights Agreement: As defined in Section 3.2.
-------------------------
FF&E: As defined in Article 2.
----
FF&E Leases: As defined in Article 2.
-----------
Guest Bookings: As defined in Article 2.
--------------
-42-
<PAGE>
Hart Act: As defined in Section 8.1.
--------
Hazardous Substances: As defined in Section 8.2.
--------------------
Holiday Inn: As defined in Section 9.1(h).
-----------
Holiday Inn Consent: As defined in Section 9.1(h).
-------------------
Hotel: As defined in Article 2.
-----
Improvements: As defined in Article 2.
------------
Interests: As defined in Section 1.1.
---------
IPO: As defined in the Recitals.
---
Land: As defined in Article 2.
----
Lease and Leases: As defined in Article 2.
----------------
Licenses: As defined in Article 2.
--------
Liens: As defined in Section 8.2(d).
-----
Lock-Up Agreement: As defined in Section 3.2.
-----------------
Losses: As defined in Section 13.1.
------
MMI: As defined in the opening paragraph.
---
MMI Interests: As defined in Section 1.1.
-------------
MMI Share: As defined in Section 3.1.
---------
Notices of Violation: As defined in Section 7.2.
--------------------
Organizational Documents: As defined in Section 8.2.
------------------------
Organizational Transactions: As defined in Section 3.4
---------------------------
Other Personalty: As defined in Article 2.
----------------
Owners: As defined in the opening paragraph.
------
Partnership: As defined in the opening paragraph.
-----------
Partnership Agreement: As defined in Section 3.1.
---------------------
Partnership Amendment: As defined in Section 3.1.
---------------------
Pending Claims: As defined in Section 8.2.
--------------
-43-
<PAGE>
Permitted Exceptions: As defined in Section 6.1.
--------------------
Personal Property: As defined in Article 2.
-----------------
Plans and Specs: As defined in Article 2.
---------------
Purchase Price: As defined in Section 3.1.
--------------
Records: As defined in Article 2.
-------
Registration Statement: As defined in the Recitals.
----------------------
REIT: As defined in the Recitals.
----
Schedule of Leases: As defined in Section 5.1.
------------------
Searches: As defined in Section 4.2.
--------
SEC: As defined in Recitals.
---
Security Documents: The documents evidencing the mortgage lien
------------------
that secures the Debt.
Separate Agreement: As defined in Section 3.2.
------------------
Service Contracts: As defined in Article 2.
-----------------
Shares: As defined in the Recitals.
------
Supporting Documents: As defined in Section 4.1.
--------------------
Survey: As defined in Section 4.3.
------
Surveyor: As defined in Section 4.3.
--------
Tenants: As defined in Section 8.2.
-------
Termination Date: As defined in Section 5.4.
----------------
Termination Information: As defined in Section 8.7.
-----------------------
Title Commitment: As defined in Section 4.1.
----------------
Title Company: As defined in Section 4.1.
-------------
Title Policy: As defined in Section 4.1.
------------
Tradenames: As defined in Article 2.
----------
Units: As defined in the Recitals.
-----
Utility Reservations: As defined in Article 2.
--------------------
-44-
<PAGE>
Warranties: As defined in Article 2.
----------
ARTICLE 16
MISCELLANEOUS
-------------
16.1 Notice. Any notice provided for by this Agreement and any other
------
notice, demand or communication which any party may wish to send to another
shall be in writing and either delivered in person or sent by registered or
certified mail, return receipt requested, in a sealed envelope, postage prepaid,
or overnight courier and addressed to the party for which such notice, demand or
communication is intended at such party's address as set forth in this Section.
The address for the AGH Parties for all purposes under this Agreement shall be
the following:
American General Hospitality, Inc.
3860 W. Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Bruce G. Wiles,
Executive Vice President
with a copy to:
Battle Fowler, L.L.P.
75 East 55th Street
New York, New York 10022
Attention: Peter M. Fass, Esq.
Owners' address for all purposes under this Agreement shall be the following:
MMI
215 Keo Way
Des Moines, Iowa 50309
Attention: Matthew Bucksbaum
-and-
CSI
Holiday Inn Select
4402 East Washington Avenue
Madison, Wisconsin 53704
with a copy to:
Neal Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg
-45-
<PAGE>
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall
be deemed given and effective as of the date of delivery in person or receipt
set forth on the return receipt. The inability to deliver because of changed
address of which no notice was given, or rejection or other refusal to accept
any notice, demand or other communication, shall be deemed to be receipt of
notice, demand or other communication as of the date of such attempt to deliver
or rejection or refusal to accept.
16.2 Entire Agreement; Modifications and Waivers; Cumulative
-------------------------------------------------------
Remedies. This Agreement constitutes the entire agreement between the parties
hereto and may not be modified or amended except by instrument in writing signed
by the parties hereto, and no provisions or conditions may be waived other than
by a writing signed by the party waiving such provisions or conditions. No
delay or omission in the exercise of any right or remedy accruing to Owners, AGH
or Partnership upon any breach under this Agreement shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by Owners, AGH or Partnership of any breach of any term,
covenant or condition herein stated shall not be deemed to be a waiver of any
other breach, or of a subsequent breach of the same or any other term, covenant
or condition herein contained. All rights, powers, options or remedies afforded
to Owners, AGH or Partnership either hereunder or by law shall be cumulative and
not alternative, and the exercise of one right, power, option or remedy shall
not bar other rights, powers, options or remedies allowed herein or by law,
unless expressly provided to the contrary herein.
16.3 Exhibits. All exhibits referred to in this Agreement and
--------
attached hereto are hereby incorporated in this Agreement by reference.
16.4 Successors and Assigns. Except as set forth in this Article,
----------------------
this Agreement may not be assigned by AGH or the Partnership without the prior
approval of Owners. This Agreement shall be binding upon, and inure to the
benefit of, Owners, AGH and the Partnership and their respective legal
representatives, successors, and permitted assigns. Whenever a reference is
made in this Agreement to AGH or the Partnership, it shall include their
respective successors and permitted assigns under this Agreement. The
Partnership or AGH may assign its rights and obligations under this Agreement
(other than obligations as to issuance of Units) to an affiliate. The
Partnership and AGH shall remain liable hereunder notwithstanding any assignment
of this Agreement.
16.5 Article Headings. Article and section headings and numbers are
----------------
inserted herein only as a matter of convenience
-46-
<PAGE>
and in no way define, limit or prescribe the scope or intent of this Agreement
or any part thereof and shall not be considered in interpreting or construing
this Agreement.
16.6 Governing Law. This Agreement shall be construed and
-------------
interpreted in accordance with the laws of the State of Wisconsin (without
regard to its conflicts of law principles).
16.7 Time Periods. If the final day of any time period or limitation
------------
set out in any provision of this Agreement falls on a Saturday, Sunday or legal
holiday under the laws of the State of Wisconsin or the federal government, then
and in such event the time of such period shall be extended to the next day
which is not a Saturday, Sunday or legal holiday.
16.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on a separate counterpart, each of which
when so executed and delivered shall be deemed an original and all of which
taken together shall constitute but one and the same instrument.
16.9 Survival. Except as otherwise provided herein, all covenants
--------
and agreements contained in the Agreement which contemplate performance after
the Closing Date shall expressly survive the Closing, and shall not be deemed to
merge into any closing documents.
16.10 Further Acts. In addition to the acts, deeds, instruments and
------------
agreements recited herein and contemplated to be performed, executed and
delivered by REIT, Partnership and Owners, REIT, Partnership and Owners shall
perform, execute and deliver or cause to be performed, executed and delivered at
the Closing or after the Closing, any and all further acts, deeds, instruments
and agreements and provide such further assurances as the other party or the
Title Company may reasonably require to consummate the transactions contemplated
hereunder. However, the foregoing shall not be deemed to (i) require Owners to
pay money or incur material obligations not expressly contemplated hereby, or
(ii) require Partnership or REIT to pay money or incur material obligations not
expressly contemplated hereby.
16.11 Severability. In case any one or more of the provisions
------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
16.12 Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this
-47-
<PAGE>
Agreement, or to recover damages for breach of this Agreement, the nonprevailing
party in any action pursued in a court of competent jurisdiction (the finality
of which is not legally contested) agrees to pay to the prevailing party all
reasonable costs, damages, and expenses, including attorneys' fees, expended or
incurred in connection therewith.
IN WITNESS WHEREOF, this Agreement has been entered into effective as
of the day and year first above written.
MADISON MOTOR INNS, INC.,
a Delaware corporation
By: /s/ Matthew Bucksbaum
---------------------------
Name: Matthew Bucksbaum
-------------------------
Title: President
------------------------
CRAIG STARK, INC.,
a Wisconsin corporation
By: /s/ Craig A. Stark
---------------------------
Name: Craig A. Stark
-----------------------
Title: President
-----------------------
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
By: /s/ Bruce G. Wiles
--------------------------------
Name: Bruce G. Wiles
----------------------------
Title: Executive Vice President
----------------------------
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada corporation, General
Partner
By: /s/ Bruce G. Wiles
-------------------------------
Name: Bruce G. Wiles
----------------------------
Title: Executive Vice President
----------------------------
AGH GP, INC., a Nevada corporation, General
Partner
By: /s/ Bruce G. Wiles
--------------------------------
Name: Bruce G. Wiles
----------------------------
Title: Executive Vice President
----------------------------
-48-
<PAGE>
Schedule 5
----------
The CSI Unit Component (calculated prior to any adjustments pursuant to
Section 10.8), shall be adjusted and, as adjusted, shall be paid to CSI in
Units, as follows:
At the Closing, CSI shall receive a number of Units equal to (a) the CSI Unit
Component (subject to adjustment as set forth below), divided by (b) the
mid-point of the proposed per Share offering prices (the "Mid-Point Price") set
forth in the final red herring included in the REIT's Registration Statement on
Form S-11 (the "Red Herring"). In the event that the initial yield per Share set
forth in the Red Herring (the "Initial Yield"; calculated by dividing the
estimated annual distribution per Share for the 12-month period following the
IPO, as set forth in the Red Herring by the Mid-Point Price) is a percentage
greater or less than 8.00%, then the CSI Unit Component shall decrease or
increase accordingly by an amount equal to the Applicable Percentage (as defined
below) times the resulting change in the value of the Partnership; provided,
however, in no event shall the CSI Unit Component be reduced by more than 12.5%.
As used in this Schedule 5, the "value of the Partnership" shall be determined
by taking the product of the "Pro Forma Cash Available for Distribution" as
defined in the Red Herring ("CAD") times the percentage of CAD (expressed as a
decimal fraction) to be distributed to the partners in the Partnership or the
shareholders in the REIT (as the case may be) as set forth in the Red Herring,
and dividing that product by the Initial Yield. While the CSI Unit Component may
never be reduced by more than 12.5%, there shall be no cap on increases in the
CSI Unit Component as a result of any positive pricing adjustment described in
this Schedule 5. For purposes of this Schedule 5, "Applicable Percentage" shall
mean the fraction (expressed as a decimal fraction), the numerator of which is
the percentage interest being conveyed under this Agreement for Units times the
Purchase Price of the underlying hotel asset and the denominator of which is the
value of the total portfolio of hotel assets acquired by the Partnership upon
the consummation of the IPO as determined in good faith by the REIT.
The AGH Parties represent and warrant that all persons receiving Units
in exchange for contributions to the Partnership are receiving such Units
pursuant to a consistently-applied methodology for determining the number of
Units.
<PAGE>
Exhibit 10.27
PURCHASE AND SALE AGREEMENT
---------------------------
The exhibits and/or schedules of Exhibit 10.27, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into as
of the 9th day of November, 1995 (the "Agreement Date"), by and between Park
Center Plaza Hotel, a Joint Venture, a California general partnership, and
S.F.W.S.D. a California general partnership (hereinafter collectively referred
to as "Seller"), and American General Hospitality, Inc., a Texas corporation
(hereinafter referred to as "Purchaser"), with reference to the following facts.
RECITALS
A. WHEREAS, Seller is the owner of that certain improved real property
situated in the City of San Jose, County of Santa Clara, State of California,
commonly referred to as the Holiday Inn-Park Center Plaza, as legally described
in Exhibit "A" attached hereto and made a part hereof (the "Land") together with
-----------
all (i) improvements, parking structure, and fixtures (collectively, the
"Buildings") and all personal property, tangible or intangible, owned by Seller
and located upon or within or with respect to the Land and/or Buildings,
including, without limitation, the hotel, bar and restaurant operations, the
Food, Beverage and Supplies Inventories (below defined), the Miscellaneous
Inventories (below defined) to the extent accepted by Purchaser hereunder, and
to the extent accepted by Purchaser hereunder all vehicles, equipment, fixtures,
furnishings, and mechanical and electrical installations, all tools and supplies
used in the operation of the Buildings and businesses therein, and all plans,
specifications, plats, engineering information relating to the Buildings to the
extent in the possession of the General Manager (hereafter defined), all
assignable warranties and guarantees of contractors and suppliers of material,
equipment and labor received by Seller relating to the construction of the
Buildings (if any), all assignable licenses and permits issued by state and/or
local authorities relating to the Buildings, all assignable contracts, licenses,
and agreements (including, without limitation, assignable franchise agreements
and liquor licenses) relevant to or associated with the operation of the hotel
or restaurant/bar business on the Land and in the Buildings to the extent
accepted by Purchaser hereunder, all telephone numbers, names, trademarks,
tradenames, and goodwill used or associated with the businesses conducted on the
Land or in the Buildings, and all leases, if any, of any kind with respect to
any personal property of a kind or character similar to that above-described in
this paragraph to the extent accepted by Purchaser hereunder, and the cash
drawer (collectively, the "Personal Property"), and (ii) easements,
appurtenances, rights and privileges belonging thereto. "Food, Beverage and
Supply Inventories" shall mean all unbroken containers or other original
packaging of food and beverages and of guest room disposables and office,
advertising, and other supplies and materials and all unbroken packaging of
sheets, pillow cases, bath towels, hand towels, wash cloths, and bath mats.
"Miscellaneous Inventories" shall mean all broken containers of all items of a
nature of the Food, Beverage and Supply Inventories. The Land, the Buildings,
the Personal Property and the interests described in (ii) above are collectively
referred to herein as the "Property"; and
B. WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the Property, in accordance with the terms and provisions
hereinafter contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,
1
<PAGE>
the parties agree as follows:
1. Sale of the Property. Seller shall sell to Purchaser and Purchaser
--------------------
shall buy from Seller the Property at the Closing (hereinafter defined in
Section 7 below), on the terms and conditions contained herein. The parties
acknowledge that two (2) separate entities comprise the "Seller" hereunder. For
purposes of this Agreement, whenever reference is made herein to Seller or any
covenants or representations are made by Seller or on Seller's behalf, all of
such references shall be deemed to refer to the two (2) separate entities which
comprise Seller to the extent of each of such entities' interest in and in and
to the Property.
2. Deposits.
--------
2.1 Initial Deposit. Within two (2) business days of the Agreement
---------------
Date, Purchaser shall place on deposit into the escrow account to be opened with
ALL-CAL Title Company, 901 Campisi Way, Suite 100, Campbell, California 95008
("Escrow Holder" or "Title Company") the amount of Seventy-five Thousand Dollars
($75,000.00) as an initial deposit (the "Initial Deposit"). Purchaser hereby
acknowledges and agrees that the Title Company shall be used by the parties for
this transaction so long as the Title Company is authorized to act as agent for
the following named underwriters/title insurers and either of the following
named underwriters/title insurers actually issues the title insurance policy to
Purchaser as contemplated herein. The underwriters/title insurers for which the
Title Company is authorized to act as an agent as of the Agreement Date include
Stewart Title Company and Old Republic Title Company. The Title Company shall
cause the Initial Deposit to be placed into a federally insured interest bearing
bank account. Until the expiration of the Conditions Period (hereinafter
defined) interest earned thereon shall accrue to Purchaser ("Purchaser's
Interest"). During the Conditions Period, the Title Company shall hold the
Initial Deposit as Trustee for Purchaser. The Initial Deposit and interest
earned thereon, shall be fully refundable to Purchaser until the earlier of (a)
the removal or waiver by Purchaser of all conditions and contingencies specified
in this Agreement or, (b) sixty (60) days after the Agreement Date (the
"Conditions Period").
2.2 Additional Deposit. Provided that Purchaser has not earlier
------------------
terminated this Agreement, within three (3) business days following the
expiration of the Conditions Period Purchaser shall place on deposit into the
escrow account opened with Escrow Holder, the amount of Seventy-five Thousand
Dollars ($75,000.00) as an additional deposit (the "Additional Deposit"). The
Escrow Holder shall cause the Additional Deposit to be placed into an interest
bearing bank account acceptable to Seller. The Additional Deposit shall be
retained in the escrow account until the Closing (defined below) and interest
earned thereon shall accrue to Seller ("Seller's Interest"). Subject to the
satisfaction of all of the closing conditions set forth below in accordance with
the provisions of this Agreement, the Additional Deposit shall be non-refundable
to Purchaser except in the event of Seller's default hereunder. The Additional
Deposit shall be applied to the Purchase Price at the Closing. The Initial
Deposit and the Additional Deposit are collectively referred to herein as the
"Deposits."
3. Purchase Price. The purchase price for the Property (including the
--------------
Liquor License) shall be the amount of Twelve Million Four Hundred Twenty-five
Thousand Dollars ($12,425,000.00), subject to the provisions of the immediately
succeeding sentence (the "Purchase Price"). A portion of the Purchase Price in
the amount of Twenty-five Thousand Dollars ($25,000.00) (the "Liquor License
Payment") is the consideration payable to Seller for the liquor license
currently held by the Seller in connection with the operation of the Property
(the "Liquor License"). If during the Conditions Period Purchaser notifies
Seller in writing that Purchaser will obtain its own liquor license for the
operation of
2
<PAGE>
the Property, then notwithstanding anything to the contrary contained herein (i)
Seller shall not be required to transfer, convey or otherwise assign to
Purchaser the Liquor License, and (ii) the amount of the Purchase Price shall be
reduced accordingly by the amount of the Liquor License Payment. Purchaser
hereby acknowledges and agrees that notwithstanding anything to the contrary
contained herein, Seller shall only be required to reasonably cooperate with
Purchaser to cause the transfer of the Liquor License to Purchaser, however,
such cooperation shall be at no cost or expense to Seller, including without
limitation, any costs or fees imposed or incurred to transfer such Liquor
License. In furtherance of the foregoing, any transfer of the Liquor License to
Purchaser hereunder shall be the sole responsibility of Purchaser. The Purchase
Price shall be payable in immediately available funds (wire transfer) at the
Closing, adjusted for prorations in accordance with Section 13 below. The
Initial Deposit, together with Purchaser's Interest, shall be applied to the
Purchase Price at the Closing. The Purchase Price shall be allocated among (a)
the Land, (b) the Buildings, (c) the Food, Beverage and Supplies Inventories,
(d) the Miscellaneous Inventories accepted by Purchaser hereunder, (e) the
tangible portions of the remainder of the Personal Property, and (f) the
intangible portions of the remainder of the Personal Property, in the
percentages as the parties may agree upon, in writing, within fourteen (14) days
after the Agreement Date. If the parties do not agree upon such percentages of
allocation within said 14-day time period, then either party may terminate this
Agreement by delivering written notice thereof to the other party within five
(5) days after the expiration of such fourteen (14) day period. If either party
shall so terminate this Agreement, this Agreement shall terminate as of the date
of delivery of such termination notice, and the Initial Deposit, together with
Purchaser's Interest, shall be returned to Purchaser, and the parties shall have
no further obligations hereunder except for the indemnities contained in
Sections 4.3 and 15 below and Purchaser's obligations under Section 4.2 below to
deliver to Seller the Due Diligence Materials (defined below).
4. Conditions to Purchaser's Obligations.
-------------------------------------
4.1 Pre-Closing Conditions. Purchaser's obligations under this
----------------------
Agreement shall be subject to the satisfaction of or waiver by Purchaser before
the expiration of the Conditions Period of the following matters (collectively,
the "Pre-Closing Conditions"):
4.1.1 Title. Within five (5) business days following the
-----
Agreement Date, Seller shall cause to be issued and delivered to Purchaser a
preliminary title report for the Land and Buildings, together with all documents
evidencing exceptions to title referred to therein issued by the Title Company
(the "Title Report"). Purchaser, at its sole expense, may obtain any surveys of
the Land and Buildings as it may choose to procure. If Purchaser actually
obtains any such surveys, Purchaser shall deliver to Seller a true and complete
copy thereof within two (2) business days after Purchaser's receipt of same.
Purchaser shall have until five (5) business days prior to the expiration of the
Conditions Period to either approve of the exceptions (if any) contained in the
Title Report and/or reflected in any surveys obtained by Purchaser (provided,
however, if Purchaser fails to obtain any such surveys within sufficient time to
advise Seller of any survey matters to which Purchaser objects, Purchaser agrees
that it shall not be entitled to any extension of time in order to obtain any
such surveys), or to notify Seller in writing, specifying any exceptions and/or
survey matters to which Purchaser objects. Seller shall have until one (1)
business day prior to the expiration of the Conditions Period to remove, or
agree to remove prior to the Closing, those exceptions and/or survey matters to
which Purchaser has objected, and to inform Purchaser of the same. Failure by
Seller to remove, or agree to remove prior to the Closing, all of the specified
exceptions and/or survey matters within the specified period shall be deemed to
be a failure of this condition, in which event the Agreement shall terminate,
and the Initial Deposit, together with Purchaser's Interest, shall be returned
to Purchaser, and the parties shall have no further obligations
3
<PAGE>
hereunder except for the indemnities contained in Sections 4.3 and 15 below and
Purchaser's obligations under Section 4.2 below to deliver to Seller the Due
Diligence Materials (defined below), unless Purchaser withdraws its objections
in writing, prior to the expiration of the Conditions Period. Except due to any
failure by Purchaser to provide the Title Company with customary documents,
affidavits, certificates, authorizations and/or monies as may be required by the
Title Company in order to issue the title insurance policy in the form approved
by Purchaser pursuant to the provisions of this Section 4.1.1 in which event the
following rights conferred upon Purchaser shall not be available, if after
Purchaser has approved of the title exceptions and/or survey matters in
accordance with the provisions of this Section 4.1.1 the Title Company advises
Purchaser of additional title exceptions (excluding any survey matters reflected
on any surveys obtained by Purchaser after the date on which Purchaser must
advise Seller of objections thereto under the provisions of this Section 4.1.1
and any matters to which Purchaser has given Seller its written consent which
give rise to any additional title exceptions) which will be included in the
title insurance policy actually issued to Purchaser on the Closing Date as
contemplated herein, Purchaser shall have an additional period of five (5)
business days from and after the date of Purchaser's receipt of such
notification of additional title exceptions to either approve or disapprove of
same and to advise Seller in writing of such approval or disapproval (the
"Additional Title Objection Notice"). Seller shall have three (3) business days
after Seller's receipt of the Additional Title Objection Notice to remove, or
agree to remove prior to the Closing, those additional title exceptions to which
Purchaser has objected, and to inform Purchaser of the same. Failure by Seller
to remove, or agree to remove prior to the Closing, all of the specified
additional title exceptions within the aforementioned time period shall be
deemed to be a failure of this condition, in which event the Agreement shall
terminate, and the Deposits (to the extent made), together with all interest
accrued thereon, shall be returned, and the parties shall have no further
obligations hereunder except for the indemnities contained in Sections 4.3 and
15 below and Purchaser's obligations under Section 4.2 below to deliver to
Seller the Due Diligence Materials (defined below), unless Purchaser withdraws
its objections to the additional title exceptions, in writing, prior to the end
of business on the date which is one (1) business day after Seller notifies
Purchaser of its decision regarding the removal or non-removal of such
additional title exceptions. The Closing Date may be extended by the parties to
facilitate the removal of any additional title exceptions which Seller has
agreed, in writing, to remove. In addition to the foregoing, Purchaser hereby
agrees to promptly provide to Seller a true and complete copy of the results of
any UCC Search performed by Purchaser in connection with the Property.
4.1.2 Physical Inspections. Purchaser shall have until the
--------------------
expiration of the Conditions Period to perform all of its studies, reviews,
tests, inspections and other investigations of the physical condition of the
Property, including but not limited to, the soil and geologic conditions, the
presence on the Property of Hazardous Materials (hereafter defined) or the
potential therefor, and the condition of any structures located on the Property
(provided, Purchaser shall not unreasonably interfere with any of the Seller's
operations or Seller's clientele), and to notify Seller in writing, that based
on such studies, reviews, tests, inspections and investigations, it has failed
in its sole discretion to obtain full satisfaction with regard to this
inspection contingency contained herein and, therefore, it would not be in
Purchaser's best interest to proceed with the purchase of the Property, in which
event this Agreement shall terminate, and the Initial Deposit, together with
Purchaser's Interest, shall be returned to Purchaser, and the parties shall have
no further obligations hereunder except for the indemnities contained in
Sections 4.3 and 15 below and Purchaser's obligations under Section 4.2 below to
deliver to Seller the Due Diligence Materials (defined below).
4.1.3 Contracts. Within five (5) business days following the
---------
Agreement Date, Seller shall deliver to Purchaser a true and complete copy of
all licenses, leases (if any), contracts and
4
<PAGE>
other agreements related to the Property and/or the businesses conducted thereon
(collectively, the "Contracts"). Purchaser shall have until five (5) business
days prior to the expiration of the Conditions Period to either approve of any
such Contracts, or to notify Seller in writing, specifying any Contracts which
Purchaser desires be terminated effective on or before the Closing (the
"Disapproved Contracts"). Seller shall have until one (1) business day prior to
the expiration of the Conditions Period to agree to terminate such Disapproved
Contracts prior to the Closing. Those Contracts not disapproved by Purchaser
shall be deemed approved by Purchaser (the "Approved Contracts") and Seller
shall assign its rights under the Approved Contracts to Purchaser at the
Closing. A condition to Seller's agreement to so terminate any of the
Disapproved Contracts shall be Purchaser's covenant and representation in favor
of Seller that Purchaser will pay and/or reimburse Seller for such costs, fees
and expenses arising from or related to the termination of such Disapproved
Contracts as shall be required under the provisions of the Disapproved
Contracts. If Seller does not, in its sole and absolute discretion, agree to so
terminate the Disapproved Contracts within the specified period, then such
failure by Seller to so agree shall be deemed to be a failure of this condition,
in which event the Agreement shall terminate, and the Initial Deposit, together
with Purchaser's Interest, shall be returned to Purchaser, and the parties shall
have no further obligations hereunder except for the indemnities contained in
Sections 4.3 and 15 below and Purchaser's obligations under Section 4.2 below to
deliver to Seller the Due Diligence Materials (defined below), unless Purchaser
withdraws its disapproval or rejection in writing, prior to the expiration of
the Conditions Period.
4.1.4 Miscellaneous Documents and Information. Within five (5)
---------------------------------------
business days following the Agreement Date, Seller shall deliver to Purchaser,
or cause to be delivered to Purchaser, to the extent in the possession of Mr.
Phil Valdez, Jr. (the "General Manager"), a true and complete copy of the
following described agreements, documents, reports, and information:
(a) A copy of all written labor, collective bargaining, or
similar agreements.
(b) A copy of all policies of hazard, liability, business
interruption and other insurance issued and in effect with respect to the Land,
Buildings, and/or Personal Property.
(c) A copy of all licenses and permits issued by any
governmental authorities with respect to the development, construction,
ownership, alteration or operation of the Buildings, including, without
limitation, certificates of occupancy or the equivalent thereof. Without
limiting the foregoing, the General Manager shall specifically provide Purchaser
with a copy of all licenses and permits applicable to the bar and/or service of
beer, wine and/or alcohol on the Property and, to the extent actually known by
the General Manager, information with respect to ownership thereof and
transferability to Purchaser or Purchaser's designee at Closing.
(d) A copy of the final plans and specifications used in
construction or alterations of the Buildings to extent in the General Manager's
possession.
(e) A copy of all unexpired warranties and guaranties issued
by contractors, suppliers of material, equipment and labor in connection with
the construction, repair or improvement of the Buildings and with the
installation, repair or improvement of the tangible Personal Property, if any
there be.
(f) A list of all current employees of Seller on the Property
and their salaries or wages and all employment benefits accompanied by copies of
their employment agreements, if any.
5
<PAGE>
(g) A copy of all leases (if any) with respect to any leased
property of a nature of any of the Personal Property.
(h) A copy of Seller's franchise agreement, all other
agreements with the franchisor, and of a current deficiency report and the two
most recent inspection reports of the franchisor.
(i) A copy of any environmental site assessment report and any
reports regarding any remediation of the Land and the Buildings.
Purchaser shall have until the expiration of the Conditions Period to
either approve or disapprove of the aforementioned reports, documents and
information, and to advise Seller in writing of its approval or disapproval of
same. If Purchaser advises Seller in writing that it disapproves of any of the
foregoing reports, documents or information, in its sole discretion, and,
therefore, it would not be in Purchaser's best interest to proceed with the
purchase of the Property, this Agreement shall terminate, and the Initial
Deposit, together with Purchaser's Interest, shall be returned to Purchaser, and
the parties shall have no further obligations hereunder except for the
indemnities contained in Sections 4.3 and 15 below and Purchaser's obligations
under Section 4.2 below to deliver to Seller the Due Diligence Materials
(defined below). Subsequent to the delivery of the documents, reports and
information described in this Section 4.1.4, Seller or the General Manager (as
applicable) will advise Purchaser promptly in writing of (i) any material
changes, additions, deletions, or modifications in or to any of said documents,
and (ii) any material change in the information so furnished by Seller or the
General Manager (as applicable), and Seller or the General Manager shall furnish
to Purchaser true, correct, and complete copies of any such changes, additions,
deletions, or modifications to said documents to the extent in Seller's or the
General Manager's possession.
4.1.5 Operating Statements; Accounts Receivable and Accounts
------------------------------------------------------
Payable Aging Reports; List of Personal Property; Employee Information; and
- ---------------------------------------------------------------------------
Inspection of Books and Records. Within five (5) business days following the
- -------------------------------
Agreement Date, the General Manager shall deliver to Purchaser a true and
complete copy of (i) all income and expense statements and year-end financial
statements for the Property for the calendar year prior to Closing and to the
extent available, the current year, and (ii) a list of the Personal Property,
and (iii) a current aging report of all accounts receivable and accounts payable
for the Property, all such statements and reports shall be in the unaudited form
prepared by Seller for its own internal purposes, which may not conform to
Generally Accepted Accounting Principles, and (iv) such information as Purchaser
may reasonably request, in writing, regarding the employees of Seller with
respect to the operation of the Property, including accrued vacations of such
employees, employee benefit plans, and information regarding such employees'
salaries. In addition to the foregoing, the General Manager shall make available
for inspection by Purchaser and its authorized agents, at reasonable times and
at the office of the General Manager, all books and records with respect to the
Property for the calendar years 1992, 1993, and 1994 and the period from January
1, 1995, through the most recent available date. Purchaser shall have until the
expiration of the Conditions Period to either approve or disapprove of the
aforementioned income and expense statements, the books and records, the list of
the Personal Property, the aging reports and the employee information, and to
advise Seller in writing of its approval or disapproval of same. If Purchaser
advises Seller in writing that it disapproves of any of the aforementioned
matters, in its sole discretion, and, therefore, it would not be in Purchaser's
best interest to proceed with the purchase of the Property, this Agreement shall
terminate, and the Initial Deposit, together with Purchaser's Interest, shall be
returned to Purchaser, and the parties shall have no further obligations
hereunder except for the indemnities contained in Sections 4.3 and 15 below and
Purchaser's obligations under Section 4.2 below to deliver to Seller the Due
Diligence Materials (defined below).
6
<PAGE>
4.1.6 Franchise Commitment. Prior to the expiration of the
--------------------
Conditions Period Purchaser shall have received a commitment for a franchise for
the Property, in form satisfactory to Purchaser, and Purchaser has delivered
written notice thereof to Seller.
4.2 Failure of Pre-Closing Conditions. In the event that any or all
---------------------------------
of the Pre-Closing Conditions are not satisfied or waived by Purchaser prior to
expiration of the Conditions Period in writing, then Purchaser may terminate
this Agreement by delivering written notice thereof to Seller on or before the
expiration of the Conditions Period; provided, if Purchaser fails to deliver any
such written notice, this Agreement shall be deemed automatically terminated and
of no further force or effect except for the indemnities contained in Sections
4.3 and 15 below and Purchaser's obligations under this Section 4.2 to deliver
to Seller the Due Diligence Materials (defined below). If Purchaser so elects to
terminate this Agreement or this Agreement is automatically terminated, so long
as Purchaser concurrently delivers to Seller a true and complete copy of all due
diligence materials obtained by Purchaser in connection with its investigation
of the Property (excluding any proprietary materials but including any materials
given to Purchaser by or on behalf of Seller) (collectively, the "Due Diligence
Materials") the Initial Deposit and the Purchaser's Interest shall promptly be
returned to Purchaser and Purchaser shall not have any further liability or
obligation to Seller hereunder except for the indemnities contained in Sections
4.3 and 15 below. If Purchaser does not elect to terminate this Agreement due to
a failure of any of the Pre-Closing Conditions and notifies Seller in writing
that it intends to proceed with the purchase of the Property prior to the
expiration of the Conditions Period, the Initial Deposit and the Purchaser's
Interest shall become non-refundable to Purchaser, except for any default of
Seller, and the Initial Deposit and the Purchaser's Interest shall be held in
escrow for Seller's benefit, however, all interest earned thereon after the
expiration of the Conditions Period shall be for the Seller's benefit, except
for any default of Seller. Failure by Purchaser to notify Seller of the
satisfaction or waiver by Purchaser of any of the contingencies set forth herein
shall be deemed disapproval by the Purchaser of such matters. In the event
Purchaser so terminates this Agreement, Purchaser shall be solely responsible
for the payment of any and all escrow cancellation charges or fees payable to
the Title Company.
4.3 Investigations Indemnity. Purchaser shall indemnify, defend
------------------------
(with counsel reasonably satisfactory to Seller), protect, and hold Seller and
Seller's partners, representatives, agents, successors and assigns harmless from
and against any and all liability, loss, cost, damage, or expense (including,
without limitation, attorneys' fees and costs) which Seller may sustain or incur
by reason of, in connection with or arising from any studies, inspections,
investigations or tests made by Purchaser or Purchaser's representatives
relating to or in connection with the Property (exclusive of the financial
effects of the discovery of the presence of any Hazardous Materials (defined
below)), or entries by Purchaser or its representatives onto the Property.
Notwithstanding any provision to the contrary in this Agreement, the indemnity
obligations of Purchaser under this Agreement shall survive any termination of
this Agreement or the delivery of the Grant Deed and the transfer of title.
5. Holiday Inn Franchise Agreement. Notwithstanding anything to the
-------------------------------
contrary contained herein, Purchaser hereby covenants and agrees that, at
Purchaser's sole cost and expense, prior to the expiration of the Conditions
Period Purchaser shall either agree, in a writing delivered to Seller prior to
expiration of the Conditions Period, to (i) assume the existing Holiday Inn
franchise agreement with respect to the Property, or (ii) enter into another
separate franchise agreement with Holiday Inns Worldwide or a different
franchisor with respect to the Property at the Closing, and Seller shall
cooperate fully therein at absolutely no expense to Seller or the General
Manager. Seller shall be responsible for all royalties, fees and other sums
accrued under the existing franchise agreement with Holiday Inns Worldwide to
the extent accrued and owing with respect to the Property for the period of time
prior to
7
<PAGE>
2:00 a.m. on the Closing Date (hereafter defined); provided, however, Purchaser
shall be solely responsible for the payment of any and all transfer fees and/or
termination fees with respect to the existing franchise agreement with Holiday
Inns Worldwide. If there is any termination and/or transfer fee payable in
connection with such termination or transfer of the existing Holiday Inn
franchise agreement, Purchaser shall pay any such termination and/or transfer
fee, and on or before the Closing Purchaser shall reimburse Seller for any and
all costs or expenses incurred by Seller in connection with such termination or
transfer of the said franchise agreement, including without limitation,
attorneys' fees and costs. Purchaser shall advise Seller in writing prior to
the expiration of the Conditions Period of Purchaser's election hereunder. If
Purchaser fails to give Seller adequate prior notice of its desire to terminate
the existing Holiday Inn franchise agreement, in accordance with the terms of
such franchise agreement, such that said franchise agreement could be lawfully
terminated by the Closing, then Purchaser hereby agrees to purchase the Property
subject to the existing Holiday Inn franchise agreement.
6. LIQUIDATED DAMAGES. IF PURCHASER FAILS TO COMPLETE THE PURCHASE OF
------------------
THE PROPERTY AS PROVIDED BY THIS AGREEMENT BY REASON OF ANY DEFAULT OF
PURCHASER, SELLER SHALL BE RELEASED FROM ITS OBLIGATION TO SELL THE PROPERTY TO
PURCHASER, AND MAY PROCEED AGAINST PURCHASER UPON ANY CLAIM OR REMEDY WHICH IT
MAY HAVE IN LAW OR EQUITY, PROVIDED, HOWEVER, THAT PURCHASER AND SELLER HEREBY
ACKNOWLEDGE AND AGREE THAT IT WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO
FIX OR ESTABLISH THE ACTUAL DAMAGE SUSTAINED BY SELLER AS A RESULT OF SUCH
DEFAULT BY PURCHASER, AND AGREE THAT THE AGGREGATE AMOUNT OF THE DEPOSITS, THE
PURCHASER'S INTEREST AND THE SELLER'S INTEREST, THE PAYMENT BY PURCHASER OF ALL
ESCROW CANCELLATION CHARGES AND FEES, AND THE DELIVERY TO SELLER BY PURCHASER OF
THE DUE DILIGENCE MATERIALS IS A REASONABLE APPROXIMATION THEREOF. ACCORDINGLY,
IN THE EVENT THAT PURCHASER BREACHES THIS AGREEMENT BY DEFAULTING IN COMPLETION
OF THE PURCHASE, THE AGGREGATE AMOUNT OF THE DEPOSITS, THE PURCHASER'S INTEREST
AND THE SELLER'S INTEREST, THE PAYMENT BY PURCHASER OF ALL ESCROW CANCELLATION
CHARGES AND FEES, AND THE DELIVERY TO SELLER BY PURCHASER OF THE DUE DILIGENCE
MATERIALS SHALL CONSTITUTE AND BE DEEMED TO BE THE AGREED AND LIQUIDATED DAMAGES
OF SELLER, AND SHALL BE PAID BY PURCHASER TO SELLER AS SELLER'S SOLE REMEDY.
SELLER AGREES TO WAIVE ALL OTHER REMEDIES AGAINST PURCHASER WHICH SELLER MIGHT
OTHERWISE HAVE IN LAW OR EQUITY BY REASON OF SUCH DEFAULT BY PURCHASER;
PROVIDED, HOWEVER, THE FOREGOING SHALL NOT LIMIT PURCHASER'S INDEMNITY
OBLIGATIONS UNDER SECTIONS 4.3 AND 15 HEREOF.
Seller's Initials /s/ Purchaser's Initials /s/
---- -----
7. Closing.
-------
7.1 Date of the Closing. Unless otherwise agreed to in writing by
-------------------
the parties, escrow shall close on the date which is thirty (30) days after the
expiration of the Conditions Period (the "Closing Date"). Purchaser, at its sole
election, may elect to cause the Closing to occur prior to the Closing Date, by
delivering not less than fifteen (15) days prior written notice to Seller of the
alternative Closing Date selected by Purchaser.
7.2 Conveyance. At Closing, Seller shall convey title, in fee
----------
simple, to the Property by means of a standard form Grant Deed, subject to all
applicable laws, rules, regulations, codes, ordinances and orders, those title
exceptions and/or survey matters expressly approved by Purchaser in accordance
with Section 4.1.1 and general real estate taxes and assessments for the then
applicable tax fiscal year in
8
<PAGE>
which the Closing occurs, and general real estate taxes and assessments for
subsequent years not yet due and payable. The Closing shall mean the date that
the Grant Deed is recorded in the official records of Santa Clara County,
possession of the Property is delivered to Purchaser subject to Seller's
clientele, and each of Seller and Purchaser fulfills its obligations hereunder.
Title shall be free and clear of all liens, encumbrances, easements and
restrictions except those expressly accepted by Purchaser in accordance with the
provisions of this Agreement, including without limitation, the provisions of
Section 4.1.1 above. In the event that the Seller cannot so deliver title to the
Property to Purchaser, Purchaser may, at its option, take title to the Property
in such condition as Seller can convey, without abatement of the Purchase Price
or, at Purchaser's option, Purchaser may terminate this Agreement in which event
the Deposits and the Seller's Interest and Purchaser's Interest shall be
returned to Purchaser, whereupon neither party shall have any other or further
obligation or liability to the other except for the indemnities contained in
Sections 4.3 and 15 and Purchaser's obligations under Section 4.2 below to
deliver to Seller the Due Diligence Materials. In the event that the Property is
subject to liens or encumbrances which may be removed by the payment of monies,
Seller shall pay said monies at or prior to Closing so as to remove any such
liens or encumbrances.
7.3 Closing Documents.
-----------------
7.3.1 Seller's Closing Documents. At Closing, in addition to the
--------------------------
Grant Deed, Seller shall deliver, or cause the General Manager to deliver, to
Purchaser all of the following documents: originals or true and complete copies
of the Approved Contracts; a written assignment of the Approved Contracts (in
which Seller agrees to remain liable for all debts and obligations arising or
accruing thereunder prior to Closing and Purchaser agrees to assume and be
liable for all debts and obligations arising or accruing thereunder from and
after Closing), including without limitation, any employee benefit plans,
employee agreements, and subject to the provisions of Section 3 above with
respect to the Liquor License, the Liquor License, in form mutually acceptable
to the parties (which will require both parties' signature); a non-warranty bill
of sale for all of the Personal Property (except that Seller shall covenant for
the benefit of Purchaser that Seller has title to the Personal Property as of
the date of transfer of same); a true and complete copy of all permits, licenses
(subject to the provisions of Section 3 above with respect to the Liquor
License, the Liquor License) or other approvals relating to the Property to the
extent in the General Manager's possession; a certificate of non-foreign status
in accordance with the requirements of Internal Revenue Code Section 1445, as
amended ("FIRPTA Certificate"); a California Form 590-RE; such affidavits or
other instruments as the Title Company may reasonably require as a condition to
the issuance of the CLTA Policy or the ALTA Policy (below defined); a general
assignment of any warranties and guaranties with respect to the Property in form
acceptable to Seller and Purchaser; certificates of title to all vehicles and
other certificate-of-title Personal Property, fully executed and sufficient for
filing to effect transfer of title to Purchaser; an assignment of all leases
accepted hereunder by Purchaser, if any (in which Seller agrees to remain liable
for all debts and obligations arising or accruing thereunder prior to Closing
and Purchaser agrees to assume and be liable for all debts and obligations
arising or accruing thereunder from and after Closing); all information required
by the Title Company to compute the prorations described herein; any required
state income, recordation, or conveyance tax reporting documentation; all keys
to the Property, including without limitation, safe deposit box and safe keys
and combinations; and a detailed update of all advance reservations for rooms,
functions, and the like. Seller, at no expense to Seller except ordinary
personnel costs, shall cooperate with Purchaser as Purchaser conducts an
inventory of the Food, Beverage and Supply Inventories and the Miscellaneous
Inventories at or about the time of the closing of the books of the businesses
at 2:00 a.m. on the Closing Date.
9
<PAGE>
7.3.2 Purchaser's Closing Documents. At Closing, in addition to
-----------------------------
the Purchase Price (adjusted for prorations as set forth in Section 13 below),
Purchaser shall deliver to Seller or the Title Company, as applicable, such
affidavits, authorizations, or other instruments as the Title Company may
reasonably require as a condition to the issuance of the CLTA Policy or the ALTA
Policy (below defined).
8. Seller's Representations. Seller hereby represents to Purchaser that
------------------------
to Seller's Actual Knowledge, as of the date hereof and as of Closing, the
following are, and will be (except to the extent Seller or the General Manager
otherwise notifies Purchaser in writing), true and correct:
8.1 Eminent Domain. Seller has not received notice of any
--------------
condemnation proceedings, either instituted or planned to be instituted, nor has
Seller received notice of any special assessment proceedings affecting the
Property.
8.2 Litigation. Except as disclosed by Seller, the General Manager
----------
or the Title Company in writing to Purchaser (including without limitation, any
references in the Title Report), there is no litigation or other actions or
proceedings pending against Seller with respect to the Property or, to the best
of Seller's Actual Knowledge threatened, against Seller with respect to the
Property.
8.3 Due Authorization. The execution of this Agreement by Seller,
-----------------
the deliveries by Seller or the General Manager, as the case may be, to
Purchaser, Seller's performance hereof and the transactions contemplated hereby
have been, or will at the time of the Closing be, duly authorized by the
requisite action on the part of Seller and no other authorization or consent is
required for the execution and performance hereof. Seller hereby further
represents and warrants that the parties signing this Agreement on behalf of
Seller have full power and authority to do so and to fully bind Seller
hereunder.
8.4 Sole Owner. Seller is the sole owner of (and Purchaser will
----------
acquire hereunder) the entire right, title and interest in and to the Property.
8.5 Hazardous Materials. Except to the extent set forth in any
-------------------
environmental site assessment report or study conducted by or on behalf of
Purchaser with respect to the Land and the Buildings, Seller has not received
written notice from any competent governmental agency, and Seller has no Actual
Knowledge, that there exists Hazardous Materials (defined below) in or under the
Land or the Buildings in violation of applicable laws, rules, regulations,
ordinances or orders.
8.6 Seller has not received any written notice of any violation of
any local, state or federal laws, ordinances, rules, regulations or requirements
applicable to the development, construction or operation of the Buildings issued
or promulgated by any governmental or quasi-governmental authority or agency
having jurisdiction over the Property (but specifically excluding the Americans
with Disabilities Act for which Seller will not make any warranties), and
neither Seller nor the General Manager has any Actual Knowledge of the existence
of any condition at or affecting the Property which Seller or the General
Manager actually knows to constitute such a violation. To Seller's Actual
Knowledge, Seller has heretofore procured, or has heretofore caused to be
procured, all licenses and permits known to Seller to be required under the
provisions of the aforesaid laws, ordinances, rules, regulations and
requirements, and all such licenses and permits are in full force and effect.
8.7 No party has been granted a license, lease or other right, which
relates to the use
10
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or possession of the Property and which will survive the Closing, except as
expressly disclosed to Purchaser hereunder by Seller, the General Manager or by
virtue of the Title Report.
8.8 Except as otherwise disclosed by Seller, the General Manager or
the Title Company in writing to Purchaser (including without limitation, any
references in the Title Report), Seller is not a party to (i) any existing
contract for the sale of any interest in the Property, (ii) any grant of option
or right of first refusal to purchase all, or any part of, or any interest in
the Property, or (iii) any written contract or agreement which materially and
adversely restricts the use of the Property for its intended purpose as a hotel.
8.9 Seller has not received any notice from any insurer or board of
fire underwriters which either (i) requests the performance of any work or the
repair, alteration or modification of the Buildings or any tangible Personal
Property as a condition to the continuation of the coverage of any policy of
hazard, liability, business interruption or other insurance applicable to the
Land, the Buildings or Personal Property or the use and operation thereof at the
then applicable rates, or (ii) in the alternative, requires an increase in the
premiums payable with respect to any of such policies as a condition to the
continuation of the coverage thereof.
8.10 There are no labor disputes pending or, to Seller's Actual
Knowledge, threatened as to the operation or maintenance of the Property or the
businesses conducted thereon. Except as disclosed to Purchaser hereunder, there
are no labor, collective bargaining, service or maintenance contracts,
management or employment agreements, utility contracts, contracts for the
purchase of supplies, insurance contracts, airline agreements, corporate account
agreements, travel agency agreements, telephone service agreements, yellow pages
or other advertising agreements, contracts for the leasing or licensing of
Leased Personal Property, obligations to pay leasing or sales commissions or
fees or any other oral or written understandings, leases, or agreements with any
person pertaining to the Land, the Buildings, or the Personal Property or the
businesses operated thereon, and, with respect to the contracts, leases and
agreements so disclosed to Purchaser, Seller is not in default thereunder.
8.12 Except as disclosed by Seller hereunder and in any deficiency
reports delivered to Purchaser hereunder, Seller's franchise agreement under
which is operated the hotel facility on the Land is in full force and effect,
and, to Seller's knowledge, there exists no default thereunder nor any condition
which, with the mere passage of time or giving of notice, would constitute a
default thereunder.
8.13 Except for employees under any collective bargaining agreement,
the employment of each management employee of Seller is terminable at will.
There are no oral agreements with any employees of Seller with respect to the
Property except as Seller or the General Manager otherwise discloses in writing
to Purchaser.
8.14 Except as otherwise disclosed in writing by Seller or the General
Manager to Purchaser, (i) the Personal Property is not leased by Seller, and
(ii) there are no leases or other rental agreements affecting any portion of the
Property.
Purchaser and Seller each specifically acknowledge and agree that all references
in this Agreement, in any of the exhibits attached hereto and in any document,
certificate or statement to be delivered by Seller to Purchaser hereunder to the
phrases "to Seller's Actual Knowledge," or "known to Seller" (whether used in
the phrase "to the actual knowledge of Seller," "actually known to Seller,"
"Seller's knowledge," or in similar or other contexts) (1) shall mean the actual
(not constructive) personal knowledge of the
11
<PAGE>
General Manager (the "Seller's Personnel"); (2) shall in no case mean or refer
to the actual or constructive knowledge of any other employee, trustee, partner,
agent, trustee or partner of a partner, officer, director or other
representative of Seller or any investment advisor, attorney, contractor or
representative of Seller (together with Seller's Personnel, the "Seller
Representatives"); and (3) shall in no event or circumstance impose upon Seller
or any of the Seller Representatives any duty or obligation to verify, inquire
or make any independent inquiry or investigation of any such representation,
warranty or statement, or to otherwise investigate the facts or circumstances
relating or otherwise pertinent thereto. Purchaser further acknowledges and
agrees that none of the Seller's Representatives shall be personally liable, or
otherwise have any personal liability, under or in connection with this
Agreement, including without limitation, in connection with any of the
representations, warranties or statements made in connection with, or pursuant
to, this Agreement. To Seller's Actual Knowledge, the person named herein
comprising the Seller's Personnel is the employee of Seller most knowledgeable
about the present operation and condition of the Property.
9. Purchaser's Representations. Purchaser hereby represents to Seller
---------------------------
that, as of the date hereof and as of the Closing, the following are and will be
true and correct:
9.1 Due Authorization. Purchaser hereby represents to Seller that the
-----------------
execution of this Agreement by Purchaser, the deliveries by Purchaser to Seller,
Purchaser's performance hereof and the transactions contemplated hereby have
been, or will at the time of the Closing be, duly authorized by the requisite
action on the part of Purchaser and no other authorization or consent is
required for the execution and performance hereof. Purchaser hereby further
represents and warrants that the parties signing this Agreement on behalf of
Purchaser have full power and authority to do so and to fully bind Purchaser
hereunder.
9.2 Survival. All covenants, representations and warranties made by
--------
the Purchaser in this Section 9 and in agreements and certificates delivered in
connection herewith shall survive the execution and delivery of this Agreement
until the second (2nd) anniversary of the Closing Date.
10. Indemnity. From and after the Closing under this Agreement, Purchaser
---------
shall protect, indemnify, defend (with counsel reasonably acceptable to Seller)
and hold Seller and its partners, employees, officers, directors, agents,
representatives and legal representatives, and its successors and assigns
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, losses, claims (including third party claims), damages, costs,
penalties, fines, judgments, attorneys' fees, consultants' fees and costs and
experts' fees incurred or suffered by the Indemnitees due to the use, presence,
storage, release, discharge, or migration of Hazardous Materials (defined below)
in violation of any Laws on, in, under or around the Property initially arising
and occurring subsequent to the date of the Closing. The term Hazardous
Materials as used in this Agreement shall mean (a) any hazardous or toxic
wastes, materials or substances, or chemicals, and other pollutants or
contaminants, which are or become regulated by all applicable local, state,
regional and federal orders, ordinances, rules, regulations (as interpreted by
judicial and administrative decisions) and laws (collectively, the "Laws"); (b)
asbestos or urea formaldehyde; (c) polychlorinated biphenyls; (d) flammables,
explosive or radioactive materials; and (e) diesel, petroleum or petroleum by-
products. This indemnity shall survive the Closing hereunder and shall continue
in effect for as long as any of the Indemnitees may be subject to any of the
liabilities or costs described above.
11. Release. Purchaser agrees that, after the Closing hereunder, the
-------
Indemnitees shall be released and discharged from any and all liabilities,
losses, claims (including third party claims),
12
<PAGE>
damages, costs, penalties, fines, judgments, attorneys' fees, consultants' fees
and costs and experts' fees (collectively, the "Claims") due to or arising from
(i) the presence of any environmental problems, or the use, presence, storage,
release, discharge, or migration of Hazardous Materials on, in, under or around
the Property initially arising and occurring subsequent to the date of the
Closing, (ii) any patent or latent defects or deficiencies with respect to the
Property, (iii) any and all matters related to the Property or any portion
thereof, including, without limitation, the condition and/or operation of the
Property and each part thereof, and (iv) the presence, release and/or
remediation of asbestos and asbestos containing materials in, on or about the
Property regardless of when such asbestos and asbestos containing materials were
first introduced in, on or about the Property. Purchaser hereby waives and
agrees not to commence any action, cause of action or suits in law or equity, of
whatever kind or nature, including, but not limited to, a private right of
action under the federal superfund laws, 42 U.S.C. section 9601 at seq. and
California Health and Safety Code sections 25300 et seq., directly or
indirectly, against the Indemnitees or their agents in connection with the costs
or liabilities described above and expressly waives the provisions of Section
1542 of the California Civil Code which provides:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor
and all similar provisions or rules of law. Purchaser elects to and does assume
all risk for such claims heretofore and hereafter arising, whether now known or
unknown by Purchaser. The aforementioned release shall not include any Claims
arising out of the entry into or performance of this Agreement.
12. Condition of Property.
----------------------
12.1 Property Condition. Purchaser acknowledges that prior to
------------------
Closing, it or its agents will have inspected the Property and observed the
physical characteristics and condition of the Property. Purchaser hereby waives
any and all defects in the physical characteristics and condition of the
Property which would be disclosed by such inspection. Purchaser further
acknowledges that neither Seller or any of Seller's employees, agents or
representatives have made any representations, warranties or agreements by or on
behalf of Seller as to any matters concerning the Property, the present use
thereof or the suitability of Purchaser's intended use of the Property,
including without limitation, the suitability of the topography; the
availability of water rights or utilities; the present and future zoning,
subdivision and any and all other land use matters; the condition of the soil,
subsoil or groundwater of the Property and any and all other environmental
matters; the purpose(s) to which the Property is suited; drainage; flooding;
access to public roads; or proposed routes or roads or extensions thereof other
than explicitly disclosed in this Agreement. Purchaser hereby acknowledges and
agrees that the Property is to be purchased, conveyed and accepted by Purchaser
in its present condition, "AS IS" AND "WHERE IS" and that no patent or latent
defect in the condition of the Property whether or not known or discovered,
shall affect the rights of either Seller or Purchaser hereunder. Any and all
documents furnished to Purchaser by Seller relating to the pro formas, reports
and other information shall be deemed furnished as a courtesy to Purchaser but
without warranty from Seller, though Seller represents that all are true,
correct and complete to Seller's Actual Knowledge. Purchaser has investigated
and has knowledge of operative or proposed governmental laws and regulations
including, without limitation, land use laws and regulations to which the
Property may be subject and shall acquire the Property upon the basis of its
review and determination of the applicability and effect of such laws and
regulations. Purchaser has neither received nor relied upon any representations
concerning such laws and regulations from Seller, Seller's employees, agents or
any other person acting on or in behalf of Seller.
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12.2 MAINTENANCE OF THE PROPERTY; NEW AND MODIFICATIONS OF AGREEMENTS;
----------------------------------------------------------------
AND CASUALTY AND CONDEMNATION.
- -----------------------------
12.2.1 Between the date hereof and the Closing, Seller, at
Seller's expense, shall maintain, or cause to be maintained, the Buildings,
Personal Property and leased Personal Property in good order, condition and
repair, as same exists as of the date hereof, except for ordinary wear and tear.
Seller shall make no unpaid commitments to purchase any equipment, supplies or
other property without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld or delayed. Seller shall not materially
amend, supplement or terminate (except as may be necessary to protect or
preserve Seller's rights or remedies with respect thereto or to implement the
terms hereof with respect to termination of the Disapproved Contracts and
possibly the existing franchise agreement with Holiday Inns Worldwide) any other
contract, license, lease or other agreement of Seller pertaining to the Land,
Buildings, or leased Personal Property or enter into or make any commitment to
enter into any other contracts pertaining thereto, without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld or
delayed. On the Closing Date Seller shall cause to be on hand at the Property
reasonably sufficient food and beverages (including beer, wine and liquor) for
the operation of the businesses on the Property for a period of five (5) days
from and after the Closing Date, inclusive. Neither the guest ledger nor any
rate agreement shall include any rate commitments for the Closing Date or after
the Closing Date at rates below the rates customarily charged by Seller, as
Seller is currently operating the Property, prior to entry into this Agreement.
12.2.2 In the event that prior to the Closing the Personal
Property or the Buildings, in whole or in part, shall be "materially damaged" by
fire or other casualty, Purchaser, at its election to be exercised by written
notice to Seller within five (5) business days after delivery of notice to
Purchaser of such casualty, may cancel its obligation to purchase the Property.
The Closing Date shall be deferred, if necessary, to permit Purchaser its five
(5) business day period within which to exercise its right of cancellation
hereunder. In the event that Purchaser elects to exercise said right of
cancellation, after Purchaser has delivered to Seller the Due Diligence
Materials and Seller has advised the Title Company, in writing, of its receipt
of the Due Diligence Materials, the Title Company shall return the Deposits and
all interest earned thereon to Purchaser within fifteen (15) days after the
aforesaid notice from Seller, whereupon this Agreement shall terminate without
further force, effect or liability except for the indemnities contained in
Sections 4.3 and 15 hereof. For purposes of this Section 12.2.2, the term
"materially damaged" shall mean and refer to any casualty damage to the Personal
Property or the Buildings for which the repair or restoration costs, as
reasonably estimated by Seller, exceed the amount of Fifty Thousand Dollars
($50,000).
12.2.3 In the event that prior to the Closing the Land or the
Buildings, in whole or in part, shall be condemned by any public or quasi-public
authority under the power of eminent domain, or in the event that an offer for
the sale of the Property, in whole or in part, in lieu of condemnation shall be
accepted by Seller, then and in either of such events, Purchaser, at its
election to be exercised by written notice to Seller within five (5) business
days after delivery of notice to Purchaser of such condemnation or offer of
sale, may cancel its obligation to purchase the Property. The Closing Date,
shall be deferred, if necessary to permit Purchaser its five (5) business day
period within which to exercise its right of cancellation hereunder. In the
event that Purchaser shall exercise said right of cancellation, after Purchaser
has delivered to Seller the Due Diligence Materials and Seller has advised the
Title Company, in writing, of its receipt of the Due Diligence Materials, the
Title Company shall return the Deposits and all interest earned thereon to
Purchaser within fifteen (15) days after the aforesaid notice from Seller,
whereupon this Agreement shall terminate without further force, effect or
liability
14
<PAGE>
except for the indemnities contained in Sections 4.3 and 15 hereof.
12.2.4 In the event that the right of cancellation set forth in
Section 12.2.2 hereof shall not be exercised by Purchaser, all of Seller's
rights to the proceeds of the insurance policies being maintained by Seller with
respect to the Personal Property or the Buildings for such casualty shall be
assigned to Purchaser and the obligations of the parties hereunder shall
continue unimpaired. In the event that the right of cancellation set forth in
Section 12.2.3 hereof shall not be exercised, any rights of Seller in and to any
condemnation award for Seller's benefit or rights of Seller in and to any
purchase price contemplated to be paid to Seller in connection with a
condemnation of the Land or the Buildings, in whole or in part, or a sale of the
Property, in whole or in part, in lieu of condemnation shall be assigned to
Purchaser and the obligations of the parties hereunder shall continue
unimpaired.
13. Prorations. At the Closing, all real estate taxes, special or general
----------
assessments, water and sewer rents, accounts payable, employee payroll, Approved
Contracts' charges, and similar periodic charges against the Property with
respect to all payment periods through and including the date of Closing shall
be prorated between the parties as of the date of Closing based upon the most
recently ascertainable bills and reports therefor. After the date of Closing,
when the actual bills become available, the parties agree to reprorate all said
taxes, assessments, accounts receivable and accounts payable and similar
periodic charges and Seller shall pay to Purchaser or Purchaser shall pay to
Seller, as the case may be, all monies owed thereby. Room rental receipts
through the night before Closing shall belong to Seller, though Seller shall be
responsible for all room maid service costs for such night. All advance
reservation deposits paid by customers or potential customers of Seller with
respect to the Property to the extent not applied or otherwise forfeited prior
to 2:00 a.m. on the Closing Date shall be credited against the Purchase Price
for Purchaser's benefit. The cash drawer and all working capital (i.e. employee
banks) used for the operation of the restaurants, bars and/or the front office
shall be paid by Purchaser to Seller at the Closing in addition to the Purchase
Price and in the same manner as the Purchase Price. All other revenues (e.g.
service and restaurant charges, and other similar charges) shall be posted as of
2:00 a.m. local time on the Closing Date. All such charges so posted shall be
and remain the property of Seller. From and after the Closing, as, if, and when
received by Purchaser, Purchaser shall deposit by mail at least weekly to an
account designated by Seller, in writing, any sums received on debts arising
from Seller's city ledger and guest ledger which are clearly made in payment
thereof. Purchaser agrees, in the ordinary course of business, for a period of
one hundred twenty (120) days after the Closing, to continue billing for any
such debts but Purchaser shall have no other responsibility or liability for any
such debts. All debts, obligations, losses, or contracts of Seller or with
respect to the Property existing as of or accruing prior to Closing (except as
shall be expressly assumed by Purchaser hereunder), including without limitation
all fees and other sums owed to franchisor with respect to Seller's franchise
(except as otherwise herein expressly provided), shall remain the responsibility
of Seller, and all debts, obligations, losses, contracts or other liabilities
with respect to the Property and accruing after Closing (except as shall be
expressly retained by Seller hereunder) shall be the responsibility of
Purchaser. It is expressly agreed that Seller shall be and remain liable for
all accrued salaries, wages, bonuses, profit-sharing, or other compensation,
vacation, sick leave, worker's compensation benefits, welfare benefits, deferred
compensation, savings, pension, profit sharing, 401(k), or retirement plan, and
insurance and other benefits of all employees on the Property whether or not
employed by Purchaser and for all liabilities of whatever kind (including
without limitation those arising under COBRA) with respect to all employees on
the Property who are not employed by Purchaser (excluding any severance pay to
employees not retained by Purchaser or any other obligations or liabilities to
employees terminated by Purchaser after the Closing). Purchaser hereby agrees
to cause all utilities used in connection with the Property to be transferred
into the name of Purchaser on the Closing Date.
15
<PAGE>
14. Closing Costs. Except as otherwise set forth in this Section 14, all
-------------
costs associated with the transfer of title and the associated escrow shall be
in accordance with the customary practices in Santa Clara County. Purchaser
shall pay one-half of the applicable city transfer tax and one-half of the
documentary county transfer taxes, one-half of the escrow fees and all of the
recording costs with respect to the Grant Deed and any financing instruments
which Purchaser desires be recorded. Seller shall pay the cost of one-half of
the documentary county transfer taxes, one-half of the applicable city transfer
tax, one-half of the escrow fees, and all of the recording charges to remove
liens, encumbrances and title exceptions in accordance with this Agreement. In
addition to the foregoing, Purchaser shall pay any and all sales taxes and
similar taxes related to the transfer of the Personal Property to Purchaser. At
Closing, Purchaser may obtain from the Title Company a CLTA Owner's Policy of
Title Insurance in the aggregate amount of the Purchase Price plus the amount
----
equal to all costs and expenses reimbursed or paid to Seller pursuant to this
Agreement, insuring fee simple title to the Land and the Buildings in Purchaser,
subject to all applicable Laws, those exceptions expressly approved by Purchaser
in accordance with Section 4.1.1, general real estate taxes and assessments for
the then applicable tax fiscal year in which the Closing occurs and general real
estate taxes and assessments for subsequent years not yet due and payable (the
"CLTA Title Policy"). Purchaser may elect to cause the Title Company to issue an
ALTA Owner's Policy of Title Insurance (Form B, rev. 10/17/70) (the "ALTA
Policy") and if Purchaser so elects, Purchaser shall provide the Title Company
with an ALTA Survey of the Property, at its sole cost and expense. The CLTA
Title Policy shall provide full coverage against mechanics' or materialmen's
liens arising out of the construction, repair or alteration of any of the
Buildings or any tenant improvements. The ALTA Policy shall contain such special
endorsements as Purchaser may require. Seller shall pay the premium charged for
the CLTA Policy (excluding endorsements except for those endorsements required
by the Title Company to be obtained in order to cause the removal from title of
objectionable title matters which Seller has agreed to remove in accordance with
the provisions of Section 4.1.1 above) and Purchaser shall pay for any
incremental premiums or other charges related to the ALTA Policy (including
endorsements).
15. Broker.
------
15.1 Broker's Commission. Seller and Purchaser respectively represent
-------------------
that there are no brokers or other intermediaries entitled to receive brokerage
commissions or fees or other compensation out of or with respect to the sale of
the Property except for Colliers International Hotel Realty Company (the
"Broker"). At Closing (and only if the Closing actually occurs), Seller shall
pay to the Broker the brokerage commission required to be paid under that
certain Exclusive Sales Listing Agreement, dated January 24, 1995 (the "Broker
Agreement") by and between Seller and the Broker, in accordance with the terms
of the Broker Agreement. Seller and Purchaser shall indemnify and save and hold
each other harmless from and against all claims, suits, damages and costs
incurred or resulting from the claim of any person, except the Broker (payment
of the Broker being Seller's responsibility), that a commission, fee or
remuneration is due in connection with this transaction.
15.2 Dual Agency. Seller and Purchaser hereby acknowledge and agree
-----------
that the Broker represents both Seller and Purchaser and the Broker is acting as
a dual agent in connection with this transaction.
16. Notices. Notices shall be deemed given when received or when receipt
-------
is refused. Notices shall be sent by U.S. mail, registered or certified, return
receipt requested, postage prepaid or by overnight delivery service showing
receipt of delivery. If to Purchaser, notices shall be sent to: American
General Hospitality, Inc., 3860 W. Northwest Highway, Suite 300, Dallas, Texas
75220;
16
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Attention: Mr. Bruce G. Wiles, Executive Vice President, with a copy to
Calhoun & Stacy, P.C., 5700 NationsBank Plaza, 901 Main Street, Dallas, Texas
75202-3747; Attention: Parker Nelson, and if to Seller; to Park Center Plaza
Hotel, c/o J. Philip DiNapoli, 99 Almaden Boulevard, Suite 565, San Jose,
California 95113; Attention: Mr. J. Philip DiNapoli, with a copy to Bonnie
Frank, A Professional Corporation, 116 Grove Avenue, Corte Madera, California
94925.
17. Entire Agreement. This Agreement constitutes the entire understanding
----------------
of the parties and all prior agreements, representations, and understandings
between the parties, whether oral or written, are deemed null and void, all of
the foregoing having been merged into this Agreement. The parties acknowledge
that each party and/or its counsel have reviewed and revised this Agreement and
that no rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall be employed in the interpretation of
this Agreement or any amendments or exhibits to this Agreement or any document
executed and delivered by either party in connection with this Agreement.
18. Assignment; Binding Effects. Purchaser may assign its rights,
---------------------------
obligations and interest in this Agreement to any other entity, without Seller's
prior written consent thereto; provided that the principals of Purchaser are
participants as partial owners of such entity and Purchaser gives Seller at
least ten (10) days' prior written notice thereof. Such assignment by Purchaser
shall relieve and release the Purchaser named herein as of the Agreement Date of
or from its obligations and liabilities hereunder to the extent such assignee
assumes such obligations and liabilities hereunder pursuant to a written
instrument in which Seller shall be named as a third party beneficiary thereof.
Any attempted assignment not in compliance with the provisions of this Section
18 shall be null and void. This Agreement shall inure to the benefit of and be
binding upon the parties to this Agreement and their respective successors and
permitted assigns.
19. Enforceability. If for any reason, any provision of this Agreement
--------------
shall be held to be unenforceable, it shall not affect the validity or
enforceability of any other provision of this Agreement and to the extent any
provision of this Agreement is not determined to be unenforceable, such
provision, or portion thereof, shall be, and remain, in full force and effect.
20. California Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California.
21. Modifications/Survival. Any and all addenda attached hereto and
----------------------
either signed or initialed by the parties shall be deemed a part hereof. This
Agreement, including addenda, if any, expresses the entire agreement of the
parties and supersedes any and all previous agreements between the parties with
regard to the Property. There are no other understandings, oral or written,
which in any way alter or enlarge its terms, and there are no warranties or
representations of any nature whatsoever, either expressed or implied, except as
may be expressly set forth herein. At the Closing all of Seller's
representations and warranties made herein and in any other agreements,
documents or instruments delivered by Seller to Purchaser shall be deemed merged
into the Grant Deed and shall be of no further force or effect. Any and all
future modifications of this Agreement will be effective only if it is in
writing and signed by the parties hereto. The terms and conditions of any and
all addenda attached hereto and any and all future modifications of this
Agreement shall supersede and replace any inconsistent provisions in this
Agreement.
22. Counterparts. This Agreement may be executed in counterparts. All
------------
executed counterparts shall constitute one agreement, and each counterpart shall
be deemed an original.
17
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23. Dispute Costs. In the event any dispute between the parties with
-------------
respect to this Agreement result in litigation or other proceeding, the
prevailing party shall be reimbursed by the party not prevailing in such action
or proceeding for all reasonable costs and expenses, including, without
limitation, reasonable attorneys' and experts' fees and costs incurred by the
prevailing party in connection with such litigation or other proceeding and any
appeal thereof. Such costs, expenses and fees shall be included in and made a
part of the judgment recovered by the prevailing party, if any.
24. Confidentiality. Seller and Purchaser agree that, (a) except as
---------------
otherwise provided or required by law, (b) except to the extent either Purchaser
or Seller considers such documents or information reasonably necessary to
prosecute and/or defend any claim made with respect to the Property or this
Agreement, and (c) except to the extent reasonably necessary to deliver such
documents or information to Purchaser's nominee, assignee, lenders, partners,
employees, paralegals, attorneys and/or prospective lenders and/or partners, (i)
each party, including any of their respective agents, representatives and
employees, shall keep the contents of this Agreement and any information related
to the transaction contemplated hereby confidential, including without
limitation, Purchaser's acquisition or ownership of the Property, the Due
Diligence Materials and all information obtained by Purchaser in connection with
its investigation of the Property, and (ii) each party, including any of their
respective agents, representatives and employees, shall refrain from generating
or participating in any publicity or press release regarding this transaction
without the prior written consent of the other party. The provisions of this
Section 24 shall survive the termination of this Agreement or the Closing, as
the case may be, and shall not be deemed merged into any instrument or
conveyance delivered at the Closing.
25. No Waiver. No exercise or waiver, in whole or in part, of any right
---------
or remedy provided for in this Agreement shall operate as a waiver of any other
right or remedy, except as otherwise herein provided. No delay on the part of
any party in the exercise of any right or remedy shall operate as a waiver
thereof.
26. Delay for Weekends and Holidays. Whenever any determination is to be
-------------------------------
made or action to be taken on a date specified in this Agreement, if such date
shall fall upon a Saturday, Sunday or a state or federal legal holiday in
California, the date for such determination or action shall be extended to the
first day thereafter that is not a Saturday, Sunday, or state or federal holiday
in such State.
27. Time of the Essence. Time shall be of the essence in the performance
-------------------
of this Agreement.
28. Limited Liability. Purchaser on behalf of itself and its directors,
-----------------
officers, representatives, successors and assigns hereby agrees that in no event
or circumstance shall Seller, any of its directors, officers, representatives or
employees, any partners of Seller, any representatives, employees, trustees or
partners of the partners of Seller, J. Philip DiNapoli, DiNapoli Development
Company and/or any related or affiliated entities thereof, or any
representatives, employees, consultants or agents of any of J. Philip DiNapoli,
DiNapoli Development Company and/or any related or affiliated entities thereof
have
/////
/////
/////
/////
18
<PAGE>
any personal liability under this Agreement, or to any of Purchaser's creditors,
or to any other party in connection with the Property or this Agreement.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed as
of the day and year first above written.
SELLER:
Park Center Plaza Hotel, a Joint Venture,
a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
--------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
-----------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
-----------------------------------------------
Lewis N. Wolff, general partner
S.F.W.S.D. a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
---------------------------------
Richard L. DiNapoli, its President
[SIGNATURES CONTINUED ON NEXT PAGE]
19
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
------------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
----------------------------------
Lewis N. Wolff, general partner
By: /s/ Louis N. Wolff
-------------------------------------------
Lewis N. Wolff, general partner
PURCHASER:
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
By: /s/ American General Hospitality, Inc.
----------------------------------------
Its: EXECUTIVE VICE PRESIDENT
-------------------------
By:___________________________________________
Its:__________________________________________
20
<PAGE>
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------------
This First Amendment to Purchase and Sale Agreement (the "Amendment") is
made and entered into to be effective as of December 21, 1995, by and between
Park Center Plaza Hotel, a Joint Venture, a California general partnership, and
S.F.W.S.D., a California general partnership (hereinafter collectively referred
to as "Seller") and American General Hospitality, Inc., a Texas corporation
(hereinafter referred to as "Purchaser"). All capitalized terms herein shall
have the meanings attributed to them in the Agreement (below defined) unless
otherwise herein expressly defined.
RECITALS
A. Seller and Purchaser entered into that certain Purchase and Sale
Agreement (the "Agreement") of Agreement Date November 9, 1995 for the sale and
purchase of the Property located at 282 Almaden Blvd., San Jose, Santa Clara
County, California.
B. Seller and Purchaser desire to amend the Agreement as set forth herein
to allow Purchaser additional time within its Conditions Period.
Therefore, in consideration of the foregoing and Ten Dollars and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby amend the Agreement as follows:
1. The last day of the Conditions Period as defined in clause (b) of Section
2.1 of the Agreement is hereby modified to be January 22, 1996, and all
other dates depending upon the Conditions Period in the Agreement are
similarly extended.
2. The Agreement, as hereby modified, is hereby ratified and confirmed in its
entirety.
<PAGE>
3. This First Amendment may be executed in multiple counterparts all of which
shall be taken together as one original.
SELLER:
- ------
Park Center Plaza Hotel, a Joint Venture,
a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
--------------------------------------------------
Richard L DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
--------------------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
--------------------------------------------------
Lewis N. Wolff, general partner
- -and-
<PAGE>
S.F.W.S.D., a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
--------------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
--------------------------------------------------
Lewis N. Wolff, general Partner
By: /s/ Lewis N. Wolff
--------------------------------------------------
Lewis N. Wolff, general Partner
PURCHASER:
- ---------
American General Hospitality, Inc.
By: /s/ Bruce G. Wiles
--------------------------------------------------
Bruce G. Wiles, Executive Vice President
<PAGE>
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
-----------------------------------------------
This Second Amendment to Purchase and Sale Agreement (the "Amendment") is
made and entered into to be effective as of January 19, 1996, by and between
Park Center Plaza Hotel, a Joint Venture, a California general partnership, and
S.F.W.S.D., a California general partnership (hereinafter collectively referred
to as "Seller") and American General Hospitality, Inc., a Texas corporation
(hereinafter referred to as "Purchaser"). All capitalized terms herein shall
have the meanings attributed to them in the Agreement (below defined) unless
otherwise herein expressly defined.
RECITALS
A. Seller and Purchaser entered into that certain Purchase and Sale
Agreement of Agreement Date November 9, 1995 for the sale and purchase of the
Property located at 282 Almaden Blvd., San Jose, Santa Clara County, California,
and an amendment thereto, being that certain First Amendment to Purchase and
Sale Agreement of effective date December 21, 1995 (together, the "Agreement")
B. Seller and Purchaser desire to amend the Agreement as set forth herein
to allow Purchaser additional time within its Conditions Period.
Therefore, in consideration of the foregoing and Ten Dollars and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby amend the Agreement as follows:
1
<PAGE>
1. The last day of the Conditions Period as defined in clause (b) of Section
2.1 of the Agreement is hereby modified to be January 29, 1996, and all
other dates depending upon the Conditions Period in the Agreement are
similarly extended.
2. The Agreement, as hereby modified, is hereby ratified and confirmed in its
entirety.
3. This First Amendment may be executed in multiple counterparts all of which
shall be taken together as one original.
SELLER:
- ------
Park Center Plaza Hotel, a Joint Venture,
a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
---------------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan CEO
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
---------------------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
---------------------------------------------------
Lewis N. Wolff, general partner
- - and -
2
<PAGE>
S.F.W.S.D., a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
---------------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan CEO
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By:/s/ Lewis N. Wolff
---------------------------------------------------
Lewis N. Wolff, general partner
By:/s/ Lewis N. Wolff
---------------------------------------------------
Lewis N. Wolff, general partner
PURCHASER:
- ---------
American General Hospitality, Inc.
By: /s/ Bruce G. Wiles
---------------------------------------------------
Bruce G. Wiles, Executive Vice President
3
<PAGE>
THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------------
This Third Amendment to Purchase and Sale Agreement (the "Amendment") is
made and entered into to be effective as of January 26, 1996, by and between
Park Center Plaza Hotel, a Joint Venture, a California general partnership, and
S.F.W.S.D., a California general partnership (hereinafter collectively referred
to as "Seller") and American General Hospitality, Inc., a Texas corporation
(hereinafter referred to as "Purchaser"). All capitalized terms herein shall
have the meanings attributed to them in the Agreement (below defined) unless
otherwise herein expressly defined.
RECITALS
A. Seller and Purchaser entered into that certain Purchase and Sale
Agreement of Agreement Date November 9, 1995 for the sale and purchase of the
Property located at 282 Almaden Blvd., San Jose, Santa Clara County, California,
and an amendment thereto, being that certain First Amendment to Purchase and
Sale Agreement of effective date December 21, 1995, and a further amendment
thereto, being that certain Second Amendment to Purchase and Sale Agreement of
effective date January 19, 1996 (all together, the "Agreement").
B. Seller and Purchaser desire to amend the Agreement as set forth herein
to allow Purchaser additional time within its Conditions Period.
Therefore, in consideration of the foregoing and Ten Dollars and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby amend the Agreement as follows:
1
<PAGE>
1. The last day of the Conditions Period as defined in clause (b) of Section
2.1 of the Agreement is hereby modified to be February 9, 1996, and all
----------
other dates depending upon the Conditions Period in the Agreement are
similarly extended.
2. The Agreement, as hereby modified, is hereby ratified and confirmed in its
entirety.
3. This First Amendment may be executed in multiple counterparts all of which
shall be taken together as one original.
SELLER:
- ------
Park Center Plaza Hotel, a Joint Venture,
a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
----------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
--------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
-----------------------------------------
Lewis N. Wolff, general partner
- - and -
2
<PAGE>
S.F.W.S.D., a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
-----------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
-------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
-----------------------------------------
Lewis N. Wolff, general partner
PURCHASER:
- ---------
American General Hospitality, Inc.
By: /s/ Bruce G. Wiles
-----------------------------------------
Bruce G. Wiles, Executive Vice President
3
<PAGE>
FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT
-----------------------------------------------
This Fourth Amendment to Purchase and Sale Agreement (the "Amendment") is
made and entered into to be effective as of January 30, 1996, by and between
Park Center Plaza Hotel, a Joint Venture, a California general partnership, and
S.F.W.S.D., a California general partnership (hereinafter collectively referred
to as "Seller") and American General Hospitality, Inc., a Texas corporation
(hereinafter referred to as "Purchaser"). All capitalized terms herein shall
have the meanings attributed to them in the Agreement (below defined) unless
otherwise herein expressly defined.
RECITALS
A. Seller and Purchaser entered into that certain Purchase and Sale
Agreement of Agreement Date November 9, 1995 for the sale and purchase of the
Property located at 282 Almaden Blvd., San Jose, Santa Clara County, California,
and three amendments thereto, being that certain First Amendment to Purchase and
Sale Agreement of effective date December 21, 1995, that certain Second
Amendment to Purchase and Sale Agreement of effective date January 19, 1996, and
that certain Third Amendment to Purchase and Sale Agreement of effective date
January 29, 1996 (all together, the "Agreement").
B. Seller and Purchaser desire to amend the Agreement as set forth herein
to allow Purchaser potential extensions of the Closing Date in consideration of
increases of the Deposits and the Purchase Price.
Therefore, in consideration of the foregoing, the terms hereof, and Ten
Dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Seller and Purchaser hereby amend the
Agreement as follows:
1. As agreed in the above-described Third Amendment, the last day of the
Conditions Period as defined in clause (b) of Section 2.1 of the Agreement is
hereby acknowledged to be February 9, 1996, and all other dates depending upon
the Conditions Period in the Agreement were similarly extended. Such agreement
is hereby modified as follows: (i) Seller agrees to deliver its response to
Purchaser's objection letters by February 5, 1996; and (ii) with respect to the
Redevelopment Agency Issues (below defined), the last day of the Conditions
Period is hereby acknowledged to be March 11, 1996. The "Redevelopment Agency
Issues" means the following:
(a) Full satisfaction of all construction-related obligations with respect
to the parking structure tract;
(b) Full compliance by the hotel structure with all height, number-of-
stories, floor-area-ratio, and lot-coverage restrictions;
(c) Full satisfaction by the City of San Jose and the Redevelopment Agency
of the City of San Jose (together, "San Jose") of all obligations with
respect to the Ohlone People; and
1
<PAGE>
(d) Full waiver or variance by San Jose with respect to signage, vaults,
utility connections, and other survey items which lie outside Property
lines.
2. If this Agreement shall then still be in effect, on or before the due date
for the Additional Deposit (February 12, 1996), in addition to the Additional
Deposit, Purchaser shall deposit with the Escrow Holder an additional amount of
$50,000.00 which will be added to the Deposits, the Deposits thereby totaling
$200,000.00. If this Agreement shall then still be in effect, after the last
day of the Conditions Period (i.e. March 11, 1996, with respect to the
Redevelopment Agency Issues, and February 9, 1996, with respect to all other
issues), the Deposits, to the extent paid to Escrow Holder as of the Closing
Date or termination of the Agreement, whichever is applicable, shall be
absolutely and unequivocally non-refundable to Purchaser except in the event of
a default by Seller under the Agreement and except that the Deposits shall apply
to the Purchase Price at Closing.
3. If this Agreement shall then still be in effect, Purchaser shall have the
right on or before March 11, 1996, to extend the Closing Date to March 31, 1996,
by delivery to Seller of a written notice to that effect in which event the
Purchase Price shall simultaneously increase by $50,000.00.
4. If this Agreement shall then still be in effect, Purchaser shall have the
right on or before March 31, 1996, by delivery to Seller of a written notice to
that effect and simultaneously delivering to the Escrow Holder an additional
amount of $25,000.00 which will be added to the Deposits, to extend the Closing
Date to April 30, 1996, in which event the Purchase Price shall simultaneously
increase by $25,000.00.
5. If this Agreement shall then still be in effect, Purchaser shall have the
right on or before April 30, 1996, by delivery to Seller of a written notice to
that effect and simultaneously delivering to the Escrow Holder an additional
amount of $25,000.00 which will be added to the Deposits, to extend the Closing
Date to May 31, 1996, in which event the Purchase Price shall simultaneously
increase by $25,000.00.
6. If this Agreement shall then still be in effect, Purchaser shall have the
right on or before May 31, 1996, by delivery to Seller of a written notice to
that effect and simultaneously delivering to the Escrow Holder an additional
amount of $25,000.00 which will be added to the Deposits, to extend the Closing
Date to June 30, 1996, in which event the Purchase Price shall simultaneously
increase by $25,000.00.
7. If this Agreement shall then still be in effect, Purchaser shall have the
right on or before June 30, 1996, by delivery to Seller of a written notice to
that effect and simultaneously delivering to the Escrow Holder an additional
amount of $25,000.00 which will be added to the Deposits, to extend the Closing
Date to July 31, 1996, in which event the Purchase Price shall simultaneously
increase by $25,000.00.
8. The Agreement, as hereby modified, is hereby ratified and confirmed in its
entirety. Any notices under the Agreement may be given by facsimile as well as
by the other manners set forth in the Agreement.
2
<PAGE>
9. This Fourth Amendment may be executed in multiple counterparts all of which
shall be taken together as one original.
SELLER:
- ------
Park Center Plaza Hotel, a Joint Venture,
a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
---------------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
-------------------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
-------------------------------------------------
Lewis N. Wolff, general partner
3
<PAGE>
S.F.W.S.D., a California general partnership
By: Sunfair Co., a California general partnership,
general partner
By: Sun Garden Packing Co., a California corporation,
general partner
By: /s/ Richard L. DiNapoli
---------------------------------------------------
Richard L. DiNapoli, its President
By: Mayfair Packing Co., a California corporation,
general partner
By: /s/ Joseph Melehan
--------------------------------------------------
Joseph Melehan, its Chief Executive Officer
By: Wolff Sesnon Buttery, a Development Company,
a California general partnership,
general partner
By: /s/ Lewis N. Wolff
-------------------------------------------------
Lewis N. Wolff, general partner
By: /s/ Lewis N. Wolff
-------------------------------------------------
Lewis N. Wolff, general partner
PURCHASER:
- ---------
American General Hospitality, Inc.
By: /s/ Bruce G. Wiles
-------------------------------------------------
Bruce G. Wiles, Executive Vice President
4
<PAGE>
Exhibit 10.28
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY, INC., OR ITS ASSIGNS
AS PURCHASER
AND
NORTHBROOK CORPORATION,
AS SELLER
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1
THE CONTRACT......................................................................... 2
------------
ARTICLE 2
HOTEL................................................................................ 2
-----
ARTICLE 3
PURCHASE PRICE....................................................................... 4
--------------
3.1. Purchase Price............................................................. 4
--------------
3.2. Allocations................................................................ 5
-----------
3.3. Earnest Money.............................................................. 5
-------------
ARTICLE 4
TITLE DELIVERIES..................................................................... 5
----------------
4.1. Title Commitment........................................................... 5
----------------
4.2. Survey..................................................................... 6
------
4.3. UCC Search................................................................. 7
----------
4.4. Procedure for Purchaser's Objections....................................... 7
------------------------------------
4.5. Permitted Exceptions....................................................... 7
--------------------
ARTICLE 5
HOTEL DOCUMENTS AND INSPECTION....................................................... 8
------------------------------
5.1. Inspections and Receipt of Documents....................................... 8
------------------------------------
5.2. Hotel Documents............................................................ 8
---------------
ARTICLE 6
INTERIM OPERATION OF HOTEL........................................................... 9
--------------------------
6.1. Interim Operation.......................................................... 9
-----------------
6.2. Third Party Consents.......................................................11
--------------------
ARTICLE 7
REPRESENTATIONS......................................................................11
---------------
7.1. Representations by Purchaser...............................................11
----------------------------
7.2. Representations by Seller..................................................12
-------------------------
7.3 Utility Reservations.......................................................15
--------------------
7.4 Subsequent Developments....................................................15
-----------------------
ARTICLE 8
COVENANTS
---------
8.1 Representation Letter......................................................16
---------------------
8.2 Seller's Indemnity.........................................................16
------------------
8.3 Purchaser's Indemnity......................................................16
---------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
8.4 Liquor Licenses............................................................16
---------------
8.5 Ground Lease Estoppel......................................................17
---------------------
8.6 Owner's Actions............................................................17
---------------
ARTICLE 9
CONDITIONS PRECEDENT TO THE CLOSING..................................................18
-----------------------------------
9.1 Purchaser's Conditions.....................................................19
----------------------
9.2. Mutual Conditions..........................................................19
-----------------
ARTICLE 10
CLOSING AND CLOSING DOCUMENTS........................................................19
-----------------------------
10.1 Closing....................................................................19
-------
10.2 Title Conveyance Standards.................................................20
--------------------------
10.3 Seller's Deliveries........................................................20
-------------------
10.4 Purchaser's Deliveries.....................................................21
----------------------
10.5 Prorations.................................................................22
----------
10.6 Document Preparation and Transfer Costs....................................23
---------------------------------------
10.7 Reconciliation and Final Payment...........................................23
--------------------------------
10.8 Accounts Payable...........................................................23
----------------
10.9 Accounts Receivable........................................................24
-------------------
ARTICLE 11
CASUALTY AND CONDEMNATION............................................................24
-------------------------
11.1 Risk of Loss; Notice.......................................................24
--------------------
11.2 Purchaser's Termination Right..............................................24
-----------------------------
11.3 Procedure for Closing......................................................24
---------------------
ARTICLE 12
DEFAULT AND REMEDIES.................................................................25
--------------------
12.1 Purchaser's Default........................................................25
-------------------
12.2 Seller's Default...........................................................25
----------------
12.3 Survival...................................................................26
--------
ARTICLE 13
BROKERS..............................................................................26
-------
13.1 Identity of Brokers........................................................26
-------------------
13.2 Indemnification by Seller..................................................26
-------------------------
13.3 Indemnification by Purchaser...............................................26
----------------------------
ARTICLE 14
MISCELLANEOUS........................................................................27
-------------
14.1 Notices....................................................................27
-------
14.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies...........28
----------------------------------------------------------------
14.3 Exhibits...................................................................28
--------
14.4 Successors and Assigns.....................................................28
----------------------
14.5 Article Headings...........................................................28
----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
14.6 Governing Law..............................................................29
-------------
14.7 Time Periods...............................................................29
------------
14.8 Counterparts...............................................................29
------------
14.9 Survival...................................................................29
--------
14.10 Further Acts...............................................................29
------------
14.11 Severability...............................................................29
------------
14.12 Attorneys' Fees............................................................29
---------------
14.13 Qualification on Confidentiality...........................................30
--------------------------------
</TABLE>
LIST OF EXHIBITS
- ----------------
Exhibit A - Legal Description of Land
Exhibit 2(c) - Schedule of Equipment Not Owned by The Hotel
Exhibit 2(e) - Schedule of Leases
Exhibit 2(f) - Schedule of FF&E Leases
Exhibit 2(g) - Schedule of Service Contracts
Exhibit 8.5 - Ground Lease Estoppel
Exhibit 8.6 - Copy of the letter of conditional approval from one of the Owner's
two general partners
The exhibits and/or schedules of Exhibit 10.28, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
HOTEL PURCHASE AGREEMENT
------------------------
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of the date
last below written by and between Northbrook Corporation, a Delaware corporation
("Seller"), and American General Hospitality, Inc., a Texas corporation, or its
assigns as permitted pursuant to Section 14.4 hereof ("Purchaser").
RECITALS:
--------
A. The City of Albuquerque, New Mexico ("Ground Lessor") is the
owner of the land located at 2910 Yale Boulevard, S.E., Albuquerque, Bernalillo
County, New Mexico and more particularly described on Exhibit A attached hereto
---------
(the "Land").
B. Ground Lessor leased the Land to Fred Harvey, Inc., a Delaware
corporation, ("Fred Harvey") by a certain Ground Lease dated November 10, 1969,
as amended by (i) that certain First Supplemental Lease Agreement dated May 17,
1971, and (ii) that certain Second Supplemental Lease Agreement dated as of
October 2, 1972 (said Ground Lease as thus amended is herein called the "Ground
Lease", and the entirety of all of the rights, titles, privileges, easements,
appurtenances and attendant benefits and burdens of the lessee under the Ground
Lease is herein called the "Leasehold Estate").
C. Fred Harvey constructed a certain hotel building and ancillary
improvements and facilities on the Land and, by that certain Deed and Assignment
(the "Sale Document") dated October 3, 1972, assigned the Ground Lease and
conveyed said building, improvements and facilities to Frah Associates, a New
York limited partnership ("Owner").
D. By that certain Lease and Sublease Agreement (the "Leaseback
Document") dated March 15, 1973, Owner subleased the Leasehold Estate and leased
said building, improvements and facilities to Fred Harvey.
E. Through corporate name changes, as of December 31, 1987, Fred
Harvey became Amfac Resorts, Inc. ("Amfac Resorts").
F. By that certain Transfer and Assumption Agreement (the "1989
Transfer Document") dated May 8, 1989, Amfac Resorts transferred and assigned
its rights under the Leaseback Document to Amfac, Inc., a Hawaii corporation
("Amfac"). (The term "Leasehold Transfer Documents" shall mean the Sale
Document, the Leaseback Document and the 1989 Transfer Document, taken
together.)
G. As of May 1, 1995, Amfac merged into Seller.
H. The foregoing results in the following, as of the date of this
Agreement:
HOTEL PURCHASE AGREEMENT - Page 1
- ------------------------
<PAGE>
(1) Ground Lessor owns the Land in fee simple, subject to the
Ground Lease and the Leaseback Document.
(2) Owner is the current lessee under the Ground Lease and the
current owner of the Improvements (below defined), subject to the Leaseback
Document and subject to certain mortgage financing thereon.
(3) Seller is the current sublessee of the Land and the current
lessee of the Improvements under the Leaseback Document.
(4) Seller intends to acquire the Leasehold Estate and
Improvements from Owner prior to or concurrent with the Closing (below
defined).
AGREEMENT:
---------
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
THE CONTRACT
------------
For and in consideration of the mutual benefits enjoyed by one another
under this Agreement, Seller agrees to sell, assign and convey the Hotel to
Purchaser, and Purchaser agrees to purchase and accept assignment and conveyance
of the Hotel pursuant to the terms and conditions set forth in this Agreement.
ARTICLE 2
HOTEL
-----
As used in this Agreement, the term "Hotel" shall mean and refer to the
following:
(a) The entirety of Seller's and Owner's interests in the
Leasehold Estate;
(b) The 266 room hotel and all other buildings, structures,
fixtures, parking areas, and other improvements presently located upon the Land
(collectively, the "Improvements");
(c) All of the following (collectively, the "FF&E"): all
tangible personal property and fixtures (which are not part of the Improvements)
of any kind attached to, or located upon and used in connection with the
ownership, maintenance, use or operation of the Leasehold Estate or Improvements
as of the date hereof (or acquired by Seller and so employed prior to Closing,
as defined below), exclusive of any such property which is leased under any FF&E
Lease and exclusive of the equipment that is described in Exhibit 2(c) attached
------------
hereto (the "Schedule of Equipment Not Owned By The Hotel");
HOTEL PURCHASE AGREEMENT - Page 2
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<PAGE>
(d) All of the merchandise, supplies, inventory (including
without limitation, all food and beverage inventories) and other items used for
the operation and maintenance of guest rooms, guest services, restaurants,
lounges, swimming pools, health clubs, and other common areas and recreational
areas within or relating to the Improvements (collectively, the "Supplies");
(e) To the extent assignable, all of the leases, franchises,
licenses, and "trade-out" agreements demising space in, providing for the use or
occupancy of, or otherwise similarly affecting or relating to the use or
occupancy of, the Improvements or Leasehold Estate, together with all
amendments, modifications, renewals and extensions thereof, and all guaranties
by third parties of the obligations of the tenants, licensees, franchisees,
concessionaires or other entities thereunder (collectively, the "Leases" and
individually, the "Lease") described in Exhibit 2(e) attached hereto (the
------------
"Schedule of Leases");
(f) To the extent assignable, the leases of any property of the
nature of FF&E and the other contracts permitting the use of any such property
(the "FF&E Leases") described in Exhibit 2(f) attached hereto (the "Schedule of
------------
FF&E Leases");
(g) To the extent assignable, the contracts and agreements
(collectively, the "Service Contracts") described in Exhibit 2(g) attached
------------
hereto (the "Schedule of Service Contracts);
(h) To the extent assignable without material cost to Seller,
all prepaid rents and deposits, including, but not limited to utility deposits,
refundable security deposits and rental deposits, and all other deposits for
advance reservations, banquets or future services, made in connection with the
use or occupancy of the Improvements (collectively the "Deposits"); provided,
however, that Purchaser shall be entitled to a credit against the cash portion
of the Purchase Price (as defined below) in an amount equal to the amount of the
Deposits at Closing, and Purchaser agrees to assume all of Seller's liability
and obligations, if any, with regard to such prepaid rents and/or deposits;
(i) To the extent assignable without material cost to Seller,
any and all of the following that relate to or affect in any way, the design,
construction, ownership, use, occupancy, leasing, maintenance, service, or
operation of the Leasehold Estate, Improvements, Leases, Deposits, Supplies, or
FF&E:
(i) Warranties, guaranties, indemnities, and claims for
the benefit of Seller (collectively the "Warranties");
(ii) Licenses (including without limitation liquor, beer,
wine, bar and similar licenses), permits, franchises (including without
limitation hotel franchise license agreements), certificates of occupancy,
and similar documents issued by any federal, state, or municipal authority
or by any private party so long as assignment can be made without material
cost to Seller, (collectively the "Licenses");
HOTEL PURCHASE AGREEMENT - Page 3
- ------------------------
<PAGE>
(iii) Telephone numbers, trade names, trade styles, trade
marks, service marks, and other identifying material, and all variations
thereof, together with all related goodwill (provided that the names
"Amfac" and "Fred Harvey" shall not be assigned) (collectively, the
"Tradenames") (it being understood and agreed that the name of the hotel
chain to which the Hotel is affiliated by franchise or other license
agreement is a protected name or registered service mark of such hotel
chain and cannot be transferred to Purchaser by this Agreement); and
(iv) Plans, drawings, specifications, surveys, soil
reports, engineering reports, inspection reports, environmental audits and
other technical descriptions and reports to the extent in Seller's
possession or control (collectively, the "Plans and Specs");
(j) To the extent assignable, Seller's interest in the right to
receive immediately on and after Closing and continuously consume thereafter
water service, sanitary and storm sewer service, electrical service, gas
service, and telephone service on and for the Leasehold Estate and Improvements
(all of the foregoing are referred to in this Agreement collectively as the
"Utility Reservations");
(k) All rights, titles, and interests of Seller appurtenant to
the Land, Leasehold Estate, and Improvements, including, but not limited to, (i)
all easements, rights of way, rights of ingress and egress, tenements,
hereditaments, privileges, and appurtenances in any way belonging to the Land,
Leasehold Estate, or Improvements, (ii) any land lying in the bed of any alley,
highway, street, road or avenue, open or proposed, in front of or abutting or
adjoining the Land, (iii) any strips or gores of real estate adjacent to the
Land, and (iv) the use of all alleys, easements and rights-of-way, if any,
abutting, adjacent or contiguous to, or adjoining the Land (collectively, the
"Appurte nances");
(l) All books and records, promotional material, tenant data,
marketing and leasing material and forms, market studies, keys, and other
materials of any kind owned by Seller or in Seller's possession or control, or
to which Seller has access or may obtain and has the right to convey and deliver
which are or may be used in Seller's or Owner's ownership or use of the
Leasehold Estate, the Land, the Improvements or the FF&E, whether any of the
foregoing are in hard copy form or in computerized data storage form
(collectively, the "Records"); provided, however, that a copy of any such
material may be retained by Seller; and
(m) Seller's active guest ledger and cash drawers and house
accounts as of 2:00 A.M. on the Closing Date (the "Cash and Equivalents").
ARTICLE 3
PURCHASE PRICE
--------------
3.1. Purchase Price. The total price (the "Purchase Price") for which
--------------
Seller agrees to sell, assign and convey the Hotel to Purchaser, and which
Purchaser agrees to pay or deliver to Seller, subject to the terms of this
Agreement and adjustments as provided herein, shall consist of
HOTEL PURCHASE AGREEMENT - Page 4
- ------------------------
<PAGE>
$9,350,000.00 plus the sum of the Cash and Equivalents. Purchaser shall pay the
Purchase Price, as adjusted in the manner set forth below, to Seller or other
applicable party in immediately available cash funds by wire transfer at
Closing.
3.2. Allocations. Subject to adjustments as provided herein, the
-----------
Purchase Price shall be allocated among the Ground Lease and Leasehold Estate,
Improvements, and FF&E as follows: Ground Lease and Leasehold Estate - 0%;
Improvements - 95%; and FF&E - 5%.
3.3. Earnest Money. For the purpose of securing the performance of
-------------
Purchaser under the terms and provisions of this Agreement and as a condition
precedent to Seller's obligations hereunder, within three (3) business days of
the execution hereof, Purchaser shall deliver $100,000.00 to the Title Company
(as hereinafter defined) in current funds to be held in a joint order escrow
therewith. Further, if this Agreement shall then still be in effect, on or
before June 15, 1996, Purchaser shall deliver an additional $50,000.00 to the
Title Company in current funds for addition to such joint order escrow. Such
$100,000.00, the subsequent $50,000.00, if made, and any other sums which may
from time to time be deposited as "Earnest Money" or "Additional Earnest Money"
under the terms of this Agreement or any addendum or amendment hereto is herein
referred to as the "Earnest Money". All interest accruing on Earnest Money
deposited under this Agreement shall become a part of and be added to the
Earnest Money so that it shall be subject to disbursement or application in the
same manner as is the principal of the Earnest Money. The Title Company shall
deposit the Earnest Money in an interest bearing account at a bank or savings
institution reasonably acceptable to Seller and Purchaser, and all interest
accrued thereon shall be reported under Purchaser's federal tax identification
number. If the sale of the Hotel is not consummated in accordance with the
terms hereof, the Earnest Money, less the sum of $100.00 therefrom which shall
be paid to Seller as independent consideration for entering into this Agreement,
shall be returned to Purchaser or delivered to Seller as liquidated damages as
herein provided. If the sale of the Hotel is consummated in accordance with the
terms hereof, the Earnest Money, less such $100.00 independent consideration,
shall be applied to the Purchase Price.
ARTICLE 4
TITLE DELIVERIES
----------------
4.1. Title Commitment. Within 21 days after the execution of this
----------------
Agreement, Seller shall obtain and deliver to Purchaser, at Seller's sole cost
and expense, a Commitment for Title Insurance (the "Title Commitment") issued
for Chicago Title Insurance Company ("Chicago") or other title underwriter
designated by Purchaser, issued through an agency designated by agreement of
Seller and Purchaser (the "Title Company"), for the most recent form of ALTA
leasehold policy covering the Leasehold Estate and owner policy covering the
Improvements, in the full amount of the Purchase Price and endorsed as Purchaser
may reasonably require, setting forth the current status of the title to the
Land, Ground Lease and Leasehold Estate, and Improvements, showing all liens,
claims, encumbrances, easements, rights of way, encroachments, reservations,
restrictions, and any other matters affecting the Land, Ground Lease and
Leasehold Estate, and Improvements, and
HOTEL PURCHASE AGREEMENT - Page 5
- ------------------------
<PAGE>
pursuant to which the Title Company agrees to issue to Purchaser at Closing a
Leasehold Policy of Title Insurance (including owner policy coverages for the
Improvements) (the "Title Policy") on the most recent form of ALTA leasehold
policy as endorsed as Purchaser may reasonably require. Seller shall direct the
Title Company to deliver to Purchaser with the Title Commitment a true,
complete, and legible copy of all plats, documents and instruments (as recorded,
where applicable) (the "Supporting Documents") referred to or identified in the
Title Commitment and of the Leasehold Transfer Documents and all other deeds,
assignments, and other conveyance documents evidencing title in Seller or Owner.
4.2. Survey. Within 21 days after the execution of this Agreement,
------
Seller shall provide to Purchaser, at Seller's sole cost and expense, a current
"as built" survey (the "Survey") of the Land and Improvements made on the ground
and certified by a professional land surveyor licensed in the state in which the
Hotel is located and approved by the Title Company and Purchaser (the
"Surveyor"). The Survey must be prepared, and the field work surveying must be
conducted, in accordance with the Minimum Standard Detail Requirements for
ALTA/ACSM Real Property Title Surveys and must be adequate to allow the Title
Company to issue an ALTA extended coverage leasehold (owner, with respect to the
improvements) policy with no survey exceptions. Seller shall request that the
Survey contain the following the additional cost for which shall be Purchaser's
responsibility: the items set forth in Table A to said Minimum Standards (other
than contours and elevations of the Land but including elevations of the
Improvements) and (i) the locations and dimensions of all existing easements,
fire hydrants, fences, encroachments, conflicts, protrusions, alleys, streets
and roads (including median and curb cuts), and rights-of-way on or adjacent to
or serving the Land or Leasehold Estate which are visible on the ground or
listed in the Title Commitment (with recording information shown if applicable);
(ii) the locations of all existing improvements, monuments, sidewalks,
driveways, parking lots (with striped spaces shown) and other visible items on
the Land; (iii) all areas designated as being flood prone or subject to special
flood hazards or other hazardous conditions according to the most current
official maps of the Flood Insurance Administration, the Federal Emergency
Management Agency or any other public or semi-public body charged with
determining the existence of such conditions which has jurisdiction over the
Hotel; and (iv) a metes and bounds description of the Land and all on-the-
ground Appurtenances tied at all corners to physical monuments and on all sides
and curves to adjoining tracts (with any discrepancies fully disclosed) and a
description by reference to the recorded plat or map of the Land. At Seller's
expense, the Survey shall contain a certification by the Surveyor in form
reasonably acceptable and addressed to Seller, Purchaser and the Title Company,
indicating that the Survey was made on the ground and accurately shows all the
matters required above. If there is an increase in the Surveyor's charges for
certification of Purchaser's additional matters described above, then such
increase shall also be at Purchaser's expense. If different from the description
contained in Exhibit A attached to this Agreement, the legal description of the
---------
Land contained in the Survey shall be substituted for the description of the
Land contained in said Exhibit A, and this Agreement shall be deemed amended by
---------
the substitution of the legal description of the Land contained in the Survey as
a new Exhibit A without the necessity of the parties executing any additional
---------
written amendments to this Agreement. In addition, such description shall be
used in the Leasehold Policy of Title Insurance and in the Ground Lease
Assignment.
HOTEL PURCHASE AGREEMENT - Page 6
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<PAGE>
4.3. UCC Search. Purchaser, at Purchaser's sole cost and expense, may,
----------
if it so elects, obtain current written reports (the "UCC Searches") from the
Office of the Secretary of State of the State where the Hotel is located and the
deed recording offices of the county where the Hotel is located reflecting the
results of current searches of the Uniform Commercial Code Records maintained by
such offices, said UCC Searches to be made under the name of Seller and Owner.
4.4. Procedure for Purchaser's Objections. Purchaser shall have until
------------------------------------
21 days following the completion of all deliveries required of Seller to
Purchaser under Sections 4.1 and 4.2 (the "Review Period") to notify Seller in
writing of any objections Purchaser may have to matters reflected in or
concerning the Title Commitment, the Supporting Documents, the Survey, or the
UCC Searches (if Purchaser has elected to obtain same). If Purchaser shall so
notify Seller of any objections, Seller shall make its good faith efforts to
cure such objections to Purchaser's reasonable satisfaction within 14 days from
the date on which Seller receives Purchaser's objections; provided, however,
that Seller shall not be obligated to cure such objections if such cure will
result in material cost to Seller. If Seller does not attempt to cure such
objections or if Seller attempts to cure same but Purchaser, in Purchaser's
reasonable judgment, is not satisfied with the results of any cure efforts by
Seller, Purchaser may terminate this Agreement by giving written notice of
termination to Seller at any time within 5 days after the end of said 14-day
period. If Purchaser terminates this Agreement pursuant to this Section, Seller
shall be entitled to retain and, to the extent it has not already done so,
Purchaser shall deliver to Seller all reports and studies of third parties
relating to the Hotel resulting from the inspection of the Hotel (or the
portions of such reports and studies that are specific to the Hotel) and all
documents delivered to Purchaser pursuant to Section 5.2. The Earnest Money
shall be returned to Purchaser within 5 days after any such termination, and
neither party shall have any further rights or obligations one to the other,
except for the repair obligation set forth in Section 5.1. If Purchaser does
not terminate this Agreement within five days after said 14-day period as
provided herein, Purchaser shall be deemed to have waived the right to terminate
this Agreement under this Section 4.4 and shall be deemed to have accepted and
approved the condition of title to the Hotel, subject to the remaining terms of
this Agreement.
4.5. Permitted Exceptions. Notwithstanding any other provision herein
--------------------
set forth, Purchaser shall not be entitled to make any objection or terminate
this Agreement on the basis of any lien, encumbrance or security interest
created by Purchaser at Closing in connection with Purchaser's acquisition of
the Hotel. The agreed exceptions to title specified in the immediately
preceding sentence, together with any title exceptions to which the Purchaser
does not object in accordance with Section 4.4 and any title exceptions to which
Purchaser objects that are not cured but which Purchaser accepts or is deemed to
have accepted in accordance with Section 4.4 shall be hereinafter referred to as
the "Permitted Exceptions." The Permitted Exceptions shall be described in, or
in an exhibit to, the Ground Lease Assignment.
HOTEL URCHASE AGREEMENT - Page 7
- -----------------------
<PAGE>
ARTICLE 5
HOTEL DOCUMENTS AND INSPECTION
------------------------------
5.1. Inspections and Receipt of Documents. As of the date hereof,
------------------------------------
Seller has provided to Purchaser, its agents, employees and representatives,
access to the Hotel and to certain of the Hotel employees (including the Hotel
manager) for purposes of (i) making inquiry regarding the Hotel and its
operations, (ii) performing all tests and inspections of the Hotel desired by
Purchaser, and (iii) reviewing Hotel documents. As of the date hereof, Seller
has made available for Purchaser's review and approval as to form and content
originals or legible copies of all of the Service Contracts described in the
Schedule of Service Contract, all of the Leases described in the Schedule of
Leases, all of the FF&E Leases described in the Schedule of FF&E Leases and such
other documents of the nature of those described in Section 5.2 below to the
extent in Seller's possession or in the possession of any party responsible for
managing the Hotel. Purchaser acknowledges and agrees that it has reviewed and
approved the results of all such inspections and all of such documents. The
terms of this Agreement and all information furnished by Seller to Purchaser or
obtained by Purchaser in the course of its investigations shall be treated as
confidential information by Purchaser, except that Purchaser may disclose such
information as provided in Section 14.13 and to attorneys and other parties
assisting or representing Purchaser in connection with the subject transaction
and to others as may be required by lawful order. The foregoing obligation to
treat such information as confidential shall survive any termination of this
Agreement but shall not survive Closing. In the event that the transaction
contemplated by this Agreement does not close for any reason other than Seller's
default, Purchaser shall have the obligation to repair any damage caused by
Purchaser's inspections and tests at the Hotel to the condition prior to
Purchaser's entry, which obligation shall survive any termination of the
Agreement.
5.2. Hotel Documents. The other documents to which reference is made
---------------
in Section 5.1 above are:
(i) Material warranties relating to the Hotel or any
part thereof which are still in effect;
(ii) Financial statements and budgets for the Hotel, for
the current year to date and each of the five (5) years prior to the year
of this Agreement (the "Financial Statements"), including the itemization
of (1) annual insurance premiums for each such year for fire, extended
coverage, workers' compensation, vandalism and malicious mischief, general
liability, business interruption, rents and other forms of insurance shown
thereon; (2) expenses incurred for water, electricity, natural gas, sewer
and other utility charges; (3) total rents and revenues collected from
tenants and from hotel guests and other patrons of the Hotel; (4)
management fees; (5) maintenance, repairs and other expenses relating to
the management and operation of the Hotel; (6) historical occupancy
statistics for the Hotel; and (7) all capital expenditures made during the
aforementioned periods;
(iii) The Licenses;
HOTEL PURCHASE AGREEMENT - Page 8
- ------------------------
<PAGE>
(iv) The most recent real estate and personal property
tax statements with respect to the Hotel and notices of appraised value for
the Land, Ground Lease and/or Leasehold Estate, and Improvements;
(v) Engineering and architectural plans, drawings and
specifications relating to the Hotel, and environmental reports, boundary
surveys, engineering reports and subsurface studies affecting the Hotel;
(vi) Notices of material current matters still pending
received from governmental authorities in connection with the Hotel; and
(vii) Seller's franchise agreement and a current
deficiency report and the two most recent inspection reports of the
franchisor of the Hotel.
ARTICLE 6
INTERIM OPERATION OF HOTEL
--------------------------
6.1. Interim Operation. Seller hereby covenants and agrees that
-----------------
between the date of this Agreement and the Closing Date Seller shall:
(a) Operate, manage, and maintain the Hotel consistent with
Seller's prior practice, including, without limitation, (i) using reasonable
efforts to preserve its relations with guests, suppliers and other parties doing
business with Seller with respect to the Hotel, (ii) accepting booking contracts
for the use of the Hotel facilities on terms not less favorable than the terms
typically arranged by Seller as of the date of this Agreement and using best
efforts to retain such bookings, (iii) maintaining the current level of
advertising and other promotional activities for Hotel facilities, (iv)
maintaining its books of accounts and records in the usual, regular and ordinary
manner, on a basis consistent with the basis used in keeping its books in prior
years, and (v) remaining in substantial compliance with all current Licenses;
(b) Not commit waste of any portion of the Hotel;
(c) Keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (a) above;
(d) Keep, observe, and perform all its obligations under the
Leases, the FF&E Leases, the Service Contracts, the Licenses (in particular, the
license agreement between Seller and the franchisor of the franchise on the
Hotel), and all other applicable contractual arrangements relating to the Hotel;
(e) Not enter into any new agreements of the nature of the
Service Contracts, FF&E Leases, or Leases or any amendments or modifications of
any existing Service Contracts,
HOTEL PURCHASE AGREEMENT - Page 9
- ------------------------
<PAGE>
FF&E Leases, or Leases which call for monthly payments in excess of $500.00 or
are for a term in excess of one (1) year unless cancelable upon no more than
thirty (30) days notice without Purchaser's prior written consent provided that
Seller shall have the right to renew or extend the Service Contracts described
on the Schedule of Service Contracts, the FF&E Leases described on the Schedule
of FF&E Leases, and the Leases described on the Schedule of Leases for a period
of up to six (6) months on terms comparable to the existing terms thereof;
(f) Not cause or permit the removal of FF&E from the Hotel
except for the purpose of discarding, and replacing where consistent with
Seller's prior practices, worn items;
(g) Keep Supplies stocked consistent with Seller's prior
practice, as if the sale of the Hotel hereunder were not to occur;
(h) Not enter into any new employment or union contracts or
agreements or hire any new employees that will be binding on Purchaser on or
after the Closing provided that Seller shall have the right to hire employees as
replacements for employees who have vacated positions so long as such
replacements are at compensation rates comparable to those earned by the
employee being replaced;
(i) Advise Purchaser promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is instituted or threatened after the date of this
Agreement or if any representation or warranty contained in this Agreement shall
become false;
(j) Not take, or omit to take, any action that would have the
effect of violating any of the representations, warranties, covenants or
agreements of Seller contained in this Agreement;
(k) Comply in all material respects with all federal, state, and
municipal laws, ordinances, regulations, and orders relating to the Hotel;
(l) Not sell or assign or enter into any agreement to sell or
assign, or to create or permit to exist any lien or encumbrance (other than a
Permitted Exception) on, the Hotel or any portion thereof;
(m) Not allow any material License currently in existence with
respect to the operation, use, occupancy or maintenance of the Hotel to be
canceled or otherwise terminate without Purchaser's prior written consent;
(n) Not unreasonably cancel any existing booking contracts for
the use of Hotel facilities or new booking contracts obtained by Seller after
the date of this Agreement;
(o) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due;
HOTEL PURCHASE AGREEMENT - Page 10
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<PAGE>
(p) Not market the Hotel or execute other offers (other than
unsolicited back-up offers) prior to the termination of this Agreement in
accordance with its terms;
(q) Permit Purchaser, at Purchaser's sole cost and expense, to
establish and maintain a shadow management operation with respect to the Hotel,
for a period or periods of time in the aggregate not to exceed 14 days, prior to
the Closing Date. Personnel from Purchaser's shadow management operation shall
have reasonable access during normal business hours to all books, records and
other information in the possession or control of Seller or its agents
concerning the Hotel and shall have the right (at Purchaser's expense) to
establish duplicate books and records in order to effect a smooth transition in
the ownership and management of the Hotel; provided, however, that Purchaser and
its shadow management operation and employees (a) shall not unreasonably
interfere with the normal management and operation of the Hotel, (b) shall hold
all information acquired from such books and records confidential in accordance
with the provisions of this Agreement, (c) shall repair any damage to the
physical condition of the Hotel caused by Purchaser or its agents in any such
shadow management operation, and (d) shall not be deemed to have assumed
management responsibilities prior to Closing by virtue of such shadow
management; and
(r) Notify Purchaser of all notices of violation of federal,
state or municipal laws, ordinances, orders, regulations or requirements
("Notices of Violation") issued by, or filed by, or served by, any governmental
agency having jurisdiction over the Hotel against or affecting the Hotel on or
before the Closing Date of which Seller has actual knowledge.
6.2. Third Party Consents. Prior to the Closing Date, Seller shall use
--------------------
reasonable efforts and cooperate with Purchaser to obtain all third party
consents and approvals required in order for Purchaser to purchase the Hotel.
ARTICLE 7
REPRESENTATIONS
---------------
7.1. Representations by Purchaser. Purchaser hereby represents and
----------------------------
warrants unto Seller that each and every one of the following statements is to
the best of Purchaser's knowledge, true, correct and complete in every material
respect as of the date of this Agreement and will be true, correct and complete
as of the Closing Date:
(a) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas, and, other than
qualifying to do business in the state where the Hotel is located, has full
right, power and authority to enter into this Agreement and to assume and
perform all of its obligations under this Agreement; and the execution and
delivery of this Agreement and the performance by Purchaser of its obligations
under this Agreement require no further action or approval of Purchaser's
shareholders, directors, members, managers or partners (as the case may be) or
of any other individuals or entities in order to constitute this Agreement as
HOTEL PURCHASE AGREEMENT - Page 11
- ------------------------
<PAGE>
a binding and enforceable obligation of Purchaser. The individuals and/or
entities signing below in the indicated representative capacities are fully
authorized so to act.
(b) Purchaser is not a foreign entity, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are defined
in the Internal Revenue Code and Income Tax Regulations).
(c) None among the entry into, performance of, or compliance
with, this Agreement by Purchaser has resulted, or will result, in any violation
of, default under, or acceleration of any obligation under any existing
corporate charter, certificate of incorporation, bylaw, articles of
organization, limited liability company agreement or regulations, partnership
agreement, mortgage indenture, lien agreement, note, contract, permit, judgment,
decree, order, restrictive covenant, statute, rule or regulation applicable to
Purchaser.
(d) There is no suit, action or arbitration, or other proceeding
or governmental investigation or requirement, which materially and adversely
affects Purchaser or Purchaser's ability to perform hereunder.
(e) Purchaser has relied on its own inspectors, agents and
independent contractors, and the express representations and indemnities herein
and in documents delivered to Purchaser by Seller at Closing, in determining to
purchase the Hotel.
(f) Purchaser acknowledges that, except as specifically set
forth herein, neither Seller nor any of its agents or representatives has made
or is willing to make any representation as to the physical condition
(including, without limitation, the presence or absence of hazardous or toxic
materials or any other environmental condition) footage, use or operation or any
other matter or things affecting or related to the Hotel.
(g) Purchaser has not relied and will not rely upon any implied
representation or warranty with respect to the physical or financial condition
of the Hotel, quality of construction, workmanship, or fitness for any
particular purpose. Purchaser is relying solely on its own physical inspections
except as herein specifically set forth. Purchaser shall purchase the Hotel on
the Closing Date "AS IS", in its current physical condition.
7.2. Representations by Seller. Seller hereby represents and warrants
-------------------------
unto Purchaser that each and every one of the following statements is, to the
best of Seller's knowledge, true, correct and complete in every material
respect as of the date of this Agreement and to the best of Seller's knowledge
will be true, correct and complete as of the Closing Date:
(a) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full right,
power and authority to enter into this Agreement and to assume and perform all
of its obligations under this Agreement. The execution and delivery of this
Agreement and the performance by Seller of its obligations under this
HOTEL PURCHASE AGREEMENT - Page 12
- ------------------------
<PAGE>
Agreement require no further action or approval of Seller's shareholders,
directors, members, managers or partners (as the case may be) or of any other
individuals or entities in order to constitute this Agreement as a binding and
enforceable obligation of Seller. The individuals and/or entities signing below
in the indicated representative capacities are fully authorized so to act.
(b) Seller Owner is not a foreign entity, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are defined
in the Internal Revenue Code and Income Tax Regulations).
(c) None among the entry into, performance of, or compliance
with this Agreement by Seller has resulted, or will result, in any violation of,
default under, or acceleration of any obligation under any existing corporate
charter, certificate of incorporation, bylaw, articles of organization, limited
liability company agreement or regulations, partnership agreement, mortgage
indenture, lien agreement, note, contract, permit, judgment, decree, order,
restrictive covenant, statute, rule or regulation applicable to Seller or to the
Hotel.
(d) There are no leases, management agreements, leasing agent's
agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements binding upon the Hotel, relating to the ownership, occupancy,
operation or maintenance of the Hotel, (other than advance booking and
reservation agreements) except for the Service Contracts, Leases, Warranties and
FF&E Leases.
(e) Seller has received no notice, and has no knowledge, that it
lacks any permit, license, certificates or authority necessary for the present
use and occupancy of the Improvements.
(f) The present level of insurance with respect to the Hotel
will be maintained in full force and effect until the Closing Date.
(g) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser, except as set forth in the Ground Lease,
and the Leaseback Document.
(h) There are no:
(i) pending or threatened arbitration proceedings or
unsatisfied arbitration awards, or judicial proceedings or orders
respecting awards, which might become a lien on the Hotel;
(ii) pending or threatened unfair labor practice charges
or complaints, unsatisfied unfair labor practice orders or judicial
proceedings or orders with respect thereto relating to the Hotel;
(iii) pending or threatened charges or complaints with or
by city, state or federal civil or human rights agencies, unremedied orders
by such agencies or judicial
HOTEL PURCHASE AGREEMENT - Page 13
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<PAGE>
proceedings or orders with respect to obligations under city, state or
federal civil or human rights or antidiscrimination laws or executive
orders relating to the Hotel;
(iv) pending or threatened condemnation proceedings with
regard to all or any part of the Hotel; or
(v) other pending or threatened litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affects the Hotel or might become a
lien on the Hotel (all matters referred to in this Section 7.2(h) being
referred to collectively as the "Pending Claims").
(i) Seller has received no Notice of Violations.
(j) To the best of Seller's knowledge and belief without benefit
of any investigation or inquiry, Seller and the Hotel are in compliance in all
material respects (i) with all terms and conditions of all notices, permits,
licenses, registrations, certificates of occupancy, applications, consents,
zoning and/or building code restrictions, variances, notices of intent, and/or
other authorizations which are required for the use or operation of the Hotel,
(ii) with all applicable laws, rules, regulations, ordinances and orders in
effect as of the date hereof promulgated by any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority, or any applicable judicial or administrative decision that relate to
the Hotel, including without limitation the Americans With Disabilities Act of
1990, as amended, and regulations or orders promulgated thereunder, and all such
laws, rules and regulations that relate to the environment or the pollution,
preservation, protection, clean-up or remediation thereof, or the treatment,
storage, disposal or other management of "hazardous substances," as such term is
currently defined in the Comprehensive Environmental Response, Compensation
Liability Act of 1980, with respect to the Hotel, and (iii) with all
limitations, requirements, restrictions, conditions, standards, prohibitions,
schedules and timetables contained in any of the foregoing.
(k) Each of the Schedule of Service Contracts, Schedule of FF&E
Leases, and Schedule of Leases is a true, correct, and complete list of all
Service Contracts, all FF&E Leases, and all Leases; the copies of the Service
Contracts, FF&E Leases, and Leases, when delivered to Purchaser, were true,
complete and correct copies thereof (including all amendments, modifications,
renewals, and extensions thereof); there are and will be no written or oral
agreements of the nature of the Service Contracts, the Leases, or the FF&E
Leases binding on the Hotel or on Purchaser after Closing, other than those
described respectively in the Schedule of Service Contracts, the Schedule of
Leases, and the Schedule of FF&E Leases; and the Service Contracts, FF&E Leases,
and Leases are in full force and effect and no default exists thereunder and no
condition exists that, with the giving of notice or passage of time, or both,
would constitute a default.
(l) The execution of this Agreement does not constitute a
default under the Ground Lease or any of the Leasehold Transfer Documents.
HOTEL PURCHASE AGREEMENT - Page 14
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<PAGE>
(m) Except as set forth in Sections 8.7 and 8.8 below, Purchaser
(i) will in no way be obligated for any employees, or union contracts with
respect to employees, employed by Seller with regard to the Hotel either before
or after the Closing, and (ii) will not be obligated to give or pay any amount
to any employee of Seller or Seller's managing agent. Purchaser shall not have
any liability under any pension or profit sharing plan that Seller or its
managing agent may have established with respect to the Property or their or its
employees. It is expressly agreed that Seller shall be and remain liable for
certain severance obligations in accordance with Section 8.7 below, certain
vacation accrual obligations in accordance with Section 8.8 below, and all
accrued salaries, wages, bonuses, profit-sharing, and other compensation, sick
leave, worker's compensation, and welfare benefits, deferred compensation,
savings, pension, profit sharing, 401(k), and retirement plans, and insurance
and other benefits and for all liabilities of whatever kind (including without
limitation those arising under COBRA) with respect to amounts incurred or
accruing prior to Closing for all employees of the Hotel, and Seller hereby
indemnifies Purchaser with respect to all of the foregoing.
7.3 Utility Reservations. Seller knows of no reason why the Utility
--------------------
Reservations are not adequate to operate the Improvements for the purposes for
which they were intended, free and clear of all qualifications and encumbrances
other than the obligation to pay the applicable utility company the published
rate for utility consumption after Closing, and Seller has no knowledge the
Utility Reservations do not include (i) the right to the present and future use
of wastewater, drainage, water and other utility facilities to the extent such
use benefits the Land, Leasehold Estate, or Improvements, (ii) all reservations
of or commitments covering any such use in the future, and (iii) all wastewater
capacity reservations ever issued and relating to the Land, Leasehold Estate, or
Improvements
7.4 Subsequent Developments. After the date of this Agreement and
-----------------------
until the Closing Date, Seller shall keep Purchaser fully informed of all
subsequent developments ("Subsequent Developments") which would cause any of
Seller's representations contained in this Agreement to be no longer accurate in
any material respect.
ARTICLE 8
COVENANTS
---------
8.1 Representation Letter. With respect to Purchaser's proposed real
---------------------
estate investment trust (as defined in Sections 856 to 860 of the Internal
Revenue Code of 1986, as amended) (the "REIT"), prior to the end of the Review
Period, Seller shall provide to Purchaser's representatives a signed
representation letter to Purchaser's independent public accountant in a form
reasonably acceptable to Seller .
8.2 Seller's Indemnity. Seller agrees to indemnify and hold Purchaser
------------------
harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees) which Purchaser may suffer or incur by
reason of any debts, act or cause of action occurring or accruing prior and up
to the Closing and arising from the ownership or operation of the Hotel by
Seller or Owner prior to the Closing Date, including but not limited to any
claims by employees of Seller or
HOTEL PURCHASE AGREEMENT - Page 15
- ------------------------
<PAGE>
third parties covered by insurance carried by Seller.
8.3 Purchaser's Indemnity. Purchaser agrees to indemnify and hold
---------------------
Seller harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonably attorneys' fees) which the Seller may suffer or incur by
reason of any debts, act or cause of action occurring and accruing on and after
the Closing and arising from the ownership or operation of the Hotel by
Purchaser subsequent to the Closing Date, including but not limited to any
claims by employees of Purchaser or third parties covered by insurance carried
by Purchaser.
8.4 Liquor Licenses. At Closing, to the extent permitted by law,
---------------
Seller shall assign its alcoholic beverage, liquor, beer and/or wine licenses
and/or permits with respect to the Hotel (the "Liquor Licenses") to Purchaser or
its lessee or management company (hereinafter "Operator") as part of the
Licenses. Operator shall execute such forms, license applications and other
documents as may be necessary for the Operator to take such assignment of the
Liquor Licenses, and Seller shall reasonably cooperate with the Operator in
filing such forms, applications and other documents so that such acquisition of
the Liquor Licenses can take effect, if possible, simultaneously with or upon
completion of Closing. Operator's attempts to obtain the Liquor Licenses shall
not diminish, prior to the Closing, the full force and effect of the Liquor
Licenses. If the Liquor Licenses cannot be acquired by Operator until after
Closing, then Seller agrees reasonably to cooperate with Operator, at
Purchaser's sole cost and expense, for a period of one year following Closing in
maintaining ongoing liquor service and facilities of the Hotel between the
Closing and the time when such Liquor Licenses are acquired by Operator.
Operator and Purchaser shall indemnify, defend and hold Seller harmless from any
liability, damages, claims, costs, penalties, losses or expenses (including
reasonable attorney's fees) encountered by Seller in connection with, arising
out of, or growing from such operations and the sale of alcoholic beverages at
and from the restaurants, bars and lounges located at the Hotel during said
period of time. Operator and Purchaser shall reimburse Seller for Seller's
costs in maintaining the Liquor Licenses in full force and effect and in
assigning or transferring same to Operator. In no event shall Seller be
required to obtain any additional liquor or alcoholic beverage licenses which
Seller does not possess at the time of Closing.
8.5 Ground Lease Estoppel. Attached hereto as Exhibit 8.5 is a form
--------------------- -----------
of estoppel (the "Ground Lease Estoppel") for Seller to submit to Ground Lessor.
Purchaser agrees to provide all information and documentation reasonably
requested by Ground Lessor associated with its consenting to the assignment of
the Leasehold Estate to Purchaser in a prompt and timely manner. Purchaser
acknowledges that Ground Lessor is not obligated to provide an estoppel
certificate pursuant to the terms of the Ground Lease, but Seller and Purchaser
agree in good faith to use their best efforts to obtain Ground Lessor's approval
and execution of the Ground Lease Estoppel no later than the end of the Review
Period. Seller and Purchaser shall cooperate in attempts to reconcile any
objections that Ground Lessor shall raise with respect to the form of the Ground
Lease Estoppel, and, in such event, the final form shall then be substituted for
the Ground Lease Estoppel for purposes of this Agreement.
HOTEL PURCHASE AGREEMENT - Page 16
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<PAGE>
8.6 Owner's Actions. Seller is in the process of attempting to obtain
---------------
the agreement of Owner that Owner, at or prior to Closing, shall (i) reconvey to
Seller everything conveyed by Seller's predecessor (Fred Harvey) to Owner in the
Sale Document and any and all attendant documentation (the "Reconveyance"), (ii)
terminate the Leaseback Document and any and all attendant documentation, (iii)
pay and satisfy all mortgages, debts, liens, security interests, and other
financing encumbrances arising by, through, or under Owner or its predecessors
with respect to the Hotel and to secure full release of record thereof so that
none will appear in Purchaser's Leasehold Title Policy hereunder, and (iv)
obtain the consent of Ground Lessor to items (i) and (ii) above. As of the date
hereof, Seller represents that it has received a letter from one of the general
partners of Owner a copy of which is attached hereto as Exhibit 8.6. Seller has
-----------
requested that said general partner submit the general substance of the
foregoing to the other general partner and to their limited partners with a
favorable recommendation for approval thereby. In conjunction with documentation
of Owner's agreement with Seller with respect to this transaction, Seller agrees
to use good faith best efforts, and Purchaser agrees to cooperate therein, to
obtain from Owner a certification ("Owner's Certification") in favor, and for
the benefit, of Seller, Purchaser, and Purchaser's successors and assigns that
will include the following:
(a) That copies of the Ground Lease attached to such
certification are true and correct copies thereof; that the Ground Lease has not
been otherwise amended and constitutes the entire agreement between Owner and
Ground Lessor with respect to the Hotel; and that the Ground Lease is in full
force and effect, that Owner is not in default thereunder, that, to Owner's
knowledge, Ground Lessor is not in default thereunder, and that Owner knows of
no condition which with the passage of time or notice or both would constitute a
default;
(b) That, to Owner's knowledge, none among Owner, Ground Lessor,
nor the Hotel, is in violation of the restrictions set forth in the deed from
the United States to Ground Lessor filed December 15, 1962, and recorded in
Volume 672, Folio 469 of the records of the Bernalillo County Records and none
has been alleged;
(c) That the representations described in Sections 7.2(a), (b),
(c), and (g) through (j), 7.3, and 7.4 above, as applied to Owner rather than
Seller, are to the best of Owner's knowledge true, correct and complete;
(d) That the Reconveyance to Seller is free and clear of all
mortgages, debts, liens, security interests, encumbrances, prior assignments or
conveyances, conditions, restrictions, rights-of-way, easements, encroachments,
and claims other than the Permitted Exceptions; and
(e) That Owner agrees to indemnify and hold Seller, Purchaser,
and Purchaser's successors and assigns harmless of and from all liabilities,
losses, damages, costs, expenses (including reasonable attorneys' fees) which
Seller, Purchaser, or Purchaser's successors and assigns may suffer or incur by
reason of any violation of any of the foregoing.
Seller and Purchaser shall cooperate in attempts to reconcile any objections
that Owner shall raise with respect to the content of Owner's Certification, and
the final form as thus agreed shall become
HOTEL PURCHASE AGREEMENT - Page 17
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<PAGE>
the "Owner's Certification" for the further purposes of this Agreement. In
particular, Purchaser agrees that if Owner objects to the indemnification
concept of subsection 8.6(e) above or the inclusion of Purchaser and its
successors and assigns therein, Purchaser will agree to deletion of such
objectionable items.
8.7 Employee Severance. Purchaser agrees to interview all or
------------------
substantially all of Seller's employees who work at the Hotel, and to hire, at a
comparable wage rate or salary, such employees that in Purchaser's reasonable
judgment have the appropriate skills and experience necessary to perform the
applicable job. To the extent that certain employees are not hired by Purchaser
or are terminated by Purchaser within 90 days after the Closing Date, Seller
agrees to pay such employees severance pursuant to Seller's existing severance
policy in an aggregate amount not to exceed $50,000.00 (the "Seller's Severance
Cap"); provided, however, that any severance paid to (a) any employees that are
terminated because they do not have appropriate documentation permitting them to
work in the United States, or (b) any employee who is terminated for cause,
shall not be included in calculating the Seller's Severance Cap. Purchaser and
Seller agree to fund severance costs which are incurred within the first 90 days
following Closing equally to the extent such severance costs exceed the Seller's
Severance Cap. Upon the expiration of such 90-day period, Purchaser agrees to
pay severance to the Hotel employees under Purchaser's normal policy, without
regard to Seller's prior policy. Except for the sums for which Purchaser is
liable above in this Section 8.7, Seller shall indemnify Purchaser for any
claims made by any Hotel employee employed by Seller prior to the Closing to the
extent such employee files a claim against Purchaser for severance pay pursuant
to Seller's severance policy. Purchaser agrees to cooperate with Seller, at
Seller's sole cost and expense, in minimizing the number and amount of such
claims.
8.8 Employee Vacations. For vacation time accrual purposes,
------------------
Purchaser agrees to credit each of Seller's employees who is retained by
Purchaser with such seniority as such employee has earned with Seller so as to
vest in such employee accrued vacation time of up to two (2) weeks during the
one year period following Closing. Seller shall continue to be liable for, and
shall pay to each employee, the amount of his or her vacation time which accrued
prior to the Closing Date in excess of that for which Purchaser will be liable
under this Section 8.8.
ARTICLE 9
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
9.1 Purchaser's Conditions. In addition to any other conditions set
----------------------
forth in this Agreement, Purchaser's obligations to consummate the Closing are
subject to the timely satisfaction of each and every one of the conditions set
forth in this Section 9.1, all of which shall be conditions precedent to
Purchaser's obligations under this Agreement, and failing in any of which
Purchaser may terminate this Agreement, the Earnest Money shall be returned to
Purchaser within five (5) days after any such termination, and neither party
shall have any further rights or obligations one to the other, except for the
repair and confidentiality obligations set forth in Section 5.1. Notwithstanding
the foregoing, Purchaser, in its sole discretion, may waive any such condition
by notice to Seller.
HOTEL PURCHASE AGREEMENT - Page 18
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<PAGE>
(a) Seller shall have performed all obligations of Seller
hereunder which are to be performed prior to Closing.
(b) Seller's representations and warranties set forth in Section
7.2 shall be true and correct in all material respects as if made again on the
Closing Date.
(c) Seller shall have obtained and delivered to Purchaser the
Ground Lease Estoppel and Owner's Certification.
9.2. Mutual Conditions. In addition to any other conditions set forth
-----------------
in this Agreement, Purchaser's and Seller's obligations to consummate the
Closing are subject to the timely satisfaction of each and every one of the
conditions and requirements set forth in this Section 9.2, all of which shall be
conditions precedent to Purchaser's and Seller's obligations under this
Agreement, and failing in any of which either Purchaser or Seller may terminate
this Agreement, the Earnest Money shall be returned to Purchaser within five (5)
days after any such termination, and neither party shall have any further rights
or obligations one to the other, except for the repair obligation set forth in
Section 5.1.
(a) Seller shall have obtained the consent of Ground Lessor to
the assignment to Purchaser of the Ground Lease.
(b) Owner shall have reconveyed the Leasehold Estate and
Improvements and any interest of Owner in the remainder of the Hotel to Seller
free and clear of debts, mortgages, liens, and encumbrances, other than the
Permitted Exceptions.
ARTICLE 10
CLOSING AND CLOSING DOCUMENTS
-----------------------------
10.1 Closing. The consummation and closing (the "Closing") of the
-------
transaction contemplated under this Agreement shall take place at the offices of
the Title Company or such other place as is mutually agreeable to the parties on
or, at Purchaser's election, before July 1, 1996, (the "Closing Date") or as
otherwise set by agreement of the parties. Notwithstanding the foregoing, if
this Agreement shall then be in effect, Purchaser may, by written notice to
Seller and deposit with the Title Company of Additional Earnest Money in the
amount of $50,000.00 no later than three (3) days prior to the Closing Date,
extend the Closing to August 1, 1996, which shall then become the "Closing
Date".
10.2 Title Conveyance Standards. On the Closing Date, the Hotel and
--------------------------
the Ground Lease as it applies to the Lessee therein shall be conveyed, assigned
and transferred to Purchaser subject only to the Permitted Exceptions, the
Service Contracts described in the Schedule of Service Contracts, the Leases
described in the Schedule of Leases, and the FF&E Leases described in the
Schedule of FF&E Leases.
HOTEL PURCAHSE AGREEMENT - Page 19
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<PAGE>
10.3 Seller's Deliveries. At the Closing, pursuant to the standards
-------------------
of Section 10.2 above and at Seller's sole cost and expense, Seller shall
deliver the following to Purchaser in addition to all other items required to be
delivered to Purchaser by Seller:
(a) Ground Lease Assignment. The Leasehold Estate, Improvements
-----------------------
and Appurtenances (if any) and the Ground Lease as it applies to the Lessee
therein shall be conveyed and assigned to Purchaser by Seller's Assignment of
Lease (containing a deed form warranty of title and no prior conveyance or
encumbrance to the Leasehold Estate and the Improvements) in a form reasonably
acceptable to both Purchaser and Seller provided that it shall in any event
contain the concepts set forth in Sections 8.2 and 8.3 above (the "Ground Lease
Assignment") duly executed and acknowledged by Seller;
(b) Bill of Sale. The FF&E, Supplies, Warranties, Licenses,
------------
Tradenames, Plans and Specs, Utility Reservations, Records, Deposits, and Cash
and Equivalents shall be conveyed to Purchaser (and/or, at Purchaser's option,
Purchaser's lessee or other designee) by Seller's Bill of Sale, Assignment and
Assumption Agreement (which, with respect to the FF&E and the Supplies, shall
contain a warranty of title and no prior conveyance or encumbrance) in a form
reasonably acceptable to both Purchaser and Seller (the "Bill of Sale") duly
executed and acknowledged by Seller;
(c) Assignment and Assumption of Leases, FF&E Leases and Service
------------------------------------------------------------
Contracts. An Assignment and Assumption of all of the Leases, FF&E Leases, and
- ---------
Service Contracts described respectively in the Schedule of Leases, the Schedule
of FF&E Leases, and the Schedule of Service Contracts, in a form reasonably
acceptable to, and duly executed by, both Purchaser and Seller provided that it
shall in any event contain the concepts set forth in Sections 8.2 and 8.3 above
(the "Assignment");
(d) FIRPTA Affidavit. An affidavit from Seller, as required by
----------------
Section 1445 of the Internal Revenue Code, specifying (i) that it is not a
foreign entity, foreign corporation, foreign partnership, foreign trust or
foreign estate (as those terms are defined in the Internal Revenue Code and
Income tax regulations), (ii) its taxpayer identification number or U.S.
employer identification number, and (iii) its office address;
(e) Vehicle Titles. The necessary certificates of titles duly
--------------
endorsed for transfer together with any required affidavits and other
documentation necessary for the transfer of title from Seller and/or Owner to
Purchaser of any motor vehicles used in connection with the Hotel's operations;
(f) Authority Documents. Evidence reasonably satisfactory to
-------------------
Purchaser that the person or persons executing the closing documents on behalf
of Seller have full right, power and authority to do so;
HOTEL PURCHASE AGREEMENT - Page 20
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<PAGE>
(g) Title Policy. A Leasehold Policy of Title Insurance issued
------------
pursuant to the Title Commitment as approved by Purchaser and issued by the
Title Company for Chicago (or other underwriter approved by Purchaser) to
Purchaser insuring good and indefeasible title to the Leasehold Estate
(specifically including coverage for the Improvements and any of the
Appurtenances which are expressly included within the Leasehold Estate under the
Ground Lease), subject only to the Permitted Exceptions, in the amount of the
Purchase Price;
(h) Miscellaneous. Such other instruments as are customarily
-------------
executed in the county and State where the Hotel is located to effectuate the
conveyance of property similar to the Hotel, with the effect that, after the
Closing, Purchaser will have succeeded to all of the rights, titles, and
interests of Seller and Owner related to the Hotel, and neither Seller nor Owner
will any longer have any rights, titles, or interests in and to the Hotel. Such
instruments shall include, if appropriate, any documents required effectively to
transfer the Utility Reservations by Seller to Purchaser;
(i) Plans, Keys, and Records. To the extent not previously
------------------------
delivered to and in the possession of Purchaser, all Plans and Specs, all keys,
access cards, and combinations for the Hotel (which shall be properly tagged for
identification), all Records, and all Licenses;
(j) Original Documents. To the extent in Seller's possession or
------------------
control, originals of all of the documents and agreements covered by the
foregoing that have not already been delivered to Purchaser;
(k) Updates. A complete list of all advance room and functions
-------
reservations;
(l) Ground Lessor Estoppel. The Ground Lessor Estoppel duly
----------------------
executed by Ground Lessor;
(m) Owner's Certification. Owner's Certification duly executed
---------------------
by Owner; and
(n) Possession. Possession of the Hotel.
----------
10.4 Purchaser's Deliveries. At the Closing and at Purchaser's sole
----------------------
cost and expense, Purchaser shall deliver the following to Seller:
(a) Purchase Price. The Purchase Price, plus or minus the
--------------
adjustments to be made at the Closing in accordance with the terms of this
Agreement;
(b) Assignments. The Ground Lease Assignment and the
-----------
Assignment;
(c) Authority Documents. Evidence satisfactory to Seller that
-------------------
the person or persons executing the closing documents on behalf of Purchaser
have full right, power and authority to do so; and
HOTEL PURCHASE AGREEMENT - Page 21
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<PAGE>
(d) Miscellaneous. Such other instruments as are customarily
-------------
executed by the purchaser in the county and State where the Hotel is located to
effectuate the purchase of property similar to the Hotel.
10.5 Prorations. At Closing, the following items shall be prorated,
----------
adjusted and appropriated as of 12:01 A.M. (except as otherwise provided) on the
Closing Date:
(a) Hotel Taxes. Real estate taxes, personal property or use
-----------
taxes, assessments, and sewer rents, on the basis of the best available
estimates for such taxes, assessments and rents that will be due and payable on
the Hotel for the calendar year in which the Closing occurs. As soon as the
exact amount of such taxes, assessments and rents for such calendar year is
ascertained, Seller and Purchaser shall readjust the amounts thereof to be paid
by each party to the end that Seller shall pay for those such taxes, assessments
and rents attributable to the period of time prior to the Closing Date, and
Purchaser shall pay for those such taxes, assessments and rents attributable to
the period of time after Closing.
(b) Operating Costs. All costs and expenses of operating the
---------------
Hotel, including without limitation amounts paid or payable under the Service
Contracts, Leases, or the FF&E Leases provided, however, that Seller shall
receive a credit in the amount of any and all costs and expenses of operating
the Hotel incurred and paid in the ordinary course of business prior to the
Closing Date for services, materials or the like delivered on or after the
Closing Date to the extent that Seller has provided to Purchaser reasonable
substantiation of the covered items and the amounts paid therefor; in the event
any such items shall reasonably appear to Purchaser to be out of the ordinary,
then upon written request from Purchaser Seller shall provide reasonable
evidence that they were reasonably acquired in accordance with this Agreement
and in the ordinary course of business;
(c) Revenues. Guest, convention, room, food, beverage, and all
--------
other charges and revenues for services rendered and the operation of all
departments of the Hotel, including, but not limited to, advance payments under
booking agreements for rooms, facilities and services of the Hotel and any other
revenues relating to sales or services occurring or provided prior to the
Closing Date, provided, however, that food, room service and restaurant revenue
shall be apportioned as of the closing of dinner service hours at each
restaurant on the evening preceding the Closing Date, and bar revenues shall be
read, measured (and tapes preserved) and apportioned as of 2:00 A.M. on the
Closing Date and provided further that room rental receipts through the night
before Closing shall belong to Seller, though Seller shall be responsible for
all room maid service costs for such night. Except for the Cash Equivalents, all
cash, checks, and other funds, and all other notes, security and other evidence
of indebtedness located at the Hotel on the Closing Date and balances on deposit
to the credit of the Seller with banking institutions are and shall remain the
property of the Seller and are not included in this sale;
(d) Miscellaneous. Fees and expenses for music, entertainment,
-------------
trade association dues, trade subscriptions, coin machine income, and washroom
and checkroom income;
HOTEL PURCHASE AGREEMENT - Page 22
- ------------------------
<PAGE>
(e) Deposits. Purchaser shall receive a credit in an amount
--------
equal to the sum of all prepaid room rentals and all security deposits, cleaning
fees and deposits and other deposits paid under any Lease and not properly
applied as of the Closing to a monetary obligation of the related Tenant; and
(f) Sales Taxes. All sales, use and occupancy taxes, if any,
-----------
due or to become due in connection with revenues received from the Hotel prior
to the time of proration as set forth herein, and all sales, use and occupancy
taxes, if any, payable in connection with any of the transactions contemplated
by this Agreement will be paid by Seller. Seller shall be entitled to receive
any rebates or refunds on such taxes paid by Seller prior to the Closing.
10.6 Document Preparation and Transfer Costs. Each party shall bear
---------------------------------------
its own legal fees and costs. Seller and Purchaser shall each pay fifty percent
(50%) of all transfer and recording fees and taxes, and Seller shall pay all
transfer, assumption and/or assignment fees and charges imposed by any party
having an interest in the Hotel. Seller and Purchaser each shall pay one-half of
the Title Company's escrow fee.
10.7 Reconciliation and Final Payment. Seller shall be responsible
--------------------------------
for calculating the initial prorations required hereunder as of the Closing.
Seller and Purchaser shall reasonably cooperate after Closing to make a final
determination of the prorations required hereunder. Purchaser shall be
responsible for one final reconciliation of the prorations which Purchaser shall
deliver to Seller as soon as practical following Closing but in no event later
than ninety (90) days following the Closing Date or, with respect to taxes, if
the actual bases therefor are not available within such 90-day period, then
within thirty (30) days after receipt by Purchaser of such bases but in no event
later than one (1) year following the Closing Date; provided however, Seller
shall have the right to review and audit such final reprorations within thirty
(30) days of Seller's receipt of such final reprorations. Seller shall pay the
cost of the audit unless the audit discloses an error in Purchaser's favor in
excess of $25,000.00 in which case Purchaser shall pay the cost of the audit.
Upon the final reconciliation of the prorations, the party which owes the other
party any sums hereunder shall pay such party such sums within ten (10) days
after the reconciliation of such sums. The obligations to calculate such
prorations, make such reconciliations and pay any such sums shall survive the
Closing.
10.8 Accounts Payable. Seller shall retain and be responsible for the
----------------
payment of all accounts payable and other debts relating to the Hotel which have
accrued prior to or as of the Closing. Purchaser shall be responsible for the
accounts payable and other debts relating to the Hotel arising and accruing
after the Closing.
10.9 Accounts Receivable. The active guest ledger is assigned and
-------------------
conveyed hereunder to Purchaser as part of the Cash and Equivalents; otherwise,
Seller shall retain all of its accounts receivable as of Closing. If any such
accounts receivable are received by Purchaser after Closing, Purchaser shall
promptly deliver same to Seller.
HOTEL PURCHASER AGREEMENT - Page 23
- -------------------------
<PAGE>
ARTICLE 11
CASUALTY AND CONDEMNATION
-------------------------
11.1 Risk of Loss; Notice. Prior to Closing and the delivery of
--------------------
possession of the Hotel to Purchaser in accordance with this Agreement, all risk
of loss to the Hotel (whether by casualty, condemnation or otherwise) shall be
borne by Seller. In the event that (a) any loss or damage to the Hotel shall
occur prior to the Closing Date as a result of fire or other casualty, or (b)
Seller receives notice that a governmental authority has initiated or threatened
to initiate a condemnation proceeding affecting the Hotel, Seller shall give
Purchaser immediate written notice of such loss, damage or condemnation
proceeding.
11.2 Purchaser's Termination Right. If, prior to Closing and the
-----------------------------
delivery of possession of the Hotel to Purchaser in accordance with this
Agreement, (a) any condemnation proceeding shall be pending against a
substantial portion of the Hotel or (b) there is any substantial casualty loss
or damage to the Hotel, Purchaser shall have the option to terminate this
Agreement provided it delivers written notice to Seller of its election so to
terminate this Agreement within thirty (30) days after the date Seller has
delivered Purchaser written notice of any such loss, damage or condemnation
(which notice shall include a certification of (i) the amounts of insurance
coverages in effect with respect to the loss or damage and (ii) if known, the
amount of the award to be received in such condemnation), and in such event all
Earnest Money shall be delivered to Purchaser and thereafter no party shall have
any further obligation or liability to the other under this Agreement. In the
context of condemnation, "substantial" shall mean condemnation of such portion
of the Hotel as would, in Purchaser's sole judgment, render use of the remainder
impractical or unfeasible for the uses herein contemplated, and, in the context
of casualty loss or damage, "substantial" shall mean a loss or damage in excess
of $100,000 in value.
11.3 Procedure for Closing. If Purchaser shall not timely elect to
---------------------
terminate this Agreement under Section 11.2 above, or if the loss, damage or
condemnation is not substantial, Seller agrees to pay to Purchaser at the
Closing all insurance proceeds or condemnation awards which Seller has received
as a result of the same and assign to Purchaser all insurance proceeds and
condemnation awards payable as a result of the same in which event the Closing
shall occur without Seller replacing or repairing such damage or paying to
Purchaser any credit against the Purchase Price.
ARTICLE 12
DEFAULT AND REMEDIES
--------------------
12.1 Purchaser's Default. If, at or prior to Closing, for any reason
-------------------
other than termination hereof pursuant to a right granted to Purchaser hereunder
to do so or because of an uncured default by Seller, (i) Purchaser refuses or
fails to consummate the purchase of the Hotel pursuant to this Agreement, or
(ii) Purchaser shall otherwise fail in any material respect to perform any of
its material obligations as and when required hereunder, or if, at or prior to
Closing, any representation or warranty made by or on behalf of Purchaser herein
shall have been materially incorrect when
HOTEL PURCHASE AGREEMENT - Page 24
- ------------------------
<PAGE>
made, then Seller shall give Purchaser and the Title Company written notice
specifying the nature of the default. In the event such default by Purchaser is
the result of Purchaser's failure to pay any sum of money due and payable under
this Agreement, Purchaser shall have three (3) days from receipt of Seller's
written notice within which to cure the specified default. In the event such
default of Purchaser is a non-monetary default, Purchaser shall have thirty
(30) days from receipt of Seller's notice within which to cure the specified
default. If the default is still not cured, then Seller, as its sole and
exclusive remedy, shall have the right to terminate this Agreement by giving
Purchaser and the Title Company written notice thereof, in which event neither
party shall have any further rights, duties or obligations hereunder (except to
the extent this Agreement may specifically provide for the survival of certain
obligations of Purchaser) and Seller shall be entitled to receive the Earnest
Money as liquidated damages, Seller and Purchaser hereby acknowledging that the
amount of damages resulting from breach of this Agreement by Purchaser would be
difficult or impossible accurately to ascertain, and the Title Company shall
immediately deliver the Earnest Money to Seller. Notwithstanding the foregoing,
in the event of any default by Purchaser under this Agreement due to a breach
after Closing or any termination hereof of any covenant or indemnity which
survives the Closing or any termination hereof, or if Seller shall discover
after Closing that any warranty or representation made by Purchaser herein or in
connection with the transaction contemplated herein was materially incorrect or
breached when made, Seller shall have any and all rights and remedies available
at law or in equity by reason of such default.
12.2 Seller's Default. If, at or prior to Closing, for any reason
----------------
other than termination hereof pursuant to a right granted to Seller hereunder to
do so or because of an uncured default by Purchaser (i) Seller refuses or fails
to consummate the transaction contemplated by this Agreement, or (ii) Seller
shall otherwise fail in any material respect to perform any of its material
obligations as and when required hereunder, or if, at or prior to Closing, any
representation or warranty made by or on behalf of Seller herein shall have been
materially incorrect when made, then Purchaser shall give Seller and the Title
Company written notice specifying the nature of the default. In the event such
default by Seller is the result of Seller's failure to pay any sum of money due
and payable under this Agreement, Seller shall have three (3) days from receipt
of Purchaser's written notice within which to cure the specified default. In the
event such default of seller is a non-monetary default, Seller shall have thirty
(30) days from receipt of Purchaser's notice within which to cure the specified
default. If at the end of the thirty (30) day period, the default is still not
cured, then Purchaser, as its sole remedies, shall have the right to do any one
of the following:
(a) Terminate this Agreement by written notice given to Seller
and the Title Company within fifteen (15) days of the expiration of the three
(3) or thirty (30) day cure period (whichever is applicable), in which event the
Earnest Money shall be returned to Purchaser by the Title Company promptly upon
receipt of such notice; or
(b) Seek specific performance of this Agreement.
Notwithstanding the foregoing, in the event of any default by Seller under this
Agreement due to a breach after Closing or any termination hereof of any
covenant or indemnity which survives the
HOTEL PURCHASE AGREEMENT - Page 25
- ------------------------
<PAGE>
Closing or any termination hereof, or if Purchaser shall discover after Closing
that any warranty or representation made by Seller herein or in connection with
the transaction contemplated herein was materially incorrect or breached when
made, Purchaser shall have any and all rights and remedies available at law or
in equity by reason of such default.
12.3 Survival. Neither Purchaser's nor Seller's attendance or
--------
appearance at Closing shall be deemed to nullify or void the provisions of this
Section.
ARTICLE 13
BROKERS
-------
13.1 Identity of Brokers. The parties hereto represent to each other
-------------------
that they dealt with no finder, broker or consultant in connection with this
Agreement or the transactions contemplated hereby except for Lundberg &
Associates, Inc., (the "Brokers") which have been engaged by Seller to assist as
brokers in the sale of the Hotel. Seller shall be responsible for payment of
the commissions owing to the Brokers out of the Purchase Price payable at
Closing.
13.2 Indemnification by Seller. Seller agrees to, and hereby does,
-------------------------
indemnify and save harmless Purchaser and its affiliates and their respective
successors and assigns against and from any loss, liability or expense,
including reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by any broker, finder, consultant or like
agent if such claim or claims made by any such broker, finder, consultant or
like agent are based in whole or in part on any agreements entered into by
Seller or its representatives for a commission or other compensation. Seller
shall likewise indemnify and save harmless Purchaser and its affiliates and
their respective successors and assigns against and from any loss, liability or
expense, including reasonable attorneys' fees, arising out of any claim or
claims for commissions or other compensation relating to the Leases.
13.3 Indemnification by Purchaser. Purchaser agrees to, and hereby
----------------------------
does, indemnify and save harmless Seller and its affiliates and their respective
successors and assigns against and from any loss, liability or expense,
including reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by any broker, finder, consultant or like
agent if such claim or claims made by any such broker, finder, consultant or
like agent are based in whole or in part on any agreements entered into by
Purchaser or its representatives for a commission or other compensation.
ARTICLE 14
MISCELLANEOUS
-------------
14.1 Notices. Any notice provided for by this Agreement and any other
-------
notice, demand or communication which any party may wish to send to another
shall be in writing and either
HOTEL PURCHASE AGREEMENT - Page 26
- ------------------------
<PAGE>
delivered in person or sent by registered or certified mail or overnight
courier, return receipt requested, in a sealed envelope, postage prepaid, and
addressed to the party for which such notice, demand or communication is
intended at such party's address as set forth in this Section. Purchaser's
address for all purposes under this Agreement shall be the following:
American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Steven D. Jorns, President, or Bruce G. Wiles,
Executive Vice President
with a copy to:
Calhoun & Stacy, PLLC
5700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
Attention: Parker Nelson
Seller's address for all purposes under this Agreement shall be the
following:
Northbrook Corporation
900 North Michigan Avenue
Chicago, Illinois 60611-1581
Attention: Gary Grottke, Executive Vice President
with a copy to:
AMFAC/JMB Hawaii, Inc.
Law Department
700 Bishop Street
P.O. Box 3230
Honolulu, Hawaii 96801
Attention: Tamara Edwards
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall
be deemed given and effective as of the date of delivery in person or receipt
set forth on the return receipt. The inability to deliver because of changed
address of which no notice was given, or rejection or other refusal to accept
any notice, demand or other communication, shall be deemed to be receipt of the
notice, demand or other communication as of the date of such attempt to deliver
or rejection or refusal to accept.
14.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies.
---------------------------------------------------------------
This Agreement constitutes the entire agreement between the parties hereto and
may not be modified or amended except by an instrument in writing signed by the
parties hereto, and no provisions or conditions may be waived other than by a
writing signed by the party waiving such provisions or conditions. No delay or
omission in the exercise of any right or remedy accruing to Seller or
HOTEL PURCHASE AGREEMENT - Page 27
- ------------------------
<PAGE>
Purchaser upon any breach under this Agreement shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by Seller or Purchaser of any breach of any term,
covenant or condition herein stated shall not be deemed to be a waiver of any
other breach, or of a subsequent breach of the same or any other term, covenant
or condition herein contained. All rights, powers, options or remedies afforded
to Seller or Purchaser either hereunder or by law shall be cumulative and not
alternative, and the exercise of one right, power, option or remedy shall not
bar other rights, powers, options or remedies allowed herein or by law, unless
expressly provided to the contrary herein.
14.3 Exhibits. All exhibits referred to in this Agreement and attached
--------
hereto are hereby incorporated in this Agreement by reference.
14.4 Successors and Assigns. Purchaser may assign its rights under
----------------------
this Agreement to any limited partnership, limited liability company or other
entity to be formed for the purpose of purchasing the Hotel or implementing the
REIT so long as such entity is related, directly or indirectly, to Purchaser and
Purchaser provides notice thereof to Seller prior to Closing; provided, however,
that Purchaser shall remain liable for all of its obligations under this
Agreement notwithstanding any such assignment. Otherwise, this Agreement may not
be assigned by Purchaser without Seller's prior written consent. This Agreement
shall be binding upon, and inure to the benefit of, Seller and Purchaser and
their respective legal representatives, successors, and assigns. Whenever a
reference is made in this Agreement to Purchaser, it shall include Purchaser's
successors and assigns under this Agreement.
14.5 Article Headings. Article headings and article and section
----------------
numbers are inserted herein only as a matter of convenience and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
thereof and shall not be considered in interpreting or construing this
Agreement.
14.6 Governing Law. This Agreement shall be construed and interpreted
-------------
in accordance with the laws of the State where the Hotel is located.
14.7 Time Periods. If the final day of any time period or limitation
------------
set out in any provision of this Agreement falls on a Saturday, Sunday or legal
holiday under the laws of the State where the Hotel is located or of the federal
government, then and in such event the time of such period shall be extended to
the next day which is not a Saturday, Sunday or legal holiday. Time is of the
essence herein.
14.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on a separate counterpart, each of which
when so executed and delivered shall be deemed an original and all of which
taken together shall constitute but one and the same instrument.
HOTEL PURCHASE AGREEMENT - Page 28
- ------------------------
<PAGE>
14.9 Survival. All covenants, agreements, indemnities, representations
--------
and warranties contained in the Agreement shall survive the Closing for a period
of one (1) year. None of the foregoing shall be deemed to merge into, or be
waived by, any of the closing documents.
14.10 Further Acts. In addition to the acts, deeds, instruments and
------------
agreements recited herein and contemplated to be performed, executed and
delivered by Purchaser and Seller, Purchaser and Seller shall perform, execute
and deliver or cause to be performed, executed and delivered at the Closing or
after the Closing, any and all further acts, deeds, instruments and agreements
and provide such further assurances as the other party or the Title Company may
reasonably require to consummate the transaction contemplated hereunder.
However, the foregoing shall not be deemed to (i) require Seller to expend a sum
of money which it could not reasonably have anticipated on the date of execution
of this Agreement, or (ii) require Purchaser to expend a sum of money which it
could not reasonably have anticipated on the expiration of the Review Period.
14.11 Severability. In case any one or more of the provisions contained
------------
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
14.12 Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, the nonprevailing party in any action
pursued in a court of competent jurisdiction (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages, and expenses, including attorneys' fees, expended or incurred in
connection therewith.
14.13. Qualification on Confidentiality. Notwithstanding the
--------------------------------
confidentiality requirements elsewhere herein contained, it is acknowledged that
Purchaser is, or is an affiliate of, the REIT which is in process of
organization and that Purchaser anticipates that the REIT will seek to sell
shares to the general public. In connection therewith, Purchaser will have the
right to market such securities and prepare and file all necessary or reasonably
required registration statements and other papers, documents and instruments
necessary or reasonably required in Purchaser's judgment and that of its
attorneys and underwriters to file a registration statement with respect to the
REIT's shares with the U.S. Securities and Exchange Commission and/or similar
state authorities and to cause same to become effective and to disclose therein
and thus to its underwriters, to the U.S. Securities and Exchange Commission
and/or to similar state authorities and to the public the following:
(a) Occupancy, number of guest rooms, average daily rate,
revenues per available room, the year the Hotel was built and renovated, and
renovation and capital improvement expenditures from January 1, 1993, through
December 31, 1995;
(b) Income statement and balance sheet data to be presented on a
consolidated basis with certain other hotels (currently estimated to be eight
(8) in number) being acquired by the REIT or its partnership affiliate; and
HOTEL PURCHASE AGREEMENT - Page 29
- ------------------------
<PAGE>
(c) Narrative information describing the Hotel's physical plant
and its location to be presented in summary nature.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the 26th day of April, 1996.
---- -----
SELLER:
NORTHBROOK CORPORATION
By: /s/ Gary Grottke
------------------------------------------
Gary Grottke, Executive Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY, INC.
By: /s/ Bruce G. Wiles
----------------------------------------
Bruce G. Wiles, Executive Vice President
HOTEL PURCHASE AGREEMENT - PAGE 30
- ------------------------
<PAGE>
Exhibit 10.29
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY, INC., OR ITS ASSIGNS
AS PURCHASER
AND
LE BARON HOTELS, INC.,
AS SELLER
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 The Contract................................................. 1
ARTICLE 2 Hotel........................................................ 2
ARTICLE 3 Purchase Price............................................... 5
3.1. Purchase Price............................................... 5
3.2. Allocations.................................................. 7
3.3. Earnest Money................................................ 7
ARTICLE 4 Title Deliveries............................................. 8
4.1. Assignment................................................... 8
4.2. Bill of Sale................................................. 8
4.3. Title Commitment............................................. 8
4.4. UCC Search................................................... 9
4.5. Survey....................................................... 9
4.6. Procedure for Purchaser's Title Objections................... 10
ARTICLE 5 Hotel Documents, Inspection and Objections................... 11
5.1. Inspections.................................................. 11
5.2. Hotel Documents.............................................. 11
5.3. Procedure for Purchaser's Objection.......................... 13
ARTICLE 6 Permitted Exceptions......................................... 14
6.1. Permitted Exceptions......................................... 14
ARTICLE 7 Leases, FF&E Leases, and Service Contracts................... 15
7.1. Schedules.................................................... 15
ARTICLE 8 Operation of Hotel........................................... 15
8.1. Interim Operation............................................ 15
8.2. Mechanics Liens.............................................. 17
8.3. Notices of Violation......................................... 18
8.4. Third Party Consents......................................... 18
8.5. Estoppel Letters............................................. 18
ARTICLE 9 Representations and Covenants................................ 18
9.1. Representations by Purchaser................................. 18
9.2. Representations by Seller.................................... 19
9.3. Subsequent Developments...................................... 24
9.4. Limitation on Further Sales Efforts.......................... 24
9.5. Shadow Management............................................ 25
9.6. Access to Records and Financial Information.................. 25
9.7. Condition of Hotel........................................... 26
9.8. Seller's Indemnity........................................... 26
9.9. Purchaser's Indemnity........................................ 26
9.10. Liquor License............................................... 26
9.11. Food and Beverages........................................... 27
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 10 Conditions Precedent to the Closing.......................... 27
10.1. Seller's Obligation.......................................... 27
10.2. Seller's Representations and Warranties...................... 27
10.3. Operational Licenses......................................... 27
10.4. Consent of Sublessor and Master Lessor....................... 28
10.5. Release by Sublessor......................................... 28
10.6. Other........................................................ 28
ARTICLE 11 Closing and Closing Documents................................ 28
11.1. Closing...................................................... 28
11.2. Right to Extend Closing Date................................. 28
11.3. Seller's Deliveries.......................................... 28
11.4. Purchaser's Deliveries....................................... 31
11.5. Prorations................................................... 31
11.6. Document Preparation and Transfer Costs...................... 33
11.7. Reconciliation and Final Payment............................. 33
11.8. Accounts Payable............................................. 34
ARTICLE 12 Casualty and Condemnation.................................... 34
12.1. Risk of Loss; Notice......................................... 34
12.2. Purchaser's Termination...................................... 34
12.3. Procedure for Closing........................................ 35
ARTICLE 13 Default and Remedies......................................... 35
13.1. Purchaser's Default.......................................... 35
13.2. Seller's Default............................................. 36
13.3. Survival..................................................... 37
ARTICLE 14 Brokers...................................................... 37
14.1. Identity of Brokers.......................................... 37
14.2. Indemnification by Seller.................................... 37
14.3. Indemnification by Purchaser................................. 37
ARTICLE 15 Miscellaneous................................................ 38
15.1. Notices...................................................... 38
15.2. Entire Agreement; Modifications and Waivers,
Cumulative Remedies.......................................... 39
15.3. Exhibits..................................................... 39
15.4. Successors and Assigns....................................... 39
15.5. Article Headings............................................. 39
15.6. Governing Law................................................ 40
15.7. Time Periods................................................. 40
15.8. Counterparts................................................. 40
15.9. Survival..................................................... 40
15.10. Further Acts................................................. 40
15.11. Severability................................................. 40
15.12. Attorneys' Fees.............................................. 40
</TABLE>
ii
<PAGE>
HOTEL PURCHASE AGREEMENT
------------------------
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of the
date last below written by and between Le Baron Hotels, Inc., a California
corporation ("Seller"), and American General Hospitality, Inc., a Texas
corporation, or its permitted assigns ("Purchaser").
A. Seller is the owner of a subleasehold interest in a certain
sublease (the "Sublease") dated February 1, 1973, between Claitor Properties Co.
and Claitor Properties, Inc., as sublessor ("Sublessor"), and Hotel Circle, Inc.
as sublessee, as subsequently amended, whereby Sublessor subleased its interest
in a certain ground lease (the "Groundlease") between Dorothy Kiersted and Helen
Reynolds, as lessor ("Master Lessor"), and Lederer Properties, Inc., as lessee,
dated June 11, 1959, as amended. The Sublease was assigned to Seller by an
Assignment of Sublease dated March 7, 1979, between North First-Gish
Corporation, as assignor, and Seller, as assignee. The Sublease affects a
portion of the land affected by the Groundlease and such portion is more
particularly described on Exhibit A attached hereto (the "Land").
---------
B. Seller is the owner of the Hotel (as hereinafter defined),
currently licensed and operated as a full service hotel.
C. Seller desires to assign its interest in the Sublease (the
"Sublease Interest") to Purchaser and to sell and convey all other components of
the Hotel to Purchaser, and Purchaser desires that Seller assign such Sublease
Interest and convey the Hotel, on the terms and conditions hereinafter set
forth.
AGREEMENT:
---------
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
THE CONTRACT
------------
For and in consideration of the mutual benefits enjoyed by one another
under this Agreement, Seller agrees to assign the Sublease Interest and sell and
convey all components of the Hotel to Purchaser and Purchaser agrees to purchase
and accept the assignment of the Sublease Interest and conveyance of the Hotel
pursuant to the terms and conditions set forth in this Agreement.
<PAGE>
ARTICLE 2
HOTEL
-----
As used in this Agreement, the term "Hotel" shall mean and refer to
the following:
(a) The Sublease Interest in the real property located at 1350 North
First Street, San Jose, California, more particularly described on Exhibit A
---------
attached hereto, together with all rights, alleys, streets, strips, gores,
waters, privileges, appurtenances, advantages and easements belonging thereto or
in anywise appertaining thereto (collectively the "Land");
(b) The 327 room hotel building and all other buildings, structures,
fixtures, parking areas, and other improvements presently located upon the Land
(collectively, the "Improvements");
(c) All tangible personal property and fixtures (which are not part
of the Improvements) of any kind attached to, or located upon and used in
connection with the ownership of the Sublease Interest, maintenance, use or
operation of the Land or Improvements as of the date hereof (or acquired by
Seller and so employed prior to Closing, as defined below), including, but not
limited to, all furniture, fixtures, equipment, signs; all heating, lighting,
plumbing, drainage, electrical, air conditioning, and other mechanical fixtures
and equipment and systems; all elevators, escalators, and related motors and
electrical equipment and systems; all hot water heaters, furnaces, heating
controls, motors and boiler pressure systems and equipment, all shelving and
partitions, all ventilating equipment, and all incinerating and disposal
equipment; all tennis, pool and health club and fitness equipment and
furnishings; all vans, automobiles and other motor vehicles; all carpet, drapes,
beds, furniture, televisions, telephones and other furnishings; and all stoves,
ovens, freezers, refrigerators, dishwashers, disposals, kitchen equipment and
utensils, tables, chairs, plates and other dishes, glasses, silverware, china,
serving pieces and other restaurant and bar equipment, apparatus and utensils
(collectively, the "FF&E") . Seller agrees that between the date hereof and the
Closing Date (as hereinafter defined), Seller will not cause or permit the
removal of FF&E from the Hotel except for the purpose of discarding worn and
valueless items;
(d) All food and beverage (alcoholic and non-alcoholic) inventory in
unopened cases ("Food and Beverages"). Seller agrees that between the date
hereof and the Closing Date, Seller will not cause or permit depletion of Food
and Beverages except in the ordinary course of business, but will
2
<PAGE>
cause the Food and Beverages to be maintained in normal quantities considering
the season and in accordance with Section 8.1(g) hereof;
(e) All merchandise, supplies, inventory and other items used for the
operation and maintenance of guest rooms, restaurants, lounges, swimming pools,
health clubs, and other common areas and recreational areas located within or
relating to the Improvements, including, without limitation, office supplies and
stationery, advertising and promotional materials, towels, washcloths, linen and
bedding, guest cleaning, paper and other supplies, napkins and tablecloths,
upholstery material, carpets, rugs, furniture, engineers' supplies, paint and
painters' supplies, employee uniforms, and pool, tennis court and other
recreational area cleaning and maintenance supplies (collectively, the
"Supplies"). Seller agrees that between the date hereof and the Closing Date,
Seller will not cause or permit depletion of Supplies except in the ordinary
course of business, but will cause the Supplies to be maintained in normal
quantities considering the season and in accordance with Section 8.1(g) hereof;
(f) To the extent assignable, all leases, licenses, occupancy
agreements, "trade-out" agreements, advance bookings, convention reservations,
or other agreements demising space in, providing for the use or occupancy of, or
otherwise similarly affecting or relating to the use or occupancy of, the
Improvements or Land, together with all amendments, modifications, renewals and
extensions thereof, and all guaranties by third parties of the obligations of
the tenants, licensees, concessionaires or other entities thereunder
(collectively, the "Leases" and individually, the "Lease");
(g) To the extent assignable, all prepaid rents and deposits,
including, but not limited to, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services,
made in connection with the use or occupancy of the Improvements (collectively
the "Deposits"); provided, however, that to the extent Purchaser does not
receive the Deposits at Closing, Purchaser shall be entitled to a credit against
the Purchase Price (as defined below) in an amount equal to the Deposits, and
Purchaser agrees to assume all of Seller's liability and obligations, if any,
with regard to such prepaid rents and/or deposits;
(h) To the extent assignable, any and all of the following that
relate to or affect in any way, the design, construction, ownership, use,
occupancy, leasing, maintenance, service, or operation of the Land,
Improvements, Leases, Deposits, Supplies, or FF&E:
3
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(i) Contracts and agreements, such as labor, collective
bargaining, service, or maintenance contracts, management or employment
agreements, utility contracts, contracts for the purchase of supplies, insurance
contracts, airline agreements, corporate account agreements, travel agency
agreements, telephone service agreements, and yellow pages or other advertising
agreements, but only to the extent assumed hereunder by Purchaser (collectively,
the "Service Contracts");
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of Seller (collectively the "Warranties");
(iii) Licenses (including without limitation liquor, beer, wine,
bar and similar licenses), permits, utility reservations, certificates of
occupancy, and similar documents issued by any federal, state, or municipal
authority or by any private party so long as assignment can be made without
material cost to Seller, but only to the extent assumed hereunder by Purchaser
(collectively the "Licenses");
(iv) Telephone numbers ("Telephone Numbers");
(v) Plans, drawings, specifications, surveys, soil reports,
engineering reports, inspection reports, environmental audits and other
technical descriptions and reports to the extent in Sellers possession or
control (collectively, the "Plans and Specs");
(vi) Leases of any FF&E and other contracts permitting the use of
any FF&E at the Improvements, but only to the extent assumed hereunder by
Purchaser (collectively, the "FF&E Leases");
(i) To the extent assignable, Seller's interest in the right to
receive immediately on and after Closing and continuously consume thereafter
water service, sanitary and storm sewer service, electrical service, gas
service, and telephone service on and for the Land and Improvements for the
purposes for which they were intended, free and clear of all qualifications and
encumbrances other than the obligation to pay the applicable utility company the
published rate for utility consumption after Closing, and the foregoing right
shall include, but not be limited to (i) the right to the present and future use
of wastewater drainage, water and other utility facilities to the extent such
use benefits the Land or Improvements, (ii) all reservations of or commitments
covering any such use in the future, and (iii) all wastewater capacity
reservations ever issued and relating to the Land or Improvements (all of the
foregoing are referred to in this Agreement collectively as the "Utility
Reservations");
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(j) All rights, titles, and interests of Seller appurtenant to the
Land and Improvements, including, but not limited to, (i) all easements, rights
of way, rights of ingress and egress, tenements, hereditaments, privileges, and
appurtenances in any way belonging to the Land or Improvements, (ii) any land
lying in the bed of any alley, highway, street, road or avenue, open or
proposed, in front of or abutting or adjoining the Land, (iii) any strips or
gores of real estate adjacent to the Land, and (iv) the use of all alleys,
easements and rights-of-way, if any, abutting, adjacent or contiguous to or
adjoining the Land (collectively, the "Appurtenances");
(k) All books and records, promotional material, tenant data,
marketing and leasing material and forms, market studies, keys, and other
materials of any kind owned by Seller and in Seller's possession or control, or
to which Seller has access or may obtain and has the right to convey and deliver
which are or may be used in Seller's use of the Land and ownership and use of
the Improvements and the FF&E, whether any of the foregoing are in hard copy
form or in computerized data storage form (collectively, the "Records");
provided, however, that a copy of any such material which constitutes a part of
Seller's continuing business or financial records may be retained by Seller; and
(l) Seller's cash drawers as of 2:00 A.M. on the Closing Date, up to
a maximum aggregate amount of $25,000 (the "Cash Drawers").
The Hotel shall be conveyed, assigned, and transferred to Purchaser at Closing,
free and clear of all mortgages, debts, liens, encumbrances, management
agreements, leases, licenses and license agreements, franchises and franchise
agreements, concession agreements, security interests, prior assignments or
conveyances, conditions, restrictions, rights-of-way, easements, encroachments,
claims and other matters affecting title, except for those matters specifically
approved in writing by Purchaser or otherwise permitted by the express terms of
this Agreement (including (i) any Title Objections or Other Objections (as such
terms are defined below) which Purchaser waives in writing or is deemed to have
waived in accordance with Sections 4.6 and 5.3 hereof and (ii) the Service
Contract listed on Exhibit B-1 and any other Service Contract which Purchaser
-----------
agrees in writing to assume).
ARTICLE 3
PURCHASE PRICE
--------------
3.1. Purchase Price. (a) The total price (the "Purchase Price") for
--------------
which Seller agrees to assign the Sublease Interest and sell and convey all
components of the Hotel to
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Purchaser, and which Purchaser agrees to pay or deliver to Seller, subject to
the terms of this Agreement, and adjustments as provided herein, shall consist
of (i) Nineteen Million, Six Hundred Thousand dollars ($19,600,000), (ii) plus
----
the sum of the Cash Drawers and the cost of the Food and Beverages calculated in
accordance with Section 9.12 hereof, (iii) less the $15,000 purchase price for
----
the Liquor License, calculated in accordance with Section 9.11 hereof, all as
subject to adjustment as herein provided, in immediately available funds payable
to Seller at the Closing.
(b) Purchaser shall pay the balance of the Purchase Price, as
adjusted in the manner set forth below, to Seller or other applicable party at
Closing in current funds delivered in cash, by wire or by other mutually
acceptable method.
(c) Seller and Purchaser (the "Cooperating Party") each agree to
fully cooperate with the other (the "Exchanger) (including cooperation with
Professional Data Corp. (the "Intermediary")) to structure the acquisition of
the Hotel and/or the Real Property as an exchange of property held for
productive use in a trade or business or for investment ("Like-Kind Property")
within the meaning of Section 1031 of the Internal Revenue Code of 1986 (as
amended), and upon request, Cooperating Party agrees to execute additional
escrow instructions, documents, agreements or instruments to effect the
exchange; provided, however, that Cooperating Party shall incur no additional
costs or expenses in this transaction, or be required to acquire, accept or hold
title to any property, as a result of or in connection with any such exchange,
unless because of Cooperating Party's default hereunder or under any agreement
executed by reason of this Section 3.1(c).
Exchanger agrees to indemnify, defend or hold Cooperating Party
harmless from and against any and all additional costs, expenses, claims,
demands, liabilities, losses, obligations, damages, recoveries, and deficiencies
(such categories being collectively referred to herein as "Liabilities") in
excess of those Liabilities that Cooperating Party would otherwise have if the
transaction contemplated in this Agreement closes as a sale transaction, and
that Cooperating Party may incur or suffer, as a result of or in connection with
(i) the structuring of the transaction contemplated in this Agreement as an
exchange under Internal Revenue Code Section 1031 and/or (ii) the execution of
any documents in connection with the exchange. Exchanger's foregoing indemnity
shall not indemnify Cooperating Party for any Liabilities arising as a result of
or in connection with any default by Cooperating Party under this Agreement or
any default by Cooperating Party under any of the documents or agreements
entered into by Cooperating Party in connection with the exchange or for any
negligence or willful misconduct on the part of Cooperating Party. Exchanger's
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<PAGE>
obligation with respect to Cooperating Party's attorneys' fees involved in the
review, documentation and advice concerning exchange documents and transactions
shall be limited to reasonable attorneys' fees for each exchange property.
Implementation of the exchange(s) contemplated in this Section 3.1(c) shall not
be a condition to the Closing.
Concurrently herewith, Purchaser and Seller shall execute the
agreement among Purchaser, Seller and Intermediary, entitled "Assignment of
Rights and Notification (Seller's Position)" and attached hereto as Exhibit
-------
3.1(c).
- ------
3.2. Allocations. Subject to adjustments in accordance with the terms
-----------
of this Agreement, the Purchase Price shall be allocated as follows (i) ninety-
six and three-fourths percent (96.75%) to the Improvements, (ii) three percent
(3%) to the FF&E and (iii) one-fourth percent (.25%) to the Supplies.
3.3. Earnest Money. For the purpose of securing the performance of
-------------
Purchaser under the terms and provisions of this Agreement and as a condition
precedent to Seller's obligations hereunder, Purchaser shall deliver the Initial
Earnest Money to the Title Company (as hereinafter defined) in current funds, on
the later of (i) the date of this Agreement or (ii) April 25, 1996. The term
"Initial Earnest Money" shall mean One Hundred Thousand Dollars ($100,000).
Upon the end of the Review Period (as such term is defined in Section 5.3
hereof), Purchaser shall deliver the Additional Earnest Money to the Title
Company in current funds (subject however to the terms of Section 5.3 hereof).
The term "Additional Earnest Money" shall mean One Hundred-Fifty Thousand
Dollars ($150,000). The Initial Earnest Money and the Additional Earnest Money
and any other sums which may from time to time be deposited as Earnest Money
under the terms of this Agreement or any addendum or amendment hereto shall
collectively be referred to as "Earnest Money". All interest accruing on
Earnest Money deposited under this Agreement shall become a part of and be added
to the Earnest Money so that it shall be subject to disbursement or application
in the same manner as is the principal of the Earnest Money.
The Title Company shall deposit the Initial Earnest Money and the
Additional Earnest Money, respectively when received, in an interest bearing
account at a bank or savings institution reasonably acceptable to Seller and
Purchaser to be held in escrow until, delivered pursuant to the terms of this
Agreement or the termination of this Agreement in accordance with the terms
hereof, and all interest accrued thereon shall be reported under Purchaser's
federal tax identification number. If this Agreement is terminated in
accordance with the terms hereof prior to the end of the Review Period, the
Initial Earnest Money, less the sum of $100.00 therefrom which shall be paid to
Seller as independent consideration for entering into this Agreement,
7
<PAGE>
shall be returned to Purchaser or delivered to Seller as liquidated damages as
herein provided. If this Agreement is terminated in accordance with the terms
hereof subsequent to the end of the Review Period, the Additional Earnest Money,
less the sum of $100.00 therefrom which shall be paid to Seller as independent
consideration for entering into this Agreement, shall be returned to Purchaser
or delivered to Seller as liquidated damages as herein provided. If the sale of
the Hotel is consummated in accordance with the terms hereof, the Earnest Money,
less such $100.00 independent consideration, shall be applied to the Purchase
Price.
ARTICLE 4
TITLE DELIVERIES
----------------
4.1. Assignment. On the Closing Date, Seller shall assign the
----------
Sublease Interest and convey, transfer, and assign title to all other components
of the Hotel to Purchaser. The Improvements and Appurtenances shall be conveyed
to Purchaser in a form reasonably acceptable to both Purchaser and Seller
conveying good, indefeasible, and insurable title to the Improvements, free and
clear of all mortgages, liens, encumbrances, management agreements, leases,
licenses, franchises, concession agreements, security interests, prior
assignments or conveyances, conditions, restrictions, rights of way, easements,
encroachments, claims, and other matters except only those matters that become
Permitted Exceptions (defined below) under the terms hereof.
4.2. Bill of Sale. Seller's interest in all FF&E, Supplies,
------------
Warranties, Licenses, Telephone Numbers, Plans and Specs, Utility Reservations,
Records, Deposits, Cash Drawers and other personal property shall be conveyed to
Purchaser (and/or, at Purchaser's option, Purchaser's ground lessee or other
designee) by Seller's Special Warranty Bill of Sale, Assignment and Assumption
Agreement in a form reasonably acceptable to both Purchaser and Seller (the
"Bill of Sale").
4.3. Title Commitment. Within ten (10) days after the execution of
----------------
this Agreement, Seller shall obtain and deliver to Purchaser, at Seller's sole
cost and expense, the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by Chicago Title Insurance Company ("Chicago") or other title company designated
by Purchaser, or, if applicable, issued for Chicago or such other title company
through an agency designated by Purchaser, (the "Title Company"), for the most
recent form of ALTA owner's policy, covering the Land and Improvements, in the
full amount of the Purchase Price (subject to reduction, if appropriate, to the
portion of the Purchase Price allocated under Section 3.2 to the Sublease
8
<PAGE>
Interest and the Improvements) and endorsed as Purchaser or its lender may
reasonably require, setting forth the current status of the title to the Land
and Improvements, showing all liens, claims, encumbrances, easements, rights of
way, encroachments, reservations, restrictions, and any other matters affecting
the Land and Improvements, and pursuant to which the Title Company agrees to
issue to Purchaser at Closing an Owner Policy of Title Insurance (the "Title
Policy") on the most recent form of ALTA owner's policy as endorsed as Purchaser
or its lender may reasonably require; and
(b) A true, complete, and legible copy of all documents and
instruments (as recorded, where applicable) (the "Supporting Documents")
referred to or identified in the Title Commitment, including, but not limited
to, the Groundlease and all amendments thereto, the Sublease and all amendments
thereto, lien instruments, leases, plats, surveys, reservations, restrictions,
and easements.
4.4. UCC Search. Within ten (10) days after the execution of this
----------
Agreement, Seller shall obtain and deliver to Purchaser, at Seller's sole cost
and expense, current written reports (the "UCC Searches") from the Office of the
Secretary of State of the State where the Hotel is located and the deed
recording offices of the county where the Hotel is located reflecting the
results of current searches of the Uniform Commercial Code Records maintained by
such offices, said UCC Searches to be made under the name of Seller.
4.5. Survey. Within ten (10) days after the execution of this
------
Agreement, Seller shall provide to Purchaser, at Seller's sole cost and expense,
a current "as built" survey (the "Survey") of the Land and Improvements made on
the ground and certified by a professional land surveyor licensed in the state
in which the Hotel is located and approved by the Title Company and Purchaser
(the "Surveyor"). The Survey must be prepared, and the field work surveying
must be conducted, in accordance with the Minimum Standard Detail Requirements
for ALTA/ACSM Real Property Title Surveys and the items set forth in Table A
thereto (other than contours and elevations of the Land but including elevations
of the Improvements) and shall, without limiting the foregoing, (i) accurately
show the locations and dimensions of all existing easements, fire hydrants,
fences, encroachments, conflicts, protrusions, alleys, stems and roads
(including median and curb cuts), and rights-of-way on or adjacent to or serving
the Land which are visible on the ground or listed in the Title Commitment (with
recording information shown if applicable); (ii) accurately show the locations
of all existing improvements, monuments, sidewalks, driveways, parking lots
(with striped spaces shown) and other visible items on the Land; (iii)
accurately show all areas designated as being flood prone or subject to special
flood hazards or other hazardous conditions according to the most
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current official maps of the Flood Insurance Administration, the Federal
Emergency Management Agency or any other public or semi-public body charged with
determining the existence of such conditions which has jurisdiction over the
Hotel; (iv) set forth a metes and bounds description of the Land and all on-the-
ground Appurtenances tied at all corners to physical monuments and on all sides
and curves to adjoining tracts (with any discrepancies fully reconciled) and a
description by reference to the recorded plat or map of the Land; and (v)
contain a certification by the Surveyor in form reasonably acceptable and
addressed to Seller, Purchaser and the Title Company, indicating that the Survey
was made on the ground and accurately shows all the matters required above. If
different from the description contained in Exhibit A attached to this
---------
Agreement, the legal description of the Land contained in the Survey, once the
correctness thereof has been confirmed by Seller, Purchaser and the Title
Company, shall be substituted for the description of the Land contained in said
Exhibit A and this Agreement shall be deemed amended by the substitution of the
- ---------
legal description of the Land contained in the Survey as a new Exhibit A without
---------
the necessity of the parties executing any additional written amendments to this
Agreement. In addition, such description shall be used in the Owner Policy of
Title Insurance, in the Assignment of Leases, and in any Mortgagee Policy of
Title Insurance and any mortgage or satisfaction of mortgage to be delivered to
any lender at Closing.
4.6. Procedure for Purchaser's Title Objections. Purchaser shall have
------------------------------------------
until thirty (30) days following the completion of all deliveries required of
Seller to Purchaser under Sections 4.3, 4.4 and 4.5 (the "Title Review Period")
to notify Seller in writing of any objections ("Title Objections") Purchaser may
have to matters reflected in or concerning the Title Commitment, the Supporting
Documents, the Survey, the UCC Searches, any of the other documents or items
delivered by Seller to Purchaser. (i) In the event that Purchaser fails to
notify Seller of any such objections prior to the expiration of the Title Review
Period, Purchaser shall be deemed to have waived such objections. (ii) If
Purchaser shall so notify Seller of any such objections, Seller may elect to
cure such objections within fourteen (14) days from the date on which Seller
receives Purchaser's title objections (the "Title Cure Period"). If Purchaser,
in Purchaser's reasonable discretion, is not satisfied with the results of any
such cure efforts by Seller, Purchaser may terminate this Agreement by giving
written notice of termination to Seller at any time within twenty (20) days (the
"Post-Title Cure Period") after the end of the Title Cure Period. The Earnest
Money shall be returned to Purchaser within five (5) days after any such
termination, and neither party shall have any further rights or obligations one
to the other, except for the repair obligation set forth in Section 5.1. If
Purchaser does not
10
<PAGE>
terminate this Agreement within said twenty (20) days after the Title Cure
Period as provided herein, Purchaser shall be deemed to have waived the Title
Objections and the right to terminate this Agreement under this Section 4.6,
subject to the remaining terms of this Agreement.
ARTICLE 5
HOTEL DOCUMENTS, INSPECTION AND OBJECTIONS
------------------------------------------
5.1. Inspections. For a period of forty-five (45) days from the date
-----------
hereof, Seller shall give Purchaser and Purchaser's agents and representatives
reasonable access to the Hotel during normal business hours prior to Closing and
the right to physically inspect the Hotel and to conduct soil tests,
environmental and engineering tests and inspections, review accounting records,
correspondence and deliveries of Supplies to the Hotel and conduct other tests
and inspections (so long as such tests and inspections do not unreasonably
interfere with the use and occupancy of the Hotel by Seller, by guests or
patrons of the Hotel property, or by tenants). The costs and expenses of
Purchaser's investigation shall be borne solely by Purchaser. In the event that
the transaction contemplated by this Agreement does not close for any reason,
Purchaser shall have the obligation to repair any damage caused by Purchaser's
inspections and tests to the condition prior to Purchaser's entry, which
obligation shall survive any termination of this Agreement. The terms of this
Agreement and all information furnished by Seller to Purchaser in accordance
with the provisions of this Agreement or obtained by Purchaser in the course of
its investigations shall be treated as confidential information by Purchaser,
and Purchaser shall not discuss or otherwise disclose to Hotel employees such
terms and information without the prior approval of Seller, except that
Purchaser may disclose such information to prospective investors and lenders, to
attorneys and other parties assisting or representing Purchaser in connection
with the subject transaction, and to others as may be required by lawful order.
The foregoing obligation to treat such information as confidential shall survive
any termination of this Agreement but shall not survive Closing.
5.2. Hotel Documents. As soon as practicable but in no event later
---------------
than ten (10) days after the execution hereof, Seller, at Seller's sole cost and
expense, will deliver to Purchaser true, correct and complete copies (or where
specifically indicated, original counterparts) of the following, together with
all amendments, modifications, renewals or extensions thereof-
(i) All Warranties relating to the Hotel or any part thereof
which are still in effect;
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(ii) Financial statements, budgets and Federal and State income
tax returns for the Hotel, for the current year to date and each of the
five (5) years prior to the year of this Agreement (the "Financial
Statements"), including the itemization of (1) annual insurance premiums
for each such year for fire, extended coverage, workers' compensation,
vandalism and malicious mischief, general liability, business interruption,
rents and other forms of insurance shown thereon; (2) expenses incurred for
water, electricity, natural gas, sewer and other utility charges; (3) total
rents and revenues collected from tenants and from hotel guests and other
patrons of the Hotel; (4) management fees; (5) maintenance, repairs and
other expenses relating to the management and operation of the Hotel; (6)
historical occupancy statistics for the Hotel; and (7) all capital
expenditures made during the aforementioned periods;
(iii) All Licenses;
(iv) All of the most recent real estate and personal property tax
statements with respect to the Hotel and notices of appraised value for the
Land and Improvements;
(v) To the extent in Seller's possession or control or readily
obtainable without material expense, all engineering and architectural
plans, drawings and specifications relating to the Hotel, as well as copies
of any environmental reports, boundary surveys, engineering reports and
subsurface studies affecting the Hotel. If the Hotel is purchased by
Purchaser, all such documents and information shall thereupon be and become
the property of Purchaser without payment of any additional consideration
therefor; provided, however, in the event that the Closing does not
actually occur, Purchaser shall return such information to Seller;
(vi) All Services Contracts and a schedule of such Service
Contracts (the "Schedule of Service Contracts");
(vii) All Leases (other than guest or room booking and
reservation contracts), a schedule of such Leases (the "Schedule of
Leases") and all agreements for real estate commissions, brokerage fees,
finder's fees or other compensation payable by Seller in connection
therewith which would be binding on Purchaser after Closing;
(viii) A rent roll including for each Lease (1) the name of the
tenant; (2) the suite; (3) the base rental rate; (4) the amount of prepaid
rent; (5) the amount of each security deposit; (6) the applicable
percentage rental rate,
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if any, and the means of calculation thereof, (7) the date of the Lease;
and (8) the expiration date of the Lease;
(ix) To the extent in Seller's possession or control, all notices
received from governmental authorities in connection with the Hotel;
(x) A list of all current employees of Seller at the Hotel and
their salaries or wages and all employment benefits accompanied by copies
of their employment agreements and/or union contracts, if any;
(xi) All FF&E Leases and a schedule of such FF&E Leases (the
"Schedule of FF&E Leases");
(xii) An inventory of the FF&E and Supplies;
(xiii) A schedule of the Deposits and the Utility Reservations
(the "Schedule of Deposits and Utility Reservations"); and
(xiv) Such other documents or information as may be reasonably
requested in writing by Purchaser no later than twenty (20) days after the
execution hereof.
If requested by Seller, Purchaser shall acknowledge in writing the receipt of
items listed in this Section 5.2, upon receipt of such items.
5.3. Procedure for Purchaser's Objection. (a) Purchaser shall have
-----------------------------------
until forty-five (45) days following the completion of all deliveries required
of Seller to Purchaser under Section 5.2 (the "Review Period") to notify Seller
in writing of any reasonable objections ("Other Objections") Purchaser may have
to matters reflected in or concerning any of the documents or items delivered by
Seller to Purchaser, or the results of the inspections, tests, and studies under
Section 5.1 and any other tests or inspections of the Hotel made by Purchaser
and also of any Service Contracts, Leases, FF&E Leases, or Licenses that
Purchaser does not wish to assume. (i) In the event that either (x) Purchaser
fails to notify Seller of any objections prior to the expiration of the Review
Period or (y) Purchaser notifies Seller in writing that it wishes to terminate
the Review Period pursuant to Paragraph 5.3(b) hereof and Seller consents to
such termination, Purchaser shall be deemed to have waived such objections and
the Initial Earnest Money shall become non-refundable to Purchaser and be
delivered immediately to Seller by the Title Company. (ii) If Purchaser shall
so notify Seller of any objections, Seller may elect to cure such objections
within ten (10) days from the date on which Seller receives Purchaser's
objections (the "Cure Period"). If Purchaser, in Purchaser's reasonable
discretion, is not satisfied
13
<PAGE>
with the results of any cure efforts by Seller, Purchaser may terminate this
Agreement by giving written notice of termination to Seller at any time within
twenty (20) days (the "Post-Cure Period") after the end of the Cure Period. In
the event that Purchaser notifies Seller of any Other Objections, (i) the Title
Company shall continue holding the Initial Earnest Money in escrow during the
Cure Period and the Post-Cure Period and (ii) Purchaser will not be required to
deliver the Additional Earnest Money until the end of such Post-Cure Period. If
Purchaser terminates this Agreement pursuant to this Section, Seller shall be
entitled to retain and, to the extent it has not already done so, Purchaser
shall deliver to Seller all reports and studies of third parties relating to the
Hotel resulting from the inspection of the Hotel (or the portions of such
reports and studies that are specific to the Hotel) and all the documents
delivered to Purchaser pursuant to Section 5.2. The Initial Earnest Money shall
be returned to Purchaser within five (5) days after any such termination, and
neither party shall have any further rights or obligations one to the other,
except for the repair obligation set forth in Section 5.1. If Purchaser does not
terminate this Agreement within the Post-Cure Period, (i) Purchaser shall be
deemed to have waived the Other Objections and the right to terminate this
Agreement under this Section 5.3 and shall be deemed to have accepted and
approved the condition of the Hotel and the delivered items, subject, however,
to the remaining terms of this Agreement, (ii) the Title Company shall
immediately deliver the Initial Earnest Money to Seller and (iii) Purchaser
shall deliver the Additional Earnest Money to Title Company to be held in
accordance with the terms of this Agreement. By Closing, Seller shall, at
Seller's expense, cancel any and all management agreements affecting the Hotel
and such other Service Contracts, Leases and FF&E Leases as to which Purchaser
objects pursuant to Sections 4.6 and 5.3 hereof and pay and cause to be released
all debts, liens, and encumbrances in any way affecting the Hotel unless
Purchaser has expressly agreed herein to accept the Hotel subject thereto.
(b) Purchaser may terminate the Review Period prior to the expiration
of such period by giving written notice to Seller of such termination, subject
however to Seller's right to object within two (2) days of its receipt of
Purchaser's notice.
5.4. Deliveries. Prior to the end of the Review Period, Seller shall
----------
deliver the following to Purchaser, at Seller's sole cost and expense:
(a) Consent of Sublessor. Written consent of the Sublessor to the
--------------------
transactions contemplated herein, including the Assignment of Sublease Interest,
duly executed and acknowledged by Sublessor ("Sublessor Consent"), in form and
substance reasonably satisfactory to Purchaser's counsel.
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(b) Consent of Master Lessor. Written consent of the Master Lessor
------------------------
to the transactions contemplated herein, including the Assignment of Sublease,
duly executed and acknowledged by Master Lessor ("Master Lessor Consent"), in
form and substance reasonably satisfactory to Purchaser's counsel.
(c) Non-Disturbance Agreement. A non-disturbance agreement from
-------------------------
Master Lessor to the holder of the Sublease Interest, duly executed and
acknowledged by Master Lessor, in form and substance reasonably satisfactory to
Purchaser's counsel.
(d) Estoppel Certificate from Sublessor. An Estoppel Certificate
-----------------------------------
from the Sublessor, in form and substance reasonably satisfactory to Purchaser's
counsel.
(e) Estoppel Certificate from Master Lessor. An Estoppel Certificate
---------------------------------------
from the Master Lessor, in form and substance reasonably satisfactory to
Purchaser's counsel.
ARTICLE 6
PERMITTED EXCEPTIONS
--------------------
6.1. Permitted Exceptions. Notwithstanding any other provision herein
--------------------
set forth, Purchaser shall not be entitled to make any objection or terminate
this Agreement on the basis of any lien, encumbrance or security interest
created by Purchaser at Closing in connection with Purchaser's acquisition of
the Hotel. The agreed exceptions to title specified in the immediately
preceding sentence, together with the Groundlease and Sublease, each as amended,
and any other title exceptions, test items, or deliveries to which the Purchaser
does not object in accordance with Sections 4.6 or 5.3, as appropriate, and any
title exceptions, test items, or deliveries to which Purchaser objects that are
not cured and which Purchaser is deemed to have accepted and approved in
accordance with Sections 4.6 or 5.3, as appropriate, shall be hereinafter
referred to as the "Permitted Exceptions."
ARTICLE 7
LEASES, FF&E LEASES, AND SERVICE CONTRACTS
------------------------------------------
7.1. Schedules. Seller hereby warrants, represents, and certifies
---------
unto Purchaser, to the best of Seller's knowledge and belief, (i) that the
Schedule of Service Contracts, Schedule of FF&E Leases, Schedule of Leases, and
Schedule of Deposits and Utility Reservations, when delivered, will be a true,
correct, and complete list of all Service Contracts, all FF&E Leases, all Leases
(other than guest or room booking and reservation
15
<PAGE>
contracts), and all Deposits and Utility Reservations in effect at that time,
(ii) that the copies of the Service Contracts, FF&E Leases, and Leases, when
delivered to Purchaser, will be true, complete and correct copies of such
Service Contracts, FF&E Leases, and Leases (including, without limitation, all
amendments, modifications, renewals, and extensions thereof), (iii) that there
are and will be no written or oral agreements of the nature of the Service
Contracts or the FF&E Leases binding on the Hotel or on Purchaser after Closing,
other than the Service Contracts, the FF&E Leases, and the Leases assumed
hereunder by Purchaser, (iv) that there are and will be no other written or oral
agreements binding on the Hotel or on Purchaser after Closing with any tenants,
licensees, concessionaires or other persons or entities (collectively,
"Tenants", and individually, "Tenant") or any guarantors of the Tenants'
obligations (collectively "Guarantors", and individually, "Guarantor") relating
to their use or occupancy other than those permitted under Section 8. 1 (e) of
this Agreement, (v) that the Service Contracts, FF&E Leases, and Leases are in
full force and effect and no default exists thereunder and no condition exists
that, with the giving of notice or passage of time, or both, would constitute a
default, and (vi) that no Tenant has made any claim of any right of offset. The
term "Tenant" shall refer only to tenants under Leases and not guests of the
Hotel.
ARTICLE 8
OPERATION OF HOTEL
------------------
8.1. Interim Operation. Seller hereby covenants and agrees that
-----------------
between the date of this Agreement and the Closing, Seller shall:
(a) Operate, manage, and maintain the Hotel consistent with Seller's
prior practice and as a reasonable and prudent operator of like-kind hotels in
the same competitive market would operate, manage, and maintain the Hotel,
including, without limitation, (i) using reasonable efforts to keep available
the services of its present employees at the Improvements and to preserve its
relations with guests, suppliers and other parties doing business with Seller
with respect to the Hotel, (ii) accepting booking contracts for the use of the
Hotel facilities on terms not less favorable than the terms typically arranged
by Seller as of the date of this Agreement and retaining such bookings, (iii)
maintaining the current level of advertising and other promotional activities
for Hotel facilities, (iv) maintaining its books of accounts and records in the
usual, regular and ordinary manner, in accordance with generally accepted
accounting principles applied on a basis consistent with the basis used in
keeping its books in prior years, and (v) remaining in substantial compliance
with all current license agreements;
16
<PAGE>
(b) Not commit waste of any portion of the Hotel;
(c) Keep and maintain the Hotel in a state of repair and condition
consistent with the requirements of clause (a) above;
(d) Keep, observe, and perform all its obligations under the Leases,
the FF&E Leases, the Service Contracts, the Licenses, and all other applicable
contractual arrangements relating to the Hotel;
(e) Not enter into any new agreements of the nature of the Service
Contracts, FF&E Leases, or Leases or any amendments, modifications, renewals or
extensions of any existing Service Contracts, FF&E Leases, or Leases without
Purchaser's prior written consent;
(f) Timely make all repairs, maintenance, and replacements to keep
the Hotel and all FF&E in good operating condition;
(g) Keep Food and Beverages and Supplies adequately stocked,
consistent with good business practice, as if the sale of the Hotel hereunder
were not to occur, including without limitation, maintaining china, glassware,
silverware, dining room linens, bedroom sheets, pillowcases, bath towels and
washcloths in accordance with Seller's customary practice prior to the
commencement of negotiation of this Agreement;
(h) Not grant any bonus, free rent, rebate or other concession to any
present or future Tenant, without Purchaser's prior written consent;
(i) Advise Purchaser promptly of any litigation, arbitration, or
administrative hearing before any court or governmental agency concerning or
affecting the Hotel which is instituted or threatened after the date of this
Agreement or if any representation or warranty contained in this Agreement shall
become false;
(j) Not take, or omit to take, any action that would have the effect
of violating any of the representations, warranties, covenants or agreements of
Seller contained in this Agreement;
(k) Comply with all federal, state, and municipal laws, ordinances,
regulations, and orders relating to the Hotel of which Seller has knowledge,
provided that if Seller notifies Purchaser of any non-compliance with any such
law, ordinance, regulation or order, Purchaser shall object to such non-
compliance within thirty (30) days of receipt of such notice or be deemed to
have consented to such non-compliance (provided
17
<PAGE>
further that any such consent by Purchaser shall only apply to the current non-
compliance with the specific law, ordinance, regulation or order);
(l) Not sell or assign or enter into any agreement to sell or assign,
or to create or permit to exist any lien or encumbrance (other than a Permitted
Exception) on, the Hotel or any portion thereof;
(m) Not allow any License or other right currently in existence with
respect to the operation, use, occupancy or maintenance of the Hotel to expire,
be canceled or otherwise terminated without Purchaser's prior written consent;
(n) Not cancel any existing booking contracts for the use of Hotel
facilities or new booking contracts obtained by Seller after the date of this
Agreement; and
(o) Pay or cause to be paid all taxes, assessments (or in the event
an assessment is payable in installments, all installments thereof) and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due.
None of the requirements of this Section 8.1 shall be construed to
require Seller to perform any major repairs of the Hotel.
In the event that Seller is required by this Section 8.1 to obtain
Purchaser's prior consent to any action by Seller or state of facts, Seller
shall make a written request to Purchaser for such consent and Purchaser shall
not unreasonably withhold its consent. If Purchaser has not approved or
rejected such request within ten (10) days of Purchaser's receipt thereof,
Purchaser shall be deemed to have given its approval thereto.
8.2. Mechanics Liens. Seller hereby represents, warrants, and
---------------
covenants that all work required to be done prior to the Closing Date under the
terms of any Lease or License has been or will be performed and fully paid for
by Seller prior to the Closing Date in accordance with the terms of such Lease
or License, and all mechanics' and materialmen's liens arising from any labor or
material furnished prior to the Closing Date will be discharged or bonded so as
to be omitted from Purchaser's Title Policy.
8.3. Notices of Violation. Seller hereby covenants and agrees that
--------------------
all notices of violation of federal, state or municipal laws, ordinances,
orders, regulations or requirements ("Notices of Violation") issued, filed, or
served by any governmental agency having jurisdiction over the Hotel against or
18
<PAGE>
affecting the Hotel on or before the Closing Date of which Seller has actual
knowledge shall be promptly disclosed to Purchaser.
8.4. Third Party Consents. Prior to the Closing Date, Seller shall,
--------------------
at Seller's expense use reasonable good faith efforts and cooperate with
Purchaser to obtain all third party consents and approvals required in order for
Purchaser to purchase the Hotel.
8.5. Estoppel Letters. Seller shall employ reasonable good faith
----------------
efforts to obtain from each Tenant under any Lease affecting the Hotel (but not
from current or prospective occupants of hotel rooms within the Hotel), and to
deliver to Purchaser not less than five (5) days before the expiration of the
Review Period, an estoppel letter substantially in the form attached to this
Agreement as Exhibit 8.5. In the event that Seller is unable to obtain an
-----------
estoppel letter from any such Tenant by said date, Seller shall deliver to
Purchaser a certificate in which Seller certifies, to the best of Seller's
actual knowledge, the information required by the form of estoppel letter
attached to the Agreement as Exhibit 8.5.
-----------
ARTICLE 9
REPRESENTATIONS AND COVENANTS
-----------------------------
9.1. Representations by Purchaser. Purchaser hereby represents and
----------------------------
warrants unto Seller that each and every one of the following statements is
true, correct and complete in every material respect as of the date of this
Agreement and may be correct and complete as of the Closing Date:
(a) Purchaser is duly organized, validly existing and in good
standing under the laws of the State of Texas, and, other than qualifying to do
business in the state where the Hotel is located (if not already so qualified),
has full right power and authority to enter into this Agreement and to assume
and perform all of its obligations under this Agreement; and the execution and
delivery of this Agreement and the performance by Purchaser of its obligations
under this Agreement require no further action or approval of Purchaser's
shareholders, directors, members, managers or partners (as the case may be) or
of any other individuals or entities in order to constitute this Agreement as a
binding and enforceable obligation of Purchaser. The individuals and/or entities
signing below in the indicated representative capacities are fully authorized so
to act.
(b) Purchaser is not a foreign entity, foreign corporation, foreign
partnership, foreign trust or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations).
19
<PAGE>
(c) To the best of Purchaser's knowledge and belief, none of: (a) the
entry into, (b) performance of, or (c) the compliance with this Agreement by
Purchaser has resulted, or will result, in any violation of, default under, or
acceleration of any obligation under any existing corporate charter, certificate
of incorporation, bylaw, articles of organization, limited liability company
agreement or regulations, partnership agreement, mortgage indenture, lien
agreement, note, contract, permit, judgment, decree, order, restrictive
covenant, statute, rule or regulation or other agreement applicable to
Purchaser.
(d) Purchaser will rehire a sufficient number of Hotel employees
after Closing so that Seller will not be required to give the notification
specified in the Worker Adjustment and Retraining Notification Act.
(e) Promptly after the date hereof Purchaser shall deliver to Seller
pro forma financial statements of American General Hospitality Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
reviewed by Coopers & Lybrand L.L.P..
(f) To the best of Purchaser's knowledge and belief, no exhibit
hereto or document specified hereunder furnished or to be furnished, pursuant to
this Agreement, to Seller, contains or will contain any materially untrue
statement or omission of a material fact.
9.2. Representations by Seller. Seller hereby, represents and
-------------------------
warrants unto Purchaser that each and every one of the following statements is
true, correct and complete in every material respect as of the date of this
Agreement and will be true, correct and complete as of the Closing Date:
(a) Seller is duly organized, validly existing and in good standing
under the laws of the State of California and has full right, power and
authority to enter into this Agreement and to assume and perform all of its
obligations under this Agreement; and the execution and delivery of this
Agreement and the performance by Seller of its obligations under this Agreement
require no further action or approval of Seller's shareholders, directors,
members, managers or partners (as the case may be) or of any other individuals
or entities in order to constitute this Agreement as a binding and enforceable
obligation of Seller. The individuals and/or entities signing below in the
indicated representative capacities are fully authorized so to act.
(b) Seller is not a foreign entity, foreign corporation, foreign
partnership, foreign trust or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations).
20
<PAGE>
(c) To the best of Seller's knowledge and belief, none of: (i) the
entry into, (ii) the performance of, or (iii) the compliance with this Agreement
by Seller has resulted, or will result, in any violation of, default under, or
acceleration of any obligation under any existing corporate charter, certificate
of incorporation, bylaw, articles of organization, limited liability company
agreement or regulations, partnership agreement, mortgage indenture, lien
agreement, note, contract, permit, judgment, decree, order, restrictive
covenant, statute, rule or regulation or other agreement applicable to Seller or
to the Hotel.
(d) To the best of Seller's knowledge and belief, there are no
leases, licenses, concessions, management agreements, leasing agent's
agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements (i) to which Seller is a party or an assignee, (ii) binding
upon the Hotel, relating to the ownership, occupancy, operation or maintenance
of the Land, Improvements, FF&E or Supplies, or (iii) giving anyone other than
Seller and transient hotel guests a right to use or occupy the Hotel or any part
thereof, except for the Groundlease and Sublease and those Service Contracts,
Leases, Warranties and FF&E Leases previously disclosed to Purchaser. True and
complete copies of each of the Service Contracts, Leases, Warranties and FFE
Leases identified on Exhibit B have been delivered to Purchaser. The Service
---------
Contracts, Leases, Warranties and FFE Leases are in full force and effect and
there are no defaults thereunder by any party thereto and all amounts now due
thereunder have been paid.
(e) Seller has received no notice, and has no knowledge, that it
lacks any permit, license, certificates or authority necessary for the present
use and occupancy of the Improvements.
(f) To the best of Seller's knowledge and belief, the present level
of insurance with respect to the Hotel is commercially reasonable and will be
maintained in full force and effect until the Closing Date. The insurance
covering the Hotel is listed in the insurance schedule annexed hereto as Exhibit
-------
C. True and correct copies of each policy have been furnished to Purchaser.
- -
(g) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser's rights hereunder.
(h) To the best of Seller's knowledge and belief there are no:
21
<PAGE>
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial proceedings or orders respecting awards, which might
become a lien on the Hotel;
(ii) pending unfair labor practice charges or complaints, unsatisfied
unfair labor practice orders or judicial proceedings or orders, with
respect to the Hotel;
(iii) pending charges or complaints with or by city, state or federal
civil or human rights agencies, unremedied orders by such agencies or
judicial proceedings or orders with respect to obligations under city,
state or federal civil or human rights or anti-discrimination laws or
executive orders, with respect to the Hotel;
(iv) condemnation proceeding pending or, to Seller's knowledge,
threatened with regard to all or any part of the Hotel; or
(v) other pending, or threatened or actual litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affects the Hotel or might become a
lien on the Hotel,
(all collectively, the "Pending Claims").
(i) Seller has received no Notice of Violations.
(j) To the best of Seller's knowledge and belief, Seller and the
Hotel are in compliance in all material respects (i) with all terms and
conditions of all notices, permits, licenses, registrations, certificates of
occupancy, applications, consents, zoning and/or building code restrictions,
variances, notices of intent, and/or other authorizations which are required for
the use or operation of the Hotel, (ii) with all applicable laws, rules,
regulations, ordinances and orders in effect as of the date hereof promulgated
by any federal, state or local executive, legislative, judicial, regulatory or
administrative agency, board or authority, or any applicable judicial or
administrative decision that relate to the Hotel, including without limitation
the Americans With Disabilities Act of 1990, as amended, and regulations or
orders promulgated thereunder, and (iii) with all limitations, requirements,
restrictions, conditions, standards, prohibitions, schedules and timetables
contained in any of the foregoing.
(k) To best of Seller's knowledge, no "Hazardous Materials" (defined
below) are located on or at the Hotel. To the best of Seller's knowledge, the
Hotel has never been used as a manufacturing, storage or dump site for Hazardous
Materials, nor is the Hotel affected by any "Hazardous Materials Contamination"
(also defined below). To the best of the Seller's
22
<PAGE>
knowledge and belief, no property adjoining the Hotel has ever been used as a
manufacturing, storage or dump site for Hazardous Materials nor is any such
adjoining property affected by Hazardous Materials Contamination. As used
herein, the term "Hazardous Materials" shall mean any material or substance (A)
which is defined as a "hazardous waste" under the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. (S)(S) 6901 et seq.), as amended from time to
-- ---
time, and regulations promulgated thereunder; (B) which is defined as a
"hazardous substance" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. (S)(S) 9601 et seq.), as
-- ---
amended from time to time, and regulations promulgated thereunder; (C) which is
defined as a hazardous or toxic substance or waste in any statute, regulation or
ordinance adopted by the state in which the Hotel are located or its agencies
or political subdivisions; (D) which is petroleum; (E) which is asbestos; (F)
which is designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. (S) 1251 et seq. (33 U.S.C. (S) 1321) or listed
-- ---
pursuant to Section 307 of the Clean Water Act (33 U.S.C. (S) 1317); or (G) the
presence of which on the Hotel is prohibited by any legal requirement of any
governmental authority or which may give rise to a lien for the benefit of a
governmental authority; and which, under the circumstances and quantities in
which any of the foregoing may be found, requires remediation. "Hazardous
Materials Contamination" shall mean the contamination (whether presently
existing or hereafter occurring) of the Hotel and improvements thereon,
facilities, soil, ground water, air or other elements on, or of, the Hotel by
Hazardous Materials, or the contamination of the buildings, facilities, soil,
ground water, air or other elements on, or of, any other property as a result of
Hazardous Materials at any time emanating from any portion of the Hotel. There
are no underground gasoline, oil or other storage tanks at the Hotel.
(l) To the best of Seller's knowledge and belief, Purchaser will in
no way be obligated for any employees, or union contracts with respect to
employees, employed by Seller with regard to the Hotel before the Closing,
subject to Section 9.1(d) hereof. Neither Seller nor its managing agent (if any)
will, between the date hereof and the date of Closing, enter into any new
employment or union contracts or agreements or hire any new employees that will
be binding on Purchaser on or after the Closing. Purchaser will not be obligated
to give or pay any amount accruing before Closing to any employee of Seller or
Seller's managing agent. Purchaser shall not have any liability incurred before
Closing under any pension or profit sharing plan that Seller or its managing
agent may have established with respect to the Hotel or their or its employees.
It is expressly agreed that Seller shall be and remain liable for all accrued
salaries, wages, bonuses, profit-sharing, and other compensation, vacation, sick
leave, worker's compensation, and welfare
23
<PAGE>
benefits, deferred compensation, savings, pension, profit sharing, 401(k), and
retirement plan, and insurance and other benefits of all employees of the Hotel
whether or not employed by Purchaser and for all liabilities of whatever kind
(including without limitation those arising under COBRA) with respect to all
employees of the Hotel who are not employed by Purchaser, and Seller hereby
indemnifies Purchaser with respect to the foregoing.
(m) To the best of Seller's knowledge, information and belief there
is no material defect in the condition of the Hotel or any portion thereof,
which has not been corrected or which will materially impair the operation of
the Hotel and the Hotel will be in materially good operating condition on the
Closing Date. FF&E and Supplies as of the Closing Date will be of sufficient
quantity and quality for the continued rental in the usual course immediately
following the Closing Date of all of the rooms and facilities of the Hotel.
(n) To the best of Seller's knowledge, information and belief,
neither the Hotel nor any portion thereof is (i) listed, or eligible to be
listed, in any national, state or local register of historic places or areas, or
(ii) located within any designated district or area in which the permitted uses
of land located therein are restricted by regulations, rules or laws other than
those specified under local zoning ordinances.
(o) To the best of Seller's knowledge and belief, true and complete
copies of all licenses, permits and certificates issued in connection with the
use and operation of the Hotel are annexed hereto as Exhibit D. To the best of
---------
Seller's knowledge and belief, no default has occurred in the due observance of
any condition to any license, permit or certificate relating to the Hotel, nor
is there lacking any license, permit or certificate needed in connection with
the ownership or operation of the Hotel or the Business. The sale and service
of alcoholic beverages at the Facility has been in compliance with all
applicable laws and regulations and Seller has no knowledge of any violation or
alleged violation of any such laws or regulations during its period of
ownership. Valid permanent certificates of occupancy have been issued for each
of the Buildings and remain in full force and effect.
(p) Seller has no knowledge of any pending or threatened condemnation
affecting the Hotel or of any improvement liens or special assessments to be
made against any portion of the Hotel by any governmental authority.
(q) True and complete copies of Seller's audited financial statements
for the Hotel for the past five years or, if Seller has owned the Hotel for less
than five years, for such shorter period of time, and the most recent year-to-
date
24
<PAGE>
statements are annexed hereto as Exhibit E. The information contained therein
---------
is materially true, correct and complete and does not omit any material
information required to make them fair and complete.
(r) The Groundlease, as amended, and the Sublease, as amended, are in
full force and effect and there are no defaults thereunder, nor have there
occurred any events which with the passage of time or the giving of notice or
both would constitute a default thereunder. True and complete legible copies of
the Sublease and all amendments thereto and the Groundlease and all amendments
thereto have been delivered to Purchaser, and all of the foregoing are listed on
Exhibit F attached hereto.
- ---------
(s) To the best of Seller's knowledge and belief, no exhibit hereto
or document specified hereunder furnished or to be furnished, pursuant to this
Agreement, to Purchaser, contains or will contain any materially untrue
statement or omission of a material fact.
(t) No person or party, other than Purchaser, has any right or option
to acquire the Hotel or any portion thereof covered by this Agreement, or any
part thereof or any interest therein. There exist no agreements, written or
oral, affecting the Hotel which are not mentioned in this Agreement.
(u) Seller shall use its best efforts to identify a Like-Kind
Property promptly after the date hereof to be used in the exchange contemplated
in Section 3.1(c) hereof.
9.3. Subsequent Developments. After the date of this Agreement and
-----------------------
until the Closing Date, Seller shall keep Purchaser fully informed of all
subsequent developments which would cause any of Seller's representations
contained in this Agreement to be no longer accurate in any material respect.
After the date of this Agreement and until the Closing Date, Purchaser shall
keep Seller fully informed of all subsequent developments which would cause any
of Purchaser's representations contained in this Agreement to be no longer
accurate in any material respect.
9.4. Limitation on Further Sales Efforts. Seller may receive
-----------------------------------
unsolicited offers for the Hotel but shall not market the Hotel or solicit or
execute other offers prior to the termination of this Agreement in accordance
with its terms. If Seller has entered into any agreements with any brokers in
connection with the Hotel, Seller shall immediately instruct all such brokers to
cease further advertisement and other active promotion of the Hotel, provided
that Seller may advise such brokers that they may receive offers for the Hotel
as long as they follow the terms of this Section 9.4. Seller shall not be
responsible for the
25
<PAGE>
failure of any broker to follow Seller's instructions given in accordance with
the preceding sentence.
9.5. Shadow Management. Seller shall permit Purchaser to establish
-----------------
and maintain a shadow management operation with respect to the Hotel prior to
the Closing Date. Personnel from Purchaser's shadow management operation shall
have reasonable access during normal business hours to all books, records and
other information in the possession or control of Seller or its agents
concerning the Hotel and shall have the right (at Purchaser's expense) to
establish duplicate books and records in order to effect a smooth transition in
the ownership and management of the Hotel; provided, however, that Purchaser and
its shadow management operation and employees (a) shall not unreasonably
interfere with the normal management and operation of the Hotel, (b) shall hold
all information acquired from such books and records confidential in accordance
with the provisions of this Agreement, (c) shall repair any damage to the
physical condition of the Hotel caused by Purchaser or its agents in any such
shadow management operation in the event that the Closing does not occur, (d)
shall not be deemed to have assumed management responsibilities prior to Closing
by virtue of such shadow management and (e) shall not discuss or otherwise
disclose to Hotel employees the proposed sale of the Hotel without the prior
approval of Seller.
9.6. Access to Records and Financial Information. Purchaser and
-------------------------------------------
Purchaser's authorized representatives and employees shall have the right, at
Purchaser's sole cost, risk and expense, from time to time to enter upon and
pass through the Hotel during normal business hours and upon reasonable notice
to Seller to examine and inspect all of the then existing books, records,
surveys, plans, specifications, permits, certificates of occupancy and other
files that are relevant to the management, ownership, operation, use, occupancy,
construction or leasing of the Hotel, are in Seller's possession or control, and
have not been otherwise provided to Purchaser as required elsewhere herein,
provided that, to the extent permitted by law, Purchaser shall keep confidential
any information provided to Purchaser during such examinations and inspections
which has not previously been publicly disclosed by Seller. Purchaser and its
representatives and employees shall not unreasonably interfere with the
operation of the Hotel or the right to privacy of guests of the Hotel. Further,
and not in limitation of Section 5.2(ii) above, Purchaser's representatives
shall have access to all financial and other information relating to the Hotel
sufficient to enable them to prepare audited financial statements in form
requested by Purchaser's independent auditors. Seller shall cooperate with
Purchaser and its representatives in their review of the items listed in this
Section 9.6. Prior to the end of the Review Period, Seller shall also provide
to Purchaser's representatives a signed representation letter sufficient to
26
<PAGE>
enable an independent public accountant to render an opinion on the financial
statements related to the Hotel such letter to be in the form of Exhibit 9.6
-----------
hereto subject to the further requirements of such accountant.
9.7. Condition of Hotel. The Hotel shall be conveyed "as is" in its
------------------
present condition and state of repair (subject to reasonable wear, tear and
natural deterioration between the date hereof and the date of Closing),
provided, however, that this Section 9.7 shall not be construed to limit in any
way the terms of Article 8 hereof.
9.8. Seller's Indemnity. Seller agrees to indemnify, and hold
------------------
Purchaser harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees) which the Purchaser may suffer or incur
by reason of any debt, act or cause of action, not disclosed by Seller and
approved by Purchaser, occurring or accruing prior to the Closing Date and
arising from the ownership of the Sublease Interest or ownership or operation of
all other components of the Hotel prior to the Closing Date, including but not
limited to any claims by employees of Seller or third parties covered by
insurance carried by Seller.
9.9. Purchaser's Indemnity. Purchaser agrees to indemnify and hold
---------------------
Seller harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonably attorneys' fees) which the Seller may suffer or incur by
reason of (i) any debt, act or cause of action occurring and accruing subsequent
to the Closing Date and arising from the ownership of the Sublease Interest or
ownership or operation of all other components of the Hotel by Purchaser
subsequent to the Closing Date, including but not limited to any claims by
employees of Purchaser or third parties covered by insurance carried by
Purchaser, (ii) any public offering by Purchaser of a real estate investment
trust (the "REIT"), as such term is defined in Sections 856 to 860 of the
Internal Revenue Code of 1986, as amended, which Purchaser organizes and funds,
provided that Seller is not in default of any of its obligations hereunder or
(iii) any obligation incurred or liability arising after the Closing to any
employee, or under any union contract with respect to employees, employed by
Purchaser with regard to the Hotel subsequent to the Closing.
9.10. Liquor License. The Liquor License shall be conveyed to
--------------
Purchaser (or its designee) pursuant to a separate purchase and sale agreement
in form and content substantially similar to the agreement attached hereto as
Exhibit H (the "Liquor Transfer Agreement"), which shall reflect a purchase
- ---------
price for the Liquor License of Fifteen Thousand Dollars ($15,000). Promptly
after the execution hereof, (i) Purchaser shall execute (or cause its designee
to execute) the Liquor Transfer Agreement and deliver any escrow deposits
required
27
<PAGE>
thereunder and (ii) Seller shall execute (or cause the current holder of the
Liquor License to execute) the Liquor Transfer Agreement.
9.11. Food and Beverages. The Food and Beverages shall be conveyed to
------------------
Purchaser (or its designee) for a purchase price to be paid in cash by Purchaser
at Closing (as part of the Purchase Price), equal to the price unit list for the
Food and Beverages at the Hotel for the last full calendar month preceding
Closing. Seller shall deliver a copy of such price unit list to Purchaser at
Closing.
9.12. Elevator Service Contract. Upon Closing, Purchaser shall assume
-------------------------
a certain Vertrans Preventive Maintenance Agreement (the "Elevator Contract")
dated March 13, 1995, which provides for elevator maintenance and repair service
at the Hotel, unless Purchaser gives prior written notice to Seller (i) stating
that Purchaser does not wish to assume the Elevator Contract and (ii)
identifying the terms of an alternative agreement (an "Alternate Contract") for
the provision of such elevator maintenance and repair service. In the event
that Purchaser does not assume the Elevator Contract, Seller shall be
responsible for any termination or cancellation fees thereunder.
Notwithstanding the foregoing, in the event that the terms (including the
services provided) of the Elevator Contract and the Alternate Contract are
substantially similar except for the service, rental and other fees thereunder,
Seller may elect to pay or credit to Purchaser at Closing the difference between
(x) the aggregate remaining fees due under the Elevator Contract during the
remaining term thereof and (y) the aggregate fees which would be due under the
Alternative Contract during such remaining term, in which case Purchaser shall
assume the Elevator Contractor.
ARTICLE 10
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
In addition to any other conditions set forth in this Agreement,
Purchaser's obligations to consummate the Closing are subject to the timely
satisfaction of each and every one of the conditions and requirements set forth
in this Article 10, all of which shall be conditions precedent to Purchaser's
obligations under this Agreement, and failing in any of which Purchaser may
terminate this Agreement, the Earnest Money shall be returned to Purchaser
within five (5) days after any such termination, and neither party shall have
any further rights or obligations one to the other, except for the repair
obligation set forth in Section 5.1. Notwithstanding the foregoing, Purchaser,
in its sole discretion, may waive any such condition by notice to Seller.
28
<PAGE>
10.1. Seller's Obligation. Seller shall have performed all
-------------------
obligations of Seller hereunder which are to be performed prior to Closing.
10.2. Seller's Representations and Warranties. Seller's
---------------------------------------
representations and warranties set forth in Section 9.2 shall be true and
correct (or, if applicable, true and correct to the best of Seller's knowledge
and belief) in all material respects as if made again on the Closing Date.
10.3. Operational Licenses. Purchaser shall have obtained all
--------------------
permits, licenses, approvals and other authorizations necessary to operate the
Hotel and all restaurants, bars and lounges presently located in the Hotel,
including, without limitation, the Liquor Licenses. To that end, Seller and
Purchaser shall have cooperated with each other, and each shall have executed
such transfer forms, license applications and other documents as may be
necessary or desirable for Purchaser to obtain such permits, licenses, approvals
and other authorizations.
10.4. Consent of Sublessor and Master Lessor. Seller shall have
--------------------------------------
obtained the consent of Sublessor and Master Lessor to the transfer of the
Hotel.
10.5. Release by Sublessor. Seller shall have obtained from
--------------------
Sublessor a release from all obligations under the Sublease incurred after
Closing.
10.6. Other. The conditions of Article 11 below shall have been
-----
satisfied.
ARTICLE 11
CLOSING AND CLOSING DOCUMENTS
-----------------------------
11.1. Closing. The consummation and closing (the "Closing") of the
-------
transaction contemplated under this Agreement shall occur on the date (the
"Closing Date") that is the earlier of (i) thirty (30) days following the end of
the Review Period or (ii) July 1, 1996, provided, however, that in the event
Purchaser notifies Seller of any Title Objections or Other Objections in
accordance, respectively, with Sections 4.6 and 5.3 hereof, Purchaser, in its
sole discretion, may choose a Closing Date which is thirty (30) days following
the end, respectively, of the Post-Title Cure Period or the Post-Cure Period, by
giving notice to Seller prior to the date on which the Closing would otherwise
occur. In the event that the Closing Date would otherwise occur prior to July
1, 1996, Seller shall have the right to designate July 1, 1996 as the Closing
Date. Notwithstanding anything to the contrary contained herein, the Closing
Date determined in accordance with this Section 11.1 is subject to Purchaser's
right
29
<PAGE>
to extend such Closing Date in accordance with Section 11.2 hereof.
The parties hereto shall endeavor in good faith to enter into a
mutually satisfactory escrow agreement with the Title Company pursuant to which
the Closing shall occur on the Closing Date through an escrow-style closing. At
least one (1) day prior to the Closing Date, the parties hereto shall place in
escrow with the Title Company (i) the documents to be delivered pursuant to this
Article 11 and (ii) the proration funds estimated pursuant to Sections 11.5 and
11.7 hereof.
11.2. Right to Extend Closing Date. Purchaser shall have the right
----------------------------
to extend the Closing Date for up to thirty (30) days after the date on which
the Closing would otherwise occur under Section 11.1, by giving notice to Seller
prior to such date on which the Closing would otherwise occur.
11.3. Seller's Deliveries. At the Closing and at Seller's sole cost
-------------------
and expense, Seller shall deliver the following to Purchaser in addition to all
other items required to be delivered to Purchaser by Seller:
(a) Assignment of Sublease Interest. An Assignment of Sublease
-------------------------------
Interest in a form acceptable to Purchaser's counsel, duly executed and
acknowledged by Seller ("Sublease Assignment").
(b) Bill of Sale. The Bill of Sale duly executed and acknowledged by
------------
Seller;
(c) Assignment and Assumption of Leases, FF&E Leases and Service
------------------------------------------------------------
Contracts. An Assignment and Assumption of all of the Leases, FF&E Leases, and
- ---------
Service Contracts which Purchaser has accepted hereunder, in a form reasonably
acceptable to, and duly executed by, both Purchaser and Seller (the "Assignment
and Assumption of Leases") provided that (i) the Assignment of Leases shall
contain the concepts set forth in Sections 9.7 and 9.8 above, (ii) Seller shall
indemnify Purchaser for any liability incurred prior to Closing under such
Leases, FF&E Leases, and Service Contracts and (iii) Purchaser shall indemnify
Seller for any liability incurred after Closing under such Leases, FF&E Leases,
and Service Contracts;
(d) FIRPTA Affidavit. An affidavit from Seller in form and substance
------
acceptable to Purchaser, as required by Section 1445 of the Internal Revenue
Code, specifying (i) that Seller is not a foreign entity, foreign corporation,
foreign partnership, foreign trust or foreign estate (as those terms are defined
in the Internal Revenue Code and Income tax regulations), (ii) Seller's taxpayer
identification number or U.S. employer identification number, (iii) Seller's
office address, and (iv) such other matters as Purchaser may reasonably require
in order
30
<PAGE>
to satisfy itself that no withholding is required under Section 1445 of the
Internal Revenue Code including an indemnity against any claim for taxes which
should have been withheld;
(e) Vehicle Titles. The necessary certificates of titles duly
--------------
endorsed for transfer together with any required affidavits and other
documentation necessary for the transfer of title from Seller to Purchaser of
any motor vehicles owned by Seller and used in connection with the Hotel's
operations;
(f) Authority Documents. Evidence satisfactory to Purchaser that the
-------------------
person or persons executing the closing documents on behalf of Seller have full
right, power and authority to do so;
(g) Title Policy. An Owner's Policy of Title Insurance ("Title
------------
Policy") issued pursuant to the Title Commitment as approved by Purchaser and
issued by the Title Company (or other underwriter approved by Purchaser) to
Purchaser insuring (i) the Sublease Interest and (ii) good and marketable title
to the Improvements (and full rights to any of the Appurtenances evidenced by a
recorded document or otherwise adequate for the Title Company to include in
affirmative coverage as part of the insured estate), subject only to the
Permitted Exceptions, with such endorsements as Purchaser shall reasonably
require, in the amount of the portion of the Purchase Price allocated under
Section 3.2 to the Sublease Interest and the Improvements. Seller shall pay the
premium for the Title Policy and any other fees or charges imposed in connection
with such policy;
(h) Miscellaneous. Such other instruments as are customarily
-------------
executed in the county and State where the Hotel is located to effectuate the
conveyance of property similar to the Hotel, with the effect that, after the
Closing, Purchaser will have succeeded to all of the rights, titles, and
interests of Seller related to the Hotel and Seller will no longer have any
rights, titles, or interests in and to the Hotel. Such instruments shall
include, if appropriate, any documents required effectively to transfer the
Utility Reservations by Seller to Purchaser;
(i) Plans, Keys, and Records. To the extent not previously delivered
------------------------
to and in the possession of Purchaser, all Plans and Specs, all keys, access
cards, and combinations for the Hotel (which shall be properly tagged for
identification), all Records, and all Licenses;
(j) Original Documents. Originals of all of the documents and
------------------
agreements covered by the foregoing that have not already been delivered to
Purchaser;
31
<PAGE>
(k) Updates. A complete list of all advance room reservations,
-------
functions and the like, in reasonable detail specified by Purchaser, and updated
UCC Searches;
(l) Estoppel Letters. Either the estoppel letters or Seller's
----------------
certificates as described in Section 8.5 above; and
(m) Termination of Management Agreements. Fully executed and
------------------------------------
effective terminations of all management agreements with respect to the Hotel.
On the Closing Date, Seller shall deliver to Purchaser possession of the Hotel
free and clear of all tenancies of every kind and parties in possession, except
for the Tenants under the Leases assumed by Purchaser under the terms hereof and
guests in the Hotel, and with all parts of the Hotel (including, without
limitation, the Improvements and FF&E) in substantially the same condition as
the same were on the date of this Agreement, normal wear only excepted.
11.4. Purchaser's Deliveries. At the Closing and at Purchaser's sole
----------------------
cost and expense, Purchaser shall deliver the following to Seller:
(a) Purchase Price. The Purchase Price, plus or minus the
--------------
adjustments to be made at the Closing in accordance with the terms of this
Agreement;
(b) Corporate Documents. A certified copy of the certificate of
-------------------
incorporation and corporate bylaws of Purchaser, and any amendments thereto, and
a corporate resolution authorizing the transactions contemplated in this
Agreement;
(c) Authority Documents. Evidence satisfactory to Seller that the
-------------------
person or persons executing the closing documents on behalf of Purchaser have
full right, power and authority to do so;
(d) Assignment of Purchase Agreement. An assignment of this
--------------------------------
Agreement from Purchaser to the Operating Partnership or an affiliate thereof;
and
(e) Confirmation of Assignee's Financial Information. A confirmation
------------------------------------------------
of the accuracy of the pro forma financial statements of the Operating
Partnership (or the aforesaid affiliate) delivered under Section 9.1(e) hereof.
(f) Miscellaneous. Such other instruments as are customarily
-------------
executed by the purchaser in the county and State where the Hotel is located to
effectuate the purchase of property similar to the Hotel.
32
<PAGE>
11.5. Prorations. At Closing, the following items of revenue and
----------
expense shall be prorated, adjusted and appropriated as of 12:01 A.M. (except as
otherwise provided) on the Closing Date, subject to Section 11.7 hereof:
(a) Hotel Taxes. Real estate taxes, personal property or use taxes,
-----------
assessments, and sewer rents, on the basis of the best available estimates for
such taxes, assessments and rents that will be due and payable on the Hotel for
the calendar year in which the Closing occurs, and Seller shall pay to Purchaser
in cash at the Closing or credit against the Purchase Price Seller's pro rata
portion of such taxes, assessments and rents, provided however, that if any
assessments are payable in installments, Seller shall pay to Purchaser in cash
at the Closing or credit against the Purchase Price those installments due at or
before Closing. As soon as the exact amount of such taxes, assessments and
rents for such calendar year is ascertained, Seller and Purchaser shall readjust
the amounts thereof to be paid by each party to the end that Seller shall pay
for those such taxes, assessments and rents attributable to the period of time
prior to the Closing Date. Special assessments of any public or taxing
authority constituting liens or encumbrances on the Hotel or attributable to
improvements benefiting the Hotel or property in the vicinity of the Hotel which
have been commenced prior to the Closing Date, whether or not assessment
therefor has been levied or a lien has been imposed upon the Hotel, shall be
paid by and discharged of record by Seller on or before the Closing Date. If
any such special assessments for improvements benefiting the Hotel or property
in the vicinity of the Hotel may be paid in installments and Seller has elected
the installment method of payment, all installments shall be deemed payable as
of the day prior to the Closing Date and shall be discharged of record by Seller
on or before the Closing Date;
(b) Operating Costs. All costs and expenses of operating the Hotel,
---------------
including without limitation amounts paid or payable under the Service Contracts
or the FF&E Leases;
(c) Lease Rents. Rents under Leases and other revenues as and when
-----------
collected. If Purchaser receives any rents from Tenants after the Closing Date
then such collections shall first be applied to rents accruing on or after the
Closing Date, and Purchaser shall promptly remit the balance, if any, to Seller
to the extent any pre-Closing Date rental obligation under such Tenant's Lease
remains unpaid to Seller. Nothing in this paragraph shall restrict Seller's
right to collect delinquent rents directly from a tenant by any legal means or
shall obligate Purchaser to attempt to collect such delinquent rents on Seller's
behalf;
(d) Groundlease and Sublease Rents. Any rents (whether fixed or
------------------------------
otherwise) under the Groundlease or Sublease.
33
<PAGE>
Seller shall receive a cash credit for any security deposits made by Seller
under the Master Lease or Ground Lease to Master Lessor or Sublessor,
respectively, which are not returned to Seller, provided that Seller assigns the
right to such deposits to Purchaser;
(e) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service and
restaurant revenue shall be apportioned as of the closing of dinner service
hours at each restaurant on the evening preceding the Closing Date, and bar
revenues shall be read, measured (and tapes preserved) and apportioned as of
2:00 A.M. on the Closing Date and provided further that room rental receipts
through the night before Closing shall belong to Seller, though Seller shall be
responsible for all room maid service costs for such night. All cash, checks,
and other funds, and all other notes, security and other evidence of
indebtedness located at the Hotel on the Closing Date and balances on deposit to
the credit of the Seller with banking institutions are and shall remain the
property of the Seller and are not included in this sale except for the Cash
Drawers;
(f) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade subscriptions, coin machine income, and washroom and
checkroom income;
(g) Deposits. (i) Purchaser shall receive a cash credit in an amount
--------
equal to the sum of all prepaid rentals and all security deposits, cleaning fees
and deposits and other deposits paid under any Lease and not properly applied as
of the Closing to a monetary obligation of the related Tenant and (ii) Seller
shall receive a cash credit for all utility and other deposits made by Seller to
any utility company or other third party which are not returned to Seller,
provided that Seller assigns the right to such deposits to Purchaser; and
(h) Sales Taxes. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
time of proration as set forth herein, and all sales, use and occupancy taxes,
if any, payable in connection with any of the transactions contemplated by this
Agreement will be paid by Seller. Seller shall be entitled to receive any
rebates or refunds on such taxes paid by Seller prior to the Closing.
11.6. Document Preparation and Transfer Costs. The cost of preparing
---------------------------------------
or obtaining documents to be delivered by
34
<PAGE>
Purchaser to Seller pursuant to this Agreement shall be paid by Purchaser. The
cost of preparing or obtaining documents to be delivered by Seller to Purchaser
pursuant to this Agreement shall be paid by Seller including, but not limited
to, the cost of obtaining the Sublessor Consent, Master Lessor Consent, Non-
Disturbance Agreement, Estoppel Certificate from Sublessor and Estoppel
Certificate from Master Lessor. Purchaser and Seller shall equally pay all
transfer and recording fees and taxes, and transfer, assumption and/or
assignment fees and charges imposed by any party having an interest in the
Hotel. Seller and Purchaser each shall pay one-half of the Title Company's
escrow fee.
11.7. Reconciliation and Final Payment. Prior to Closing, Seller and
--------------------------------
Purchaser shall reasonably cooperate to make a preliminary determination of the
prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. Seller and Purchaser
shall reasonably cooperate after Closing to make a final determination of such
prorations. Upon the final reconciliation of the prorations under this Section
and Section 11.5, the party which owes the other party any sums hereunder shall
pay such party such sums within ten (10) days after the reconciliation of such
sums. The obligations to calculate such prorations, make such reconciliations
and pay any such sums shall survive the Closing.
11.8. Accounts Payable. Seller shall retain and be responsible for
----------------
the payment of all accounts payable and other debts relating to the Hotel which
have accrued prior to or as of the Closing and payable after the Closing to the
extent the Purchase Price is not adjusted in favor of Purchaser under the
proration provisions of Sections 11.5 and 11.7 of this Agreement for such
accounts payable and other debts. Purchaser shall be responsible for the
particular accounts payable relating to the Hotel arising and accruing after the
Closing to the extent the Purchase Price is not adjusted in favor of Seller
under the same provisions.
11.9. Accounts Receivable. All accounts receivable relating
-------------------
exclusively to periods prior to the Closing Date ("Accounts Receivable") shall
remain the property of Seller. Purchaser shall forward to Seller all payments
(including credit card reimbursements) actually received by Purchaser for
Accounts Receivable, provided that Purchaser shall have no obligation to collect
unpaid Accounts Receivable.
ARTICLE 12
CASUALTY AND CONDEMNATION
-------------------------
12.1. Risk of Loss; Notice. Prior to Closing and the delivery of
--------------------
possession of the Hotel to Purchaser in accordance with this Agreement, all risk
of loss to the Hotel (whether by
35
<PAGE>
casualty, condemnation or otherwise) shall be borne by Seller. In the event
that (a) any loss or damage to the Hotel shall occur prior to the Closing Date
as a result of fire or other casualty, or (b) Seller receives notice that a
governmental authority has initiated or threatened to initiate a condemnation
proceeding affecting the Hotel, Seller shall give Purchaser immediate written
notice of such loss, damage or condemnation proceeding.
12.2. Purchaser's Termination. If, prior to Closing and the delivery
-----------------------
of possession of the Hotel to Purchaser in accordance with this Agreement, (a)
any condemnation proceeding shall be pending against a substantial portion of
the Hotel or (b) there is any substantial casualty loss or damage to the Hotel,
Purchaser shall have the option to terminate this Agreement provided it delivers
written notice to Seller of its election so to terminate this Agreement within
thirty (30) days after the date Seller has delivered Purchaser written notice of
any such loss, damage or condemnation (which notice shall include a
certification of (i) the amounts of insurance coverages in effect with respect
to the loss or damage and (ii) if known, the amount of the award to be received
in such condemnation), and in such event all Earnest Money shall be delivered to
Purchaser and thereafter no party shall have any further obligation or liability
to the other under this Agreement. In the context of condemnation,
"substantial" shall mean condemnation of such portion of the Hotel as would, in
Purchaser's sole judgment, render use of the remainder impractical or unfeasible
for the uses herein contemplated, and, in the context of casualty loss or
damage, "substantial" shall mean a loss or damage in excess of $100,000 in
value.
12.3. Procedure for Closing. If Purchaser shall not timely elect to
---------------------
terminate this Agreement under Section 12.2 above, or if the loss, damage or
condemnation is not substantial, Seller agrees to pay to Purchaser at the
Closing all insurance proceeds or condemnation awards which Seller has received
as a result of the same plus an amount equal to the insurance deductible, if
any, and assign to Purchaser all insurance proceeds and condemnation awards
payable as a result of the same in which event the Closing shall occur without
Seller replacing or repairing such damage.
ARTICLE 13
DEFAULT AND REMEDIES
--------------------
13.1. Purchaser's Default. If, at or prior to Closing, for any
-------------------
reason other than termination hereof pursuant to a right granted to Purchaser
hereunder to do so or because of an uncured default by Seller (i) Purchaser
refuses or fails to consummate the purchase of the Hotel pursuant to this
Agreement, or (ii) Purchaser shall otherwise fail in any material respect to
36
<PAGE>
perform any of its material obligations as and when required hereunder, or if,
at or prior to Closing, any representation or warranty made by or on behalf of
Purchaser herein shall have been materially incorrect when made, then Seller
shall give Purchaser and the Title Company written notice specifying the nature
of the default, and Purchaser shall have thirty (30) days from receipt of
Seller's notice within which to cure the specified default; provided, however,
if at the end of said thirty (30) day period Purchaser is diligently pursuing
the cure of the default but the default has not been cured, Purchaser shall have
an additional period not to exceed thirty (30) days within which to complete the
cure of the default. If at the end of the initial thirty (30) or, if
applicable, additional thirty (30) day period the default is still not cured,
then Seller, as its sole and exclusive remedy, shall have the right to terminate
this Agreement by giving Purchaser and the Title Company written notice thereof,
in which event neither party shall have any further rights, duties or
obligations hereunder (except to the extent this Agreement may specifically
provide for the survival of certain obligations of Purchaser) and Seller shall
be entitled to receive the Earnest Money as liquidated damages, Seller and
Purchaser hereby acknowledging that the amount of damages resulting from breach
of this Agreement by Purchaser would be difficult or impossible accurately to
ascertain, and the Title Company shall immediately deliver the Earnest Money to
Seller. Notwithstanding the foregoing, in the event of any default by Purchaser
under this Agreement due to a breach after Closing or any termination hereof of
any covenant or indemnity which survives the Closing or any termination hereof,
or if Seller shall discover after Closing that any warranty or representation
made by Purchaser herein or in connection with the transaction contemplated
herein was materially incorrect or breached when made, Seller shall have any and
all rights and remedies available at law or in equity by reason of such default.
If Purchaser terminates this Agreement pursuant to a right granted to Purchaser
hereunder to do so, then neither party shall have any further rights, duties or
obligations hereunder (except to the extent this Agreement may specifically
provide for the survival of certain obligations of Purchaser), and the Earnest
Money together with all interest earned thereon shall be returned to Purchaser.
13.2. Seller's Default. If, at or prior to Closing, for any reason
----------------
other than termination hereof pursuant to a right granted to Seller hereunder to
do so or because of an uncured default by Purchaser (i) Seller refuses or fails
to consummate the transaction contemplated by this Agreement, or (ii) otherwise
wrongfully fails to perform any of its obligations or agreements hereunder, or
if, at or prior to Closing, any representation or warranty made by or on behalf
of Seller herein shall have been materially incorrect when made, then Purchaser
shall give Seller and the Title Company written notice specifying the nature of
the
37
<PAGE>
default, and Seller shall have thirty (30) days from receipt of Purchaser's
notice within which to cure the specified default; provided, however, if at the
end of said thirty (30) day period Seller is diligently pursuing the cure of the
default but the default has not been cured, Seller shall have an additional
period not to exceed thirty (30) days within which to complete the cure of the
default. If at the end of the initial thirty (30) or, if applicable, additional
thirty (30) day period, the default is still not cured, then Purchaser, as its
sole remedies, shall have the right to do any one or more of the following:
(a) Terminate this Agreement by written notice given to Seller and
the Title Company within fifteen (15) days of the expiration of the initial
thirty (30) or additional thirty (30) day cure period (whichever is applicable),
in which event the Earnest Money shall be returned to Purchaser by the Title
Company promptly upon receipt of such notice; or
(b) Seek damages or specific performance of this Agreement.
Notwithstanding the foregoing, in the event of any default by Seller under this
Agreement due to a breach after Closing or any termination hereof of any
covenant or indemnity which survives the Closing or any termination hereof, or
if Purchaser shall discover after Closing that any warranty or representation
made by Seller herein or in connection with the transaction contemplated herein
was materially incorrect or breached when made, Purchaser shall have any and all
rights and remedies available at law or in equity by reason of such default.
13.3. Survival. Neither Purchaser's nor Seller's attendance or
--------
appearance at Closing shall be deemed to nullify or void the provisions of this
Section.
ARTICLE 14
BROKERS
-------
14.1. Identity of Brokers. The parties hereto represent to each
-------------------
other that they dealt with no finder, broker or consultant in connection with
this Agreement or the transactions contemplated hereby except for Com-Spec
Properties Inc. (the "Brokers") which have been engaged by Seller to assist as
brokers in the sale of the Hotel. Seller shall be responsible for payment of
the commissions owing to the Brokers out of the Purchase Price payable at
Closing.
14.2. Indemnification by Seller. Seller agrees to, and hereby does,
-------------------------
indemnify and save harmless Purchaser and its affiliates and their respective
successors and assigns against and from any loss, liability or expense,
including reasonable
38
<PAGE>
attorneys' fees, arising out of any claim or claims for commissions or other
compensation for bringing about this Agreement or the transactions contemplated
hereby made by any broker, finder, consultant or like agent if such claim or
claims made by any such broker, finder, consultant or like agent are based in
whole or in part on any agreements entered into by Seller or its representatives
for a commission or other compensation. Seller shall likewise indemnify and
save harmless Purchaser and its affiliates and their respective successors and
assigns against and from any loss, liability or expense, including reasonable
attorneys' fees, arising out of any claim or claims for commissions or other
compensation relating to the Leases.
14.3. Indemnification by Purchaser. Purchaser agrees to, and hereby
----------------------------
does, indemnify and save harmless Seller and its affiliates and their respective
successors and assigns against and from any loss, liability or expense,
including reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by any broker, finder, consultant or like
agent if such claim or claims made by any such broker, finder, consultant or
like agent are based on any agreements entered into by Purchaser or its
representatives for a commission or other compensation.
ARTICLE 15
MISCELLANEOUS
-------------
15.1. Notices. Any notice provided for by this Agreement and any
-------
other notice, demand or communication which any party may wish to send to
another shall be in writing and either delivered in person or sent by registered
or certified mail or overnight courier, return receipt requested, in a sealed
envelope, postage prepaid, and addressed to the party for which such notice,
demand or communication is intended at such party's address as set forth in this
Section. Purchaser's address for all purposes under this Agreement shall be the
following:
American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Steven D. Jorns, President, or
Bruce G. Wiles, Executive Vice President
39
<PAGE>
with a copy to:
Battle Fowler LLP
75 East 55th Street
Park Avenue Tower
New York, New York 10022
Attention: Peter M. Fass, Esq.
Seller's address for all purposes under this Agreement shall be the following:
Le Baron Hotels, Inc.
1029 Beacon Bluff Court
Colorado Springs, Colorado 80906
Attention: Christopher R. Riley
with a copy to:
V. Frank Asaro, Esq.
4350 La Jolla Village Drive
Suite 300
San Diego, California 92122
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall
be deemed given and effective as of the date of delivery in person or receipt
set forth on the return receipt. The inability to deliver because of changed
address of which no notice was given, or rejection or other refusal to accept
any notice, demand or other communication, shall be deemed to be receipt of the
notice, demand or other communication as of the date of such attempt to deliver
or rejection or refusal to accept.
15.2. Entire Agreement; Modifications and Waivers, Cumulative
-------------------------------------------------------
Remedies. This Agreement constitutes the entire agreement between the parties
- --------
hereto and may not be modified or amended except by an instrument in writing
signed by the parties hereto, and no provisions or conditions may be waived
other than by a writing signed by the party waiving such provisions or
conditions. No delay or omission in the exercise of any right or remedy
accruing to Seller or Purchaser upon any breach under this Agreement shall
impair such right or remedy or be construed as a waiver of any such breach
theretofore or thereafter occurring. The waiver by Seller or Purchaser of any
breach of any term, covenant or condition herein stated shall not be deemed to
be a waiver of any other breach, or of a subsequent breach of the same or any
other term, covenant or condition herein contained. All rights, powers, options
or remedies afforded to Seller or Purchaser either hereunder or by law shall be
cumulative and not alternative, and the exercise of one right, power, option or
remedy shall not bar other rights, powers, options or remedies
40
<PAGE>
allowed herein or by law, unless expressly provided to the contrary herein.
15.3. Exhibits. All exhibits referred to in this Agreement and
--------
attached hereto are hereby incorporated in this Agreement by reference.
15.4. Successors and Assigns. Purchaser may assign its rights under
----------------------
this Agreement to any limited partnership, limited liability company or other
entity to be formed for the purpose of purchasing the Hotel or implementing the
REIT so long as Purchaser (i) provides notice thereof to Seller prior to
Closing, (ii) guarantees the obligations of such assignee under the Sublease and
Groundlease and (iii) obtains the consent of Sublessor and Master Lessor to such
assignment, provided that Seller shall cooperate with Purchaser in obtaining
such consents. This Agreement shall be binding upon, and inure to the benefit
of, Seller and Purchaser and their respective legal representatives, successors,
and assigns and shall not be construed to benefit any third party. Whenever a
reference is made in this Agreement to Purchaser, it shall include Purchaser's
successors and assigns under this Agreement.
15.5. Article Headings. Article headings and article and section
----------------
numbers are inserted herein only as a matter of convenience and in no way
define, limit or prescribe the scope or intent of this Agreement or any part
thereof and shall not be considered in interpreting or construing this
Agreement.
15.6. Governing Law. This Agreement shall be construed and
-------------
interpreted in accordance with the laws of the State where the Hotel is located.
15.7. Time Periods. If the final day of any time period or
------------
limitation set out in any provision of this Agreement falls on a Saturday,
Sunday or legal holiday under the laws of the State where the Hotel is located
or of the federal government, then and in such event the time of such period
shall be extended to the next day which is not a Saturday, Sunday or legal
holiday.
15.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by either party hereto on a separate counterpart, each of which
when so executed and delivered shall be deemed an original and all of which
taken together shall constitute but one and the same instrument.
15.9. Survival. All covenants, agreements and indemnities contained
--------
in the Agreement which contemplate performance after the Closing Date shall
survive the Closing. All representations and warranties contained in this
Agreement shall expressly survive the Closing for a period of five (5)
41
<PAGE>
years. None of the foregoing shall be deemed to merge into, or be waived by,
any closing document.
15.10. Further Acts. In addition to the acts, deeds, instruments and
------------
agreements recited herein and contemplated to be performed, executed and
delivered by Purchaser and Seller, Purchaser and Seller shall perform, execute
and deliver or cause to be performed, executed and delivered at the Closing or
after the Closing, any and all further acts, deeds, instruments and agreements
and provide such further assurances as the other party or the Title Company may
reasonably require to consummate the transaction contemplated hereunder.
However, the foregoing shall not be deemed to (i) require Seller to expend a sum
of money which it could not reasonably have anticipated on the date of execution
of this Agreement, or (ii) require Purchaser to expend a sum of money which it
could not reasonably have anticipated on the expiration of the Review Period.
15.11. Severability. In case any one or more of the provisions
------------
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
15.12. Attorneys' Fees. Should either party employ an attorney or
---------------
attorneys to enforce any of the provisions hereof or to protect its interest in
any, manner arising under this Agreement, the non-prevailing party in any action
pursued in a court of competent jurisdiction (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages, and expenses, including attorneys' fees, expended or incurred in
connection therewith.
42
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into effective as
of the 25th day of April, 1996.
----
SELLER:
LE BARON HOTELS, INC.
By: /s/ Christopher R. Riley
-----------------------------------------
Name: Christopher R. Riley
Title: President and Chief Financial Officer
PURCHASER:
AMERICAN GENERAL HOSPITALITY, INC.
By: /s/ Bruce G. Wiles
----------------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
43
<PAGE>
LIST OF EXHIBITS
- ----------------
Exhibit A - Legal Description of Land
Exhibit 3.1(c) - Assignment of Rights and Notification (Seller's Position)
Exhibit 8.5 - Tenant Estoppel Letter
Exhibit B - Service Contracts, Leases, Warranties and FFE Leases
Exhibit B-1 - Service Contract(s) to be assumed by Purchaser
Exhibit C - Insurance
Exhibit D - Licenses, Permits and Certificates
Exhibit E - Financial Statements
Exhibit F - Groundlease and Sublease
Exhibit 9.6 - Audit Representation Letter
Exhibit H - Liquor Transfer Agreement
The exhibits and/or schedules of Exhibit 10.29, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
Exhibit 10.30
REAL ESTATE SALE AGREEMENT
--------------------------
Days Inn - Ocean City, Maryland
-------------------------------
The exhibits and/or schedules of Exhibit 10.30, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
THIS AGREEMENT ("Agreement"), made as of the 11th day of April, 1996 by and
--------- ----
between COM Realty, Inc., a Delaware corporation ("Seller") and American General
------
Hospitality, Inc., its nominees or assigns ("Purchaser").
---------
WITNESSETH:
----------
WHEREAS, Seller desires to sell and Purchaser desires to purchase the real
estate herein described;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the sum of Ten Dollars ($10.00) in hand paid to the other and other good and
valuable consideration, the parties hereto agree as follows:
1. Agreement of Purchase and Sale. The Purchaser agrees to purchase and
------------------------------
Seller agrees to sell, upon the terms, provisions and conditions herein
contained, all of Seller's right, title and interest in and to the following:
the land (hereafter called the "Land") located at 4201 Coastal Highway, Ocean
City (Worcester County), Maryland, legally described in Exhibit "A" attached
hereto and made a part hereof and commonly known as the Days Inn - Ocean City;
all buildings, improvements and fixtures thereon (hereafter collectively called
the "Improvements"); all goods, equipment, supplies, furniture, furnishings,
machinery, appliances and other personal property (including assignment of
telephone number 410-289-6488), if any, owned by Seller, located on the Land or
in the Improvements and used in connection with the operation thereof, but
excluding all inventories of food, liquor and sundries (hereafter collectively
called the "Personalty"); and all easements, appurtenances, rights, privileges,
reservations, tenements and hereditaments belonging to any of the foregoing.
The Land, Improvements, Personalty and other foregoing items are hereafter
collectively called the "Premises."
2. Closing Date and Place. The consummation of the transaction
----------------------
contemplated herein (herein called the "Closing") shall take place at the
-------
offices of the Title Company (hereafter defined), at a time and date mutually
agreed upon by the parties, but not later than June 30, 1996, or on the date, if
any, to which such time is extended by reason of Paragraph 4 of this Agreement
becoming operative, or by reason of Purchaser having delivered to Seller written
notice of extension thereof to July 30, 1996, and having delivered an additional
$50,000 Earnest Money to Escrow Agent, which amount will be deemed non-
refundable to Purchaser absent Seller's default, whichever date is later (the
"Closing Date").
The Closing and disbursement of funds with regard to the transactions
contemplated hereunder shall take place in an escrow with the Title Company, as
escrowee, pursuant to a written escrow agreement among the Title Company and the
attorneys for the parties, in form
<PAGE>
mutually satisfactory to the parties. The cost of any escrow services provided
by the Title Company shall be borne equally by the parties.
3. Purchase Price. The Purchase Price for the Premises (herein the
--------------
"Purchase Price") shall be Seven Million Five Hundred Thousand and no/100
- ---------------
DOLLARS ($7,500,000.00), paid to Seller as follows:
a. Upon execution of this Agreement by Purchaser, Purchaser shall
deposit with the Title Company as escrow agent ("Escrow Agent") the sum of
Two Hundred Thousand and no/100 DOLLARS ($200,000.00) in cash or by
certified check as earnest money (the "Earnest Money") to be applied to the
Purchase Price at Closing or otherwise in accordance with the terms of this
Agreement. The Earnest Money is to be held by Escrow Agent in trust for the
mutual benefit of the parties hereto in accordance with the terms herein
set forth. At Purchaser's request, the Earnest Money will be invested at a
Federally insured banking institution in a passbook savings account earning
interest on a day of deposit to day of withdrawal basis or such other
account approved by Seller and Purchaser. Interest on the Earnest Money
shall belong to the party entitled to the Earnest Money, and as used herein
the term "Earnest Money" shall include any and all interest thereon.
Purchaser bears the risk of the failure of the depository. Upon expiration
of the Due Diligence Period (hereafter defined), provided Purchaser has
elected to proceed with the purchase of the Premises, the Earnest Money
shall be deemed wholly nonrefundable to Purchaser (absent Seller's default)
and, at Closing shall be paid to Seller and credited to the payment of the
Purchase Price; and
b. The balance of the Purchase Price, plus or minus the prorations
described herein, shall be paid on the Closing Date in cash by wire
transfer of immediately available federal funds through escrow and then to
a financial institution and account designated by Seller.
4. Survey and Title Insurance. Within ten (10) business days of the
--------------------------
Execution Date, Seller, at its expense, shall furnish to Purchaser the
following:
a. a title commitment ("Title Commitment") for an ALTA Form B
owner's title insurance policy ("Title Policy") issued by Chicago Title
Insurance Company (the "Title Company") in the amount of the Purchase Price
subject to the general exceptions contained in the Title Policy, the
matters set forth on Exhibit "B" hereto subject to Purchaser's review
rights under Section 4.c below, and any title exceptions permitted by
subparagraph (c) below (collectively the "Permitted Exceptions").
b. a current plat of survey (the "Survey") of the Land and
Improvements made and certified by the surveyor in favor of the Title
Company and Purchaser in a form sufficient to cause the Title Company to
delete any exception for matters of survey.
c. Purchaser shall have ten (10) days from the receipt of the Title
Commitment accompanied by copies of all documents of exception, and the
Survey as modified (at Purchaser's expense) to meet Purchaser's
requirements in which to notify Seller of any
2
<PAGE>
title defects ("Defects") disclosed by the Title Commitment or the Survey,
which Purchaser deems objectionable. Any matter set forth in the Title
Commitment or the Survey and not set forth in said notice shall be deemed
to be a permitted exception to the title, and the Deed (hereafter defined)
and Title Policy delivered at Closing may be subject thereto, or if no such
notice is given, it shall be deemed that Purchaser has agreed to accept the
Premises subject to the matters shown in the Title Commitment, or the
Survey, and this Agreement shall remain in full force and effect. Seller
shall have twenty (20) days from receipt of Purchaser's notice (the "Cure
Period") in which to remedy the Defects and provide evidence satisfactory
to Purchaser thereof. If Seller fails to remedy such Defects within the
Cure Period, Purchaser shall have the option exercisable within ten (10)
days after the expiration of Seller's Cure Period to accept conveyance of
title subject to such Defects, and proceed with this Agreement (in which
event the Title Commitment and the Deed will be accepted subject to any
such Defects) or, give written notice to Seller to terminate this
Agreement, and thereafter no party hereto shall have any claims, rights,
duties, obligations, or liabilities to another party hereto by virtue of
this Agreement, except those which herein are expressly stated to survive
any termination of this Agreement, and the Earnest Money Deposit shall be
returned to Purchaser. If Purchaser makes no election it shall be deemed
that Purchaser has agreed to accept the title "as is" subject to the
Defects, and this Agreement shall remain in full force and effect.
5. Conveyance and Documents. At the Closing, the parties will execute
------------------------
and deliver all deeds and other documents necessary to consummate the sale and
purchase of the Premises pursuant to the terms of this Agreement:
a. At Closing, Seller will deliver to Purchaser the following
documents (all of which shall be duly executed, sealed, witnessed and
notarized where required):
(i) Special Warranty Deed (the "Deed") in recordable form
----
conveying to Purchaser Purchaser (or Purchaser's assignee under
Section 21 below) title to the Land and Improvements subject only to
the Permitted Exceptions.
(ii) Special Warranty Bill of Sale conveying the Personalty to
Purchaser (or Purchaser's assignee under Section 21 below) subject
only to the Permitted Exceptions.
(iii) An assignment of all contracts and personal property and
equipment leases, if any, (collectively the "Assigned Contracts")
which are assignable and not terminable by Seller at will (with an
assumption by Purchaser of all obligations arising and to be performed
on or after the Closing Date) concerning the operation, repair and
maintenance of the Premises, except for any management contract (which
will be canceled at Seller's sole expense at Closing). Purchaser shall
indemnify and hold Seller harmless with respect to same. Seller shall
give a similar indemnity for its period of ownership of the Premises.
3
<PAGE>
(iv) Blanket assignment and transfer of any and all assignable
warranties and guarantees from any contractors, subcontractors,
suppliers, manufacturers or distributors relating to the Premises, if
any.
(v) To the extent possessed by Seller: the original of all
assigned leases, contracts, and any licenses, permits, and
certificates of occupancy for the Premises.
(vi) Drawings, plans and specifications and maintenance and
warranty manuals for the Premises, if any are possessed by Seller.
(vii) A copy of a Resolution of the Board of Directors of Seller
certified by the Secretary or Assistant Secretary of Seller to be in
force as of the Closing Date, authorizing the transactions
contemplated herein, the execution and delivery of all documents
required to effectuate such, and designating the officers of Seller
who are authorized to execute and deliver such documents on behalf of
Seller, together with a Certificate of Incumbency with respect to such
officers.
(viii) A FIRPTA certificate, certifying that Seller is not a
foreign entity under FIRPTA.
(ix) Evidence satisfactory to Purchaser that Seller's Days Inn
franchise has been terminated at no cost or residual fee or expense to
Purchaser.
(x) All other instruments, affidavits and documents as may be
reasonably requested by the Title Company and necessary or appropriate
to consummate the transaction contemplated herein.
(xi) The Title Policy in the full amount of the Purchase Price
subject only to the Permitted Exceptions.
b. At Closing, Purchaser will deliver to Seller cash portion of the
Purchase Price.
c. At Closing, Seller and Purchaser shall execute and deliver the
following:
(i) Real estate transfer declarations required by the state,
county and municipality in which the Premises are located;
(ii) Closing Statement showing the Purchase Price and any
adjustments thereto;
d. Purchaser shall be responsible for timely making any filings with
the Internal Revenue Service required by Section 1521 of the Tax Reform Act
of 1986 and any regulations promulgated with respect thereto. Seller may
also make filings if it deems it appropriate to do so, but the
responsibility for making such filings shall nevertheless remain on
Purchaser. This subparagraph will survive Closing.
4
<PAGE>
e. At Closing, Escrow Agent will deliver to the Closing attorney the
Earnest Money, with interest, which will be disposed of in accordance with
this Agreement.
6. Possession. Seller shall deliver possession of the Premises to
----------
Purchaser, subject to the executory contracts set forth in the list provided
under Section 7 below, at the time of Closing. The condition of the Premises
shall be the same as the condition as of the date hereof, ordinary wear and tear
excepted.
7. Property Inspection; Franchise. Within ten (10) days of the Execution
------------------------------
Date, Seller shall provide Purchaser with copies of tax and assessment
statements and a list of all contracts, leases and other agreements to be
assigned to and assumed by Purchaser hereunder. Purchaser and Purchaser's
agents or contractors shall have the right until fifteen (15) days after the
Transaction Approval Date as provided in Paragraph 26 or until the earlier
termination of this Agreement ("Due Diligence Period") to review availability of
franchises for operation of the Property and to enter the Premises at reasonable
times and conduct inspections, examinations and tests of the Premises and its
books, as they relate to the Premises (Purchaser shall be allowed to copy and,
provided Purchaser closes the sale contemplated hereby, retain all of same) and
operations, which Purchaser deems necessary, including, but not limited to, the
Personalty, air conditioning and heating systems, electrical systems, plumbing,
foundations, structural, sprinkler systems, roofs, sewage distribution systems,
paint and finish work, soil, environmental condition and other physical aspects
including but not limited to furniture, fixtures and equipment and review of
leases, copies of bills for utilities, taxes, operations and maintenance,
contracts and other documents concerning the Premises. Purchaser and
Purchaser's agents, representatives, employees, independent contractors and
invitees agree not to unreasonably interfere with tenants of the Premises in
performing any inspections or reviews of the Premises or any part thereof.
Purchaser agrees to indemnify and hold Seller harmless from any damages, loss,
claim, or injury to person or property sustained by or asserted against Seller
resulting from the exercise by Purchaser or its agents, representatives,
employees independent contractors, invitees of the rights granted in this
Paragraph, which agreement shall survive Closing or the earlier termination of
this Agreement. If Purchaser, in Purchaser's reasonable judgment, disapproves
the physical, financial or environmental condition of the Premises or has been
unable to satisfy itself with respect to franchise matters, then Purchaser may
terminate this Agreement by written notice, which, to be effective with respect
to property condition, must be accompanied by Purchaser's inspection report
identifying the defects relied upon, delivered to Seller within fifteen (15)
days after the Transaction Approval Date, in which event, Escrow Agent shall
return the Earnest Money to Purchaser, and the parties hereto shall have no
further rights, obligations or liabilities to each other hereunder, except those
which are specifically stated in this Agreement to survive the earlier
termination hereof. Failure to notify Seller of termination of this Agreement
under this Paragraph within said period shall constitute a waiver of the
condition contained in this Paragraph and the acceptance of the physical,
environmental, financial and all other conditions of the Premises, including
franchise matters. On or before April 10, 1996, Seller shall deliver to
Purchaser's auditor, Coopers & Lybrand, a signed representation letter intended
for use by such auditors in rendering an opinion on the financial statement
related to the hotel on the Premises, which letter shall be wholly satisfactory
to Seller in its reasonable discretion.
5
<PAGE>
8. As-Is Sale. Purchaser expressly acknowledges that Seller acquired the
----------
Premises through deed in lieu of foreclosure on October 6, 1992, and that Seller
possesses little information concerning the Premises prior thereto. Purchaser
further acknowledges that it has been given the opportunity to make a full and
complete investigation and inspection of the Premises and the operation thereof
and that Purchaser has had an opportunity to make full inquiry of Seller as to
all matters deemed relevant by Purchaser in evaluating the Premises. Purchaser
expressly acknowledges that the Premises is being purchased "AS IS", "WHERE IS"
and "WITH ALL FAULTS," latent and patent. WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, EXCEPT FOR SELLER'S TITLE WARRANTIES, SELLER HAS NOT AND WILL
NOT, AND HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT OR RELATING TO THE PREMISES, INCLUDING WITHOUT LIMITATION,
MERCHANTABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Purchaser
expressly acknowledges that (i) it is not authorized to rely, has not relied,
and will not rely on any representation, statement or warranty of Seller, or of
any agent, or representative, or broker of Seller, not expressly set forth
herein, and (ii) Seller has not agreed to perform any work on or about the
Premises as a condition to Purchaser's purchase of same. Seller makes no
representations, warranties or indemnities for any claim, condition or liability
arising before or after this Agreement pursuant to, or arising under, any
federal, state or local law, rule or ordinance including, but not limited to,
those relating to the protection of the environment including, but not limited
to, CERCLA and RCRA. This paragraph will survive Closing.
9. Environmental Audit. Seller will furnish Purchaser with an
-------------------
environmental audit performed by Boelter Environmental Consultants, Inc. dated
January 3, 1991 (the "Environmental Report") on the subject Premises. Seller
does not warrant the content or accuracy of the Environmental Report.
10. Settlement Costs and Prorations.
-------------------------------
a. Each party shall be responsible for its attorneys' fees and other
costs incurred by it in connection with this Agreement and the transactions
contemplated hereby. Seller shall pay the costs of the Survey (any
modifications to the Survey shall be at Purchaser's expense) and 50% of the
Recording Costs, normal charges for the Title Policy, and 50% of the state,
county and municipal revenue stamps and/or transfer taxes. Purchaser shall
be responsible for the costs of any audits, tests, surveys, (except as
provided in Paragraph 4. b., above) or inspections of the Premises which it
desires to make, and 50% of the recording costs, File Policy, the costs of
state, county and municipal revenue stamps and/or transfer taxes and
mortgage and intangible taxes. This provision shall survive the Closing.
b. The "Cut-Off Time," as used herein, shall mean 12:01 a.m. of the
Closing Date. The following adjustments and prorations shall be made at the
Closing.
6
<PAGE>
(i) Seller shall be entitled to room revenues and all other
revenues from the Premises through and including the Cut-Off Time. (By
way of illustration only, if the Closing occurs on June 30, 1996,
Seller shall be entitled to the room revenues for the night beginning
the 29th day of June and ending as of the checkout time (12:00 noon)
the 30th day of June.) At Closing, Seller shall sell to Purchaser and
Purchaser shall purchase from Seller, at face value, the cash funds
not to exceed $1,000.00, at the Premises as of the Cut-Off Time and
the guest ledger as of the Cut-Off Time for guests staying at the
Premises on the Closing Date. The purchase price of these items shall
be paid to Seller in cash at Closing. Seller shall sell and Purchaser
shall purchase at face value, all inventories of food, liquor and
sundries at the Premises as of the Cut-Off Time.
(ii) Except for the cash funds described in paragraph (i) above,
all cash, checks and other funds, and all receivables (whether in the
form of notes or other security) of the Seller, its management company
or otherwise relating to the Premises as of the Cut-Off Time shall
remain the property of Seller and are not included in the purchase and
sale. Seller shall retain all rights to collect all receivables
accrued prior to the Cut-Off Time for its own account and shall have
the right to have the management company assign all such cash, checks,
funds and receivables to Seller at or prior to the Closing.
(iii) All general real estate, personal property and sanitary
taxes and assessments which are liens upon the Premises for the year
of Closing shall be prorated on the basis of the most recent
ascertainable tax bill. Such taxes shall be adjusted, if necessary,
when the actual tax bills shall become available, and the appropriate
payment or credit shall be made between Purchaser and Seller within 10
days after demand. Seller shall pay all taxes and assessments due and
payable prior to the Closing Date; Purchaser shall pay all taxes and
assessments becoming payable after the Closing Date. This provision
shall survive the Closing.
(iv) All operating expenses for or pertaining to the Premises
for utilities and assigned service contracts and agreements, and
personal property and equipment leases; provided, however, that Seller
shall attempt to have readings of utility meters made as of the
Closing Date and to cause utilities to render final bills to Seller,
which Seller shall pay promptly. If final readings are not possible,
utilities will be prorated based upon the most recent period for which
costs are available and a final adjustment will be made within thirty
(30) days after request therefor by Purchaser or Seller after receipt
of the final bills. Any deposits made by Seller with utility companies
shall be returned to Seller. Purchaser shall be responsible for making
all arrangements for the continuation of utility service. This
provision shall survive the Closing.
(v) Seller shall pay or cause to be paid any trade payables,
liabilities or other obligations with respect to the operation and
ownership of the Premises which are incurred or accrue prior to and
including the Cut-Off Time. Purchaser shall pay any
7
<PAGE>
trade payables, utility charges and all other liabilities and
obligations which are incurred or accrue after the Cut-Off Time.
Purchaser shall notify Seller in writing 30 days following Purchaser
receiving notice of any payable, liability or obligation for which
Seller is liable hereunder and which payable, liability or obligation
does not present any economic benefit to the Purchaser as determined
by Seller. Seller shall be relieved of liability for any such item for
which it does not receive timely notice from Purchaser. This provision
shall survive the Closing.
(vi) On the date preceding the Closing Date, an inventory and
accounting of the Premises shall be taken by representatives of
Purchaser and Seller and incorporated in a document signed at Closing.
At this inventory, the parties shall determine the purchase price for
the revenues and cash as contemplated under this paragraph 10. The
parties shall also take an inventory of all personal property of the
Premises, guest baggage, safe deposit boxes and such other matters
relating to the Premises as either party may reasonably request.
c. Seller shall transfer to Purchaser at Closing by credit on the
Closing Statement the amount of any and all deposits and advances held by
Seller (and not previously applied pursuant to a right to do so) made by
guests and/or prospective guests of the Premises including, without
limitation, security deposits.
d. Post Closing Revenues. If Purchaser or Seller receives
---------------------
revenues from the Premises on or after the Closing Date and the other party
is entitled to such revenues, the receiving party shall immediately remit
said revenues to the other party. This provision shall survive the Closing.
e. Except as otherwise expressly set forth herein, all prorations
shall be final.
11. Seller's Obligations Pending Closing. Between the Execution Date
------------------------------------
(hereafter defined) and the Closing Date (or earlier termination hereof),
Seller shall:
a. Perform its obligations under all leases, service, management and
all other contracts which Seller has entered into in connection with the
Premises.
b. Maintain the Premises in the same manner as is presently done,
subject to normal wear and tear, casualty, condemnation, and matters
unreported by tenants.
c. Maintain existing insurance coverage or its equivalent in force
with respect to the Premises.
d. Operate the Premises in a reasonable, prudent manner consistent
with Sellers pre-contract operations.
e. Pay all debts, trade payables and other obligations, as they come
due.
8
<PAGE>
f. Provide to Purchaser with all information concerning advance
reservations and future bookings at such time as it furnishes its operating
records.
g. Manage the food, beverage and sundries inventory in a manner
consistent with its normal operation of the Premises and shall not
otherwise intentionally deplete the inventory.
12. Warranties and Representations.
------------------------------
a. Seller. Seller warrants and represents to Purchaser that:
------
(i) Seller has received no notice from any governmental
authority of zoning, building, fire or health code violations or
environmental violations, state or municipal law violations with
respect to the Premises within the past twelve (12) months which have
not been corrected and to the knowledge of Fred R. Schimel, there are
no such violations;
(ii) Seller has received no notice from any public authority
of any eminent domain or condemnation proceeding concerning the
Premises or any part thereof. To the knowledge of Seller, there is no
action, suit or proceeding at law or in equity by any person or
entity, or any arbitration or any administrative or other proceeding
by or before any governmental or other instrumentality or agency,
pending against or affecting any portion of the Premises, and no
judgment, order or decree with respect to any such matter has been
entered against any portion of the Premises. Seller further warrants
that in the event it receives any such notice prior to the Closing
Date, it will provide Purchaser with a copy of such notice prior to
the Closing;
(iii) Seller is a corporation organized and created under the
laws of the State of Delaware and is in good standing;
(iv) Seller has the full right, power and authority to enter
in this Agreement, to perform its obligations hereunder and to execute
and deliver this Agreement and all other documents to be executed and
delivered by Seller at Closing in connection with the transaction
contemplated herein. The representations and warranties set forth in
this subparagraph shall be deemed to be renewed and restated at and as
of the Closing Date. At Closing, Seller shall deliver to Purchaser
documentation evidencing the representations set forth herein;
(v) As of Closing, Seller has paid (or will pay) all
applicable hotel/motel taxes due on account of the Premises; and
The warranties and/or representations of Seller set forth above
in this Paragraph 12 shall survive the Closing for twelve (12) months.
9
<PAGE>
b. Purchaser. Purchaser represents and warrants to Seller that:
---------
(i) Purchaser has the full right, power and authority to enter
in this Agreement and to perform its obligations hereunder. The
representations and warranties set forth in this paragraph above shall
be deemed to be renewed and restated at and as of the Closing Date. At
Closing, Purchaser shall deliver to Seller documentation evidencing
the representations set forth herein.
13. Casualty or Condemnation. If on or before the Closing Date all or any
------------------------
part of the Premises is destroyed or damaged by fire or any other cause, or if
eminent domain proceedings are instituted, or a notice of condemnation is given,
with respect to all or a portion of the Premises, Seller shall promptly notify
Purchaser thereof. If such damage or destruction is repaired at the sole cost
and expense of Seller prior to Closing to the same condition existing prior to
such damage or destruction, or if such damage or destruction does not exceed
$25,000.00 (as determined by Seller's insurer), Purchaser shall be bound to
purchase the Premises with a corresponding reduction in the Purchase Price, but
without receiving insurance proceeds on account thereof. If the value of any
land taken or to be taken does not exceed $25,000.00, Purchaser shall be bound
to purchase the Premises with either, as may be applicable, a corresponding
reduction in the Purchase Price or assignment of any condemnation award. In the
event of (i) damage to or destruction of all or any part of the Premises of
$25,000.00 or more and Seller fails to repair such damage or destruction as
provided herein, or (ii) the institution or giving of notice of eminent domain
proceedings with respect to all or any part of the Premises the value of which
exceeds $25,000.00 Purchaser shall have the right to terminate this Agreement by
giving written notice to Seller on or before the Closing Date and in the event
Purchaser exercises such right to terminate this Agreement, the Earnest Money
shall be returned to Purchaser, whereupon no party hereto shall have any further
rights, obligations or liabilities hereunder. In the event of any unrepaired
damage or eminent domain proceedings which would permit termination hereunder
and neither party elects to terminate, or if Purchaser is required to proceed
hereunder, the Deed shall be subject to any such eminent domain proceeding, such
taking shall be deemed a Permitted Exception, and Seller shall deliver to
Purchaser on the Closing Date an assignment in a form reasonably satisfactory to
Purchaser of all of Seller's right, title and interest in and to any eminent
domain award or insurance claim (including rental insurance except for any
rental insurance proceeds attributable to the period prior to Closing) to the
extent not previously applied to restoration or repair of the Premises, but the
Purchase Price shall not be affected by any such condemnation, damage or
destruction. Seller shall also pay Purchaser all deductibles on such insurance.
14. Default.
-------
a. Seller's Remedy. The parties acknowledge that it is impossible
---------------
to ascertain Seller's damages in the event of default by Purchaser
hereunder. Accordingly, the parties agree that if Purchaser defaults in
performing under this Agreement (Seller not then being in default), Seller
shall retain the Earnest Money and any interest thereon, Escrow Agent shall
pay to Seller the Earnest Money and interest thereon, not as a penalty, but
for full liquidation of damages, the parties declaring and agreeing that
such is and represents a
10
<PAGE>
reasonable forecast and settlement of such damages of Seller. The parties
agree that the sum stated above in liquidated damages shall be in lieu of
any other relief to which the Seller might otherwise be entitled by virtue
of this Agreement or by operation of law or otherwise, and shall represent
Seller's sole and exclusive remedy for such breach by Purchaser.
b. Purchaser's Remedy. In the event that Seller defaults in
------------------
performing under this Agreement or should any of Seller's warranties or
representations be untrue in any material respect, if no other remedy
therefor is specified herein, Purchaser may (if Purchaser is not in
default) elect to either (i) terminate the Agreement and receive the return
of the Earnest Money, or (ii) require the specific performance of this
Agreement by Seller.
Any Closing by Purchaser shall conclusively be deemed a waiver of any
breach of representation or warranty of which Purchaser has knowledge, of any
default known to Purchaser or its affiliates of any unfulfilled condition of
Closing known to Purchaser or its affiliates.
15. Notices. All notices required or permitted hereunder, shall be in
-------
writing and shall be served on the parties at the following addresses:
If to Purchaser:
- ---------------
American General Hospitality, Inc.
3860 West Northwest Highway, Suite #300
Dallas, Texas 75220
ATTN: Bruce G. Wiles
with a copy to:
Colhoun & Stacy, PLLC
5700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
ATTN: Parker Nelson
If to Seller:
- ------------
COM Realty, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
ATTN: Fred R. Schimel
with a copy to: Household Commercial Financial Services, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
ATTN: Nancy J. Bromley
11
<PAGE>
Notices shall be either (i) personally delivered or sent by Federal Express
or other nationally recognized overnight courier to the addresses set forth
above, in which case they shall be deemed delivered on the date of delivery to
said address or (ii) sent by registered or certified mail, return receipt
requested, in which case they shall be deemed delivered three business days
after deposit in the U.S. mail.
16. Broker's Commissions. Seller is responsible to pay a broker's
--------------------
commission to CB Commercial Real Estate Inc., Boca Raton, Florida ("Broker")
upon Closing, as evidenced by delivery and recording of the Deed and receipt of
the Purchase Price, pursuant to Seller's agreement with said Broker. Seller and
Purchaser covenant and represent each to the other that there is no party
entitled to be paid a finder's fee, cooperation fee, commission or other
brokerage-type fee or similar compensation in connection with this Agreement and
the transactions contemplated hereby (whether sale or loan), except to the said
Broker, and that neither Seller nor Purchaser has had any dealings or agreements
with any such individual or entity in connection therewith. If any person or
entity shall assert a claim to such a fee or compensation against either Seller
or Purchaser on account of alleged employment as a finder, consultant or broker,
then the party to this Agreement by, through or under whom the person or entity
claims such employment shall indemnify, defend and hold harmless the other party
against and from any and all such claims and all costs, expenses and
liabilities, including attorneys fees, incurred in connection with such claim or
any action or proceedings brought thereon. The representations and agreements
contained in this Paragraph shall survive the Closing or the earlier termination
hereof.
17. Survival. Except as expressly set forth in this Agreement, no
--------
representations, warranties, covenants, agreements, undertakings, and other
obligations of Seller set forth herein shall survive the Closing of the
transactions contemplated hereby or the execution and delivery of the documents
contemplated hereunder, and such shall be merged therein, and no action based
thereon shall be commenced after the Closing of this transaction.
The delivery of the Deed by Seller, and the acceptance thereof by
Purchaser, shall be deemed the full performance and discharge of every
obligation on the part of Seller to be performed hereunder, except those
obligations of Seller which are expressly stated in this Agreement to survive
the Closing of this transaction.
18. Time of the Essence. Time is of the essence of this Agreement.
-------------------
Provided, however, that if the time within which any action, consent, approval
or other activity herein contemplated, expires on a Saturday, Sunday or a
national bank holiday, such time period shall automatically be deemed extended
to the first day after the scheduled termination of such time period which is
not a Saturday, Sunday or national bank holiday.
19. Governing Law. The Premises are located in the State of Maryland and
-------------
this Agreement shall be governed by and enforced in accordance with the laws of
said State. Any provision of this Agreement which is unenforceable or invalid
or the inclusion of which would affect the validity, legality or enforcement of
this Agreement shall be of no effect, but all the remaining provisions of this
Agreement shall remain in full force and effect.
12
<PAGE>
20. Entire Agreement. This instrument contains the entire agreement of
----------------
the parties and no representations, warranties or agreements have been made by
either of the parties except as set forth in this Agreement. No modification,
waiver or amendment of the provisions of this Agreement shall be effective
unless made in writing and signed by the parties hereto.
21. Assignment. This Agreement shall inure to the benefit of and shall be
----------
binding upon the parties hereto and their respective successors and permitted
assigns, provided, however, that neither party may assign its rights or
obligations hereunder without the prior written consent of the other party,
except that Purchaser may assign this Agreement to an affiliated partnership or
to an entity affiliated with the Real Estate Investment Trust being sponsored by
Purchaser without Seller's consent.
22. Escrow Agent. Upon receipt of written request from Seller or
------------
Purchaser to disburse all or any portion of the Earnest Money, Escrow Agent
shall have the right to disburse the Earnest Money to Purchaser or Seller on the
tenth (10th) day after written notice to the parties; provided, however, that,
Escrow Agent shall not have received any written objections to such disbursement
after such written notice but prior to said tenth (10th) day. The parties hereto
hereby acknowledge that the Escrow Agent shall have no liability to any party on
account of its failure to disburse the disputed portion of the Earnest Money;
and, in the event of any dispute as to who is entitled to receive the Earnest
Money, Escrow Agent shall have the right to retain the funds and disburse them
in accordance with the final order of a court of competent jurisdiction or to
deposit the disputed portion of the Earnest Money with said court, pending a
final decision of such controversy. The parties hereto further agree that Escrow
Agent shall not be liable for failure of the depository and shall only be
otherwise liable in the event of its gross negligence or willful misconduct.
23. Construction. Each party hereto hereby acknowledges that all parties
------------
hereto participated equally in the drafting of this Agreement and that,
accordingly, no court construing this Agreement shall construe it more
stringently against one party than the other.
24. Binding. The issuance of this Agreement by Seller does not constitute
-------
an offer for the sale of the Premises from Seller to Purchaser. This Agreement
shall not be binding or effective until properly executed and delivered by both
Seller and Purchaser.
25. Execution Date. For purposes of this Agreement, the "Execution Date"
--------------
shall mean the later "Date of Execution" subscribed beneath Seller's and
Purchaser's signatures set forth herein below.
26. Approval Contingency. This Agreement and Seller's obligations
--------------------
hereunder are Contingent upon approval by the requisite members of Seller's
Investment Committee, pursuant to internal policies and procedures of the
transaction contemplated by this Agreement. If Seller has not obtained the
aforementioned approval within five (5) days of the Execution Date ("Transaction
Approval Date") and has not given Purchaser written notice to such effect
13
<PAGE>
by the Transaction Approval Date, this Agreement shall terminate automatically
and be of no further force and effect and the Earnest Money shall be returned to
Purchaser.
27. Liquor License and Franchise. The Closing of the sale of the Premises
----------------------------
shall not be contingent upon or conditioned on the completion of the transfer to
the Purchaser of any liquor license or hotel franchise, pertaining to the
Premises. Seller hereby agrees at its sole cost, to terminate the existing
franchise with Days Inn prior to the Closing.
28. Confidentiality. Unless and until the Closing has been completed,
---------------
Purchaser and its representatives shall hold in strict confidence, and shall not
use to the detriment of Seller, all data and information obtained in connection
with this transaction with respect to the business of Seller including, but not
limited to, books, records, accounts, contracts and documents of or relating to
the Premises. Nothing contained herein shall prohibit Purchaser from disclosing
the data and information to its lenders, underwriters of Purchaser's real estate
investment trust now in formation, investors, attorneys, accountants and
consultants, where such disclosure is made in good faith to carry out the
intents and purposes of this Contract. This obligation shall survive any
termination of this Contract.
29. Bulk Transfer Law. Purchaser and Seller acknowledge that the
-----------------
transaction contemplated herein constitutes a sale of real estate and, as such,
does not fall within the purview of the Maryland Uniform Commercial Code
relating to bulk transfers ("Bulk Transfer Law").
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the dates written below.
SELLER:
- ------
COM Realty, Inc.
By: /s/ COM Realty, Inc.
--------------------------------------
Vice President
---------
Attest: /s/ Nancy Bromley
---------------------------------
Ass't Secretary
--------
Date of Execution: April 11, 1996
-----------------------
PURCHASER:
- ---------
AMERICAN GENERAL HOSPITALITY, INC.
By:/s/ Bruce G. Wiles
--------------------------------------
Bruce G. Wiles, Executive Vice President
15
<PAGE>
Exhibit 10.31
PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
BETWEEN
HIHC, LLC
RAJNI PATEL
ANAND PATEL
AS SELLERS
AND
AMERICAN GENERAL HOSPITALITY, INC.
AS PURCHASER
HOLIDAY INN - HOTEL CIRCLE
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
PARTIES........................................................... 1
RECITALS.......................................................... 1
I DEFINITIONS....................................................... 1
II SALE AND PURCHASE OF PROPERTY..................................... 5
2.1 Purchase of Property....................................... 5
2.2 Purchase Price and Terms of Payment........................ 6
2.3 Assumption of Contracts and Leases......................... 7
2.4 Liquor License, Alcoholic Beverages, Food Inventory
and Restaurant Equipment................................ 7
III ESCROW............................................................ 7
3.1 Opening of Escrow.......................................... 7
3.2 Escrow Holder's General Provisions......................... 7
3.3 Additional Escrow Holder Requirements...................... 8
3.4 Deposit of Funds........................................... 8
3.5 Release of Funds by Escrow Holder.......................... 8
3.6 Delivery of Documents and Funds; Consent of Sellers........ 8
IV CONDITION OF TITLE................................................ 9
4.1 Title Commitment........................................... 9
4.2 Title Insurance Policy..................................... 9
4.3 Voluntary Encumbrances..................................... 10
4.4 Other Encumbrances......................................... 10
4.5 Inspection................................................. 11
4.6 Notice of Non-Satisfaction................................. 12
4.7 Condition of the Real Property............................. 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
V CLOSING ...................................................... 16
5.1 Closing Date............................................... 16
5.2 Action Prior to the Close of Escrow by Sellers............. 17
5.3 Action Prior to the Close of Escrow by Purchaser........... 18
5.4 Recording of Grant Deed.................................... 18
5.5 Prorations................................................. 18
5.6 Guest Property............................................. 20
5.7 Closing Costs.............................................. 20
5.8 Distribution of Funds and Documents Following
Close of Escrow......................................... 21
5.9 Possession................................................. 22
VI ADDITIONAL COVENANTS AND INDEMNITIES.............................. 22
6.1 Purchaser's Covenants and Indemnities...................... 22
6.2 Sellers' Covenants and Indemnities......................... 23
6.3 Employee Matters........................................... 24
6.4 Hart-Scott Rodino Filing................................... 25
VII REPRESENTATIONS AND WARRANTIES.................................... 26
7.1 By Purchaser............................................... 26
7.2 By Sellers................................................. 27
VIII CONDITIONS PRECEDENT TO CLOSE OF ESCROW........................... 29
8.1 Conditions to Sellers' Obligations......................... 29
8.2 Conditions to Purchaser's Obligations...................... 29
IX LIQUIDATED DAMAGES................................................ 30
9.1 Purchaser's Breach......................................... 30
9.2 Sellers' Breach............................................ 30
X BROKERS........................................................... 31
XI NOTICES........................................................... 31
XII MISCELLANEOUS..................................................... 33
12.1 Governing Law.............................................. 33
12.2 Attorneys' Fees............................................ 33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
12.3 Exhibits and Schedules a Part of this Agreement............ 33
12.4 Counterparts............................................... 33
12.5 Assignment................................................. 33
12.6 IRS - Form 1099-S.......................................... 33
12.7 Successors and Assigns..................................... 34
12.8 Time is of the Essence..................................... 34
12.9 Entire Agreement........................................... 34
12.10 Further Assurances......................................... 34
12.11 Waiver..................................................... 34
12.12 Headings................................................... 34
12.13 Risk of Loss............................................... 34
12.14 Bulk Sales Law............................................. 35
12.15 Construction of Agreement.................................. 35
12.16 Tax Deferred Exchange...................................... 36
12.17 Arbitration................................................ 36
12.18 No Public Disclosure....................................... 37
12.19 Covenants, Representations and Warranties.................. 37
XIII EXECUTION......................................................... 37
Exhibit "A" -- Land Legal Description
Schedule "B" -- Leases
Schedule "C" -- Percentage Interests
Exhibit "D" -- Liquor Transfer Agreement
Exhibit "E" -- Acceptance Letter and General Provisions
Exhibit "F" -- Grant Deed
Exhibit "G" -- Bill of Sale
Exhibit "H" -- Assignment of Intangible Property
Exhibit "I" -- Assignment and Assumption of Contracts and Leases
</TABLE>
The exhibits and/or schedules of Exhibit 10.31, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
iii
<PAGE>
PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
---------------------------------------------------
This PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS ("Agreement") is
---------
dated this 24th day of April, 1996, and is made by and among HIHC, LLC, a
California limited liability company, RAJNI PATEL, an individual domiciled in
the State of California, and ANAND PATEL, an individual domiciled in the State
of South Carolina (individually a "SELLER" and collectively "SELLERS"), and
------ -------
AMERICAN GENERAL HOSPITALITY, INC., a Texas corporation ("PURCHASER").
---------
RECITALS
--------
A. SELLERS are all of the owners of certain real property located in the
City of San Diego, County of San Diego, State of California, more specifically
located at and commonly known as 595 Hotel Circle South, San Diego, California
92108, on which are constructed certain improvements in, by, and through which
is operated a hotel and hospitality business under the name of "Holiday Inn -
Hotel Circle."
B. Subject to the terms and conditions below, SELLERS desire to sell,
assign, transfer, convey and deliver to PURCHASER, and PURCHASER desires to
acquire, the Property (as defined hereinbelow), together with all rights,
benefits, privileges and appurtenances pertaining thereto, for such
consideration as is referred to below.
NOW THEREFORE, for valuable consideration, including the promises,
covenants, representations and warranties hereinafter set forth, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
and equitably bound, agree as set forth hereinbelow.
I.
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
(a) "ALCOHOLIC BEVERAGES." All unopened wine, beer and other alcoholic
-------------------
beverages located at the Real Property and held for sale in the operation of the
Hotel.
(b) "ASSIGNMENT OF CONTRACTS AND LEASES." As set forth in Section 5.2(d)
----------------------------------
below.
(c) "ASSIGNMENT OF INTANGIBLES." As set forth in Section 5.2(c) below.
-------------------------
(d) "BILL OF SALE." As set forth in Section 5.2(b) below.
------------
1
<PAGE>
(e) "CASUALTY." As set forth in Section 12.13(a) below.
--------
(f) "CASUALTY NOTICE." As set forth in Section 12.13(a) below.
---------------
(g) "CLOSE OF ESCROW." As set forth in Section 5.1 below.
---------------
(h) "CLOSING DATE." As set forth in Section 5.1 below.
------------
(i) "CONTRACTS." All contracts and agreements used and/or executed in
---------
connection with the ownership and operation of the Hotel and/or the Property,
including, without limitation, the Franchise Agreement, all maintenance and
service contracts, all occupancy agreements, all room rental contracts, and all
banquet room contracts, but excluding the Management Agreement and the Leases.
(j) "COOPERATING PARTY." As set forth in Section 12.16 below.
-----------------
(k) "CUT-OFF TIME." As set forth in Section 5.5.4 below.
------------
(l) "EARNEST MONEY DEPOSIT." As set forth in Section 2.2.1 below.
---------------------
(m) "ENVIRONMENTAL DAMAGES." As set forth in Section 4.7(g) below.
---------------------
(n) "ENVIRONMENTAL REQUIREMENTS." As set forth in Section 4.7(h) below.
--------------------------
(o) "ESCROW." As set forth in Section 3.1 below.
------
(p) "ESCROW HOLDER." Heritage Escrow Company of Orange County, Attention:
-------------
Janet Tilbury, 4010 Barranca Parkway, Suite 120, Irvine, California 92714,
Telephone No. (714) 651-9000, Telecopier No. (714) 651-8037.
(q) "ESTIMATED RENOVATION COST." As set forth in Section 12.13(a) below.
-------------------------
(r) "EXCHANGOR." As set forth in Section 12.16 below.
---------
(s) "FOOD INVENTORY." All food, food stuffs, menu stock and non-alcoholic
--------------
beverages located at the Real Property and held for sale in the operation of the
Hotel.
(t) "GOOD FUNDS." A deposit of cash, cashier's check, certified funds, or
----------
confirmed wire transfer of funds.
(u) "GRANT DEED." As set forth in Section 5.2(a) below.
----------
(v) "HART-SCOTT-RODINO." The Hart-Scott-Rodino Antitrust Improvements Act
-----------------
of 1976.
2
<PAGE>
(w) "HAZARDOUS MATERIALS." As set forth in Section 4.3(i) below.
-------------------
(x) "HOLIDAY INN FRANCHISE AGREEMENT." That certain Franchise Agreement
-------------------------------
dated _______________________ between Holiday Inns, as franchisor, and UKA
Partnership, a California general partnership, as franchisee, affecting the
Hotel.
(y) "HOTEL." The hospitality business (including restaurant and lounge
-----
services and businesses) operated and conducted by SELLERS and/or UKA on the
Real Property.
(z) "IMPROVEMENTS." The buildings, structures, and other permanent
------------
improvements located on the Land, including, without limitation, electrical
distribution systems, HVAC systems, parking lots, walkways, driveways, plumbing,
swimming pool, lighting, signage (to the extent affixed to the Land or any
building thereon) and mechanical equipment, and fixtures installed thereon, and
all rights, benefits and privileges appurtenant thereto.
(aa) "INSPECTION PERIOD." As set forth in Section 4.5 below.
-----------------
(bb) "INTANGIBLE PROPERTY." All (i) fictitious business names and logos
-------------------
used in connection with the operation of the Hotel and any part of the Property,
but excluding the names "Holiday Inn," "Hotel Circle," and all derivatives
thereof, (ii) local (Area Code 619) telephone exchange numbers identified
exclusively with the Hotel, (iii) transferable hereditaments, privileges,
tenements and appurtenances belonging to the Real Property, and any right or
interest in any open or proposed highways, streets, roads, avenues, alleys,
easements, strips, gores and rights-of-way in, across, in front of, contiguous
to, abutting or adjoining the Real Property, (iv) transferable certificates
(including the Certificate of Occupancy for the Real Property), licenses,
permits and warranties now in effect with respect to the Property (specifically
excluding, however, the Liquor License and the Holiday Inn franchise for the
Hotel), and (v) all other intangible property located at the Real Property and
used by SELLERS and/or UKA exclusively in connection with the ownership and
operation of the Real Property. All refunds and claims for refunds with respect
to real property and personal property taxes with respect to the Property for
any period prior to the Close of Escrow shall be excluded, and shall not be a
part of, the Intangible Property
(cc) "INTERMEDIARY." As set forth in Section 12.16 below.
------------
(dd) "INVENTORY." All operating inventories, materials and supplies used
---------
in connection with the operation of the Hotel and located thereat, including,
but not limited to, paper goods, brochures, office supplies, stationery,
chinaware, glassware, liners, silverware, soap, pool chemicals, and other
operational and guest supplies, wherever located, but excluding Alcoholic
Beverages and Food Inventory.
(ee) "LAND." The land more particularly described on Exhibit "A" attached
---- -----------
hereto and upon which the Improvements are located, including all easements,
rights-of-way, strips, zones, privileges, licenses, appurtenances, and other
rights and benefits running with the Land and/or the owner of the Land.
3
<PAGE>
(ff) "LEASES." All leases, licenses and concession agreements of Property,
------
including, without limitation, equipment leases, and leases and licenses of
portions of the Real Property, all of which are listed on Schedule "B" attached
------------
to this Agreement, as may be amended by all additional licenses and concession
agreements executed by SELLERS and/or UKA on or after the date of this Agreement
as permitted hereunder.
(gg) "LIABILITIES." As set forth in Section 12.16 below.
-----------
(hh) "LIQUOR LICENSE." All liquor licenses relating to the operation of
--------------
the restaurant and lounge businesses at the Real Property.
(ii) "LIQUOR TRANSFER AGREEMENT." As set forth in Section 2.4 below.
-------------------------
(jj) "MANAGEMENT AGREEMENT." That certain Hotel Management Agreement dated
--------------------
December 31, 1995, with UKA, as operator, affecting the management and operation
of the Hotel.
(kk) "NON-FOREIGN AFFIDAVIT." As set forth in Section 5.2(c) below.
---------------------
(ll) "NOTICES." As set forth in Article XI below.
-------
(mm) "OPENING OF ESCROW." As set forth in Section 3.1 below.
-----------------
(nn) "PARTNERSHIP." UKA Partnership, a California general partnership.
-----------
(oo) "PERCENTAGE INTEREST" AND "PERCENTAGE INTERESTS." As set forth on
----------------------------------------------
Schedule "C" attached to this Agreement.
- ------------
(pp) "PERMITTED EXCEPTIONS." As set forth in Section 4.2 below.
--------------------
(qq) "PERSONAL PROPERTY." All (i) keys and combinations to all doors,
-----------------
cabinets, enclosures and other locks on or about the Real Property, (ii)
furniture, equipment (including office equipment), machinery, tools, trade
fixtures and other personal property of whatever kind or type located on the
Real Property and used in connection with the operation of the Hotel and/or the
Real Property, (iii) files maintained or generated in the course of the Hotel's
operation, including, but not limited to, copies of those books, records and
files requested by PURCHASER, in writing, on the Close of Escrow, and any
customer, mailing or "frequent user" lists maintained in connection with the
operation or promotion of the Hotel (excluding financial and accounting
records), including those maintained or generated by UKA (except for materials
proprietary to UKA and not concerning the Hotel), (iv) all other personal
property located at the Real Property with respect to which SELLERS are the
owners thereof and which is used by SELLERS and/or UKA exclusively in connection
with the ownership and operation of the Hotel and/or the Real Property, and (v)
all other rights, benefits and privileges held or enjoyed in respect of the use,
management, operation, rental, or maintenance of the Real Property; but
excluding, however, (A) Food Inventory and the Alcoholic Beverages, and related
items, (B) cash, cash equivalents and accounts receivable, (C) the personal
property owned by any tenant or
4
<PAGE>
guest on the Real Property, (D) the Restaurant Equipment, (E) the Liquor
License, (F) all refunds and claims for refunds for real property and personal
property taxes in connection with the Property for any period prior to the Close
of Escrow, and (G) all tax and utilities and other deposits.
(rr) "PROPERTY." The Land, the Improvements, the Hotel, the Personal
--------
Property, the Inventory, and the Intangible Property. Notwithstanding any
provision to the contrary in this Agreement, "Property" does not include cash,
cash equivalents, checks and other funds, including, without limitation, till
money, house banks, and notes, securities and other evidence of indebtedness
held at the Hotel as of the Cut-Off Time (except as specified in Section 5.5.11
below), nor does it include balances on deposit to the credit of SELLERS or UKA,
as SELLERS' agent, with banking institutions, and the same shall be retained by
SELLERS on the Close of Escrow.
(ss) "PURCHASE PRICE." As set forth in Section 2.2 below.
--------------
(tt) "REAL PROPERTY." The Land and the Improvements.
-------------
(uu) "REPORTS. As set forth in Section 4.3(c) below.
-------
(vv) "RESTAURANT EQUIPMENT." All equipment, furniture, fixtures, utensils,
--------------------
glassware, silverware and china used in connection with the operation of all
restaurants and lounges on the Real Property.
(ww) "SELLERS' ACCOUNTS RECEIVABLE." As set forth in Section 6.1 below.
----------------------------
(xx) "TITLE COMMITMENT." As set forth in Section 4.1 below.
----------------
(yy) "TITLE INSURER." Chicago Title Company, 925 "B" Street, San Diego,
-------------
California 92101, Attention: Ken Cyr, Telephone: (619) 239-6081, Telecopier:
(619) 544-6275.
(zz) "TITLE POLICY." As set forth in Section 4.2 below.
------------
(aaa) "UKA." UKA Hotel Management Company, Inc., a California
---
corporation.
(bbb) "WARN." As set forth in Section 6.3.5 below.
----
II.
SALE AND PURCHASE OF PROPERTY
-----------------------------
2.1 PURCHASE OF PROPERTY. As of the Close of Escrow, and subject to the
--------------------
terms and conditions of this Agreement, SELLERS shall sell, assign, convey,
transfer and deliver to PURCHASER, and PURCHASER shall purchase and acquire from
SELLERS, fee title in the Real Property, good marketable title (to the extent of
SELLERS' interest) in the Personal Property and the Inventory, and all of
SELLER'S right, title and interest in and to the Intangible Property, free and
clear of all liens and
5
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other encumbrances (other than the Contracts, Leases and the Permitted
Exceptions), at the purchase price provided in Section 2.2 below.
2.2 PURCHASE PRICE AND TERMS OF PAYMENT. The purchase price for the
-----------------------------------
Property ("Purchase Price") shall be Nineteen Million Five Hundred Thousand
--------------
Dollars ($19,500,000), less the purchase price for the Liquor License and the
----
Restaurant Equipment as described hereinbelow, and shall consist of and be paid
as follows:
2.2.1 EARNEST MONEY DEPOSIT. Within two (2) business days of the
---------------------
execution of this Agreement by PURCHASER, PURCHASER shall deliver to Escrow
Holder, in Good Funds, the sum of Two Hundred Thousand Dollars ($200,000) (the
"Earnest Money Deposit"). The Earnest Money Deposit shall be held by Escrow
---------------------
Holder in accordance with the terms of this Agreement, and shall be released and
disbursed to SELLERS (or, if then a party(ies) to this Agreement, SELLERS', or
any of their, Intermediaries) in accordance with their Percentage Interests,
without further notice, consent or instruction, upon the expiration of the
Inspection Period, unless, prior thereto, SELLERS and Escrow Holder receive from
------
PURCHASER written notice that PURCHASER either (a) elects to terminate this
Agreement and cancel the Escrow, in which case Escrow Holder shall immediately
thereafter return the Earnest Money Deposit (and all accrued interest thereon)
to PURCHASER, or (b) objects, in accordance with the provisions of Section 4.6
below, to any item(s) of due diligence (as provided in Section 4.6 below), in
which case Escrow Holder shall retain the Earnest Money Deposit, until such time
as (i) SELLERS and Escrow Holder receive written notice from PURCHASER that such
objection(s) has not been cured by SELLERS (or SELLERS have not committed to
cure the same) as, and within the time parameters, provided in Section 4.6
below, and that PURCHASER therefore elects to terminate this Agreement and
cancel the Escrow, in which case the Earnest Money Deposit (and all accrued
interest thereon) shall be returned to PURCHASER, or (ii) Escrow Holder and
PURCHASER receive written notice from SELLERS that all such objections have
either (A) been cured by SELLERS, (B) commenced to cure, are committed to cure,
and are diligently pursuing such cure by SELLERS, or (C) been waived by
PURCHASER, in which case the Earnest Money Deposit shall, two (2) business days
thereafter, be released and disbursed by Escrow Holder to SELLERS without
further notice, consent or instruction, unless PURCHASER disputes SELLERS'
notice, in a writing delivered to Escrow Holder and SELLERS prior to the release
of the Earnest Money Deposit, in which case the Earnest Money Deposit shall be
retained by Escrow Holder pending receipt by Escrow Holder of either (1) joint
instructions from SELLERS and PURCHASER, in which case the Earnest Money Deposit
shall be disbursed as provided therein, or (2) SELLERS' written instructions to
terminate the Agreement and cancel the Escrow, in which case the Earnest Money
Deposit (and all interest thereon) shall be returned to PURCHASER. Upon such
release, the Earnest Money Deposit shall be non-refundable to PURCHASER except
in the event of a material uncured default by any of SELLERS of their
obligations under this Agreement.
The Earnest Money Deposit shall be applied to the Purchase Price on
the Close of Escrow.
2.2.2 BALANCE OF PURCHASE PRICE. Not later than 11:00 A.M. California
-------------------------
time on the date one (1) business day immediately preceding the Closing Date,
PURCHASER shall deposit with
6
<PAGE>
Escrow Holder, in Good Funds, the balance of the Purchase Price, reduced or
increased by such amounts required to take into account such prorations,
credits, costs or other adjustments which are required by this Agreement and
which can be computed and determined as of the time for required deposit
hereunder.
2.2.3 ALLOCATION AMONG SELLERS. The Purchase Price, the Earnest Money
------------------------
Deposit, all prorations, and other obligations and liabilities of SELLERS
pursuant to this Agreement shall be allocated between and paid to or by SELLERS,
as the case may be, in accordance with their Percentage Interests in the
Property. All funds so distributed, including, without limitation, the Earnest
Money Deposit, and the net balance of the Purchase Price, shall be by separate
bank drafts, wire transfers or cashier's checks made payable to each SELLER in
an amount equal to its/his Percentage Interest.
2.3 ASSUMPTION OF CONTRACTS AND LEASES. As additional consideration,
----------------------------------
PURCHASER shall, on and as of the Close of Escrow, assume and agree to pay all
sums and perform, fulfill and comply with all other covenants and obligations
which are to be paid, performed and complied with by SELLERS, on and after the
Close of Escrow, under the Contracts, the Leases, and the Holiday Inn Franchise
Agreement.
2.4 LIQUOR LICENSE, ALCOHOLIC BEVERAGES, FOOD INVENTORY AND RESTAURANT
------------------------------------------------------------------
EQUIPMENT. The Liquor License, Alcoholic Beverages, Food Inventory and
- ---------
Restaurant Equipment located at the Hotel shall be conveyed to PURCHASER (or its
designee) pursuant to a separate purchase and sale agreement (the "Liquor
------
Transfer Agreement") in the form and content attached hereto as Exhibit "D", to
- ------------------ -----------
be executed by PURCHASER and UKA concurrently herewith, which shall reflect a
purchase price for the Liquor License of Fifteen Thousand Dollars ($15,000), for
the Alcoholic Beverages and the Food Inventory a purchase price equal to
SELLERS'/UKA's cost thereof, and for the Restaurant Equipment a purchase price
equal to the book value thereof as of April 1, 1996.
III.
ESCROW
------
3.1 OPENING OF ESCROW. The parties shall open an escrow (the "Escrow")
----------------- ------
with Escrow Holder by depositing with Escrow Holder this Agreement, together
with Escrow Holder's acceptance letter and instructions, copies of which are
attached hereto as Exhibit "E", duly executed by SELLERS and PURCHASER. The
-----------
time when Escrow Holder receives and executes a copy of this Agreement fully
executed by the parties (in counterpart or otherwise) shall be deemed the
"Opening of Escrow." PURCHASER and SELLERS shall execute and deliver to Escrow
- ------------------
Holder in a timely fashion such instruments and funds as are reasonably
necessary to close the Escrow and consummate the sale and purchase of the
Property (or the exchange thereof, if applicable) in accordance herewith.
3.2 ESCROW HOLDER'S GENERAL PROVISIONS. Escrow Holder's standard escrow
----------------------------------
"General Provisions" are attached hereto as Exhibit "E". In the event of any
- ------------------- -----------
conflict between the provisions of the typed portion of this Agreement and the
General Provisions, the provisions of the typed
7
<PAGE>
portion of this Agreement shall be controlling and the General Provisions will
be deemed amended accordingly.
3.3 ADDITIONAL ESCROW HOLDER REQUIREMENTS. If there are any requirements
-------------------------------------
imposed by Escrow Holder relating to the duties or obligations of Escrow Holder,
or if Escrow Holder requires any other additional instructions, the parties
agree to make such deletions, substitutions and additions to this Agreement
which do not cause more than a ministerial or de minimis change to this
Agreement or its intent. Any such changes requested by Escrow Holder shall be
subject to written approval of the parties, which approval shall not be
unreasonably withheld or delayed.
3.4 DEPOSIT OF FUNDS. Except as otherwise provided in this Agreement, all
----------------
funds deposited into the Escrow by PURCHASER shall be immediately deposited by
Escrow Holder into Treasury Bills or other short-term United States Government
obligations, in repurchase contracts for the same, or in a federally insured
money market account, subject to the control of Escrow Holder in a bank or
savings and loan association, or such other institution approved by PURCHASER;
provided, however, that such funds must be readily available as necessary to
comply with the terms of this Agreement and Escrow Holder's escrow instructions,
and for the Escrow to close within the time specified in Section 5.1 of this
Agreement. Except as may be otherwise specifically provided herein, interest on
amounts placed by Escrow Holder in any such investments or interest bearing
accounts shall accrue to the benefit of PURCHASER, and PURCHASER shall promptly
provide to Escrow Holder PURCHASER'S Tax Identification Number.
3.5 RELEASE OF FUNDS BY ESCROW HOLDER. Escrow Holder's obligation under
---------------------------------
this Agreement to release the Earnest Money Deposit, and any other funds, prior
to the Close of Escrow is subject to such funds having cleared through the bank,
savings and loan, or other financial institution on which such funds are drawn.
Escrow Holder shall make such payments only in strict accordance with the
provisions of this Agreement, and PURCHASER and SELLERS agree to save and hold
Escrow Holder harmless in disbursing and releasing the funds as specified in
this Agreement. PURCHASER and SELLERS represent to Escrow Holder that the
release instructions set forth in Section 2.2.1 above are made of their own free
will, under no duress, and with full understanding of the consequences thereof,
not relying on any information furnished or statements made by Escrow Holder.
3.6 DELIVERY OF DOCUMENTS AND FUNDS; CONSENT OF SELLERS. Unless other
---------------------------------------------------
specifically instructed by all of the SELLERS, in writing, the delivery by or
from Escrow Holder to SELLERS, or any of them, of all documents, instruments and
other writings shall be delivered to B. U. Patel. In addition, to the extent
any notices, consents or approvals are required of SELLERS in accordance with
the terms of this Agreement, the written notice, consent or approval from or of
B. U. Patel shall be deemed the notice, consent and approval of all of the
SELLERS. Any notices, deliveries (other than the funds specified in Section 2.2
above), or other communications required or permitted of PURCHASER to SELLERS
shall be deemed sufficiently given if delivered to HIHC, LLC, Attention: B. U.
Patel, in accordance with the provisions of this Agreement. PURCHASER shall
have no obligation to see to the distribution of any funds or documents by
Escrow Holder to or among SELLERS, and SELLERS hereby, jointly and severally,
indemnify, hold harmless, and agree to defend PURCHASER from any and all
8
<PAGE>
costs, claims, expenses and liabilities asserted against or incurred by
PURCHASER resulting from them acting in accordance with the provisions of this
Section 3.6.
IV.
CONDITION OF TITLE
------------------
4.1 TITLE COMMITMENT. Escrow Holder shall cause Title Insurer to deliver
----------------
within ten (10) days hereof to PURCHASER a title commitment for an A.L.T.A.
Owner's Policy of Title Insurance (extended coverage) issued by Title Insurer
(the "Title Commitment") reflecting the status of title to the Real Property and
----------------
all exceptions, including easements, restrictions, rights-of-way, leases,
covenants, reservations and other conditions, if any, affecting the Real
Property, which would appear in an A.L.T.A. Owner's Policy of Title Insurance
(extended coverage) if used. Title Insurer shall also furnish to PURCHASER good
and legible copies of all documents affecting the Real Property referred to in
the Title Commitment. SELLERS shall also deliver (or cause to be delivered) to
PURCHASER any title survey previously prepared pertaining to the Real Property
which is in SELLERS' possession.
4.2 TITLE INSURANCE POLICY. Escrow Holder shall close the Escrow when
----------------------
Escrow Holder is otherwise in a position to comply with its instructions set
forth in this Agreement and Escrow Holder can record the Grant Deed and Title
Insurer is prepared to issue to PURCHASER Title Insurer's A.L.T.A. Owner's
Policy of Title Insurance (extended coverage) (the "Title Policy"), with
------------
liability in the amount of the Purchase Price insuring fee title in the Real
Property as vested in PURCHASER subject only to the following matters affecting
title ("Permitted Exceptions"):
--------------------
(a) All general and special real property taxes and assessments not
yet delinquent, and all improvement and assessment bonds;
(b) Supplemental taxes assessed pursuant to the provisions of Chapter
3.5 (commencing with Section 75) of the Revenue and Taxation Code of the State
of California;
(c) All liens, covenants, conditions, restrictions, easements, rights
of way, and all other exceptions to title as referenced in the Title Commitment,
except those of which PURCHASER objects pursuant to the provisions of Section
4.6 below;
(d) The Contracts and the Leases;
(e) All exceptions to title disclosed by or in, or arising from or in
connection with, the survey (and any updates thereto) of the Real Property for
the Title Policy, including, without limitation, easements, encroachments and
zoning, except those exceptions to which PURCHASER objects pursuant to Section
4.6 hereof; and
(f) Any exceptions created by PURCHASER or its agents, employees
and/or contractors, including without limitation, any exceptions arising by
reason of the entry on the Real Property by PURCHASER or by its agents,
employees and/or contractors.
9
<PAGE>
4.3 VOLUNTARY ENCUMBRANCES. If, on the Closing Date, title to the Real
----------------------
Property, or any portion thereof, is subject to any matter voluntarily placed on
title to the Real Property by SELLERS after the expiration of the Inspection
Period and before the Close of Escrow, SELLERS shall be obligated to deliver to
Escrow Holder an instrument, in proper form for recording and reasonably
acceptable in form and substance to Title Insurer, canceling such matters,
together with any other instruments necessary thereto and the cost of recording
and canceling the same, and Title Insurer will issue its Title Policy free of
such matters.
Notwithstanding anything to the contrary in this Agreement, SELLERS may
further encumber the Property between the expiration of the Inspection Period
and the Close of Escrow in an amount not to exceed One Million Five Hundred
Thousand Dollars ($1,500,000), and shall be prepayable at any time without
penalty.
4.4 OTHER ENCUMBRANCES. If, on the Closing Date, title to the Real
------------------
Property, or any portion thereof, is subject to any matter other than (i) the
Permitted Exceptions, (ii) those liens or encumbrances resulting from the acts
or omissions of PURCHASER, or (iii) any such liens or encumbrances as are waived
or accepted by PURCHASER in writing, PURCHASER shall notify SELLERS and Escrow
Holder of the same, in writing, and the Close of Escrow shall be delayed as
provided herein, and, notwithstanding any other provision of this Agreement,
SELLERS shall not be deemed to be in default of their obligations under this
Agreement. Upon receipt of such written notice specifying the lien, encumbrance
or other matter and PURCHASER'S objection thereto, SELLERS, within five (5)
business days thereafter, may elect any of the following, which election shall
be in writing delivered to PURCHASER and Escrow Holder:
(a) Deliver to Escrow Holder an instrument, in proper form for
recording and reasonably acceptable in form and substance to PURCHASER and Title
Insurer, canceling such matters, together with any other instruments necessary
thereto and the cost of recording and canceling the same, and Title Insurer will
issue its Title Policy free of such matters;
(b) Cause Title Insurer to "insure over" such lien(s), encumbrance(s)
or other matter(s), unless (i) such lien or encumbrance was involuntarily placed
on the Real Property by SELLERS and was of a value in excess of Seventy-Five
Thousand Dollars ($75,000) (in which case SELLERS shall cause the removal
thereof), or (ii) a reasonable person would conclude that such lien(s),
encumbrance(s) or other matter(s) is or would be a material defect to
PURCHASER'S title; or
(c) Terminate this Agreement and cancel the Escrow, and cause to be
refunded to PURCHASER the Earnest Money Deposit, and directing Escrow Holder to
release to PURCHASER all additional funds and instruments deposited by PURCHASER
with Escrow Holder, with SELLERS being obligated for all cancellation fees. In
such event, PURCHASER and SELLERS shall execute such other instruments and
documents as may be necessary to effectuate the termination of this Agreement
and the cancellation of the Escrow, whereupon the obligations and liabilities of
SELLERS and PURCHASER shall terminate. Notwithstanding the foregoing, however,
SELLERS shall provide PURCHASER with two (2) business days' notice prior to so
terminating this Agreement and canceling the Escrow, during which two (2)
business day period PURCHASER may waive and withdraw their objection(s) to close
10
<PAGE>
the purchase of the Property and accept title thereto in its then existing
condition, without reduction of or credit to the Purchase Price, thereby waiving
the title defects without further recourse against or liability to SELLERS, in
which case SELLERS shall be precluded from exercising its rights under this
subsection (c).
In the event SELLERS elect alternative (a) or (b) above, SELLERS may elect
to extend the Closing Date and the Close of Escrow to a date not to exceed the
earlier of the date which is three (3) business days after such title defects
are cured or thirty (30) days from the original Closing Date.
Nothing in this Section 4.4 shall relieve SELLERS of their obligations
under Section 4.3 above.
4.5 INSPECTION. PURCHASER shall have the right, in its sole discretion,
----------
until 10:00 A.M. California time on the date forty-five (45) days from the date
of this Agreement, or such earlier date as PURCHASER shall elect in writing, to
satisfy itself, in its sole discretion, as to the condition and extent of the
Property (the "Inspection Period"). SELLERS shall cooperate and shall provide
-----------------
PURCHASER with reasonable and continuing access to the Property (during normal
business hours) upon one (1) business day prior notice to SELLERS for the
purpose of PURCHASER'S inspection, including engineering inspection, and due
diligence review. In connection with such review, PURCHASER shall be afforded
the opportunity to review all reasonably available records, including non-
proprietary financial reports, the Contracts and the Leases affecting the
Property which are in or under SELLERS' control and relate to the operation of
the Property. PURCHASER shall not, however, have the right to contact or
otherwise discuss this transaction and /or the operation of the Hotel with any
on-site employees of the Hotel, without one (1) business day prior written
notice to SELLERS, and then only in the presence of a representative of SELLERS,
at SELLERS' election.
During the Inspection Period, PURCHASER shall also have the opportunity to
conduct a Phase I environmental audit/study of the Real Property, provided such
Phase I environmental audit/study is conducted in a reasonable manner at
reasonable times, and is not unreasonably invasive or intrusive. In addition,
PURCHASER may conduct an inspection for asbestos and undertake a Phase II
environmental audit/study. Any environmental audit/study proposed to be
undertaken by PURCHASER shall be subject to SELLERS' approval prior to the
commencement thereof, which approval shall not be unreasonably withheld or such
response unreasonably delayed. As a condition to any such consent, PURCHASER
shall obtain and maintain such public liability insurance in an amount of Two
Million Dollars ($2,000,000) affecting the Real Property, naming SELLERS as
additional insureds.
The cost of the inspections and tests undertaken pursuant to this Section
4.5 shall be borne solely by PURCHASER. PURCHASER shall provide to SELLERS, at
no cost to SELLERS, a copy of each and every report prepared for PURCHASER (or
its agents and representatives) by a third person pertaining to or involving the
Property, or any part or portion thereof. PURCHASER shall indemnify, protect,
defend, and hold SELLERS and UKA harmless from and against any obligation,
liability, claim (including any claim for damage to property or injury to or
death of any persons), lien or encumbrance, loss, damage, cost or expense,
including reasonable attorneys' fees, whether or not legal proceedings are
instituted, arising from the acts or omissions of PURCHASER or its agents,
employees or contractors occurring in connection with, or as a result of, such
inspections, tests or
11
<PAGE>
examinations of the Property, which indemnity, notwithstanding any of the
provisions of this Agreement to the contrary, shall survive the Close of Escrow
or the termination of this Agreement. PURCHASER shall promptly repair all damage
to the Property, and replace all irreparable items of Property, resulting from
or incurred in connection with any inspections, studies or audits conducted by,
or at the direction of, PURCHASER or its agents, employees, representatives and
contractors, all at the sole cost and expense of PURCHASER.
4.6 NOTICE OF NON-SATISFACTION. During the Inspection Period, PURCHASER
--------------------------
may deliver to SELLERS such objections as PURCHASER may have to anything
contained or set forth in the materials furnished pursuant to Section 4.5 above,
or arising from the Title Commitment, any survey, or its inspection of the
Property, or within such period may, in its sole and absolute discretion for any
reason or for no reason, terminate this Agreement and cancel the Escrow. If
PURCHASER objects to the Title Commitment, the condition of the Property, or any
matters set forth in any survey as a result of their inspection, or the
information provided pursuant to Section 4.5 above, but does not then terminate
this Agreement, and give written notice to SELLERS of such objections within the
time period specified above, SELLERS may, within five (5) business days
thereafter, subject to the provisions of Section 4.3 above, elect either to cure
PURCHASER'S objections or terminate this Agreement and cancel the Escrow,
whereupon the Earnest Money Deposit (and all accrued interest thereon) shall be
refunded to PURCHASER; provided, however, that SELLERS shall be obligated to
remove as an exception to title, and shall not have the right to terminate this
Agreement or cancel the Escrow in the event PURCHASER objects to the presence or
existence of (a) any federal, state or local tax lien (other than a lien for
real property taxes not yet due), or (b) any monetary lien or encumbrance on the
Property except (i) any improvement or other bonds or assessments, and (ii) the
Contracts and Leases.
If SELLERS elect to terminate this Agreement pursuant to this Section 4.6,
they shall notify PURCHASER of their election, in which case PURCHASER shall
have three (3) business days thereafter to rescind its objection(s) or terminate
this Agreement and cancel the Escrow. If PURCHASER rescinds its objection(s),
SELLERS may not terminate this Agreement or cancel the Escrow. If PURCHASER
does not rescind its objection(s), then SELLERS' election shall become binding
and effective, and the Earnest Money Deposit (and all accrued interest thereon)
shall be promptly refunded to PURCHASER, and PURCHASER shall return to SELLERS
all materials delivered to it pursuant to the provisions of Section 4.5 above,
and neither SELLERS nor PURCHASER shall have any further obligations under this
Agreement (except as otherwise provided herein).
If SELLERS do not elect to cure PURCHASER'S objection(s) in accordance with
the terms of this Section 4.6, SELLERS shall be deemed to have elected to
terminate this Agreement, unless SELLERS fail to cure any objections which
SELLERS are obligated to cure pursuant to the terms of this Agreement, in which
event SELLERS shall be deemed to be in default under this Agreement. If
PURCHASER fails to object to the Title Commitment, any survey, the condition of
the Property, or said information by giving written notice to SELLERS, or fail
to provide written notice of cancellation within the Inspection Period as
provided for above, PURCHASER shall be deemed to have approved said items and
information and the state of the Property, and shall be deemed to have waived
its rights to terminate this Agreement and cancel the Escrow as a result
thereof.
12
<PAGE>
4.7 CONDITION OF THE REAL PROPERTY.
------------------------------
(a) PURCHASER ACKNOWLEDGES THAT PURCHASER HAS, OR WILL HAVE PRIOR TO
THE EXPIRATION OF THE INSPECTION PERIOD, THOROUGHLY INSPECTED, AND
UNCONDITIONALLY AND IRREVOCABLY APPROVED, ALL ELEMENTS COMPRISING THE PROPERTY,
AND ALL FACTORS RELATED TO THEIR USE AND OPERATION, INCLUDING, WITHOUT
LIMITATION, UTILITIES, PHYSICAL AND FUNCTIONAL ASPECTS OF THE PROPERTY, THE
CONSTRUCTION AND CONDITION OF THE REAL PROPERTY, ALL MATTERS AFFECTING AND
RELATING TO TITLE, AND MUNICIPAL AND OTHER LEGAL REQUIREMENTS SUCH AS TAXES,
ASSESSMENTS AND BONDS, ZONING, USE PERMITS, BUSINESS PERMITS, LICENSES, AND
SIMILAR ENTITLEMENTS. PURCHASER HEREBY RELEASES AND FOREVER DISCHARGES SELLERS,
AND EACH OF THEM, UKA, AND THE PARTNERSHIP FROM ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES OR OBLIGATIONS ARISING OUT OF OR IN ANY WAY RELATED TO ALL
OF THE ITEMS LISTED IN THIS SECTION, WHICH RELEASE AND DISCHARGE FROM LIABILITY
SHALL SURVIVE THE CLOSE OF ESCROW.
(b) PURCHASER FURTHER ACKNOWLEDGES THAT PURCHASER HAS SUBSTANTIAL
EXPERIENCE WITH REAL PROPERTY, HOTELS AND HOTEL OPERATIONS, AND THAT PURCHASER
WILL ACQUIRE THE PROPERTY IN "AS IS, WHERE IS, WITH ALL FAULTS" CONDITION, AND
--------------------------------
SOLELY IN RELIANCE ON PURCHASER'S OWN INSPECTION AND EXAMINATION, AND SELLERS'
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT. EXCEPT AS TO
SELLERS' REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, PURCHASER
WAIVES ANY OBLIGATION ON THE PART OF SELLERS, UKA, THE PARTNERSHIP, OR ANY OTHER
PERSON, TO DISCLOSE ANY DEFECTS OR OTHER DEFICIENCIES IN OR WITH RESPECT TO THE
PROPERTY.
(c) EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN THIS AGREEMENT, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT SELLERS AND
UKA MAKE NO REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND, NATURE OR
SORT, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION, PAST, PRESENT
OR FUTURE PERFORMANCE, OR VALUE OF THE PROPERTY. SELLERS CONVEY THE REAL
PROPERTY TO PURCHASER "AS IS AND WHERE IS, WITH ALL FAULTS," AND PURCHASER
-----------------------------------
ACKNOWLEDGES THAT SELLERS AND UKA MAKE NO REPRESENTATIONS, GUARANTIES OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE QUALITY, CHARACTER,
PERFORMANCE, CONDITION OR SUITABILITY OF THE REAL PROPERTY FOR ANY PURPOSE,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR GUARANTY OF MERCHANTABILITY OR
FITNESS FOR ANY PURPOSE. PURCHASER ACKNOWLEDGES THAT PURCHASER SHALL BE SOLELY
RESPONSIBLE AND LIABLE FOR ASCERTAINING THE TRANSFERABILITY
13
<PAGE>
OF ALL LICENSES, PERMITS AND OTHER GOVERNMENTAL CONSENTS FOR THE OWNERSHIP, USE
AND OPERATION OF THE PROPERTY, AND SHALL BE SOLELY RESPONSIBLE FOR OBTAINING THE
TRANSFERS THEREOF.
PURCHASER FURTHER WAIVES ANY AND ALL WARRANTIES, GUARANTIES OR
CONDITIONS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION OF SELLERS, UKA, AND THE PARTNERSHIP WITH RESPECT TO
CONSEQUENTIAL DAMAGES), EXCLUDING SELLERS' GROSS NEGLIGENCE OR STRICT LIABILITY.
PURCHASER ALSO ACKNOWLEDGES THAT SOME DEFECTS MAY BECOME APPARENT ONLY AFTER THE
CLOSE OF ESCROW AND HEREBY RELEASES AND HOLDS SELLERS, AND EACH OF THEM, UKA,
AND THE PARTNERSHIP HARMLESS FROM BLAME AND ALL LIABILITY FOR SUCH "LATENT
------
DEFECTS." PURCHASER HEREBY COVENANTS NOT TO BRING ANY ACTION AGAINST SELLERS,
- -------
UKA, OR THE PARTNERSHIP BASED ON ANY OF THESE CLAIMS. THIS SECTION SHALL
SURVIVE THE CLOSE OF ESCROW.
PURCHASER ALSO ACKNOWLEDGES AND AGREES THAT, ALTHOUGH SELLERS HAVE
PROVIDED TO PURCHASER CERTAIN REPORTS, STUDIES AND SURVEYS FOR OR REGARDING THE
REAL PROPERTY (THE "REPORTS"), NEITHER SELLERS NOR UKA HAVE VERIFIED THE
-------
ACCURACY THEREOF AND MAKE NO REPRESENTATIONS OR WARRANTIES REGARDING THE MATTERS
SET FORTH THEREIN, IT BEING THE RESPONSIBILITY OF PURCHASER TO VERIFY THE
ACCURACY OF SUCH REPORTS; PROVIDED, HOWEVER, THAT TO THE ACTUAL KNOWLEDGE OF
RAJNI PATEL, WITHOUT INQUIRY, NONE OF THE INFORMATION IN THE REPORTS IS
MATERIALLY FALSE OR MISLEADING. PURCHASER AGREES THAT SELLERS, UKA, AND THE
PARTNERSHIP SHALL HAVE NO LIABILITY OR RESPONSIBILITY FOR THE ACCURACY OR
CONTENTS OF ANY SUCH REPORTS. PURCHASER HEREBY RELEASES AND FOREVER DISCHARGES
SELLERS, THE PARTNERSHIP AND UKA FROM ANY AND ALL CLAIMS, LOSSES, DAMAGES,
LIABILITIES OR OBLIGATIONS ARISING OUT OF OR IN ANY WAY RELATED TO ALL OF THE
ITEMS LISTED IN THIS PARAGRAPH, WHICH RELEASE AND DISCHARGE FROM LIABILITY SHALL
SURVIVE THE CLOSE OF ESCROW.
(d) FURTHERMORE, EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES THAT SELLERS AND
UKA HAVE NOT AND DO NOT MAKE ANY REPRESENTATIONS OR WARRANTIES IN CONNECTION
WITH THE INTEGRATION OF HAZARDOUS MATERIALS UPON OR WITHIN THE REAL PROPERTY.
IN THAT REGARD, PURCHASER MAY CONDUCT ITS OWN INVESTIGATION AND MAY OBTAIN ITS
OWN ENVIRONMENTAL ASSESSMENT REPORT TO DETERMINE IF THE REAL PROPERTY CONTAINS
ANY HAZARDOUS OR TOXIC WASTE, MATERIALS, DISCHARGE, DUMPING OR CONTAMINATION,
WHETHER SOIL, GROUNDWATER OR OTHERWISE, WHICH VIOLATES ANY FEDERAL, STATE,
LOCAL OR
14
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OTHER GOVERNMENTAL LAW, REGULATION OR ORDER OR REQUIRES REPORTING TO ANY
GOVERNMENTAL AUTHORITY.
(e) SELLERS, UKA, AND THE PARTNERSHIP SHALL HAVE NO OBLIGATION OR
DUTY TO EXPEND FUNDS FOR, OR OTHERWISE BE RESPONSIBLE TO CONDUCT OR PERFORM,
ANY CLEAN-UP REQUIREMENT(S) AS IMPOSED BY ANY FEDERAL, STATE OR LOCAL GOVERNMENT
LAW, REGULATION, ORDINANCE OR AGENCY FOR THE REMOVAL OF ANY HAZARDOUS MATERIALS
CONTAMINATION FROM THE REAL PROPERTY.
(f) EXCEPT WITH RESPECT TO ANY UNLAWFUL CONTAMINATION OF THE REAL
PROPERTY BETWEEN THE DATE OF THE EXPIRATION OF THE INSPECTION PERIOD AND THE
CLOSING DATE, PURCHASER, FOR ITSELF AND ITS SHAREHOLDERS, PARTNERS, SUCCESSORS
AND ASSIGNS, HEREBY RELEASES AND FOREVER DISCHARGES SELLERS, UKA, AND THE
PARTNERSHIP, AND EACH OF THEM, AND THEIR PAST, PRESENT AND FUTURE SHAREHOLDERS,
PARTNERS, OFFICERS, DIRECTORS, AGENTS, ATTORNEYS, ASSIGNS, AND SUCCESSORS-IN-
INTEREST FROM ALL PAST, PRESENT AND FUTURE CLAIMS, DEMANDS, OBLIGATIONS, LOSSES
AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER, WHETHER NOW KNOWN OR UNKNOWN,
SUSPECTED OR UNSUSPECTED, WHICH ARE BASED UPON OR ARISE OUT OF OR IN CONNECTION
WITH THE CONDITION OF THE PROPERTY, THE MATTERS ADDRESSED IN SUBSECTIONS (A),
(B), (C), (D) AND (E) OF THIS SECTION 4.7, AND WITH RESPECT TO ANY ENVIRONMENTAL
DAMAGES OR ENVIRONMENTAL REQUIREMENTS. IN ACCORDANCE WITH THE FOREGOING,
PURCHASER WAIVES ALL RIGHTS UNDER SECTION 1542 OF THE CIVIL CODE OF CALIFORNIA,
WHICH STATES IN FULL AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
BY INITIALING THIS AGREEMENT CLAUSE, PURCHASER ACKNOWLEDGES THAT THIS
SECTION HAS BEEN READ AND FULLY UNDERSTOOD, AND THAT PURCHASER HAS HAD THE
CHANCE TO ASK QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.
/s/
----------------------
PURCHASER'S INITIALS
(g) "Environmental Damages" means all claims, judgments, damages,
---------------------
losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs, and expenses of investigation and defense of any
claim, whether or not such claim is ultimately defeated, and of any
15
<PAGE>
good faith settlement of judgment, of whatever kind or nature, contingent or
otherwise matured or unmatured, foreseeable or unforeseeable, including without
limitation reasonable attorneys' fees and disbursements and consultants' fees,
any of which are incurred at any time as a result of the existence of Hazardous
Materials upon, about, beneath the Real Property or migrating or threatening to
migrate to or from the Real Property, or the existence of a violation of
Environmental Requirements pertaining to the Real Property, regardless of
whether the existence of such Hazardous Materials or the violation of
Environmental Requirements arose prior to the present ownership or operation of
the Real Property.
(h) "Environmental Requirements" means all applicable present and
--------------------------
future statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises, and similar
items, of all governmental agencies, departments, commissions, boards, bureaus,
or instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial, administrative, and regulatory decrees,
judgments, and orders relating to the protection of human health or the
environment.
(i) "Hazardous Materials" means any substance (i) the presence of
-------------------
which requires investigation or remediation under any federal, state or local
statute, regulation, ordinance or policy; or (ii) which is defined as a
"hazardous waste" or "hazardous substance" under any federal, state or local
--------------- -------------------
statute, regulation or ordinance, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. section 9601
et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. section 6901
et seq.) and amendments thereto and regulations promulgated thereunder; or (iii)
which is toxic, explosive, corrosive, infectious or otherwise hazardous or is
regulated by any federal, state or local governmental authority; or (iv) without
limitation which contains polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde.
V.
CLOSING
-------
5.1 CLOSING DATE. The "Closing Date" for purposes of this Agreement shall
------------ ------------
be on or before June 30, 1996, or such earlier or later date as may be agreed
upon, in writing, by SELLERS and PURCHASER. Notwithstanding the foregoing,
however, PURCHASER may elect to extend the Closing Date for up to three (3)
additional thirty (30) day periods, provided, for each thirty (30) day
extension, (i) PURCHASER provides to SELLERS and Escrow Holder written notice of
its election to so extend, which written notice must be received by SELLERS and
Escrow Holder on or before 1:00 P.M. California time on the day fifteen (15)
days prior to the Closing Date, and (ii) PURCHASER deposits with Escrow Holder,
in Good Funds, the sum of Fifty Thousand Dollars ($50,000), with irrevocable
instructions to immediately thereafter release such funds to SELLERS. Such funds
shall be applied to the Purchase Price. The "Close of Escrow" for purposes of
---------------
this Agreement is defined as the time when the Grant Deed is recorded in the
Official Records of San Diego County, California by Escrow Holder.
16
<PAGE>
If the Escrow has not closed on or before the Closing Date or any extension
thereof, Escrow Holder may nevertheless proceed in accordance with the General
Provisions which are attached hereto as Exhibit "E". In the event the Escrow
-----------
and this Agreement are canceled and terminated, upon Escrow Holder's request,
the parties shall pay to Escrow Holder all title and escrow cancellation
charges; provided, however, that as an agreement between the parties not to
concern Escrow Holder, it is agreed that if termination of the Escrow is caused
by the default of one party then such party shall be responsible for all escrow
and title cancellation charges, and if the termination occurs where neither
party is in default or where both parties are in default, then each party shall
be responsible for one-half ( 1/2) of all title and Escrow cancellation charges.
5.2 ACTION PRIOR TO THE CLOSE OF ESCROW BY SELLERS. SELLERS agree that,
----------------------------------------------
provided PURCHASER has complied with its obligations under Section 5.3 below, on
or before 1:00 P.M. California time on the last business day immediately
preceding the Closing Date, SELLERS will deposit with Escrow Holder such funds
and other items and instruments (executed and acknowledged, if appropriate) as
may be necessary in order for Escrow Holder to comply with this Agreement,
including without limitation the following:
(a) A Grant Deed, in the form and content attached hereto as Exhibit
-------
"F", executed by SELLERS and acknowledged before a Notary Public in the manner
- ---
provided under the laws of the State of California, assigning, conveying and
transferring to PURCHASER fee title to the Real Property subject only to the
Permitted Exceptions (the "Grant Deed").
----------
(b) Two (2) duplicate originals of a Bill of Sale, in the form and
content attached hereto as Exhibit "G", executed by SELLERS, assigning,
-----------
conveying and transferring to PURCHASER good marketable title in the Personal
Property (except those items of Personal Property subject to any of the Leases)
and the Inventory (the "Bill of Sale").
------------
(c) Two (2) duplicate originals of an Assignment of Intangible
Property, in the form and content attached hereto as Exhibit "H", executed by
-----------
SELLERS, assigning and conveying to PURCHASER all of SELLERS' right, title and
interest in the Intangible Property (the "Assignment of Intangibles").
-------------------------
(d) Two (2) duplicate originals of an Assignment and Assumption of
Contracts and Leases, in the form and content attached hereto as Exhibit "I",
-----------
executed by SELLERS, assigning and conveying to PURCHASER all of SELLERS' rights
and obligations under the Contracts and the Leases (the "Assignment of Contracts
-----------------------
and Leases").
- ----------
(e) A Non-Foreign Affidavit signed by SELLERS in the form to be
prepared by Escrow Holder (the "Non-Foreign Affidavit").
---------------------
(f) Such other funds, instruments or documents as may be necessary to
effect or carry out the covenants and obligations to be performed by SELLERS
pursuant to this Agreement.
17
<PAGE>
5.3 ACTION PRIOR TO THE CLOSE OF ESCROW BY PURCHASER. PURCHASER agrees
------------------------------------------------
that on or before 11:00 A.M. California time on the date one (1) business day
immediately preceding the Closing Date, PURCHASER will deposit with Escrow
Holder all additional funds (in Good Funds) and/or documents (executed and
acknowledged, if appropriate) which are necessary to comply with the terms of
this Agreement, including without limitation:
(a) The funds referred to in Section 2.2.2 above.
(b) Two (2) duplicate originals of the Assignment of Contracts and
Leases executed by PURCHASER.
(c) Two (2) duplicate originals of the Assignment of Intangibles
executed by PURCHASER.
(d) Such other funds, instruments or documents as may be necessary to
effect or carry out the covenants and obligations to be performed by PURCHASER
pursuant to this Agreement.
5.4 RECORDING OF GRANT DEED. Escrow Holder will cause the Grant Deed to be
-----------------------
recorded when (but in no event after the Closing Date) Title Insurer is
irrevocably committed to issue the Title Policy to be issued as contemplated in
this Agreement, and holds for the account of SELLERS and PURCHASER the items and
funds (if any) to be delivered to SELLERS and PURCHASER through the Escrow,
after payment of costs, expenses, disbursements and prorations chargeable to
SELLERS or PURCHASER pursuant to the provisions of this Agreement.
5.5 PRORATIONS.
----------
5.5.1 TAXES. All non-delinquent real estate and personal property
-----
general and special taxes and assessments for the Property for the current
assessment year shall be prorated on and as of the Close of Escrow. As a matter
not to concern Escrow Holder, the parties agree that if there are supplemental
taxes and/or assessments levied or if additional proration becomes necessary
because additional tax information becomes available following the Close of
Escrow, the parties shall make the appropriate adjustments outside of the Escrow
as soon as reasonably possible so that SELLERS shall bear such additional or
supplemental taxes and assessments applicable to periods prior to the Close of
Escrow, and PURCHASER shall bear any such additional or supplemental taxes and
assessments applicable to periods following the Close of Escrow. It is
understood that any supplemental property tax bill issued as a result of the
sale of the Property pursuant to the provisions of this Agreement, shall be
borne by PURCHASER. Notwithstanding anything to the contrary in this Agreement,
SELLERS shall retain all right, title and interest in and to any and all
property tax (both real property and personal property) refunds and claims for
refunds with respect to the Property for any period prior to the Close of
Escrow. PURCHASER shall be responsible for, and shall pay, all sales, use and
other transfer taxes imposed in connection with the sale and transfer of the
Personal Property, the Inventory and the Intangible Property.
18
<PAGE>
5.5.2 ADVANCE RESERVATIONS. At the Close of Escrow, SELLERS shall
--------------------
provide PURCHASER with a schedule of post-closing confirmed reservations for the
Hotel, which shall list the amount of any room rental deposits, and the amount
of any other deposits made for advance reservations, banquets and future
services to be provided after the Cut-Off Time. PURCHASER shall receive a
credit against the Purchase Price in the amount of all prepayments or deposits.
5.5.3 UTILITY SERVICE. SELLERS shall request each utility company
---------------
providing utility service to the Real Property to cause all utility billings to
be closed and billed as of the Close of Escrow in order that utility charges may
be separately billed for the period prior to the Cut-Off Time and the period
after the Cut-Off Time. In the event any such utility charges are not
separately billed, the same shall be prorated. In connection with any such
proration, it shall be presumed that utility charges were uniformly incurred
during the billing period in which the Close of Escrow occurs.
5.5.4 REVENUE FROM OPERATIONS. As to the Hotel, all revenues from
-----------------------
operations, including, without limitation, guest room rentals, revenue from the
minibars (if any), banquet rooms rentals, vending machines, coin telephones, and
other income-producing equipment arising through 12:01 A.M. California time on
the Close of Escrow (the "Cut-Off Time") shall belong to SELLERS. All revenues
------------
from operations, including, without limitation, guest room rentals, revenue from
the minibars (if any), banquet rooms rentals, vending machines, coin telephones,
and other income producing equipment arising after the Cut-Off Time shall belong
to PURCHASER. Revenue from guest room rentals for the evening before the date
of the Close of Escrow through to the day of the Close of Escrow, less the cost
of maid service on the morning of the day of the Close of Escrow, shall belong
to SELLERS. All prepaid rentals, room rental deposits, and all other deposits
for advance registration for the period after the Cut-Off Time, or otherwise
shall be credited to PURCHASER.
5.5.5 ACCOUNTS PAYABLE AND OPERATING EXPENSES. All obligations and
---------------------------------------
liabilities (for services and materials ordered, or otherwise) and accounts
payable for the Hotel owing as of the Cut-Off Time for merchandise, equipment,
tour agents' and travel agents' commissions, advertisements, supplies and other
materials and services shall be prorated between SELLERS and PURCHASER as of the
Cut-Off Time. SELLERS shall receive a credit for all prepaid expenses.
5.5.6 MISCELLANEOUS PERMITS AND TAXES. All water and sewer charges,
-------------------------------
taxes (other than ad valorem property taxes), including license taxes or fees
for licenses (other than the Liquor Licenses) which are assignable or
transferable without added cost and have a value which will survive Close of
Escrow, including, but not limited to, and any unpaid taxes payable in arrears,
shall be prorated as of the Cut-Off Time. SELLERS will be credited for that
portion of taxes and fees paid by SELLERS or UKA allocable to the period after
the Cut-Off Time.
5.5.7 CONTRACTS AND LEASES. All payments and receipts under the
--------------------
Contracts and the Leases to be assumed by PURCHASER pursuant to the provisions
of Section 2.3 above shall be prorated between PURCHASER and SELLERS as of the
Cut-Off Time.
5.5.8 OTHER INCOME. All other income derived by SELLERS from the
------------
Property accruing or relating to the period up to the Cut-Off Time shall be paid
to SELLERS. All other income derived
19
<PAGE>
by SELLERS from the Property accruing or relating to the period after the Cut-
Off Time shall be paid to PURCHASER.
5.5.9 OTHER EXPENSES. All other expenses and obligations not
--------------
otherwise specified in this Section 5.5 incurred in the ownership of the
Property and operation of the Hotel shall be prorated between SELLERS and
PURCHASER.
5.5.10 SECURITY DEPOSITS. All transferable security and other
-----------------
deposits paid by SELLERS or UKA in connection with any of the Contracts and
Leases shall be paid to SELLERS by PURCHASER, through the Escrow, at the time
required in Section 5.3 of this Agreement. The Purchase Price shall be credited
by an amount equal to any security and other deposits received by SELLERS or UKA
in connection with any of the Leases.
5.5.11 HOUSE BANKS. On the Close of Escrow, SELLERS shall receive a
-----------
credit through the Escrow for an amount equal to all till money and all sums in
house banks for the Hotel as determined by PURCHASER and SELLERS, in which case
all right, title and interest to the till money and house banks shall be
assigned and conveyed by SELLERS to PURCHASER. In the event PURCHASER and
SELLERS are unable to agree upon the amount of the till money and house banks,
the provisions of this Section 5.5.11 shall be inapplicable, and title to the
till money and house banks shall remain with SELLERS. The failure of PURCHASER
and SELLERS to agree on the amounts of the till money and house banks shall not
be deemed a condition precedent to the obligations of PURCHASER under this
Agreement, and PURCHASER shall, nevertheless, be obligated to comply with its
obligations in accordance with the terms of this Agreement.
5.5.12 PRORATION ALLOCATION. For proration purposes, the date of the
--------------------
Close of Escrow shall be charged or credited, as the case may be, to PURCHASER.
5.6 GUEST PROPERTY. On the Close of Escrow, SELLERS shall deliver to
--------------
PURCHASER all guest property in UKA's or SELLERS' or UKA's possession. On the
Close of Escrow, at the time possession of the Property is transferred by
SELLERS to PURCHASER, SELLERS shall also deliver and transfer custody and
control of such guest property to PURCHASER, at which time PURCHASER shall
assume all risk and liability therefor.
5.7 CLOSING COSTS. SELLERS shall pay for the cost of the premium for the
-------------
Title Policy, except that, notwithstanding the foregoing, PURCHASER shall pay
(a) the cost of that portion of the premium for the Title Policy which is in
excess of the cost of the premium for a C.L.T.A. Owner's Policy of Title
Insurance (standard coverage) for the Real Property, and shall also pay all
additional costs for acquiring any additional endorsements to the Title Policy
not otherwise included with a C.L.T.A. Owner's Policy of Title Insurance
(standard coverage), and (b) all costs of any survey (or update thereto)
required for the Title Policy. Escrow fees of Escrow Holder shall be paid
equally by SELLERS and PURCHASER. PURCHASER shall pay all recording costs and
documentary transfer taxes. All other costs of Escrow and closing shall be borne
by the parties in accordance with custom and usage in San Diego County,
California, unless otherwise specified in this Agreement.
20
<PAGE>
5.8 DISTRIBUTION OF FUNDS AND DOCUMENTS FOLLOWING CLOSE OF ESCROW.
-------------------------------------------------------------
Following Close of Escrow, Escrow Holder shall distribute the documents as
follows:
5.8.1 To SELLERS:
(a) The cash portion of the Purchase Price as set forth in
Section 2.2, less costs, offsets and prorations in accordance with the
provisions of this Agreement.
(b) One (1) fully executed duplicate original of the Bill of
Sale.
(c) One (1) fully executed duplicate original of the
Assignment of Intangibles.
(d) One (1) fully executed duplicate original of the
Assignment of Contracts and Leases.
(e) A copy of the Title Policy issued to PURCHASER.
(f) One (1) duplicate original or conformed copy as
appropriate, of any other document to be received by SELLERS through Escrow
pursuant to the provisions of this Agreement.
(g) One (1) copy of any other document delivered to Escrow
Holder by PURCHASER or SELLERS pursuant to the terms of the this Agreement.
5.8.2 To PURCHASER:
(a) Any excess funds deposited by PURCHASER which remain after
disbursement to SELLERS.
(b) One (1) conformed copy of the Grant Deed, the original to
be mailed to PURCHASER following the recordation thereof.
(c) One (1) duplicate original of the Bill of Sale.
(d) One (1) duplicate original of the Assignment of
Intangibles.
(e) One (1) duplicate original of the Assignment of Contracts
and Leases.
(f) One (1) duplicate original or conformed copy as
appropriate, of any other document to be received by PURCHASER through Escrow
pursuant to the provisions of this Agreement.
(g) One (1) copy of any other document delivered to Escrow
Holder by PURCHASER or SELLERS pursuant to the terms of this Agreement.
21
<PAGE>
(h) The original of the Title Policy.
5.9 POSSESSION. PURCHASER shall be entitled to sole possession of the
----------
Property on the Close of Escrow.
VI.
ADDITIONAL COVENANTS AND INDEMNITIES
------------------------------------
6.1 PURCHASER'S COVENANTS AND INDEMNITIES. PURCHASER covenants to defend,
-------------------------------------
indemnify and save harmless SELLERS, UKA, and the Partnership, and each of them,
from and against any and all claims, penalties, liabilities, fines, damages,
costs or expenses (including, without limitation, reasonable attorneys' fees and
costs) (i) arising from the use, management, operation, rental, maintenance and
ownership of the Property, and based upon acts, conduct or omissions occurring
on or after the Close of Escrow, including, without limitation, with respect to
and under the Holiday Inn Franchise Agreement and the Contracts and the Leases,
(ii) arising from the construction or condition of the Property (including with
respect to Environmental Requirements and Environmental Damages having their
origins after the Close of Escrow), (iii) caused by or arising out of any
material misrepresentation by PURCHASER in connection with this Agreement, (iv)
arising from the use of the term "Holiday Inn," the logo of "Holiday Inns," any
----------- ------------
materials referencing "Hotel Circle", and any derivatives thereof after the
------------
Close of Escrow, or (v) arising from any breach of this Agreement by PURCHASER
or any instrument or agreement required delivered or to be delivered pursuant to
the provisions of this Agreement. This indemnity shall survive the Close of
Escrow.
On or prior to the Close of Escrow, SELLERS shall deliver to PURCHASER a
schedule of all accounts receivable and other sums owed to SELLERS as of the
Cut-Off Time in connection with the operation of the Hotel ("Sellers' Accounts
-----------------
Receivable"). PURCHASER shall purchase from SELLERS, at full face value, all
- ----------
uncontested Sellers' Accounts Receivable for then resident Hotel guests.
SELLERS shall retain all other Sellers' Accounts Receivable. PURCHASER
covenants and agrees to use commercially reasonable efforts (without resorting
to litigation), and at its sole cost and expense, to collect all of Sellers'
Accounts Receivable for a period of one hundred eighty (180) days after the
Close of Escrow. For a period of sixty (60) days after the Close of Escrow,
PURCHASER shall permit SELLERS to have one of SELLERS' representatives on the
Real Property (in the accounting offices located thereon) to assist in such
collection efforts. PURCHASER shall provide SELLERS' representative with a
guest room at the Hotel at a cost of Twenty-Five Dollars ($25) per day. Any
sums received by PURCHASER, whether during the one hundred eighty (180) day
period or otherwise, from a person or entity listed on Sellers' Accounts
Receivable, shall, during the first ninety (90) days after the Close of Escrow,
first be allocated to the payment of the sums owing to SELLERS as referenced on
Sellers' Accounts Receivable which are, as of the date of this Agreement, less
than one hundred fifty (150) days old, and, to the extent any sums thereafter
remain from such payment, the same may be credited to any sums such person or
entity owes PURCHASER. All sums received by PURCHASER which are properly
credited to Sellers' Accounts Receivable shall be remitted to SELLERS on or
before the last day of the calendar month in which such payment is received.
For a period of one (1) year after the Close of Escrow, SELLERS shall have the
right to review the books and records of PURCHASER for the
22
<PAGE>
Hotel, but only as relating to Sellers' Accounts Receivable and sums received by
PURCHASER and credited to any accounts of the persons or entities listed on
Sellers' Accounts Receivable, for purposes of verifying PURCHASER'S compliance
with its obligations hereunder. PURCHASER'S obligations under this paragraph
shall survive the Close of Escrow.
6.2 SELLERS' COVENANTS AND INDEMNITIES. SELLERS covenant to defend,
----------------------------------
indemnify and save harmless PURCHASER from and against any and all claims,
penalties, liabilities, fines, damages, costs or expenses (including, without
limitation, reasonable attorney's fees and costs) (i) arising from the use,
management, rental, maintenance, ownership and operations of the Property during
the period of SELLERS' and the Partnership's ownership thereof (except as to
Environmental Damages, Environmental Requirements, and the matters addressed in
Section 4.3 above, except as required in subsection (iv) below), (ii) caused by
or arising out of any material misrepresentation by SELLERS in connection with
this Agreement, (iii) arising from any breach of this Agreement by SELLERS or
any instrument or agreement required to be delivered or to be delivered pursuant
to the provisions of this Agreement, or (iv) for a period of two (2) years after
the Close of Escrow only, any Environmental Damages resulting from the failure
of SELLERS, the Partnership or UKA to comply with the Environmental
Requirements, which non-compliance directly results in the unlawful
contamination of the Real Property with Hazardous Substances, but with liability
to SELLERS, the Partnership and UKA not to exceed, in the aggregate, the sum of
Two Hundred Thousand Dollars ($200,000). This indemnity shall survive the Close
of Escrow.
SELLERS, during the term of this Agreement, shall cause UKA to carry on the
business and operations of the Hotel in the same manner as heretofore carried on
by it, including the maintenance of normal operating Inventory levels,
undertaking repairs and maintenance in accordance with past practices, and
maintaining all guest and room service levels. SELLERS shall cause UKA's
management personnel to remain involved in the operation of the Hotel until the
Close of Escrow. During the term of this Agreement, SELLERS shall not, and
SELLERS shall cause UKA to not, enter into any new leases of furniture, fixtures
and equipment. SELLERS and UKA may enter into, extend, amend, modify or
terminate such Contracts as SELLERS deem appropriate to operate, service and
maintain the Property and the Hotel consistent with past practices.
Notwithstanding the foregoing, however, during the term of this Agreement,
SELLERS shall not, and SELLERS shall cause UKA to use its best efforts to not,
enter into any new Contracts, licenses or concession agreements, renew any
Contracts, or extend the term of any of the Contracts unless, in each case, such
Contract(s) may be terminated, without penalty, upon thirty (30) days' notice,
or the monthly cost thereof is One Thousand Dollars ($1,000) or less.
It shall be PURCHASER'S responsibility, at PURCHASER'S sole cost and
expense, to negotiate and arrange for the assumption of the Holiday Inn
Franchise Agreement. PURCHASER'S failure to negotiate an assumption of the
Holiday Inn Franchise Agreement shall not be deemed a failure of a condition
---
precedent to the obligations of PURCHASER to acquire the Property pursuant to
the provisions of this Agreement, and PURCHASER shall then be obligated to pay
all termination and other fees, costs and charges incurred or payable in
connection with or as a result of the termination of the Holiday Inn Franchise
Agreement. SELLERS shall cooperate with PURCHASER in PURCHASER'S efforts to
negotiate such assumption at no cost or expense to SELLERS.
23
<PAGE>
Prior to the Close of Escrow, SELLERS shall terminate, at SELLERS' sole
cost and expense, the Management Agreement and all other management contracts.
6.3 EMPLOYEE MATTERS.
----------------
6.3.1 SELLERS NOT EMPLOYER. PURCHASER acknowledges that SELLERS have
--------------------
advised PURCHASER that UKA, and not SELLERS, is the employer of all Hotel
employees. Nevertheless, in order to induce PURCHASER to purchase the Hotel in
accordance with this Agreement, SELLERS have agreed to the provisions of this
Section 6.3, but only in its capacity as owner of the Hotel and not as the
employer of the Hotel employees, with the express intent and understanding that
SELLERS, as owners of the Hotel, shall cause UKA, as employer of the Hotel
employees, to comply with the provisions of this Section 6.3 and without any
intent to change or vary that relationship. Accordingly, it is the express
intent and understanding of both SELLERS and PURCHASER that none of the
provisions set forth in this Section 6.3 below shall be construed as any
admission, statement against interest or other evidence that SELLERS, and not
UKA, are the employers of the Hotel employees.
6.3.2 PAYMENT OF EMPLOYEE COMPENSATION. On the Closing Date, SELLERS
--------------------------------
shall cause UKA to pay all employee salaries, wages, fringe benefits and other
compensation, including any applicable federal, state and local taxes, for any
employees of the Hotel which have accrued up to the Cut-Off Time. After the
Close of Escrow, all hiring and staffing decisions in connection with the Hotel
shall be within PURCHASER'S sole and exclusive discretion and control. In the
event SELLERS are not required to provide the notice under WARN, as provided
under Section 6.3.3 below, or in the event PURCHASER elects to extend the
Closing Date as permitted by the provisions of Section 5.1 above, then PURCHASER
shall, nevertheless, be obligated to hire and retain, as of the Close of Escrow,
all Hotel personnel and employees on the same terms and conditions, and with the
same compensation and benefits, as they are receiving as of the Close of Escrow.
6.3.3 WARN NOTIFICATION. In the event Purchaser waives, in writing,
-----------------
the Inspection Period within the first thirty (30) days thereof, and if
otherwise required by law, SELLERS or UKA shall give appropriate and sufficient
notification, including, without limitation, any notification required by the
Worker Adjustment and Retraining Notification Act ("WARN"), to all Hotel
----
employees or to personnel performing services at or for the Hotel who are not
hired or employed by PURCHASER after the Close of Escrow. SELLERS' obligation
with respect thereto shall arise only in the event (a) of the aforementioned
waiver of the Inspection Period within the first thirty (30) days thereof, (b)
that PURCHASER does not elect to extend the Closing Date as permitted by the
terms of Section 5.1 above, and (c) PURCHASER has not objected to any item(s) of
due diligence review as specified in Section 4.6 above (or, if PURCHASER has so
objected, all such objection(s) have been cured by SELLERS (or SELLERS have
committed to cure) or waived by PURCHASER, in accordance with the provisions of
Section 4.6 above), and SELLERS shall have the right to extend the Closing Date,
at no cost, expense or liability to SELLERS, to a date not later than sixty-five
(65) days after the date SELLERS receive PURCHASER'S written notice of waiver of
the Inspection Period as referenced hereinabove.
24
<PAGE>
6.3.4 INDEMNIFICATION. PURCHASER shall indemnify, defend and hold
---------------
harmless SELLERS, UKA, and the Partnership, and each of them, against any and
all labor or employment claims, penalties, liabilities, fines, damages, costs
and expenses (including, without limitation, reasonable attorneys' fees, charges
and costs) which arise or accrue from or after, or arise out of events occurring
from or after the Close of Escrow, including, without limitation, all claims
arising as of the termination by PURCHASER of any Hotel employee or personnel
performing services at or for the Hotel, the failure of PURCHASER to perform its
obligations under Section 6.3.2 above, the failure of PURCHASER to offer
employment to any such employee or personnel, and PURCHASER'S decision to
continue or discontinue any employment policy or practice of SELLERS or UKA in
existence or effect at the Hotel prior to the Close of Escrow, which indemnity
shall survive the Close of Escrow. The foregoing indemnity shall not include
coverage for any claims, liabilities or obligations predicated on matters which
occurred prior to the Close of Escrow even though such claims, liabilities or
obligations were first instituted or brought to the attention of SELLERS or
PURCHASER after the Close of Escrow, it being expressly understood and agreed by
SELLERS that any such claims or liabilities or obligations shall remain the
responsibility of UKA, and SELLERS shall cause UKA to satisfy all such claims,
liabilities and obligations. Notwithstanding any of the foregoing provisions of
this Section 6.3.4, in the event (a) SELLERS or UKA are not required to provide
the notice required under WARN as provided in Section 6.3.3 above, or (b)
PURCHASER elects to extend the Closing Date as permitted by the terms of Section
5.1 above, then PURCHASER (i) shall be obligated to hire and retain all
---
employees of SELLERS and UKA at the Hotel at not less than the same terms and
conditions (including, without limitation, compensation and benefits) as
existing prior to the Close of Escrow, and retain them on such basis for at
least sixty (60) days thereafter, with any termination thereafter at the risk,
cost and liability of PURCHASER, and (ii) shall indemnify and hold SELLERS, UKA
and the Partnership harmless from any and all claims, penalties, liabilities,
fines, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and costs) which arise or accrue as a result of or in connection
with the failure (as a result of (1) PURCHASER'S failure to waive the Inspection
Period as referenced in Section 6.3.3 above, or (2) PURCHASER'S election to
extend the Closing Date as permitted by the terms of Section 5.1 above) of
SELLERS or UKA to provide the notice required under WARN.
6.4 HART-SCOTT-RODINO FILING. PURCHASER and SELLERS covenant and agree to
------------------------
cooperate and coordinate with each other in the compliance with all filings and
other matters required pursuant to Hart-Scott-Rodino, if in any way applicable,
as they relate and apply, to the transactions set forth in this Agreement. If
such filings are determined to be required, each party shall promptly make the
required filings, shall request early termination of the waiting period under
Hart-Scott-Rodino, and shall thereafter promptly comply with any request for
additional information made pursuant to Hart-Scott-Rodino. Each party shall
cooperate with the other in all matters relating to the foregoing, shall
promptly provide to the other all information in such party's possession or
control which is necessary for completion of such filings and compliance with
such requests for additional information, and shall promptly provide to the
other copies of all correspondence and other notifications with respect thereto.
PURCHASER shall pay all fees required in conjunction with filings under Hart-
Scott-Rodino. Subject to the foregoing, each party shall bear its own costs
(including attorneys' fees) incurred in connection with such filings. In
satisfaction of their obligations with respect to the matters set forth in this
Section 6.4, in the event either PURCHASER or SELLERS determine that the
purchase and sale of
25
<PAGE>
the Property is subject to the jurisdiction and provisions of Hart-Scott-Rodino,
and requires or mandates the filing of a Notification and Report for Certain
Mergers and Acquisitions to the Department of Justice and the Federal Trade
Commission, as required, then PURCHASER and SELLERS shall so submit the same, in
coordination with one another, not later than seven (7) days after the
expiration of the Inspection Period (unless PURCHASER has objected to any
item(s) of due diligence review as specified in Section 4.6 above, in which case
such filing shall be made within seven (7) days after the later of (a) SELLERS'
cure (or commitment to cure) of all such objection(s), or (b) PURCHASER'S waiver
of all such objections (or the combination of both (a) and (b)), in which case
SELLERS may, at no cost, expense or liability to SELLERS, extend the Closing
Date by the number of days after the expiration of the Inspection Period that
all such objection(s) have been cured, committed to be cured by SELLERS, or
waived by PURCHASER).
Escrow Holder shall not be concerned with the provisions of this Article
VI.
VII.
REPRESENTATIONS AND WARRANTIES
------------------------------
7.1 BY PURCHASER. PURCHASER represents and warrants to SELLERS that as of
------------
the date hereof and the Close of Escrow:
7.1.1 ORGANIZATION AND STANDING. PURCHASER is a corporation, duly
-------------------------
organized, validly existing, and in good standing under the laws of the State of
Texas, is duly qualified to do business in the State of California, and has the
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby to be carried out by it. The person(s) signing
this Agreement and any document pursuant hereto on behalf of PURCHASER have full
power and authority to bind PURCHASER.
7.1.2 DUE AUTHORIZATION. The performance of this Agreement and the
-----------------
transactions contemplated hereunder by PURCHASER have been duly authorized by
all necessary action on the part of PURCHASER. No consent, approval or
authorization of any governmental regulatory authority is required in connection
with the execution, delivery and performance of PURCHASER'S obligations under
this Agreement, except with respect to the transfer of any licenses or permits
used in connection with the operation of the Hotel.
7.1.3 LACK OF CONFLICT. Neither the execution of this Agreement nor
----------------
the consummation of the transactions contemplated hereby will violate any
restriction, court order, judgment, law, regulation, charter, bylaw, instrument
or agreement to which PURCHASER is subject.
7.1.4 SOLVENCY/BANKRUPTCY. PURCHASER has not (i) made any general
-------------------
assignment for the benefit of creditors, (ii) filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition in bankruptcy by
PURCHASER'S creditors, (iii) suffered the appointment of a receiver to take
possession of all, or substantially all, of PURCHASER'S assets, (iv) suffered
the attachment or other judicial seizure of all, or substantially all, of
PURCHASER'S assets, (v) admitted
26
<PAGE>
in writing its inability to pay its debts as they come due, or (vi) made any
offer of settlement, extension or compromise to its creditors generally, and has
not considered doing or undertaking, and has no current plans to do or
undertake, any of the foregoing. Furthermore, PURCHASER has not taken, and does
not contemplate taking, against it any such actions.
7.2 BY SELLERS. SELLERS, severally in proportion with their Percentage
----------
Interests, represent and warrant to PURCHASER that as of the date hereof and the
Close of Escrow:
7.2.1 LEASES. Schedule "B" contains a list of all Leases pertaining
------ ------------
to the Property. Except as noted on Schedule "B", SELLERS have received no
------------
written notice that the lessor or lessee under any Lease has failed to pay,
perform or observe any of the terms, covenants and conditions on such party's
part to be so paid, performed or observed thereunder, and SELLERS shall, prior
to the Close of Escrow, pay, perform and observe all of SELLERS' obligations
under the Leases. Except as noted on Schedule "B", to the actual knowledge of
------------
SELLERS, none of the Real Property subject to any Lease is presently occupied by
a sub-tenant, and SELLERS shall not consent, between the date hereof and the
Close of Escrow, to any subletting without PURCHASER'S prior written consent,
which consent shall not be unreasonably withheld or delayed. All brokerage,
leasing and other commissions, and all other compensation and fees payable in
connection with the Leases, have been fully paid or shall be fully paid by
SELLERS prior to the Close of Escrow. Except as shown on Schedule "B", no tenant
------------
has prepaid rent for more than one (1) month, has not received and is not
entitled to receive a rent concession in connection with his tenancy, or is
entitled to any work not yet performed or consideration not yet given in
connection with its tenancy. Prior to the Close of Escrow, SELLERS shall not
collect any rent in advance for more than the then current month, give any rent
concessions to or agree to do any work for, or give any consideration to (other
than as expressly provided in the Lease), a tenant except with the PURCHASER'S
prior written consent, which consent shall not be unreasonably withheld or
delayed.
7.2.2 NO MECHANIC'S LIENS. SELLERS shall keep the Property at all
-------------------
times free and clear of any mechanic's or materialmen's liens for work performed
or materials furnished or contracted for by SELLERS or UKA.
7.2.3 EMPLOYEES. There are no written employment agreements with any
---------
employees of the Hotel, and neither SELLERS nor UKA shall enter into any such
written employment agreements prior to the Close of Escrow.
7.2.4 NO PENDING CONDEMNATION PROCEEDINGS. SELLERS have no actual
-----------------------------------
knowledge (and have made no inquiry) of pending or proposed condemnation
proceedings affecting the Real Property or any part thereof.
7.2.5 REAL ESTATE TAX PROTESTS. SELLERS have not commenced any
------------------------
proceedings which are pending for the reduction of the assessed valuation of the
Real Property or the Personal Property, or any portion thereof.
27
<PAGE>
7.2.6 NO THIRD PARTY RIGHTS. No person, firm or entity, except as set
---------------------
forth herein or in any agreement or instrument listed in any of the schedules or
exhibits attached hereto, has any rights in or to acquire any interest in the
Property, or any part thereof.
7.2.7 LITIGATION. SELLERS have no actual knowledge (and have made no
----------
inquiry) of any pending or threatened litigation, action or proceeding which
does or will materially and adversely affect the Property.
7.2.8 INSURANCE POLICIES. SELLERS shall maintain in effect through
------------------
the Close of Escrow substantially the same insurance coverage as existing on the
date hereof affecting the Property.
7.2.9 SELLERS' POWER AND AUTHORITY. SELLERS, and each of them, have
----------------------------
full power and authority to enter into this Agreement and to assume and perform
all of their obligations hereunder. The execution and delivery of this
Agreement, and the performance by SELLERS of their obligations hereunder, have
been duly authorized by such partnership, corporate and/or limited liability
company actions as may be required, and no further action or approval is
required in order to constitute this Agreement as a binding and enforceable
obligation of SELLERS. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereunder on the part of SELLERS,
do not and will not violate any partnership agreement, articles of
incorporation, bylaws, articles of organization or operating agreement of any
SELLER, and do not and will not conflict with or result in the breach of any
condition or provision of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrances upon any of the
Property or assets of any SELLER by reason of the terms of any contract,
mortgage, lien, lease, agreement, indenture, instrument or judgment to which any
SELLER is a party or which is or purports to be binding upon any SELLER or which
affects any SELLER. No action by any federal, state or other governmental
departments, boards, bureaus or instrumentalities, or any other party, is
necessary to make this Agreement a valid instrument binding upon SELLERS in
accordance with its terms.
7.2.10 GOOD STANDING. Each non-individual SELLER, and each of its
-------------
constituent partners, shareholders or members, if in any way applicable, is duly
organized, validly existing and in good standing under the laws of the State of
its organization and, to the extent required by applicable California law, is
qualified to do business and is in good standing in the State of California.
7.2.11 MAINTENANCE OF BOOKS OF ACCOUNT. To the actual knowledge of
-------------------------------
SELLERS, without independent inquiry, the books of account and other financial
records of the Hotel maintained for SELLERS by UKA are in all material respects
complete and accurate.
7.2.12 PERSONAL PROPERTY. No tangible Personal Property shall be
-----------------
removed from the Hotel except items replaced in the ordinary course of business
or in connection with the upgrade or renovation of the Hotel with items of equal
or greater value and quality.
28
<PAGE>
7.2.13 LATENT DEFECTS. To the actual knowledge of SELLERS, without
--------------
independent inquiry, SELLERS are unaware of any material latent structural
defects in the Improvements which could have a material adverse effect on the
value or operation of the Property.
As used herein, the phrases "SELLERS have no actual knowledge," "to the
actual knowledge of SELLERS," and any similar phraseology shall mean to the
actual knowledge of Rajni Patel without independent investigation or inquiry.
VIII.
CONDITIONS PRECEDENT TO CLOSE OF ESCROW
---------------------------------------
8.1 CONDITIONS TO SELLERS' OBLIGATIONS. The obligation of SELLERS to close
----------------------------------
the Escrow shall be subject to the satisfaction or written waiver, in whole or
in part, by SELLERS of each of the following conditions precedent:
(a) Escrow Holder is in a position to and will deliver to SELLERS the
instruments and funds accruing to SELLERS pursuant to the provisions of this
Agreement;
(b) There is no existing uncured material breach of any of the
covenants, representations, warranties or obligations of PURCHASER set forth in
this Agreement that has not been waived by SELLERS;
(c) The termination or expiration of the applicable waiting period
under Hart-Scott-Rodino; and
(d) SELLERS, UKA, and the Partnership have been released from all
obligations under the Holiday Inn Franchise Agreement, subject to SELLERS paying
all fees (other than assumption fees, termination fees, and any other similar
fees) accruing prior to the Close of Escrow.
The foregoing conditions contained in this Section 8.1 are intended solely
for the benefit of SELLERS. SELLERS shall at all times have the right to waive
any condition precedent. The waiver by SELLERS of any condition precedent shall
not relieve PURCHASER of any liability or obligation with respect to any
representation, warranty, covenant or agreement of PURCHASER.
8.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of PURCHASER to
-------------------------------------
close the Escrow shall be subject to the satisfaction or written waiver, in
whole or in part, by PURCHASER of each of the following condition precedent:
(a) Escrow Holder is in a position to and will deliver to PURCHASER
the instruments and funds, if any, accruing to PURCHASER pursuant to the
provisions of this Agreement;
29
<PAGE>
(b) There is no existing uncured material breach of any of the
covenants, representa tions, warranties or obligations of SELLERS set forth in
this Agreement that has not been waived by PURCHASER; and
(c) The termination or expiration of the applicable waiting period
under Hart-Scott-Rodino.
The foregoing conditions contained in this Section 8.2 are intended solely
for the benefit of PURCHASER. PURCHASER shall at all times have the right to
waive any condition precedent. The waiver by PURCHASER of any condition
precedent shall not relieve SELLERS of any liability or obligation with respect
to any representation, warranty, covenant or agreement of SELLERS.
IX.
LIQUIDATED DAMAGES
------------------
9.1 PURCHASER'S BREACH. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF
------------------
THE TRANSACTIONS HEREIN CONTEMPLATED DO NOT OCCUR AS HEREIN PROVIDED BY REASON
OF ANY MATERIAL DEFAULT OF PURCHASER, PURCHASER AND SELLERS AGREE THAT IT WOULD
BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLERS, OR
ANY OF THEM, MAY SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT
A REASONABLE ESTIMATE OF THE TOTAL DAMAGES THAT SELLERS WOULD SUFFER IN THE
EVENT THAT PURCHASER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY
IS AND SHALL BE, AS SELLERS' SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN
EQUITY), AN AMOUNT EQUAL TO THE EARNEST MONEY DEPOSIT (AND ALL ACCRUED INTEREST
THEREON). SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE
BREACH OF THIS AGREEMENT BY PURCHASER, ALL OTHER CLAIMS TO DAMAGES OR OTHER
REMEDIES BEING HEREIN EXPRESSLY WAIVED BY SELLERS. THE PAYMENT OF SUCH AMOUNT
AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE
MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO
CONSTITUTE LIQUIDATED DAMAGES TO SELLERS PURSUANT TO CALIFORNIA CIVIL CODE
SECTION 1671, 1676 AND 1677. SELLERS HEREBY WAIVE THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 3389. UPON DEFAULT BY PURCHASER, THIS AGREEMENT SHALL BE
TERMINATED AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS
HEREUNDER, EACH TO THE OTHER, EXCEPT ANY INDEMNIFICATION OBLIGATIONS, AND FOR
THE RIGHT OF SELLERS TO COLLECT SUCH LIQUIDATED DAMAGES FROM PURCHASER AND
ESCROW HOLDER.
9.2 SELLERS' BREACH. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE
---------------
TRANSACTIONS HEREIN CONTEMPLATED DO NOT OCCUR AS HEREIN PROVIDED SOLELY BY
REASON OF ANY MATERIAL DEFAULT OF SELLERS, OR ANY
30
<PAGE>
OF THEM, PURCHASER AND SELLERS AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY
DIFFICULT TO ESTIMATE THE DAMAGES WHICH PURCHASER MAY SUFFER. THEREFORE,
PURCHASER AND SELLERS DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL
DAMAGES THAT PURCHASER WOULD SUFFER IN THE EVENT THAT SELLERS DEFAULT AND FAIL
TO COMPLETE THE SALE OF THE PROPERTY IS AND SHALL BE, AS PURCHASER'S SOLE AND
EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), EITHER (A) THE RETURN OF THE
EARNEST MONEY DEPOSIT (AND ALL ACCRUED INTEREST THEREON), PLUS THE SUM OF
TWENTY-FIVE THOUSAND DOLLARS ($25,000), OR (B) SPECIFIC PERFORMANCE. SAID AMOUNT
SHALL BE THE FULL, AGREE AND LIQUIDATED DAMAGES FOR THE BREACH OF THIS AGREEMENT
BY SELLERS, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES BEING HEREIN EXPRESSLY
WAIVED BY PURCHASER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT
INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE
SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO
PURCHASER PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671, 1676 AND 1677.
PURCHASER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389.
UPON DEFAULT BY SELLERS, THIS AGREEMENT SHALL BE TERMINATED, AND NEITHER PARTY
SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER,
EXCEPT FOR THE RIGHT OF PURCHASER TO COLLECT SUCH LIQUIDATED DAMAGES FROM
SELLERS, OR ANY OF THEM.
/s/ /s/
-------------------- -----------------
PURCHASER'S INITIALS SELLERS' INITIALS
X.
BROKERS
-------
SELLERS and PURCHASER each agree to indemnify, protect, defend and hold
the other harmless from and against any claims, actions, suits or demands for
payment of any commission, finder's fee or other sum initiated by any broker,
commission agent or other person which such party or its representatives has
engaged or retained or with which it has had discussions concerning, or in
connection with, the transaction contemplated by this Agreement or the sale of
the Property by SELLERS. Notwithstanding the foregoing, however, SELLERS agree
to pay a commission to Grubb and Ellis pursuant to the terms of a separate
agreement with Grubb and Ellis.
XI.
NOTICES
-------
Except as otherwise expressly provided in this Agreement, all notices,
requests, demands and other communications hereunder ("Notices") shall be in
-------
writing and shall be deemed delivered by
31
<PAGE>
(i) hand delivery upon receipt, (ii) registered mail or certified mail, return
receipt requested, postage prepaid, upon the third day after deposit into the
United States mail, (iii) by confirmed telecopy or facsimile transmission when
sent, and (iv) overnight courier (next business day delivery) on the next
business day at 12:00 noon, whichever shall occur first, as follows:
To PURCHASER: AMERICAN GENERAL HOSPITALITY, INC.
Attn: Bruce Wiles, Executive Vice President
3860 West Northwest Highway
Dallas, TX 75220
Telephone: (214) 352-3330
Telecopier: (214) 351-0568
With a Copy to: BATTLE FOWLER, L.L.P.
Attn: Peter M. Fass, Esq.
75 East 55th Street
New York, NY 10022
Telephone: (212) 856-7000
Telecopier: (212) 856-7812
To SELLERS: HIHC, LLC
c/o Tarsadia Hotels, Attn: B. U. Patel
650 Town Center Drive, Suite 1910
Costa Mesa, CA 92626
Telephone: (714) 549-2931
Telecopier: (714) 549-2927
RAJNI PATEL
18356 Taft Avenue
Villa Park, CA 92667
ANAND PATEL
c/o Days Inn
Route 1, Box 70
Dillon, SC 29536
With a Copy to: LAZOF & COSS
Attn: Edward G. Coss, Esq.
4590 MacArthur Boulevard, Suite 390
Newport Beach, CA 92660
Telephone: (714) 553-1991
Telecopier: (714) 553-1646
Either party may change the address to which Notices to it are to be sent by
giving notice of any such change as herein prescribed.
32
<PAGE>
XII.
MISCELLANEOUS
-------------
12.1 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. If any legal action is
necessary to enforce the terms and conditions of this Agreement, the parties
hereby agree that the Superior Court of California, County of San Diego, shall
be the sole jurisdiction and venue for the bringing of the action.
12.2 ATTORNEYS' FEES. If either party hereto shall bring suit or commence
---------------
an arbitration proceeding against the other as a result of any alleged breach by
the other party of its representations or warranties hereunder or such party's
failure to fulfill or perform any of its covenants or obligations in this
Agreement or in any deed, assignment, certificate or other instrument delivered
pursuant hereto, or retain an attorney in connection with a default hereunder by
the other party, then in such event the prevailing party in such action shall,
in addition to any other relief granted or ordered by the Court or arbitrator,
be entitled to judgment for reasonable attorneys' fees incurred by reason of
such action and all costs of suit and those incurred in preparation therefor, at
the trial, arbitration and appellate levels.
12.3 EXHIBITS AND SCHEDULES A PART OF THIS AGREEMENT. The Exhibits and
-----------------------------------------------
Schedules attached hereto are incorporated in this Agreement by reference and
are hereby made a part hereof.
12.4 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instruments.
12.5 ASSIGNMENT. PURCHASER may not assign, convey and otherwise transfer
----------
all or any part of its interest or rights herein without the prior written
consent of SELLERS, which consent may be withheld in SELLERS' sole discretion.
Notwithstanding the foregoing, however, PURCHASER may assign and transfer all of
its rights and obligations under this Agreement without so requesting SELLERS'
prior written consent to an affiliate(s) or subsidiary(ies) thereof; provided,
however, that PURCHASER shall not be released of its obligations under this
Agreement as a result of any such assignment. Any assignment as permitted in
the preceding sentence shall be conditioned upon PURCHASER delivering to SELLERS
and Escrow Holder, prior to Closing, written notice thereof, together with a
copy of such assignee's organizational and formation documents and instruments,
a Certificate of Good Standing for such assignee (if appropriate for the nature
of the entity), and copies of the resolutions of PURCHASER and such assignee
authorizing such assignment. As a further condition to any such permitted
assignment, PURCHASER shall cause its assignee to execute an assignment and
assumption agreement of PURCHASER'S obligations under this Agreement (in form
and content reasonably and mutually acceptable), and such other documents and
instruments as Escrow Holder may reasonably request.
12.6 IRS - FORM 1099-S. For purposes of complying with Section 6045 of
-----------------
the Internal Revenue Code of 1986, as amended, Escrow Holder shall be deemed the
"person responsible for closing the transaction" and shall be responsible for
obtaining the information necessary to file with
33
<PAGE>
the Internal Revenue Service Form 1099-S, "Statement for Recipients of Proceeds
from Real Estate, Broker and Barter Exchange Transactions."
12.7 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 12.5
----------------------
above, this Agreement shall be binding upon and inure to the benefit of the
parties' respective successors and permitted assigns.
12.8 TIME IS OF THE ESSENCE. Time is of the essence of this Agreement.
----------------------
12.9 ENTIRE AGREEMENT. This Agreement, and Exhibits and Schedules and
----------------
other documents and instruments attached to or referenced herein, contain all
representations and the entire understanding and agreement between the parties
hereto with respect to the purchase and sale of the Property, and all prior and
contemporaneous understandings, letters of intent, agreements and repre
sentations, whether oral or written, are entirely superseded. No amendment of
this Agreement shall be binding unless in writing and executed by the parties
hereto.
12.10 FURTHER ASSURANCES. Whenever and so often as requested by a party,
------------------
the other party will promptly execute and deliver or cause to be executed and
delivered all such other and further instruments, documents or assurances, and
promptly do or cause to be done all such other and further things as may be
necessary and reasonably required in order to further and more fully vest in
such requesting party all rights, interests, powers, benefits privileges and
advantages conferred or intended to be conferred upon it by this Agreement.
12.11 WAIVER. No waiver of any of the provisions of this Agreement shall
------
be deemed to constitute a waiver of any other provisions, nor shall any waiver
be a continuing waiver.
12.12 HEADINGS. The headings of this Agreement are for purposes of
--------
convenience only and shall not limit or define the meaning of the provisions of
this Agreement.
12.13 RISK OF LOSS.
------------
(a) RISK OF LOSS. Until the Closing Date, SELLERS shall bear the
------------
risk of loss should there be damage to any of the Improvements by fire or other
casualty (collectively "Casualty"). If, prior to the Closing Date, any of the
Improvements shall be damaged by any Casualty, SELLERS shall promptly deliver to
PURCHASER written notice ("Casualty Notice") of such event. Upon PURCHASER'S
---------------
receipt of a Casualty Notice, SELLERS and PURCHASER shall meet promptly to
estimate the cost to repair and restore the Improvements to good condition and
to replace the damaged Personal Property (the "Estimated Renovation Cost"). If
-------------------------
the parties are unable to agree on the cost of restoration, the matter will be
submitted to a duly licensed engineer designated by SELLERS and an engineer
designated by PURCHASER, each licenses to practice in the state in which the
Land is located, and the engineers shall resolve the dispute. All fees, costs
and expenses of the engineers so selected shall be shared equally by SELLERS and
PURCHASER. In the event SELLERS' and PURCHASER'S engineers cannot reach an
agreement as to Estimated Renovation Cost, the matter shall be submitted for
arbitration in accordance with Section 12.17 hereof.
34
<PAGE>
(b) MATERIAL LOSS. If the Estimated Renovation Cost exceeds ten
-------------
percent (10%) of the Purchase Price, PURCHASER may, at its option, elect to
terminate this Agreement by written notice to SELLERS within five (5) days after
the date that the Estimated Renovation Cost is determined, in which case the
Earnest Money Deposit shall be delivered to PURCHASER, and neither party shall
have any further rights or obligations hereunder, except for any continuing
indemnity obligations as provided in this Agreement. If PURCHASER fails to
timely make its election to terminate this Agreement, then the Close of Escrow
shall take place as provided herein without reduction of the Purchase Price, and
SELLERS shall assign the insurance proceeds to PURCHASER and pay PURCHASER, at
Close of Escrow, the difference between the Estimated Renovation Cost and the
amount of insurance proceeds actually paid (or the amount which the insurers
agree in writing to pay).
(c) NONMATERIAL LOSS. If the Estimated Renovation Cost is ten
----------------
percent (10%) or less of the Purchase Price, then, in any such event, PURCHASER
shall have no right to terminate this Agreement, but the Closing shall taken
place as provided herein without reduction of the Purchase Price, and SELLERS
shall assign the insurance proceeds to PURCHASER and pay PURCHASER, at the Close
of Escrow, the difference between the Estimated Renovation Cost and the amount
of insurance proceeds actually paid (or the amount which the insurers agree in
writing to pay).
(d) EMINENT DOMAIN. If, prior to the Close of Escrow, all or
--------------
substantially all of the Real Property is taken by condemnation or eminent
domain, this Agreement shall, upon the giving of notice of such event or of the
condemning authorities' intention so to take the Real Property, terminate, and
PURCHASER shall receive a full and prompt refund of all sums deposited by them
with Escrow Holder and/or SELLERS. If, prior to the Close of Escrow, less than
all or substantially all of the Real Property shall be taken by condemnation or
eminent domain, then, if any of the foregoing, in PURCHASER'S reasonable
opinion, materially impairs the value of the Real Property or any significant
interest therein, then PURCHASER shall have the option to (i) accept title to
the Real Property subject to such taking, in which event at the Close of Escrow
all of the proceeds of any award or payment made or to be made by reason of such
taking shall be assigned by SELLERS and UKA to PURCHASER, and any money
theretofore received by SELLERS in connection with such taking shall be paid
over to PURCHASER, whereupon PURCHASER shall pay the Purchase Price without
abatement by reason of such taking, or (ii) terminate this Agreement and receive
a full and prompt refund of all sums deposited by PURCHASER with Escrow Holder
and/or SELLERS. SELLERS shall not settle, agree to, or accept any award or
payment in connection with a taking of less than all of the Real Property
without obtaining PURCHASER'S prior written consent in each case, which consent
shall not be unreasonably withheld or delayed.
12.14 BULK SALES LAW. SELLERS shall cooperate with PURCHASER in compliance
--------------
with the provisions of the Bulk Sales Law of California. PURCHASER shall pay
all costs incurred in the publishing of the Notice of Bulk Sale Transfer.
12.15 CONSTRUCTION OF AGREEMENT. In determining the meaning of, or
-------------------------
resolving any ambiguity with respect to, any word, phrase or provision of this
Agreement, no uncertainty or ambiguity shall be construed or resolved against
any party under any rule of construction, including the party primarily
responsible for the drafting and preparation of this Agreement.
35
<PAGE>
12.16 TAX DEFERRED EXCHANGE. SELLERS and PURCHASER (the "Cooperating
--------------------- -----------
Party") each agree to fully cooperate with the other (the "Exchangor")
- ----- ---------
(including cooperation with any Intermediary (as defined hereinbelow) selected
by Exchangor) to structure the acquisition of the Property and/or the Real
Property as an exchange of property held for productive use in a trade or
business or for investment within the meaning of Section 1031 of the Internal
Revenue Code of 1986 (as amended), and upon request, Cooperating Party agrees to
execute additional escrow instructions, documents, agreements or instruments to
effect the exchange; provided, however, that Cooperating Party shall incur no
additional costs or expenses in this transaction, or be required to acquire,
accept or hold title to any property (other than the Property), as a result of
or in connection with any such exchange, unless because of Cooperating Party's
default hereunder or under any agreement executed by reason of this Section
12.16.
Exchangor agrees to indemnify, defend or hold Cooperating Party harmless
from and against any and all additional costs, expenses, claims, demands,
liabilities, losses, obligations, damages, recoveries, and deficiencies (such
categories being collectively referred to herein as "Liabilities") in excess of
-----------
those Liabilities that Cooperating Party would otherwise have if the transaction
contemplated in this Agreement closes as a sale transaction, and that
Cooperating Party may incur or suffer, as a result of or in connection with (i)
the structuring of the transaction contemplated in this Agreement as an exchange
under Internal Revenue Code Section 1031 and/or (ii) the execution of any
documents in connection with the exchange. Exchangor's foregoing indemnity
shall not indemnify Cooperating Party for any Liabilities arising as a result of
or in connection with any default by Cooperating Party under this Agreement or
any default by Cooperating Party under any of the documents or agreements
entered into by Cooperating Party in connection with the exchange or for any
negligence or willful misconduct on the part of Cooperating Party. Exchangor's
obligation with respect to Cooperating Party's attorneys' fees involved in the
review, documentation and advice concerning exchange documents and transactions
shall be limited to reasonable attorneys' fees for each exchange property not to
exceed One Thousand Dollars ($1,000) for each exchange property transaction.
Implementation of the exchange(s) contemplated in this Section 12.16 shall not
be a condition to the Close of Escrow.
Exchangor, at its election, may substitute for any one or more of them, one
or more persons or entities ("Intermediary") as a party(ies) to the Escrow and
------------
this Agreement, in which event the Intermediary shall assume and perform the
obligations of Exchangor under this Agreement (but without the release of
liability of Exchangor for such performance), and Cooperating Party agrees to
accept the performance by Intermediary and shall tender its performance to
Intermediary.
12.17 ARBITRATION. Except in connection with actions or claims for
-----------
equitable relief and/or remedies, PURCHASER and SELLERS agree that any
controversy or dispute arising from or in connection with this Agreement, its
interpretation, performance or termination, shall, upon demand of a party
hereto, be submitted to and decided by binding arbitration. The arbitration
shall be conducted pursuant to Part 3, Title 9, of the California Code of Civil
Procedure Sections 1280-1288.8, inclusive. Discovery, including depositions for
the purpose of discovery, shall be broadly permitted, and the provisions of the
Code of Civil Procedure Section 1283.05 shall apply. Any demand to arbitrate
shall be deemed to have been made on the date actually received by the party
upon whom
36
<PAGE>
it is served and, for purposes of the statute of limitations, shall have the
same effect as if suit had been filed on the date the demand is made. The
arbitration shall occur in Orange County, California, before a single retired or
former judge of the Superior Court of the State of California, or the Court of
Appeals of the State of California. The parties shall agree upon an arbitrator
within ten (10) days after the demand is made, and if the parties fail to so
agree, then any of them may apply to the court for an Order appointing an
arbitrator meeting the requirements of this Section. The arbitrator's decision
shall be rendered within ninety (90) days after the hearing, and the decision of
the arbitrator shall be final and binding and shall be subject to confirmation,
correction or vacation in accordance with the provisions of the Code of Civil
Procedure Sections 1285-1287.4, inclusive. Any application, petition, or other
proceeding (i) to enforce the award or the provisions of this Agreement, (ii) to
the extent that the arbitrator does not have the power or authority to resolve
or grant the release sought, and/or (iii) for provisions or equitable relief
pending appointment of the arbitrator (should a party elect to proceed to obtain
equitable relief through the arbitration process set forth herein), shall be
commenced in the appropriate state or federal court having jurisdiction in
Orange County, California, and the parties hereby consent to jurisdiction and
venue of such courts.
12.18 NO PUBLIC DISCLOSURE. Prior to the Close of Escrow, neither SELLERS
--------------------
nor PURCHASER shall make no public disclosure of the terms of this transaction
without the prior written consent of the other.
12.19 COVENANTS, REPRESENTATIONS AND WARRANTIES. All of the covenants and
-----------------------------------------
agreements of SELLERS and PURCHASER set forth in this Agreement shall survive
the Close of Escrow. All of the representations and warranties of Sellers and
Purchasers set forth in this Agreement shall survive the Close of Escrow for a
period of one (1) year, and shall not merge into any deed, assignment or other
instrument executed or delivered hereunder. By proceeding with the closing of
the sale transaction, SELLERS and PURCHASER shall be deemed to have waived, and
so covenant to waive, any claims of defaults or breaches by the other party
under this Agreement, and any other document or instrument executed by the other
party in connection with this transaction, of which the waiving party was aware
prior to the Close of Escrow for which the other party shall have no liability.
XIII.
EXECUTION
---------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the 18th day of April, 1996.
SELLERS:
-------
HIHC, LLC, a California limited liability company
BY: /s/ B.U. Patel
----------------------------------------
B. U. PATEL, Its Member
37
<PAGE>
/s/ Rajni Patel
--------------------------------------------
RAJNI PATEL
/s/ Anand Patel
---------------------------------------------
ANAND PATEL
PURCHASER:
---------
AMERICAN GENERAL HOSPITALITY, INC.,
a Texas corporation
BY: /s/ American General Hospitality, Inc.
-----------------------------------------
ESCROW HOLDER HEREBY ACKNOWLEDGES
AND AGREES TO THE ESCROW INSTRUC-
TIONS SET FORTH IN THIS AGREEMENT.
HERITAGE ESCROW COMPANY OF ORANGE COUNTY
BY: /s/ Janet Tilbury
-----------------------------------
JANET TILBURY, Escrow Officer
38
<PAGE>
Exhibit 10.32
OMNIBUS OPTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTORS NAMED BELOW
JOHN D. GOURLEY
Dated as of April 26, 1996
* THIS AGREEMENT HAS BEEN AMENDED IN ACCORDANCE WITH SECTION 6.1 BY DELETING
RANDALL H. TALBOT AS A PARTY HERETO AND CONFORMING EXHIBIT A AND EXHIBIT B
IN CONNECTION WITH SUCH DELETION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I: THE OPTION................................................................. 1
1.1 Grant of Option............................................................ 1
1.2 Term and Exercise of Option................................................ 1
1.3 Acquisition Consideration.................................................. 2
1.4 Lock-Up Agreement.......................................................... 2
1.5 Other Agreements........................................................... 2
1.6 Adjustments to Acquisition Consideration................................... 2
ARTICLE II: CLOSING PROCEDURES......................................................... 2
2.1 Contribution of Property Interests......................................... 2
2.2 Closing; Conditions to Obligations......................................... 2
2.3 Documents to Be Delivered at the Closing................................... 3
2.4 Cessation of Public Offering............................................... 5
2.5 Closing Costs.............................................................. 5
2.6 Default.................................................................... 5
2.7 Further Assurances......................................................... 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS...................... 5
3.1 Title to Interests......................................................... 6
3.2 Organization; Authority; No Conflicts...................................... 6
3.3 Litigation................................................................. 7
3.4 No Other Agreements........................................................ 7
3.5 No Brokers................................................................. 7
3.6 Investment Representations and Warranties.................................. 7
3.7 Private Placement Memorandum............................................... 8
3.8 Covenant to Remedy Breaches................................................ 8
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP................................................................ 9
4.1 Authority.................................................................. 9
4.2 No Brokers................................................................. 9
4.3 Exercise of Options........................................................ 9
ARTICLE V: POWER OF ATTORNEY.......................................................... 9
5.1 Grant of Power of Attorney................................................. 9
5.2 Limitation on Liability.................................................... 11
5.3 Ratification; Third Party Reliance......................................... 11
ARTICLE VI: MISCELLANEOUS.............................................................. 11
6.1 Amendment.................................................................. 11
6.2 Entire Agreement; Counterparts; Applicable Law............................. 11
6.3 Assignability.............................................................. 11
6.4 Titles..................................................................... 12
6.5 Third Party Beneficiary.................................................... 12
6.6 Severability............................................................... 12
6.7 Equitable Remedies......................................................... 12
6.8 Notices; Exercise of Option................................................ 12
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6.9 Waiver of Rights; Consents with Respect to Partnership Interests........... 13
6.10 Confidentiality............................................................ 14
6.11 Computation of Time........................................................ 14
6.12 Survival................................................................... 14
6.13 Time of the Essence........................................................ 14
</TABLE>
Exhibits
A. Grantors
B. Partnerships & Interests
C. Form of Lock-Up Agreement
D. Form of Exchange Rights Agreement
E. Form of Registration Rights Agreement
F. Adjustment Provisions
Schedule 1.3
The exhibits and/or schedules of Exhibit 10.32, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OMNIBUS OPTION AGREEMENT
------------------------
This Omnibus Option Agreement (this "AGREEMENT") dated as of the 26th
day of April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and the Grantors listed on Exhibit A attached hereto (each, a "GRANTOR" and,
collectively, the "GRANTORS").
R E C I T A L S:
- - - - - - - -
A. Each Grantor owns interests in one or more partnerships as
described on Exhibit B (the "PARTNERSHIPS").
B. The Operating Partnership desires to acquire through a
contribution to capital from each Grantor, and each Grantor desires to grant to
the Operating Partnership, an option to acquire on the terms and conditions set
forth herein, all interests owned by such Grantor and set forth on Exhibit B and
any other direct or indirect interests such Grantor may have, whether now owned
or hereinafter acquired, in the Partnerships and/or in the properties set forth
opposite each such Partnership's name on Exhibit B. (Each such property and all
personal property related thereto or to the operation thereof is hereinafter
referred to as such Partnership's "PROPERTY," and all of such direct or indirect
interests of a Grantor in such Partnership or Property, including, without
limitation, the interests shown on Exhibit B, are referred to collectively as
such Grantor's "PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, par value $.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to each Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantors agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. Each Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (each, an "OPTION") to acquire
through a contribution to capital all such Grantor's right, title and interest
in such Grantor's Property Interests on the terms and conditions set forth
herein.
1.2 Term and Exercise of Option. Each Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (the
earlier of such dates, the "OPTION TERMINATION DATE"); provided, that if on the
Option Termination Date the Operating Partnership or the Grantor of such Option
is prohibited by applicable law, or the Operating Partnership or such Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
such Option, then such Option may be exercised by the Operating Partnership
during the 10 business day period commencing on the first business day following
the removal of each such prohibition, stay, order, injunction, action,
proceeding or similar limitation in effect at that time. Subject to the
foregoing, if the Operating Partnership does not exercise an Option by the
Option Termination Date, such Option shall be deemed terminated and shall be of
no further force or effect and the Grantor of such Option shall have no further
obligations hereunder.
<PAGE>
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
-------------------------
CONSIDERATION") to be received by each Grantor in respect of the contribution of
such Grantor's Property Interests to the Operating Partnership shall be
determined in accordance with the calculation set forth in Schedule 1.3 hereto,
prior to any adjustments pursuant to Section 1.6. The Acquisition Consideration
shall be paid in units of limited partnership interest in the Operating
Partnership ("OP UNITS"). The Acquisition Consideration will be allocated 95%
to buildings, fixtures and other improvements and 5% to personal property.
1.4 Lock-Up Agreement. The Units to be issued to each Grantor
-----------------
hereunder shall be subject to a Lock-Up Agreement to be executed at Closing by
the Operating Partnership and each Grantor, substantially in the form attached
as Exhibit C, whereby no Grantor will be permitted to transfer Units for one
year after Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to Closing, the Company, Grantors
----------------
and the other parties thereto shall enter into a Registration Rights Agreement
and Exchange Rights Agreement, as described in Section 5.1(a) and substantially
in the forms attached hereto as Exhibits D and E, respectively.
1.6 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to each Grantor and each Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for each Partnership in
accordance with provisions substantially in the form on Exhibit F attached
hereto. For purposes of this Section 1.6 and Exhibit F, each Grantor shall be
considered an "Other Contributor" within the meaning of Exhibit F and agrees to
be bound by Exhibit F and fulfill all obligations thereunder, including the
obligation to make payments prescribed thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Contribution of Property Interests. Upon the Operating
----------------------------------
Partnership's exercise of an Option, the Grantor of such Option shall, in
accordance with Section 2.2 hereof, transfer, assign, and convey to the
Operating Partnership and the Operating Partnership shall accept as a
contribution to capital from such Grantor, all right, title and interest in such
Grantor's Property Interests, free and clear of all Encumbrances in exchange for
such Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Operating Partnership shall exercise each Option by
delivering to the Grantor of such Option a notice (the "OPTION NOTICE"), which
notice shall state the date (the "CLOSING DATE") of the closing of the
transactions contemplated by Section 2.1 (the "CLOSING"), which date shall be no
more than 30 days following the date of such Option Notice. The Closing shall
be held within such 30 day period at the offices of Battle Fowler, LLP, 75 East
55th Street, New York, New York or at such other place to be determined by the
Operating Partnership in its sole discretion. Following delivery of an Option
Notice, the Operating Partnership and Grantor will at or prior to the Closing
execute and deliver all closing documents (the "CLOSING DOCUMENTS") required by
the Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP, as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to acquire all the Property Interests of each
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO, as the same shall be in effect on the day of the IPO
Closing.
-2-
<PAGE>
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to each Grantor whose Option has been
exercised, (x) a certificate of the general partner of the Operating Partnership
(the "GENERAL PARTNER") certifying that such Grantor has been or will be,
effective as of the Closing, admitted as a limited partner of the Operating
Partnership and that the Operating Partnership's books and records indicate or
will indicate that such Grantor is the holder of the number of OP Units that
represents such Grantor's Acquisition Consideration and (y) if such OP Units are
represented by certificates, a certificate or certificates in the name of such
Grantor representing the number of OP Units to which such Grantor is entitled;
and
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to each Grantor whose Option has been exercised, the
certificates, if any, representing such Grantor's OP Units and, if requested by
such Grantor, a copy of the General Partner's certificate referred to in clause
(i).
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Property Interests of any Grantor as
follows:
(i) in the event that such Grantor either identifies in
its Assignment delivered pursuant to Section 2.3(a) a breach of or other
exception with respect to any of the representations, warranties or covenants
contained in Article III or has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of such Grantor's
Property Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess substantial
damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
- ----
such Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to consummate the contribution of all of such Grantor's Property
Interests, notify the Escrow Agent of such election and direct the Escrow Agent
to return such Grantor's Closing Documents to such Grantor, or (B) in all other
cases, equitably adjust the delivery with respect to such Grantor pursuant to
clause (c)(i) above to reflect the portion of such Grantor's Property Interests
with respect to which the contribution is actually being consummated, which
adjustment shall be determined in the Operating Partnership's reasonable
discretion, and shall in all events be binding upon such Grantor. The election
of the Operating Partnership not to purchase all or any portion of the Property
Interests of a particular Grantor shall not affect the obligations of any other
Grantor hereunder.
(e) Except as the result of a default by a Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor any Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise each Option again
at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, each Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
-3-
<PAGE>
(a) An assignment of such Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Operating
Partnership, shall contain a warranty of title that such Grantor owns such
Grantor's Property Interests free and clear of all Encumbrances (as defined
below) and shall either (i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article III
hereof, or (ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III hereof
(other than Section 3.9) which the Grantor can no longer make or comply with,
represent that such Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties and/or to
comply with such covenants, and reaffirm the accuracy of all other
representations and warranties and the satisfaction of all other covenants
contained in Article III hereof.
(b) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, a certified copy of all
appropriate corporate resolutions or partnership or trust actions authorizing
the execution, delivery and performance by such Grantor of this Agreement and
the Closing Documents.
(c) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, an opinion from counsel
for such Grantor in form and content reasonably acceptable to the Operating
Partnership substantially to the effect that:
(i) such Grantor is a corporation, limited partnership,
general partnership or trust duly organized, validly existing and in good
standing under the laws of the state of its organization and had and has
all applicable power and authority to execute, deliver and perform this
Agreement and the Closing Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of such
Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other material
agreement or instrument to which such Grantor is a party or by which it or
its assets or properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and warranted will
be waived or cured, or discharged or repaid prior to or contemporaneously
with the Closing; (y) to the knowledge of such counsel, constitute a
violation of any order, judgment or decree to which such Grantor is a party
or by which it or any of its assets or properties are bound or affected; or
(z) to the knowledge of such counsel, result in the creation of any lien,
charge or encumbrance upon any of Grantor's assets or properties, except
for Permitted Pledges (as defined below); and
(iii) all applicable corporate, partnership or trust action
necessary for such Grantor to execute and deliver this Agreement and the
Closing Documents and to perform the transactions contemplated hereby and
thereby has been taken and that the same have been validly executed and
delivered and are the valid and binding obligations of such Grantor
enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights and remedies
generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event Grantor fails to provide such an affidavit, the Operating
Partnership shall be entitled to withhold from the Acquisition Consideration and
pay to the Internal Revenue Service the sums required to be withheld pursuant to
FIRPTA (and the amount so withheld shall be paid by the Operating Partnership to
the Internal Revenue Service, in order for the Operating Partnership to comply
with the provisions of Section 1445 of the Internal Revenue Code of 1986 or
successor similar legislation, as the same may be amended hereafter).
-4-
<PAGE>
(e) The Lock-up Agreement, the Exchange Rights Agreement, the
Registration Rights Agreement and the Partnership Agreement of the Operating
Partnership (the "Partnership Agreement").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
such Grantor's Property Interests to the Operating Partnership as a contribution
to capital and to otherwise effectuate the transactions contemplated hereby,
including filings with any applicable governmental jurisdiction in which the
Operating Partnership is required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Operating Partnership will so advise each Grantor in
writing and thereupon all parties hereto will be relieved of all obligations
under this Agreement and all Closing Documents (except for obligations arising
under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
-------------
the closing costs, other than Grantor's legal fees, arising from the
contribution of the Property Interests of each Grantor to the Operating
Partnership pursuant to the exercise by the Operating Partnership of such
Grantor's Option.
2.6 Default.
-------
(a) If after having exercised an Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to each Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of each Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of each Grantor's damages in such event.
(b) If any Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
such Grantor any and all remedies provided at law or in equity, including but
not limited to, the right of specific performance. No default by any Grantor
hereunder shall in any way limit or affect the obligations of all other Grantors
hereunder.
2.7 Further Assurances. Each Grantor will, from time to time,
------------------
execute and deliver to the Operating Partnership all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Operating Partnership may reasonably request in order to
effect the transactions contemplated by this Agreement, including instruments or
documents deemed necessary or desirable by the Operating Partnership to effect
and evidence the contribution of such Grantor's Property Interests to the
Operating Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF GRANTORS
---------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, each
Grantor hereby severally makes to the Operating Partnership each of the
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to consummate
the contribution of any Grantor's Property Interests to the Operating
Partnership after the exercise of such Grantor's Option, such representations
and warranties must be true as of the Closing Date.
-5-
<PAGE>
3.1 Title to Interests. Except as set forth on Exhibit B, such
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by such Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will acquire as a
contribution to capital good and valid title thereto, free and clear of any
Encumbrance, except Encumbrances created in favor of the Operating Partnership
by the transactions contemplated hereby. Each of such Grantor's Property
Interests representing an interest in a Partnership has been validly issued and
such Grantor has funded (or will fund before the same is past due) all capital
contributions and advances to the Partnership in which such Property Interest
represents an interest that are required to be funded or advanced prior to the
date hereof and the date of the Closing. There are no agreements, instruments
or understandings with respect to any of such Grantor's Property Interests
except, in the case of any Property Interest constituting an interest in a
Partnership, as set forth in the partnership agreement of such Partnership.
Such Grantor has no interest, either direct or indirect, in any of the
Partnerships or Properties except for the Property Interests identified on
Exhibit B which are the subject of this Agreement. No Permitted Pledge will be
in existence as of the date of the Closing, and such Grantor shall provide, at
the Closing, such documentary evidence of the release of any Permitted Pledge as
the Operating Partnership may reasonably request. In making the representations
in this Section 3.1 regarding the absence of Encumbrances, each Grantor may
assume that the consents and waivers of rights set forth in Section 6.9 hereof
have been given by all partners of any Partnerships in which such Grantor's
Property Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. Any such Grantor which is
-------------------------------------
not a natural person is a corporation, limited partnership, general partnership
or trust duly organized, validly existing and in good standing under the laws of
the state of its organization. Such Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of such Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of such Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable corporate,
partnership or trust action necessary for such Grantor to execute and deliver
this Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of such Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date. This Agreement, each Closing
Document and each other agreement, document and instrument executed and
delivered by or on behalf of such Grantor pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of such Grantor, each enforceable in accordance with its
respective terms. Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Grantor: (x) does not and will not violate
such Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable; (y) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Grantor or require such Grantor to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and (z) does not and will not result in a
breach or a violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract, instrument,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Grantor is a party or by which
the property of such Grantor is bound or affected, or result in the creation of
any Encumbrance on any of the property or assets of any Partnership in which any
Property Interest of such Grantor represents an interest. In making the
representations set forth in this Section 3.2, each Grantor may assume (i) that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of Partnerships
-6-
<PAGE>
in which such Grantor's Property Interests represent direct or indirect
interests and (ii) that, for purposes of making such representation as of the
date hereof, any Permitted Pledge has been released.
3.3 Litigation. There is no litigation or proceeding, either
----------
judicial or administrative, pending or overtly threatened, affecting all or any
portion of such Grantor's Property Interests or such Grantor's ability to
consummate the transactions contemplated hereby. Such Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair such
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. Such Grantor has made no agreement with,
-------------------
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of such Grantor's Property Interests or restricting in any
way such Grantor's ability to contribute such Grantor's Property Interests to
the Operating Partnership or to enter into any agreement with respect to such
Grantor's Property Interests. In making the representations set forth in this
Section 3.4, each Grantor may assume (i) that the consents and waivers of rights
set forth in Section 6.9 hereof have been given by all partners of the
Partnerships in which such Grantor's Property Interests represent direct or
indirect interests and (ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. Such Grantor has not entered into, and covenants
----------
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
-----------------------------------------
(a) Such Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in connection
with the contribution of Property Interests to the Operating Partnership (which
Private Placement Memorandum includes a draft Registration Statement on Form S-
11 prepared in connection with the IPO), the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters (the "TAX
MATTERS SUMMARY"), and understands the risks of, and other considerations
relating to, an investment in OP Units. Such Grantor, by reason of its business
and financial experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with respect to
its investment in OP Units, (i) has such knowledge, sophistication and
experience in financial and business matters and in making investment decisions
of this type that it is capable of evaluating the merits and risks of and of
making an informed investment decision with respect to an investment in OP
Units, (ii) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests and (iii)
is capable of bearing the economic risk of such investment. Such Grantor is an
"accredited investor" as defined in Rule 501 of the regulations promulgated
under the Securities Act. If such Grantor has retained or retains a person to
represent or advise it with respect to its investment in OP Units, such Grantor
will advise the Operating Partnership of such retention and, at the Operating
Partnership's request, such Grantor shall, prior to or at the Closing, (i)
acknowledge in writing such representation and (ii) cause such representative or
advisor to deliver a certificate to the Operating Partnership containing such
representations as may be reasonably requested by the Operating Partnership.
(b) Such Grantor understands that an investment in the Operating
Partnership involves substantial risks. Such Grantor has been given the
opportunity to make a thorough investigation of the proposed activities of the
Operating Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary and the
Tax Matters Summary. Such Grantor has been afforded the opportunity to obtain
any additional information requested by it. Such Grantor has had an opportunity
to ask questions of and receive answers from representatives
-7-
<PAGE>
of the Operating Partnership concerning the Operating Partnership and its
proposed activities and the terms and conditions of an investment in OP Units.
Such Grantor has relied and is making its investment decision based upon the
Private Placement Memorandum, the Partnership Summary, the Tax Matters Summary
and other written information provided to the Grantor by or on behalf of the
Operating Partnership and/or, as applicable, such Grantor's position as a
director and/or executive officer of the Company.
(c) The OP Units to be issued to such Grantor at the Closing will be
acquired by such Grantor for its own account, for investment only and not with a
view to, or with any intention of, a distribution or resale thereof, in whole or
in part, or the grant of any participation therein. Such Grantor was not formed
for the specific purpose of acquiring an interest in the Operating Partnership.
(d) Such Grantor acknowledges that (i) the OP Units to be issued to
such Grantor at the Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and,
if such OP Units are represented by certificates, such certificates will bear a
legend to such effect, (ii) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such Grantor contained
herein, (iii) the OP Units to be issued to such Grantor at the Closing may not
be resold or otherwise distributed unless registered under the Securities Act
and applicable state securities laws, or unless an exemption from registration
is available, (iv) there is no public market for such OP Units, and (v) the
Operating Partnership has no obligation or intention to register such OP Units
under the Securities Act or any state securities laws or to take any action that
would make available any exemption from the registration requirements of such
laws, except as provided in the Registration Rights Agreement (as defined
below). Such Grantor hereby acknowledges that because of the restrictions on
transfer or assignment of such OP Units to be issued hereunder which will be set
forth in the Partnership Agreement and in the Lock-up Agreement, such Grantor
may have to bear the economic risk of the investment commitment evidenced by
this Agreement and any OP Units issued hereunder for an indefinite period of
time, although (x) under the terms of the Exchange Rights Agreement, as it will
be in effect at the time of the IPO, OP Units will be exchangeable at the
request of the holder thereof at any time after the first anniversary of their
issuance for cash based on their fair market value or, at the option of the
Company, for Common Stock and (y) the holder of any such Common Stock issued
upon exchange of OP Units will be afforded certain rights to have such Common
Stock registered under the Securities Act and applicable state securities laws
pursuant to the Registration Rights Agreement (as described in Section 5. 1
(a)).
(e) The address set forth under such Grantor's name in Exhibit A is
the address of the Grantor's principal place of business or, if a natural
person, the address of the Grantor's residence, and such Grantor has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal place of business or
residence is sited.
3.7 Private Placement Memorandum. Such Grantor understands and
----------------------------
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of such Grantor. Without limiting the foregoing,
such changes may include the deletion (or addition) of one or more properties
expected to be acquired by the Operating Partnership and changes in the amount
of the indebtedness expected to be repaid with the proceeds of the IPO. The
Operating Partnership shall not be obligated to obtain such Grantor's consent as
a result of such changes, although such changes could affect the nature and
value of such Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. Each Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of such Grantor hereunder, (ii) to satisfy all
covenants of such Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of such Grantor hereunder upon its learning
of same.
-8-
<PAGE>
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to each Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to each Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; (ii) to
perform the transactions contemplated hereby and thereby; and (iii) to issue OP
Units to each Grantor pursuant to and in accordance with the terms of this
Agreement. This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms. The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership: (x) does
not and will not violate the Partnership Agreement; (y) does not and will not
violate any foreign, federal, state, local or other laws applicable to the
Operating Partnership or require the Operating Partnership to obtain any
approval, consent or waiver of, or make any filing with, any person or authority
(government or otherwise) that has not been obtained or made and which does not
remain in effect; and (z) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement, any other material agreement, contract, instrument,
lease, permit or authorization, or any order, writ, judgment, injunction,
decree, determination or arbitration award to which the Operating Partnership is
a party or by which the property of the Operating Partnership is bound or
affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
----------
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
Option of any Grantor hereunder, it will exercise the Options of all Grantors
hereunder, but this covenant shall in no way affect the Operating Partnership's
right, pursuant to Section 2.2(c), to elect not to accept the contribution of
all or any portion of the Property Interests of any Non-Complying Grantor.
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. Each Grantor does hereby irrevocably
--------------------------
appoint Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the Operating
Partnership, and each of them individually, with full power of substitution
(such person or the Operating Partnership or any such successor of any of them
acting in his, her or its capacity as attorney-in-fact pursuant hereto, the
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of such
Grantor, to act in the name, place and stead of such Grantor:
(a) To enter into (i) the Exchange Rights Agreement, as well as the
(ii) Registration Rights Agreement, which provides such Grantor certain
rights to have the Common Stock which may be issued to such Grantor upon
exchange of such Grantor's OP Units registered under the Securities Act,
and (iii) the Lock-up Agreement.
-9-
<PAGE>
(b) To take for such Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the IPO, including without
limitation (i) filing the REGISTRATION STATEMENT and any amendments thereto
under the Securities Act which describes the benefit to be received by such
Grantor in connection with the formation of the Company and the offering of
the Company's Common Stock, (ii) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common Stock (the
"PRELIMINARY PROSPECTUS" and "PROSPECTUS") which contain such information
as is deemed necessary or desirable to lawfully effect the IPO, and (iii)
to take such other steps as the Attorney-in-Fact may deem necessary or
advisable.
(c) To make, acknowledge, verify and file on behalf of such Grantor
applications, consents to service of process and such other undertakings or
reports as may be required by law with state commissioners or officers
administering state securities or Blue Sky laws and to take any other
action required to facilitate the exemption from registration of the OP
Units and the qualification of the Company's Common Stock under the
securities or Blue Sky laws of the jurisdictions in which the OP Units and
the Company's Common Stock are to be offered.
(d) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the contribution of such Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could such Grantor if personally present
and acting.
The Power of Attorney granted by each Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other Grantors and is for the purpose of completing the transactions
contemplated by this Agreement. The Power of Attorney of each Grantor granted
hereby and all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act of such
Grantor or by operation of law, whether by the death, disability, incapacity or
liquidation of such Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
such Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, such Grantor shall die or become disabled or incapacitated or
is liquidated, or if any other such event or events shall occur before the
completion of the transactions contemplated by this Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. Each Grantor
acknowledges that Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transaction contemplated by this
Agreement. Each Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
Each Grantor hereby acknowledges and confirms that the Power of
Attorney granted by each Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of such Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the aggregate number of OP Units that
such Grantor will receive in connection with the exercise by the Operating
Partnership of such Grantor's Option, provided that such power is used for such
purpose only in connection with a change in the anticipated range of initial
offering prices of the Company's Common Stock or if the actual initial offering
price of the Company's Common Stock is different from that which was originally
anticipated in determining the Acquisition Consideration.
-10-
<PAGE>
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by each Grantor hereby. Each Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the contribution of the Property Interests to the
Operating Partnership, the Registration Statement, the Prospectus or any
Preliminary Prospectus, nor for any aspect of the IPO, and it shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. Each
Grantor agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-
in-Fact harmless against any loss, claim, damage or liability incurred or in
part arising out of or in connection with its acting as the Attorney-in-Fact
under the Power of Attorney created by such Grantor hereby, as well as the cost
and expense of investigating and defending against any such loss, claim, damage
or liability, except to the extent such loss, claim, damage or liability is due
to the gross negligence or bad faith of the Attorney-in-Fact. Each Grantor
agrees that the Attorney-in-Fact may consult with counsel of its own choice (who
may be counsel for the Operating Partnership and/or the Company) and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that each Attorney-in-Fact may, without
breaching any express or implied obligation to the Grantor hereunder, release,
amend or modify any other Power of Attorney granted by any other Grantor
hereunder or by any other person under any related agreement.
5.3 Ratification; Third Party Reliance. Each Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by such Grantor
hereunder, and such Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
-------------
6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment, provided that the Operating Partnership may amend this Agreement
without notice to or the consent of any Grantor for the purpose of adding
additional Grantors as parties hereto or deleting Grantors as parties hereto and
conforming Exhibit A in connection with such additions or deletions. No waiver
of any provisions of this Agreement shall be valid unless in writing and signed
by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantors, or
by any Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantors.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
-11-
<PAGE>
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 6.3 and 6.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of an Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of a notice to a Grantor,
to the address and telecopy number set forth under such Grantor's name in
Exhibit A hereto.
-12-
<PAGE>
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) Each Grantor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of Property Interests) may conflict with,
and may not have been contemplated by, the partnership agreement of one or more
Partnerships in which one or more of such Grantor's Property Interests represent
a direct or indirect interest or another agreement among one or more holders of
such Property Interests or one or more of the partners of any such partnership.
With respect to each Partnership in which a Property Interest of a Grantor
represents a direct or indirect interest, each Grantor expressly gives all
Consents (and any consent necessary to authorize the proper parties in interest
to give all Consents) and Waivers necessary or desirable to facilitate any
Conveyance Action relating to such partnership (as such terms are defined
below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is a
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company as described in the
Private Placement Memorandum, or (ii) the entering into by any such partner or
holder of any agreement relating to (x) the formation of the Operating
Partnership or the Company as described in the Private Placement Memorandum, (y)
the direct or indirect acquisition by to the Operating Partnership or the
Company of any such direct or indirect interest, or (z) the transactions
described in or contemplated by the Private Placement Memorandum, or (iii) the
taking by any such partner or holder of any action necessary or desirable to
facilitate any of the foregoing, including, without limitation, the following
(provided that the same are taken in furtherance of the foregoing): any sale or
distribution to any person of a direct or indirect interest in such partnership,
the entering into any agreement with any person that grant to such person the
right to purchase a direct or indirect interest in such partnership, and the
giving of the Consents and Waivers contained in this Section 6.9 or consent or
waivers similar thereto in form or purpose. As used herein, the term "CONSENTS"
means, with respect to any such partnership, any consent necessary or desirable
under the partnership agreement of such partnership or any other agreement among
all or any of the holders of interests therein or any other agreement relating
thereto or referred to therein (i) to permit any and all Conveyance Actions
relating to such partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs or
interferes with any Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default under such
agreement if interests therein are transferred for other than cash), (ii) to
admit the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section 6.3 above) as a
substitute limited partner or general partner of such partnership upon the
Operating Partnership's acquisition of a limited or general partner interest
therein, respectively, and to adopt such amendment as is necessary or desirable
to effect such admission, (iii) to adopt any amendment as may be deemed
desirable by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general partnership
interest therein, and (iv) to continue such partnership following the transfer
of interests therein to the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance with Section
6.3 above). As used herein, the term "WAIVERS" means, with respect to a
partnership of which a Property Interest of a Grantor represents a direct or
indirect interest, the waiving of any and all rights that such Grantor may have
with respect to, and (to the extent possible) that any other person may have
with respect to, or that may accrue to such Grantor or other person upon the
occurrence of, a Conveyance Action relating to such partnership, including, but
not limited to, the following rights: rights of notice, rights to response
periods, rights to purchase the direct or indirect interest of another partner
in such partnership or to sell such Grantor's or other person's direct or
indirect interest therein to another partner, rights to sell such Grantor's or
other person's direct or indirect interest therein at a price other than as
provided herein, or rights to prohibit, limit, invalidate, otherwise restrict or
impair any such Conveyance Action or to cause a termination or dissolution of
such partnership because of such Conveyance Action. Each Grantor further agrees
that such Grantor will take no action to enjoin, or seek damages resulting from,
any Conveyance
-13-
<PAGE>
Action by any holder of a direct or indirect interest in a partnership in which
a Property Interest of such Grantor represents a direct or indirect interest.
The Waivers and Consent contained in this Section 6.9 shall terminate upon the
termination of this Agreement, except as to transactions completed hereunder
prior to termination.
(b) Each Grantor by its execution hereof (i) with respect to each
Partnership in which a Property Interest owned by such Grantor represents a
direct or indirect interest therein, gives such consent as is necessary to cause
each Partnership, as applicable, to have authority to transfer all or
substantially all of the assets of such Partnership to the Operating Partnership
on such terms and conditions as such Partnership and the Operating Partnership
may agree; and (ii) agrees that such Grantor's Acquisition Consideration may be
reduced to reflect such direct transfer of assets and the consequent receipt of
OP Units directly by such Partnership, provided that the total consideration to
be received by such Grantor either directly hereunder or indirectly through the
receipt of OP Units by a Partnership shall equal Grantor's Acquisition
Consideration.
(c) Each Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which a Property Interest of such Grantor represents directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law, (i)
to admit the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section 6.3 above) as a
substitute limited partner therein and/or a substitute general partner therein
if the Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by the exercise
of the Grantor's Option acquires a limited partnership interest or a general
partnership interest in such partnership, (ii) to redeem the interest of any
other partner therein who has not agreed to become a party to this Agreement,
(iii) to distribute to all partners thereof, including any partner who has not
agreed to become a party to this Agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or general partners
thereof may determine, provided that such Grantor receives as a result of all
such distributions and the direct payment of consideration hereunder, that
number of OP Units that is in conformity with the Acquisition Consideration of
such Grantor provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and (iv) any such other amendment as the
Operating Partnership may deem desirable, provided that such amendment occurs
simultaneously with or immediately prior to the acquisition of the applicable
partnership interest and, provided further, that such amendment will not result
in any increased liability on the part of any Grantor hereunder or under the
applicable partnership agreement. The Attorney-in-Fact may on behalf of each
Grantor execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. Each Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to such
Grantor who agree to keep such terms confidential. Grantor shall treat all
information received from the Operating Partnership or its counsel or advisors
pertaining to the Operating Partnership or the Company confidential and shall
disseminate same only to counsel to such Grantor who agree to keep such
information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of each
Grantor set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of Grantor under this Agreement.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
By: /s/ Bruce G. Wiles
-----------------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-15-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors
to that certain Omnibus Option Agreement by and among American General
Hospitality Operating Partnership, L.P. and such Grantors, dated as of April 26,
1996 hereby becomes a party to such Omnibus Option Agreement. The undersigned
agrees that this signature page may be attached to any counterpart of said
Omnibus Option Agreement.
Signature line for Grantors
who are natural persons: /s/ John D. Gourley
-----------------------------------
Name:
Signature line for trusts,
partnerships and other
entities:
-------------------------------
Name of Grantor
By:
-------------------------------
Name:
Title:
Address of Grantor:
-----------------------------------
-----------------------------------
-----------------------------------
By the Grantor's execution of this Omnibus Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
<PAGE>
EXHIBIT F
The Adjustment Provisions set forth below herein are substantially in the
form as Article ("Article 7") of that certain Contribution Agreement, among
Virtual Hospitality, Inc., Jackson-Shaw Partners No. 51, Ltd., 3005 Hotel
Associates, Ltd., 3100 Hotel Associates, L.P., Stephen D. Jorns, James E.
Sowell, Lewis W. Shaw, II, Kenneth W. Shaw, Monica Jorns, Bruce G. Wiles, 3860
Investors Joint Venture, and 282 Almaden Hotel Associates, L.P. and the
Operating Partnership, dated on or about the 26th day of April, 1996. It is the
intention of the parties that the adjustments contemplated in Section 1.6 shall
be made in accordance with Article 7.
ADJUSTMENT PROVISIONS
- ---------------------
7.1 APPORTIONMENTS. With respect to each Hotel, the Contribution
--------------
Value reflects a deduction for all mortgage indebtedness on the Hotels. With
respect to each Partnership, the following adjustments and apportionments shall
be made in cash among the Contributors in each Partnership, and the OP. It is
the parties' intention that the prorations and adjustments conform in substance
to those that would be made in a sale of real property as set forth herein. All
such prorations for each Partnership shall be netted against each other and the
net amount, if in favor of the Contributors, shall be paid in cash to each
Contributor (and each Other Contributor) in such Partnership with each such
Contributor (and each Other Contributor) to receive its "Allocable Share" of
such amount; or, if in favor of the OP, to the OP, in which case, each
Contributor (and each Other Contributor) shall pay its Allocable Share thereof.
As used in this Article 7, Allocable Share shall mean each Contributor's (and
Other Contributor's) pro rata share commensurate with its Partnership Interest
in the Partnership at Closing. At Closing, the following items of revenue and
expense shall be prorated as of 12:01 A.M. on the Closing Date:
A. Real estate taxes, personal property or use taxes and sewer
rents, on the basis of the best available estimates for such taxes and rents
that will be due and payable on the Hotel for the calendar year in which the
Closing occurs.
B. All utility costs and expenses and other costs and expenses of
operating the Hotel which are reasonably capable of proration, including, but
not limited to, all salaries, compensation, sick pay, vacation pay and other
accrued benefits of Hotel employees.
C. Amounts paid or payable under the service contracts and equipment
leases.
D. Rents under space leases and other revenues as and when
collected. If the Partnership receives any rents from tenants under space
leases after the Closing Date then such collections shall first be applied to
rents accruing on or after the Closing Date, and OP shall cause the Partnership
to remit the balance, if any, to the applicable Contributors to the extent any
pre-Closing Date rental obligation under such tenant's lease remains unpaid.
Upon request of the Contributors (at their expense), the Partnership will use
reasonable efforts to collect delinquent rents directly from a tenant on such
Contributors' behalf.
E. The Contributors will be charged with all interest to date of
Closing on any mortgage other than DFW South. With respect to DFW South,
interest thereon and all escrows held by lender shall be adjusted at Closing.
F. Rents due under any ground leases shall be prorated.
G. Guest, convention, room, food, beverage, and all other charges
and revenues for services rendered and the operation of all departments of the
Hotel, including, but not limited to, advance payments under booking agreements
for rooms, facilities and services of the Hotel and any other revenues, as and
when collected,
<PAGE>
provided, however, that food, room service and restaurant revenue shall be read,
measured (and tapes preserved) and apportioned as of 2:00 a.m. on the Closing
Date. The final night's room revenue (revenue from rooms occupied on the
evening preceding the Closing Date) less a sum equal to all room maid services
with respect thereto shall be allocated to the applicable Contributors. All
cash, checks, and other funds, and all other notes, security, accounts
receivable and other evidence of indebtedness located at the Hotel as of 2:00
a.m. on the Closing Date and balances on deposit to the credit of the
Partnership with banking institutions are and shall be credited to the
applicable Contributors (except for the guest (tray) ledger for guests staying
in the Hotel on the Closing Date which will be paid for by the OP).
H. Fees and expenses for music, entertainment, trade association
dues, trade, newspaper and other periodical subscriptions, coin machine income,
and washroom and checkroom income.
I. The value of food and liquor inventory in unopened cases.
J. With respect to all prepaid rents and deposits, including but not
limited to, utility deposits, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services or
made in connection with the space leases or the guest bookings (collectively,
the "Deposits"), the OP shall be entitled to a credit for the amount of the
Deposits which do not remain in possession of the Partnership, and the
Partnership will remain liable for all of the post-Closing liability and
obligations, if any, with regard to such Deposits;
7.2 RECONCILIATION. If, after the prorations to be made pursuant to
--------------
7.1, (x) the sum of all cash and cash equivalents, investments, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by the Partnership, exceeds or is less than (y) the sum
of all accounts payable, accrued real estate taxes, accrued interest, other
accrued expenses and other liabilities generally recognized as current
liabilities owed by the Partnership, any excess amount shall be paid by the OP
to the Contributors (and Other Contributors) in such Partnership (based on their
Allocable Shares), or such Contributors (and Other Contributors) shall each pay
their Allocable Shares of any shortfall to the OP, as the case may be; provided,
however, that the Contributors (and the Other Contributors) in each Partnership
shall remain each responsible for their Allocable Shares of the payment of all
accounts payable and other pre-Closing liabilities of each Partnership relating
exclusively to periods prior to the Closing Date and each of the Contributors
(and the Other Contributors) in each Partnership shall be entitled to receive
their Allocable Shares of all accounts receivable relating exclusively to such
period, and no prorations will be made with respect thereto.
7.3 OTHER COSTS. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by the applicable Contributors. All sales, use and
other transfer taxes, if any, payable as a result of the contribution of the
Partnership Interests to the OP will be paid by the OP. The Contributors shall
be entitled to receive any rebates or refunds on taxes or other payments paid by
the Partnerships for periods prior to the Closing. The costs of Title Policies
and recordation of all instruments as well as all surveys, environmental
investigations, and the like shall be borne by the OP.
7.4 ESTIMATE AND FINAL RECONCILIATION. Prior to Closing, the
---------------------------------
Contributors and Partnership shall reasonably cooperate to make a preliminary
determination of the prorations required hereunder, and upon closing in escrow
pursuant to Section 5.2, all such adjustments and prorations shall be paid into
escrow based on those estimated numbers. After Closing, the Contributors (and
Other Contributors) in each Partnership shall reasonably cooperate to make a
final determination of such prorations in accordance with this Article 7. Upon
the final reconciliation of the prorations under this Article, but in any event
not later than thirty days following Closing, any party which owes another party
any sums hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay such sums shall survive Closing.
<PAGE>
7.5 CONTRACT HOTEL. The prorations, adjustments and costs in
--------------
connection with the acquisition of the Contract Hotel shall be allocated between
the Seller and the Acquired Hotel Owner in accordance with the Contract. At
Closing, the Contract Contributor shall be reimbursed in cash for the cost of
any deposit, title search, survey or any other out-of-pocket costs it incurred
in connection with the Contract.
<PAGE>
Schedule 1.3
------------
At the Closing, each Grantor, who has elected to receive OP Units
shall receive a number of OP Units equal to (i) the value of the Equity Interest
(as defined below) (subject to adjustment as set forth below) divided by (ii)
the mid-point of the proposed per share offering prices (the "Mid-Point") set
forth in the final red herring prospectus (the "RED HERRING") included in the
Company's Registration Statement on Form S-11 prepared and filed in connection
with the IPO (the "REGISTRATION STATEMENT"). In the event the initial yield
(the "Initial Yield") (calculated by dividing the estimated annual distribution
per share for the 12-month period following the IPO, as set forth in the Red
Herring, by the Mid-Point) is a percentage greater or less than 8.0%, then the
value of the Equity Interest shall increase or decrease accordingly by an amount
equal to the Applicable Percentage (as defined below) times the resulting change
in the value of the Operating Partnership; provided, however, in no event shall
the value of the Equity Interest be reduced by more than 12.5%. As used herein,
the "value of the Operating Partnership" shall be determined by taking the
product of the "Pro Forma Cash Available for Distribution" as defined in the Red
Herring ("CAD") times the percentage of CAD (expressed as a decimal fraction) to
be distributed to the partners in the Operating Partnership or the shareholders
in the Company (as the case may be) as set forth in the Red Herring, and
dividing that product by the Initial Yield. While the value of the Equity
Interest may never be reduced by more than 12.5%, there shall be no cap on
increases in the value of the Equity Interest as a result of any positive
pricing adjustment described in this Schedule 1.3. For purposes of this
Schedule 1.3, "Applicable Percentage" shall mean the fraction (expressed as a
decimal fraction), the numerator of which is the value of the Equity Interests
(plus each Grantor's pro rata share of the mortgage debt) which are the subject
of the Agreement and the denominator of which is the value of all the assets
acquired by the Operating Partnership upon the consummation of the IPO as
determined in good faith by the Company. For purposes of this Agreement, the
value of the Equity Interests of each of the respective Grantors shall be equal
to their respective Property Interest (as set forth in Exhibit B) multiplied by
$1,949,270.
<PAGE>
Exhibit 10.33
OMNIBUS OPTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTORS NAMED BELOW
RANDALL H. TALBOT
Dated as of April 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE
<S> <C> <C>
ARTICLE I: THE OPTION................................................................. 1
1.1 Grant of Option............................................................ 1
1.2 Term and Exercise of Option................................................ 1
1.3 Acquisition Consideration.................................................. 2
1.4 Adjustments to Acquisition Consideration................................... 2
ARTICLE II: CLOSING PROCEDURES......................................................... 2
2.1 Purchase of Property Interests............................................. 2
2.2 Closing; Conditions to Obligations......................................... 2
2.3 Documents to Be Delivered at the Closing................................... 3
2.4 Cessation of Public Offering............................................... 4
2.5 Closing Costs.............................................................. 4
2.6 Default.................................................................... 5
2.7 Further Assurances......................................................... 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS...................... 5
3.1 Title to Interests......................................................... 5
3.2 Organization; Authority; No Conflicts...................................... 6
3.3 Litigation................................................................. 6
3.4 No Other Agreements........................................................ 6
3.5 No Brokers................................................................. 6
3.6 Covenant to Remedy Breaches................................................ 7
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
OPERATING PARTNERSHIP...................................................... 7
4.1 Authority.................................................................. 7
4.2 No Brokers................................................................. 7
4.3 Exercise of Options........................................................ 7
ARTICLE V: POWER OF ATTORNEY.......................................................... 8
5.1 Grant of Power of Attorney................................................. 8
5.2 Limitation on Liability.................................................... 8
5.3 Ratification; Third Party Reliance......................................... 9
ARTICLE VI: MISCELLANEOUS.............................................................. 9
6.1 Amendment.................................................................. 9
6.2 Entire Agreement; Counterparts; Applicable Law............................. 9
6.3 Assignability.............................................................. 9
6.4 Titles..................................................................... 9
6.5 Third Party Beneficiary.................................................... 9
6.6 Severability............................................................... 10
6.7 Equitable Remedies......................................................... 10
6.8 Notices; Exercise of Option................................................ 10
6.9 Waiver of Rights; Consents with Respect to Partnership Interests........... 10
6.10 Confidentiality............................................................ 12
6.11 Computation of Time........................................................ 12
6.12 Survival................................................................... 12
6.13 Time of the Essence........................................................ 12
</TABLE>
<PAGE>
Exhibits
A. Grantors
B. Partnerships & Interests
C. Adjustment Provisions
The exhibits and/or schedules of Exhibit 10.33, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OMNIBUS OPTION AGREEMENT
------------------------
This Omnibus Option Agreement (this "AGREEMENT") dated as of the 26th
day of April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and the Grantors listed on Exhibit A attached hereto (each, a "GRANTOR" and,
collectively, the "GRANTORS").
R E C I T A L S:
- - - - - - - -
A. Each Grantor owns interests in one or more partnerships as
described on Exhibit B (the "PARTNERSHIPS").
B. The Operating Partnership desires to purchase for cash from each
Grantor, and each Grantor desires to grant to the Operating Partnership, an
option to acquire on the terms and conditions set forth herein, all interests
owned by such Grantor and set forth on Exhibit B and any other direct or
indirect interests such Grantor may have, whether now owned or hereinafter
acquired, in the Partnerships and/or in the properties set forth opposite each
such Partnership's name on Exhibit B. (Each such property and all personal
property related thereto or to the operation thereof is hereinafter referred to
as such Partnership's "PROPERTY," and all of such direct or indirect interests
of a Grantor in such Partnership or Property, including, without limitation, the
interests shown on Exhibit B, are referred to collectively as such Grantor's
"PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, no par value ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to each Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantors agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. Each Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (each, an "OPTION") to purchase for
cash all such Grantor's right, title and interest in such Grantor's Property
Interests on the terms and conditions set forth herein.
1.2 Term and Exercise of Option. Each Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (as such
term is defined in Section 2.4) (the earlier of such dates, the "OPTION
TERMINATION DATE"); provided, that if on the Option Termination Date the
Operating Partnership or the Grantor of such Option is prohibited by applicable
law, or the Operating Partnership or such Grantor is subject to a stay, order,
injunction, or similar limitation or any pending or threatened action or
proceeding to enjoin, restrain, prohibit or assess substantial damages in
respect of the exercise by the Operating Partnership of such Option, then such
Option may be exercised by the Operating Partnership during the 10 business day
period commencing on the first business day following the removal of each such
prohibition, stay, order, injunction, action, proceeding or similar limitation
in effect at that time. Subject to the foregoing, if the Operating Partnership
does not exercise an Option by the Option
<PAGE>
Termination Date, such Option shall be deemed terminated and shall be of no
further force or effect and the Grantor of such Option shall have no further
obligations hereunder.
1.3 Acquisition Consideration. The cash consideration (the
-------------------------
"ACQUISITION CONSIDERATION") to be received by each Grantor in respect of the
Operating Partnership's purchase of each Grantor's Property Interests shall be
the amount is equal to the product of the respective Grantor's applicable
Property Interest as set forth on Exhibit B, multiplied by the net cash proceeds
from an assumed sale of the Property at an aggregate purchase price of
$25,132,000 in cash less the outstanding mortgage balance in the original amount
of $14,250,000, as determined in accordance with the terms and conditions of the
Amended and Restated Agreement of Limited Partnership of DFW South I Limited
Partnership, dated May 1, 1992. Acquisition Consideration shall be adjusted as
set forth in Section 1.4 below. The Acquisition Consideration will be allocated
95% to buildings, fixtures and other improvements and 5% to personal property.
1.4 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to each Grantor and each Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for each Partnership in
accordance with provisions substantially in the form on Exhibit C attached
hereto. For purposes of this Section 1.4 and Exhibit C, each Grantor shall be
considered a "Seller" within the meaning of the provisions of Exhibit C and
agrees to be bound by Exhibit C and fulfill all obligations thereunder,
including the obligation to make payments prescribed thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Purchase of Property Interests. Upon the Operating Partnership's
------------------------------
exercise of an Option, the Grantor of such Option shall, in accordance with
Section 2.2 hereof, transfer, assign, and convey to the Operating Partnership
and the Operating Partnership shall purchase from such Grantor, all right, title
and interest in such Grantor's Property Interests, free and clear of all
Encumbrances in exchange for such Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Operating Partnership shall exercise each Option by
delivering to the Grantor of such Option a notice (the "OPTION NOTICE"), which
notice shall state the date (the "CLOSING DATE") of the closing of the
transactions contemplated by Section 2.1 (the "CLOSING"), which date shall be no
more than 30 days following the date of such Option Notice. The Closing shall
be held within such 30 day period at the offices of Battle Fowler, LLP, 75 East
55th Street, New York, New York or at such other place to be determined by the
Operating Partnership in its sole discretion. Following delivery of an Option
Notice, the Operating Partnership and Grantor will at or prior to the Closing
execute and deliver all closing documents (the "CLOSING DOCUMENTS") required by
the Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP, as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to purchase all the Property Interests of each
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO, as the same shall be in effect on the day of the IPO
Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to each Grantor whose Option has been
exercised, the Acquisition Consideration in immediately available funds by check
or wire transfer; and
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<PAGE>
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to each Grantor whose Option has been exercised, the
Acquisition Consideration owed to such Grantor.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to purchase of all
or any portion of the Property Interests of any Grantor as follows:
(i) in the event that such Grantor either identifies in its
Assignment delivered pursuant to Section 2.3(a) a breach of or other exception
with respect to any of the representations, warranties or covenants contained in
Article III or has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to purchase such Grantor's Property Interests, or there
exists an order or judgment enjoining, restraining or prohibiting, or assessing
substantial damages in respect of such consummation, or there shall be any
action or proceeding instituted or threatened in writing to enjoin, restrain,
prohibit or assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
- ----
such Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to purchase of all of such Grantor's Property Interests, notify the
Escrow Agent of such election and direct the Escrow Agent to return such
Grantor's Closing Documents to such Grantor, or (B) in all other cases,
equitably adjust the delivery with respect to such Grantor pursuant to clause
(c)(i) above to reflect the portion of such Grantor's Property Interests with
respect to which the purchase is actually being made, which adjustment shall be
determined in the Operating Partnership's reasonable discretion, and shall in
all events be binding upon such Grantor. The election of the Operating
Partnership not to purchase all or any portion of the Property Interests of a
particular Grantor shall not affect the obligations of any other Grantor
hereunder.
(e) Except as the result of a default by a Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor any Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise each Option again
at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, each Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of such Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Operating
Partnership, shall contain a warranty of title that such Grantor owns such
Grantor's Property Interests free and clear of all Encumbrances (as defined
below) and shall either (i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article III
hereof, or (ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III hereof
(other than Section 3.9) which the Grantor can no longer make or comply with,
represent that such Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties and/or to
comply with such covenants, and reaffirm the accuracy of all other
representations and warranties and the satisfaction of all other covenants
contained in Article III hereof.
(b) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, a certified copy of all
appropriate corporate resolutions or partnership or trust actions authorizing
the execution, delivery and performance by such Grantor of this Agreement and
the Closing Documents.
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<PAGE>
(c) If requested by the Operating Partnership, in the case of any
Grantor which is a corporation, partnership or trust, an opinion from counsel
for such Grantor in form and content reasonably acceptable to the Operating
Partnership substantially to the effect that:
(i) such Grantor is a corporation, limited partnership,
general partnership or trust duly organized, validly existing and in good
standing under the laws of the state of its organization and had and has
all applicable power and authority to execute, deliver and perform this
Agreement and the Closing Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of such
Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other material
agreement or instrument to which such Grantor is a party or by which it or
its assets or properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and warranted will
be waived or cured, or discharged or repaid prior to or contemporaneously
with the Closing; (y) to the knowledge of such counsel, constitute a
violation of any order, judgment or decree to which such Grantor is a party
or by which it or any of its assets or properties are bound or affected; or
(z) to the knowledge of such counsel, result in the creation of any lien,
charge or encumbrance upon any of Grantor's assets or properties, except
for Permitted Pledges (as defined below); and
(iii) all applicable corporate, partnership or trust action
necessary for such Grantor to execute and deliver this Agreement and the
Closing Documents and to perform the transactions contemplated hereby and
thereby has been taken and that the same have been validly executed and
delivered and are the valid and binding obligations of such Grantor
enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights and remedies
generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event Grantor fails to provide such an affidavit, the Operating
Partnership shall be entitled to withhold from the Acquisition Consideration and
pay to the Internal Revenue Service the sums required to be withheld pursuant to
FIRPTA (and the amount so withheld shall be paid by the Operating Partnership to
the Internal Revenue Service, in order for the Operating Partnership to comply
with the provisions of Section 1445 of the Internal Revenue Code of 1986 or
successor similar legislation, as the same may be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
such Grantor's Property Interests to the Operating Partnership and to otherwise
effectuate the transactions contemplated hereby, including filings with any
applicable governmental jurisdiction in which the Operating Partnership is
required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Operating Partnership will so advise each Grantor in
writing and thereupon all parties hereto will be relieved of all obligations
under this Agreement and all Closing Documents (except for obligations arising
under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
-------------
the closing costs, other than Grantor's legal fees, arising from the purchase of
the Property Interests of each Grantor to the Operating Partnership pursuant to
the exercise by the Operating Partnership of such Grantor's Option.
-4-
<PAGE>
2.6 Default.
-------
(a) If after having exercised an Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to each Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of each Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of each Grantor's damages in such event.
(b) If any Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
such Grantor any and all remedies provided at law or in equity, including but
not limited to, the right of specific performance. No default by any Grantor
hereunder shall in any way limit or affect the obligations of all other Grantors
hereunder.
2.7 Further Assurances. Each Grantor will, from time to time,
------------------
execute and deliver to the Operating Partnership all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Operating Partnership may reasonably request in order to
effect the transactions contemplated by this Agreement, including instruments or
documents deemed necessary or desirable by the Operating Partnership to effect
and evidence the purchase of such Grantor's Property Interests to the Operating
Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTORS
-----------------------------------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, each
Grantor hereby severally makes to the Operating Partnership each of the
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to purchase of
any Grantor's Property Interests to the Operating Partnership after the exercise
of such Grantor's Option, such representations and warranties must be true as of
the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit B, such
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by such Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will purchase good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby. Each of such Grantor's Property Interests representing an interest in a
Partnership has been validly issued and such Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Property Interest represents an interest that are
required to be funded or advanced prior to the date hereof and the date of the
Closing. There are no agreements, instruments or understandings with respect
to any of such Grantor's Property Interests except, in the case of any Property
Interest constituting an interest in a Partnership, as set forth in the
partnership agreement of such Partnership. Such Grantor has no interest, either
direct or indirect, in any of the Partnerships or Properties except for the
Property Interests identified on Exhibit B which are the subject of this
Agreement. No Permitted Pledge will be in existence as of the date of the
Closing, and such Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request. In making the representations in this Section 3.1 regarding
the absence of Encumbrances, each Grantor may assume that the consents and
waivers of rights set forth in Section
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<PAGE>
6.9 hereof have been given by all partners of any Partnerships in which such
Grantor's Property Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. Any such Grantor which is
-------------------------------------
not a natural person is a corporation, limited partnership, general partnership
or trust duly organized, validly existing and in good standing under the laws of
the state of its organization. Such Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of such Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of such Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable corporate,
partnership or trust action necessary for such Grantor to execute and deliver
this Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of such Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date. This Agreement, each Closing
Document and each other agreement, document and instrument executed and
delivered by or on behalf of such Grantor pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of such Grantor, each enforceable in accordance with its
respective terms. Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Grantor: (x) does not and will not violate
such Grantor's charter and/or bylaws, partnership agreement or declaration of
trust, as applicable; (y) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Grantor or require such Grantor to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and (z) does not and will not result in a
breach or a violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract, instrument,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Grantor is a party or by which
the property of such Grantor is bound or affected, or result in the creation of
any Encumbrance on any of the property or assets of any Partnership in which any
Property Interest of such Grantor represents an interest. In making the
representations set forth in this Section 3.2, each Grantor may assume (i) that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of Partnerships in which such Grantor's Property Interests
represent direct or indirect interests and (ii) that, for purposes of making
such representation as of the date hereof, any Permitted Pledge has been
released.
3.3 Litigation. There is no litigation or proceeding, either
----------
judicial or administrative, pending or overtly threatened, affecting all or any
portion of such Grantor's Property Interests or such Grantor's ability to
consummate the transactions contemplated hereby. Such Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair such
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. Such Grantor has made no agreement with,
-------------------
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of such Grantor's Property Interests or restricting in any
way such Grantor's ability to sell such Grantor's Property Interests to the
Operating Partnership or to enter into any agreement with respect to such
Grantor's Property Interests. In making the representations set forth in this
Section 3.4, each Grantor may assume (i) that the consents and waivers of rights
set forth in Section 6.9 hereof have been given by all partners of the
Partnerships in which such Grantor's Property Interests represent direct or
indirect interests and (ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. Such Grantor has not entered into, and covenants
----------
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the
-6-
<PAGE>
Operating Partnership to pay any finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. Each Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of such Grantor hereunder, (ii) to satisfy all
covenants of such Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of such Grantor hereunder upon its learning
of same.
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to each Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to each Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; and
(ii) to perform the transactions contemplated hereby and thereby. This
Agreement, each Closing Document to which the Operating Partnership is a party
and each agreement, document and instrument executed and delivered by the
Operating Partnership pursuant to this Agreement constitutes, or when executed
and delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable in accordance with its respective terms.
The execution, delivery and performance of this Agreement, each Closing Document
to which the Operating Partnership is a party and each such agreement, document
and instrument by the Operating Partnership: (x) does not and will not violate
the Partnership Agreement; (y) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (government or otherwise) that
has not been obtained or made and which does not remain in effect; and (z) does
not and will not result in a breach or a violation of, constitute a default
under, accelerate any obligation under or give rise to a right of termination
of, any indenture, deed of trust, mortgage, loan or credit agreement, any other
material agreement, contract, instrument, lease, permit or authorization, or any
order, writ, judgment, injunction, decree, determination or arbitration award to
which the Operating Partnership is a party or by which the property of the
Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
----------
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
Option of any Grantor hereunder, it will exercise the Options of all Grantors
hereunder, but this covenant shall in no way affect the Operating Partnership's
right, pursuant to Section 2.2(c), to elect not to purchase all or any portion
of the Property Interests of any Non-Complying Grantor.
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<PAGE>
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. Each Grantor does hereby irrevocably
--------------------------
appoint Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the Operating
Partnership, and each of them individually, with full power of substitution
(such person or the Operating Partnership or any such successor of any of them
acting in his, her or its capacity as attorney-in-fact pursuant hereto, the
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of such
Grantor, to act in the name, place and stead of such Grantor:
(a) To take for such Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the IPO, including without
limitation (i) filing a registration statement and amendments thereto (the
"REGISTRATION STATEMENT") under the Securities Act which describes the
benefit to be received by such Grantor in connection with the formation of
the Company and the offering of the Company's Common Stock, (ii)
distributing a preliminary prospectus and prospectus regarding the offering
of the Company's Common Stock (the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and (iii) to take such other steps as
the Attorney-in-Fact may deem necessary or advisable.
(b) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the purchase of such Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could such Grantor if personally present
and acting.
The Power of Attorney granted by each Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other Grantors and is for the purpose of completing the transactions
contemplated by this Agreement. The Power of Attorney of each Grantor granted
hereby and all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act of such
Grantor or by operation of law, whether by the death, disability, incapacity or
liquidation of such Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
such Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, such Grantor shall die or become disabled or incapacitated or
is liquidated, or if any other such event or events shall occur before the
completion of the transactions contemplated by this Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. Each Grantor
acknowledges that Steven D. Jorns, Bruce G. Wiles and Kenneth E. Barr and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transaction contemplated by this
Agreement. Each Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
Each Grantor hereby acknowledges and confirms that the Power of
Attorney granted by each Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of such Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the amount of Acquisition Consideration
that such Grantor will receive in connection with the exercise by the Operating
Partnership of such Grantor's Option.
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by each Grantor hereby. Each Attorney-in-
-8-
<PAGE>
Fact makes no representations with respect to and shall have no responsibility
for the formation of the Company, the purchase of the Property Interests by the
Operating Partnership, the Registration Statement, the Prospectus or any
Preliminary Prospectus, nor for any aspect of the IPO, and it shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. Each
Grantor agrees to indemnify the Attorney-in-Fact for and to hold the Attorney
- -in-Fact harmless against any loss, claim, damage or liability incurred or in
part arising out of or in connection with its acting as the Attorney-in-Fact
under the Power of Attorney created by such Grantor hereby, as well as the cost
and expense of investigating and defending against any such loss, claim, damage
or liability, except to the extent such loss, claim, damage or liability is due
to the gross negligence or bad faith of the Attorney-in-Fact. Each Grantor
agrees that the Attorney-in-Fact may consult with counsel of its own choice (who
may be counsel for the Operating Partnership and/or the Company) and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that each Attorney-in-Fact may, without breaching
any express or implied obligation to the Grantor hereunder, release, amend or
modify any other Power of Attorney granted by any other Grantor hereunder or by
any other person under any related agreement.
5.3 Ratification; Third Party Reliance. Each Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by such Grantor
hereunder, and such Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
-------------
6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment, provided that the Operating Partnership may amend this Agreement
without notice to or the consent of any Grantor for the purpose of adding
additional Grantors as parties hereto or deleting Grantors as parties hereto and
conforming Exhibit A in connection with such additions or deletions. No waiver
of any provisions of this Agreement shall be valid unless in writing and signed
by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantors, or
by any Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantors.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity,
-9-
<PAGE>
provided, however, that Sections 5.3, 6.3 and 6.9 of this Agreement shall be
- --------
enforceable by and shall inure to the benefit of the persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of an Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of a notice to a Grantor,
to the address and telecopy number set forth under such Grantor's name in
Exhibit A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) Each Grantor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of Property Interests) may conflict with,
and may not have been contemplated by, the partnership agreement of one or more
Partnerships in which one or more of such
-10-
<PAGE>
Grantor's Property Interests represent a direct or indirect interest or another
agreement among one or more holders of such Property Interests or one or more of
the partners of any such partnership. With respect to each Partnership in which
a Property Interest of a Grantor represents a direct or indirect interest, each
Grantor expressly gives all Consents (and any consent necessary to authorize the
proper parties in interest to give all Consents) and Waivers necessary or
desirable to facilitate any Conveyance Action relating to such partnership (as
such terms are defined below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is a
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company, or (ii) the entering into
by any such partner or holder of any agreement relating to (x) the formation of
the Operating Partnership or the Company or (y) the direct or indirect
acquisition by to the Operating Partnership or the Company of any such direct or
indirect interest, or (iii) the taking by any such partner or holder of any
action necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing): any sale or distribution to any person of a
direct or indirect interest in such partnership, the entering into any agreement
with any person that grant to such person the right to purchase a direct or
indirect interest in such partnership, and the giving of the Consents and
Waivers contained in this Section 6.9 or consent or waivers similar thereto in
form or purpose. As used herein, the term "CONSENTS" means, with respect to any
such partnership, any consent necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any of the
holders of interests therein or any other agreement relating thereto or referred
to therein (i) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other agreements so
that no provision thereof prohibit, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if interests therein
are transferred for other than cash), (ii) to admit the Operating Partnership
(or the Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's acquisition of a
limited or general partner interest therein, respectively, and to adopt such
amendment as is necessary or desirable to effect such admission, (iii) to adopt
any amendment as may be deemed desirable by the Operating Partnership, either
simultaneously with or immediately prior to the acquisition of a limited or
general partnership interest therein, and (iv) to continue such partnership
following the transfer of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above). As used herein, the term "WAIVERS" means,
with respect to a partnership of which a Property Interest of a Grantor
represents a direct or indirect interest, the waiving of any and all rights that
such Grantor may have with respect to, and (to the extent possible) that any
other person may have with respect to, or that may accrue to such Grantor or
other person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights: rights of
notice, rights to response periods, rights to purchase the direct or indirect
interest of another partner in such partnership or to sell such Grantor's or
other person's direct or indirect interest therein to another partner, rights to
sell such Grantor's or other person's direct or indirect interest therein at a
price other than as provided herein, or rights to prohibit, limit, invalidate,
otherwise restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such Conveyance
Action. Each Grantor further agrees that such Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which a Property Interest of
such Grantor represents a direct or indirect interest. The Waivers and Consent
contained in this Section 6.9 shall terminate upon the termination of this
Agreement, except as to transactions completed hereunder prior to termination.
(b) Each Grantor by its execution hereof (i) with respect to each
Partnership in which a Property Interest owned by such Grantor represents a
direct or indirect interest therein, gives such consent as is necessary to cause
each Partnership, as applicable, to have authority to transfer all or
substantially all of the assets of such
-11-
<PAGE>
Partnership to the Operating Partnership on such terms and conditions as
such Partnership and the Operating Partnership may agree; and (ii) agrees that
such Grantor's Acquisition Consideration may be reduced to reflect such direct
transfer of assets and the consequent receipt of cash and other consideration
directly by such Partnership, provided that the total consideration to be
received by such Grantor either directly hereunder or indirectly through the
receipt of distributions from a Partnership shall equal Grantor's Acquisition
Consideration.
(c) Each Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which a Property Interest of such Grantor represents directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law, (i)
to admit the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section 6.3 above) as a
substitute limited partner therein and/or a substitute general partner therein
if the Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by the exercise
of the Grantor's Option acquires a limited partnership interest or a general
partnership interest in such partnership, (ii) to redeem the interest of any
other partner therein who has not agreed to become a party to this Agreement,
(iii) to distribute to all partners thereof, including any partner who has not
agreed to become a party to this Agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or general partners
thereof may determine, provided that such Grantor receives as a result of all
such distributions and the direct payment of consideration hereunder, the amount
of cash that is in conformity with the Acquisition Consideration of such Grantor
provided for herein), and thereafter, at the Operating Partnership's option, to
dissolve, and (iv) any such other amendment as the Operating Partnership may
deem desirable, provided that such amendment occurs simultaneously with or
immediately prior to the acquisition of the applicable partnership interest and,
provided further, that such amendment will not result in any increased liability
on the part of any Grantor hereunder or under the applicable partnership
agreement. The Attorney-in-Fact may on behalf of each Grantor execute such
consents, amendments or other instruments as it deems necessary or desirable in
connection with the foregoing.
6.10 Confidentiality. Each Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to such
Grantor who agree to keep such terms confidential. Grantor shall treat all
information received from the Operating Partnership or its counsel or advisors
pertaining to the Operating Partnership or the Company confidential and shall
disseminate same only to counsel to such Grantor who agree to keep such
information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of each
Grantor set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of Grantor under this Agreement.
-12-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
By: /s/ Bruce G. Wiles
-----------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-13-
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become one of the within named Grantors to
that certain Omnibus Option Agreement by and among American General Hospitality
Operating Partnership, L.P. and such Grantors, dated as of ____________________,
1996 hereby becomes a party to such Omnibus Option Agreement. The undersigned
agrees that this signature page may be attached to any counterpart of said
Omnibus Option Agreement.
Signature line for Grantors
who are natural persons: /s/ Randall Talbot
--------------------------------
Name:
Signature line for trusts,
partnerships and other
entities: Grantor
--------------------------------
Name of Grantor
By: /s/ Grantor
-----------------------------
Name:
Title:
Address of Grantor:
-----------------------------------------
-----------------------------------------
-----------------------------------------
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
<PAGE>
EXHIBIT C
The Adjustment Provisions set forth herein are substantially in the form as
Sections 10.8 through 10.12 of Article 10 (the "Article 10 Provisions") of that
certain Contribution Agreement, by and among DFW South Acquisition Corporation,
American General Hospitality, Inc., and the Operating Partnership, dated on or
about the 26th of April, 1996. It is the intention of the parties that the
adjustments contemplated in Section 1.4 shall be made in accordance with the
Article 10 Provisions.
ADJUSTMENT PROVISIONS
- ---------------------
10.8 Prorations and Adjustments. It is the parties' intention that
--------------------------
the prorations and adjustments conform in substance to those that would be made
in a sale of real property as set forth herein. All such prorations shall be
netted against each other and the new amount shall be paid in cash to Sellers
(in which case, a GP shall receive such amount and shall distribute to Sellers
each Seller's Share of such amount) or to the Partnership (in which case, DFWGP
shall pay such amount and shall seek reimbursement of each Seller's Share from
each of the Sellers), as the case may be, by the wire transfer of Federal funds
on the Closing Date. As used in this Article 10, Seller's Share shall mean each
Seller's percentage share equal to its percentage share of the Aggregate
Purchase Price as determined pursuant to the applicable provisions of the
Amended and Restated Agreement of Limited Partnership of DFWS. At Closing, the
following items of revenue and expense shall be prorated as of 12:01 A.M. on the
Closing Date:
(a) Hotel Taxes. Real estate taxes, personal property or use taxes
-----------
and sewer rents, on the basis of the best available estimates for such taxes and
rents that will be due and payable on the Hotel for the calendar year in which
the Closing occurs;
(b) Operating Costs. All utility costs and expenses and other costs
---------------
and expenses of operating the Hotel which are reasonably capable of proration,
including but not limited to all salaries, compensation, sick pay, vacation pay,
other accrued benefits of Hotel employees and other expenses which are charged
to Sellers under the Managing Agreement;
(c) Service Contracts and FF&E Leases. Amounts paid or payable under
---------------------------------
the Service Contracts and FF&E Leases;
(d) Lease Rents. Rents and other revenues under Leases;
-----------
(e) Debt Interest. Interest due and payable on the Debt;
-------------
(f) Revenues. Guest, convention, room, food, beverage, and all other
--------
charges and revenues for services rendered and the operation of all departments
of the Hotel, including, but not limited to, advance payments under booking
agreements for rooms, facilities and services of the Hotel and any other
revenues, as and when collected, provided, however, that food, room service and
restaurant revenue shall be read, measured (and tapes preserved) and apportioned
as of 2:00 a.m. on the Closing Date. Each Seller's Share of the final night's
room revenue (revenue from rooms occupied on the evening preceding the Closing
Date) less a sum equal to all room maid services with respect thereto shall be
the property of each of Sellers. All cash, checks, and other funds, and all
other notes, security and other evidence of indebtedness located at the Hotel as
of 2:00 a.m. on the Closing Date and balances on deposit to the credit of DFWS
with banking institutions are and shall remain the property of Sellers and are
not included in this sale (except for the guest (tray) ledger for guests staying
in the Hotel on the Closing Date which will be paid for by the Partnership);
(g) Miscellaneous. Fees and expenses for music, entertainment, trade
-------------
association dues, trade, newspaper and other periodical subscriptions, coin
machine income, and washroom and checkroom income;
<PAGE>
(h) Food and Liquor. The value of the food and liquor inventory in
---------------
unopened containers;
(i) Deposits. Deposits as provided in Section 2.1(g);
--------
(j) Escrow and Operating Accounts. The amount, if any, held in any
-----------------------------
tax and insurance escrow with Bank relating to the Debt, and the amount of the
net balance, if any, in any operating account maintained (and retained) by the
Partnership relating to the Hotel; and
(k) Current Assets and Liabilities. If, after the prorations to be
------------------------------
made pursuant to the preceding subparagraphs, (x) the sum of all cash and cash
equivalents, investments, accounts receivable, prepaid expenses and deposits and
other assets generally recognized as current assets owned by Sellers, exceeds or
is less than (y) the sum of all accounts payable, accrued real estate taxes,
accrued interest, other accrued expenses and other liabilities generally
recognized as current liabilities owed by Sellers, the net cash prorations under
this Section shall be increased or decreased, as the case may be, by such excess
or deficiency; provided, however, that each of Sellers shall remain responsible
for each Seller's Share of the payment of all accounts payable and other pre-
Closing liabilities of DFWS relating exclusively to periods prior to the Closing
Date and each of Sellers shall be entitled to receive each Seller's Share of all
accounts receivable relating exclusively to such period, and no prorations will
be made with respect thereto.
10.9 Capital Improvement Plan. The parties acknowledge that there is
------------------------
currently in place a capital improvement plan ("CIP") at the Hotel to which DFWS
has committed to spending $800,000. The portion of that $800,000 that has not
been expended or placed in escrow in accordance with the CIP by the Closing Date
shall be credited at Closing to the Partnership as part of the prorations
provided for in the preceding Section.
10.10 Sales Tax. Each Seller's Share of all sales, use and occupancy
---------
taxes, if any, due or to become due in connection with revenues received from
the Hotel prior to the Closing Date will be paid by each of Sellers. All sales,
use and other transfer taxes, if any, payable as a result of the conveyance of
the Interest to Partnership will be paid by the Partnership. Each of Sellers
shall be entitled to receive each Seller's Share of any rebates or refunds on
taxes paid by DFWS prior to the Closing.
10.11 Document Recordation and Transfer Costs. Sellers and
---------------------------------------
Partnership shall bear equally the escrow fee and other charges payable to the
Title Company, except that the premium payable to the Title Company for the
Revised Coverage shall be paid pursuant to the terms of Article 4, above. Each
of Sellers shall pay each Seller's Share of any costs or transfer taxes in
conjunction with the conveyance of the Interests. The cost of preparing or
obtaining documents to be delivered by Partnership or REIT to DFWGP pursuant to
this Agreement shall be paid by Partnership. The cost of preparing or obtaining
other documents to be delivered by Sellers to Partnership pursuant to this
Agreement shall be paid by Sellers. Any other costs of Closing shall be borne
in accordance with local custom in Dallas, Texas.
10.12 Reconciliation and Final Payment. Prior to Closing, Sellers
--------------------------------
and Partnership shall reasonably cooperate to make a preliminary determination
of the prorations required hereunder, and at Closing all such adjustments and
prorations shall be based on those estimated numbers. After Closing, Sellers
and Partnership shall reasonably cooperate to make a final determination of such
prorations. Upon the final reconciliation of the prorations under this Article,
but in any event not later than ninety (90) days following Closing, the party
which owes the other party any sums hereunder shall pay such party such sums
within ten (10) days after the reconciliation of such sums. The obligations to
calculate such prorations, make such reconciliations and pay any such sums shall
survive the Closing.
<PAGE>
Exhibit 10.34
OPTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AND THE
GRANTOR NAMED BELOW
RBD PARTNERSHIP
Dated as of April 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I: THE OPTION........................................................ 1
1.1 Grant of Option................................................... 1
1.2 Term and Exercise of Option....................................... 1
1.3 Acquisition Consideration......................................... 1
1.4 Adjustments to Acquisition Consideration.......................... 2
ARTICLE II: CLOSING PROCEDURES................................................ 2
2.1 Purchase of Property Interests.................................... 2
2.2 Closing; Conditions to Obligations................................ 2
2.3 Documents to Be Delivered at the Closing.......................... 3
2.4 Cessation of Public Offering...................................... 4
2.5 Closing Costs..................................................... 4
2.6 Default........................................................... 5
2.7 Further Assurances................................................ 5
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR.............. 5
3.1 Title to Interests................................................ 5
3.2 Organization; Authority; No Conflicts............................. 6
3.3 Litigation........................................................ 6
3.4 No Other Agreements............................................... 6
3.5 No Brokers........................................................ 6
3.6 Covenant to Remedy Breaches....................................... 7
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP....................................................... 7
4.1 Authority......................................................... 7
4.2 No Brokers........................................................ 7
4.3 Exercise of Options............................................... 7
ARTICLE V: POWER OF ATTORNEY................................................. 7
5.1 Grant of Power of Attorney........................................ 7
5.2 Limitation on Liability........................................... 8
5.3 Ratification; Third Party Reliance................................ 9
ARTICLE VI: MISCELLANEOUS..................................................... 9
6.1 Amendment......................................................... 9
6.2 Entire Agreement; Counterparts; Applicable Law.................... 9
6.3 Assignability..................................................... 9
6.4 Titles............................................................ 9
6.5 Third Party Beneficiary........................................... 9
6.6 Severability...................................................... 9
6.7 Equitable Remedies................................................ 10
6.8 Notices; Exercise of Option....................................... 10
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.. 10
6.10 Confidentiality................................................... 12
6.11 Computation of Time............................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6.12 Survival.......................................................... 12
6.13 Time of the Essence............................................... 12
</TABLE>
Exhibits
A. Grantor
B. Partnerships & Interests
C. Adjustment Provisions
The exhibits and/or schedules of Exhibit 10.34, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OPTION AGREEMENT
----------------
This Option Agreement (this "AGREEMENT") dated as of the 26th day of
April, 1996 by and among AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the
Grantor listed on Exhibit A attached hereto (the "GRANTOR").
R E C I T A L S:
---------------
A. The Grantor owns an interest in the partnership as described on
Exhibit B (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash from the
Grantor, and the Grantor desires to grant to the Operating Partnership, an
option to acquire on the terms and conditions set forth herein, all of the
interest owned by the Grantor and set forth on Exhibit B and any other direct or
indirect interest the Grantor may have, whether now owned or hereinafter
acquired, in the Partnership and/or in the property owned thereby. (Such
property and all personal property related thereto or to the operation thereof
is hereinafter referred to as such Partnership's "PROPERTY," and all of such
direct or indirect interests of the Grantor in such Partnership or Property,
including, without limitation, the interests shown on Exhibit B, are referred to
collectively as the Grantor's "PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property
Interests in connection with (i) the formation of American General Hospitality
Corporation, a Maryland corporation, which intends to qualify as a real estate
investment trust (the "COMPANY") and which is (or through its wholly owned
subsidiaries) the sole general partner as well as a limited partner of the
Operating Partnership, and (ii) the proposed initial public offering ("IPO") of
shares of the Company's common stock, no par value ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, the mutual covenants and conditions set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Operating Partnership and
Grantor agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
---------------
Operating Partnership the right and option (the "OPTION") to purchase for cash
all of the Grantor's right, title and interest in Grantor's Property Interests
on the terms and conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
---------------------------
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on the earlier of (i) October 31, 1996 or (ii) the Cessation Date (as such
term is defined in Section 2.4) (the earlier of such dates, the "OPTION
TERMINATION DATE"); provided, that if on the Option Termination Date the
Operating Partnership or the Grantor is prohibited by applicable law, or the
Operating Partnership or the Grantor is subject to a stay, order, injunction, or
similar limitation or any pending or threatened action or proceeding to enjoin,
restrain, prohibit or assess substantial damages in respect of the exercise by
the Operating Partnership of the Option, then the Option may be exercised by the
Operating Partnership during the 10 business day period commencing on the first
business day following the removal of each such prohibition, stay, order,
injunction, action, proceeding or similar limitation in effect at that time.
Subject to the foregoing, if the Operating Partnership does not exercise the
Option by the Option Termination Date, then the Option shall be deemed
terminated and shall be of no further force or effect and the Grantor of the
Option shall have no further obligations hereunder.
<PAGE>
1.3 Acquisition Consideration. The cash consideration (the
-------------------------
"ACQUISITION CONSIDERATION") to be received by the Grantor in respect of the
Operating Partnership's purchase of the Grantor's Property Interests shall be
the amount equal to $172,004, as adjusted in accordance with Section 1.4 hereof.
1.4 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to the Grantor and the Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for the Partnership in
accordance with provisions substantially in the form on Exhibit C attached
hereto. For purposes of this Section 1.4 and Exhibit C, the Grantor shall be
considered an "Other Contributor" within the meaning of Exhibit C and agrees to
be bound by Exhibit C and fulfill all obligations thereunder, including the
obligation to make payments prescribed thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Purchase of Property Interests. Upon the Operating Partnership's
------------------------------
exercise of the Option, the Grantor shall, in accordance with Section 2.2
hereof, transfer, assign, and convey to the Operating Partnership and the
Operating Partnership shall purchase from the Grantor, all right, title and
interest in the Grantor's Property Interests, free and clear of all Encumbrances
in exchange for the Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Operating Partnership shall exercise the Option by delivering
to the Grantor a notice (the "OPTION NOTICE"), which notice shall state the date
(the "CLOSING DATE") of the closing of the transactions contemplated by Section
2.1 (the "CLOSING"), which date shall be no more than 30 days following the date
of such Option Notice. The Closing shall be held within such 30 day period at
the offices of Battle Fowler LLP, 75 East 55th Street, New York, New York or at
such other place to be determined by the Operating Partnership in its sole
discretion. Following delivery of an Option Notice, the Operating Partnership
and Grantor will at or prior to the Closing execute and deliver all closing
documents (the "CLOSING DOCUMENTS") required by the Operating Partnership
pursuant to Section 2.3 and, pending the Closing, deposit such Closing Documents
in escrow with Battle Fowler LLP, as escrow agent of the Operating Partnership
(the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Operating Partnership in its reasonable discretion, to enable
the Operating Partnership (i) to purchase all the Property Interests of the
Grantor, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO, as the same shall be in effect on the day of the IPO
Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent, with respect to the Grantor where the Grantor's Option has
been exercised, the Acquisition Consideration in immediately available funds by
check or wire transfer; and
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor where the Grantor's Option has been
exercised, the Acquisition Consideration owed to the Grantor.
-2-
<PAGE>
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to purchase of all
or any portion of the Property Interests of the Grantor as follows:
(i) in the event that the Grantor either identifies in its
Assignment delivered pursuant to Section 2.3(a) a breach of or other exception
with respect to any of the representations, warranties or covenants contained in
Article III or has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to purchase the Grantor's Property Interests, or there
exists an order or judgment enjoining, restraining or prohibiting, or assessing
substantial damages in respect of such consummation, or there shall be any
action or proceeding instituted or threatened in writing to enjoin, restrain,
prohibit or assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery with respect to
- ----
the Grantor pursuant to clause (c)(i) above, either (A) in the case of an
election not to purchase of all of the Grantor's Property Interests, notify the
Escrow Agent of such election and direct the Escrow Agent to return the
Grantor's Closing Documents to the Grantor, or (B) in all other cases, equitably
adjust the delivery with respect to the Grantor pursuant to clause (c)(i) above
to reflect the portion of the Grantor's Property Interests with respect to which
the purchase is actually being made, which adjustment shall be determined in the
Operating Partnership's reasonable discretion, and shall in all events be
binding upon the Grantor. The election of the Operating Partnership not to
purchase all or any portion of the property interests of any other grantor
contributing property in connection with the IPO shall not affect the
obligations of the Grantor hereunder.
(e) Except as the result of a default by the Grantor hereunder, if
the Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
- -- ------
the Closing Documents it holds. This Agreement shall thereafter remain in
effect and the Operating Partnership may thereafter exercise the Option again at
any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Operating
Partnership, shall contain a warranty of title that the Grantor owns the
Property Interests free and clear of all Encumbrances (as defined below) and
shall either (i) reaffirm the accuracy of all representations and warranties and
the satisfaction of all covenants contained in Article III hereof, or (ii) if
such reaffirmation cannot be made, identify those representations, warranties
and/or covenants contained in Article III hereof (other than Section 3.9) which
the Grantor can no longer make or comply with, represent that the Grantor has
used reasonable efforts to take such actions as would permit the Grantor to make
such representations and warranties and/or to comply with such covenants, and
reaffirm the accuracy of all other representations and warranties and the
satisfaction of all other covenants contained in Article III hereof.
(b) If requested by the Operating Partnership, a certified copy of
all appropriate partnership actions authorizing the execution, delivery and
performance by the Grantor of this Agreement and the Closing Documents.
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<PAGE>
(c) If requested by the Operating Partnership, an opinion from
counsel for the Grantor in form and content reasonably acceptable to the
Operating Partnership substantially to the effect that:
(i) the Grantor is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to execute,
deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of the
Grantor's partnership agreement or, to the knowledge of such counsel, any
indenture, deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party or by
which it or its assets or properties are bound or affected, except for such
breach or violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid prior to or
contemporaneously with the Closing; (y) to the knowledge of such counsel,
constitute a violation of any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or properties are
bound or affected; or (z) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of Grantor's assets or
properties, except for Permitted Pledges (as defined below); and
(iii) all partnership action necessary for the Grantor to
execute and deliver this Agreement and the Closing Documents and to perform
the transactions contemplated hereby and thereby has been taken and that
the same have been validly executed and delivered and are the valid and
binding obligations of the Grantor enforceable against it in accordance
with their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event the Grantor fails to provide such an affidavit, the
Operating Partnership shall be entitled to withhold from the Acquisition
Consideration and pay to the Internal Revenue Service the sums required to be
withheld pursuant to FIRPTA (and the amount so withheld shall be paid by the
Operating Partnership to the Internal Revenue Service, in order for the
Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Property Interests to the Operating Partnership and to otherwise
effectuate the transactions contemplated hereby, including filings with any
applicable governmental jurisdiction in which the Operating Partnership is
required to file its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Operating Partnership will so advise the Grantor in
writing and thereupon all parties hereto will be relieved of all obligations
under this Agreement and all Closing Documents (except for obligations arising
under Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of
-------------
the closing costs, other than the Grantor's legal fees, arising from the
purchase of the Property Interests of the Grantor to the Operating Partnership
pursuant to the exercise by the Operating Partnership of the Grantor's Option.
-4-
<PAGE>
2.6 Default.
-------
(a) If after having exercised the Option, the Operating Partnership
fails to close (including a failure due to the IPO Closing not having occurred),
then the Operating Partnership will pay to the Grantor the sum of $100.00 as
liquidated and agreed upon damages. The parties acknowledge that it would be
difficult, if not impossible, to ascertain the actual measure of the Grantor's
damages in the event of the Operating Partnership's default and the parties
agree that $100.00 is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
the Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
------------------
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Property Interests to the Operating
Partnership in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES AND COVENANTS OF GRANTOR
----------------------------------------------------
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase any of the
Grantor's Property Interests after the exercise of the Grantor's Option, such
representations and warranties must be true as of the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit B, the
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by the Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Property
Interests as herein provided, the Operating Partnership will purchase good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby. Each of the Grantor's Property Interests representing an interest in a
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Property Interest represents an interest that are
required to be funded or advanced prior to the date hereof and the date of the
Closing. There are no agreements, instruments or understandings with respect to
any of the Grantor's Property Interests except, in the case of any Property
Interest constituting an interest in a Partnership, as set forth in the
partnership agreement of such Partnership. The Grantor has no interest, either
direct or indirect, in any of the Partnerships or Properties except for the
Property Interests identified on Exhibit B which are the subject of this
Agreement. No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request. In making the representations in this Section 3.1 regarding
the absence of Encumbrances, the Grantor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of any Partnerships in which the Grantor's Property Interests represent
direct or indirect interests.
-5-
<PAGE>
3.2 Organization; Authority; No Conflicts. The Grantor is a limited
-------------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the state of its organization. The Grantor has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and delivered
by or on behalf of the Grantor pursuant to this Agreement; (ii) to perform the
transactions contemplated hereby and thereby; and (iii) to transfer, assign,
convey and deliver all of the Grantor's Property Interests to the Operating
Partnership in accordance with this Agreement. All applicable partnership
action necessary for the Grantor to execute and deliver this Agreement, the
Closing Documents and each other agreement, document and instrument executed by
or on behalf of the Grantor pursuant to this Agreement, and to perform the
transactions contemplated hereby and thereby, has been taken, or will be taken
prior to the Closing Date. This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of the
Grantor pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms. Except for any breaches,
violations or defaults which will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing, the execution, delivery and
performance of this Agreement, the Closing Documents and each other agreement,
document and instrument to be executed and delivered by or on behalf of the
Grantor: (x) does not and will not violate the Grantor's partnership agreement;
(y) does not and will not violate any foreign, federal, state, local or other
laws applicable to the Grantor or require the Grantor to obtain any approval,
consent or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and which does
not remain in effect; and (z) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement or any other agreement, contract, instrument, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which the Grantor is a party or by which the property of
the Grantor is bound or affected, or result in the creation of any Encumbrance
on any of the property or assets of any Partnership in which any Property
Interest of the Grantor represents an interest. In making the representations
set forth in this Section 3.2, the Grantor may assume (i) that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership in which the Grantor's Property Interests represent
direct or indirect interests and (ii) that, for purposes of making such
representation as of the date hereof, any Permitted Pledge has been released.
3.3 Litigation. There is no litigation or proceeding, either
----------
judicial or administrative, pending or overtly threatened, affecting all or any
portion of the Grantor's Property Interests or the Grantor's ability to
consummate the transactions contemplated hereby. The Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair the
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
3.4 No Other Agreements. The Grantor has made no agreement with, and
-------------------
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Grantor's Property Interests or restricting in any
way the Grantor's ability to sell the Grantor's Property Interests to the
Operating Partnership or to enter into any agreement with respect to the
Grantor's Property Interests. In making the representations set forth in this
Section 3.4, the Grantor may assume (i) that the consents and waivers of rights
set forth in Section 6.9 hereof have been given by all partners of the
Partnerships in which the Grantor's Property Interests represent direct or
indirect interests and (ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
----------
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
-6-
<PAGE>
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of the Grantor hereunder, (ii) to satisfy all
covenants of the Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of the Grantor hereunder upon its learning
of same.
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE OPERATING PARTNERSHIP
--------------------------------------
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. The Operating Partnership is a limited partnership
---------
duly organized, validly existing and in good standing under the laws of the
state of Delaware. The Operating Partnership has full right, authority, power
and capacity: (i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to this Agreement; and
(ii) to perform the transactions contemplated hereby and thereby. This
Agreement, each Closing Document to which the Operating Partnership is a party
and each agreement, document and instrument executed and delivered by the
Operating Partnership pursuant to this Agreement constitutes, or when executed
and delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable in accordance with its respective terms.
The execution, delivery and performance of this Agreement, each Closing Document
to which the Operating Partnership is a party and each such agreement, document
and instrument by the Operating Partnership: (x) does not and will not violate
the Partnership Agreement; (y) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (government or otherwise) that
has not been obtained or made and which does not remain in effect; and (z) does
not and will not result in a breach or a violation of, constitute a default
under, accelerate any obligation under or give rise to a right of termination
of, any indenture, deed of trust, mortgage, loan or credit agreement, any other
material agreement, contract, instrument, lease, permit or authorization, or any
order, writ, judgment, injunction, decree, determination or arbitration award to
which the Operating Partnership is a party or by which the property of the
Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
----------
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Exercise of Options. If the Operating Partnership exercises the
-------------------
option of any other granter contributing property in connection with the IPO it
will exercise the Option of the Grantor hereunder, but this covenant shall in no
way affect the Operating Partnership's right, pursuant to Section 2.2(c), to
elect not to purchase all or any portion of the Property Interests of the
Grantor where the Grantor is not in compliance with the terms of this Agreement.
ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. The Grantor does hereby irrevocably
--------------------------
appoint Steven D. Jorns, Bruce G. Wiles, Kenneth E. Barr and the Operating
Partnership, and each of them individually, with full power of substitution
(such person or the Operating Partnership or any such successor of any of them
acting in his, her
-7-
<PAGE>
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT"), as
the true and lawful attorney-in-fact and agent of the Grantor, to act in the
name, place and stead of the Grantor:
(a) To take for the Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the IPO, including without
limitation (i) filing a registration statement and amendments thereto (the
"REGISTRATION STATEMENT") under the Securities Act which describes the
benefit to be received by the Grantor in connection with the formation of
the Company and the offering of the Company's Common Stock, (ii)
distributing a preliminary prospectus and prospectus regarding the offering
of the Company's Common Stock (the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and (iii) to take such other steps as
the Attorney-in-Fact may deem necessary or advisable.
(b) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the purchase of the Grantor's Property Interests to the Operating
Partnership, and any consents contemplated by Section 6.9 hereof) and, in
general, to do all things and to take all actions which the Attorney-in-
Fact in its sole discretion may consider necessary or proper in connection
with or to carry out the transactions contemplated by this Agreement and
the Closing Documents as fully as could the Grantor if personally present
and acting.
The Power of Attorney granted by the Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Operating Partnership, the Company and the
other grantors contributing property in connection with the IPO and is for the
purpose of completing the transactions contemplated by this Agreement. The
Power of Attorney of the Grantor granted hereby and all authority conferred
hereby is coupled with an interest and therefore shall be irrevocable and shall
not be terminated by any act of the Grantor or by operation of law, whether by
the liquidation of the Grantor or by the occurrence of any other event or events
(including without limitation the termination of any trust or estate for which
the Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, the Grantor is liquidated, or if any other such event or
events shall occur before the completion of the transactions contemplated by
this Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such liquidation or other event
or events had not occurred and regardless of notice thereof. The Grantor
acknowledges that Steven D. Jorns, Bruce G. Wiles and Kenneth E. Barr and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transaction contemplated by this
Agreement. The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
The Grantor hereby acknowledges and confirms that the Power of
Attorney granted by the Grantor pursuant to this Article V includes and is
intended to include the power to act on behalf of the Grantor to amend this
Agreement to modify the Grantor's Acquisition Consideration so that there is a
change in accordance with Section 1.3 in the amount of Acquisition Consideration
that the Grantor will receive in connection with the exercise by the Operating
Partnership of the Grantor's Option.
5.2 Limitation on Liability. It is understood that each Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by the Grantor hereby. Each Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the purchase of the Property Interests by the
Operating Partnership, the Registration Statement, the Prospectus or any
Preliminary Prospectus, nor for any aspect of the IPO, and it shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for its own gross negligence or bad faith. The
Grantor agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-
in-Fact harmless against any loss,
-8-
<PAGE>
PAGE>
claim, damage or liability incurred or in part arising out of or in connection
with its acting as the Attorney-in-Fact under the Power of Attorney created by
the Grantor hereby, as well as the cost and expense of investigating and
defending against any such loss, claim, damage or liability, except to the
extent such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Attorney-in-Fact. The Grantor agrees that the Attorney-in-Fact
may consult with counsel of its own choice (who may be counsel for the Operating
Partnership and/or the Company) and it shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel. It is understood
that each Attorney-in-Fact may, without breaching any express or implied
obligation to the Grantor hereunder, release, amend or modify any other Power of
Attorney granted by any other grantor contributing property in connection with
the IPO or by any other person under any related agreement.
5.3 Ratification; Third Party Reliance. The Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
-------------
6.1 Amendment. Any amendment hereto shall be effective only against
---------
those parties hereto who have acknowledged in writing their consent to such
amendment. No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
--------
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 6.3 and 6.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
6.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
-9-
<PAGE>
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality, Inc.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Exhibit A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) The Grantor acknowledges that the agreements contained herein and
the transactions contemplated hereby and any actions taken in contemplation of
the transactions contemplated hereby (including the declaration of any dividend
or distribution in the form of Property Interests) may conflict with, and may
not have been contemplated by, the partnership agreement of the Partnership in
which the Grantor's Property Interests represent a direct or indirect interest
or another agreement among one or more holders of other property interests in
the Partnership or one or more of the partners of the Partnership. With respect
to the Partnership in which a Property Interest of the Grantor represents a
direct or indirect interest, the Grantor expressly gives all Consents (and any
consent necessary to authorize the proper parties in interest to give all
Consents) and Waivers necessary or desirable to facilitate any Conveyance Action
relating to such partnership (as such terms are defined below).
-10-
<PAGE>
As used herein, the term "CONVEYANCE ACTION" means, with respect to
the Partnership having a direct or indirect ownership interest in the Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is the
Grantor hereunder) of its direct or indirect interest in such partnership to the
Operating Partnership or the Company or to another person in connection with the
formation of the Operating Partnership or the Company, or (ii) the entering into
by any such partner or holder of any agreement relating to (x) the formation of
the Operating Partnership or the Company or (y) the direct or indirect
acquisition by to the Operating Partnership or the Company of any such direct or
indirect interest, or (iii) the taking by any such partner or holder of any
action necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing): any sale or distribution to any person of a
direct or indirect interest in such partnership, the entering into any agreement
with any person that grant to such person the right to purchase a direct or
indirect interest in such partnership, and the giving of the Consents and
Waivers contained in this Section 6.9 or consent or waivers similar thereto in
form or purpose. As used herein, the term "CONSENTS" means, with respect to any
such partnership, any consent necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any of the
holders of interests therein or any other agreement relating thereto or referred
to therein (i) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other agreements so
that no provision thereof prohibit, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if interests therein
are transferred for other than cash), (ii) to admit the Operating Partnership
(or the Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's acquisition of a
limited or general partner interest therein, respectively, and to adopt such
amendment as is necessary or desirable to effect such admission, (iii) to adopt
any amendment as may be deemed desirable by the Operating Partnership, either
simultaneously with or immediately prior to the acquisition of a limited or
general partnership interest therein, and (iv) to continue such partnership
following the transfer of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above). As used herein, the term "WAIVERS" means,
with respect to the Partnership of which a Property Interest of a Grantor
represents a direct or indirect interest, the waiving of any and all rights that
the Grantor may have with respect to, and (to the extent possible) that any
other person may have with respect to, or that may accrue to the Grantor or
other person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights: rights of
notice, rights to response periods, rights to purchase the direct or indirect
interest of another partner in such partnership or to sell the Grantor's or
other person's direct or indirect interest therein to another partner, rights to
sell the Grantor's or other person's direct or indirect interest therein at a
price other than as provided herein, or rights to prohibit, limit, invalidate,
otherwise restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such Conveyance
Action. The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in the Partnership in which a Property Interest of
the Grantor represents a direct or indirect interest. The Waivers and Consent
contained in this Section 6.9 shall terminate upon the termination of this
Agreement, except as to transactions completed hereunder prior to termination.
(b) The Grantor by its execution hereof (i) with respect to the
Partnership in which a Property Interest owned by the Grantor represents a
direct or indirect interest therein, gives such consent as is necessary to cause
the Partnership to have authority to transfer all or substantially all of the
assets of such Partnership to the Operating Partnership on such terms and
conditions as the Partnership and the Operating Partnership may agree; and (ii)
agrees that the Grantor's Acquisition Consideration may be reduced to reflect
such direct transfer of assets and the consequent receipt of cash and other
consideration directly by the Partnership, provided that the total consideration
to be received by the Grantor either directly hereunder or indirectly through
the receipt of distributions from the Partnership shall equal the Grantor's
Acquisition Consideration.
-11-
<PAGE>
(c) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of the Partnership
in which a Property Interest of the Grantor represents directly or indirectly, a
limited partner or general partner interest, an amendment thereto to enable such
partnership, to the extent permissible under applicable law, (i) to admit the
Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner therein if the
Operating Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by the exercise
of the Grantor's Option acquires a limited partnership interest or a general
partnership interest in such partnership, (ii) to redeem the interest of any
other partner therein who has not agreed to become a party to this Agreement,
(iii) to distribute to all partners thereof, including any partner who has not
agreed to become a party to this Agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a result of all
such distributions and the direct payment of consideration hereunder, the amount
of cash that is in conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating Partnership's option, to
dissolve, and (iv) any such other amendment as the Operating Partnership may
deem desirable, provided that such amendment occurs simultaneously with or
immediately prior to the acquisition of the applicable partnership interest and,
provided further, that such amendment will not result in any increased liability
on the part of the Grantor hereunder or under the applicable partnership
agreement. The Attorney-in-Fact may on behalf of the Grantor execute such
consents, amendments or other instruments as it deems necessary or desirable in
connection with the foregoing.
6.10 Confidentiality. The Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to the Grantor
who agree to keep such terms confidential. Grantor shall treat all information
received from the Operating Partnership or its counsel or advisors pertaining to
the Operating Partnership or the Company confidential and shall disseminate same
only to counsel to the Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of the Grantor
set forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of the Grantor under this Agreement.
-12-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, INC.,
its general partner
By: /s/ Bruce G. Wiles
---------------------------------------
Name: Bruce G. Wiles
Title: Executive Vice President
-13-
<PAGE>
EXHIBIT C
The Adjustment Provisions set forth below herein are substantially in the
form as Article ("Article 7") of that certain Contribution Agreement, among
Virtual Hospitality, Inc., Jackson-Shaw Partners No. 51, Ltd., 3005 Hotel
Associates, Ltd., 3100 Hotel Associates, L.P., Stephen D. Jorns, James E.
Sowell, Lewis W. Shaw, II, Kenneth W. Shaw, Monica Jorns, Bruce G. Wiles, 3860
Investors Joint Venture, and 282 Almaden Hotel Associates, L.P. and the
Operating Partnership, dated on or about the 26th day of April, 1996. It is the
intention of the parties that the adjustments contemplated in Section 1.6 shall
be made in accordance with Article 7.
ADJUSTMENT PROVISIONS
- ---------------------
7.1 APPORTIONMENTS. With respect to each Hotel, the Contribution
--------------
Value reflects a deduction for all mortgage indebtedness on the Hotels. With
respect to each Partnership, the following adjustments and apportionments shall
be made in cash among the Contributors in each Partnership, and the OP. It is
the parties' intention that the prorations and adjustments conform in substance
to those that would be made in a sale of real property as set forth herein. All
such prorations for each Partnership shall be netted against each other and the
net amount, if in favor of the Contributors, shall be paid in cash to each
Contributor (and each Other Contributor) in such Partnership with each such
Contributor (and each Other Contributor) to receive its "Allocable Share" of
such amount; or, if in favor of the OP, to the OP, in which case, each
Contributor (and each Other Contributor) shall pay its Allocable Share thereof.
As used in this Article 7, Allocable Share shall mean each Contributor's (and
Other Contributor's) pro rata share commensurate with its Partnership Interest
in the Partnership at Closing. At Closing, the following items of revenue and
expense shall be prorated as of 12:01 A.M. on the Closing Date:
A. Real estate taxes, personal property or use taxes and sewer
rents, on the basis of the best available estimates for such taxes and rents
that will be due and payable on the Hotel for the calendar year in which the
Closing occurs.
B. All utility costs and expenses and other costs and expenses of
operating the Hotel which are reasonably capable of proration, including, but
not limited to, all salaries, compensation, sick pay, vacation pay and other
accrued benefits of Hotel employees.
C. Amounts paid or payable under the service contracts and equipment
leases.
D. Rents under space leases and other revenues as and when
collected. If the Partnership receives any rents from tenants under space leases
after the Closing Date then such collections shall first be applied to rents
accruing on or after the Closing Date, and OP shall cause the Partnership to
remit the balance, if any, to the applicable Contributors to the extent any
pre-Closing Date rental obligation under such tenant's lease remains unpaid.
Upon request of the Contributors (at their expense), the Partnership will use
reasonable efforts to collect delinquent rents directly from a tenant on such
Contributors' behalf.
E. The Contributors will be charged with all interest to date of
Closing on any mortgage other than DFW South. With respect to DFW South,
interest thereon and all escrows held by lender shall be adjusted at Closing.
F. Rents due under any ground leases shall be prorated.
G. Guest, convention, room, food, beverage, and all other charges
and revenues for services rendered and the operation of all departments of the
Hotel, including, but not limited to, advance payments under booking agreements
for rooms, facilities and services of the Hotel and any other revenues, as and
when collected, provided, however, that food, room service and restaurant
revenue shall be read, measured (and tapes preserved)
<PAGE>
and apportioned as of 2:00 a.m. on the Closing Date. The final night's room
revenue (revenue from rooms occupied on the evening preceding the Closing Date)
less a sum equal to all room maid services with respect thereto shall be
allocated to the applicable Contributors. All cash, checks, and other funds, and
all other notes, security, accounts receivable and other evidence of
indebtedness located at the Hotel as of 2:00 a.m. on the Closing Date and
balances on deposit to the credit of the Partnership with banking institutions
are and shall be credited to the applicable Contributors (except for the guest
(tray) ledger for guests staying in the Hotel on the Closing Date which will be
paid for by the OP).
H. Fees and expenses for music, entertainment, trade association
dues, trade, newspaper and other periodical subscriptions, coin machine income,
and washroom and checkroom income.
I. The value of food and liquor inventory in unopened cases.
J. With respect to all prepaid rents and deposits, including but not
limited to, utility deposits, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services or
made in connection with the space leases or the guest bookings (collectively,
the "Deposits"), the OP shall be entitled to a credit for the amount of the
Deposits which do not remain in possession of the Partnership, and the
Partnership will remain liable for all of the post-Closing liability and
obligations, if any, with regard to such Deposits;
7.2 RECONCILIATION. If, after the prorations to be made pursuant to
--------------
7.1, (x) the sum of all cash and cash equivalents, investments, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by the Partnership, exceeds or is less than (y) the sum
of all accounts payable, accrued real estate taxes, accrued interest, other
accrued expenses and other liabilities generally recognized as current
liabilities owned by the Partnership, any excess amount shall be paid by the OP
to the Contributors (and Other Contributors) in such Partnership (based on their
Allocable Shares), or such Contributors (and Other Contributors) shall each pay
their Allocable Shares of any shortfall to the OP, as the case may be; provided,
however, that the Contributors (and the Other Contributors) in each Partnership
shall remain each responsible for their Allocable Shares of the payment of all
accounts payable and other pre-Closing liabilities of each Partnership relating
exclusively to periods prior to the Closing Date and each of the Contributors
(and the Other Contributors) in each Partnership shall be entitled to receive
their Allocable Shares of all accounts receivable relating exclusively to such
period, and no prorations will be made with respect thereto.
7.3 OTHER COSTS. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by the applicable Contributors. All sales, use and
other transfer taxes, if any, payable as a result of the contribution of the
Partnership Interests to the OP will be paid by the OP. The Contributors shall
be entitled to receive any rebates or refunds on taxes or other payments paid by
the Partnerships for periods prior to the Closing. The costs of Title Policies
and recordation of all instruments as well as all surveys, environmental
investigations, and the like shall be borne by the OP.
7.4 ESTIMATE AND FINAL RECONCILIATION. Prior to Closing, the
---------------------------------
Contributors and Partnership shall reasonably cooperate to make a preliminary
determination of the prorations required hereunder, and upon closing in escrow
pursuant to Section 5.2, all such adjustments and prorations shall be paid into
escrow based on those estimated numbers. After Closing, the Contributors (and
Other Contributors) in each Partnership shall reasonably cooperate to make a
final determination of such prorations in accordance with this Article 7. Upon
the final reconciliation of the prorations under this Article, but in any event
not later than thirty days following Closing, any party which owes another party
any sums hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay such sums shall survive Closing.
<PAGE>
7.5 CONTRACT HOTEL. The prorations, adjustments and costs in
--------------
connection with the acquisition of the Contract Hotel shall be allocated between
the Seller and the Acquired Hotel Owner in accordance with the Contract. At
Closing, the Contract Contributor shall be reimbursed in cash for the cost of
any deposit, title search, survey or any other out-of-pocket costs it incurred
in connection with the Contract.
<PAGE>
GRANTOR SIGNATURE PAGE
The undersigned, desiring to become the named Grantor to that certain
Option Agreement by and among American General Hospitality Operating
Partnership, L.P. and the Grantor, dated as of April 26, 1996 hereby becomes a
party to such Option Agreement. The undersigned agrees that this signature page
may be attached to any counterpart of said Option Agreement.
Signature line for Grantor:
/s/ Robert I. Machacek
----------------------------------
Name of Grantor
By: /s/ Robert I. Machacek
-------------------------------
Name:
Title: General Partner
Address of Grantor: 1501 San Pedro N.E.
-----------------------------------
Albuquerque N.M. 87110
-------------------------------
_______________________________
By the Grantor's execution of this Option
Agreement, the Grantor grants a Power of Attorney to certain
individuals and to the Operating Partnership hereunder pursuant to Article V.
<PAGE>
Exhibit 10.35
OPTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL HOSPITALITY CORPORATION
AND THE
AMERICAN GENERAL HOSPITALITY, INC. RETIREMENT SAVINGS PLAN
Dated as of April 26, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I: THE OPTION.......................................................... 1
1.1 Grant of Option..................................................... 1
1.2 Term and Exercise of Option......................................... 1
1.3 Acquisition Consideration........................................... 2
1.4 Lock-Up Agreement................................................... 2
1.5 Other Agreements.................................................... 2
1.6 Adjustments to Acquisition Consideration............................ 2
ARTICLE II: CLOSING PROCEDURES.................................................. 2
2.1 Contribution of Property Interests.................................. 2
2.2 Closing; Conditions to Obligations.................................. 2
2.3 Documents to Be Delivered at the Closing............................ 4
2.4 Cessation of Public Offering........................................ 5
2.5 Closing Costs....................................................... 6
2.6 Default............................................................. 6
2.7 Further Assurances.................................................. 6
ARTICLE III: REPRESENTATIONS, WARRANTIES
AND COVENANTS THE GRANTOR........................................ 6
3.1 Title to Interests.................................................. 6
3.2 Organization; Authority; No Conflicts............................... 7
3.3 Litigation.......................................................... 7
3.4 No Other Agreements................................................. 8
3.5 No Brokers.......................................................... 8
3.6 Investment Representations and Warranties........................... 8
3.7 Private Placement Memorandum........................................ 9
3.8 Covenant to Remedy Breaches......................................... 9
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY....................................... 10
4.1 Authority......................................................... 10
4.2 No Brokers........................................................ 10
4.3 Same Offer........................................................ 10
4.4 Grantor's Participation........................................... 10
ARTICLE V: POWER OF ATTORNEY................................................. 11
5.1 Grant of Power of Attorney........................................ 11
5.2 Limitation on Liability........................................... 12
5.3 Ratification; Third Party Reliance................................ 12
ARTICLE VI: DEFINED TERMS..................................................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE VII: MISCELLANEOUS..................................................... 14
7.1 Amendment......................................................... 14
7.2 Entire Agreement; Counterparts; Applicable Law.................... 14
7.3 Assignability..................................................... 14
7.4 Titles............................................................ 14
7.5 Third Party Beneficiary........................................... 14
7.6 Severability...................................................... 15
7.7 Equitable Remedies................................................ 15
7.8 Notices; Exercise of Option....................................... 15
7.9 Waiver of Rights; Consents with Respect to Partnership Interests.. 16
7.10 Confidentiality................................................... 17
7.11 Computation of Time............................................... 17
7.12 Survival.......................................................... 17
7.13 Time of the Essence............................................... 18
</TABLE>
Exhibits
A. Partnerships & Interests
B. Form of Lock-Up Agreement
C. Form of Registration Rights Agreement
D. Adjustment Provisions
Schedule 1.3A
Schedule 1.3B
Schedule 1.3C
Schedule 1.3D
Schedule 1.3E
The exhibits and/or schedules of Exhibit 10.35, set forth herein have not
been included as exhibits to the Registration Statement. The Registrant agrees
to furnish supplementally a copy of any such omitted schedule or exhibit upon
request.
<PAGE>
OPTION AGREEMENT
----------------
This Option Agreement (this "AGREEMENT") dated as of the 26th day of
April, 1996 by and among AMERICAN GENERAL HOSPITALITY CORPORATION, a Maryland
corporation (the "Company"), and AMERICAN GENERAL HOSPITALITY, INC. RETIREMENT
SAVINGS PLAN, a trust created under the laws of Texas (the "Grantor").
Capitalized Terms not otherwise defined shall have the meanings ascribed thereto
in Article VI.
R E C I T A L S:
- - - - - - - -
A. The Grantor owns direct or indirect interests in five
partnerships as described on Exhibit A (the "PARTNERSHIPS").
B. The Company desires to acquire through a contribution to capital
from the Grantor, and the Grantor desires to grant to the Company, an option to
acquire on the terms and conditions set forth herein, all interests owned by the
Grantor as set forth on Exhibit A and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnerships
and/or in the properties set forth opposite each such Partnership's name on
Exhibit A. (Each such property and all personal property related thereto or to
the operation thereof is hereinafter referred to as such Partnership's
"PROPERTY," and all of such direct or indirect interests of the Grantor in such
Partnership or Property, including, without limitation, the interests shown on
Exhibit A, are referred to collectively as the Grantor's "PROPERTY INTERESTS").
C. The Company desires to acquire the Property Interests in
connection with (i) its formation and qualification as a real estate investment
trust and (ii) the proposed initial public offering ("IPO") of shares of the
Company's common stock, no par value ("COMMON STOCK"). In connection with the
foregoing, the Company has formed the American General Hospitality Operating
Partnership, L.P., an indirectly wholly owned Delaware limited partnership (the
"OPERATING PARTNERSHIP") to acquire through contributions to capital the direct
or indirect interests of others in the Partnerships or Property and other direct
or indirect interests in other partnerships or properties.
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Company to the Grantor, the mutual covenants and conditions set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Grantor agree as follows:
ARTICLE I: THE OPTION
----------
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
---------------
Company the right and option (the "OPTION") to acquire through a contribution to
capital all the Grantor's right, title and interest in the Grantor's Property
Interests on the terms and conditions set forth herein. The Grantor shall take
all reasonable action necessary to obtain assignments of limited or general
partner interests, as the case may be ("Assigned Interests"), in the
Partnerships listed in rows D and E on Exhibit A, in proportion to the Grantor's
direct and/or indirect interests in the partnerships previously holding such
Assigned Interests.
1.2 Term and Exercise of Option. The Option may be exercised by the
---------------------------
Company at any time from and after the date hereof through 5:00 p.m. on the
earlier of (i) October 31, 1996 or (ii) the
<PAGE>
Cessation Date (the earlier of such dates, the "OPTION TERMINATION DATE");
provided, that if on the Option Termination Date the Company or the Grantor is
prohibited by applicable law, or the Company or the Grantor is subject to a
stay, order, injunction, or similar limitation or any pending or threatened
action or proceeding to enjoin, restrain, prohibit or assess substantial damages
in respect of the exercise by the Company of the Option, then the Option may be
exercised by the Company during the 10 business day period commencing on the
first business day following the removal of each such prohibition, stay, order,
injunction, action, proceeding or similar limitation in effect at that time.
Subject to the foregoing, if the Company does not exercise the Option by the
Option Termination Date, the Option shall be deemed terminated and shall be of
no further force or effect and the Grantor shall have no further obligations
hereunder.
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
-------------------------
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Property Interest, shall be determined in accordance with
Schedules 1.3A, 1.3B, 1.3C, 1.3D and 1.3E, as the case may be, prior to any
adjustments pursuant to Section 1.6. The Acquisition Consideration shall be
paid in shares of Common Stock (the "GRANTOR'S SHARES"). With respect to each
Property, the Acquisition Consideration will be allocated 95% to buildings,
fixtures and other improvements and 5% to personal property.
1.4 Lock-Up Agreement. The Grantor's Shares to be issued to the
-----------------
Grantor hereunder shall be subject to a Lock-Up Agreement to be executed at
Closing by the Company and the Grantor, substantially in the form attached as
Exhibit B, whereby the Grantor will not be permitted to transfer such shares for
one year after Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to Closing, the Company, the
----------------
Grantor and the other parties thereto shall enter into a Registration Rights
Agreement, as described in Section 5.1(a) and substantially in the form attached
hereto as Exhibit C.
1.6 Adjustments to Acquisition Consideration. At Closing, with
----------------------------------------
respect to the Grantor and each Partnership, items of revenue and expense shall
be prorated as of 12:01 A.M. on the Closing Date for each Partnership in
accordance with provisions substantially in the form on Exhibit D attached
hereto. For purposes of this Section 1.6 and Exhibit D, each Grantor shall be
considered an "Other Contributor" within the meaning of Exhibit D and agrees to
be bound by Exhibit D and fulfill all obligations thereunder, including the
obligation to make payments prescribed thereunder, if any.
ARTICLE II: CLOSING PROCEDURES
------------------
2.1 Contribution of Property Interests. Upon the Company's exercise
----------------------------------
of the Option, the Grantor shall, in accordance with Section 2.2 hereof,
transfer, assign, and convey to the Company and the Company shall accept as a
contribution to capital from the Grantor, all right, title and interest in the
Grantor's Property Interests, free and clear of all Encumbrances in exchange for
the Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations.
----------------------------------
(a) The Company shall exercise the Option by delivering to the
Grantor a notice (the "OPTION NOTICE"), which notice shall state (i) the date
(the "CLOSING DATE") of the closing of the
-2-
<PAGE>
transaction contemplated by Section 2.1 (the "CLOSING"), which date shall be no
more than 30 days following the date of the Option Notice, and (ii) if the
Acquisition Consideration will be less than the total amount set forth in
Exhibit A, the amount of the Acquisition Consideration. The Closing shall be
held within such 30 day period at the offices of Battle Fowler, LLP, 75 East
55th Street, New York, New York or at such other place to be determined by the
Company in its sole discretion. Following delivery of an Option Notice, the
Company and Grantor will at or prior to the Closing execute and deliver all
closing documents (the "CLOSING DOCUMENTS") required by the Company pursuant to
Section 2.3 and, pending the Closing, deposit such Closing Documents in escrow
with Battle Fowler, LLP, as escrow agent of the Company (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the IPO
(the "IPO CLOSING"); provided, that the IPO Closing shall be deemed to have
occurred only if that portion of the net proceeds from the IPO which is to be
contributed to the Operating Partnership by the Company is sufficient, as
determined by the Company in its reasonable discretion, to enable the Operating
Partnership to apply such portion of the net proceeds to acquire such other
properties or interests, to repay principal, interest and other amounts due with
respect to indebtedness and to meet such other obligations as may be described
in the Registration Statement on Form S-11 prepared and filed in connection with
the IPO, as the same shall be in effect on the day of the IPO Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Company shall cause to be delivered to the Escrow
Agent, a Common Stock certificate, representing the number of Grantor's Shares
to be received by the Grantor pursuant to Section 1.3 (the "GRANTOR STOCK
CERTIFICATE"); and
(ii) upon receipt of the consideration set forth in clause
(i) above, the Escrow Agent will release the Closing Documents to the Company
and deliver to the Grantor the Grantor Stock Certificates.
(d) Notwithstanding any other provision of this Agreement, the
Company may, in its sole discretion, elect not to consummate the contribution of
all or any portion of the Property Interests of the Grantor as follows:
(i) in the event that the Grantor either identifies in
its Assignment delivered pursuant to Section 2.3(a) a breach of or other
exception with respect to any of the representations, warranties or covenants
contained in Article III or has otherwise breached this Agreement,
(ii) in the event the Grantor shall not have obtained the
Assigned Interests in the Partnerships listed in rows D and E on Exhibit A in
proportion to the Grantor's interests in the partnerships previously holding
such Assigned Interests, or
(iii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of the Grantor's
Property Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there
<PAGE>
shall be any action or proceeding instituted or threatened in writing to enjoin,
restrain, prohibit or assess substantial damages in respect of such
consummation,
then, the Company shall, in lieu of the delivery with respect to the Grantor
- ----
pursuant to clause (c)(i) above, either (A) in the case of an election not to
consummate the contribution of all of the Grantor's Property Interests, notify
the Escrow Agent of such election and direct the Escrow Agent to return the
Grantor's Closing Documents to the Grantor, or (B) in all other cases, equitably
adjust the delivery with respect to the Grantor pursuant to clause (c)(i) above
to reflect the portion of the Grantor's Property Interests with respect to which
the contribution is actually being consummated, which adjustment shall be
determined in the Company's reasonable discretion, and shall in all events be
binding upon the Grantor.
(e) Notwithstanding any other provision of this Agreement, the
Grantor may, in its sole discretion, elect not to consummate the contribution of
its Property Interests unless the following conditions have occurred: (i) its
trustees shall have received an opinion of an independent appraiser that the
value of the Acquisition Consideration is equal to or exceeds the value of the
Property Interests to be contributed by the Grantor to the Company; (ii) its
trustees shall have received an opinion from outside counsel that the
contribution of the plan's Property Interests does not constitute a "prohibited
transaction" within the meaning of Section 406 of the Employee Retirement Income
Security Act of 1974, as amended; and (iii) the Company has determined that the
IPO Closing has occurred, as referenced in Section 2.2(b) above.
(f) Except as the result of a default by the Grantor hereunder, if
the Closing does not occur within 30 days of the date of the Option Notice, then
neither the Company nor the Grantor shall have any obligations under the Closing
Documents, the Closing Documents shall be deemed null and void ab initio and the
-- ------
Company will direct the Escrow Agent to destroy the Closing Documents it holds.
This Agreement shall thereafter remain in effect and the Company may thereafter
exercise the Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
----------------------------------------
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed desirable or
necessary by the Company, and deliver to the Escrow Agent, in addition to any
other documents mentioned elsewhere herein, the following:
(a) An assignment of the Grantor's Property Interests (the
"ASSIGNMENT"), which assignment shall be in a form satisfactory to the Company,
shall contain a warranty of title that the Grantor owns the Grantor's Property
Interests free and clear of all Encumbrances (as defined below) and shall either
(i) reaffirm the accuracy of all representations and warranties and the
satisfaction of all covenants contained in Article III hereof, or (ii) if such
reaffirmation cannot be made, identify those representations, warranties and/or
covenants contained in Article III hereof (other than Section 3.8) which the
Grantor can no longer make or comply with, represent that the Grantor has used
reasonable efforts to take such actions as would permit the Grantor to make such
representations and warranties and/or to comply with such covenants, and
reaffirm the accuracy of all other representations and warranties and the
satisfaction of all other covenants contained in Article III hereof.
(b) If requested by the Company, a certificate certifying all
appropriate trust actions authorizing the execution, delivery and performance by
the Grantor of this Agreement and the Closing Documents.
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<PAGE>
(c) If requested by the Company, an opinion from counsel for the
Grantor in form and content reasonably acceptable to the Company substantially
to the effect that:
(i) the declaration of trust creating the Grantor is in
full force and effect and the Grantor had and has all applicable power and
authority to execute, deliver and perform this Agreement and the Closing
Documents;
(ii) the execution, delivery and performance of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not: (x) constitute a breach or a violation of the
Grantor's declaration of trust or, to the knowledge of such counsel, any
indenture, deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party or by
which it or its assets or properties are bound or affected, except for such
breach or violation as the Company has represented and warranted will be
waived or cured, or discharged or repaid prior to or contemporaneously with
the Closing; (y) to the knowledge of such counsel, constitute a violation
of any order, judgment or decree to which the Grantor is a party or by
which it or any of its assets or properties are bound or affected; or (z)
to the knowledge of such counsel, result in the creation of any lien,
charge or encumbrance upon any of the Grantor's assets or properties,
except for Permitted Pledges (as defined below); and
(iii) all applicable trust action necessary for the Grantor
to execute and deliver this Agreement and the Closing Documents and to
perform the transactions contemplated hereby and thereby has been taken and
that the same have been validly executed and delivered and are the valid
and binding obligations of the Grantor enforceable against it in accordance
with their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended. In the event the Grantor fails to provide such an affidavit, the
Company shall be entitled to withhold from the Acquisition Consideration and pay
to the Internal Revenue Service the sums required to be withheld pursuant to
FIRPTA (and the amount so withheld shall be paid by the Company to the Internal
Revenue Service, in order for the Company to comply with the provisions of
Section 1445 of the Internal Revenue Code of 1986 or successor similar
legislation, as the same may be amended hereafter).
(e) The Lock-up Agreement and the Registration Rights Agreement.
(f) Any other documents, agreements or instruments as the Company
shall reasonably request in order to assign, transfer and convey the Grantor's
Property Interests to the Company as a contribution to capital and to otherwise
effectuate the transactions contemplated hereby, including filings with any
applicable governmental jurisdiction in which the Company is required to file
its partnership documentation.
2.4 Cessation of Public Offering. If at any time the Board of
----------------------------
Directors of the Company determines in good faith to abandon the formation of
the Company or the IPO (the date of such determination being referred to as the
"CESSATION DATE"), the Company will so advise the Grantor in writing and
thereupon the parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 7.10).
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<PAGE>
2.5 Closing Costs. The Company agrees to pay all of the closing
-------------
costs, other than the Grantor's legal fees, arising from the contribution of the
Grantor's Property Interests to the Company pursuant to the exercise by the
Company of the Grantor's Option.
2.6 Default.
-------
(a) If after having exercised an Option, the Company fails to close
(including a failure due to the IPO Closing not having occurred), then the
Company will pay to the Grantor the sum of $100.00 as liquidated and agreed upon
damages. The parties acknowledge that it would be difficult, if not impossible,
to ascertain the actual measure of the Grantor's damages in the event of the
Company's default and the parties agree that $100.00 is a fair reflection of the
Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under
this Agreement, the Company shall be entitled to exercise against the Grantor
any and all remedies provided at law or in equity, including but not limited to,
the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
------------------
and deliver to the Company all such other and further instruments and documents
and take or cause to be taken all such other and further action as the Company
may reasonably request in order to effect the transaction contemplated by this
Agreement, including instruments or documents deemed necessary or desirable by
the Company to effect and evidence the contribution of the Grantor's Property
Interests to the Company in accordance with the terms of this Agreement.
ARTICLE III: REPRESENTATIONS, WARRANTIES
AND COVENANTS THE GRANTOR
---------------------------
As a material inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, the Grantor hereby makes
to the Company each of the representations and warranties set forth in this
Article III, which representations and warranties (unless otherwise noted) are
true as of the date hereof. As a condition to the Company's obligation to
consummate the contribution of the Grantor's Property Interests to the Company
after the exercise of the Grantor's Option, such representations and warranties
must be true as of the Closing Date.
3.1 Title to Interests. Except as set forth on Exhibit A, the
------------------
Grantor owns beneficially and of record, free and clear of any claim, lien,
pledge (except for pledges relating to the debt or equity financing of any
Property (any such pledge, a "PERMITTED PLEDGE")), voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, right of
assignment, purchase right or other rights of any nature whatsoever
(collectively, "ENCUMBRANCES"), and has full power and authority to convey free
and clear of any Encumbrances, its Property Interests and, upon delivery of an
Assignment by the Grantor conveying its Property Interests and delivery of the
Acquisition Consideration by the Company for such Property Interests as herein
provided, the Company will acquire as a contribution to capital good and valid
title thereto, free and clear of any Encumbrance, except Encumbrances created in
favor of the Company by the transaction contemplated hereby. The Grantor's
Property Interests representing an interest in a Partnership has been validly
issued and the Grantor has funded (or will fund before the same is past due) all
capital contributions and advances to the Partnership in which such Property
Interest represents an interest that are required to be funded or advanced prior
to the date hereof and the date of the Closing. There are no agreements,
instruments or understandings with respect to any
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<PAGE>
of the Grantor's Property Interests except, in the case of any Property Interest
constituting an interest in a Partnership, as set forth in the partnership
agreement of such Partnership. The Grantor has no interest, either direct or
indirect, in any of the Partnerships or Properties except for the Property
Interests identified on Exhibit A which are the subject of this Agreement. No
Permitted Pledge will be in existence as of the date of the Closing, and the
Grantor shall provide, at the Closing, such documentary evidence of the release
of any Permitted Pledge as the Company may reasonably request. In making the
representations in this Section 3.1 regarding the absence of Encumbrances, the
Grantor may assume that the consents and waivers of rights set forth in Section
7.9 hereof have been given by all partners of any Partnerships in which the
Grantor's Property Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. The declaration of trust
-------------------------------------
creating the Grantor is in full force and effect. The Grantor has full right,
authority, power and capacity: (i) to execute and deliver this Agreement, each
Closing Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement; (ii) to perform the transactions contemplated hereby and thereby; and
(iii) to transfer, assign, convey and deliver all of the Grantor's Property
Interests to the Company in accordance with this Agreement. All applicable
trust action necessary for the Grantor to execute and deliver this Agreement,
the Closing Documents and each other agreement, document and instrument executed
by or on behalf of the Grantor pursuant to this Agreement, and to perform the
transactions contemplated hereby and thereby, has been taken, or will be taken
prior to the Closing Date. This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of the
Grantor pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms. Except for any breaches,
violations or defaults which will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing, the execution, delivery and
performance of this Agreement, the Closing Documents and each other agreement,
document and instrument to be executed and delivered by or on behalf of the
Grantor: (x) does not and will not violate the Grantor's declaration of trust;
(y) does not and will not violate any foreign, federal, state, local or other
laws applicable to the Grantor or require the Grantor to obtain any approval,
consent or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and which does
not remain in effect; and (z) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement or any other agreement, contract, instrument, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which the Grantor is a party or by which the property of
the Grantor is bound or affected, or result in the creation of any Encumbrance
on any of the property or assets of any Partnership in which any Property
Interest of the Grantor represents an interest. In making the representations
set forth in this Section 3.2, the Grantor may assume (i) that the consents and
waivers of rights set forth in Section 7.9 hereof have been given by all
partners of Partnerships in which the Grantor's Property Interests represent
direct or indirect interests and (ii) that, for purposes of making such
representation as of the date hereof, any Permitted Pledge has been released.
3.3 Litigation. There is no litigation or proceeding, either
----------
judicial or administrative, pending or overtly threatened, affecting all or any
portion of the Grantor's Property Interests or the Grantor's ability to
consummate the transactions contemplated hereby. The Grantor knows of no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting all or any
portion of its Property Interests, which in any such case would impair the
Grantor's ability to enter into and perform all of its obligations under this
Agreement.
-7-
<PAGE>
3.4 No Other Agreements. The Grantor has made no agreement with, and
-------------------
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Grantor's Property Interests or restricting in any
way the Grantor's ability to contribute the Grantor's Property Interests to the
Company or to enter into any agreement with respect to the Grantor's Property
Interests. In making the representations set forth in this Section 3.4, the
Grantor may assume (i) that the consents and waivers of rights set forth in
Section 7.9 hereof have been given by all partners of the Partnerships in which
the Grantor's Property Interests represent direct or indirect interests and (ii)
that, for purposes of making such representations as of the date hereof, any
Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
----------
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Company to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
3.6 Investment Representations and Warranties.
-----------------------------------------
(a) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in connection
with the contribution of Property Interests to the Company (which Private
Placement Memorandum includes a draft Registration Statement on Form S-11
prepared in connection with the IPO), the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters (the "TAX
MATTERS SUMMARY"), and understands the risks of, and other considerations
relating to, an investment in the Common Stock. The Grantor, by reason of its
business and financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or advise it
with respect to its investment in the Common Stock, (i) has such knowledge,
sophistication and experience in financial and business matters and in making
investment decisions of this type that it is capable of evaluating the merits
and risks of and of making an informed investment decision with respect to an
investment in the Common Stock, (ii) is capable of protecting its own interest
or has engaged representatives or advisors to assist it in protecting its
interests and (iii) is capable of bearing the economic risk of such investment.
The Grantor is an "accredited investor" as defined in Rule 501 of the
regulations promulgated under the Securities Act. If the Grantor has retained
or retains a person to represent or advise it with respect to its investment in
the Common Stock, the Grantor will advise the Company of such retention and, at
the Company's request, the Grantor shall, prior to or at the Closing, (i)
acknowledge in writing such representation and (ii) cause such representative or
advisor to deliver a certificate to the Company containing such representations
as may be reasonably requested by the Company.
(b) The Grantor understands that an investment in the Company
involves substantial risks. The Grantor has been given the opportunity to make
a thorough investigation of the proposed activities of the Company and has been
furnished with materials relating to the Company and its proposed activities,
including, without limitation, the Private Placement Memorandum, the Partnership
Summary and the Tax Matters Summary. The Grantor has been afforded the
opportunity to obtain any additional information requested by it. The Grantor
has had an opportunity to ask questions of and receive answers from
representatives of the Company concerning the Company and its proposed
activities and the terms and conditions of an investment in the Common Stock.
The Grantor has relied and is making its investment decision based upon the
Private Placement Memorandum, the Partnership Summary, the Tax Matters Summary
and other written information provided to the Grantor by or on behalf of the
Company.
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<PAGE>
(c) The Common Stock to be issued to the Grantor at the Closing will
be acquired by the Grantor for its own account, for investment only and not with
a view to, or with any intention of, a distribution or resale thereof, in whole
or in part, or the grant of any participation therein. The Grantor was not
formed for the specific purpose of acquiring an interest in the Company.
(d) The Grantor acknowledges that (i) the Common Stock to be issued
to the Grantor at the Closing have not been registered under the Securities Act
or state securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws and
the certificates representing such Common Stock will bear a legend to such
effect, (ii) the Company's reliance on such exemptions is predicated in part on
the accuracy and completeness of the representations and warranties of the
Grantor contained herein, (iii) the Common Stock to be issued to the Grantor at
the Closing may not be resold or otherwise distributed unless registered under
the Securities Act and applicable state securities laws, or unless an exemption
from registration is available, (iv) there is no public market for the Common
Stock, and (v) the Company has no obligation or intention to register such
Common Stock under the Securities Act or any state securities laws or to take
any action that would make available any exemption from the registration
requirements of such laws, except as provided in the Registration Rights
Agreement (as defined below). The Grantor hereby acknowledges that because of
the restrictions on transfer or assignment of such Common Stock to be issued
hereunder which will be set forth in the Lock-up Agreement, the Grantor may have
to bear the economic risk of the investment commitment evidenced by this
Agreement and any Common Stock issued hereunder for an indefinite period of
time, although the Grantor will be afforded certain rights to have such Common
Stock registered under the Securities Act and applicable state securities laws
pursuant to the Registration Rights Agreement (as described in Section 5.1(a)).
(e) The address set forth on the signature page of the Agreement is
the address of the Grantor's principal place of business and the Grantor has no
present intention of becoming a resident of any country, state or jurisdiction
other than the country and state in which such principal place of business or
residence is sited.
3.7 Private Placement Memorandum. The Grantor understands and
----------------------------
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor. Without limiting the foregoing,
such changes may include the deletion (or addition) of one or more properties
expected to be acquired by the Company or the Operating Partnership and changes
in the amount of the indebtedness expected to be repaid with the proceeds of the
IPO. The Company shall not be obligated to obtain the Grantor's consent as a
result of such changes, although such changes could affect the nature and value
of the Grantor's investment in the Common Stock.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
---------------------------
reasonable efforts within its control (i) to prevent the breach of any
representation or warranty of the Grantor hereunder, (ii) to satisfy all
covenants of the Grantor hereunder and (iii) to promptly clear any breach of a
representation, warranty or covenant of the Grantor hereunder upon its learning
of same.
-9-
<PAGE>
ARTICLE IV: REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY
-------------------------------
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company hereby makes
to the Grantor each of the representations and warranties set forth in this
Article IV, which representations and warranties are true as of the date hereof.
As a condition to the Grantor's obligation to consummate the contribution of the
Grantor's Property Interests to the Company after exercise of the Grantor's
Option, such representations and warranties shall be true as of the date of the
Closing.
4.1 Authority. The Company is a corporation duly organized, validly
---------
existing and in good standing under the laws of the state of Maryland. The
Company has full right, authority, power and capacity: (i) to execute and
deliver this Agreement, each Closing Document to which it is a party and each
other agreement, document and instrument to be executed and delivered by or on
behalf of it pursuant to this Agreement; (ii) to perform the transactions
contemplated hereby and thereby; and (iii) to issue the Common Stock to the
Grantor pursuant to and in accordance with the terms of this Agreement. This
Agreement, each Closing Document to which the Company is a party and each
agreement, document and instrument executed and delivered by the Company
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Company, each
enforceable in accordance with its respective terms. The execution, delivery
and performance of this Agreement, each Closing Document to which the Company is
a party and each such agreement, document and instrument by the Company: (x)
does not and will not violate its charter or bylaws; (y) does not and will not
violate any foreign, federal, state, local or other laws applicable to the
Company or require the Company to obtain any approval, consent or waiver of, or
make any filing with, any person or authority (government or otherwise) that has
not been obtained or made and which does not remain in effect; and (z) does not
and will not result in a breach or a violation of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of, any
indenture, deed of trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award to which
the Company is a party or by which the property of the Company is bound or
affected.
4.2 No Brokers. The Company has not entered into, and covenants that
----------
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Grantor to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
4.3 Same Offer. The Grantor has been offered the opportunity to
----------
contribute its Property Interests to the Company on the same terms and
conditions as made by the Company or the Operating Partnership to other holders
of Property Interests or to the holders of direct or indirect interests in other
partnerships or properties.
4.4 Grantor's Participation. The Grantor's execution of this
-----------------------
Agreement is not essential to, or a condition of, formation of the Company or
completion of the IPO.
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ARTICLE V: POWER OF ATTORNEY
-----------------
5.1 Grant of Power of Attorney. The Grantor does hereby irrevocably
--------------------------
appoint Elizabeth Williams, with full power of substitution (such person or any
such successor acting in his, her or its capacity as attorney-in-fact pursuant
hereto, the "ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and
agent of the Grantor, to act in the name, place and stead of the Grantor:
(a) To enter into (i) the Registration Rights Agreement, which
provides the Grantor certain rights to have the shares of Common Stock
received by it pursuant to this Agreement registered under the Securities
Act, and (ii) the Lock-up Agreement.
(b) To take for the Grantor all steps deemed necessary or advisable
by the Company in connection with the IPO, including without limitation (i)
filing a registration statement and amendments thereto (the "REGISTRATION
STATEMENT") under the Securities Act which describes the benefit to be
received by the Grantor in connection with the formation of the Company and
the offering of the Company's Common Stock, (ii) distributing a preliminary
prospectus and prospectus regarding the offering of the Company's Common
Stock (the "PRELIMINARY PROSPECTUS" and "PROSPECTUS") which contain such
information as is deemed necessary or desirable to lawfully effect the IPO,
and (iii) to take such other steps as the Attorney-in-Fact may deem
necessary or advisable.
(c) To make, acknowledge, verify and file on behalf of the Grantor
applications, consents to service of process and such other undertakings or
reports as may be required by law with state commissioners or officers
administering state securities or Blue Sky laws and to take any other
action required to facilitate the exemption from registration of the Common
Stock and the qualification of the Common Stock under the securities or
Blue Sky laws of the jurisdictions in which the Common Stock is to be
offered.
(d) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions, certificates,
consents, letters and other writings (including without limitation the
Closing Documents, the Partnership Agreement, any other documents relating
to the contribution of the Grantor's Property Interests to the Company, and
any consents contemplated by Section 7.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to carry
out the transactions contemplated by this Agreement and the Closing
Documents as fully as could the Grantor if personally present and acting.
The Power of Attorney granted by the Grantor pursuant to this Article
V and all authority conferred hereby is granted and conferred subject to and in
consideration of the interest of the Company and is for the purpose of
completing the transactions contemplated by this Agreement. The Power of
Attorney of the Grantor granted hereby and all authority conferred hereby is
coupled with an interest and therefore shall be irrevocable and shall not be
terminated by any act of the Grantor or by operation of law, or by the
occurrence of any other event or events, including without limitation the
termination or liquidation of the trust, if, after the execution hereof, the
Grantor is liquidated or the trust terminated, or if any other such event or
events shall occur before the completion of the transactions contemplated by
this Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such liquidation, termination
or other event or events had not occurred and regardless of notice thereof. The
Grantor agrees that, at the request of the Company, it will promptly execute a
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<PAGE>
separate power of attorney on the same terms set forth in this Article V, such
execution to be witnessed and notarized.
5.2 Limitation on Liability. It is understood that the Attorney-in-
-----------------------
Fact assumes no responsibility or liability to any person by virtue of the Power
of Attorney granted by the Grantor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
formation of the Company, the contribution of the Property Interests to the
Company, the Registration Statement, the Prospectus or any Preliminary
Prospectus, nor for any aspect of the IPO, and it shall not be liable for any
error of judgment or for any act done or omitted or for any mistake of fact or
law except for its own gross negligence or bad faith. The Grantor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred or in part arising out of
or in connection with its acting as the Attorney-in-Fact under the Power of
Attorney created by the Grantor hereby, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or liability,
except to the extent such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. The Grantor agrees that the
Attorney-in-Fact may consult with counsel of its own choice (who may be counsel
for the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. It is understood that the
Attorney-in-Fact may, without breaching any express or implied obligation to the
Grantor hereunder, release, amend or modify any other Power of Attorney granted
by any other person under any related agreement.
5.3 Ratification; Third Party Reliance. The Grantor does hereby
----------------------------------
ratify and confirm all that the Attorney-in-Fact shall lawfully do or cause to
be done by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: DEFINED TERMS
-------------
"ACQUISITION CONSIDERATION" shall have the meaning set forth in
Section 1. 3 of this Agreement.
"AGREEMENT" shall have the meaning set forth in the Preamble of this
Agreement.
"ASSIGNMENT" shall have the meaning set forth in Section 2.3 of this
Agreement.
"ATTORNEY-IN-FACT" shall have the meaning set forth in Section 5.1 of
this Agreement.
"CESSATION DATE" shall have the meaning set forth in Section 2.4 of
this Agreement.
"CLOSING" shall have the meaning set forth in Section 2.2 of this
Agreement.
"CLOSING DOCUMENTS" shall have the meaning set forth in Section 2.2 of
this Agreement.
"COMMON STOCK" shall have the meaning set forth in Recital C of this
Agreement.
"COMPANY" shall have the meaning set forth in the Preamble of this
Agreement.
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<PAGE>
"CONSENTS" shall have the meaning set forth in Section 7.9 of this
Agreement.
"CONVEYANCE ACTION" shall have the meaning set forth in Section 7.9 of
this Agreement.
"ENCUMBRANCES" shall have the meaning set forth in Section 3.1 of this
Agreement.
"ESCROW AGENT" shall have the meaning set forth in Section 2.2 of this
Agreement.
"FIRPTA" shall have the meaning set forth in Section 2.3 of this
Agreement.
"GENERAL PARTNER" shall have the meaning set forth in Section 2.2 of
this Agreement.
"GRANTOR" shall have the meaning set forth in the Preamble of this
Agreement.
"IPO" shall have the meaning set forth in Recital C of this Agreement.
"IPO CLOSING" shall have the meaning set forth in Section 2.2 of this
Agreement.
"LOCK-UP AGREEMENT" shall have the meaning set forth in Section 1.4 of
this Agreement.
"OPERATING PARTNERSHIP" shall have the meaning set forth in Recital C
of this Agreement.
"OPTION" shall have the meaning set forth in Section 1.1 of this
Agreement.
"OPTION NOTICE" shall have the meaning set forth in Section 2.2 of
this Agreement.
"OPTION TERMINATION DATE" shall have the meaning set forth in Section
1.2 of this Agreement.
"PARTNERSHIP SUMMARY" shall have the meaning set forth in Section 3.6
of this Agreement.
"PARTNERSHIPS" shall have the meaning set forth in Recital B of this
Agreement.
"PERMITTED PLEDGE" shall have the meaning set forth in Section 3.1 of
this Agreement.
"PRELIMINARY PROSPECTUS" shall have the meaning set forth in Section
5.1 of this Agreement.
"PRIVATE PLACEMENT MEMORANDUM" shall have the meaning set forth in
Section 3.6 of this Agreement.
"PROPERTY" shall have the meaning set forth in Recital B of this
Agreement.
"PROPERTY INTERESTS" shall have the meaning set forth in Recital B of
this Agreement.
"PROSPECTUS" shall have the meaning set forth in Section 5.1 of this
Agreement.
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<PAGE>
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in
Section 1.5 of this Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
5.1 of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TAX MATTERS SUMMARY" shall have the meaning set forth in Section 3.6
of this Agreement.
"WAIVERS" shall have the meaning set forth in Section 7.9 of this
Agreement.
ARTICLE VII: MISCELLANEOUS
-------------
7.1 Amendment. Any amendment hereto shall be effective only against
---------
the party hereto who has acknowledged in writing its consent to such amendment.
No waiver of any provisions of this Agreement shall be valid unless in writing
and signed by the party against whom enforcement is sought.
7.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
----------------------------------------------
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, each of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
7.3 Assignability. This Agreement shall be binding upon, and shall
-------------
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
--------
however, that this Agreement may not be assigned (except by operation of law) by
the Company without the prior written consent of the Grantor, or by the Grantor
without the prior written consent of the Company, and any attempted assignment
without such consent shall be void and of no effect; provided, further, however,
--------
that the Company may assign all or any portion of this Agreement and the Closing
Documents and any agreement contemplated hereunder or thereunder to the Company
or the Operating Partnership or to an affiliate of the Company or the Operating
Partnership without the consent of the Grantors.
7.4 Titles. The titles and captions of the Articles, Sections and
------
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
7.5 Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Sections 5.3, 7.3 and 7.9 of
--------
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
-14-
<PAGE>
7.6 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and to execute any
amendment, consent or agreement deemed necessary or desirable by the Company to
effect such replacement.
7.7 Equitable Remedies. The parties hereto agree that irreparable
------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
7.8 Notices; Exercise of Option. Any notice or demand which must or
---------------------------
may be given under this Agreement (including the exercise by the Company of an
Option) or by law shall, except as otherwise provided, be in writing and shall
be deemed to have been given (i) when physically received by personal delivery
(which shall include the confirmed receipt of a telecopied facsimile
transmission), (ii) three (3) business days after being deposited in the United
States certified or registered mail, return receipt requested, postage prepaid,
or (iii) one (1) business day after being deposited with a nationally known
commercial courier service utilizing its next day delivery service (such as
Federal Express); addressed and delivered or telecopied in the case of a notice
to the Company to the following address and telecopy number:
American General Hospitality Corporation
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: President
Phone: (214) 352-3330
Telecopy: (214) 351-0568
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Peter M. Fass, Esq.
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
on the signature page of this Agreement.
-15-
<PAGE>
7.9 Waiver of Rights; Consents with Respect to Partnership Interests.
----------------------------------------------------------------
(a) The Grantor acknowledges that the agreements contained herein and
the transactions contemplated hereby and any actions taken in contemplation of
the transactions contemplated hereby (including the declaration of any dividend
or distribution in the form of Property Interests) may conflict with, and may
not have been contemplated by, the partnership agreement of one or more
Partnerships in which one or more of the Grantor's Property Interests represent
a direct or indirect interest or another agreement among one or more holders of
such Property Interests or one or more of the partners of any such partnership.
With respect to each Partnership in which a Property Interest of the Grantor
represents a direct or indirect interest, the Grantor expressly gives all
Consents (and any consent necessary to authorize the proper parties in interest
to give all Consents) and Waivers necessary or desirable to facilitate any
Conveyance Action relating to such partnership (as such terms are defined
below).
As used herein, the term "CONVEYANCE ACTION" means, with respect to
any Partnership having a direct or indirect ownership interest in any Property,
(i) the conveyance or agreement to convey by a partner thereof or by any holder
of an indirect interest therein (whether or not such partner or holder is the
Grantor hereunder) of its direct or indirect interest in such partnership to the
Company or the Operating Partnership or to another person in connection with the
formation of the Company and the Operating Partnership as described in the
Private Placement Memorandum, or (ii) the entering into by any such partner or
holder of any agreement relating to (x) the formation of the Company and the
Operating Partnership as described in the Private Placement Memorandum, (y) the
direct or indirect acquisition by the Company or the Operating Partnership of
any such direct or indirect interest, or (z) the transactions described in or
contemplated by the Private Placement Memorandum, or (iii) the taking by any
such partner or holder of any action necessary or desirable to facilitate any of
the foregoing, including, without limitation, the following (provided that the
same are taken in furtherance of the foregoing): any sale or distribution to any
person of a direct or indirect interest in such partnership, the entering into
any agreement with any person that grant to such person the right to purchase a
direct or indirect interest in such partnership, and the giving of the Consents
and Waivers contained in this Section 7.9 or consent or waivers similar thereto
in form or purpose. As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any of the
holders of interests therein or any other agreement relating thereto or referred
to therein (i) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other agreements so
that no provision thereof prohibit, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if interest therein are
transferred for cash), (ii) to admit the Company or the Operating Partnership
(or any affiliate thereof) in accordance with Section 7.3 above) as a substitute
limited partner or general partner of such partnership upon the Company's
acquisition of a limited or general partner interest therein, respectively, and
to adopt such amendment as is necessary or desirable to effect such admission,
(iii) to adopt any amendment as may be deemed desirable by the Company, either
simultaneously with or immediately prior to the acquisition of a limited or
general partnership interest therein, and (iv) to continue such partnership
following the transfer of interests therein to the Company or the Operating
Partnership (or any affiliate thereof in accordance with Section 7.3 above). As
used herein, the term "WAIVERS" means, with respect to a partnership of which a
Property Interest of the Grantor represents a direct or indirect interest, the
waiving of any and all rights that the Grantor may have with respect to, and (to
the extent possible) that any other person may have with respect to, or that may
accrue to the Grantor or other person upon the occurrence of, a Conveyance
Action relating to such partnership, including, but not limited to, the
following rights: rights of notice, rights to response
-16-
<PAGE>
periods, rights to purchase the direct or indirect interest of another partner
in such partnership or to sell the Grantor's or other person's direct or
indirect interest therein to another partner, rights to sell the Grantor's or
other person's direct or indirect interest therein at a price other than as
provided herein, or rights to prohibit, limit, invalidate, otherwise restrict or
impair any such Conveyance Action or to cause a termination or dissolution of
such partnership because of such Conveyance Action. The Grantor further agrees
that the Grantor will take no action to enjoin, or seek damages resulting from,
any Conveyance Action by any holder of a direct or indirect interest in a
partnership in which a Property Interest of the Grantor represents a direct or
indirect interest. The Waivers and Consent contained in this Section 7.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(b) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which a Property Interest of the Grantor represents directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law, (i)
to admit the Company or the Operating Partnership (or any affiliate thereof in
accordance with Section 7.3 above) as a substitute limited partner therein
and/or a substitute general partner therein if the Company or the Operating
Partnership (or any affiliate thereof in accordance with Section 7.3 above) by
the exercise of the Grantor's Option acquires a limited partnership interest or
a general partnership interest in such partnership, (ii) to redeem the interest
of any other partner therein who has not agreed to become a party to this
Agreement, (iii) to distribute to all partners thereof, including any partner
who has not agreed to become a party to this Agreement, the Common Stock and
cash (in such proportions to each partner therein as the general partner or
general partners thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of consideration
hereunder, that number of the shares of Common Stock that is in conformity with
the Acquisition Consideration of the Grantor provided for herein), and
thereafter, at the Company's option, to dissolve, and (iv) any such other
amendment as the Company may deem desirable, provided that such amendment occurs
simultaneously with or immediately prior to the acquisition of the applicable
partnership interest and, provided further, that such amendment will not result
in any increased liability on the part of the Grantor hereunder or under the
applicable partnership agreement. The Attorney-in-Fact may on behalf of the
Grantor execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
7.10 Confidentiality. The Grantor shall treat as strictly
---------------
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel to the Grantor
who agree to keep such terms confidential. Grantor shall treat all information
received from the Company or its counsel or advisors pertaining to the Company
confidential and shall disseminate same only to counsel to the Grantor who agree
to keep such information confidential.
7.11 Computation of Time. Any time period provided for herein which
-------------------
shall end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
7.12 Survival. It is the express intention and agreement of the
--------
parties hereto that the representations, warranties and covenants of the Grantor
set forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
-17-
<PAGE>
7.13 Time of the Essence. Time is of the essence with respect to all
-------------------
obligations of Grantor under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
THE COMPANY:
By: /s/ Bruce C. Wiles
------------------------------------------
Name: Bruce C. Wiles
Title: Executive Vice President
THE GRANTOR:
By: /s/ Tammy Waybourn
---------------------------------------------
Name: Tammy Waybourn
Title: Chairperson
Address and Telephone Number of Grantor:
3860 W Northwest HuySte 300
---------------------------------------------
Dallas. Tx 75220
---------------------------------------------
214-904-2038
---------------------------------------------
Jeffrey C. Brinda, Trustee
-18-
<PAGE>
EXHIBIT D
The Adjustment Provisions set forth below herein are substantially in the
form as Article ("Article 7") of that certain Contribution Agreement, among
Virtual Hospitality, Inc., Jackson-Shaw Partners No. 51, Ltd., 3005 Hotel
Associates, Ltd., 3100 Hotel Associates, L.P., Stephen D. Jorns, James E.
Sowell, Lewis W. Shaw, II, Kenneth W. Shaw, Monica Jorns, Bruce G. Wiles, 3860
Investors Joint Venture, and 282 Almaden Hotel Associates, L.P. and the
Operating Partnership, dated on or about the 26th day of April, 1996. It is the
intention of the parties that the adjustments contemplated in Section 1.6 shall
be made in accordance with Article 7.
ADJUSTMENT PROVISIONS
- ---------------------
7.1 APPORTIONMENTS. With respect to each Hotel, the Contribution
--------------
Value reflects a deduction for all mortgage indebtedness on the Hotels. With
respect to each Partnership, the following adjustments and apportionments shall
be made in cash among the Contributors in each Partnership, and the OP. It is
the parties' intention that the prorations and adjustments conform in substance
to those that would be made in a sale of real property as set forth herein. All
such prorations for each Partnership shall be netted against each other and the
net amount, if in favor of the Contributors, shall be paid in cash to each
Contributor (and each Other Contributor) in such Partnership with each such
Contributor (and each Other Contributor) to receive its "Allocable Share" of
such amount; or, if in favor of the OP, to the OP, in which case, each
Contributor (and each Other Contributor) shall pay its Allocable Share thereof.
As used in this Article 7, Allocable Share shall mean each Contributor's (and
Other Contributor's) pro rata share commensurate with its Partnership Interest
in the Partnership at Closing. At Closing, the following items of revenue and
expense shall be prorated as of 12:01 A.M. on the Closing Date:
A. Real estate taxes, personal property or use taxes and sewer
rents, on the basis of the best available estimates for such taxes and rents
that will be due and payable on the Hotel for the calendar year in which the
Closing occurs.
B. All utility costs and expenses and other costs and expenses of
operating the Hotel which are reasonably capable of proration, including, but
not limited to, all salaries, compensation, sick pay, vacation pay and other
accrued benefits of Hotel employees.
C. Amounts paid or payable under the service contracts and equipment
leases.
D. Rents under space leases and other revenues as and when
collected. If the Partnership receives any rents from tenants under space
leases after the Closing Date then such collections shall first be applied to
rents accruing on or after the Closing Date, and OP shall cause the Partnership
to remit the balance, if any, to the applicable Contributors to the extent any
pre-Closing Date rental obligation under such tenant's lease remains unpaid.
Upon request of the Contributors (at their expense), the Partnership will use
reasonable efforts to collect delinquent rents directly from a tenant on such
Contributors' behalf.
E. The Contributors will be charged with all interest to date of
Closing on any mortgage other than DFW South. With respect to DFW South,
interest thereon and all escrows held by lender shall be adjusted at Closing.
<PAGE>
F. Rents due under any ground leases shall be prorated.
G. Guest, convention, room, food, beverage, and all other charges
and revenues for services rendered and the operation of all departments of the
Hotel, including, but not limited to, advance payments under booking agreements
for rooms, facilities and services of the Hotel and any other revenues, as and
when collected, provided, however, that food, room service and restaurant
revenue shall be read, measured (and tapes preserved) and apportioned as of 2:00
a.m. on the Closing Date. The final night's room revenue (revenue from rooms
occupied on the evening preceding the Closing Date) less a sum equal to all room
maid services with respect thereto shall be allocated to the applicable
Contributors. All cash, checks, and other funds, and all other notes, security,
accounts receivable and other evidence of indebtedness located at the Hotel as
of 2:00 a.m. on the Closing Date and balances on deposit to the credit of the
Partnership with banking institutions are and shall be credited to the
applicable Contributors (except for the guest (tray) ledger for guests staying
in the Hotel on the Closing Date which will be paid for by the OP).
H. Fees and expenses for music, entertainment, trade association
dues, trade, newspaper and other periodical subscriptions, coin machine income,
and washroom and checkroom income.
I. The value of food and liquor inventory in unopened cases.
J. With respect to all prepaid rents and deposits, including but not
limited to, utility deposits, refundable security deposits and rental deposits,
and all other deposits for advance reservations, banquets or future services or
made in connection with the space leases or the guest bookings (collectively,
the "Deposits"), the OP shall be entitled to a credit for the amount of the
Deposits which do not remain in possession of the Partnership, and the
Partnership will remain liable for all of the post-Closing liability and
obligations, if any, with regard to such Deposits;
7.2 RECONCILIATION. If, after the prorations to be made pursuant to
--------------
7.1, (x) the sum of all cash and cash equivalents, investments, accounts
receivable, prepaid expenses and deposits and other assets generally recognized
as current assets owned by the Partnership, exceeds or is less than (y) the sum
of all accounts payable, accrued real estate taxes, accrued interest, other
accrued expenses and other liabilities generally recognized as current
liabilities owed by the Partnership, any excess amount shall be paid by the OP
to the Contributors (and Other Contributors) in such Partnership (based on their
Allocable Shares), or such Contributors (and Other Contributors) shall each pay
their Allocable Shares of any shortfall to the OP, as the case may be; provided,
however, that the Contributors (and the Other Contributors) in each Partnership
shall remain each responsible for their Allocable Shares of the payment of all
accounts payable and other pre-Closing liabilities of each Partnership relating
exclusively to periods prior to the Closing Date and each of the Contributors
(and the Other Contributors) in each Partnership shall be entitled to receive
their Allocable Shares of all accounts receivable relating exclusively to such
period, and no prorations will be made with respect thereto.
7.3 OTHER COSTS. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel prior to the
Closing Date will be paid by the applicable Contributors. All sales, use and
other transfer taxes, if any, payable as a result of the contribution of the
Partnership Interests to the OP will be paid by the OP. The Contributors shall
be entitled to receive any rebates or refunds on taxes or other payments paid by
the Partnerships for periods prior to the
<PAGE>
Closing. The costs of Title Policies and recordation of all instruments as well
as all surveys, environmental investigations, and the like shall be borne by the
OP.
7.4 ESTIMATE AND FINAL RECONCILIATION. Prior to Closing, the
---------------------------------
Contributors and Partnership shall reasonably cooperate to make a preliminary
determination of the prorations required hereunder, and upon closing in escrow
pursuant to Section 5.2, all such adjustments and prorations shall be paid into
escrow based on those estimated numbers. After Closing, the Contributors (and
Other Contributors) in each Partnership shall reasonably cooperate to make a
final determination of such prorations in accordance with this Article 7. Upon
the final reconciliation of the prorations under this Article, but in any event
not later than thirty days following Closing, any party which owes another party
any sums hereunder shall pay such party such sums within ten (10) days after the
reconciliation of such sums. The obligations to calculate such prorations, make
such reconciliations and pay such sums shall survive Closing.
7.5 CONTRACT HOTEL. The prorations, adjustments and costs in
--------------
connection with the acquisition of the Contract Hotel shall be allocated between
the Seller and the Acquired Hotel Owner in accordance with the Contract. At
Closing, the Contract Contributor shall be reimbursed in cash for the cost of
any deposit, title search, survey or any other out-of-pocket costs it incurred
in connection with the Contract.
<PAGE>
Schedule 1.3A
-------------
At the Closing, the Grantor, shall receive a number of shares of
Common Stock equal to (i) the value of the Equity Interest (as defined below)
(subject to adjustment as set forth below) divided by (ii) the mid-point of the
proposed per share offering prices (the "Mid-Point") set forth in the final red
herring prospectus (the "RED HERRING") included in the Company's Registration
Statement on Form S-11 prepared and filed in connection with the IPO (the
"REGISTRATION STATEMENT"). In the event the initial yield (the "Initial Yield")
(calculated by dividing the estimated annual distribution per share for the 12-
month period following the IPO, as set forth in the Red Herring, by the Mid-
Point) is a percentage greater or less than 8.0%, then the value of the Equity
Interest shall increase or decrease accordingly by an amount equal to the
Applicable Percentage (as defined below) times the resulting change in the value
of the Operating Partnership; provided, however, in no event shall the value of
the Equity Interest be reduced by more than 12.5%. As used herein, the "value
of the Operating Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Operating Partnership or the shareholders in
the Company (as the case may be) as set forth in the Red Herring, and dividing
that product by the Initial Yield. While the value of the Equity Interest may
never be reduced by more than 12.5%, there shall be no cap on increases in the
value of the Equity Interest as a result of any positive pricing adjustment
described in this Schedule 1.3A. For purposes of this Schedule 1.3A,
"Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus the
Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of the Grantor in MDV Limited Partnership shall be equal to the
product of the Grantor's Property Interest (as set forth for such limited
partnership in Exhibit A) multiplied by $1,949,270.
<PAGE>
Schedule 1.3B
-------------
At the Closing, the Grantor, shall receive a number of shares of
Common Stock equal to (i) the value of the Equity Interest (as defined below)
(subject to adjustment as set forth below) divided by (ii) the mid-point of the
proposed per share offering prices (the "Mid-Point") set forth in the final red
herring prospectus (the "RED HERRING") included in the Company's Registration
Statement on Form S-11 prepared and filed in connection with the IPO (the
"REGISTRATION STATEMENT"). In the event the initial yield (the "Initial Yield")
(calculated by dividing the estimated annual distribution per share for the 12-
month period following the IPO, as set forth in the Red Herring, by the Mid-
Point) is a percentage greater or less than 8.0%, then the value of the Equity
Interest shall increase or decrease accordingly by an amount equal to the
Applicable Percentage (as defined below) times the resulting change in the value
of the Operating Partnership; provided, however, in no event shall the value of
the Equity Interest be reduced by more than 12.5%. As used herein, the "value
of the Operating Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Operating Partnership or the shareholders in
the Company (as the case may be) as set forth in the Red Herring, and dividing
that product by the Initial Yield. While the value of the Equity Interest may
never be reduced by more than 12.5%, there shall be no cap on increases in the
value of the Equity Interest as a result of any positive pricing adjustment
described in this Schedule 1.3B. For purposes of this Schedule 1.3B,
"Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus the
Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of the Grantor in 455 Meadowlands Associates, Ltd. shall be
equal to the product of the Grantor's Property Interest (as set forth for such
limited partnership in Exhibit A) multiplied by $2,686,997.
<PAGE>
Schedule 1.3C
-------------
At the Closing, the Grantor, shall receive a number of shares of
Common Stock equal to (i) the value of the Equity Interest (as defined below)
(subject to adjustment as set forth below) divided by (ii) the mid-point of the
proposed per share offering prices (the "Mid-Point") set forth in the final red
herring prospectus (the "RED HERRING") included in the Company's Registration
Statement on Form S-11 prepared and filed in connection with the IPO (the
"REGISTRATION STATEMENT"). In the event the initial yield (the "Initial Yield")
(calculated by dividing the estimated annual distribution per share for the 12-
month period following the IPO, as set forth in the Red Herring, by the Mid-
Point) is a percentage greater or less than 8.0%, then the value of the Equity
Interest shall increase or decrease accordingly by an amount equal to the
Applicable Percentage (as defined below) times the resulting change in the value
of the Operating Partnership; provided, however, in no event shall the value of
the Equity Interest be reduced by more than 12.5%. As used herein, the "value
of the Operating Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Operating Partnership or the shareholders in
the Company (as the case may be) as set forth in the Red Herring, and dividing
that product by the Initial Yield. While the value of the Equity Interest may
never be reduced by more than 12.5%, there shall be no cap on increases in the
value of the Equity Interest as a result of any positive pricing adjustment
described in this Schedule 1.3C. For purposes of this Schedule 1.3C,
"Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus the
Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of the Grantor in Richmond Williamsburg Associates, Ltd. shall
be equal to the product of the Grantor's Property Interest (as set forth for
such limited partnership in Exhibit A) multiplied by $2,782,277.
<PAGE>
Schedule 1.3D
-------------
At the Closing, the Grantor, shall receive a number of shares of
Common Stock equal to (i) the value of the Equity Interest (as defined below)
(subject to adjustment as set forth below) divided by (ii) the mid-point of the
proposed per share offering prices (the "Mid-Point") set forth in the final red
herring prospectus (the "RED HERRING") included in the Company's Registration
Statement on Form S-11 prepared and filed in connection with the IPO (the
"REGISTRATION STATEMENT"). In the event the initial yield (the "Initial Yield")
(calculated by dividing the estimated annual distribution per share for the 12-
month period following the IPO, as set forth in the Red Herring, by the Mid-
Point) is a percentage greater or less than 8.0%, then the value of the Equity
Interest shall increase or decrease accordingly by an amount equal to the
Applicable Percentage (as defined below) times the resulting change in the value
of the Operating Partnership; provided, however, in no event shall the value of
the Equity Interest be reduced by more than 12.5%. As used herein, the "value
of the Operating Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Operating Partnership or the shareholders in
the Company (as the case may be) as set forth in the Red Herring, and dividing
that product by the Initial Yield. While the value of the Equity Interest may
never be reduced by more than 12.5%, there shall be no cap on increases in the
value of the Equity Interest as a result of any positive pricing adjustment
described in this Schedule 1.3D. For purposes of this Schedule 1.3D,
"Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus the
Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of the Grantor in 183 Hotel Associates, Ltd. shall be equal to
the product of the Grantor's Property Interest (as set forth for such limited
partnership in Exhibit A) multiplied by $3,424,046.
<PAGE>
Schedule 1.3E
-------------
At the Closing, the Grantor, shall receive a number of shares of
Common Stock equal to (i) the value of the Equity Interest (as defined below)
(subject to adjustment as set forth below) divided by (ii) the mid-point of the
proposed per share offering prices (the "Mid-Point") set forth in the final red
herring prospectus (the "RED HERRING") included in the Company's Registration
Statement on Form S-11 prepared and filed in connection with the IPO (the
"REGISTRATION STATEMENT"). In the event the initial yield (the "Initial Yield")
(calculated by dividing the estimated annual distribution per share for the 12-
month period following the IPO, as set forth in the Red Herring, by the Mid-
Point) is a percentage greater or less than 8.0%, then the value of the Equity
Interest shall increase or decrease accordingly by an amount equal to the
Applicable Percentage (as defined below) times the resulting change in the value
of the Operating Partnership; provided, however, in no event shall the value of
the Equity Interest be reduced by more than 12.5%. As used herein, the "value
of the Operating Partnership" shall be determined by taking the product of the
"Pro Forma Cash Available for Distribution" as defined in the Red Herring
("CAD") times the percentage of CAD (expressed as a decimal fraction) to be
distributed to the partners in the Operating Partnership or the shareholders in
the Company (as the case may be) as set forth in the Red Herring, and dividing
that product by the Initial Yield. While the value of the Equity Interest may
never be reduced by more than 12.5%, there shall be no cap on increases in the
value of the Equity Interest as a result of any positive pricing adjustment
described in this Schedule 1.3E. For purposes of this Schedule 1.3E,
"Applicable Percentage" shall mean the fraction (expressed as a decimal
fraction), the numerator of which is the value of the Equity Interests (plus the
Grantor's pro rata share of the mortgage debt) which are the subject of the
Agreement and the denominator of which is the value of all the assets acquired
by the Operating Partnership upon the consummation of the IPO as determined in
good faith by the Company. For purposes of this Agreement, the value of the
Equity Interests of the Grantor in 3100 Glendale Joint Venture shall be equal to
the product of the Grantor's Property Interest (as set forth for such limited
partnership in Exhibit A) multiplied by $1,480,771.
<PAGE>
EXHIBIT 99.1
CONSENT
The undersigned hereby consents to being named as a director of American
General Hospitality Corporation (the "Company") as described in the Company's
Registration Statement on Form S-11 to be filed with the Securities and Exchange
Commission.
MAY 2, 1996 /s/ H. CABOT LODGE, III
-----------------------
H. Cabot Lodge, III
<PAGE>
EXHIBIT 99.2
CONSENT
The undersigned hereby consents to being named as a director of American
General Hospitality Corporation (the "Company") as described in the Company's
Registration Statement on Form S-11 to be filed with the Securities and Exchange
Commission.
MAY 2, 1996 /s/ JAMES R. WORMS
-----------------------
James R. Worms
<PAGE>
EXHIBIT 99.3
CONSENT
The undersigned hereby consents to being named as a director of American
General Hospitality Corporation (the "Company") as described in the Company's
Registration Statement on Form S-11 to be filed with the Securities and Exchange
Commission.
MAY 2, 1996 /s/ JAMES B. MCCURRY
-----------------------
James B. McCurry
