<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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) 904-2000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
----------------
STEVEN D. JORNS
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
3860 WEST NORTHWEST HIGHWAY
SUITE 300
DALLAS, TEXAS 75220
(214) 904-2000
(NAME AND ADDRESS 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, 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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value per share....... 6,325,000 $23.75 $150,218,750 $45,520.83
</TABLE>
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(1) Includes up to 825,000 shares which may be purchased by the Underwriters
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices
of the Common Stock reported on the New York Stock Exchange, Inc. on
January 6, 1997.
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL, OR +
+THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 10, 1997
PROSPECTUS 5,500,000 Shares
[LOGO OF AMERICAN GENERAL HOSPITALITY CORPORATION
AMERICAN GENERAL Common Stock
HOSPITALITY CORPORATION
APPEARS HERE] --------
American General Hospitality Corporation (collectively with its subsidiaries,
the "Company") is a self-administered real estate investment trust ("REIT")
that owns sixteen hotels in eleven states containing an aggregate of 3,858
guest rooms (the "Current Hotels"). In addition, the Company has entered into
contracts to purchase four additional hotels containing an aggregate of 775
guest rooms (the "Proposed Acquisition Hotels"). The Company's portfolio
consists primarily of full-service hotels located in major metropolitan
markets. Ten of the Current Hotels are currently undergoing product and brand
repositioning that is expected to result in the conversion of such hotels to
leading franchise brands. To enable the Company to qualify as a REIT, the
Company leases the Current Hotels to AGH Leasing, L.P. (the "Lessee"), which is
owned in part by certain executive officers of the Company, under participating
leases that are designed to allow the Company to achieve substantial
participation in any future growth of revenues generated at the Current Hotels.
See "AGHI, the Lessee and Other Operators."
All the shares of Common Stock offered hereby are being offered by the
Company. The Company has paid regular quarterly distributions on the Common
Stock since its initial public offering in July 1996. The Common Stock is
listed on the New York Stock Exchange, Inc. (the "NYSE") under the symbol
"AGT." On January 9, 1997, the last reported sale price of the Common Stock on
the NYSE was $24 1/8 per share. See "Price Range of Common Stock and
Distribution Policy." The Company's Charter limits the number of shares of
Common Stock that may be owned by any single person or affiliated group. See
"Description of Capital Stock--Restrictions on Transfer."
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ----------------------------------------------
Total(3) $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses estimated at $1,900,000, which are payable by
the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 825,000 additional shares of Common Stock, on the same terms set forth
above, solely to cover over-allotments, if any. See "Underwriting." If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively.
--------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as, and if accepted by them, and
subject to certain conditions. It is expected that certificates for the Common
Stock offered hereby will be available for delivery on or about , 1997 at
the offices of Smith Barney Inc., 333 West 34th Street, New York, New York
10001.
--------
Smith Barney Inc.
Legg Mason Wood Walker
Incorporated
Montgomery Securities
Prudential Securities Incorporated
The Robinson-Humphrey Company, Inc.
, 1997
<PAGE>
[MAP, PHOTOGRAPHS AND CHART TO BE INCLUDED BY
AMENDMENT TO THIS REGISTRATION STATEMENT]
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 1
The Company.............................................................. 1
Risk Factors............................................................. 3
Developments Since the Initial Public Offering........................... 4
The Hotels............................................................... 7
AGHI, the Lessee and Other Operators..................................... 9
Formation Transactions and Benefits to Related Parties................... 10
Distribution Policy...................................................... 10
Tax Status............................................................... 10
The Offering............................................................. 11
Summary Financial Information............................................ 12
RISK FACTORS.............................................................. 16
Risk That Proposed Acquisition Hotels Will Not Be Acquired............... 16
Risks Associated with the Company's Acquisition of a Substantial Number
of Additional Hotels.................................................... 16
Conflicts of Interest.................................................... 16
Dependence on Lessee and Payments Under the Participating Leases......... 17
Lack of Control Over Operations of the Hotels............................ 18
Hotel Industry Risks..................................................... 18
Contingent Liabilities of Selling Partnerships........................... 19
Risks of Leverage; No Limits on Indebtedness............................. 19
Lack of Operating History or Revenues; History of Losses................. 20
Possible Adverse Effects of Shares Available for Future Sale Upon Market
Price of Common Stock................................................... 20
Competition for Management Time.......................................... 21
Real Estate Investment Risks............................................. 21
Tax Risks................................................................ 23
ERISA.................................................................... 25
Risks of Operating Hotels Under Franchise Agreements; Approval for Brand
Conversions............................................................. 25
Potential Anti-Takeover Effect of Certain Provisions of Maryland Law and
of the Company's Charter and Bylaws..................................... 25
Reliance on Board of Directors and Management............................ 27
Contingent Obligation to Construct Additional Hotel Rooms................ 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ability of Board to Change Policies...................................... 27
Adverse Effect of Increase in Market Interest Rates on Price of Common
Stock................................................................... 27
THE COMPANY............................................................... 28
General.................................................................. 28
Growth Strategies........................................................ 30
Acquisitions............................................................. 30
Development.............................................................. 31
Internal Growth.......................................................... 31
Other Operators.......................................................... 33
Financing Strategy....................................................... 34
The Operating Partnership................................................ 34
Developments Since the Initial Public Offering........................... 35
Acquired Hotels.......................................................... 35
Proposed Acquisition Hotels.............................................. 35
Wyndham Alliance......................................................... 37
Capital Improvements, Renovations and Brand Conversions.................. 37
USE OF PROCEEDS........................................................... 38
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION POLICY....................... 39
CAPITALIZATION............................................................ 40
SELECTED FINANCIAL INFORMATION............................................ 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 46
Overview................................................................. 46
Results of Operations.................................................... 47
Results of Operations of AGH Predecessor Hotels.......................... 48
The Lessee............................................................... 49
Liquidity and Capital Resources.......................................... 51
Renovations and Other Capital Improvements............................... 52
Inflation................................................................ 53
Seasonality.............................................................. 53
THE HOTEL INDUSTRY........................................................ 54
THE HOTELS................................................................ 55
Descriptions of Hotels................................................... 58
Initial Hotels........................................................... 58
Acquired Hotels.......................................................... 62
Proposed Acquisition Hotels.............................................. 64
The Participating Leases................................................. 66
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Management Agreements................................................. 76
Mortgage Indebtedness..................................................... 77
Line of Credit............................................................ 78
Ground Leases............................................................. 79
Franchise Conversions and Other Capital Improvements...................... 79
Franchise Agreements...................................................... 80
Employees................................................................. 83
Environmental Matters..................................................... 83
Options to Purchase and Rights of First Refusal........................... 83
Competition............................................................... 84
Insurance................................................................. 84
Legal Proceedings......................................................... 84
FORMATION TRANSACTIONS..................................................... 85
Benefits to the Officers and the Primary Contributors..................... 86
Valuation of Interests.................................................... 87
Transfer of Initial Hotels................................................ 87
MANAGEMENT................................................................. 88
Directors and Executive Officers.......................................... 88
Board of Directors and Committees......................................... 90
Compensation Committee Interlocks and Insider Participation............... 90
Executive Compensation.................................................... 90
Option Grants............................................................. 91
Employment Agreements..................................................... 91
Compensation of Directors................................................. 92
Stock Incentive Plans..................................................... 92
Limitation of Liability and Indemnification............................... 96
Indemnification Agreements................................................ 96
CERTAIN RELATIONSHIPS AND TRANSACTIONS..................................... 98
Relationships Among Officers and Directors................................ 98
Acquisition of Interests in Certain of the Initial Hotels................. 98
Shared Services and Office Space Agreement................................ 98
Options to Purchase and Rights of First Refusal........................... 98
Employment Agreements and Stock Incentive Plans........................... 99
Purchase of Personal Property............................................. 99
The Participating Leases.................................................. 99
The Management Agreements................................................. 99
The Beverage Corporations................................................. 100
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGHI, THE LESSEE AND OTHER OPERATORS..................................... 100
PRINCIPAL STOCKHOLDERS................................................... 103
DESCRIPTION OF CAPITAL STOCK............................................. 105
General................................................................. 105
Common Stock............................................................ 105
Power to Issue Additional Shares of Common Stock........................ 105
Restrictions on Transfer................................................ 106
Transfer Agent and Registrar............................................ 108
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND
BYLAWS.................................................................. 109
Number of Directors; Classification of the Board of Directors........... 109
Removal; Filling Vacancies.............................................. 109
Limitation of Liability and Indemnification............................. 109
Business Combinations................................................... 110
Control Share Acquisition Statute....................................... 111
Amendment to the Charter................................................ 111
Dissolution of the Company.............................................. 112
Advance Notice of Director Nominations and New Business................. 112
Meetings of Stockholders................................................ 112
Operations.............................................................. 112
Anti-Takeover Effect of Certain Provisions of Maryland Law and of the
Charter and Bylaws..................................................... 112
POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES............... 113
Investment Policies..................................................... 113
Financing............................................................... 113
Hotel Operator Policy................................................... 114
Conflict of Interest Policies........................................... 115
Policies with Respect to Other Activities............................... 116
Working Capital Reserves................................................ 116
SHARES AVAILABLE FOR FUTURE SALE......................................... 117
PARTNERSHIP AGREEMENT.................................................... 119
Management.............................................................. 119
Transferability of Interests............................................ 119
Capital Contribution.................................................... 119
Exchange Rights......................................................... 120
Registration Rights..................................................... 120
Operations.............................................................. 120
Distributions and Allocations........................................... 121
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Term...................................................................... 121
Tax Matters............................................................... 121
FEDERAL INCOME TAX CONSIDERATIONS.......................................... 122
Requirements for Qualification as a REIT.................................. 122
Failure to Qualify as a REIT.............................................. 130
Taxation of the Company................................................... 130
Taxation of Stockholders.................................................. 131
Tax-exempt Stockholders................................................... 132
Statement of Stock Ownership.............................................. 134
Tax Aspects of the Operating Partnership.................................. 134
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Income Taxation of the Operating Partnership and Its Partners............. 136
Other Tax Considerations.................................................. 137
UNDERWRITING............................................................... 140
EXPERTS.................................................................... 141
LEGAL MATTERS.............................................................. 141
ADDITIONAL INFORMATION..................................................... 141
GLOSSARY................................................................... 143
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
</TABLE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS
PROSPECTUS PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "RISK
FACTORS" AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF
THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE
THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus assumes (i) an
offering price (the "Offering Price") per share of Common Stock of $24 1/8
(which was the last reported sale price of Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") on January 9, 1997) and (ii) the Underwriters'
over-allotment option is not exercised. Unless the context requires otherwise,
the term "Company," as used herein, includes American General Hospitality
Corporation and its two wholly owned subsidiaries, AGH GP, Inc. ("AGH GP") and
AGH LP, Inc. ("AGH LP"), and American General Hospitality Operating
Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"). The term "Operating Partnership," unless the context requires
otherwise, includes subsidiaries of the Operating Partnership. The offering of
the Common Stock pursuant to this Prospectus is referred to herein as the
"Offering". See "Glossary" for the definitions of certain terms used in this
Prospectus. Investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
The Company is a self-administered real estate investment trust ("REIT") that
owns sixteen hotels containing an aggregate of 3,858 guest rooms located in
eleven states (the "Current Hotels"). The Current Hotels consist of fourteen
full-service hotels and two limited-service hotels located primarily in major
metropolitan markets. For the twelve months ended September 30, 1996, the
Current Hotels had a weighted average occupancy of 72.8% and a weighted average
daily room rate ("ADR") of $73.08. Ten of the Current Hotels are currently
undergoing significant renovations and refurbishments that will allow the
Company to convert such hotels to leading franchise brands and reposition them
for future revenue growth. Upon completion of the planned franchise
conversions, the Current Hotels will consist of three Wyndham Hotels(R), two
Crowne Plazas(R), three Hilton Hotels(R), one Courtyard by Marriott(R), three
Holiday Inn Selectssm (the premium Holiday Inn brand), one Holiday Inn(R), two
Hampton Inns(R) and one independent luxury hotel. However, there can be no
assurance that such brand conversions and hotel repositionings will occur as
planned.
Since the Company's initial public offering in July 1996 (the "IPO"), the
Company has acquired three hotels with an aggregate of 846 guest rooms (the
"Acquired Hotels") located in Orlando, Florida, Monterey, California and
Durham, North Carolina for an aggregate purchase price of approximately $58.0
million. In addition, the Company has entered into contracts to purchase four
additional hotels with an aggregate of 775 guest rooms located in Atlanta,
Georgia, Marietta, Georgia (located in metropolitan Atlanta), Arlington
Heights, Illinois (located in metropolitan Chicago) and Key Largo, Florida (the
"Proposed Acquisition Hotels," and together with the Current Hotels, the
"Hotels") for an aggregate purchase price of approximately $71.7 million. The
Company's purchase of each of the Proposed Acquisition Hotels is subject to the
satisfaction of various closing conditions and, therefore, no assurances can be
given that these acquisitions will be completed. See "Developments Since the
Initial Public Offering--Proposed Acquisition Hotels." If the Proposed
Acquisition Hotels are acquired, the Company will have invested since the IPO
approximately $129.7 million in hotel acquisitions, and will own 20 hotels
containing approximately 4,600 guest rooms. This represents a more than 50%
increase in the Company's portfolio since the IPO based upon the number of
guest rooms.
The Company was formed for the purpose of continuing and expanding the hotel
acquisition, development and repositioning operations of American General
Hospitality, Inc. and certain of its affiliates ("AGHI"). AGHI, which manages
the Current Hotels and will manage three of the Proposed Acquisition Hotels,
was founded in 1981 by Steven D. Jorns, the Company's Chairman of the Board,
Chief Executive Officer and President. According to Hotel & Motel Management, a
leading hotel trade publication, AGHI was the nation's fourth largest
independent hotel management company in 1995, based upon number of hotels under
management. The Company expects to continue to capitalize on AGHI's expertise
to achieve revenue growth at the Company's hotels. The Company does not have
any economic interest in AGHI's hotel management operations.
1
<PAGE>
In order to qualify as a REIT, the Company may not operate hotels. As a
result, the Company leases the Current Hotels and will lease the Proposed
Acquisition Hotels to AGH Leasing, L.P. (the "Lessee"), which is owned in part
by certain executive officers of the Company, pursuant to separate
participating leases (the "Participating Leases"). The Participating Leases are
designed to allow the Company to achieve substantial participation in any
future growth of revenues generated at the Current Hotels. The Lessee, in turn,
has entered into separate management agreements (the "Management Agreements")
with AGHI to operate the Current Hotels. See "AGHI, the Lessee and Other
Operators."
The Company intends to selectively seek other qualified hotel management
companies, in addition to the Lessee and AGHI, to lease and/or manage certain
of the Company's future hotel acquisitions. The Company intends to seek
operational relationships with independent hotel operators that, in the
Company's judgment, have demonstrated one or more of the following
characteristics: (i) certain unique knowledge of the hotel or the market in
which such hotel operates, (ii) a proven track record for implementing product,
brand and operational repositioning strategies, (iii) a significant national or
regional lodging industry reputation or (iv) substantial financial resources.
The Company believes that the use of a flexible lessee or manager structure,
coupled with the continued expansion of its brand and franchise relationships,
will result in additional acquisition opportunities for the Company. The Lessee
has advised the Company that it expects to retain Wyndham Hotel Corporation as
the manager of one of the Proposed Acquisition Hotels following its purchase by
the Company. See "The Company--Other Operators."
The Current Hotels have achieved significant growth in occupancy, ADR and
total revenue per available room ("REVPAR") as shown in the following chart:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- ----------------
1993(1) 1994(1) 1995(1) 1995(1) 1996(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Occupancy........................... 71.0% 71.9% 73.0% 75.5% 75.2%
ADR................................. $58.58 $62.06 $67.76 $67.57 $74.42
REVPAR.............................. $41.60 $44.65 $49.49 $51.00 $55.97
</TABLE>
- --------
(1) For comparative purposes, the total weighted average occupancy, ADR and
REVPAR for all U.S. hotels for each of the years ended December 31, 1993,
1994 and 1995 and for each of the nine months ended September 30, 1995 and
1996 were as follows: occupancy: 63.0%, 64.7%, 65.5%, 67.1% and 67.6%,
respectively; ADR: $61.93, $64.24, $67.34, $67.07 and $71.48, respectively;
and REVPAR: $39.01, $41.56, $44.11, $45.00 and $48.31, respectively. The
occupancy, ADR and REVPAR data for all U.S. hotels was provided by Smith
Travel Research, Inc. ("Smith Travel Research"). Smith Travel Research has
not provided any form of consultation, advice or counsel regarding any
aspect of, and is in no way associated with, the Offering.
The Company believes that the growth in occupancy, ADR and REVPAR at the
eight Current Hotels managed and operated by AGHI prior to and after the IPO
reflects the successful repositioning, renovation and marketing strategies of
AGHI as well as AGHI's superior management and operational capabilities. See
"The Hotels." The Company also attributes the successful operating performance
of the Current Hotels to the slowing in recent years of new hotel construction
nationally and improved economic conditions, both of which followed an extended
period of unprofitable industry performance during the late 1980's and early
1990's. The Company believes these improved lodging market fundamentals have
created a favorable environment for continued internal growth at the Current
Hotels and for hotel acquisitions. See "The Hotel Industry."
Management believes that the full-service hotel segment, in particular, has
potential for improved performance as the economy continues to grow and as
business and leisure travel activity increases. The Company continues to target
the full-service segment of the hotel industry due, in part, to its belief that
the
2
<PAGE>
approximate three- to five-year lead time from conception to completion of the
development of a full-service hotel represents a significant barrier to entry
that will lessen near-term competition resulting from a new supply of guest
rooms. Management also believes that the full-service segment of the market
continues to offer numerous opportunities to acquire hotels at attractive
multiples of cash flow, and at discounts to replacement value, including
underperforming hotels that may benefit from new management. The Company
believes that a substantial number of hotels meeting its investment criteria
are available at attractive prices in markets that the Company believes have
attractive economic characteristics. In order to enhance its acquisition
capabilities, the Company expects to continue to use borrowings available under
its revolving line of credit (the "Line of Credit") to purchase hotels. The
Company is currently negotiating with its Line of Credit lenders to increase
its borrowing limit from $100 million to $150 million. There can be no
assurance that the Company will successfully negotiate and consummate the
proposed amendment to the Line of Credit.
The Company's executive offices are located at 3860 West Northwest Highway,
Suite 300, Dallas, Texas 75220, and its telephone number is (214) 904-2000.
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK INVOLVES VARIOUS RISKS, AND
INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS,"
INCLUDING THE FOLLOWING:
. Risks that the purchase of one or more of the Proposed Acquisition Hotels
will not be consummated, which may adversely affect the Company's Cash
Available for Distribution (as defined in "Summary Financial
Information") after the Offering;
. Risks associated with the Company's rapid growth through the acquisition
and planned acquisition of a substantial number of additional hotels
since the IPO;
. Conflicts of interest between the Company and certain of its executive
officers who own interests in the Lessee and AGHI that could lead to
decisions that do not reflect solely the interests of the Company's
stockholders, including the possible failure by the Company to enforce
the terms and conditions of the Participating Leases against the Lessee,
even when such enforcement would be in the best interests of the Company;
. Dependence upon rent payments from the Lessee for substantially all of
the Company's income, including risks related to the ability of the
Lessee to make rent payments in an amount sufficient to permit the
Company to make distributions to its stockholders, the failure or delay
in making rent payments, the failure of the Lessee, AGHI and any third
party managers to effectively operate and manage the Hotels, the failure
to meet the obligations under the franchise licenses relating to the
franchised Hotels and the limited operating history of the Lessee as a
recently organized entity;
. Risks associated with the Company's lack of control over the operations
of the Hotels due to tax restrictions that prevent REITs from operating
hotels;
. Risks affecting the hotel industry generally, and the Company's hotels
specifically, including competition for guests, increases in operating
costs due to inflation and other factors, dependence on business and
commercial travelers and tourism, increases in energy costs and other
travel expenses, seasonality and the potential need for future capital
expenditures and for replacement of furniture, fixtures and equipment
("FF&E") in excess of budgeted amounts, all of which could have a
material adverse effect on Cash Available for Distribution;
. Risks affecting the real estate industry generally, including economic
and other conditions that may adversely affect real estate investments,
including the Hotels, and the Lessee's ability to make rent
3
<PAGE>
payments from the operations of the Hotels, relative illiquidity of real
estate, increases in taxes caused by increased assessed values or property
tax rates, and potential liabilities, including liabilities for unknown or
future environmental problems, all of which could have a material adverse
effect on Cash Available for Distribution;
. Risks associated with the fact that certain of the Hotels experienced net
losses in recent years; accordingly, there can be no assurance that the
Company will not experience net losses in the future;
. The risk that the planned renovations at certain of the Hotels may
adversely impact hotel revenues and rent payments due under the
Participating Leases, which, in turn, would have a material adverse
impact on Cash Available for Distribution;
. Tax risks, including taxation of the Company as a corporation if it fails
to qualify as a REIT and taxation of the Operating Partnership as a
corporation if it were deemed not to be a partnership, and the Company's
liability for federal and state taxes on its income in either such event,
which could have a material adverse effect on Cash Available for
Distribution;
. Risks normally associated with debt financing, including the fact that
there is no limitation on the amount of indebtedness that may be incurred
by the Company, except as imposed under the Line of Credit and may be
imposed by future lenders to the Company;
. The risk that sufficient sources of financing will not be available to
fund capital expenditure requirements, including planned renovations;
. Potential loss of franchise licenses relating to the franchised Hotels
and varying capital requirements of franchisors that may affect the
Company's return on its investment in the Hotels; and
. The restriction on ownership of shares of Common Stock intended to insure
compliance with certain requirements related to continued qualification
of the Company as a REIT, and certain other provisions in the Company's
Charter and Bylaws, all of which may have the effect of inhibiting a
change in control of the Company even when such a change of control could
be beneficial to the Company's stockholders.
DEVELOPMENTS SINCE THE INITIAL PUBLIC OFFERING
Set forth below is a summary of the significant developments involving the
Company since the IPO:
ACQUIRED HOTELS
The Company has invested approximately $58.0 million in the purchase of the
Acquired Hotels, representing a more than 28% increase in the Company's
portfolio since the IPO, based upon the number of guest rooms. Set forth below
are summary descriptions of the Acquired Hotels:
Days Inn Lake Buena Vista--Orlando, Florida
On October 22, 1996, the Company acquired the 490-room Days Inn Lake Buena
Vista for an aggregate purchase price of approximately $30.5 million that was
paid as follows: (i) $30.0 million in cash and (ii) $500,000 through the
issuance of 25,397 shares of restricted Common Stock. In connection with the
acquisition, the Company also paid an aggregate of approximately $2.4 million
to acquire a license and an association membership related to the hotel's
African safari theme (as described below) and for certain hotel related design
services. The Days Inn Lake Buena Vista was developed in 1985 and is located
approximately one-quarter mile south of Walt Disney World's Lake Buena Vista
entrance. The hotel contains 94 suites and approximately 4,200 square feet of
meeting and convention space. The Company has budgeted approximately $9.3
million to complete an extensive renovation program to upgrade the entire hotel
and to reposition the hotel as a Wyndham Hotel during the fourth quarter of
1997. The renovations will include the addition of approximately 9,000 square
feet of convention space and the redesign of the exterior of the hotel to
reflect an African safari theme that will tie in with Disney's Animal Kingdom
theme park, which is expected to open in 1998.
4
<PAGE>
Holiday Inn Resort Monterey--Monterey, California
On November 21, 1996, the Company acquired the 204-room Holiday Inn Resort
Monterey for approximately $15.5 million in cash. This hotel, which was
constructed in 1971, is located in the major tourist destination of Monterey,
California. The Company has budgeted approximately $3.9 million in renovations
to upgrade the hotel's guest rooms and public areas in order to reposition the
hotel as a Hilton Hotel during the fourth quarter of 1997.
Hilton Hotel-Durham--Durham, North Carolina
On January 8, 1997, the Company acquired the 152-room Hilton Hotel-Durham for
approximately $12.1 million in cash. The hotel, which was constructed in 1987,
is located in northwest Durham, one mile from Duke University, Duke Medical
Center and Research Triangle Park. During 1997 the Company expects to add 42
guest rooms to the hotel at an anticipated cost of approximately $2.4 million.
See "Risk Factors--Conflicts of Interest--Conflicts Related to Continued
Ownership of Other Hotel Properties."
PROPOSED ACQUISITION HOTELS
The Company has entered into contracts to purchase the Proposed Acquisition
Hotels for an aggregate purchase price of approximately $71.7 million. The
closing of the purchase of each of the Proposed Acquisition Hotels is subject
to satisfactory completion of various closing conditions. Accordingly, no
assurance can be given that the Company will acquire any or all of the Proposed
Acquisition Hotels. See "Risk Factors--Risk That Proposed Acquisition Hotels
Will Not Be Acquired." If the Proposed Acquisition Hotels are acquired, the
Company will have invested approximately $129.7 million in hotel acquisitions
since the IPO and will own a portfolio of 20 hotels containing approximately
4,600 guest rooms. This represents more than a 50% increase in the Company's
portfolio since the IPO based upon the number of guest rooms. Set forth below
are summary descriptions of the Proposed Acquisition Hotels:
Portfolio Purchase. In December 1996, the Company entered into a series of
agreements to acquire a portfolio of hotels, including the Four Points by
Sheraton, the Sheraton Key Largo and the French Quarter Suites Hotel for an
aggregate purchase price of approximately $59.1 million (the "Portfolio
Purchase"). The purchase price for the Portfolio Purchase will be payable as
follows: (i) approximately $49.5 million in cash and (ii) the assumption of
approximately $9.6 million of mortgage indebtedness secured by the French
Quarter Suites Hotel.
Four Points by Sheraton(R)--Marietta, Georgia
In December 1996, the Company entered into an agreement to acquire the Four
Points by Sheraton as part of the Portfolio Purchase. The Company has allocated
a cash purchase price of $17.0 million to the Four Points by Sheraton. The 219-
room hotel was built in 1985 and is located in Marietta, a northwestern suburb
of Atlanta. During 1997, the Company expects to invest approximately $2.8
million to renovate the hotel and to reposition the hotel to operate as a
Wyndham Garden Hotel(R). The Company expects to lease the hotel to the Lessee
which, in turn, is expected to retain Wyndham Hotel Corporation to manage the
hotel.
Sheraton Key Largo--Key Largo, Florida
In December 1996, the Company entered into an agreement to acquire the
Sheraton Key Largo as part of the Portfolio Purchase. The Company has allocated
a cash purchase price of $26.1 million to the Sheraton Key Largo. This hotel,
which is located on US Highway 1 in Key Largo, was developed in 1985 as a 200-
room resort complex situated on a private beach on the western coastline of the
Florida Keys. During 1997, the Company expects to invest approximately $3.0
million in improvements to the hotel and to reposition the hotel to operate as
a Westin Resort(R). The Company expects that the hotel will be leased to the
Lessee and will be managed by AGHI.
5
<PAGE>
French Quarter Suites(R) Hotel--Atlanta, Georgia
In December 1996, the Company entered into an agreement to acquire the French
Quarter Suites Hotel as part of the Portfolio Purchase. The Company has
allocated a $16.0 million purchase price to the French Quarter Suites Hotel
that will be payable as follows: (i) approximately $6.4 million in cash and
(ii) the assumption of approximately $9.6 million in mortgage indebtedness,
which bears interest at the rate of 9.75% per annum. The French Quarter Suites
Hotel is located in the Cumberland/Galleria area of northwest Atlanta. The
hotel was constructed in 1985 and contains a total of 155 guest rooms, of which
144 are suites. During 1997, the Company plans to invest approximately $2.8
million to complete an extensive renovation of the hotel and to reposition the
hotel to operate as a DoubleTree Guest Suites(R). The Company expects that the
hotel will be leased to the Lessee and will be managed by AGHI.
Radisson(R) Arlington Heights--Arlington Heights, Illinois
In January 1997, the Company entered into a contract to purchase the Radisson
Arlington Heights for approximately $11.5 million that will be payable as
follows: (i) $3.3 million in cash and (ii) the assumption of a one-year, $8.2
million first mortgage note, which bears interest at the rate of 7.5% per
annum. In addition, commencing on the earlier of the fourth year anniversary of
the completion of initial renovations of the hotel or January 1, 2003 (the
"Arlington Buyout Date"), the seller will have the right to receive a 25%
profits interest in the net cash flow and the net proceeds from certain capital
transactions generated at the hotel; provided however the Company has the
option to purchase the profits interest for an amount equal to 25% of the fair
market value of the hotel less the aggregate of $11.2 million plus the cost of
any additional expansion of the hotel at any time after the fourth anniversary
of the completion of the initial renovations of the hotel (subject to a 30-
month extension in certain circumstances). See "The Hotels--Proposed
Acquisition Hotels--Radisson Arlington Heights." This future cash flow right
was granted in order to compensate the sellers for the expected improvement in
the hotel's performance that is not fully reflected in the historical operating
results. The Radisson Arlington Heights, which is currently managed by AGHI, is
a 201-room full-service hotel constructed in 1981. It is located in suburban
northwest Chicago approximately 8.5 miles from O'Hare International Airport.
During 1997, the Company intends to complete a $6.0 million renovation of the
hotel, which is expected to include the addition of at least 31 guest rooms.
The Company expects that the hotel will be leased to the Lessee and will
continue to be managed by AGHI.
In addition to the Proposed Acquisition Hotels, as part of its ongoing
business, the Company continually engages in discussions with public and
private real estate entities regarding possible portfolio or single asset
acquisitions.
WYNDHAM ALLIANCE
On January 9, 1997, the Company entered into an agreement with Wyndham Hotel
Corporation and its affiliates (collectively, "Wyndham") relating to a
strategic alliance (the "Wyndham Alliance") between Wyndham and the Company.
Pursuant to the Wyndham Alliance, (i) in connection with the conversion of a
hotel owned by the Company to the Wyndham brand, Wyndham will acquire Common
Stock or OP Units (the "Alliance Securities"), in an amount equal to nine times
the estimated franchise fee payable to Wyndham during the first twelve months
such hotel is operated as a Wyndham brand, (ii) Wyndham will have the non-
exclusive right (but not the obligation) to franchise new hotel acquisitions
that the Company has determined should undergo a brand conversion and (iii) the
Company will be given the opportunity to bid on any hotels to be acquired by
Wyndham that it intends to sell to a REIT or any hotel with respect to which it
intends to enter into a sale or leaseback arrangement with a REIT
simultaneously with the hotel's purchase. Wyndham's purchase of interests in
the Company pursuant to the Wyndham Alliance is subject to the satisfaction of
certain conditions, including the consent of Wyndham's lenders, and will be at
a price per share of Common Stock or OP Unit equal to the weighted average
closing sale price of the Common Stock on the NYSE for the 30-trading days
6
<PAGE>
preceding the earlier of (i) Wyndham's offer to convert a Company hotel to a
Wyndham brand or (ii) the Company's announcement of its proposed acquisition of
the hotel that is ultimately converted to a Wyndham brand. Any such purchase of
Alliance Securities will occur within 30 days after a Company hotel is
converted to a Wyndham brand. No purchase of Alliance Securities will occur in
connection with the planned conversion of the Fred Harvey Albuquerque Airport
Hotel, the Days Inn Lake Buena Vista and the Four Points by Sheraton to Wyndham
brands. See "The Company--Wyndham Alliance." Within 30 days after the
conversion of the Le Baron Airport Hotel to a Wyndham Hotel brand, Wyndham has
agreed, subject to certain conditions, to purchase 112,969 shares of Common
Stock at a negotiated price of $22.13 per share of Common Stock. The Wyndham
Alliance will expire on December 31, 1999.
CAPITAL IMPROVEMENTS, RENOVATIONS AND BRAND CONVERSIONS
The Company believes a regular program of capital improvements, including
replacement and refurbishment of FF&E at the Current Hotels, as well as the
renovation and redevelopment of selected hotels, is essential to maintaining
the competitiveness of the hotels and maximizing revenue growth. Consistent
with this strategy, as of December 31, 1996, the Company had invested
approximately $10.7 million (an average of approximately $2,800 per guest room)
in capital improvements and renovations at the Current Hotels. The Company has
budgeted for 1997 approximately $33.3 million (an average of approximately
$8,600 per guest room) for additional renovations and capital improvements at
these hotels. In addition, the Company has budgeted approximately $14.5 million
(an average of approximately $19,000 per guest room) to be spent on renovations
and capital improvements at the four Proposed Acquisition Hotels during 1997.
The Company attempts to schedule renovations and improvements during
traditionally lower occupancy periods in an effort to minimize disruptions to
the hotel's operations. In addition, the Company has agreements in place that
will permit the Company to convert, by the first quarter of 1998, ten of the
Current Hotels to new brand affiliations with nationally recognized hotel
companies.
THE HOTELS
The sixteen Current Hotels are diversified by five different national hotel
brands and include fourteen full-service hotels and two limited-service hotels.
In addition, the Company plans to reposition, by the first quarter of 1998, ten
of the Current Hotels (six Holiday Inns, two Days Inns and two independent
hotels) through an upgrade and conversion into hotels that operate under the
Wyndham Hotel, Hilton Hotel, Crowne Plaza, Holiday Inn Select and Hampton Inn
brands. The Company believes that following such upgrading and conversion,
these hotels will experience increases in occupancy and room rates as a result
of the new franchisors' national brand recognition, reservation systems and
group sales organization. There can be no assurance that any or all of such
brand conversions and repositionings will occur as planned or that, if such
brand conversions and repositionings occur, the affected hotels will experience
occupancy and rate increases. The Company believes that the diversity of its
portfolio moderates the potential effects on the Company of regional economic
conditions or local market competition affecting specific hotel franchises,
hotel markets or price segments within the industry.
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The following table sets forth certain information with respect to the
Hotels, including their current brand affiliations. The Lessee is obligated to
pay to the Company annually the greater of fixed weekly base rent payments
("Base Rent") or monthly participating rent payments based on a percentage of
revenues (the "Participating Rent") at each of the Current Hotels.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------------------------
PRO
PRO FORMA
NUMBER YEAR PRO PRO FORMA LESSEE
OF BUILT/ FORMA FORMA PARTICI- NET
GUEST RENO- TOTAL BASE PATING INCOME REVPAR
HOTELS LOCATION ROOMS VATED(1) REVENUE RENT(2) RENT(2) (LOSS)(3) OCCUPANCY ADR (4)
------ -------- ------ --------- ------------ ----------- ----------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL
HOTELS:(5)
Holiday Inn
Dallas DFW
Airport
West(6)........ Bedford, TX 243 1974/1995 $5,286,322 $ 827,000 $ 1,542,313 $1,212 66.4% $65.49 $43.49
Courtyard by
Marriott-
Meadowlands(6).. Secaucus, NJ 165 1989/1994 4,886,754 946,000 1,859,318 1,461 79.0 89.38 70.62
Hampton Inn
Richmond
Airport(6)..... Richmond, VA 124 1987/1995 2,090,079 530,000 952,411 748 72.2 59.63 43.08
Hotel Maison de
Ville(6)....... New Orleans, LA 23 1788/1994 1,937,038 274,000 454,022 357 65.1 239.36 155.71
Hilton Hotel-
Toledo(6)...... Toledo, OH 213 1987/1994 5,978,346 832,000 1,314,825 1,033 69.5 63.45 44.08
Holiday Inn
Dallas DFW
Airport
South(6)(7)(8).. Irving, TX 409 1974/1995 12,028,402 2,410,000 4,049,496 3,184 75.4 74.78 56.42
Holiday Inn New
Orleans
International
Airport(6)(7)(8).. Kenner, LA 304 1973/1994 8,421,215 2,099,000 3,479,622 2,734 76.9 77.59 59.63
Days Inn Ocean
City(6)(8)(9).. Ocean City, MD 162 1989/1994 2,443,358 719,000 1,256,174 987 50.7 77.60 39.33
Holiday Inn
Select-
Madison(8)(10).. Madison, WI 227 1987/1995 7,971,543 1,597,000 2,856,621 2,245 77.3 81.01 62.65
Holiday Inn Park
Center
Plaza(8)(10)... San Jose, CA 231 1975/1990 7,930,550 1,091,000 2,273,039 1,786 78.0 83.29 64.99
Fred Harvey
Albuquerque
Airport
Hotel(8)(11)(12).. Albuquerque, NM 266 1972/1994 6,440,475 1,202,000 2,051,165 1,612 81.8 54.62 44.67
Le Baron Airport
Hotel(8)(12)... San Jose, CA 327 1973/1995 9,928,751 1,323,000 3,082,142 2,422 73.8 73.07 53.95
Holiday Inn
Mission
Valley(7)(8)... San Diego, CA 318 1970/1995 6,893,159 1,542,000 2,293,999 1,803 68.4 66.86 45.77
ACQUIRED HOTELS:
Days Inn Lake
Buena
Vista(8)(12)... Lake Buena Vista, FL 490 1985/1994 10,254,805 5,044,000 4,776,498 17,020 73.3 58.78 43.07
Holiday Inn
Resort
Monterey(8)(13).. Monterey, CA 204 1971/1996 6,104,448 1,279,000 1,937,791 6,905 65.5 100.08 65.50
Hilton Hotel-
Durham......... Durham, NC 152 1987/1995 5,235,689 1,133,000 1,578,567 5,625 74.8 81.80 61.20
----- ------------ ----------- ----------- ------- ---- ------ ------
Totals/Weighted
Average--All
Current
Hotels......... 3,858 $103,830,934 $22,848,000 $35,758,003 $51,134 72.8% $73.08 $53.18
----- ------------ ----------- ----------- ------- ---- ------ ------
PROPOSED
ACQUISITION
HOTELS:
Four Points by
Sheraton(8)(14).. Marietta, GA 219 1985/1996 $ 5,803,428 $ 1,350,000 $ 1,951,920 $ (236) 65.2% $81.41 $53.11
Sheraton Key
Largo(8)(15)... Key Largo, FL 200 1985/1996 9,236,761 2,184,000 2,613,727 (316) 77.3 116.70 90.19
French Quarter
Suites
Hotel(8)(16)... Atlanta, GA 155 1985/1996 5,669,531 1,373,000 2,345,137 (284) 73.6 107.00 78.70
Radisson
Arlington
Heights(6)..... Arlington Heights, IL 201 1981/1995 4,517,794 922,000 1,539,616 (298) 69.9 74.52 52.08
----- ------------ ----------- ----------- ------- ---- ------ ------
Totals/Weighted
Average--All
Proposed
Acquisition
Hotels......... 775 $ 25,227,514 $ 5,829,000 $ 8,450,400 $(1,134) 71.2% $94.86 $67.56
----- ------------ ----------- ----------- ------- ---- ------ ------
TOTALS/WEIGHTED
AVERAGES--ALL
HOTELS......... 4,633 $129,058,448 $28,677,000 $44,208,403 $50,000 72.5% $76.65 $55.58
===== ============ =========== =========== ======= ==== ====== ======
</TABLE>
8
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- --------
(1) Year renovated reflects the calendar year in which management deems that a
significant renovation was completed at that hotel.
(2) Represents Base Rent and Participating Rent calculated on a pro forma
basis by applying the rent provisions of the Participating Leases to the
pro forma revenues of the Hotels as if January 1, 1995 were the beginning
of the lease year. Under the terms of the Participating Leases, the Lessee
is obligated to pay the greater of Base Rent or Participating Rent. The
departmental revenue thresholds in certain of the Participating Lease
formulas adjust commencing January 1, 1997. See "The Hotels--The
Participating Leases."
(3) After pro forma management fees of approximately $1.9 million payable to
AGHI. Excludes fees forfeited by AGHI of approximately $1.4 million. Such
management fees are subordinate to Participating Lease payments to the
Company. See "Selected Financial Information," "AGHI, the Lessee and Other
Operators" and "The Hotels--The Management Agreements."
(4) REVPAR is determined by dividing total room revenue by total available
rooms for the applicable period.
(5) The "Initial Hotels" consist of the thirteen initial hotels acquired by
the Company in connection with the IPO (the "Initial Hotels").
(6) This hotel was operated and managed by AGHI prior to its acquisition by
the Company.
(7) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Holiday Inn Select brand.
(8) There can be no assurance that the brand conversion and repositioning of
this hotel will occur as planned.
(9) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Hampton Inn brand.
(10) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Crowne Plaza brand.
(11) This hotel is currently affiliated with Best Western(R).
(12) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Wyndham Hotel brand.
(13) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Hilton Hotel brand.
(14) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Wyndham Garden Hotel brand.
(15) The Company plans to reposition this hotel and convert it to a hotel that
operates under the Westin Resort brand.
(16) The Company plans to reposition this hotel and convert it to a hotel that
operates under the DoubleTree Guest Suites brand.
AGHI, THE LESSEE AND OTHER OPERATORS
American General Hospitality, Inc.
AGHI was founded in 1981 by Mr. Jorns, the Company's Chairman of the Board,
Chief Executive Officer and President. As of December 31, 1996, AGHI's
management portfolio consisted of 64 hotels containing an aggregate of
approximately 11,200 guest rooms. According to Hotel & Motel Management, a
leading hotel trade publication, AGHI was the nation's fourth largest
independent hotel management company in 1995 based upon the number of hotels
under management. AGHI has been involved in the repositioning of approximately
70 different hotels operated under various national franchise brands. Pursuant
to the terms of the Management Agreements, and for so long as AGHI is managing
hotels for the benefit of the Company, AGHI has agreed to limit its business
activities to managing and operating Company-owned hotels and hotels owned by
third parties. The Company has no economic interest in AGHI's hotel management
operations. The Lessee has contracted with AGHI to manage the Current Hotels
under an incentive compensation structure. The Lessee has advised the Company
that it will retain AGHI to manage three of the Proposed Acquisition Hotels
pursuant to the same incentive compensation structure. See "The Hotels--The
Management Agreements." Two executive officers of the Company, Mr. Jorns and
Bruce G. Wiles, the Company's Executive Vice President, own collectively
approximately 21.0% of AGHI. The remaining interests in AGHI are owned by
persons unaffiliated with the Company, who also hold interests in the Lessee.
See "AGHI, the Lessee and Other Operators" and "Formation Transactions."
AGH Leasing, L.P.
The Company leases each Current Hotel to the Lessee pursuant to a separate
Participating Lease and expects to lease each of the Proposed Acquisition
Hotels to the Lessee. In addition, selected hotels acquired by the Company in
the future may be leased by the Company to the Lessee. Messrs. Jorns and Wiles,
executive officers of the Company, and Kenneth E. Barr, the Company's Executive
Vice President and Chief Financial Officer, own collectively approximately
23.0% of the Lessee, and Mr. Jorns is currently the sole director of the
Lessee's corporate general partner. See "AGHI, the Lessee and Other Operators."
The remaining interests in the Lessee are owned by persons unaffiliated with
the Company, who also hold interests in AGHI. Each Participating Lease has a
term of twelve years from the inception of the lease, subject to earlier
termination upon the occurrence of certain events. Under the Participating
Leases, the Lessee is obligated to pay the Company fixed weekly Base
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<PAGE>
Rent and monthly Participating Rent based on a percentage of revenues. The
Company has structured the terms of the Participating Leases, the Management
Agreements and the related agreements in an effort to seek to align the
interests of AGHI and the Lessee with the interests of the Company's
stockholders. See "AGHI, the Lessee and Other Operators," "The Hotels--The
Participating Leases" and "--The Management Agreements."
Other Operators
The Company intends to selectively seek other qualified hotel brand
owner/operators and hotel management companies, in addition to the Lessee and
AGHI, to lease and/or manage certain of the Company's future hotel
acquisitions. The Company, with the consent of its Line of Credit lenders,
anticipates that it will lease hotels to independent hotel operators or, as a
condition to entering into a Participating Lease with the Lessee, will require
the Lessee to retain an independent hotel manager in connection with selected
acquisitions. The Company will seek lessee or management relationships with
hotel operating companies that have, in the Company's judgment, (i) certain
unique knowledge of the hotel or the market in which such hotel operates, (ii)
a proven track record for implementing product, brand and operational
repositioning strategies, (iii) a significant national or regional lodging
industry reputation or (iv) substantial financial resources. The Company
believes that the use of a flexible lessee or manager structure, coupled with
the continued expansion of its brand and franchise relationships, will result
in additional acquisition opportunities for the Company. The Lessee has advised
the Company that it expects to retain Wyndham Hotel Corporation to manage the
Company's Four Points by Sheraton hotel following its acquisition by the
Company. According to public filings, Wyndham Hotel Corporation is a NYSE
listed company which, as of December 31, 1996, operated or franchised in excess
of 75 hotels. See "The Company--Developments Since the Initial Public
Offering--Wyndham Alliance."
FORMATION TRANSACTIONS AND BENEFITS TO RELATED PARTIES
The Company was formed to own hotel properties and to continue and expand the
hotel acquisition, development and repositioning operations of AGHI. Certain
investors in the entities that owned the Initial Hotels acquired by the Company
in connection with the IPO, including members of management, received certain
benefits in connection with the IPO and the transactions described elsewhere in
this Prospectus under "Formation Transactions."
DISTRIBUTION POLICY
On December 18, 1996, the Board of Directors of the Company declared a
quarterly distribution of $0.4075 per share of Common Stock payable on January
30, 1997 to stockholders of record on December 30, 1996, which on an annualized
basis represents a distribution rate of $1.63 per share. While future
distributions paid by the Company will be at the discretion of the Board of
Directors of the Company and will depend on the actual cash flow of the
Company, its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and such other factors as the Board of Directors may deem
relevant, it is the present intention of the Company to pay regular quarterly
distributions. See "Tax Status" below and "Price Range of Common Stock and
Distribution Policy."
TAX STATUS
The Company will elect to be taxed as a REIT under Sections 856 through 860
of the Code, commencing with its taxable year ending December 31, 1996. If the
Company qualifies for taxation as a REIT, the Company (subject to certain
exceptions) will not be subject to federal income taxation at the corporate
level on its taxable income that is distributed to the stockholders of the
Company. A REIT is subject to a number of organizational
10
<PAGE>
and operational requirements, including a requirement that it currently
distribute at least 95.0% of its annual taxable income. Failure to qualify as a
REIT would render the Company subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates, and
distributions to the stockholders in any such year would not be deductible by
the Company. Although the Company has not requested a ruling from the Internal
Revenue Service (the "IRS") as to its REIT status, the Company has received the
opinion of its legal counsel that the Company qualifies for taxation as a REIT,
which opinion is based on certain assumptions and representations and is not
binding on the IRS or any court. Even if the Company qualifies for taxation as
a REIT, the Company may be subject to certain federal, state and local taxes on
its income and property. In connection with the Company's election to be taxed
as a REIT, the Company's Charter imposes restrictions on the transfer of shares
of Common Stock. The Company has adopted the calendar year as its taxable year.
See "Risk Factors--Tax Risks" and "--Potential Anti-Takeover Effect of Certain
Provisions of Maryland Law and of the Company's Charter and Bylaws--Ownership
Limitation," "Description of Capital Stock--Restrictions on Transfer," and
"Federal Income Tax Considerations--Taxation of the Company."
THE OFFERING
All of the shares of Common Stock offered hereby are being sold by the
Company. None of the Company's stockholders are selling any shares of Common
Stock in the Offering.
<TABLE>
<S> <C>
Common Stock offered hereby............................... 5,500,000 shares
Common Stock to be outstanding after the Offering......... 15,685,837 shares(1)
Use of Proceeds........................................... To reduce the amounts outstanding under the Line of
Credit, to pay fees and expenses incurred in connection
with the expected expansion of the Company's
borrowing limit under the Line of Credit, to pay a
substantial portion of the cash part of the purchase
price of the Proposed Acquisition Hotels and for
general corporate and working capital purposes. See
"Use of Proceeds."
NYSE symbol............................................... AGT
</TABLE>
- --------
(1) Includes (i) 1,896,996 shares of Common Stock to be issuable at the
Company's option upon the exchange of OP Units issued in the Formation
Transactions (other than to AGH GP and AGH LP), (ii) 162,405 shares of
restricted Common Stock issued in connection with the acquisition of
certain Hotels, (iii) 50,000 shares of restricted Common Stock, of which
5,000 were vested as of that date, granted to the Company's executive
officers as stock awards and (iv) 1,436 shares of restricted Common Stock
issued on October 1, 1996 to certain of the Company's directors under the
American General Hospitality Corporation Non-Employee Directors' Incentive
Plan (the "Directors' Plan"). Excludes 850,000 reserved but unissued shares
of Common Stock under the American General Hospitality Corporation 1996
Incentive Plan (the "1996 Plan"), including 360,000 shares as to which
options were then outstanding, and 98,564 reserved but unissued shares of
Common Stock under the Directors' Plan, including 40,000 shares as to which
options were then outstanding. See "Management--Stock Incentive Plans,"
"Formation Transactions" and "Partnership Agreement--Exchange Rights."
11
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following tables set forth summary historical and pro forma consolidated
financial data for the Company and summary historical and pro forma financial
data for the Lessee. This financial information should be read in conjunction
with the financial statements and notes thereto that are contained elsewhere in
this Prospectus. The pro forma statements of operations and other data are
presented as if the IPO and related Formation Transactions, the acquisition of
all Hotels and the consummation of the Offering and the application of the net
proceeds therefrom had occurred on January 1, 1995 and therefore incorporate
certain assumptions that are included in the notes to the Pro Forma Statements
of Operations included elsewhere in the Prospectus. The pro forma balance sheet
data is presented as if the acquisition of the Acquired Hotels and the Proposed
Acquisition Hotels and the consummation of the Offering and the application of
the net proceeds therefrom had occurred on September 30, 1996. The pro forma
statements of operations do not include interest income on the pro forma cash
and cash equivalents in accordance with the rules and regulations of the
Securities and Exchange Commission.
AMERICAN GENERAL HOSPITALITY CORPORATION
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA (1)
------------------------------------------------------
HISTORICAL TWELVE MONTHS NINE MONTHS NINE MONTHS
JULY 31, 1996 YEAR ENDED ENDED ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 1996 1995 1996
------------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Participating Lease
revenue(2)............. $5,218,526 $39,969,440 $44,655,229 $30,470,441 $35,156,230
Interest income......... 32,227 31,500 31,500 23,625 23,625
---------- ----------- ----------- ----------- -----------
Total revenue........ 5,250,753 40,000,940 44,686,729 30,494,066 35,179,855
---------- ----------- ----------- ----------- -----------
Depreciation............ 1,008,874 11,167,283 9,847,421 8,375,461 7,321,321
Amortization............ 116,572 1,075,459 1,075,459 805,032 805,032
Real estate and personal
property taxes and
property insurance..... 511,115 4,527,256 4,727,617 3,283,773 3,434,043
General and
administrative(3)...... 194,226 1,700,000 1,700,000 1,275,000 1,275,000
Ground lease expense.... 218,000 881,217 962,993 660,913 722,245
Amortization of unearned
officers'
compensation(4)........ 14,792 88,750 88,750 66,563 66,563
Interest expense........ 347,622 3,119,220 3,119,220 2,334,447 2,334,447
---------- ----------- ----------- ----------- -----------
Total expenses....... 2,411,201 22,559,185 21,521,460 16,801,189 15,958,651
---------- ----------- ----------- ----------- -----------
Income before minority
interest............... 2,839,552 17,441,755 23,165,269 13,692,877 19,221,204
Minority interest(5).... 545,102 2,109,544 2,801,792 1,656,125 2,324,765
---------- ----------- ----------- ----------- -----------
Net income applicable to
common stockholders.... $2,294,450 $15,332,211 $20,363,477 $12,036,752 $16,896,439
========== =========== =========== =========== ===========
Net income per common
share.................. $ 0.29 $ 1.11 $ 1.48 $ 0.87 $ 1.23
========== =========== =========== =========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 13,787,405 13,787,405 13,787,405 13,787,405
========== =========== =========== =========== ===========
</TABLE>
See notes on page 14.
12
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 4,186,235 8,853,733
Investment in hotel properties,
net.............................. $175,613,813 $308,547,568
Total assets...................... $187,860,092 $327,853,345
Debt.............................. $ 19,297,508 $ 37,076,073
Minority interest in Operating
Partnership...................... $ 29,303,428 $ 33,963,794
Stockholders' equity.............. $127,399,398 $246,728,720
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA(1)
---------------------------------------------------------
HISTORICAL TWELVE MONTHS NINE MONTHS NINE MONTHS
JULY 31, 1996 YEAR ENDED ENDED ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 1996 1995 1996
------------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds From
Operations(6).......... $ 3,109,620 $ 25,148,252 $ 29,019,360 $ 19,398,782 $ 23,331,881
Cash Available for
Distribution(7)........ 2,737,710 21,895,596 25,504,647 16,904,569 20,575,611
Net cash provided by
operating
activities(8).......... 4,687,875 29,773,247 34,176,899 29,751,060 27,414,121
Net cash used in
investing
activities(9).......... (130,226,886) (4,864,614) (5,162,745) (3,709,152) (4,007,283)
Net cash provided by
(used in) financing
activities(10)......... 129,725,146 (26,222,705) (26,222,705) (19,667,028) (19,667,028)
Weighted average number
of shares of Common
Stock and of OP Units
outstanding............ 9,899,327 15,684,401 15,684,401 15,684,401 15,684,401
</TABLE>
See notes on page 14.
13
<PAGE>
LESSEE
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA (1)(11)
------------------------------------------------------
HISTORICAL TWELVE MONTHS NINE MONTHS NINE MONTHS
JULY 31, 1996 YEAR ENDED ENDED ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
DECEMBER 31, 1996 1995 1996 1995 1996
----------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Room revenue............ $11,185,140 $ 86,924,872 $ 94,322,228 $67,087,557 $ 74,484,913
Food and beverage
revenue................ 2,982,331 27,119,189 27,167,284 20,133,742 20,181,837
Other revenue........... 623,824 7,571,300 7,579,125 5,507,498 5,515,323
----------- ------------ ------------ ----------- ------------
Total revenue........ 14,791,295 121,615,361 129,068,637 92,728,797 100,182,073
Hotel operating
expenses............... 9,360,407 81,347,270 83,876,691 61,044,842 64,128,628
Depreciation and
amortization........... 10,500 63,000 63,000 47,250 47,250
Interest expense........ 5,250 31,500 31,500 23,625 23,625
Other expenses.......... 17,448 154,151 392,217 35,659 273,725
Participating Lease
expenses(2)............ 5,218,526 39,969,440 44,655,229 30,470,441 35,156,230
----------- ------------ ------------ ----------- ------------
Net income.............. $ 179,164 $ 50,000 $ 50,000 $ 1,106,980 $ 552,615
=========== ============ ============ =========== ============
</TABLE>
- --------
(1) The pro forma information does not purport to represent what the Company's
financial position or the Company's and the Lessee's results of operations
would actually have been if the IPO and related Formation Transactions, the
acquisition of all Hotels and the consummation of the Offering and the
application of the net proceeds therefrom had, in fact, occurred on such
dates, or to project the Company's financial position or the Company's and
Lessee's results of operations at any future date or for any future period.
(2) Pro forma amounts represent lease payments from the Lessee to the Operating
Partnership pursuant to the Participating Leases calculated on a pro forma
basis by applying the rent provisions of the Participating Leases to the
revenues of the Hotels. The departmental revenue thresholds in the
Participating Leases are seasonally adjusted for interim periods and
certain of the Participating Lease formulas adjust beginning in January
1997 and January 1998. See "The Hotels--The Participating Leases."
(3) Pro forma amounts represent salaries and wages, professional fees,
directors' and officers' insurance, allocated rent, supplies and other
operating expenses to be paid by the Company. These amounts are based on
historical general and administrative expenses as well as probable 1997
expenses.
(4) Represents amortization of unearned officers' compensation represented by
an aggregate of 50,000 shares of restricted Common Stock issued to the
Company's executive officers, which shares vest 10% at the date of grant
(5,000 shares at $17.75 per share, the price per share of Common Stock
issued in the IPO).
(5) Calculated as 19.2% for the historical period from July 31, 1996 through
September 30, 1996. Calculated as 12.1% of income before minority interest
for all pro forma periods presented.
(6) Represents Funds From Operations of the Company. The items added back to
net income applicable to common stockholders have been adjusted by the
Company's ownership percentage in the Operating Partnership of 80.8% for
the historical period from July 31, 1996 through September 30, 1996 and
87.9% for all pro forma periods presented. The following table computes
Funds From Operations under the National Association of Real Estate
Investment Trusts ("NAREIT") definition. Funds From Operations consists of
net income applicable to common stockholders (computed in accordance with
generally accepted accounting principles) excluding gains (losses) from
debt restructuring and sales of property (including furniture and
equipment) plus real estate related depreciation and amortization
(excluding amortization of deferred financing costs) and after adjustments
for unconsolidated partnerships and joint ventures. The Company considers
Funds From Operations to be an appropriate measure of the performance of an
equity REIT. Funds From Operations should not be considered as an
alternative to net income or other measurements under generally accepted
accounting principles, as an indicator of operating performance or to cash
flows from operating, investing or financing activities as a measure of
liquidity. Although Funds From Operations has been computed in accordance
with the NAREIT definition, Funds From Operations as presented may not be
comparable to other similarly titled measures used by other REITs. Funds
From Operations does not reflect cash expenditures for capital improvements
or principal amortization of indebtedness on the Hotels.
Notes continued on following page.
14
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA(1)
------------------------------------------------------
TWELVE MONTHS NINE MONTHS NINE MONTHS
JULY 31, 1996 YEAR ENDED ENDED ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 1996 1995 1996
------------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net income applicable to
common stockholders.... $2,294,450 $15,332,210 $20,363,477 $12,036,751 $16,896,439
Depreciation............ 815,170 9,816,042 8,655,883 7,362,031 6,435,442
---------- ----------- ----------- ----------- -----------
Funds From Operations... $3,109,620 $25,148,252 $29,019,360 $19,398,782 $23,331,881
========== =========== =========== =========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 13,787,405 13,787,405 13,787,405 13,787,405
</TABLE>
(7) Cash Available for Distribution represents Funds From Operations of the
Company plus the Company's ownership percentage in the Operating
Partnership of 80.8% for the historical period from July 31, 1996 through
September 30, 1996 and 87.9% for all pro forma periods presented multiplied
by the sum of amortization of deferred financing costs, franchise transfer
costs and unearned officers' compensation. This amount is then reduced by
the Company's same percentage share of the sum of 4.0% of total revenue for
each of the Hotels that is required to be set aside by the Operating
Partnership for refurbishment and replacement of FF&E, capital expenditures
and other non-routine items as required by the Participating Leases. Cash
Available for Distribution does not include the interest expense associated
with borrowings under the Line of Credit that are expected to be made in
order to fund capital expenditures at the Hotels. In addition, Cash
Available for Distribution does not include the effects of any revenue
increases expected to result from capital expenditures at the Hotels.
(8) Pro forma amounts represent net income plus minority interest,
depreciation, amortization, and amortization of unearned officers'
compensation. There are no pro forma adjustments for changes in working
capital items.
(9) Pro forma amounts represent cash used in investing activities and includes
the Operating Partnership's obligation to make available to the Lessee an
amount equal to 4.0% of total revenue for each of the Hotels for the
periodic replacement or refurbishment of FF&E, capital expenditures and
other non-routine items as required by the Participating Leases. The
Company intends to cause the Operating Partnership to spend amounts in
excess of such obligated amounts to comply with the reasonable requirements
of any franchise license and otherwise to the extent that the Company deems
such expenditures to be in the best interest of the Company. See "The
Hotels--The Participating Leases."
(10) Pro forma amounts represent pro forma initial distributions to be paid
based on the current annual distribution rate of $1.63 per share and OP
Unit and an aggregate of 15,684,401 shares of Common Stock and OP Units
outstanding plus the debt service on the indebtedness collateralized by
the Holiday Inn Dallas DFW Airport South, Courtyard by Marriott-
Meadowlands, French Quarter Suites Hotel and the Radisson Arlington
Heights.
(11) Pro forma amounts as if the Operating Partnership recorded depreciation
and amortization and paid real and personal property taxes and property
insurance contemplated by the Participating Leases and owned all of the
Hotels as of January 1, 1995.
15
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus before
purchasing Common Stock in the Offering.
RISK THAT PROPOSED ACQUISITION HOTELS WILL NOT BE ACQUIRED
The Company has entered into contracts to acquire the four Proposed
Acquisition Hotels. The purchase of each of the Proposed Acquisition Hotels is
subject to the satisfaction of a number of conditions (certain of which are
material and beyond the control of the Company and, unless satisfied, could
result in one or more of such hotels not being acquired), and should any of
these purchases not occur, for whatever reason, a portion of the net proceeds
of the Offering will not have any specific designated use. There can be no
assurance that the Company will be able to locate and acquire sufficient
additional hotels meeting the Company's acquisition criteria to utilize any
such undesignated net proceeds and, in such event, the Company's anticipated
Cash Available for Distribution could be adversely affected.
RISKS ASSOCIATED WITH THE COMPANY'S ACQUISITION OF A SUBSTANTIAL NUMBER OF
ADDITIONAL HOTELS
The Company is currently experiencing a period of rapid growth. Since the
IPO, the Company has spent approximately $58.0 million to purchase the three
Acquired Hotels, increasing its room portfolio by approximately 28%.
Additionally, the Company has entered into contracts to purchase the four
Proposed Acquisition Hotels for an aggregate purchase price of approximately
$71.7 million. Assuming completion of the acquisition of the Proposed
Acquisition Hotels, the Company will have increased its guest room portfolio
by more than 50% since the IPO. The Company's ability to manage its growth
effectively will require it to select companies to lease and manage newly
acquired hotels. There can be no assurance that the Company, the Lessee, AGHI,
or other hotel management companies and/or operators will be able to manage
these additional hotels effectively.
CONFLICTS OF INTEREST
General
Because of Messrs. Jorns', Wiles' and Barr's ownership in and positions with
the Company, AGHI and the Lessee, there are inherent conflicts of interest in
the ongoing lease, acquisition, disposition, operation and management of the
Hotels. Accordingly, the interests of the Company's stockholders may not be
reflected fully in all decisions made or actions taken or to be taken by
certain officers and directors of the Company. See "The Company," "Formation
Transactions," "Management," "Certain Relationships and Transactions," and
"Policies and Objectives with Respect to Certain Activities--Conflict of
Interest Policies."
No Arm's-Length Bargaining
In particular, the terms of the Participating Leases, the Management
Agreements, and the Option Agreements (as defined in "The Hotels--Options to
Purchase and Rights of First Refusal") relating to the Option Hotels (as
defined in "The Company--Development") and the agreements related to the
Beverage Subleases (as defined in "Formation Transactions") were not
negotiated on an arm's-length basis. In the event revenues from the Hotels
increase significantly over prior periods, and operating expenses with respect
thereto are less than historical or projected operating expenses, the Lessee
could disproportionately benefit. In the event incremental increases in
expenses at the Hotels exceed incremental increases in revenues, conflicts of
interest may arise between the Lessee and the Company. See "Certain
Relationships and Transactions--The Participating Leases" and "Policies and
Objectives with Respect to Certain Activities--Conflict of Interest Policies."
The Company does not own any interest in the Lessee. Because Messrs. Jorns,
Wiles and Barr are partners in the Lessee, and each of them is an executive
officer of the Company (Mr. Jorns is also a director of the Company), there is
an inherent conflict of interest with respect to the enforcement and
termination of the Participating Leases. Because of these conflicts, Messrs.
Jorns', Wiles' and Barr's decisions relating to the Company's enforcement of
its rights under the Participating Leases may not solely reflect the interests
of the Company's stockholders. See "AGHI, the Lessee and Other Operators."
16
<PAGE>
Conflicts Relating to Sale of Hotels Subject to Participating Leases
The Company generally will be obligated under the Participating Leases to
pay a lease termination fee to the Lessee if the Company elects to sell a
Hotel and does not replace it with another hotel on terms that would create a
leasehold interest in such hotel with a fair market value equal to the
Lessee's remaining leasehold interest under the Participating Lease to be
terminated. Where applicable, the termination fee is equal to the fair market
value of the Lessee's leasehold interest in the remaining term of the
Participating Lease to be terminated. The payment of a termination fee to the
Lessee, which is owned in part by Messrs. Jorns, Wiles and Barr, may result in
decisions regarding the sale of a Hotel that do not reflect solely the
interests of the Company's stockholders. See "The Hotels--The Participating
Leases."
Conflicts Relating to Continued Management of Hotels
AGHI, in which Messrs. Jorns and Wiles own collectively a 21.0% interest,
manages hotels for third parties. There are no restrictions in either the
Participating Leases or the Management Agreements that limit the Lessee's or
AGHI's ability to lease or manage hotels which may compete with the Company's
hotels. Accordingly, the Lessee's and AGHI's decisions relating to the
operation of any of the Hotels that are in competition with other hotels
leased or managed by either of them may not fully reflect the interests of the
Company's stockholders.
Conflicts Relating to Continued Ownership of Other Hotel Properties
AGHI continues to own three hotel properties (including one hotel currently
under development). One of these hotels, a Ramada Limited which is located in
Madison, Wisconsin, was not transferred to the Company in connection with the
IPO because at the time of the IPO it was being offered for sale for its land
value due to its location in a prime retail area. Currently, AGHI plans to
continue to operate that hotel and to renovate and reposition the hotel to
operate as a Holiday Inn by February 1998. The Company is currently
negotiating with AGHI regarding the purchase of that hotel which agreement
will be subject to approval by at least a majority of the Independent
Directors of the Company. The other two hotels owned by AGHI, the Option
Hotels, are Courtyards by Marriott (one of which is still under development)
that were not transferred to the Company in connection with the IPO because
construction of those hotels had not been completed at that time. The Company
holds an option and a right of first refusal to acquire, subject to the
receipt of any necessary third-party consents, the interests of AGHI in either
or both of the Option Hotels during the two-year period following their
respective openings (October 1998 with respect to the Option Hotel located in
Boise, Idaho, which was opened in October 1996). See "The Hotels--Options to
Purchase and Rights of First Refusal." The Option Hotel located in Durham,
North Carolina (the "Durham Option Hotel"), remains under development and is
located approximately one mile from the Hilton Hotel-Durham, an Acquired
Hotel. The Durham Option Hotel is expected to compete with the Hilton Hotel-
Durham.
DEPENDENCE ON LESSEE AND PAYMENTS UNDER THE PARTICIPATING LEASES
The Company's ability to make distributions to its stockholders depends
solely upon the ability of the Lessee to make rent payments under the
Participating Leases (which will be dependent primarily on the ability of AGHI
and other potential operators to generate sufficient revenues from the Hotels
in excess of operating expenses). Any failure or delay by the Lessee in making
rent payments would adversely affect the Company's ability to make anticipated
distributions to its stockholders. Such failure or delay by the Lessee may be
caused by reductions in revenue from the Hotels or in the net operating income
of the Lessee or otherwise. The Lessee is a recently organized limited purpose
entity; accordingly, it has limited assets. At September 30, 1996, the Lessee
had a net worth of approximately $680,000 and the partners of the Lessee have
pledged 275,000 OP Units to the Company to secure the Lessee's obligations
under the Participating Leases (the "Lessee Pledge"). Although failure on the
part of the Lessee to materially comply with the terms of a Participating
Lease (including failure to pay rent when due) gives the Company the non-
exclusive right to terminate such lease, repossess the applicable property and
enforce the payment obligations under the lease and the Lessee Pledge (as
defined in "The Company--Participating Leases Structure"), the Company would
then be required to find another lessee to lease such hotel. There can be no
assurance that the Company would be able to find another lessee or that, if
another lessee were found, the Company would be able to enter into a new lease
on favorable terms.
17
<PAGE>
LACK OF CONTROL OVER OPERATIONS OF THE HOTELS
The Company is dependent on the ability of the Lessee, AGHI and other
operators of hotels to operate and manage the Hotels. To maintain its status
as a REIT, the Company will not be able to operate the Hotels or any
subsequently acquired hotels. As a result, the Company will be unable to
directly implement strategic business decisions with respect to the operation
and marketing of its hotels, such as decisions with respect to the setting of
room rates, food and beverage operations and certain similar matters.
HOTEL INDUSTRY RISKS
Operating Risks
The Hotels are subject to all operating risks common to the hotel industry.
These risks include, among other things, (i) competition for guests from other
hotels, some of which may have greater marketing and financial resources than
the Company, the Lessee and AGHI; (ii) increases in operating costs due to
inflation and other factors, which increases may not have been offset in
recent years, and may not be offset in the future by increased room rates;
(iii) dependence on business and commercial travelers and tourism, which
business may fluctuate and be seasonal; (iv) increases in energy costs and
other expenses of travel, which may deter travelers; and (v) adverse effects
of general and local economic conditions. These factors could adversely affect
the Lessee's ability to generate revenues and to make rent payments and
therefore the Company's ability to make expected distributions to its
stockholders.
Risks of Necessary Operating Costs and Capital Expenditures; Required Hotel
Renovations
Hotels in general, including the Hotels, require ongoing renovations and
other capital improvements, including periodic replacement or refurbishment of
FF&E. Under the terms of the Participating Leases, the Company is obligated to
establish a reserve to pay the cost of certain capital expenditures at the
Hotels and pay for periodic replacement or refurbishment of FF&E. The Company
controls the use of funds in this reserve. However, if capital expenditures
exceed the Company's expectations, there can be no assurance that sufficient
sources of financing will be available to fund such expenditures. The
additional cost of such expenditures could have an adverse effect on Cash
Available for Distribution. In addition, the Company may acquire hotels in the
future that require significant renovation. Renovation of hotels involves
certain risks, including the possibility of environmental problems,
construction cost overruns and delays, uncertainties as to market demand or
deterioration in market demand after commencement of renovation and the
emergence of unanticipated competition from other hotels.
The Company plans to undertake substantial renovations at certain of the
Hotels through the fourth quarter of 1997. Such substantial renovations will
likely disrupt the operations of those hotels due to hotel guest rooms and
common areas being taken out of service for extended periods. Moreover, those
renovations may result in lower occupancy, ADR and hotel revenues at those
hotels during the renovation periods than the historical levels shown in this
Prospectus.
Competition for Investment Opportunities
The Company may be competing for investment opportunities with entities that
have substantially greater financial resources than the Company. These
entities generally may be able to accept more risk than the Company can
prudently manage, including risks with respect to the creditworthiness of a
hotel operator or the geographic proximity of its investments. Competition
generally may reduce the number of suitable investment opportunities offered
to the Company and increase the bargaining power of property owners seeking to
sell.
Seasonality of Hotel Industry
The hotel industry is seasonal in nature. Generally, hotel revenue for
business hotels is greater in the second and third quarters of a calendar
year, although this may not be true for hotels in major tourist destinations.
Revenue for hotels in tourist areas generally is substantially greater during
the tourist season than other times of
18
<PAGE>
the year. Seasonal variations in revenue at the Hotels may cause quarterly
fluctuations in the Company's lease revenue. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality."
Investment in Single Industry
The Company's current strategy is to acquire interests only in hotels. As a
result, the Company will be subject to risks inherent in investments in a
single industry. The effects on Cash Available for Distribution resulting from
a downturn in the hotel industry may be more pronounced than if the Company
had diversified its investments.
CONTINGENT LIABILITIES OF SELLING PARTNERSHIPS
In connection with the Formation Transactions, the Company acquired all the
partnership interests in the entities that owned eight of the Initial Hotels,
and since the IPO the Company acquired all the partnership interests in the
entity that owned the Days Inn Lake Buena Vista. As a result, the Company may
become liable for certain liabilities, including contingent liabilities of
such selling entities. There is, therefore, a risk that unforeseen liabilities
could exist for which the Company could be liable and which could adversely
affect Cash Available for Distribution.
RISKS OF LEVERAGE; NO LIMITS ON INDEBTEDNESS
Upon completion of the Offering and the purchase of the Proposed Acquisition
Hotels, the Company expects that it will have approximately $12.0 million of
outstanding indebtedness under the Line of Credit and will have outstanding
mortgage indebtedness encumbering four of the Hotels of approximately $36.9
million. Neither the Company's Bylaws nor its Charter limits the amount of
indebtedness the Company may incur. In addition, in connection with the
planned capital improvements and renovations at the Current Hotels, the
Company has budgeted to borrow during 1997 an additional approximate $33.3
million under the Line of Credit and intends to borrow under the Line of
Credit appproximately $14.5 million for capital improvements and renovations
at the Proposed Acquisition Hotels. The Company intends to continue to limit
consolidated indebtedness (measured at the time the debt is incurred) to no
more than 45.0% of the Company's investment in hotels. See "Policies and
Objectives with Respect to Certain Activities--Financing." The Line of Credit
has been used to fund the acquisition and renovation of certain Current
Hotels, to pay certain costs in connection with the closing of the IPO and for
working capital. The Line of Credit is currently limited to the maximum
principal amount of $100 million and, among other limitations, to 40.0% of the
value or cost of the hotels which secure such line. The Line of Credit is
secured by a first mortgage lien on fourteen of the Current Hotels. Two of the
Proposed Acquisition Hotels, as well as other hotels acquired in the future,
may be added as security for the Line of Credit. The Line of Credit requires
lender approval of certain Company actions, including new hotel development,
franchise conversions relating to the hotels which secure the Line of Credit
and approval of lessees and managers for such hotels. The Company is currently
negotiating with its lenders under the Line of Credit to increase the
borrowing limit from $100 million to $150 million. There can be no assurance
that the Company will successfully negotiate and consummate the proposed
amendment to the Line of Credit. Subject to the limitations described above
and other limitations contained in the Line of Credit, the Company may borrow
additional amounts from the same or other lenders in the future or may issue
corporate debt securities in public or private offerings. Certain of such
additional borrowings may be secured by hotels owned by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," and "Policies and Objectives
with Respect to Certain Activities--Financing" and "The Hotels--Line of
Credit."
There can be no assurances that the Company will be able to meet its debt
service obligations, and, to the extent that it cannot, the Company risks the
loss of some or all of its assets, including the Current Hotels, to
foreclosure. Economic conditions could result in higher interest rates, which
could increase debt service requirements on variable rate debt, such as the
Line of Credit, and could reduce the amount of Cash Available for
Distribution. Adverse economic conditions could cause the terms on which
borrowings become available to be unfavorable. In such circumstances, if the
Company is in need of capital to repay indebtedness in accordance with its
terms or otherwise, it could be required to liquidate one or more investments
in hotel properties that at times may result in a financial loss to the
Company.
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LACK OF OPERATING HISTORY OR REVENUES; HISTORY OF LOSSES
The Company has been recently organized and has limited operating history.
There can be no assurance that the Company will be able to generate sufficient
Cash Available for Distribution to continue to make distributions to its
stockholders. The Company is subject to the risks generally associated with
the formation of any new business. Certain of the Hotels experienced net
losses in recent years. Accordingly, there can be no assurance that the
Company will not experience net losses in the future.
POSSIBLE ADVERSE EFFECTS OF SHARES AVAILABLE FOR FUTURE SALE UPON MARKET PRICE
OF COMMON STOCK
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect the prevailing market price for the
Common Stock. In connection with the Formation Transactions, (i) the Operating
Partnership issued to persons other than the Company an aggregate of 1,896,996
OP Units, and (ii) the Company issued 137,008 shares of restricted Common
Stock. In connection with the acquisition of the Days Inn Lake Buena Vista,
the Company issued 25,397 shares of restricted Common Stock. Commencing July
31, 1997, the OP Units issued in the Formation Transactions may be exchanged
pursuant to the Exchange Agreement (as defined in "Partnership Agreement--
Exchange Rights") for cash based on their fair market value or, at the
Company's sole option, for shares of Common Stock on a one-for-one basis. In
certain circumstances, the Company may not be able to exercise its option to
satisfy such partners' exchange rights with Common Stock because of tax or
securities law limitations. An exercise of exchange rights in such
circumstances could adversely affect the Operating Partnership's liquidity
because it would then be required to satisfy such rights with cash. In
addition, the officers and directors of the Company, certain other persons and
the Plan have agreed, subject to certain limited exceptions, not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock (or
any securities convertible into or exercisable for shares of Common Stock)
until July 31, 1997 (the "Lock-up Period") without the prior written consent
of the Company and/or Smith Barney Inc. The Registration Rights Agreements (as
defined in "Partnership Agreement--Registration Rights") requires the Company
to register all restricted shares of Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), including shares issuable upon the
exchange of OP Units. As a result, at the conclusion of the Lock-up Period,
all shares of Common Stock issued in connection with the Formation
Transactions or acquired upon exchange of OP Units or issued to acquire the
Days Inn Lake Buena Vista may be sold in the public market. In addition,
850,000 shares of Common Stock (exclusive of stock awards issued under the
1996 Plan as described below) are reserved for issuance pursuant to the 1996
Plan and 98,564 shares of Common Stock (exclusive of the 1,436 shares of
restricted Common Stock issued under the Directors' Plan) are reserved for
issuance to non-employee directors pursuant to the Directors' Plan. Stock
awards equal to an aggregate of 50,000 shares of restricted Common Stock, of
which 5,000 have vested, and options to purchase 360,000 shares of Common
Stock, of which 90,000 are currently exercisable, have been granted to the
Company's executive officers under the 1996 Plan and 1,436 shares of
restricted Common Stock, and options to purchase 40,000 shares of Common
Stock, of which 13,332 are currently exercisable, have been granted to the
Company's directors under the Directors' Plan. Moreover, in connection with
the Wyndham Alliance, the Company has agreed to issue, and Wyndham has agreed
to purchase, restricted Common Stock or OP Units in an amount equal to nine
times the estimated franchise fee that is payable to Wyndham during the first
twelve months a Company hotel is converted to the Wyndham brand. During 1997,
the Company estimates that Wyndham will acquire 112,969 shares of Common Stock
pursuant to the Wyndham Alliance upon conversion of the Le Baron Airport Hotel
to the Wyndham Hotel brand. This purchase right will not apply to the planned
conversion of the Fred Harvey Albuquerque Airport Hotel, the Days Inn Lake
Buena Vista and the Four Points by Sheraton to the Wyndham Hotel brand.
Wyndham has agreed not to offer, sell, contract to sell or otherwise dispose
of any interests in the Company acquired pursuant to the Wyndham Alliance for
a period of six months after their acquisition without the prior written
consent of the Company. Any OP Units issued to Wyndham may be exchanged for
cash based on their fair market value or, at the Company's sole option, for
shares of Common Stock on a one-for-one basis commencing one year after their
issuance. The Company is obligated to register under the Securities Act all
restricted shares of Common Stock and shares issuable upon the exchange of OP
Units that are issued to Wyndham pursuant to the Wyndham Alliance. See
"Management--Stock Incentive Plans," "Shares Available for Future Sale" and
"Underwriting."
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COMPETITION FOR MANAGEMENT TIME
Messrs. Jorns, Wiles, Barr and Valentine are employed both as executive
officers of the Company and AGHI and are thus necessarily subject to competing
demands on their time. See "--Conflicts of Interest" and "Management--
Employment Agreements."
REAL ESTATE INVESTMENT RISKS
General Risks
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. The underlying value of the
Company's hotel investments and the Company's income and ability to make
distributions to its stockholders is dependent upon the ability of the Lessee
and AGHI to operate the Hotels in a manner sufficient to maintain or increase
revenues and to generate sufficient revenue in excess of operating expenses to
make rent payments under the Participating Leases. Income from the Hotels may
be adversely affected by changes in national economic conditions, changes in
local market conditions due to changes in general or local economic conditions
and neighborhood characteristics, changes in interest rates and in the
availability, cost and terms of mortgage funds, the impact of present or
future environmental legislation and compliance with environmental laws, the
ongoing need for capital improvements, particularly in older structures,
changes in real estate tax rates and other operating expenses, adverse changes
in governmental rules and fiscal policies, civil unrest, acts of God,
including earthquakes and other natural disasters (which may result in
uninsured losses), acts of war, adverse changes in zoning laws, and other
factors which are beyond the control of the Company.
Dependence on Particular Regions
The Current Hotels are located throughout the United States, but 16.9% and
14.5% of the total number of the guest rooms of the Current Hotels
(representing 15.4% and 15.0% of the Company's estimated Participating Rent
revenues for the twelve months ended September 30, 1996) are located at the
Dallas/Fort Worth Airport and in the San Jose area, respectively. The
Company's cash flow, ability to make distributions to its stockholders and the
value of the Common Stock will be affected, to a large degree, by economic
conditions and the demand for hotel rooms in the Dallas/Fort Worth and San
Jose markets in which these four Hotels are located.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the Company
to vary its portfolio in response to changes in economic and other conditions
will be limited. If the Company must sell an investment, there can be no
assurance that the Company will be able to dispose of it in the time period it
desires or that the sale price of any investment will recoup or exceed the
amount of the Company's investment.
Property Taxes and Casualty Insurance
Each Current Hotel is subject to real and personal property taxes. Under the
Participating Leases, the Company is required to pay real and personal
property taxes. The real and personal property taxes on hotel properties in
which the Company invests may increase or decrease as property tax rates
change and as the properties are assessed or reassessed by taxing authorities.
Each Current Hotel is covered by casualty insurance, which, pursuant to the
Participating Leases, must be paid by the Company, the rates for which may
increase or decrease depending on claims experience. The increase in property
taxes or casualty insurance premiums could adversely affect the Company's
ability to make expected distributions to its stockholders.
Consents of Lessors Required for Sale and Renovation of Certain Hotels
The Fred Harvey Albuquerque Airport Hotel, the Courtyard by Marriott-
Meadowlands, the Le Baron Airport Hotel and the Hilton Hotel-Toledo are each
subject to ground leases, the Hotel Maison de Ville is
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subject to a space lease for its restaurant facilities and certain of its
guest rooms and the Sheraton Key Largo is subject to a bay bottom lease for
certain offshore property at the resort, each with third-party lessors. In
addition, the Radisson Arlington Heights is subject to a space lease with
respect to its restaurant facilities until January 1998. Any proposed sale of
such hotels by the Company or any proposed assignment of the Company's
leasehold interest in the ground leases, the space lease and the bay bottom
lease, as well as the subletting to the Lessee may require the consent of the
respective third-party lessors. There can be no assurance that the Company
will be able to obtain such requisite consents. As a result, the Company may
not be able to sell, assign, transfer or convey its interest in these Hotels
in the future, even if such transactions may be in the best interests of the
stockholders of the Company.
Environmental Matters
The Company's operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of future legislation. Under various federal,
state and local environmental laws, ordinances and regulations, a current or
previous owner or operator of real property may be liable for the costs of
removal or remediation of hazardous or toxic substances on, under or in such
property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of hazardous or toxic substances,
or the failure to remediate such property properly, may adversely affect the
owner's ability to use the property, sell the property or borrow by using such
real property as collateral. Persons who arrange for the disposal or treatment
of hazardous or toxic substances may also be liable for the costs of removal
or remediation of such substances at the disposal or treatment facility,
whether or not such facility is or ever was owned or operated by such person.
Certain environmental laws and common law principles could be used to impose
liability for releases of hazardous materials, including asbestos-containing
materials ("ACMs"), into the environment, and third parties may seek recovery
from owners or operators of real properties for personal injury associated
with exposure to released ACMs or other hazardous materials.
Environmental laws also may impose restrictions on the manner in which a
property may be used or transferred or in which businesses may be operated,
and these restrictions may require expenditures. In connection with the
ownership of the Hotels, the Company or the Lessee may be potentially liable
for any such costs. The cost of defending against claims of liability or
remediating contaminated property and the cost of complying with environmental
laws could materially adversely affect the Company's results of operations and
financial condition. Phase I environmental site assessments ("ESAs") have been
conducted at all of the Hotels by qualified independent environmental
engineers. The purpose of Phase I ESAs is to identify potential sources of
contamination for which the Hotels may be responsible and to assess the status
of environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that the Company believes would
have a material adverse effect on the Company's business, assets, results of
operations or liquidity, nor is the Company aware of any material
environmental liability or concerns. Nevertheless, it is possible that these
ESAs did not reveal all environmental liabilities or compliance concerns or
that material environmental liabilities or compliance concerns exist of which
the Company is currently unaware.
Compliance with Americans with Disabilities Act
Under the Americans with Disabilities Act of 1990, as amended (the "ADA"),
all public accommodations are required to meet certain federal requirements
related to access and use by disabled persons. A determination that the
Company is not in compliance with the ADA could result in imposition of fines
or an award of damages to private litigants. If the Company were required to
make modifications to its hotels to comply with the ADA, the Company's ability
to make expected distributions to its stockholders could be adversely
affected.
Uninsured and Underinsured Losses
Each Participating Lease requires comprehensive insurance to be maintained
on each of the Current Hotels, including liability, fire and extended
coverage. Management believes such specified coverage is of the type and
amount customarily obtained for or by an owner of hotels. Leases for
subsequently acquired hotels will contain
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similar provisions. However, there are certain types of losses, generally of a
catastrophic nature, such as those caused by earthquakes, hurricanes and
floods, that may be uninsurable or not economically insurable. The Company's
Board of Directors and management will use their discretion in determining
amounts, coverage limits and deductibility provisions of insurance, with a
view to maintaining appropriate insurance coverage on the Company's
investments at a reasonable cost and on suitable terms. This may result in
insurance coverage that, in the event of a substantial loss, would not be
sufficient to pay the full current market value or current replacement cost of
the Company's lost investment. Inflation, changes in building codes and
ordinances, environmental considerations and other factors also might make it
infeasible to use insurance proceeds to replace the property after such
property has been damaged or destroyed. Under such circumstances, the
insurance proceeds received by the Company might not be adequate to restore
its economic position with respect to such property.
Acquisition and Development Risks
The Company intends to pursue acquisitions of additional hotels (including
the Proposed Acquisition Hotels) and, under appropriate circumstances, may
pursue development opportunities. Acquisitions entail risks that investments
will fail to perform in accordance with expectations and that estimates of the
cost of improvements necessary to market and acquire hotels will prove
inaccurate, as well as general investment risks associated with any new real
estate investment. New project development is subject to numerous risks,
including risks of construction delays or cost overruns that may increase
project costs, new project commencement risks such as receipt of zoning,
occupancy and other required governmental approvals and permits and the
incurrence of development costs in connection with projects that are not
pursued to completion. In addition, the Line of Credit provides that the
lenders thereunder must consent to any development activities by the Company
other than development in connection with the limited expansion of existing
hotels. The fact that the Company must distribute 95.0% of REIT taxable income
in order to maintain its qualification as a REIT may limit the Company's
ability to rely upon lease income from the Hotels or subsequently acquired
hotels to finance acquisitions or new developments. As a result, if debt or
equity financing were not available on acceptable terms, further acquisitions
or development activities might be curtailed or Cash Available for
Distribution might be adversely affected.
TAX RISKS
Failure to Qualify as a REIT
The Company operates in a manner designed to permit it to qualify as a REIT
for federal income tax purposes.
Qualification as a REIT involves the application of highly technical and
complex Code provisions for which there are only limited judicial or
administrative interpretations. The determination of various factual matters
and circumstances not entirely within the Company's control may affect its
ability to continue to qualify as a REIT. The complexity of these provisions
and of the applicable income tax regulations that have been promulgated under
the Code is greater in the case of a REIT that holds its assets through a
partnership, such as the Company. Moreover, no assurance can be given that
legislation, new regulations, administrative interpretations or court
decisions will not change the tax laws with respect to qualification as a REIT
or the federal income tax consequences of such qualification. The Company has
received an opinion of Battle Fowler LLP, counsel to the Company ("Counsel"),
to the effect that, based on various assumptions relating to the operation of
the Company and representations made by the Company as to certain factual
matters, the Company meets the requirements for qualification and taxation as
a REIT. Such legal opinion is not binding on the IRS. See "Federal Income Tax
Considerations."
If the Company fails to qualify as a REIT in any taxable year, the Company
will not be allowed a deduction for distributions to its stockholders in
computing its taxable income and will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
the applicable corporate rate. In
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addition, unless it were entitled to relief under certain statutory
provisions, the Company would be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification is lost. This
disqualification would reduce the funds of the Company available for
investment or distribution to stockholders because of the additional tax
liability of the Company for the year or years involved.
If the Company were to fail to qualify as a REIT, it no longer would be
subject to the distribution requirements of the Code and, to the extent that
distributions to stockholders would have been made in anticipation of the
Company's qualifying as a REIT, the Company might be required to borrow funds
or to liquidate certain of its assets to pay the applicable corporate income
tax. Although the Company currently operates in a manner designed to qualify
as a REIT, it is possible that future economic, market, legal, tax or other
considerations may cause the Company's Board of Directors to decide to revoke
the REIT election. See "Federal Income Tax Considerations."
Adverse Effects of REIT Minimum Distribution Requirements
To obtain the favorable tax treatment accorded to REITs under the Code, the
Company generally will be required each year to distribute to its stockholders
at least 95% of its REIT taxable income. The Company will be subject to income
tax on any undistributed REIT taxable income and net capital gain, and to a
4.0% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the
sum of (i) 85.0% of its ordinary income for the calendar year, (ii) 95.0% of
its capital gain net income for such year, and (iii) 100.0% of its
undistributed income from prior years.
The Company has made distributions to its stockholders to comply with the
distribution provisions of the Code and to avoid federal income taxes and the
non-deductible 4.0% excise tax. The Company's income consists primarily of its
share of the income of the Operating Partnership, and the Company's cash flow
consists primarily of its share of distributions from the Operating
Partnership. Differences in timing between the receipt of income and the
payment of expenses in arriving at taxable income (of the Company or the
Operating Partnership) and the effect of non-deductible capital expenditures,
the creation of reserves or required debt amortization payments could in the
future require the Company to borrow funds through the Operating Partnership
on a short-term or long-term basis to meet the distribution requirements that
are necessary to continue to qualify as a REIT. In such circumstances, the
Company might need to borrow funds to avoid adverse tax consequences even if
management believes that the then prevailing market conditions generally are
not favorable for such borrowings or that such borrowings are not advisable in
the absence of such tax considerations.
Distributions by the Operating Partnership are determined by its sole
general partner, a wholly owned subsidiary of the Company and are dependent on
a number of factors, including the amount of Cash Available for Distribution,
the Operating Partnership's financial condition, any decision by the Company's
Board of Directors to reinvest funds rather than to distribute such funds, the
Operating Partnership's capital expenditure requirements, the annual
distribution requirements under the REIT provisions of the Code and such other
factors as the Board of Directors deems relevant. There is no assurance that
the Company will be able to continue to satisfy the annual distribution
requirement so as to avoid corporate income taxation on the earnings that it
distributes. See "Federal Income Tax Considerations--Requirements for
Qualification as a REIT--Annual Distribution Requirements."
Consequences of Failure to Qualify as Partnerships
The Operating Partnership has received an opinion of Counsel stating that,
assuming that the Operating Partnership and each Subsidiary Partnership (as
defined in "The Company--The Operating Partnership") is being operated in
accordance with its respective organizational documents, the Operating
Partnership and each of the Subsidiary Partnerships will be treated as a
partnership, and not as a corporation, for federal income tax purposes. Such
opinion is not binding on the IRS. If the IRS were to challenge successfully
the status of the Operating Partnership or any Subsidiary Partnership as a
partnership for federal income tax purposes, the Operating Partnership or the
affected Subsidiary Partnership would be taxable as a corporation. In such
event,
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the Company would cease to qualify as a REIT for federal income tax purposes.
The imposition of a corporate tax on the Operating Partnership or any of the
Subsidiary Partnerships, with a concomitant loss of REIT status of the
Company, would reduce substantially the amount of Cash Available for
Distribution. See "Federal Income Tax Considerations--Tax Aspects of the
Operating Partnership."
ERISA
Depending upon the particular circumstances of the plan, an investment in
Common Stock may not be an appropriate investment for an ERISA Plan, a
Qualified Plan or an IRA. In deciding whether to purchase Common Stock, a
fiduciary of an ERISA Plan, in consultation with its advisors, should
carefully consider its fiduciary responsibilities under ERISA, the prohibited
transaction rules of ERISA and the Code and the effect of the "plan asset"
regulations issued by the U.S. Department of Labor.
RISKS OF OPERATING HOTELS UNDER FRANCHISE AGREEMENTS; APPROVAL FOR BRAND
CONVERSIONS
Thirteen of the Current Hotels and three of the Proposed Acquisition Hotels
are subject to franchise agreements with nationally recognized hotel
companies. In addition, two of the Current Hotels which are not currently
subject to franchise agreements are expected to become subject to franchise
agreements during the second quarter of 1997. The continuation of such
franchise agreements is subject to specified operating standards and other
terms and conditions. Franchisors typically inspect licensed properties
periodically to confirm adherence to operating standards. Action or inaction
on the part of any of the Company, the Lessee, AGHI or third party operators
could result in a breach of such standards or other terms and conditions of
the franchise agreements and could result in the loss or cancellation of a
franchise license. It is possible that a franchisor could condition the
continuation of a franchise license on the completion of capital improvements
which the Board of Directors determines are too expensive or otherwise
unwarranted in light of general economic conditions or the operating results
or prospects of the affected hotel. In that event, the Board of Directors may
elect to allow the franchise license to lapse. In any case, if a franchise is
terminated, the Company and the Lessee may seek to obtain a suitable
replacement franchise or to operate the Hotel independent of a franchise
license. The loss of a franchise license could have a material adverse effect
upon the operations or the underlying value of the hotel covered by the
franchise because of the loss of associated name recognition, marketing
support and centralized reservation systems provided by the franchisor.
The Company intends to convert ten of the Current Hotels and three of the
Proposed Acquisition Hotels that either operate under one franchise brand or
do not operate under a franchise brand into hotels that operate under
different franchise brands. While the Company has obtained preliminary
franchisor approval for such conversions, completion of such conversions is
dependent upon, among other things, entering into definitive franchise
agreements with the new franchisors. Failure to effect such conversions could
have a material adverse effect on the Company's results of operations and, in
turn, Cash Available for Distribution.
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS
Certain provisions of Maryland law and of the Company's Charter and Bylaws
may have the effect of discouraging a third party from making an acquisition
proposal for the Company and could delay, defer or prevent a transaction or a
change in control of the Company under circumstances that could give the
holders of Common Stock the opportunity to realize a premium over the then
prevailing market prices of the Common Stock. Such provisions include the
following:
Ownership Limitation
In order for the Company to maintain its qualification as a REIT under the
Code, not more than 50.0% in value of the outstanding shares of stock of the
Company may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) at any time during the last
half of the Company's taxable year (other than the first year for which the
election to be treated as a REIT has been made). Furthermore,
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if any partner of the Lessee owns, actually or constructively, 10.0% or more
in value of the stock of the Company, the Lessee could become a Related Party
Tenant (as defined in "Federal Income Tax Consequences--Requirements for
Qualification as a REIT--Income Tests") of the Company, which would result in
loss of REIT status for the Company. For the purpose of preserving the
Company's REIT qualification, the Company's Charter prohibits direct or
indirect ownership (taking into account applicable ownership provisions of the
Code) of more than 9.8% of any class of the Company's outstanding stock by any
person (the "Ownership Limitation"), subject to an exception that permits
mutual funds and certain other entities to own as much as 15.0% of any class
of the Company's stock in appropriate circumstances (the "Look-Through
Ownership Limitation"). Generally, the stock owned by affiliated owners will
be aggregated for purposes of the Ownership Limitation. The Ownership
Limitation could have the effect of delaying, deferring or preventing a
transaction or a change in control of the Company in which holders of some or
a majority of the Common Stock might receive a premium for their Common Stock
over the then prevailing market price or which such holders might believe to
be otherwise in their best interests. See "Description of Capital Stock--
Restrictions on Transfer" and "Federal Income Tax Considerations--Requirements
for Qualification as a REIT."
Staggered Board
The Board of Directors is divided into three classes of directors. The
initial terms of the first, second and third classes will expire in 1997, 1998
and 1999, respectively. Directors of each class will be elected for three-year
terms upon the expiration of the current class terms, and, beginning in 1997
and each year thereafter, one class of directors will be elected by the
stockholders. A director may be removed, with or without cause, by the
affirmative vote of 75.0% of the votes entitled to be cast for the election of
directors, which super-majority vote may have the effect of delaying,
deferring or preventing a change of control of the Company. The staggered
terms of directors may reduce the possibility of a tender offer or an attempt
to change control of the Company even though a tender offer or change in
control might be in the best interests of the stockholders. See "Certain
Provisions of Maryland Law and of the Company's Charter and Bylaws--Number of
Directors; Classification of the Board of Directors."
Maryland Business Combination Law
Under the Maryland General Corporation Law, as may be amended from time to
time (the "MGCL"), certain "business combinations" (including certain
issuances of equity securities) between a Maryland corporation such as the
Company and any person who owns 10.0% or more of the voting power of the
corporation's shares (an "Interested Stockholder") or an affiliate thereof are
prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder. Thereafter, any such business
combination must be approved by two super-majority votes unless, among other
conditions, the holders of shares of Common Stock receive a minimum price (as
defined in the MGCL) for their stock and the consideration is received in cash
or in the same form as previously paid by the Interested Stockholder for its
shares. See "Certain Provisions of Maryland Law and of the Company's Charter
and Bylaws--Business Combinations."
Maryland Control Share Acquisition Statute
In addition to certain provisions of the Charter, the Maryland control share
acquisition statute may have the effect of discouraging a third party from
making an acquisition proposal for the Company. The MGCL provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes eligible under the statute to be cast on the matter.
"Control shares" are voting shares of stock, which, if aggregated with all
other such shares of stock previously acquired by the acquiror or in respect
of which the acquiror is able to exercise or direct the exercise of voting
power (except solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-
third, (ii) one-third or more but less than a majority, or (iii) a majority of
all voting power. Control shares do not include shares that the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
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If voting rights are not approved at a meeting of stockholders, then,
subject to certain conditions and limitations, the issuer may redeem any or
all of the control shares (except those for which voting rights have
previously been approved) for fair value. If voting rights for control shares
are approved at a stockholders' meeting and the acquiror becomes entitled to
vote a majority of the shares of stock entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The Company's Bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any persons of shares of stock
of the Company. There can be no assurance that such provision will not be
amended or eliminated at any point in the future. If the foregoing exemption
in the Company's Bylaws is rescinded, the control share acquisition statute
could have the effect of delaying, deferring, preventing or otherwise
discouraging offers to acquire the Company and of increasing the difficulty of
consummating any such offer. See "Certain Provisions of Maryland Law and of
the Company's Charter and Bylaws--Control Share Acquisition Statute."
RELIANCE ON BOARD OF DIRECTORS AND MANAGEMENT
Stockholders have no right or power to take part in the management of the
Company except through the exercise of voting rights on certain specified
matters. The Board of Directors are responsible for directing the management
of the business and affairs of the Company. The Company relies upon the
services and expertise of its management for strategic business direction. The
Company has in effect employment agreements with Steven D. Jorns, Chairman of
the Board, Chief Executive Officer and President; Bruce G. Wiles, Executive
Vice President; Kenneth E. Barr, Executive Vice President and Chief Financial
Officer; and Russ C. Valentine, Senior Vice President--Acquisitions, which
currently provide for base salary at below market rates for comparable
positions. Accordingly, the loss of services of any such officer may require
the Company to hire a replacement officer at a salary greater than the Company
is currently obligated to pay, which, in turn, would increase the Company's
operating costs and reduce Cash Available for Distribution.
CONTINGENT OBLIGATION TO CONSTRUCT ADDITIONAL HOTEL ROOMS
Pursuant to the terms of the ground lease relating to the Fred Harvey
Albuquerque Airport Hotel, the Company will be required, at its expense, to
build 100 additional guest rooms if the occupancy rate at the hotel is 85.0%
or greater for 24 consecutive months. The Company could be required to build
the additional rooms even if the Company does not deem such capital
expenditure to be in its economic interest and even if financing is not
available or is available only on unattractive terms, in order to complete
such construction. In addition, construction of the additional guest rooms
would require the consent of the lenders under the Line of Credit. Failure to
construct the additional rooms could result in a default under such ground
lease. For the twelve months ended September 30, 1996, the occupancy rate at
the hotel was 81.8%.
ABILITY OF BOARD TO CHANGE POLICIES
The major policies of the Company, including its policies with respect to
acquisitions, financing, growth, operations, debt capitalization and
distributions, are determined by its Board of Directors. The Board of
Directors may amend or revise these and other policies at any time and from
time to time at the Board's discretion without a vote of the stockholders of
the Company. See "Policies and Objectives with Respect to Certain Activities."
ADVERSE EFFECT OF INCREASE IN MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that may influence the price of the Common Stock in
public trading markets will be the annual yield from distributions by the
Company on the Common Stock as compared to yields on certain financial
instruments. Thus, an increase in market interest rates will result in higher
yields on certain financial instruments, which could adversely affect the
market price of the Common Stock.
27
<PAGE>
THE COMPANY
GENERAL
The Company is a self-administered REIT that owns sixteen hotels containing
an aggregate of 3,858 guest rooms located in eleven states. The Current Hotels
consist of fourteen full-service hotels and two limited-service hotels located
primarily in major metropolitan markets. For the twelve months ended September
30, 1996, the Current Hotels had a weighted average occupancy of 72.8% and an
ADR of $73.08. Ten of the Current Hotels are currently undergoing significant
renovations and refurbishments that will allow the Company to convert such
hotels to leading franchise brands and reposition them for future revenue
growth. Upon completion of the planned franchise conversions, the Current
Hotels will consist of three Wyndham Hotels, two Crowne Plazas, three Hilton
Hotels, one Courtyard by Marriott, three Holiday Inn Selects (the premium
Holiday Inn brand), one Holiday Inn, two Hampton Inns and one independent
luxury hotel. However, there can be no assurance that such brand conversions
and hotel repositionings will occur as planned. Certain of the Current Hotels,
including the Holiday Inn Select in Madison, Wisconsin, and the Holiday Inn
Dallas DFW Airport South in Irving, Texas, have garnered prestigious awards,
including Holiday Inn's Torchbearer (awarded to those hotels that are deemed
to be leaders in the community, based on their involvement in community and
civic affairs), Modernization (awarded to those hotels that complete the most
effective total renovation projects), Quality Excellence (awarded to those
hotels that, based upon a quality indexing system, noticeably exceed guest
expectations) and Hotel of the Year (as determined by a panel of three members
of Holiday Inn Worldwide senior management) awards.
Since the Company's initial public offering in July 1996, the Company has
acquired three hotels with an aggregate of 846 guest rooms located in Orlando,
Florida, Monterey, California and Durham, North Carolina, for an aggregate
purchase price of approximately $58.0 million. In addition, the Company has
entered into contracts to purchase four additional hotels with an aggregate of
775 guest rooms located in Atlanta, Georgia, Marietta, Georgia (located in
metropolitan Atlanta), Arlington Heights, Illinois (located in metropolitan
Chicago) and Key Largo, Florida for an aggregate purchase price of
approximately $71.7 million. The Company's purchase of each of the Proposed
Acquisition Hotels is subject to the satisfaction of various closing
conditions and, therefore, no assurances can be given that these acquisitions
will be completed. See "Developments Since the Initial Public Offering--
Proposed Acquisition Hotels." If the Proposed Acquisition Hotels are acquired,
the Company will have invested, since the IPO, approximately $129.7 million in
hotel acquisitions in four states and will own 20 hotels containing
approximately 4,600 guest rooms. This growth represents a more than 50%
increase in the Company's portfolio since the IPO based upon the number of
guest rooms.
The Company was formed for the purpose of continuing and expanding the hotel
acquisition, development and repositioning operations of AGHI and certain of
its affiliates. AGHI, which manages the Current Hotels and will manage four of
the Proposed Acquisition Hotels, was founded in 1981 by Steven D. Jorns, the
Company's Chairman of the Board, Chief Executive Officer and President. As of
December 31, 1996, AGHI operated and managed 64 hotels in 24 states containing
an aggregate of more than 11,200 guest rooms. According to Hotel & Motel
Management, a leading hotel trade publication, AGHI was the nation's fourth
largest independent hotel management company in 1995, based upon number of
hotels under management. The Company expects to continue to capitalize on
AGHI's expertise to achieve revenue growth at the Company's hotels. The
Company does not have any economic interest in AGHI's hotel management
operations.
In order to qualify as a REIT, the Company may not operate hotels. As a
result, the Company leases the Current Hotels and will lease the Proposed
Acquisition Hotels to the Lessee, which is owned in part by certain executive
officers of the Company pursuant to separate participating leases. Messrs.
Jorns, Wiles and Barr own collectively an approximate 23.0% interest in the
Lessee. The Participating Leases are designed to allow the Company to achieve
substantial participation in any future growth of revenues generated at the
Current Hotels. The Lessee, in turn, has entered into separate management
agreements with AGHI to operate the Current Hotels. See "AGHI, the Lessee and
Other Operators."
The Company intends to selectively seek other qualified hotel management
companies, in addition to the Lessee and AGHI, to lease and/or manage certain
of the Company's future hotel acquisitions. The Company intends to seek
operational relationships with independent hotel operators that, in the
Company's judgment, have demonstrated one or more of the following
characteristics: (i) certain unique knowledge of the hotel or the market
28
<PAGE>
in which such hotel operates, (ii) a proven track record for implementing
product, brand and operational repositioning strategies, (iii) a significant
national or regional lodging industry reputation or (iv) substantial financial
resources. The Company believes that the use of a flexible lessee or manager
structure, coupled with the continued expansion of its brand and franchise
relationships, will result in additional acquisition opportunities for the
Company. The Lessee has advised the Company that it expects to retain Wyndham
Hotel Corporation as the manager of one of the Proposed Acquisition Hotels
following its purchase by the Company. See "The Company--Other Operators."
The Company believes that the growth in occupancy, ADR and REVPAR at the
eight Current Hotels managed and operated by AGHI prior to and after the IPO
reflects the successful repositioning, renovation and marketing strategies of
AGHI as well as AGHI's superior management and operational capabilities. See
"The Hotels." The Company attributes the success of the Hotels, in part, to
the slowing in recent years of new hotel construction nationally and improving
economic conditions, both of which followed an extended period of unprofitable
industry performance in the late 1980's and early 1990's. According to Smith
Travel Research, for 1994 and 1995, occupancy rates for the U.S. lodging
industry were 64.7% and 65.5%, respectively, reflecting a 2.9% increase in
guest room demand from 1994 to 1995 and a 1.7% increase in guest room supply
during the same period. The Company believes these improved lodging market
fundamentals have created a favorable environment for internal growth at the
Hotels and for acquisitions. The following table compares occupancy, ADR, and
REVPAR at the Current Hotels with comparable data for all midscale and lower
upscale U.S. hotels as well as all U.S. hotels for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER
------------------------- --------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
OCCUPANCY
Current Hotels(1).................... 71.0% 71.9% 73.0% 75.5% 75.2%
All Midscale Hotels(2)............... 63.0 64.1 64.6 66.7 66.5
All Lower Upscale Hotels(2).......... 67.3 69.9 70.2 71.6 72.2
All U.S. Hotels(2)................... 63.0 64.7 65.5 67.1 67.6
ADR(3)
Current Hotels(1).................... $ 58.58 $ 62.06 $ 67.76 $67.57 $74.42
All Midscale Hotels(2)............... 54.55 56.23 58.97 59.13 62.63
All Lower Upscale Hotels(2).......... 71.98 74.72 78.81 78.72 84.21
All U.S. Hotels(2)................... 61.93 64.24 67.34 67.07 71.48
REVPAR(4)
Current Hotels(1).................... $ 41.60 $ 44.65 $ 49.49 $51.00 $55.97
All Midscale Hotels(2)............... 34.36 36.04 38.08 39.44 41.65
All Lower Upscale Hotels(2).......... 48.44 52.21 55.36 56.36 60.80
All U.S. Hotels(2)................... 39.01 41.56 44.11 45.00 48.31
</TABLE>
- --------
(1) The occupancy, ADR and REVPAR calculations for the Current Hotels are
derived from room revenue that is included in the audited financial data
relating to each of the Current Hotels for each of the periods indicated
except for the following hotels for which information is audited only from
the date of acquisition of such hotel by AGHI or the Company (such date is
set forth in parentheses): the Hilton Hotel-Durham (January 1997), the
Holiday Inn Resort Monterey (November 1996), the Hotel Maison de Ville
(August 1994), the Holiday Inn Dallas DFW Airport West (June 1995), the
Hampton Inn Richmond Airport (December 1994) and the Courtyard by
Marriott-Meadowlands (December 1993). The occupancy, ADR and REVPAR
information for the periods prior to the date of acquisition of the hotels
have been provided to management by the prior owners of such hotels.
(2) Source: Smith Travel Research. Smith Travel Research has not provided any
form of consultation, advice or counsel regarding any aspect of, and is in
no way associated with, the Offering. The "Midscale" category includes 22
hotel chains designated by Smith Travel Research as "Midscale" hotels. The
"Lower Upscale" category includes 17 hotel chains designated by Smith
Travel Research as "Lower Upscale" hotels. Two of the Current Hotels are
currently within the "Lower Upscale" category and ten of the Current
Hotels are currently within the "Midscale" category. The Company expects
that upon completion of its subsequent product and brand repositioning
program, eight of the Current Hotels will be within the "Lower Upscale"
category and seven of the Current Hotels will be within the "Midscale"
category.
(3) Determined by dividing total room revenue by total rooms sold.
(4) Determined by dividing total room revenue by total available rooms.
29
<PAGE>
Management believes that the full-service hotel segment, in particular, has
potential for improved performance as the economy continues to grow, and as
business and leisure travel activity increases. The Company targets the full-
service segment of the hotel industry due, in part, to its belief that the
approximate three- to five-year lead time from conception to completion of the
development of a full-service hotel represents a significant barrier to entry
that will limit near-term competition resulting from a new supply of guest
rooms. Management also believes that the full-service segment of the market
offers numerous opportunities to acquire hotels at attractive multiples of
cash flow, and at discounts to replacement value, including underperforming
hotels that may benefit from new management. The Company believes that a
substantial number of hotels meeting its investment criteria are available at
attractive prices in markets that the Company believes have attractive
economic characteristics. In order to enhance its acquisition capabilities,
the Company expects to continue to use borrowings available under the Line of
Credit to purchase hotels. The Company is currently negotiating with its Line
of Credit lenders to increase its borrowing limit from $100 million to $150
million.
GROWTH STRATEGIES
The Company will seek to maximize current returns to stockholders through
increases in Cash Available for Distribution and to increase long-term total
returns to stockholders through appreciation in value of the Common Stock. The
Company plans to achieve these objectives through participation in any
increased revenues from the Hotels, pursuant to the Participating Rent
payments under the Participating Leases and by the acquisition and selective
development of additional hotels.
ACQUISITIONS
The Company intends to continue to acquire additional hotels that meet one
or more of the investment criteria outlined below. The Company intends to
capitalize on AGHI's extensive resources and industry contacts available
through its hotel management business, sizable existing management portfolio,
and significant industry and national presence to access acquisition
opportunities not readily available to the market in general. As an example of
the benefits of this relationship, the Company's proposed acquisition of the
Radisson Arlington Heights arose out of AGHI's position as manager of that
hotel. In addition, the Company expects the adoption of a flexible lessee
and/or manager structure will result in additional acquisition opportunities
for the Company. The Company employs four professionals devoted exclusively to
hotel acquisitions.
The Company seeks to acquire additional hotels that meet one or more of the
following investment criteria:
. full-service hotels located in major metropolitan markets, including
hotels that are in close proximity to the airports that serve such
markets, as well as selective prominent hotels in major tourist areas;
. hotels that are underperforming and are candidates for implementation of
market repositioning, franchise conversion and turnaround strategies;
. hotels where the Company believes that necessary renovation or
redevelopment can be completed expeditiously and will result in an
immediate improvement in the hotel's revenues and an attractive return on
its renovation or redevelopment investment;
. hotels with sound operating fundamentals that are performing below their
potential because they are owned or controlled by financially distressed
owners or involuntary owners that may have acquired hotels through
foreclosure, including owners that lack the financial resources or the
commitment to make capital improvements appropriate for such hotels;
. hotels in attractive locations that the Company believes would benefit
significantly by changing franchises to a recognized brand affiliation
that is capable of increasing penetration in a particular market;
. nationally franchised hotels in locations with a relatively high demand
for rooms, relatively low supply of competing hotels and high barriers to
entry; and
30
<PAGE>
. portfolios of hotels that exhibit some or all of the other criteria
discussed above, where purchasing several hotels in one transaction
enables the Company to obtain a favorable price, or to purchase
attractive hotels that otherwise would not be available to the Company.
The Company's ability to continue to make acquisitions will depend, in part,
on its ability to access debt and equity financing. The Company expects to
continue to fund its acquisitions by utilizing funds available under its Line
of Credit, through the issuance of equity and OP Units and, subject to the
consent of the Line of Credit lenders, the assumption or issuance of debt.
Although as a public company the Company may have available alternative
sources of financing, no commitments relating to such financing currently
exist. Acquisitions entail risks that acquired hotels will fail to perform in
accordance with expectations and that estimates of the cost of improvements
necessary to reposition hotels will prove inaccurate, as well as general
investment risks associated with any new real estate investment. In addition,
future trends in the hotel industry may make future acquisitions economically
impractical. Moreover, there can be no assurance that the Company will be able
to acquire hotels that meet its investment criteria or that any such hotels'
operations can be successfully improved. See "Risk Factors--Real Estate
Investment Risks--General Risks" and "--Acquisition and Development Risks."
DEVELOPMENT
The Company's executive officers average approximately 17 years of
experience in the development and renovation of real estate. Under the
direction of the Company's executive officers, AGHI has developed seven hotel
properties, with an aggregate development cost of approximately $70 million,
and has completed redevelopment or repositioning projects at approximately 70
hotel properties, including both full- and limited-service hotels. Recently,
AGHI completed development of a 167-room Courtyard by Marriott in Boise, Idaho
and currently has one hotel under development, a 151-room Courtyard by
Marriott in Durham, North Carolina that is scheduled for completion in the
first quarter of 1997. The Company has an option and a right of first refusal
to purchase AGHI's interest in these option hotels (the "Option Hotels") for a
two-year period following the opening of each such hotel. See "The Hotels--
Options to Purchase and Rights of First Refusal." The Company anticipates that
most of the hotels it develops in the future will be in the full-service
market segment. Other than in connection with the limited expansion of
existing hotels, the Company may not engage in development activities without
the consent of the lenders under the Line of Credit.
The Company's development activities will be limited by the terms of the
Line of Credit and its ability to access financing as well as future trends in
the hotel industry. Like acquisitions, new project development is also subject
to numerous risks, including risks of construction delays or cost overruns
that may increase project costs. Accordingly, there can be no assurance that
the Company will be able to develop hotels that meet its investment criteria
or that any hotels can be successfully developed. See "Risk Factors--Real
Estate Investment Risks--Acquisition and Development Risks."
INTERNAL GROWTH
The Company believes that, based on the historical operating results of the
Current Hotels, the strength of the Company's and AGHI's existing management
teams and the structure of the Participating Leases, the Current Hotels
provide the Company with the opportunity for significant revenue growth. The
Company believes that it has structured its business relationships with AGHI
and the Lessee to provide incentives to operate and maintain the Current
Hotels in a manner that will increase revenue and the Cash Available for
Distribution. See "The Hotels--The Participating Leases" and "--The Management
Agreements."
AGHI has extensive experience in managing hotels through all stages of the
lodging industry cycle, including industry downturns. During the late 1980's
and early 1990's, AGHI managed over 140 different hotels for institutional
owners, a substantial number of whom acquired the hotels through foreclosure,
thus enhancing AGHI's extensive turnaround and repositioning experience as
well as its management depth and operating systems.
31
<PAGE>
The Company believes there is significant potential to increase revenues at
the Hotels and increase Participating Lease payments by continuing to employ
the following strategies:
. product repositioning through renovation and refurbishment of the hotels;
. brand repositioning through conversion to leading national franchise
affiliations;
. operational repositioning through property-level management and marketing;
and
. use of Participating Leases designed to capture increased revenues
attributable to improved marketing and yield management techniques that
AGHI will continue to employ at the Current Hotels and any additional
hotels acquired by the Company and managed by AGHI.
Product Repositioning. The Company believes that a regular program of
capital improvements, including replacement and refurbishment of FF&E at the
Current Hotels, as well as the renovation and redevelopment of selected
Hotels, is essential to maintaining the competitiveness of the hotels and
maximizing revenue growth. Consistent with this strategy, as of December 31,
1996, the Company had invested approximately $10.7 million (an average of
approximately $2,800 per guest room) in capital improvements and renovations
at the Current Hotels. The Company has budgeted for 1997 approximately $33.3
million (an average of approximately $8,600 per guest room) for additional
capital improvements and renovations at these hotels. In addition, the Company
has budgeted approximately $14.5 million (an average of approximately $19,000
per guest room) to be spent on capital improvements and renovations at the
four Proposed Acquisition Hotels during 1997 (see "Brand Repositioning"
below).
The Participating Leases require the Company to establish reserves of 4.0%
of total revenue for each of the Current Hotels (which, on a consolidated pro
forma basis for the twelve months ended September 30, 1996, represented
approximately 5.4% of room revenue), which will be utilized by the Lessee for
the replacement and refurbishment of FF&E and for other capital expenditures
designed to enhance the competitive position of the Current Hotels. The
Company and the Lessee will agree on the use of funds in this reserve and the
Company will have the right to approve the Lessee's annual and long-term
capital expenditure budgets. While the Company expects its reserves to be
adequate to fund recurring capital needs (including periodic renovations), the
Company may use Cash Available for Distribution in excess of distributions
paid (subject to federal income tax restrictions on the Company's ability to
retain earnings) or funds drawn under the Line of Credit to fund additional
capital improvements as necessary, including major renovations at the
Company's hotels.
Brand Repositioning. The Company believes an opportunity exists in certain
major U.S. markets to acquire underperforming hotels that currently operate as
independent hotels or under franchise affiliations that have limited brand
recognition and convert them to stronger, more nationally recognized brand
affiliations, such as Courtyard by Marriott, Crowne Plaza, DoubleTree, Hilton,
Holiday Inn, Holiday Inn Select, Wyndham and Westin brands, in order to
improve the operating performance at these hotels. Ten of the Current Hotels
are anticipated to undergo brand conversions during the next twelve months. It
is expected that the Holiday Inn Park Center Plaza will be converted to a
Crowne Plaza, the Holiday Inn Select-Madison will be converted to a Crowne
Plaza, the Days Inn Ocean City will be converted to a Hampton Inn, the Le
Baron Airport Hotel will be converted to a Wyndham Hotel, the Holiday Inn New
Orleans International Airport will be converted to a Holiday Inn Select, the
Holiday Inn Dallas DFW Airport South will be converted to a Holiday Inn
Select, the Holiday Inn Mission Valley will be converted to a Holiday Inn
Select, the Fred Harvey Albuquerque Airport Hotel will be converted to a
Wyndham Hotel, the Days Inn Lake Buena Vista will be converted to a Wyndham
Hotel and the Holiday Inn Resort Monterey will be converted to a Hilton Hotel.
Three of the Proposed Acquisition Hotels are expected to undergo brand
conversions upon their purchase by the Company. The French Quarter Suites
Hotel will be converted to a DoubleTree Guest Suites, the Four Points by
Sheraton will be converted to a Wyndham Garden Hotel, and the Sheraton Key
Largo will be converted to a Westin Resort. These brand conversions are
subject to, among other things, final franchisor and lender approval, and
there can be no assurance that such brand conversions and repositioning will
occur as planned. See "Risk Factors--Risks of Operating Hotels Under Franchise
Agreements; Approval for Brand Conversions."
32
<PAGE>
The Company's ability to utilize its brand repositioning strategies will
depend on its ability to access financing. The Company plans to use funds
available under the Line of Credit to implement its conversion and brand
repositioning strategy at certain of the Hotels. Substantial renovations of
hotels often disrupt the operations of those hotels due to hotel guest rooms
and common areas being out of service for extended periods. The Company,
however, attempts to schedule renovations and improvements during
traditionally lower occupancy periods in an effort to minimize disruption to
the hotels' operations. See "Risk Factors--Hotel Industry Risks--Risks of
Necessary Operating Costs and Capital Expenditures; Required Hotel
Renovations."
Operational Repositioning. The Company expects to achieve internal growth
through the application of AGHI's operating strategies, which stress
responsiveness and adaptability to changing market conditions to maximize
revenue growth. The Company's objectives include increasing REVPAR through
increases in occupancy and ADR through AGHI's continuing use of (i)
interactive yield management techniques, (ii) highly developed operating
systems and controls, (iii) targeted sales and marketing plans, (iv) proactive
financial management, (v) extensive training programs and (vi) an incentive-
based compensation structure.
Participating Leases Structure. The Participating Leases are designed to
allow the Company to participate in any increased revenues from the hotels in
which it invests. The Company also believes that AGHI's marketing and yield
management techniques contribute to maximizing revenues at the hotels managed
by it, thereby increasing the rent payable to the Company by the Lessee under
the Participating Leases. While the rent provisions of the Participating
Leases are revenue-based, such provisions have been developed with
consideration of the fixed and variable nature of hotel operating expenses and
changes in operating margins typically associated with increases in revenues.
See "The Hotels--The Participating Leases."
In an effort to align the interests of AGHI and the Lessee with the
interests of the Company's stockholders, the Participating Leases, the
Management Agreements and certain related agreements provide for the
following:
. the partners of the Lessee have (i) capitalized the Lessee with $500,000
in cash and (ii) pledged 275,000 OP Units to the Company to secure the
Lessee's obligations under the Participating Leases;
. until the Lessee's net worth equals the greater of (i) $6.0 million or
(ii) 17.5% of actual rent payments from hotels leased to the Lessee
during the preceding calendar year, the Lessee will not pay any
distributions to its partners (except for the purpose of permitting its
partners to pay taxes on the income attributable to them from the
operations of the Lessee and except for distributions relating to
interest or dividends received by the Lessee from cash or securities held
by it);
. management fees paid to AGHI by the Lessee include an incentive fee of up
to 2.0% of gross revenues based upon reaching certain gross revenue
targets at the Hotels;
. management fees payable by the Lessee to AGHI are subordinated to the
Lessee's rent obligations to the Company under the Participating Leases;
. defaults by the Lessee under each Participating Lease will result in a
cross-default of all other Participating Leases to which the Lessee is a
party allowing the Company to terminate each other lease;
. Messrs. Jorns and Wiles, who are stockholders of AGHI and are also
executive officers of the Company, have agreed to use 50% of the
dividends (net of tax liability) received by them from AGHI that are
attributable to AGHI's earnings from the management of hotels owned by
the Company (as determined in good faith by such officers) to purchase
additional interests in the Company; and
. the Board of Directors of the Company established a Leasing Committee,
consisting entirely of Independent Directors, that reviews not less
frequently than annually the Lessee's compliance with the terms of the
Participating Leases and reviews and approves the terms of each new
Participating Lease between the Company and the Lessee.
OTHER OPERATORS
The Company intends to selectively seek other qualified hotel brand
owner/operators and hotel management companies, in addition to the Lessee and
AGHI, to lease and/or manage certain of the Company's future hotel
acquisitions with the consent of its Line of Credit lenders. The Company
anticipates that it will lease hotels
33
<PAGE>
to independent hotel operators or, as a condition to entering into a
Participating Lease with the Lessee, will require the Lessee to retain an
independent hotel manager in connection with selected acquisitions, provided
such lessee or manager has, in the Company's judgment, (i) certain unique
knowledge of the hotel or the market in which the hotel operates, (ii) a
proven track record for implementing product, brand and operational
repositioning strategies, (iii) a significant national or regional lodging
industry reputation or (iv) substantial financial resources, In addition, the
Company will seek to develop lessee or management relationships with operators
which are capable of providing the Company with attractive acquisition
opportunities that satisfy its investment criteria. The Company believes that
the use of a flexible lessee or manager structure, coupled with the continued
expansion of its brand and franchise relationships, will result in additional
acquisition opportunities for the Company. Consistent with this strategy, the
Lessee has advised the Company that it expects to retain Wyndham Hotel
Corporation to manage the Company's Four Points by Sheraton hotel following
its acquisition by the Company. According to public filings, Wyndham Hotel
Corporation is a NYSE listed company which, as of December 31, 1996, operated
or franchised in excess of 75 hotels. The engagement of a lessee or manager
other than the Lessee or AGHI to operate the Company's hotels is subject to
the approval of the Line of Credit lenders.
FINANCING STRATEGY
Upon completion of this Offering and the purchase of the Proposed
Acquisition Hotels, the Company will have approximately $12.0 million of
outstanding indebtedness under the Line of Credit and will have outstanding
mortgage indebtedness encumbering four of the Hotels of approximately $36.9
million. In addition, in connection with the planned capital improvements and
renovations at the Current Hotels, the Company has budgeted to borrow
approximately $33.3 million under the Line of Credit and intends to borrow
under the Line of Credit approximately $14.5 million for capital improvements
and renovations at the Proposed Acquisition Hotels. While its organizational
documents contain no limitation on the amount of debt it may incur, the
Company, subject to the discretion of the Board of Directors, intends to
continue to limit consolidated indebtedness (measured at the time the debt is
incurred) to not more than 45.0% of the Company's investment in hotels
(calculated in the manner set forth under "Policies and Objectives with
Respect to Certain Activities--Financing"). The Company may from time to time
re-evaluate its debt limitation policy in light of then-current economic
conditions, relative costs of debt and equity capital, market values of its
hotels, acquisition and expansion opportunities and other factors.
As a publicly owned hotel REIT, the Company believes that it has access to a
wide variety of financing sources to fund acquisitions, such as the ability to
issue several types of public and private debt, equity and hybrid securities,
as well as the ability to utilize OP Units as acquisition consideration. The
Line of Credit is currently limited to the maximum principal amount of $100
million and, among other limitations, to 40.0% of the value or cost of the
hotels which secure such line. The Line of Credit is currently secured by a
first mortgage lien on fourteen of the Current Hotels and is expected to be
secured by two of the Proposed Acquisition Hotels. Subject to the limitations
described above and other limitations contained in the Line of Credit, the
Company may borrow additional amounts from the same or other lenders in the
future or may issue corporate debt securities in public or private offerings.
Certain of such additional borrowings may be secured by hotels owned by the
Company. The Company is currently negotiating with its Line of Credit lenders
to increase the borrowing limit to $150 million. There can be no assurance
that the Company will successfully negotiate and consummate the proposed
amendment to the Line of Credit. See "The Hotels--Line of Credit."
THE OPERATING PARTNERSHIP
The Company owns an approximate 81.4% interest in the Operating Partnership,
a Delaware limited partnership. The Company holds its interest in the
Operating Partnership through two wholly owned subsidiaries, AGH GP and AGH
LP. AGH GP is the sole general partner of the Operating Partnership and owns a
1.0% general partnership interest in the Operating Partnership. Through AGH
GP, the Company controls the Operating Partnership and its assets. AGH LP is
one of the Operating Partnership's limited partners (the "Limited Partners")
and owns an approximate 80.4% limited partnership interest in the Operating
Partnership. In their capacity as such, the Limited Partners have no authority
to transact business for, or participate in the management, activities or
decisions of, the Operating Partnership. The Operating Partnership owns,
directly or
34
<PAGE>
through one or more subsidiary partnerships or limited liability companies
(the "Subsidiary Partnerships"), all of the Current Hotels and leases such
hotels to the Lessee. The Operating Partnership owns, directly or indirectly,
a 99.9% interest in each Subsidiary Partnership. Upon completion of the
Offering, the Company will own indirectly through AGH GP and AGH LP an
approximate 87.9% interest in the Operating Partnership, consisting of a 1.0%
general partnership interest and an approximate 86.9% limited partnership
interest.
DEVELOPMENTS SINCE THE INITIAL PUBLIC OFFERING
Set forth below is a summary of the significant developments involving the
Company since the IPO:
Acquired Hotels
The Company has invested approximately $58.0 million in the purchase of the
Acquired Hotels containing an aggregate 846 guest rooms, representing a more
than 28% increase in the Company's Portfolio since the IPO, based upon the
number of guest rooms. Set forth below are summary descriptions of the
Acquired Hotels:
Days Inn Lake Buena Vista--Orlando, Florida
On October 22, 1996, the Company acquired the 490-room Days Inn Lake Buena
Vista for an aggregate purchase price of approximately $30.5 million that was
paid as follows: (i) $30.0 million in cash and (ii) $500,000 through the
issuance of 25,397 shares of restricted Common Stock. In connection with the
acquisition, the Company also paid an aggregate of approximately $2.4 million
to acquire a license and an association membership related to the hotel's
African safari theme (as described below) and for certain hotel related design
services. The Days Inn Lake Buena Vista was developed in 1985 and is located
approximately one-quarter mile south of Walt Disney World's Lake Buena Vista
entrance. The hotel contains 94 suites and approximately 4,200 square feet of
meeting and convention space. The Company has budgeted approximately $9.3
million to complete an extensive renovation program to upgrade the entire
hotel and to reposition the hotel as a Wyndham Hotel during the fourth quarter
of 1997. The renovations will include the addition of approximately 9,000
square feet of convention space and the redesign of the exterior of the hotel
to reflect an African safari theme that will tie in with Disney's Animal
Kingdom theme park, which is expected to open in 1998.
Holiday Inn Resort Monterey--Monterey, California
On November 21, 1996, the Company acquired the 204-room Holiday Inn Resort
Monterey for approximately $15.5 million in cash. This hotel, which was
constructed in 1971, is located in the major tourist destination of Monterey,
California. The Company has budgeted approximately $3.9 million in renovations
to upgrade the hotel's guest rooms and public areas in order to reposition the
hotel as a Hilton Hotel during the fourth quarter of 1997.
Hilton Hotel-Durham--Durham, North Carolina
On January 8, 1997, the Company acquired the 152-room Hilton Hotel--Durham
for approximately $12.1 million in cash. The hotel, which was constructed in
1987, is located in northwest Durham, one mile from Duke University, Duke
Medical Center and Research Triangle Park. During 1997 the Company expects to
add 42 guest rooms to the hotel at an anticipated cost of approximately $2.4
million. However, there can be no assurance that such hotel expansion will
occur. See "Risk Factors--Conflicts of Interest--Conflicts Relating to
Continued Ownership of Other Hotel Properties."
Proposed Acquisition Hotels
The Company has entered into contracts to purchase the Proposed Acquisition
Hotels for an aggregate purchase price of approximately $71.7 million. The
closing of the purchase of each of the Proposed Acquisition Hotels is subject
to satisfactory completion of various closing conditions. Accordingly, no
assurance can be given that the Company will acquire any or all of the
Proposed Acquisition Hotels. See "Risk Factors--Risk That Proposed Acquisition
Hotels Will Not Be Acquired." If the Proposed Acquisition Hotels are acquired,
the Company will have invested approximately $129.7 million in hotel
acquisitions since the IPO and will own a portfolio of 20 hotels containing
approximately 4,600 guest rooms. This represents a more than 50% increase in
the Company's portfolio since the IPO based upon the number of guest rooms.
Set forth below are summary descriptions of the Proposed Acquisition Hotels:
35
<PAGE>
Portfolio Purchase. In December 1996, the Company entered into a series of
agreements to acquire a portfolio of hotels, including the Four Points by
Sheraton, the Sheraton Key Largo and the French Quarter Suites Hotel for an
aggregate purchase price of approximately $59.1 million. The purchase price
for the Portfolio Purchase will be payable as follows: (i) approximately $49.5
million in cash and (ii) the assumption of approximately $9.6 million of
mortgage indebtedness secured by the French Quarter Suites Hotel.
Four Points by Sheraton--Marietta, Georgia
In December 1996, the Company entered into an agreement to acquire the Four
Points by Sheraton as part of the Portfolio Purchase. The Company has
allocated a cash purchase price of $17.0 million to the Four Points by
Sheraton. The 219-room hotel was built in 1985 and is located in Marietta, a
northwestern suburb of Atlanta. During 1997, the Company expects to invest
approximately $2.8 million to renovate the hotel and to reposition the hotel
to operate as a Wyndham Garden Hotel(R). The Company expects to lease the
hotel to the Lessee which, in turn, is expected to retain Wyndham Hotel
Corporation to manage the hotel.
Sheraton Key Largo--Key Largo, Florida
In December 1996 the Company entered into an agreement to acquire the
Sheraton Key Largo as part of the Portfolio Purchase. The Company has
allocated a cash purchase price of $26.1 million to the Sheraton Key Largo.
This hotel, which is located on US Highway 1 in Key Largo, was developed in
1985 as a 200-room resort complex situated on a private beach on the western
coastline of the Florida Keys. The Company intends to invest approximately
$3.0 million in improvements to the hotel and to reposition the hotel to
operate as a Westin Resort. The Company expects that the hotel will be leased
to the Lessee and will be managed by AGHI.
French Quarter Suites Hotel--Atlanta, Georgia
In December 1996, the Company entered into an agreement to acquire the
French Quarter Suites Hotel as part of the Portfolio Purchase. The Company has
allocated a $16.0 million purchase price to the French Quarter Suites Hotel
that will be payable as follows: (i) approximately $6.4 million in cash and
(ii) the assumption of approximately $9.6 million in mortgage indebtedness,
which bears interest at the rate of 9.75% per annum. The French Quarter Suites
Hotel is located in the Cumberland/Galleria area of northwest Atlanta. The
hotel was constructed in 1985 and contains a total of 155 guest rooms, of
which 144 are suites. During 1997, the Company plans to invest approximately
$2.8 million to complete an extensive renovation of the hotel and to
reposition the hotel to operate as a DoubleTree Guest Suites. The Company
expects that the hotel will be leased to the Lessee and will be managed by
AGHI.
Radisson Arlington Heights--Arlington Heights, Illinois
In January 1997, the Company entered into a contract to purchase the
Radisson Arlington Heights for approximately $11.5 million that will be
payable as follows: (i) $3.3 million in cash and the (ii) assumption of a one-
year $8.2 million first mortgage note, which bears interest at the rate of
7.5% per annum. In addition, commencing on the earlier of the fourth year
anniversary of the completion of initial renovations of the hotel or January
1, 2003 (the "Arlington Buyout Date"), the seller will have the right to
receive a 25% profits interest in the net cash flow and the net proceeds from
certain capital transactions generated at the hotel; provided however the
Company has the option to purchase the profits interest, for an amount equal
to 25% of the fair market value of the hotel less the aggregate of $11.2
million plus the cost of any additional expansion of the hotel at any time
after the fourth anniversary of the completion of the initial renovations at
the hotel (subject to a 30-month extension in certain circumstances). See "The
Hotels--Proposed Acquisition Hotels--Radisson Arlington Heights." This future
cash flow right was granted in order to compensate the sellers for the
expected improvement in the hotel's performance that is not fully reflected in
the historical operating results. The Radisson Arlington Heights, which is
currently managed by AGHI, is a 201-room full-service hotel constructed in
1981. It is located in suburban northwest Chicago approximately 8.5 miles from
O'Hare International Airport. During 1997, the Company
36
<PAGE>
intends to complete a $6.0 million renovation of the hotel, which is expected
to include the addition of at least 31 guest rooms. The Company expects that
the hotel will be leased to the Lessee and will continue to be managed by
AGHI.
In addition to the planned purchase of the Proposed Acquisition Hotels, as
part of its ongoing business, the Company continually engages in discussions
with public and private real estate entities regarding possible portfolio or
single asset acquisitions.
WYNDHAM ALLIANCE
On January 9, 1997, the Company entered into an agreement with Wyndham
relating to a strategic alliance between Wyndham and the Company. Pursuant to
the Wyndham Alliance, (i) in connection with the conversion of a hotel owned
by the Company to the Wyndham brand, Wyndham will acquire Common Stock or OP
Units (the "Alliance Securities"), in an amount equal to nine times the
estimated franchise fee payable to Wyndham during the first twelve months such
hotel is operated as a Wyndham brand, (ii) Wyndham will have the non-exclusive
right (but not the obligation) to franchise new hotel acquisitions that the
Company has determined should undergo a brand conversion and (iii) the Company
will be given the opportunity to bid on any hotels to be acquired by Wyndham
that it intends to sell to a REIT or any hotel with respect to which it
intends to enter into a sale or leaseback arrangement with a REIT
simultaneously with the hotel's purchase. Wyndham's purchase of interests in
the Company pursuant to the Wyndham Alliance is subject to the satisfaction of
certain conditions, including the consent of Wyndham's lenders, and will be at
a price per share of Common Stock or OP Unit equal to the weighted average
closing sale price of the Common Stock on the NYSE for the 30-trading days
preceding the earlier of (i) Wyndham's offer to convert a Company hotel to a
Wyndham brand or (ii) the Company's announcement of its proposed acquisition
of a hotel that is ultimately converted to a Wyndham brand. Any such purchase
of Alliance Securities will occur within 30 days after a Company hotel is
converted to a Wyndham brand. No purchase of Alliance Securities will occur in
connection with the planned conversion of the Fred Harvey Albuquerque Airport
Hotel, the Days Inn Lake Buena Vista and the Four Points by Sheraton to
Wyndham brands. See "The Company--Wyndham Alliance." Within 30 days after the
conversion of the Le Baron Airport Hotel to a Wyndham Hotel brand, Wyndham has
agreed, subject to certain conditions, to purchase 112,969 shares of Common
Stock at the consent of a negotiated price of $22.13 per share of Common
Stock. The Wyndham Alliance will expire on December 31, 1999.
CAPITAL IMPROVEMENTS, RENOVATIONS AND BRAND CONVERSIONS
The Company believes a regular program of capital improvements, including
replacement and refurbishment of FF&E at the Current Hotels, as well as the
renovation and redevelopment of selected Hotels, is essential to maintaining
the competitiveness of the Hotels and maximizing revenue growth. Consistent
with this strategy, as of December 31, 1996, the Company had invested
approximately $10.7 million (an average of approximately $2,800 per guest
room) for capital improvements and renovations at the Current Hotels. The
Company has budgeted for 1997 approximately $33.3 million (an average of
approximately $8,600 per guest room) for additional renovations and capital
improvements at these hotels. In addition, the Company has budgeted
approximately $14.5 million (an average of approximately $19,000 per guest
room) to be spent on renovations and capital improvements at the four Proposed
Acquisition Hotels during 1997. The Company attempts to schedule renovations
and improvements during traditionally lower occupancy periods in an effort to
minimize disruptions to the hotel's operations. In addition, the Company has
agreements in place that will permit the Company to convert, by the first
quarter of 1998, ten of the Current Hotels to new brand affiliations with
nationally recognized hotel companies.
37
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering after payment of estimated
expenses incurred in connection with the Offering, are estimated to be
approximately $123.5 million (approximately $142.3 million if the
Underwriters' overallotment is exercised in full). The Company will contribute
the net proceeds from the Offering to the Operating Partnership in exchange
for additional interests therein, and following such contribution will own an
approximate 87.9% interest in the Operating Partnership (an approximate 91.5%
interest if the Underwriters' overallotment option is exercised in full). The
Operating Partnership intends to use such net proceeds as follows: (i)
approximately $80.0 million to repay indebtedness borrowed under the Line of
Credit; (ii) approximately $700,000 to pay fees and expenses incurred in
connection with the anticipated expansion of the borrowing limit under the
Line of Credit to $150 million; (iii) approximately $42.8 million to pay a
substantial portion of the cash part of the purchase price of the Proposed
Acquisition Hotels; and (iv) the balance, if any, for general corporate and
working capital purposes. The Company's borrowings under the Line of Credit,
with accrued interest, totalled approximately $57.5 million as of December 31,
1996, which amounts have been borrowed principally to purchase the Acquired
Hotels and to make renovations and capital improvements to certain of the
Current Hotels. The estimated $80.0 million balance under the Line of Credit
at the time of the closing of the Offering consists of the approximately $57.5
million of outstanding borrowings at December 31, 1996 plus approximately
$12.1 million of borrowings in connection with the Company's January 8, 1997
acquisition of the Hilton Hotel--Durham and $10.0 million of borrowings
expected to be incurred during January 1997 in connection with the Company's
capital improvement program. Borrowings under the Line of Credit bear interest
at a 30-day, 60-day or 90-day LIBOR (5.50%, 5.53% and 5.56% at December 31,
1996), at the option of the Company, plus 1.85% per annum, and mature on July
31, 1999. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
Pending the uses described above, the net proceeds will be invested in
interest-bearing accounts and short-term, interest-bearing securities, which
are consistent with the Company's intention to qualify for taxation as a REIT.
Such investments may include, for example, government and government agency
securities, certificates of deposit, interest-bearing bank deposits and
mortgage loan participations.
38
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION POLICY
The Company's Common Stock began trading on the NYSE on July 26, 1996 under
the symbol "AGT." On January 9, 1997, the last reported sale price per share
of Common Stock on the NYSE was $24 1/8 and there were 53 holders of record of
the Company's Common Stock. The following table sets forth the quarterly high
and low closing sale prices per share of Common Stock reported on the NYSE and
the cash distributions declared per share by the Company with respect to each
such period.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
CASH
DISTRIBUTIONS
DECLARED
HIGH LOW PER SHARE
---- ------- -------------
<S> <C> <C> <C>
CALENDAR 1996
Third Quarter, from July 26, 1996.............. $19 $17 1/2 $0.2476(1)
Fourth Quarter................................. 23 3/4 18 7/8 $0.4075(2)
CALENDAR 1997
First Quarter (through January 9, 1997)........ 24 3/8 23 1/4 N/A
</TABLE>
- --------
(1) Represents a pro rata distribution of the Company's initial quarterly
distribution of $0.4075 per share of Common Stock, based on a partial
calendar quarter beginning on July 31, 1996 (the closing date of the IPO)
through September 30, 1996.
(2) On December 18, 1996, the Company declared a distribution of $0.4075 per
share relating to the fourth quarter of 1996 that is payable on January
30, 1997 to stockholders of record as of December 30, 1996. Purchasers of
Common Stock in the Offering will not receive the fourth quarter 1996
dividend in respect of the shares of Common Stock offered hereby.
Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the Company's financial condition, its capital
requirements, the annual distribution requirements under the REIT provisions
of the Code and such other factors as the Board of Directors deems relevant.
There can be no assurance that any such distributions will be made by the
Company. For a discussion of the tax treatment of distributions to holders of
shares of Common Stock, see "Federal Income Tax Considerations."
Distributions by the Company to the extent of its current and accumulated
earnings and profits for federal income tax purposes generally will be taxable
to stockholders as ordinary dividend income. Distributions in excess of
current and accumulated earnings and profits will be treated as a non-taxable
reduction of the stockholder's basis in its shares of Common Stock to the
extent thereof, and thereafter as taxable gain. Distributions that are treated
as a reduction of the stockholder's basis in its shares of Common Stock will
have the effect of deferring taxation until the sale of the stockholder's
shares. The Company has determined that, for federal income tax purposes,
approximately 18% of the $0.6551 per share distribution paid for 1996
represented a return of capital to the stockholders. No assurances can be
given regarding what percent of future distributions will constitute return of
capital for federal income tax purposes.
39
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 on a historical basis and on a pro forma basis, assuming
completion of the Offering and the use of the net proceeds from the Offering
as described in "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
HISTORICAL PRO FORMA
------------ ------------
<S> <C> <C>
Long-term debt..................................... $ 21,297,508 $ 37,076,073
Minority interest in Operating Partnership(1)...... 29,303,428 33,963,794
Stockholders' equity:
Common Stock, $0.01 par value per share,
100,000,000 shares authorized, 8,262,008 shares
issued and outstanding, and 13,787,405 shares
issued and outstanding, as adjusted(2).......... 82,620 137,874
Additional paid-in capital....................... 128,163,784 247,437,852
Unearned officers' compensation.................. (872,708) (872,708)
Earnings in excess of distributions.............. 25,702 25,702
------------ ------------
Total stockholders' equity..................... 127,399,398 246,728,720
------------ ------------
Total Capitalization........................... $178,000,334 $317,768,587
============ ============
</TABLE>
- --------
(1) At September 30, 1996, the Company owned an approximate 81.4% interest in
the Operating Partnership. If the acquisition of the Acquired Hotels, the
consummation of the Offering and related transactions had occurred on
September 30, 1996, the Company would have owned an approximate 87.9%
interest in the Operating Partnership.
(2) Includes (i) 162,405 shares of restricted Common Stock issued in
connection with the acquisition of certain Hotels, (ii) 50,000 shares of
restricted Common Stock, of which 5,000 were vested as of that date,
granted to the Company's executive officers as stock awards and (iii)
1,436 shares of restricted Common Stock issued on October 1, 1996 to
certain of the Company's directors under the Directors' Plan. Excludes (i)
1,896,996 shares of Common Stock to be issuable at the Company's option
upon the exchange of OP Units issued in the Formation Transactions, (ii)
850,000 reserved but unissued shares of Common Stock under the 1996 Plan,
including 360,000 shares as to which options are outstanding and
(iii) 98,564 reserved but unissued shares of Common Stock under the
Directors' Plan, including 40,000 shares as to which options are
outstanding. See "Management--Stock Incentive Plans," "Formation
Transactions" and "Partnership Agreement--Exchange Rights."
40
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth (1) selected historical financial data for
the Company as of September 30, 1996 and for the period from July 31, 1996
through September 30, 1996 and selected pro forma consolidated financial data
for the Company as of and for the year ended December 31, 1995, the twelve
months ended September 30, 1996 and the nine months ended September 30, 1996
and 1995, (2) selected historical combined financial data for the Initial
Hotels for each of the years in the five-year period ended December 31, 1995,
(3) selected historical financial data for the Lessee for the period from July
31, 1996 through September 30, 1996 and pro forma financial data for the
Lessee for the year ended December 31, 1995, the twelve months ended September
30, 1996 and the nine months ended September 30, 1996 and 1995, (4) selected
historical combined financial data for the AGH Predecessor Hotels (as defined
in the Glossary) for each of the years in the three-year period ended December
31, 1995, and the period from January 1, 1996 through July 30, 1996 and (5)
selected historical combined financial data for the Other Initial Hotels for
each of the years in the five-year period ended December 31, 1995. The
selected historical combined financial data of the AGH Predecessor Hotels for
the periods presented and the selected historical combined financial data of
the Other Initial Hotels (as defined in the Glossary) for each of the years in
the three-year period ended December 31, 1995 have been derived from the
historical financial data of the Company, the selected historical combined
financial statements and notes thereto of the AGH Predecessor Hotels and the
Other Initial Hotels audited by Coopers & Lybrand L.L.P., independent
accountants, whose reports with respect thereto are included elsewhere in this
Prospectus. The selected historical financial data of the Lessee and the
selected historical combined financial data of the Other Initial Hotels for
each of the years in the two-year period ended December 31, 1992 have been
derived from unaudited internal statements of operations of the Lessee and the
Other Initial Hotels. In the opinion of management, the unaudited financial
data include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial information set forth
therein.
The pro forma and other data are presented as if the IPO and related
Formation Transactions, the acquisition of all Hotels and the consummation of
the Offering and the application of the net proceeds therefrom had occurred on
January 1, 1995 and therefore incorporate certain assumptions that are
included in the Notes to the Pro Forma Statements of Operations included
elsewhere in this Prospectus. The pro forma operating data for the Lessee is
presented to reflect the pro forma operations of the Lessee for the period
presented, whose operations are the source of the Lessee's Participating Lease
payments to the Company. The pro forma balance sheet data is presented as if
the acquisition of the Acquired Hotels and the Proposed Acquisition Hotels and
the consummation of the Offering had occurred on September 30, 1996. The pro
forma statements of operations do not include income on the pro forma cash and
cash equivalents in accordance with the rules and regulations of the
Commission.
The pro forma information does not purport to represent what the Company's
financial position or the Company's or the Lessee's results of operations
would have been if the IPO and related Formation Transactions, the acquisition
of all Hotels and the consummation of the Offering had, in fact, occurred on
such dates, or to project the Company's or the Lessee's financial position or
results of operations at any future date or for any future period.
The historical financial information includes the operations of the AGH
Predecessor Hotels for the periods owned by affiliates of AGHI. The Courtyard
by Marriott-Meadowlands was acquired in December 1993; the Hotel Maison de
Ville was acquired in August 1994; the Hampton Inn Richmond Airport was
acquired in December 1994 and the Holiday Inn Dallas DFW Airport West was
acquired in June 1995. Complete historical financial information for each of
the AGH Predecessor Hotels prior to their respective acquisition dates is
unavailable. The historical financial information for the Other Initial Hotels
does not include information related to the Days Inn Ocean City for each of
the years in the two-year period ended December 31, 1992 and the Holiday Inn
Mission Valley for the year ended December 31, 1991. Historical financial
information for the Other Initial Hotels for these periods is unavailable.
Therefore, historical financial information for the Other Initial Hotels does
not include information for the above hotels prior to the dates previously
described.
The following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and all of the financial statements and notes thereto included
elsewhere in this Prospectus.
41
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA(1)
--------------------------------------------------------------
HISTORICAL TWELVE MONTHS NINE MONTHS NINE MONTHS
JULY 31, 1996 YEAR ENDED ENDED ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 1996 1995 1996
------------------ ------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Participating Lease
revenue(2)............. $ 5,218,526 $ 39,969,440 $ 44,655,229 $ 30,470,441 $ 35,156,230
Interest income......... 32,227 31,500 31,500 23,625 23,625
------------- ------------ ------------ ------------ ------------
Total revenue........ 5,250,753 40,000,940 44,686,729 30,494,066 35,179,855
------------- ------------ ------------ ------------ ------------
Depreciation............ 1,008,874 11,167,283 9,847,421 8,375,461 7,321,321
Amortization............ 116,572 1,075,459 1,075,459 805,032 805,032
Real estate and personal
property taxes and
property insurance..... 511,115 4,527,256 4,727,617 3,283,773 3,434,043
General and
administrative(3)...... 194,226 1,700,000 1,700,000 1,275,000 1,275,000
Ground lease expense.... 218,000 881,217 962,993 660,913 722,245
Amortization of unearned
officers'
compensation(4)........ 14,792 88,750 88,750 66,563 66,563
Interest expense........ 347,622 3,119,220 3,119,220 2,334,447 2,334,447
------------- ------------ ------------ ------------ ------------
Total expenses....... 2,411,201 22,559,185 21,521,460 16,801,189 15,958,651
------------- ------------ ------------ ------------ ------------
Income before minority
interest............... 2,839,552 17,441,755 23,165,269 13,692,877 19,221,204
Minority interest(5).... 545,102 2,109,544 2,801,792 1,656,125 2,324,765
------------- ------------ ------------ ------------ ------------
Net income applicable to
common stockholders.... $ 2,294,450 $ 15,332,211 $ 20,363,477 $ 12,036,752 $ 16,896,439
============= ============ ============ ============ ============
Net income per common
share.................. $ 0.29 $ 1.11 $ 1.48 $ 0.87 $ 1.23
============= ============ ============ ============ ============
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 13,787,405 13,787,405 13,787,405 13,787,405
============= ============ ============ ============ ============
<CAPTION>
HISTORICAL PRO FORMA(1)
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 4,186,235 $ 8,853,733
Investment in hotel
properties, net........ 175,613,813 308,547,568
Total assets............ 187,860,092 327,853,345
Debt.................... 19,297,508 37,076,073
Minority interest in
Operating Partnership.. 29,303,428 33,963,794
Stockholders' equity.... 127,399,398 246,728,720
<CAPTION>
PRO FORMA(1)
--------------------------------------------------------------
HISTORICAL NINE MONTHS NINE MONTHS
JULY 1, 1996 YEAR ENDED TWELVE MONTHS ENDED ENDED
THROUGH SEPTEMBER 30, ENDED SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 SEPTEMBER 30, 1996 1995 1996
------------------ ------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds From
Operations(6).......... $ 3,109,620 $ 25,148,252 $ 29,019,360 $ 19,398,782 $ 23,331,881
Cash Available for
Distribution(7) 2,737,710 21,895,596 25,504,647 16,904,569 20,575,611
Net cash provided by
operating
activities(8).......... 4,687,875 29,773,247 34,176,899 29,751,060 27,414,121
Net cash used in
investing
activities(9).......... (130,226,886) (4,864,614) (5,162,745) (3,709,152) (4,007,283)
Net cash provided by
(used in) financing
activities(10)......... 129,725,146 (26,222,705) (26,222,705) (19,667,028) (19,667,028)
Weighted average number
of shares of Common
Stock and of OP Units
outstanding............ 9,899,327 15,684,401 15,684,401 15,684,401 15,684,401
</TABLE>
See notes on page 44.
42
<PAGE>
LESSEE
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA(1)(11)
HISTORICAL ------------------------------------------------------
JULY 1, 1996 TWELVE MONTHS NINE MONTHS NINE MONTHS
THROUGH YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995 1996
------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Room revenue............ $11,185,140 $86,924,872 $94,322,228 $67,087,557 $74,484,913
Food and beverage
revenue................ 2,982,331 27,119,189 27,167,284 20,133,742 20,181,837
Other revenue........... 623,824 7,571,300 7,579,125 5,507,498 5,515,323
----------- ----------- ----------- ----------- -----------
Total revenue........ 14,791,295 121,615,361 129,068,637 92,728,797 100,182,073
Hotel operating
expenses............... 9,360,407 81,347,270 83,876,691 61,044,842 64,128,628
Depreciation and
amortization........... 10,500 63,000 63,000 47,250 47,250
Interest expense........ 5,250 31,500 31,500 23,625 23,625
Other expenses.......... 17,448 154,151 392,217 35,659 273,725
Participating Lease
expenses(2)............ 5,218,526 39,969,440 44,655,229 30,470,441 35,156,230
----------- ----------- ----------- ----------- -----------
Net income.............. $ 179,164 $ 50,000 $ 50,000 $ 1,106,980 $ 552,615
=========== =========== =========== =========== ===========
</TABLE>
INITIAL HOTELS
SELECTED HISTORICAL COMBINED FINANCIAL DATA(12)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Room revenue............ $27,963,802 $30,376,150 $36,829,877 $43,541,206 $53,756,926
Food and beverage
revenue................ 13,526,143 13,597,748 15,453,080 16,378,861 17,717,760
Other revenue........... 2,434,535 2,528,364 4,680,010 3,392,275 4,147,900
----------- ----------- ----------- ----------- -----------
Total revenue........ 43,924,480 46,502,262 56,962,967 63,312,342 75,622,586
Hotel operating
expenses............... 32,251,012 35,083,148 40,130,782 44,349,278 51,198,375
Depreciation and
amortization........... 2,575,564 6,329,770 5,847,629 5,986,460 8,131,244
Interest expense........ 3,802,670 4,819,749 4,667,281 4,771,483 6,307,202
Other expenses.......... 1,946,193 617,334 2,543,235 2,996,568 3,132,865
----------- ----------- ----------- ----------- -----------
Revenues over (under)
expenses(13)........... $ 3,349,041 $ (347,739) $ 3,774,040 $ 5,208,553 $ 6,852,900
=========== =========== =========== =========== ===========
</TABLE>
AGH PREDECESSOR HOTELS
SELECTED HISTORICAL COMBINED FINANCIAL DATA(14)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEVEN MONTHS
--------------------------------- ENDED
1993 1994 1995 JULY 30, 1996
-------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Room revenue................. $ 17,941 $3,431,654 $ 9,020,479 $6,770,568
Food and beverage revenue.... 6,158 552,697 1,293,238 1,175,807
Other revenue................ 1,448 223,211 568,415 432,750
-------- ---------- ----------- ----------
Total revenue............. 25,547 4,207,562 10,882,132 8,379,125
Hotel operating expenses..... 8,741 3,173,721 7,565,824 5,682,473
Depreciation and
amortization................ 46,982 364,513 2,480,054 645,195
Interest expense............. 430,535 1,572,244 1,129,060
Other expenses............... 831 525,287 754,193 443,295
-------- ---------- ----------- ----------
Net income (loss)......... $(31,007) $ (286,494) $(1,490,183) $ 479,102
======== ========== =========== ==========
</TABLE>
See notes on page 44.
43
<PAGE>
OTHER INITIAL HOTELS
SELECTED HISTORICAL COMBINED FINANCIAL DATA(15)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------------ JULY 30,
1991 1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Room revenue............ $27,963,802 $30,376,150 $36,811,936 $40,109,552 $44,736,447 $23,779,491
Food and beverage
revenue................ 13,526,143 13,597,748 15,446,922 15,826,164 16,424,522 8,260,931
Other revenue........... 2,434,535 2,528,364 4,678,562 3,169,064 3,579,485 1,827,603
----------- ----------- ----------- ----------- ----------- -----------
Total revenue........ 43,924,480 46,502,262 56,937,420 59,104,780 64,740,454 33,868,025
Hotel operating
expenses............... 32,251,012 35,083,148 40,122,041 41,175,557 43,632,551 22,175,694
Depreciation and
amortization........... 2,575,564 6,329,770 5,800,647 5,621,947 5,651,190 2,302,865
Interest expense........ 3,802,670 4,819,749 4,667,281 4,340,948 4,734,958 2,161,521
Other expenses.......... 1,946,193 617,334 2,542,404 2,471,281 2,378,672 1,592,414
----------- ----------- ----------- ----------- ----------- -----------
Revenues over (under)
expenses............... $ 3,349,041 $ (347,739) $ 3,805,047 $ 5,495,047 $ 8,343,083 $ 5,635,531
=========== =========== =========== =========== =========== ===========
</TABLE>
(1) The pro forma information does not purport to represent what the Company's
financial position or the Company's and the Lessee's results of operations
would actually have been if the IPO and related Formation Transactions,
the acquisitions of all Hotels and the consummation of the Offering and
the application of the net proceeds therefrom, in fact, occurred on such
dates, or to project the Company's financial position or the Company's and
Lessee's results of operations at any future date or for any future
period.
(2) Pro forma amounts represent lease payments from the Lessee to the
Operating Partnership pursuant to the Participating Leases calculated on a
pro forma basis by applying the rent provisions of the Participating
Leases to the revenues of the Hotels. The departmental revenue thresholds
in the Participating Leases are seasonally adjusted for interim periods
and certain of the Participating Lease formulas adjust beginning in
January 1997 or January 1998. See "The Hotels--The Participating Leases."
(3) Pro forma amounts represent salaries and wages, professional fees,
directors' and officers' insurance, allocated rent, supplies and other
operating expenses to be paid by the Company. These amounts are based on
historical general and administrative expenses as well as probable 1997
expenses.
(4) Represents amortization of unearned officer's compensation, represented by
an aggregate of 50,000 shares of restricted Common Stock issued to
executive officers, which shares vest 10.0% at the date of grant (5,000
shares at $17.75 per share, the price per share of Common Stock issued in
the IPO).
(5) Calculated as 19.2% for the historical period from July 31, 1996 through
September 30, 1996. Calculated as 12.1% of income before minority interest
for all pro forma periods presented.
(6) Represents Funds From Operations of the Company. The items added back to
net income applicable to common stockholders have been adjusted by the
Company's ownership percentage in the Operating Partnership of 80.8% for
the historical period from July 31, 1996 through September 30, 1996 and
87.9% for all pro forma periods presented. The following table computes
Funds From Operations under the NAREIT definition. Funds From Operations
consists of net income applicable to common stockholders (computed in
accordance with generally accepted accounting principles) excluding gains
(losses) from debt restructuring and sales of property (including
furniture and equipment) plus real estate related depreciation and
amortization (excluding amortization of deferred financing costs) and
after adjustments for unconsolidated partnerships and joint ventures. The
Company considers Funds From Operations to be an appropriate measure of
the performance of an equity REIT. Funds From Operations should not be
considered as an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance or to cash flows from operating, investing or financing
activities as a measure of liquidity. Although Funds From Operations has
been calculated in accordance with the NAREIT definition, Funds From
Operations as presented may not be comparable to other similarly titled
measures used by other REITs. Funds From Operation does not reflect cash
expenditures for capital improvements or principal amortization of
indebtedness on the Hotels.
Notes continued on following page.
44
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA (1)
------------------------------------------------------
HISTORICAL
JULY 31, 1996 TWELVE MONTHS NINE MONTHS NINE MONTHS
THROUGH YEAR ENDED ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995(1) 1996(1) 1995 1996(1)
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net income applicable to
common stockholders.... $2,294,450 $15,332,210 $20,363,477 $12,036,751 $16,896,439
Depreciation............ 815,170 9,816,042 8,655,883 7,362,031 6,435,442
---------- ----------- ----------- ----------- -----------
Funds From Operations... $3,109,620 $25,148,252 $29,019,360 $19,398,782 $23,331,881
========== =========== =========== =========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 13,787,405 13,787,405 13,787,405 13,787,405
========== =========== =========== =========== ===========
</TABLE>
(7) Cash Available for Distribution represents Funds From Operations of the
Company plus the Company's ownership percentage in the Operating
Partnership of 80.8% for the historical period from July 31, 1996 through
September 30, 1996 and 87.9% for all pro forma periods presented multiplied
by the sum of amortization of deferred financing costs, franchise transfer
costs and unearned officers' compensation. This amount is then reduced by
the Company's same percentage share of the sum of 4.0% of total revenue for
each of the Hotels that is required to be set aside by the Operating
Partnership for refurbishment and replacement of FF&E, capital expenditures
and other non-routine items as required by the Participating Leases. Cash
Available for Distribution does not include the interest expense allocated
to borrowings under the Line of Credit that are expected to be made in
order to fund capital expenditures at the Hotels. In addition, Cash
Available for Distribution does not include the effects of any revenue
increases expected to result from capital expenditures at the Hotels.
(8) Pro forma amounts represent net income plus minority interest,
depreciation, amortization, and amortization of unearned officers'
compensation. There are no pro forma adjustments for changes in working
capital items.
(9) Pro forma amounts represent cash used in investing activities and includes
the Operating Partnership's obligation to make available to the Lessee an
amount equal to 4.0% of total revenue for each of the Hotels for the
periodic replacement or refurbishment of FF&E, capital expenditures, and
other non-routine items as required by the Participating Leases. The
Company intends to cause the Operating Partnership to spend amounts in
excess of such obligated amounts to comply with the reasonable requirements
of any Franchise License and otherwise to the extent that the Company deems
such expenditures to be in the best interests of the Company. See "The
Hotels--The Participating Leases."
(10) Pro forma amounts represent pro forma initial distributions to be paid
based on the current annual distribution rate of $1.63 per share and an
aggregate of 15,684,401 shares of Common Stock and OP Units outstanding
plus the debt service on the indebtedness collateralized by the Holiday
Inn Dallas DFW Airport South, Courtyard by Marriott--Meadowlands, French
Quarter Suites Hotel and the Radisson Arlington Heights.
(11) Pro forma amounts as if the Operating Partnership recorded depreciation
and amortization and paid real and personal property taxes and property
insurance contemplated by the Participating Leases and owned all of the
Hotels as of January 1, 1995.
(12) The Initial Hotels' financial data is derived by adding selected
financial data of the AGH Predecessor Hotels and the Other Initials
Hotels. Such financial data exclude information regarding the AGH
Predecessor Hotels for periods prior to their acquisition by AGHI. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(13) Income taxes for the Other Initial Hotels have not been deducted in
calculating revenue over (under) expenses.
(14) Information is for the periods owned by AGHI.
(15) Includes information from each Other Initial Hotel for all periods
presented except that no information was available for the Days Inn Ocean
City for the periods ended December 31, 1991 and 1992 and for the Holiday
Inn Mission Valley for the period ended December 31, 1991. Information
with respect to the Other Initial Hotels was obtained from the owners of
the Other Initial Hotels and includes information for all periods.
45
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
On July 31, 1996, the Company completed its IPO of 7,500,000 shares of
Common Stock and commenced operations. The Company contributed substantially
all of the net proceeds from the IPO in exchange for an approximate 80.2%
interest in the Operating Partnership.
The Operating Partnership used approximately $119.8 million of the net
proceeds from the IPO together with the proceeds of initial borrowings of
$10.0 million under the Line of Credit to acquire the thirteen Initial Hotels
and to repay existing mortgage indebtedness encumbering the Initial Hotels. In
addition, in connection with the IPO, the Company closed on its $100 million
Line of Credit that it utilizes primarily for the acquisition of hotels, the
renovation of certain hotels and for working capital.
On August 28, 1996, the Company sold an additional 575,000 shares of Common
Stock in connection with the exercise of the IPO underwriters' overallotment
option. The Company contributed the net proceeds from the exercise of this
overallotment option to the Operating Partnership in exchange for additional
partnership interests therein, thereby raising its aggregate percentage
interest in the Operating Partnership to approximately 81.3%. The Operating
Partnership utilized the net proceeds from the exercise of the IPO
overallotment option to repay the initial $10.0 million of borrowings under
the Line of Credit.
Consistent with the Company's acquisition strategy, the Company has acquired
or has entered into binding agreements to purchase the following hotels for
the purchase prices set forth below:
<TABLE>
<CAPTION>
PURCHASE
PRICE,
INCLUDING
CLOSING
COSTS
------------
<S> <C>
Acquired Hotels:
Days Inn Lake Buena Vista.................................... $ 31,850,000
Holiday Inn Resort Monterey.................................. 15,790,000
Hilton Hotel--Durham......................................... 12,400,000
------------
Total/All Acquired Hotels.................................. 60,040,000
------------
Proposed Acquisition Hotels:
Radisson Arlington Heights................................... 12,918,755
Four Points by Sheraton...................................... 17,300,000
French Quarter Suites Hotel.................................. 16,300,000
Sheraton Key Largo........................................... 26,375,000
------------
Total/All Proposed Acquisition Hotels...................... 72,893,755
------------
Total/All Acquired and Proposed Acquisition Hotels......... $132,933,755
============
</TABLE>
Immediately following the closing of this Offering, the Company will
contribute all of the net proceeds of the Offering to the Operating
Partnership and, following such contribution, will own an approximate 87.9%
interest in the Operating Partnership. The Operating Partnership will use such
net proceeds (i) to repay amounts borrowed under the Line of Credit, (ii) to
pay fees and expenses in connection with the anticipated increase in the
borrowing limit under the Line of Credit, (iii) to fund a substantial portion
of the cash part of the purchase price of the Proposed Acquisition Hotels, and
(iv) for working capital purposes. See "Use of Proceeds."
In order for the Company to qualify as a REIT, neither the Company nor the
Operating Partnership can operate hotels; therefore, the Operating Partnership
leases the Current Hotels and expects to lease the Proposed Acquisition Hotels
to the Lessee. The principal source of revenue for the Operating Partnership
and the Company is lease payments paid by the Lessee under the Participating
Leases. Participating Rent is based upon the Current Hotels' gross revenues.
The Lessee's ability to make payments to the Company under the Participating
Leases is dependent on the ability of the Lessee, AGHI and any other lessees
or operators to generate cash flow from the operations of the Hotels. See
"Risk Factors--Dependence on Lessee and Payments Under the Participating
Leases."
46
<PAGE>
RESULTS OF OPERATIONS
Actual for the period July 31, 1996 through September 30, 1996
For the period July 31, 1996 through September 30, 1996, the Company earned
$5,218,526 in Participating Lease revenue from the Lessee. Depreciation of the
Company's investment in hotel properties was $1,008,874. Amortization,
consisting primarily of deferred financing costs and franchise transfer fees,
was $131,364 and real estate and personal property taxes and insurance was
$511,115. Interest expense attributable to indebtedness relating to the
Holiday Inn Dallas DFW Airport South, Courtyard by Marriott-Meadowlands and
borrowings under the Line of Credit were $205,682, $68,344, and $73,596,
respectively. Interest expense relating to the Line of Credit borrowings
includes interest on borrowings of approximately $10,000,000 from July 31,
1996 to August 28, 1996, which were repaid with the proceeds from the exercise
of the overallotment option in connection with the IPO, and borrowings of
$3,000,000 from September 16, 1996 to September 30, 1996, which were utilized
for working capital purposes. The minority interest in income was $545,102 and
the resulting net income applicable to the common stockholders was $2,294,450
for the period.
Funds from Operations, calculated using the NAREIT definition of Funds From
Operations, was $3,109,620, which is the sum of net income applicable to
common stockholders, and the Company's ownership percentage in the Operating
Partnership multiplied by depreciation.
Pro Forma Comparison of the Nine Months ended September 30, 1996 and 1995
Participating Lease revenue would have increased $4,685,789 or 15.4% from
$30,470,441 to $35,156,230 primarily due to ADR increases at many of the
hotels. Interest income for each period would have been $23,625 attributable
to the FF&E Note issued by the Lessee. Depreciation expense, accounting for
45.9% and 49.9% of the nine months ended September 30, 1996 and 1995 expenses
respectively, would have decreased $1,054,141 from $8,375,462 to $7,321,322.
Depreciation expense represents depreciation of the AGH Predecessor Hotels'
historical carryover cost basis plus depreciation of the Other Initial Hotels,
Acquired Hotels and Proposed Acquisition Hotels new costs basis. This decrease
is due to the accelerated depreciation recorded in 1995 on FF&E that was
replaced in connection with renovations at the AGH Predecessor Hotels. General
and administrative expenses would have been $1,275,000 for the nine months
ended September 30, 1996 and 1995 representing salaries and wages of $688,500,
professional fees of $334,500, directors and officers' insurance expense of
$94,500 and other expenses of $582,500. Interest expense for the nine months
ended September 30, 1996 and 1995 would have been $4,382,693 on indebtedness
totaling approximately $39.8 million. Debt includes approximately $14.1
million of mortgage indebtedness relating to the Holiday Inn Dallas DFW
Airport South hotel (8.75% interest rate), $5.2 million of mortgage
indebtedness relating to the Courtyard by Marriott-Meadowlands (range of 7.5%
to 7.89% interest rate), $9.6 million of mortgage indebtedness relating to the
French Quarter Suites Hotel (9.75% interest rate), $8.2 million of mortgage
indebtedness relating to the Radisson Arlington Heights (7.5% interest rate).
Pro Forma Funds From Operations
The Company considers Funds From Operations to be an appropriate measure of
the performance of an equity REIT. Funds From Operations should not be
considered an alternative to net income or other measurements under generally
accepted accounting principles as an indicator of operating performance or to
cash flows from operating, investing or financing activities as a measure of
liquidity.
The following is a reconciliation of pro forma net income applicable to
common stockholders to Pro Forma Funds From Operations and illustrates the
difference in the two measures of operating performance:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Pro forma net income applicable to Common
stockholders................................... $12,036,751 $16,896,439
Depreciation (Company share).................... 7,362,031 6,435,442
----------- -----------
Funds From Operations........................... $19,398,782 $23,331,881
=========== ===========
Weighted Average Number of shares of Common
Stock Outstanding.............................. 13,787,405 13,787,405
=========== ===========
</TABLE>
47
<PAGE>
RESULTS OF OPERATIONS OF AGH PREDECESSOR HOTELS
The accompanying discussion and analysis of financial condition and results
of operations is based on the consolidated historical financial statements of
the Company and the Lessee and the combined historical financial statements of
the AGH Predecessor Hotels that are included elsewhere in this Prospectus. The
AGH Predecessor Hotels' financial statements include the results of operations
of the following hotels since their dates of acquisition by affiliates of
AGHI: Courtyard by Marriott-Meadowlands (December 1993), Hotel Maison de Ville
(August 1994), Hampton Inn Richmond Airport (December 1994) and Holiday Inn
Dallas DFW Airport West (June 1995). The four AGH Predecessor Hotels were
combined into one set of financial statements since they were acquired by the
Company from a group of limited partnerships controlled by shareholders of
AGHI.
The following table sets forth certain combined historical financial
information for the AGH Predecessor Hotels as a percentage of combined AGH
Predecessor Hotels' revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1994 1995
------ ------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Room revenue............................................. 81.6% 82.9%
Food and beverage revenue................................ 13.1 11.9
Other revenue............................................ 5.3 5.2
------ ------
Total revenue.......................................... 100.0 100.0
Hotel operating expenses................................. 75.4 69.6
Depreciation and amortization............................ 8.7 22.8
Interest expense......................................... 10.2 14.4
Other corporate expenses................................. 12.5 6.9
------ ------
Net loss............................................... (6.8%) (13.7%)
====== ======
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1994 1995
------ ------
<S> <C> <C>
KEY FACTORS:
Occupancy................................................ 71.1% 72.1%
ADR...................................................... $62.10 $73.26
REVPAR................................................... $44.14 $52.84
</TABLE>
The year-to-year comparisons of the results of operations of the AGH
Predecessor Hotels are significantly impacted by the hotel acquisitions. Net
losses incurred for each of the three years ended December 31, 1993, 1994 and
1995 were ($31,007), ($286,494) and ($1,490,183), respectively. The AGH
Predecessor Hotels generated net cash from operating activities of $147,616,
$217,282 and $790,304 for each of the three years ended December 31, 1993,
1994 and 1995, respectively.
Comparison of year ended December 31, 1995 and 1994
Room revenue increased to $9,020,479 from $3,431,654, an increase of
$5,588,825 or 162.9%, principally resulting from: (i) an increase of
approximately $2,056,000 in revenue due to the acquisition of the Holiday Inn
Dallas DFW West in June 1995, approximately $1,850,000 in revenue from the
Hampton Inn Richmond Airport since its acquisition in late December 1994, and
approximately $955,000 in revenues from the Hotel Maison de Ville since its
acquisition in August 1994; (ii) an increase in the Courtyard by Marriott-
Meadowlands' ADR to $81.77 from $73.37; and (iii) an improvement in the
Courtyard by Marriott-Meadowlands' occupancy percentage to 77.8% from 70.1%.
The increases in both ADR and occupancy were due primarily to the
repositioning strategy implemented when the Courtyard by Marriott-Meadowlands
was converted from a Days Hotel in 1994.
Food and beverage revenue increased to $1,293,238 from $552,697, an increase
of $740,541 or 134.0%, due primarily to activity at two of the three
acquisitions described above. Other revenue increased to $568,415 from
$223,211, or 154.7%, due to the activity at the three acquisitions described
above.
Hotel operating expenses increased to $7,565,824 from $3,173,721, an
increase of $4,392,103 or 138.4%. The acquisition of the Hotel Maison de Ville
(acquired August 1994), the Hampton Inn Richmond Airport (acquired December
1994) and the Holiday Inn Dallas DFW Airport West (acquired June 1995)
accounted for $968,511, $1,066,733 and $1,932,980 of the expense increase,
respectively. The remainder of the increase is related to the conversion of
the Courtyard by Marriott-Meadowlands from a Days Hotel. The hotel experienced
an increase in revenues of approximately $750,000 following the franchise
repositioning and consequently had
48
<PAGE>
an increase in operating expenses. Hotel operating expenses as a percentage of
total revenue decreased from 75.4% in 1994 to 69.5% in 1995. The decrease is
primarily attributable to the inclusion of only the Courtyard by Marriott-
Meadowlands and the Hotel Maison de Ville in the 1994 operating results, which
at the time were being transitioned to the AGH Predecessor Hotels' management.
Consequently, hotel operating expenses as a percentage of total revenue were
higher for these hotels in 1994 than in 1995.
Depreciation and amortization increased to $2,480,054 from $364,513, an
increase of $2,115,541 due in part to the following: (i) depreciation on the
assets of the three acquisitions described above, (ii) depreciation on
approximately $1,300,000 and approximately $2,200,000 of FF&E renovations and
additions during 1994 and 1995, respectively, and (iii) accelerated
depreciation on the FF&E replaced during such renovations.
Interest and other expenses increased to $2,326,437 from $955,822, an
increase of $1,370,615. The acquisitions in 1995 and 1994 increased debt by
approximately $8,300,000 and approximately $6,100,000, respectively. Related
interest expense increased by $1,141,709 due to the additional indebtedness
outstanding.
Comparison of year ended December 31, 1994 and 1993
Room revenue increased to $3,431,654 from $17,941, an increase of
$3,413,713, principally resulting from (i) an increase of approximately
$3,072,000 in revenue from the Courtyard by Marriott-Meadowlands following its
acquisition on December 30, 1993 and (ii) approximately $342,000 in revenue
attributable to the acquisition of the Hotel Maison de Ville in August 1994.
The only room revenue reported for 1993 for the AGH Predecessor Hotels was
$17,941 from the acquisition of the Courtyard by Marriott-Meadowlands on
December 30, 1993.
Food and beverage revenue increased to $552,697 from $6,158, a change of
$546,539, due primarily to the late 1993 acquisition of the Courtyard by
Marriott-Meadowlands compared to a full year's food and beverage revenue in
1994 and the acquisition of the Hotel Maison de Ville in August 1994. Other
revenue increased to $223,211 from $1,448, an increase of $221,763, due
primarily to the acquisitions described above.
Hotel operating expenses increased to $3,173,721 from $8,741, an increase of
$3,164,980. The expenses from 1993 include only two days of operations for the
Courtyard by Marriott-Meadowlands. Hotel operating expenses as a percentage of
total revenue were 75.4% in 1994.
Depreciation and amortization, interest and other expenses increased to
$1,320,335 from $47,813, representing an increase of $1,272,522, attributable
to depreciation of assets acquired in the hotel acquisitions described above.
THE LESSEE
Actual
For the period July 31, 1996 through September 30, 1996, the Lessee had room
revenues of $11,185,140 from the Initial Hotels. The Participating Lease
payments and property operating costs and expenses were $5,218,526 and
$9,393,605, respectively. Net income for the period was $179,164.
Pro Forma Operations
The following table sets forth pro forma financial information for the
Lessee, as a percentage of revenue, for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1996
-------- --------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Room revenue.......................................... 72.3% 74.4%
Food and beverage revenue............................. 21.7 20.1
Other revenue......................................... 6.0 5.5
-------- --------
Total revenue....................................... 100.0 100.0
Hotel operating expenses.............................. 65.8 64.0
Other corporate expenses.............................. 0.1 0.3
Participating Lease expenses.......................... 32.9 35.1
-------- --------
Net Income.......................................... 1.2% 0.6%
======== ========
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1996
-------- --------
<S> <C> <C>
Key Factors:
Occupancy........................................... 75.0% 74.8%
ADR................................................. $70.65 $78.18
REVPAR.............................................. $52.99 $58.50
</TABLE>
49
<PAGE>
The following table sets forth room revenue for each of the Hotels and the
percentage changes between the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
PERCENT
1996 1995 CHANGE
----------- ----------- -------
<S> <C> <C> <C>
INITIAL HOTELS:
Holiday Inn Dallas DFW
Airport West................................ $3,069,720 $2,792,749 9.9%
Courtyard by Marriott--Meadowlands........... 3,250,259 2,792,612 16.4
Hampton Inn Richmond Airport................. 1,555,913 1,444,733 7.7
Hotel Maison de Ville........................ 958,853 941,437 1.8
Hilton Hotel--Toledo......................... 2,673,599 2,630,401 1.6
Holiday Inn Dallas DFW Airport South......... 6,491,623 6,194,350 4.8
Holiday Inn New Orleans International
Airport..................................... 4,990,643 4,919,684 1.4
Days Inn Ocean City.......................... 2,129,547 2,015,226 5.7
Holiday Inn Select--Madison.................. 4,100,587 3,982,525 3.0
Holiday Inn Park Center Plaza................ 4,313,287 3,643,675 18.4
Fred Harvey Albuquerque Airport Hotel........ 3,344,851 3,267,688 2.4
Le Baron Airport Hotel....................... 5,209,398 3,766,332 38.3
Holiday Inn Mission Valley................... 4,312,791 4,166,821 3.5
----------- ----------- ----
Subtotals/Percent change..................... 46,401,071 42,558,233 9.0
ACQUIRED HOTELS:
Days Inn Lake Buena Vista.................... 6,337,411 5,438,660 16.5
Holiday Inn Resort Monterey.................. 4,021,248 3,462,967 16.1
Hilton Hotel Durham.......................... 2,648,478 2,326,615 13.8
----------- ----------- ----
Subtotals/Percent change..................... 13,007,137 11,228,242 15.8
PROPOSED ACQUISITION HOTELS:
Radisson Arlington Heights................... 2,976,613 2,330,786 27.7
Four Points by Sheraton...................... 3,343,064 2,978,257 12.2
French Quarter Suites Hotel.................. 3,438,215 3,246,097 5.9
Sheraton Key Largo........................... 5,318,813 4,745,942 12.1
----------- ----------- ----
Subtotals/Percent change..................... 15,076,705 13,301,082 13.3
----------- ----------- ----
Totals (All Hotels).......................... $74,484,913 $67,087,557 11.0%
=========== =========== ====
</TABLE>
Pro Forma Comparison for the nine months ended September 30, 1996 and 1995
Room revenue increased to $74,484,913 from $67,087,557, an increase of
$7,397,356 or 11.0%, principally resulting from: (i) an increase of $457,647
in Courtyard by Marriott-Meadowlands' room revenue due to an increase in ADR
to $90.98 from $80.76, (ii) an increase of $669,612 in Holiday Inn Park Center
Plaza's room revenue due to an increase in ADR to $86.94 from $80.40, (iii) an
increase in Le Baron Airport Hotel's room revenues of $1,443,066 due to an
increase in ADR to $74.47 from $63.35, (iv) an increase of $898,751 in the
Days Inn Hotel and Suites' room revenue due to an increase in ADR to $61.44
from $49.01, (v) an increase of $276,971 in Holiday Inn Dallas DFW West's room
revenue due to an increase in ADR to $64.82 from $58.10, (vi) an increase of
$898,751 in Days Inn Lake Buena Vista's room revenue due to an increase in ADR
to $61.44 from $49.01, (vii) an increase in Holiday Inn Resort Monterey's room
revenue due to an increase in ADR to $100.27 from $89.45, and (viii) an
increase in Radisson Arlington Heights' room revenue due to an increase in ADR
to $76.36 from $67.90 and occupancy to 71.0% from 62.6% which resulted from
the completion of road construction during 1995 that improved the access to
the hotel.
Food and beverage revenue increased to $20,181,837 from $20,133,742, an
increase of $48,095 or 0.2%. Most of the hotels experienced slight increases
in food and beverage revenues with the exception of Holiday Inn Dallas DFW
Airport West which had a significant increase of $251,160. This increase is
mainly due to major renovations of the restaurant and the bar during the
fourth quarter of 1995.
50
<PAGE>
Hotel operating expenses increased to $64,128,628 from $61,044,842, an
increase of $3,083,786 or 5.1%; however, as a percentage of total revenue,
expenses decreased to 63.4% from 65.6%, due primarily to revenue increases
that were not accompanied by corresponding increases in hotel operating
expenses.
Participating Lease expenses increased to $35,156,230 from $30,470,441, an
increase of $4,685,789 or 15.4%. The increase is primarily due to increased
revenues at the hotels which resulted in increased Participating Rent payments
to the Company..
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to stockholders, is its share of the Operating
Partnership's cash flow from the Participating Leases. For the period from
July 31, 1996 through September 30, 1996, cash flow provided by the operating
activities, consisting primarily of Participating Lease revenues, was
$4,687,875 and Funds from Operations was $3,109,620. The Lessee's obligations
under the Participating Leases are secured by the pledge of 275,000 OP Units.
The Lessee's ability to make rent payments under the Participating Leases and
the Company's liquidity, including its ability to make distributions to
stockholders, are substantially dependent on the ability of the Lessee and
AGHI to generate sufficient cash flow from the operation of the Current Hotels
and, upon the Company's acquisition of the Proposed Acquisition Hotels, will
be dependent upon the Lessee's, AGHI's and Wyndham's operation of all the
Hotels.
The Company has entered into contracts to acquire the four Proposed
Acquisition Hotels. The acquisitions are subject to various closing conditions
and there can be no assurance that any or all of the Proposed Acquisition
Hotels will be consummated. The Company currently intends to utilize proceeds
from this Offering as well as borrowings under its Line of Credit to acquire
these hotels. While no definitive agreements with respect to the acquisition
of any additional hotels has been entered into, the Company expects that
during 1997 additional acquisitions will be completed and funded with
borrowings under the Line of Credit or permanent debt or equity financing. The
Company intends to limit consolidated indebtedness (measured at the time the
debt is incurred) to no more than 45.0% of the Company's investments in
hotels.
Upon the consummation of the IPO, the Company closed on its $100 million
Line of Credit. At December 31, 1996 the Company had approximately $57.5
million outstanding under the Line of Credit and approximately $80.6 million
of borrowing capacity (including outstanding borrowings). The Company is
currently negotiating with its lenders to increase its borrowing limit under
the Line of Credit to approximately $150 million. Upon the acquisition of the
two proposed Acquisition Hotels that are not expected to be encumbered by
mortgage indebtedness upon their acquisition by the Company (Four Points by
Sheraton and Sheraton Key Largo) and assuming the increase in the Company's
borrowing limit under the Line of Credit to $150 million, the Company
anticipates that its borrowing capacity under the Line of Credit will increase
to approximately $106.9 million. Borrowings under the Line of Credit bear
interest at 30-day, 60-day or 90-day LIBOR (5.50%, 5.53% and 5.56% at December
31, 1996) at the option of the Company, plus 1.85% per annum, payable monthly
in arrears or one-half percent in excess of the prime rate.
Cash and cash equivalents as of September 30, 1996 were $4,186,235,
including capital improvement reserves of $425,710. Cash flow from operating
activities of the Company was $4,687,875 for the period from July 31, 1996
through September 30, 1996, which primarily represents the collection of rents
under the Participating Leases, less the Company's operating expenses for the
period. Cash flow used in investing activities during that period in the
amount of $130,226,886 resulted from the purchase and improvements made to the
Initial Hotels. Cash flows from financing activities of $129,725,146 during
this period was primarily related to the receipt of proceeds from the IPO and
borrowings on the Line of Credit, net of principal payments on borrowings and
payments for deferred loan costs.
51
<PAGE>
RENOVATIONS AND OTHER CAPITAL IMPROVEMENTS
The Participating Leases require the Company to establish annual minimum
reserves equal to 4.0% of total revenue of the Current Hotels which will be
utilized by the Lessee for the replacement and refurbishment of FF&E and other
capital expenditures to enhance the competitive position of the Current
Hotels. The Company and the Lessee will jointly determine the use of funds in
this reserve and the Company will have the right to approve the Lessee's
capital expenditure budgets. While the Company expects its reserve to be
adequate to fund recurring capital needs, including periodic renovations, the
Company may use Cash Available for Distribution in excess of distributions
paid or funds drawn under the Line of Credit or other borrowings to fund
additional capital improvements, as necessary, including major renovations at
the Company's hotels.
The Company has budgeted $33.3 million to fund capital improvements and
renovations at the Current Hotels during 1997 and has budgeted approximately
$14.5 million during 1997 to fund capital improvements and renovations at the
Proposed Acquisition Hotels. In certain circumstances such capital
improvements are being completed in connection with franchisor requirements.
The following table describes such renovations and improvements:
<TABLE>
<CAPTION>
DESCRIPTION OF
HOTEL RENOVATION/IMPROVEMENT BUDGETED AMOUNT
- ----- ---------------------------------- ---------------
<S> <C> <C>
Holiday Inn Dallas DFW
Airport West............. Upgrade of guest rooms and
corridors. $ 242,000
Hampton Inn Richmond
Airport.................. Upgrade of public areas and 50,000
replacement of roof.
Hotel Maison de Ville..... Upgrade of selected guest rooms 26,000
and public areas.
Hilton Hotel--Toledo...... Upgrade of guest rooms and 341,000
renovation of public areas.
Holiday Inn Dallas DFW
Airport South............ Upgrade of guest rooms, public 1,600,000
areas and hotel exterior in
connection with conversion to the
Holiday Inn Select brand.
Holiday Inn New Orleans
International Airport.... Upgrade of guest rooms and public 1,100,000
areas in connection with
conversion to the Holiday Inn
Select brand and renovation of
roof.
Days Inn Ocean City....... Upgrade of guest rooms and public 990,000
areas in connection with
conversion to the Hampton Inn
brand.
Holiday Inn Select--
Madison.................. Upgrade of guest rooms, public 870,000
areas and reservation equipment in
connection with conversion to the
Crowne Plaza brand.
Holiday Inn Park Center
Plaza.................... Upgrade of guest rooms and public 3,600,000
areas and conversion of the ninth
floor to "club" level in
connection with conversion to the
Crowne Plaza brand.
Fred Harvey Albuquerque
Airport Hotel............ Upgrade of guest rooms and public 3,600,000
areas and convert meeting space to
additional guest rooms in
connection with conversion to the
Wyndham Hotel brand.
Le Baron Airport Hotel.... Upgrade of public areas and guest 5,000,000
rooms and convert ninth floor to
concierge floor in connection with
conversion to the Wyndham Hotel
brand.
Holiday Inn Mission
Valley................... Upgrade of guest rooms and public 1,800,000
areas in connection with
conversion to the Holiday Inn
Select brand.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF
HOTEL RENOVATION/IMPROVEMENT BUDGETED AMOUNT
- ----- ---------------------------------- ---------------
<S> <C> <C>
Days Inn Lake Buena
Vista.................... Upgrade and renovation of guest $7,500,000
rooms and public areas, including
the addition of approximately
9,000 square feet of convention
space as well as the addition of
extensive landscaping and
entertainment attractions to hotel
exterior in connection with
conversion to the Wyndham Hotel
brand.
Holiday Inn Resort--
Monterey................. Upgrade and renovation of guest 3,900,000
rooms and public areas in
connection with conversion to the
Hilton Hotel brand.
Hilton Hotel--Durham...... Addition of 42 guest rooms and 2,650,000
renovation of guest rooms and
public areas.
Four Points by Sheraton... Upgrade and renovation of guest 2,800,000
rooms, public areas and restaurant
in connection with conversion to
the Wyndham Hotel brand.
Sheraton Key Largo........ Upgrade and renovation of guest 3,000,000
rooms, public areas and exterior
in connection with conversion to
the Westin Resort brand.
French Quarter Suites
Hotel.................... Upgrade and renovation of guest 2,800,000
rooms, atrium and public areas.
Radisson Arlington
Heights.................. Upgrade and renovation of guest 6,000,000
rooms and public areas as well as
addition of 31 guest rooms.
</TABLE>
There can be no assurance that the Company will be able to complete the
scheduled capital improvements during 1997 or that the anticipated costs for
the capital improvements will not exceed the amounts budgeted for that
purpose. The Company intends to use borrowings under the Line of Credit and
the FF&E reserve established under the Participating Leases to fund these
expenditures. The Company attempts to schedule renovations and improvements
during traditionally lower occupancy periods in an effort to minimize
disruption to the hotels' operations.
INFLATION
Operators of hotels, in general, possess the ability to adjust room rates
quickly. Competitive pressures may, however, limit the Lessee's ability to
raise room rates in the face of inflation.
SEASONALITY
The hotel industry is seasonal in nature. Generally, hotel revenue is
greater in the second and third quarters of a calendar year, although this may
not be true for hotels in major tourist destinations. Revenue for hotels in
tourist areas generally is substantially greater during the tourist season
than other times of the year. Seasonal variations in revenue at the Hotels may
cause quarterly fluctuations in the Company's lease revenue. To the extent
that cash flow from operations may be insufficient during any quarter to pay
distributions at its current distribution rate due to temporary or seasonal
fluctuations in lease revenues, the Company expects to utilize other cash on
hand or borrowings under the Line of Credit to make such distributions.
53
<PAGE>
THE HOTEL INDUSTRY
According to Smith Travel Research, the United States lodging industry is
currently experiencing a significant recovery from an extended period of
unprofitable performance during the late 1980's and early 1990's. The Company
believes that this broad industry recovery will contribute to growth in
revenues at the Hotels (and hotels subsequently acquired by the Company) which,
in turn, will result in increases in the Company's Cash Available for
Distribution.
According to Smith Travel Research, the hotel industry experienced an
extended period of unprofitable performance from 1986 to 1991. The industry
downturn resulted from a dramatic increase in the supply of hotel rooms that
significantly outpaced growth in demand. The growth in supply, which resulted
from the development of new hotels, was supported by the availability of
financing from banks, savings and loans, insurance companies, high yield bonds
and various tax incentives. According to Smith Travel Research, and as
demonstrated in the chart below, total room supply in the United States
increased by 32.0%, or approximately 750,000 rooms, from 1980 to 1991. Of this
increase, approximately 567,000 rooms were added between 1985 and 1991. In all
but two of these years (1988 and 1989), increases in supply substantially
exceeded growth in demand. In some years, demand remained flat or even
declined. As a result of the extended supply/demand imbalance, overall hotel
occupancy rates dropped steadily from 70.6% in 1980 to a 20-year low of 60.9%
in 1991. The graph set forth below illustrates the relationship between supply,
demand and occupancy. Increases in demand in excess of increases in supply
necessarily result in higher occupancy.
Percentage Change in United States Hotel Room Supply vs. Demand
(1980-1995)
[BAR/LINE GRAPH APPEARS HERE]
The following is a list of figures depicted by the bar/line graph. The line
overlap on the graph depicts the hotel room percent occupancy for the years
1980-1995. The bars on the graph depict the % changes in hotel room supply and
demand for the years 1980-1995.
<TABLE>
<CAPTION>
Year: Percent Occupancy: Room Supply: Room Demand:
- ----- ------------------ ------------ ------------
<S> <C> <C> <C>
1980 70.6% 0.8% -1.0%
1981 67.9% 1.5% -2.4%
1982 66.7% 0.7% -1.2%
1983 64.4% 1.2% -2.3%
1984 64.0% 1.5% 0.9%
1985 63.2% 2.8% 1.5%
1986 62.5% 3.3% 2.1%
1987 61.9% 3.8% 2.8%
1988 62.3% 4.2% 4.9%
1989 63.2% 3.6% 5.1%
1990 62.4% 3.4% 2.1%
1991 60.9% 2.5% 0.1%
1992 62.1% 1.3% 3.3%
1993 63.0% 2.3% 3.7%
1994 64.7% 1.4% 4.1%
1995 65.4% 1.6% 2.9%
</TABLE>
54
<PAGE>
The hotel industry began its recovery in 1992. New hotel construction
declined considerably as lenders who previously supported development focused
on restructurings and foreclosures of existing hotel loans. With minimal new
capital available for hotel construction, the growth in room supply declined
from a high of 4.2% in 1988 to 1.7% in 1995, and has averaged approximately
1.8% since 1992. By contrast, room demand has increased with the improving
economy, and average occupancy and room rates have moved steadily upward.
According to Smith Travel Research, overall hotel occupancy increased from
60.9% in 1991 to 65.5% in 1995. Average room rate growth increased from 1.4%
in 1992 to 4.8% in 1995.
While the hotel industry's recovery has been broad-based, the Company
believes that the greatest continuing growth in REVPAR will occur in the full-
service segment of the industry due to the relative lack of current new
construction of full-service hotels and the lead time required for new full-
service hotels to be developed and opened. Accordingly, the Company intends to
focus its acquisition and selected development activities primarily on full-
service hotels. The Company also believes the hotel industry's difficulties
during the 1980's and changes in tax and banking laws have produced a more
responsible relationship between hotel developers and financing sources. As a
result, the Company believes that future additions to full-service hotel
supply will be more demand-driven, minimizing the overbuilding in key markets
that characterized supply growth during the late 1980's and increasing the
prospect for continued growth of revenues in the hotel industry for the
foreseeable future.
THE HOTELS
The sixteen Current Hotels are diversified by five different national hotel
brands and include fourteen full-service hotels and two limited-service
hotels. In addition, the Company plans to reposition, by the first quarter of
1998, ten of the Current Hotels (six Holiday Inns, two Days Inns and two
independent hotels) through upgrade and conversion into hotels that operate
under the Wyndham Hotel, Hilton Hotel, Crowne Plaza, Holiday Inn Select and
Hampton Inn brands. The Company believes that following such upgrading and
conversion, these hotels will experience increases in occupancy and room rates
as a result of the new franchisors' national brand recognition, reservation
systems and group sales organization. There can be no assurance that any or
all of such brand conversions and repositionings will occur as planned or
that, if such brand conversions and repositionings occur, the affected hotels
will experience occupancy and rate increases. The Company believes that the
diversity of its portfolio moderates the potential effects on the Company of
regional economic conditions or local market competition affecting specific
hotel franchises, hotel markets or price segments within the industry.
The following table sets forth certain information with respect to the
Current Hotels and the Proposed Acquisition Hotels. The chart summarizes the
historical performance of the Hotels for each of the three years ended
December 31, 1995 and for the nine months ended September 30, 1995 and 1996.
The operating performance of the Holiday Inn Dallas DFW Airport West and the
Hampton Inn Richmond Airport was impacted during 1995 by extensive and ongoing
renovations at those hotels.
55
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ------------------------
YEAR NUMBER
OPENED/ OF GUEST % % %
HOTELS/LOCATION(1) RENOVATED(2) ROOMS 1993 1994 CHANGE 1995 CHANGE 1995 1996 CHANGE
------------------ ------------ -------- ------- ------- ------ ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL HOTELS:
Holiday Inn Dallas DFW
Airport West(3)
Bedford, Texas.......... 1974/1995 243
Occupancy.............. 74.2% 70.0% (5.7)% 69.4% (0.8)% 73.1% 70.5% (3.6)%
ADR.................... $ 46.37 $ 48.85 5.3 % $ 60.08 23.0 % $ 58.10 $ 64.82 11.6 %
REVPAR................. $ 34.41 $ 34.19 (0.6)% $ 41.70 22.0 % $ 42.48 $ 45.73 7.7 %
Courtyard by Marriott-
Meadowlands(3)
Secaucus, New Jersey.... 1989/1994 165
Occupancy.............. 74.8% 70.1% (6.3)% 77.8% 10.9 % 76.8% 78.4% 2.1 %
ADR.................... $ 65.63 $ 73.37 11.8 % $ 81.77 11.4 % $ 80.76 $ 90.98 12.7 %
REVPAR................. $ 49.09 $ 51.44 4.8 % $ 63.58 23.6 % $ 62.00 $ 71.37 15.1 %
Hampton Inn Richmond
Airport(3)
Richmond, Virginia...... 1987/1995 124
Occupancy.............. 75.9% 76.3% 0.6 % 70.8% (7.2)% 72.8% 74.6% 2.5 %
ADR.................... $ 46.71 $ 50.84 8.8 % $ 57.69 13.5 % $ 58.44 $ 60.92 4.2 %
REVPAR................. $ 35.45 $ 38.81 9.5 % $ 40.86 5.3 % $ 42.52 $ 45.46 6.9 %
Hotel Maison de Ville(3)
New Orleans, Louisiana.. 1788/1994 23
Occupancy.............. 64.1% 61.7% (3.8)% 66.5% 7.8 % 64.9% 63.0% (2.9)%
ADR.................... $188.18 $201.80 7.2 % $232.97 15.4 % $230.91 $239.65 3.8 %
REVPAR................. $120.65 $124.50 3.2 % $154.91 24.4 % $149.93 $151.05 0.7 %
Hilton Hotel-Toledo(3)
Toledo, Ohio............ 1987/1994 213
Occupancy.............. 66.7% 72.5% 8.8 % 72.8% 0.3 % 75.8% 71.4% (5.8)%
ADR.................... $ 52.29 $ 54.59 4.4 % $ 59.98 9.9 % $ 59.67 $ 64.16 7.5 %
REVPAR................. $ 34.87 $ 39.59 13.6 % $ 43.65 10.2 % $ 45.24 $ 45.81 1.3 %
Holiday Inn Dallas DFW
Airport South(3)(4)(5)
Irving, Texas........... 1974/1995 409
Occupancy.............. 76.0% 76.7% 0.9 % 76.9% 0.3 % 77.9% 76.0% (2.4)%
ADR.................... $ 51.82 $ 63.19 22.0 % $ 71.26 12.8 % $ 70.92 $ 75.56 6.5 %
REVPAR................. $ 39.39 $ 48.44 23.0 % $ 54.78 13.1 % $ 55.27 $ 57.44 3.9 %
Holiday Inn New Orleans
International
Airport(3)(4)(5)
Kenner, Louisiana....... 1973/1994 304
Occupancy.............. 80.8% 79.2% (1.9)% 81.2% 2.5 % 82.4% 76.5% (7.2)%
ADR.................... $ 60.61 $ 61.49 1.5 % $ 72.83 18.5 % $ 71.99 $ 78.30 8.8 %
REVPAR................. $ 48.94 $ 48.71 (0.5)% $ 59.16 21.5 % $ 59.28 $ 59.91 1.1 %
Days Inn Ocean
City(3)(5)(6)
Ocean City, Maryland.... 1989/1994 162
Occupancy.............. 45.9% 45.8% (0.3)% 49.3% 7.6 % 55.5% 57.3% 3.2 %
ADR.................... $ 64.72 $ 70.91 9.6 % $ 76.10 7.3 % $ 82.14 $ 83.70 1.9 %
REVPAR................. $ 29.71 $ 32.47 9.3 % $ 37.50 15.5 % $ 45.57 $ 47.98 5.3 %
Holiday Inn Select-Madi-
son(5)(7)
Madison, Wisconsin...... 1987/1995 227
Occupancy.............. 79.6% 78.7% (1.2)% 79.3% 0.8 % 81.4% 78.6% (3.4)%
ADR.................... $ 74.47 $ 78.25 5.1 % $ 78.46 0.3 % $ 78.99 $ 82.32 4.2 %
REVPAR................. $ 59.31 $ 61.60 3.9 % $ 62.26 1.1 % $ 64.26 $ 64.75 0.8 %
Holiday Inn Park Center
Plaza(5)(7)
San Jose, California.... 1975/1990 231
Occupancy.............. 58.4% 62.2% 6.4 % 72.1% 16.0 % 70.6% 78.4% 11.0 %
ADR.................... $ 72.47 $ 73.41 1.3 % $ 78.16 6.5 % $ 80.40 $ 86.94 8.1 %
REVPAR................. $ 42.35 $ 45.66 7.8 % $ 56.38 23.5 % $ 56.79 $ 68.15 20.0 %
Fred Harvey Albuquerque
Airport
Hotel(5)(8)
Albuquerque, New Mexi-
co..................... 1972/1994 266
Occupancy.............. 85.2% 83.5% (2.0)% 83.7% 0.2 % 84.6% 82.0% (3.1)%
ADR.................... $ 48.11 $ 53.23 10.6 % $ 53.24 0.0 % $ 53.32 $ 55.14 3.4 %
REVPAR................. $ 40.98 $ 44.44 8.4 % $ 44.55 0.2 % $ 45.09 $ 45.23 0.3 %
Le Baron Airport Ho-
tel(5)(9)
San Jose, California.... 1973/1995 327
Occupancy.............. 64.3% 66.2% 3.0 % 65.2% (1.4)% 66.6% 78.1% 17.3 %
ADR.................... $ 47.85 $ 52.77 10.3 % $ 64.40 22.0 % $ 63.35 $ 74.47 17.6 %
REVPAR................. $ 30.76 $ 34.93 13.5 % $ 42.01 20.3 % $ 42.19 $ 58.14 37.8 %
Holiday Inn Mission Val-
ley(4)(5)
San Diego, California... 1970/1995 318
Occupancy.............. 68.6% 69.8% 1.7 % 68.5% (1.9)% 73.2% 73.1% (0.1)%
ADR.................... $ 61.09 $ 62.94 3.0 % $ 65.17 3.5 % $ 65.55 $ 67.67 3.2 %
REVPAR................. $ 41.94 $ 43.94 4.8 % $ 44.63 1.6 % $ 48.00 $ 49.50 3.1 %
ACQUIRED HOTELS:
Days Inn Lake Buena Vis-
ta(5)(9)
Orlando, Florida........ 1985/1994 490
Occupancy.............. 73.9% 77.9% 5.4 % 77.8% (0.1)% 83.0% 76.8% (7.5)%
ADR.................... $ 48.44 $ 47.45 (2.0)% $ 49.02 3.3 % $ 49.01 $ 61.44 25.4 %
REVPAR................. $ 35.82 $ 36.95 3.2 % $ 38.16 3.3 % $ 40.66 $ 47.20 16.1 %
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ------------------------
YEAR NUMBER
OPENED/ OF GUEST % % %
HOTELS/LOCATION(1) RENOVATED(2) ROOMS 1993 1994 CHANGE 1995 CHANGE 1995 1996 CHANGE
------------------ ------------ -------- ------- ------- ------ ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Resort
Monterey(5)(10)
Monterey, California.... 1971/1996 204
Occupancy.............. 60.7% 60.8% 0.2 % 63.8% 4.9 % 69.5% 71.8% 3.3 %
ADR.................... $ 93.40 $ 94.13 0.8 % $ 91.25 (3.1)% $ 89.45 $100.27 12.1 %
REVPAR................. $ 56.69 $ 57.18 0.9 % $ 58.19 1.8 % $ 62.18 $ 71.94 15.7 %
Hilton Hotel-Durham,
North Carolina.......... 1987/1995 152
Occupancy.............. 65.4% 72.4% 10.7 % 72.1% (0.4)% 72.8% 76.5% 5.1 %
ADR.................... $ 66.96 $ 72.05 7.6 % $ 76.42 6.1 % $ 76.08 $ 83.13 9.3 %
REVPAR................. $ 43.81 $ 52.20 19.2 % $ 55.08 5.5 % $ 55.40 $ 63.59 14.8 %
PROPOSED ACQUISITION HO-
TELS:
Four Points by
Sheraton(5)(11)
Marietta, Georgia....... 1985/1996 219
Occupancy.............. * * * 70.4% * % 73.4% 66.4% (9.5)%
ADR.................... * * * $ 69.02 $ 68.06 $ 84.29 23.8 %
REVPAR................. * * * $ 48.60 * % $ 49.93 $ 55.97 12.1 %
Sheraton Key
Largo(5)(12)
Key Largo, Florida...... 1985/1996 200
Occupancy.............. 75.0% 70.3% (6.3)% 73.3% 4.3 % 75.7% 81.0% 7.0 %
ADR.................... $104.49 $109.46 4.8 % $112.70 3.0 % $114.83 $119.79 4.3 %
REVPAR................. $ 78.42 $ 76.90 (1.9)% $ 82.59 7.4 % $ 86.92 $ 97.06 11.7 %
French Quarter Suites
Hotel(5)(13)
Atlanta, Georgia........ 1985/1996 155
Occupancy.............. 75.5% 78.2% 3.6 % 78.5% 0.4 % 80.6% 74.0% (8.2)%
ADR.................... $ 84.33 $ 91.24 8.2 % $ 96.21 5.4 % $ 95.15 $109.38 15.0 %
REVPAR................. $ 63.70 $ 71.33 12.0 % $ 75.52 5.9 % $ 76.71 $ 80.96 5.5 %
Radisson Arlington
Heights(3)
Arlington Heights,
Illinois............... 1981/1995 201
Occupancy.............. 60.7% 67.0% 10.4 % 63.5% (5.2)% 62.6% 71.0% 13.4 %
ADR.................... $ 61.52 $ 62.15 1.0 % $ 68.08 9.5 % $ 67.90 $ 76.36 12.5 %
REVPAR................. $ 37.34 $ 41.64 11.5 % $ 43.25 3.9 % $ 42.48 $ 54.25 27.7 %
-----
Totals--All Hotels..... 4,633
=====
WEIGHTED AVERAGES:
Initial Hotels
Occupancy.............. 71.6% 71.7% 0.1 % 72.9% 1.7 % 74.8% 75.1% 0.4 %
ADR.................... $ 57.65 $ 62.28 8.0 % $ 69.19 11.1 % $ 69.11 $ 74.46 7.7 %
REVPAR................. $ 41.26 $ 44.67 8.3 % $ 50.46 13.0 % $ 51.70 $ 55.93 8.2 %
Acquired Hotels
Occupancy.............. 69.2% 72.8% 5.2 % 73.4% 0.8 % 77.9% 75.5% (3.1)%
ADR.................... $ 61.08 $ 61.30 0.4 % $ 62.72 2.3 % $ 62.29 $ 74.28 19.3 %
REVPAR................. $ 42.27 $ 44.60 5.5 % $ 46.04 3.2 % $ 48.51 $ 56.11 15.7 %
Proposed Acquisition Ho-
tels
Occupancy.............. 70.0% 71.3% 1.8 % 71.0% (0.4)% 72.6% 72.9% 0.4 %
ADR.................... $ 84.94 $ 87.80 3.4 % $ 86.46 (1.5)% $ 86.63 $ 97.60 12.7 %
REVPAR................. $ 59.45 $ 62.58 5.3 % $ 61.38 (1.9)% $ 62.91 $ 71.16 13.1 %
</TABLE>
- --------
* Occupancy, ADR and REVPAR for the noted periods were not available to the
Company.
(1) The occupancy, ADR and REVPAR calculations for the Hotels are derived from
room revenue included in the audited financial data relating to each of
the Hotels for each of the periods indicated except for the following
hotels, for which information is audited only from the date of acquisition
of such hotel by AGHI (such date is set forth in parentheses): Hilton
Hotel-Durham (January 1997), Holiday Inn Resort Monterey (November 1996),
Hotel Maison de Ville (August 1994), Holiday Inn Dallas DFW Airport West
(June 1995), Hampton Inn Richmond Airport (December 1994) and Courtyard by
Marriott-Meadowlands (December 1993). The occupancy, ADR and REVPAR
calculations for the periods prior to the date of acquisition of the
hotels have been provided to management by the prior owners of such
hotels.
(2) Year renovated reflects the calendar year in which management deems that a
significant renovation was completed at the hotel.
(3) This hotel is currently operated and managed by AGHI. The following sets
forth the date AGHI began managing each such hotel: the Holiday Inn New
Orleans International Airport (February 1995), the Courtyard by Marriott-
Meadowlands (February 1993), the Hilton Hotel-Toledo (February 1993), the
Holiday Inn Dallas DFW Airport South (December 1991), the Holiday Inn
Dallas DFW Airport West (June 1995), the Hampton Inn Richmond Airport
(November 1993), the Hotel Maison de Ville (August 1992), the Days Inn
Ocean City (February 1993) and the Radisson Arlington Heights (March
1993).
(Notes continued on next page.)
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(4) The Company plans to reposition this hotel to operate as a Holiday Inn
Select.
(5) There can be no assurance that the brand conversion and repositioning of
this hotel will occur as planned.
(6) The Company plans to reposition this hotel to operate as a Hampton Inn.
(7) The Company plans to reposition this hotel to operate as a Crowne Plaza.
(8) This hotel also has an affiliation with Best Western. The Company plans
to reposition this hotel to operate as a Wyndham Hotel.
(9) The Company plans to reposition this hotel to operate as a Wyndham Hotel.
(10) The Company plans to reposition this hotel to operate as a Hilton Hotel.
(11) The Company plans to reposition this hotel to operate as a Wyndham Garden
Hotel. The Lessee has advised the Company that it plans to retain Wyndham
Hotel Corporation as the manager of this hotel.
(12) The Company plans to reposition this hotel to operate as a Westin Resort.
(13) The Company plans to reposition this hotel to operate as a DoubleTree
Guest Suites.
DESCRIPTIONS OF HOTELS
Fourteen of the Current Hotels are full-service hotels with an aggregate of
3,572 guest rooms, which target both business and leisure travelers, including
meetings and groups, who prefer a full range of facilities, services and
amenities. After completion of the Company's planned brand repositionings of
the Current Hotels, the Company's full-service hotels will include one
Courtyard by Marriott, two Hilton Hotels, two Holiday Inns, two Crowne Plazas,
three Holiday Inn Selects, three Wyndham Hotels and one independent hotel. All
four of the Proposed Acquisition Hotels are full-service hotels with an
aggregate of 775 guest rooms. After the Company's planned acquisition and
repositioning of the Proposed Acquisition Hotels, such hotels will operate
under the DoubleTree Guest Suites, Radisson Hotel, Wyndham Garden Hotel and
Westin Resort brands. Full-service hotels generally offer a full range of
meeting and conference facilities and banquet space. Facilities typically
include restaurants and lounge areas, gift shops and recreational facilities,
including swimming pools. Full-service hotels generally provide a significant
array of guest services, including room service, valet services and laundry.
As a result, full-service hotels often generate significant revenue from
sources other than guest room revenue.
Two of the Current Hotels are limited-service hotels with an aggregate of
286 guest rooms, which target both business and leisure travelers. After
completion of the Company's planned brand repositionings of the Current
Hotels, the Company's limited-service hotels will consist of two Hampton Inns.
Limited-service hotels have limited or no meeting space. Hotels operating in
this market segment generally seek to minimize operational costs by offering
only those basic services required by travelers; thus, guest room revenues
account for substantially all of the revenues generated by these hotels.
Because they cater to both business and leisure travelers and therefore
maintain relatively consistent occupancy on weekdays and weekends, limited-
service hotels often achieve occupancy rates higher than full-service hotels.
Set forth below is a description of each of the Current Hotels and Proposed
Acquisition Hotels.
INITIAL HOTELS
Holiday Inn Dallas DFW Airport West--Bedford, Texas
The Holiday Inn Dallas DFW Airport West is located in Bedford, a suburban
community west of the Dallas/Fort Worth International Airport. Originally
constructed in 1972 with an addition in 1987, the hotel contains 243 guest
rooms and features approximately 5,190 square feet of meeting facilities, a
restaurant and a theme lounge.
Upon AGHI's acquisition of the hotel in June 1995, AGHI immediately
implemented a significant capital improvement program that included
renovations to the exterior of the building, guest rooms, meeting facilities,
food and beverage outlets and the remaining public space. AGHI also changed
the hotel's guest mix by replacing the lower-rated contract demand business
(principally airline flight crews) with higher rate corporate business.
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<PAGE>
The Company acquired the hotel at the time of the IPO and plans to make
approximately $242,000 in additional improvements and renovations to the hotel
by August 1997.
Courtyard by Marriott-Meadowlands--Secaucus, New Jersey
The Courtyard by Marriott-Meadowlands is located within the Harmon Meadow
mixed-use development across the Hudson River from New York City. The hotel
opened in April 1989 and is situated between two nationally recognized
restaurants. It contains 165 guest rooms and its features include meeting
facilities, a restaurant, lounge and fitness facilities.
AGHI acquired the Courtyard by Marriott-Meadowlands in December 1993. At the
time of its acquisition by AGHI, this hotel faced declining operating
performance due to prior management inefficiencies, deferred maintenance and a
lack of capital to effectively compete in its market. In response to these
conditions, AGHI developed a multi-phase strategy, including repositioning the
former Days Hotel to a Courtyard by Marriott and upgrading the hotel by making
approximately $530,000 in renovations to guest rooms and public space and
exterior improvements to the hotel. From May 1994 through the hotel's July
1996 acquisition by the Company, AGHI had invested an additional $845,400 to
further improve the restaurant, lounge, exterior entrances, guest rooms and
meeting facilities at the hotels.
Hampton Inn Richmond Airport--Richmond, Virginia
The Hampton Inn Richmond Airport is located in an established industrial and
commercial area adjacent to Richmond International Airport. Constructed in
1988, the hotel contains 124 rooms and features hospitality suites, a swimming
pool and complimentary breakfast service. AGHI acquired the hotel in December
1994, after which time it implemented a $376,000 capital improvement program
which included the renovation of guest rooms and public areas. The Company
acquired the hotel at the time of the IPO and plans to invest an aggregate of
approximately $50,000 in additional improvements to the hotel during 1997.
Hotel Maison de Ville--New Orleans, Louisiana
The Hotel Maison de Ville is situated in a landmark location in the heart of
the French Quarter in New Orleans at the intersection of Bourbon and Rue
Toulouse streets and has had such notable residents as John James Audubon and
Tennessee Williams. Originally built in 1788, the 23-room hotel consists of
seven cottages, two suites and fourteen guest rooms. The hotel's features
include an award-winning bistro and an outdoor pool. The hotel is associated
with the prestigious Small Luxury Hotels(R), Historic Hotels of America and
Luxury Hotels of America(R) affiliations.
The hotel was acquired by affiliates of AGHI in August 1994. After the hotel
was acquired, AGHI instituted renovations totaling $650,000 designed to
restore the hotel's authentic style. The Company acquired the hotel at the
time of the IPO and since its acquisition has made approximately $24,000 in
improvements to the hotel. The Company has budgeted $26,000 for additional
improvements to the hotel during 1997. The restaurant facilities, three guest
rooms and an accounting office at the hotel are subject to a space lease with
a third party lessor; such lease expires in 2014 and requires annual minimum
rent of $42,000 (increasing to an annual minimum rent of $51,000 in the final
year of the lease).
Hilton Hotel-Toledo--Toledo, Ohio
The Hilton Hotel-Toledo is located on the campus of the Medical College of
Ohio in Toledo, Ohio. The hotel was developed in 1987 and consistent upgrading
of the property has allowed the hotel to maintain a facility that, the Company
believes, is among the finest in Northwest Ohio. The 213-room hotel is
connected to the Medical College of Ohio at Toledo's Eleanor N. Dana
Conference Center, which has approximately 13,000
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<PAGE>
square feet of conference space, and its Morse Health & Fitness Center, both
of which may be used by the hotel's guests. The Morse Health & Fitness Center
has over 33,000 square feet of state-of-the-art fitness equipment, basketball
and racquet ball courts and an indoor running track, and is staffed by fitness
professionals. AGHI is the exclusive supplier of food and beverage services
for the Eleanor N. Dana Conference Center. The Company acquired the hotel at
the time of the IPO and plans to invest approximately $341,000 in capital
improvements at the hotel during 1997.
Holiday Inn Dallas DFW Airport South--Irving, Texas
The Holiday Inn Dallas DFW Airport South is located near the south entrance
of the Dallas/Fort Worth International Airport in Irving, Texas. The main
building was constructed in 1974 with a guest-room tower added in 1983. The
Holiday Inn Dallas DFW Airport South targets the business traveler but also
offers additional facilities which appeal to families. The hotel contains 409
rooms and features an approximately 13,000 square foot conference center, a
fitness facility, a theme lounge, multiple food outlets, indoor and outdoor
pools and a "Kids Corner." The Company believes that the hotel is currently
the largest Holiday Inn in the southwestern United States.
AGHI, after its retention as manager of the Holiday Inn Dallas DFW Airport
South in December 1991 and its acquisition of an interest in the hotel in May
1992, commenced an extensive $2.5 million renovation of the hotel, which
included upgrades of all guest rooms and corridors, common areas, meeting
space, restaurants and the lounge and renovation of the exterior of the
building. At the time of AGHI's purchase, the hotel had lost its Holiday Inn
franchise due to product deficiencies and was experiencing declining occupancy
arising from poor marketing and insufficient capital improvements. Following
AGHI's completion of the initial renovations in 1992 and until the Company's
acquisition of the hotel at the time of the IPO, an additional $2.5 million
was spent upgrading the hotel. Since the Company's acquisition of the hotel,
it has spent approximately $730,000 renovating and improving the hotel and has
budgeted for 1997 an additional $1.6 million for renovations and improvements
in anticipation of repositioning the hotel to operate under the Holiday Inn
Select brand. There can be no assurance that such brand conversion will occur.
Holiday Inn New Orleans International Airport--Kenner, Louisiana
The Holiday Inn New Orleans International Airport is located in suburban
Kenner, approximately one-half mile from the entrance to the New Orleans
International Airport. The Holidome facility is the closest Holiday Inn to the
New Orleans International Airport. The hotel contains 304 rooms and features
approximately 5,000 square feet of meeting and banquet space, as well as
fitness facilities, a restaurant, a lounge, and a business center. The hotel
underwent a $1.6 million capital improvement program during 1993 and 1994
which included the renovation of the exterior of the building, food and
beverage facilities, guest rooms, meeting rooms and public space.
The Company acquired the hotel at the time of the IPO and since that date
has spent approximately $1.2 million renovating and improving the hotel. The
Company has budgeted for 1997 approximately $1.1 million in additional
improvements to the hotel in anticipation of repositioning the hotel under the
Holiday Inn Select brand. There can be no assurance that such brand conversion
will occur.
Days Inn Ocean City--Ocean City, Maryland
The Days Inn Ocean City is located on the area's primary commercial
boulevard, one block north of the Ocean City Convention Center and two blocks
west of the Atlantic Ocean beaches, and serves both the leisure and
conventions markets. The seven-story hotel was built in 1989. It contains 162
rooms and features approximately 3,600 square feet of meeting space and an
indoor pool. A $529,000 capital-improvement program was completed at the hotel
in 1995 which included renovation of the guest rooms, meeting facilities and
public space. The Company acquired the hotel at the time of the IPO and since
that date has invested approximately $975,000 on renovations and improvements
to the hotel. The Company has budgeted for 1997 approximately
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<PAGE>
$990,000 in additional improvements to the hotel in anticipation of
repositioning the hotel to operate under the Hampton Inn brand by March 1997.
There can be no assurance that such brand conversion will occur.
Holiday Inn Select-Madison--Madison, Wisconsin
The Holiday Inn Select-Madison is located adjacent to a large regional
shopping center in Madison, Wisconsin. The hotel has been consistently
upgraded since its opening in 1987 and management believes it is in excellent
physical condition. The hotel contains 227 rooms, including 36 suites, in a
mid-rise building designed around a central atrium containing an enclosed
pool, popular restaurant, lobby bar and lounge. In 1995, the hotel was chosen
as the top property out of Holiday Inn's domestic hotels in terms of product
quality and guest satisfaction for which it received the "Hotel of the Year"
award. The hotel has also received several Holiday Inn Torchbearer and Quality
Excellence awards.
The Company acquired the Holiday Inn Select--Madison at the time of the IPO
and since that date has invested approximately $850,000 on renovations and
improvements to the hotel. The Company has budgeted for 1997 approximately
$870,000 in additional improvements to the hotel in anticipation of
repositioning the hotel within its market as a Crowne Plaza. The Company
anticipates that the franchise change, combined with product and service
enhancements and adoption of Crowne Plaza operating standards, will result in
a further improvement in the hotel's revenues through higher guest-room rates
commensurate with the improved quality. There can be no assurance that such
brand conversion and improved operating results will occur.
Holiday Inn Park Center Plaza--San Jose, California
The Holiday Inn Park Center Plaza is located adjacent to the McEnery
Convention Center in downtown San Jose and is within two blocks of the new
world headquarters of Adobe Software and within two miles of San Jose Arena
and San Jose State University. The high-rise hotel and three-level garage were
built in 1975 and underwent an extensive renovation in 1990, including the
public space, guest rooms, food and beverage outlets and meeting facilities.
The hotel contains 231 rooms and features a fitness facility, outdoor pool,
restaurant and lounge, and over 8,000 square feet of meeting space.
The Company acquired the hotel at the time of the IPO and since that date
has spent approximately $1.6 million on an extensive renovation program at the
hotel. The Company has budgeted for 1997 approximately $3.6 million in order
to complete this renovation program and to convert the hotel from a
traditional Holiday Inn into a Crowne Plaza hotel. In addition, it was
recently recommended to the Redevelopment Agency of the City of San Jose that
the Company be issued a $350,000 grant for renovation of the exterior of the
hotel. The Company expects to utilize the funds during 1997, assuming they are
received during this year. The Company anticipates that the renovation and
franchise change will enable the hotel to increase its ADR. There can be no
assurance that such brand conversion and improved operating results will
occur.
Fred Harvey Albuquerque Airport Hotel--Albuquerque, New Mexico
The Fred Harvey Albuquerque Airport Hotel is located at the entrance to the
Albuquerque International Airport and is within three miles of the University
of New Mexico and the Albuquerque Convention Center. The 14-story high-rise
hotel opened in 1972 and is currently affiliated with Best Western. It
contains 266 rooms and features two restaurants, a lounge, fitness facilities,
an outdoor pool, tennis courts and approximately 8,000 square feet of meeting
space.
The Company acquired the hotel at the time of the IPO and since that date
has embarked on an extensive renovation program at the hotel that includes the
conversion of the second floor, which is currently used for meeting rooms and
administrative offices, to guest rooms, thereby increasing the number of guest
rooms available to 278. Since the Company's acquisition of the hotel, it has
spent approximately $1.6 million on the renovation program and has budgeted
for 1997 an additional $3.6 million in order to complete the program.
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<PAGE>
Upon the completion of the renovation program, the Company expects that it
will convert the hotel to the Wyndham Hotel brand.
Le Baron Airport Hotel--San Jose, California
The Le Baron Airport Hotel is located approximately one mile from the San
Jose International Airport and two miles from downtown San Jose. The hotel was
developed in 1974 and has 327 guest rooms in a nine-story tower. The hotel
contains approximately 21,000 square feet of meeting and banquet space, two
restaurants, a cocktail lounge, an outdoor pool and a fitness center.
The Company acquired the hotel at the time of the IPO and since that date
has embarked on an extensive renovation program to upgrade the entire hotel
and reposition it as a Wyndham Hotel. The renovations include the conversion
of currently underutilized space to an additional 33 guest rooms. Since the
Company's acquisition of the hotel, the Company has spent approximately $1.7
million on the renovation program and has budgeted for 1997 an additional $5.0
million in order to complete the program. The Company believes that the
renovation, the increase in the number of guest rooms, the conversion to the
Wyndham Hotel brand and the expected improvements in operational efficiencies
will produce substantial increases in revenue. There can be no assurance that
such brand conversion and improved operating results will occur. The Company
originally anticipated converting this hotel to a DoubleTree brand; however,
as a result of DoubleTree Corporation's recent acquisition of Red Lion Hotels
and its subsequent decision to convert the Red Lion branded hotel in this
market to a DoubleTree Hotel, the Company altered its initial branding plan
for the hotel.
Holiday Inn Mission Valley--San Diego, California
The Holiday Inn Mission Valley is located approximately one mile from Old
Town, approximately three miles from Jack Murphy Stadium and the San Diego
Zoo, approximately four miles from Sea World, and within driving distance of
the San Diego central business district and the San Diego International
Airport. The hotel was built in 1975 and was expanded in 1986. The hotel
contains 318 guest rooms and features over 6,000 square feet of meeting space,
a heated outdoor pool and spa, restaurant, lounge and fitness facilities.
The Company acquired the hotel at the time of the IPO and since that date
has spent approximately $390,000 on renovations and capital improvements at
the hotel. The Company has budgeted for 1997 approximate $1.8 million in
additional capital improvements and renovations in order to reposition the
hotel under the Holiday Inn Select brand. There can be no assurance that such
brand conversion will occur. The Company originally anticipated converting
this hotel to a DoubleTree brand; however as a result of DoubleTree
Corporation's recent acquisition of Red Lion Hotels and its subsequent
decision to convert the Red Lion branded hotel in this market to a DoubleTree
Hotel, the Company altered its initial branding plan for the hotel.
ACQUIRED HOTELS
Days Inn Lake Buena Vista--Orlando, Florida
On October 22, 1996, the Company acquired the 490-room Days Inn Lake Buena
Vista for an aggregate purchase price of $30.5 million, consisting of $30.0
million in cash and, 25,397 shares of restricted Common Stock valued at
$500,000 at the time of the closing of the acquisition of the hotel. In
addition, in connection with this acquisition the Company purchased a license
and an association membership from the seller for the membership in Grand
Theme Hotels and exclusive use of the Royal Safari theme in the Orlando area
for approximately $1.3 million payable in installments through 1997, and will
pay an additional $900,000 for certain construction, design and other services
related to the operation of the hotel. The Lessee also paid the seller
$200,000 for certain cash flow guarantees through 1997. In addition,
commencing January 1998, in connection with the license and the association
membership, the Company is required to pay recurring association fees
including a base monthly fee equal to 1.0% of the prior month's gross monthly
room revenues generated at the hotel, and an additional fee of 0.5% to 1.0% of
gross monthly room revenues if the trailing twelve month's gross
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<PAGE>
room revenues at the hotel exceeds a threshold of approximately $13 million,
(subject to increase based on the percentage increase in the CPI). In
addition, the Company is obligated to pay a recurring royalty for the Royal
Safari theme equal to an amount, which ranges from 10% to 25% of net operating
income in excess of $6 million (subject to adjustment if the Company invests
more than $40 million in the hotel). The Company is also obligated to pay a
marketing assistance fee equal to .25% of gross room revenues. The Company
expects that such marketing and association fees will not exceed 2.25% of
gross room revenues for any twelve-month period. The association membership
agreement terminates in October 2008; the Company is obligated to pay
liquidated damanges if the agreement is terminated earlier.
The Days Inn Lake Buena Vista is located approximately one-quarter mile
south of Walt Disney World's Lake Buena Vista entrance. The area in which the
hotel is located is resort-oriented and includes hotels, strip retail centers
and numerous free standing restaurants. Currently, Orlando is a $15 billion-
per-year tourism market, and management believes that local hotels will
benefit from even greater demand in the future with both Universal Studios and
Walt Disney World recently announcing multi-billion dollar expansion projects.
Hotel occupancy in the Orlando market is very strong, with a year-to-date
occupancy through September 30, 1996 of 82.3%. The hotel has also been
selected by Disney as one of the hotels outside its park to which it will
offer reservations to overflow customers. The hotel was developed in 1985 and
contains a total of 490 guest rooms, including 94 suites. The hotel is
configured around a large courtyard area which contains a swimming pool and
play areas. Additional amenities include a restaurant, deli, cocktail lounge,
approximately 4,200 square feet of convention space and a gift shop.
Since the Company's acquisition of the hotel, the Company has commenced an
extensive renovation program to upgrade the entire hotel and to reposition the
facility as a Wyndham Hotel. The renovations include refurbishing all areas of
the hotel including public areas and guest rooms, including the addition of
approximately 9,000 square feet of convention space, as well as significant
alterations to the hotels exterior, including extensive landscaping and other
entertainment attractions. The hotel will be redesigned to reflect an African
safari theme that will tie in with Disney's new Wild Animal Kingdom theme
park, which is expected to open in 1998. Since the Company's acquisition of
the hotel, the Company has spent approximately $1.8 million on this renovation
program and has budgeted for 1997 an additional $7.5 million in order to
complete this program. The Company believes that the renovations, increase in
convention space, creation of the African safari theme, conversion to a
Wyndham Hotel brand, and the expected improvements in operational efficiencies
(that were taken into account in establishing the rent payable to the Company
under the Participating Lease relating to the hotel) will produce substantial
increases in revenue. There can be no assurance that such brand conversion and
improved operating results will occur.
The Days Inn Lake Buena Vista constitutes more than 10% of the aggregate
historical cost basis of the Company's assets as of December 31, 1996. The
aggregate tax bases of depreciable real and personal property of the hotel for
federal income tax purposes were approximately $27.7 million and $955,500,
respectively, as of December 31, 1996. Depreciation is computed for federal
income tax purposes using the straight-line method over a 39 year life for the
real property and declining balance methods over lives which range from 5 to 7
years for the personal property. The 1996 realty tax rate for the Days Inn
Lake Buena Vista was $21.08 per $1,000 of assessed value. The occupancy rate
for the Days Inn Lake Buena Vista was as follows: (i) 73.9% for the year ended
December 31, 1993; (ii) 77.9% for the year ended December 31, 1994; (iii)
77.8% for the year ended December 31, 1995; and (iv) 76.8% for the 9 months
ended September 30, 1996. Occupancy information for the year ended December
31, 1992 was not available to the Company.
Holiday Inn Resort Monterey--Monterey, California
On November 21, 1996, the Company acquired the 204-room Holiday Inn Resort
Monterey for approximately $15.5 million in cash. The Holiday Inn Resort
Monterey is located at the major tourist destination of Monterey, California.
The hotel is a three-story, interior corridor facility configured around a
central courtyard and pool. Amenities include two tennis courts, a heated
outdoor pool, an indoor therapy whirlpool, restaurant, lounge and
approximately 6,200 square feet of meeting space.
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The Monterey/Carmel area is nationally known for its beautiful coastline
scenery, the scenic 17 Mile Drive, Fisherman's Wharf, the Monterey Aquarium,
the golf courses of Pebble Beach, Spy Glass and Cypress Point and the historic
Cannery Row. In addition, the communities of Monterey and Carmel have limited
the development of new lodging facilities in their area through several voter
initiatives. The hotel had occupancy, ADR and REVPAR of 65.5%, $100.08 and
$65.50, respectively, for the twelve months ended September 30, 1996. The
hotel was developed in 1971 and is wood frame construction with painted stucco
and wood exterior walls trimmed with rock veneer. The contemporary
architecture and well-developed landscaping combine to produce an appealing
complex similar to others found in the area. The Company has budgeted for 1997
approximately $3.9 million in renovations and capital improvements to the
hotel in order to reposition the hotel as a Hilton Hotel. The Company believes
that the renovation and brand conversion planned for the hotel will allow the
hotel to capture the benefits associated with the overall improvement in the
lodging market in the area in which the hotel operates. There can be no
assurance that such brand conversion and improved operating results will
occur.
Hilton Hotel-Durham--Durham, North Carolina
On January 8, 1997, the Company acquired the 152-room Hilton Hotel-Durham
for approximately $12.1 million in cash. The Hilton Hotel-Durham is located in
northwestern Durham, one mile from Duke University and Duke Medical Center.
The hotel is accessible by two major highways and is situated in proximity to
a number of business centers. The hotel has been well maintained and underwent
an interior renovation in 1993 and 1994. The competitive market in which the
hotel operates has experienced significant increases in rate and occupancy
levels over the last several years, with overall demand for guest rooms
increasing by 8.1% from 1992 to 1995, from 64.0% to 72.1%, and average room
rates increased by 13.2% for the same time period, from $63.22 to $76.42.
The hotel, which was constructed in 1987, offers 152 guest rooms, 300
parking spaces and over 6,000 square feet of function space. The hotel also
contains a full-service restaurant, an entertainment lounge and a lobby bar,
an outdoor pool, an exercise room, a business center and a car rental counter.
The Company has budgeted for 1997 approximately $250,000 for renovations and
improvements of the hotel and approximately $2.4 million on a 42 guest room
expansion of the hotel.
This hotel competes with the Durham Option Hotel in which AGHI holds a 16.7%
interest. Pursuant to the Option Agreement, the Company has the option and
right of first refusal to acquire AGHI's 16.7% partnership interest in the
Durham Option Hotel. See "Risk Factors--Conflicts Relating to Continued
Ownership of Other Hotel Properties" and "Certain Relationships and
Transactions--Options to Purchase and Rights of First Refusal."
PROPOSED ACQUISITION HOTELS
The Company has entered into contracts to purchase the Proposed Acquisition
Hotels for an aggregate purchase price of approximately $71.7 million. The
closing of the purchase of each of the Proposed Acquisition Hotels is subject
to satisfactory completion of various closing conditions. Accordingly, no
assurance can be given that the Company will acquire any or all of the
Proposed Acquisition Hotels. See "Risk Factors--Risk That Proposed Acquisition
Hotels Will Not Be Acquired." If the Proposed Acquisition Hotels are acquired,
the Company will have invested approximately $129.7 million in hotel
acquisitions since the IPO and will own a portfolio of 20 hotels containing
approximately 4,600 guest rooms. This represents a more than 50% increase in
the Company's portfolio since the IPO based upon the number of guest rooms.
Set forth below are summary descriptions of the Proposed Acquisition Hotels:
Portfolio Purchase. In December 1996, the Company entered into a series of
agreements to acquire a portfolio of hotels, including the Four Points by
Sheraton, the Sheraton Key Largo and the French Quarter Suites Hotel for an
aggregate purchase price of approximately $59.1 million. The purchase price
for the Portfolio Purchase is as follows: (i) approximately $49.5 million in
cash and (ii) the assumption of approximately $9.6 million of mortgage
indebtedness secured by the French Quarter Suites Hotel.
64
<PAGE>
Four Points by Sheraton--Marietta, Georgia
The Four Points by Sheraton is located in Marietta, Georgia, a northwest
suburb of Atlanta. The hotel was built in 1985 as a 219-room Sheraton. The
hotel is situated within a highly traveled commercial and residential area in
central Marietta. Amenities at the hotel include a restaurant, lounge, outdoor
pool, fitness center and approximately 10,000 square feet of meeting space.
The hotel's extensive meeting space is the largest in Marietta, allowing the
hotel to accommodate the majority of the group and meetings demand in that
market.
The Company has budgeted approximately $2.8 million to renovate the hotel
during 1997 in order to reposition the hotel to operate under the Wyndham
Garden Hotel brand. There can be no assurance that such brand conversion will
occur. The Company expects to lease the hotel to the Lessee, which, in turn,
expects to engage Wyndham Hotel Corporation as the manager of this property.
Assuming the acquisition of this hotel by the Company, this will be the first
hotel owned by the Company that is not managed by AGHI.
The hotel is being acquired as part of the Portfolio Purchase. The Company
has allocated a $17.0 million cash purchase price to Four Points by Sheraton.
The hotel had occupancy, ADR and REVPAR of 65.2%, $81.41 and $53.11,
respectively, for the twelve months ended September 30, 1996. The closing is
scheduled to occur in March 1997 and is conditioned on, among other things,
the satisfactory completion of the Company's due diligence and certain lender
consents.
Sheraton Key Largo--Key Largo, Florida
The Sheraton Key Largo is located at Mile Marker 97 and US Highway 1 in Key
Largo, Florida. The hotel, developed in 1985, is a 200-room resort complex
contained within three sprawling four-story structures nestled within highly
dense vegetation and situated on the island's western coastline. The resort
offers a private beach, boat dock, two outdoor pools, two tennis courts, a
2,000 foot nature trail, two restaurants, a lounge and approximately 10,500
square feet of meeting space. Additional amenities include a gift shop, hair
salon and water sports activities. The Sheraton Key Largo is the largest hotel
facility in the major tourist destination of Key Largo.
The Company has budgeted approximately $3.0 million to renovate the hotel
during 1997 in order to reposition the hotel to operate as a Westin Resort.
There can be no assurance that such conversion will occur. The hotel had
occupancy, ADR and REVPAR of 77.3%, $116.70 and $90.19, respectively, for the
twelve months ended September 30, 1996.
The hotel is being acquired as part of the Portfolio Purchase. The Company
has allocated a $26.1 million cash purchase price to the Sheraton Key Largo.
The closing is scheduled to occur in March 1997 and is conditioned on, among
other things, the satisfactory completion of the Company's due diligence and
certain lender consents. The Company expects that the hotel will be leased to
the Lessee and will be managed by AGHI.
French Quarter Suites Hotel--Atlanta, Georgia
The French Quarter Suites Hotel is located in the Cumberland Mall/Galleria
area of northwestern Atlanta. The hotel was constructed in 1985 and contains a
total of 155 guest rooms of which 144 are two-room, 600 square foot suites.
The hotel also contains an upscale restaurant, the Cafe New Orleans, as well
as a fitness center, an outdoor pool and 3,500 square feet of meeting space.
The Company has budgeted approximately $2.8 million during 1997 to complete
an extensive renovation of the hotel in order to convert the facility to
operate as a DoubleTree Guest Suites hotel. There can be no assurance that
such brand conversion will occur. The hotel had occupancy, ADR and REVPAR of
73.6%, $107.00 and $78.70, respectively, for the twelve months ended September
30, 1996.
65
<PAGE>
The hotel is being acquired as part of the Portfolio Purchase. The Company
has allocated a $16.0 million purchase price to the French Quarter Suites
Hotel, consisting of approximately $6.4 million in cash and the assumption of
approximately $9.6 million of mortgage indebtedness bearing an interest rate
of 9.75% per annum and secured by the property. The closing is scheduled to
occur in March 1997 and is conditioned on, among other things, the
satisfactory completion of the Company's due diligence and certain lender
consents. The Company expects that the hotel will be leased to the Lessee and
will be managed by AGHI.
Radisson Arlington Heights--Arlington Heights, Illinois
The Radisson Arlington Heights is located in suburban northwest Chicago,
approximately 8.5 miles from O'Hare International Airport, in an area
dominated by a large number of corporate users of lodging facilities,
including National Car Rental, United Airlines, American Airlines, Airborne
Express and Pepsi-Cola. The hotel, which was developed in 1981, is a 201-room
full-service facility. The six-story hotel contains a restaurant, lobby and
approximately 7,200 square feet of meeting space. Other amenities at the hotel
include an indoor heated pool, exercise room and gift shop.
The hotel has been managed by AGHI since March 1993. In 1993, when AGHI
commenced managing the property, occupancy, ADR and REVPAR at the hotel were
60.7%, $61.52 and $37.34, respectively. By the twelve months ended September
30, 1996, occupancy at the hotel had increased 15.2% to 69.9%, ADR at the
hotel had increased 21.1% to $74.52 and REVPAR at the hotel had increased
39.5% to $52.08.
The purchase price of the hotel is approximately $11.5 million payable as
follows: (i) $3.3 million in cash and (ii) the assumption of a one-year, $8.2
million first mortgage note, which bears interest at the rate of 7.5% per
annum. In addition, commencing on the earlier of the fourth year anniversary
of the completion of initial renovations of the hotel or January 1, 2003 (the
"Arlington Buyout Date"), the seller will have the right to receive a 25%
profits interest in the net cash flow and the net proceeds from certain
capital transactions generated at the hotel. The Company has the option to
purchase this profits interest for an amount equal to 25% of the fair market
value of the hotel less the sum of $11.2 million plus the cost of any
additional expansion of the hotel at any time after the fourth anniversary of
the completion of the initial renovations at the hotel, except that if the
number of rooms are increased at the hotel or the franchise brand is changed,
then the option right may not be exercised until a date that is at least 30
months after the completion of any such expansion or commencement of
operations under such new franchise, as the case may be. In the event that the
Company exercises its option and acquires the seller's 25% profit interest,
the Company will immediately terminate any right to receive such interest.
This future cash flow right was granted in order to compensate the sellers for
the recent improvement in the hotel's performance that is not fully reflected
in the historical operating results. The Company expects that the hotel will
be leased to the Lessee and will continue to be managed by AGHI.
The Company has budgeted for 1997 approximately $4.0 million to renovate the
hotel and approximately $2.0 million to add at least 31 guest rooms to the
hotel. The restaurant facilities are subject to a space lease with a third
party lessee; such lease provides for monthly payments of $11,111 from the
date of the closing of the purchase through December 1997, at which time the
lease expires.
THE PARTICIPATING LEASES
In order for the Company to qualify as a REIT, neither the Company nor the
Operating Partnership may operate hotels or related properties. The Operating
Partnership leases each Current Hotel and will lease each Proposed Acquisition
Hotel to the Lessee for a term of twelve years from the date of its
acquisition by the Company pursuant to separate Participating Leases that
provide for rent equal to the greater of Base Rent or
66
<PAGE>
Participating Rent. The Participating Leases for the Proposed Acquisition
Hotels are expected to contain substantially the same ancillary terms as the
Participating Leases for the Current Hotels. In addition, the Company and the
Lessee are party to a Lease Master Agreement (the "Lease Master Agreement"),
which sets forth the terms of the Lessee Pledge and certain other matters.
Each Participating Lease with the Lessee contains terms substantially similar
to those described below. The following summary is qualified in its entirety
by the Participating Leases and the Lease Master Agreement, the forms of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
Participating Lease Terms. Each Participating Lease has a term of twelve
years from the date of the Company's acquisition of the hotel subject to such
lease, subject to earlier termination upon the occurrence of certain
contingencies described in the Participating Lease (including, particularly,
the provisions described herein under "Damage to Hotels," "Condemnation of
Hotels," and "Termination of Participating Leases Upon Disposition of the
Hotels").
Base Rent; Participating Rent; Additional Charges. Each Participating Lease
requires the Lessee to pay (i) fixed weekly Base Rent, (ii) on a monthly
basis, the excess of Participating Rent over Base Rent, with Participating
Rent based on certain percentages of room revenue, food and beverage revenue
and telephone and other revenue at each Hotel, and (iii) certain other
amounts, including interest accrued on any late payments or charges
("Additional Charges"). Commencing in January 1997, Base Rent and
Participating Rent departmental thresholds (departmental revenue on which the
rent percentage is based) will be increased annually by a percentage equal to
the percentage increase in the CPI (as defined in "Glossary") (CPI percentage
increase plus 0.75% in the case of the Participating Rent departmental revenue
thresholds) compared to the prior year. At ten of the Hotels, the franchise
agreements for the hotels require increases in the franchise royalty rates in
future years and the Participating Leases for those hotels provide that the
room revenue threshold will be increased to a higher level effective in the
year of the franchise royalty rate increase. At fourteen of the Hotels, the
Company plans to undertake substantial renovations that are expected to be
completed by the fourth quarter of 1997. At thirteen of these Hotels, the
renovations are expected to significantly negatively affect the operating
margins at these hotels during the renovation period. As a result, as set
forth in the table below, the Participating Rent formulas in the Participating
Leases for these hotels contain Participating Rent thresholds that adjust
effective January 1, 1997 and/or January 1, 1998, as the case may be, to take
into account the impact of such renovations and will increase by the
percentage increase in CPI plus 0.75% thereafter. In addition, Base Rent
relating to these thirteen Hotels will adjust effective January 1, 1997 and/or
January 1, 1998, as the case may be, and will increase by the percentage
increase in CPI thereafter. See the footnotes to the chart on the following
page. Following completion of the planned renovations, the Participating Rent
thresholds for those Participating Leases will increase thereafter based upon
increases in the CPI in the same manner as in the other Participating Leases.
Base Rent is payable weekly in arrears. Participating Rent is payable monthly
in arrears in an estimated budgeted amount equal to one-third of the
Participating Rent estimated to be payable during such quarter and will be
calculated based on the year-to-date departmental receipts as of the end of
the preceding calendar quarter, and a prorated amount of each of the
applicable departmental revenue thresholds determined based on the calendar
quarter, or portion thereof, of the fiscal year for which the calculation is
being made, and crediting against such amount the total Participating Rent
previously paid for such fiscal year and the cumulative Base Rent paid for
such fiscal year as of the end of the preceding calendar quarter. The monthly
departmental thresholds and the weekly Base Rent are set based on the
Company's annual budget, which reflects the seasonal variations in the
Company's revenues. Participating Rent payments during each calendar quarter
will be adjusted at the end of each quarter to reflect actual results. A final
adjustment of the Participating Rent for each fiscal year will be made, based
on audited statements of revenue for each hotel.
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<PAGE>
The table below sets forth (i) the annual Base Rent, (ii) Participating Rent
formulas and (iii) the pro forma rent that would have been paid for each hotel
pursuant to the terms of the Participating Leases based on the historical
revenues for the twelve months ended September 30, 1996, as if the Company had
owned the hotels and the Participating Leases were in effect during such
twelve-month period and October 1, 1995 was the beginning of the lease year.
For each hotel, pro forma Participating Rent is greater than Base Rent.
<TABLE>
<CAPTION>
LEASE TWELVE MONTHS ENDED
EXPIRATION SEPTEMBER 30, 1996
DATE BASE RENT PARTICIPATING -----------------------------------
(MONTH/ (DOLLARS IN RENT FORMULA PRO FORMA
HOTEL PROPERTIES YEAR) THOUSANDS) (DOLLARS IN THOUSANDS) PARTICIPATING RENT
- ------------------------ ---------- ----------- ------------------------------- -------------------------
PRO FORMA TELEPHONE
TOTAL AND
REVENUE ROOM F&B OTHER
--------- ------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL HOTELS
Holiday Inn Dallas DFW
Airport West
--Bedford, Texas....... 6/08 $ 827 Rooms: 25.0% of first $2,650; $ 3,588 $ 1,421 $ 68 $ 53
60.0% of next $825; 70.0%
thereafter; F&B: 5.0% of first
$905; 10.0% thereafter;
Telephone and Other: 22.5%
Courtyard by Marriott-
Meadowlands(1)
6/08 946 Rooms: 20.0% of first $2,150; 3,219 1,787 0 72
60.0% of next $1,315; 70.0%
thereafter; Telephone and
- --Secaucus, New Jersey.. Other: 25.0%
Hampton Inn Richmond
Airport
6/08 530 Rooms: 30.0% of first $1,155; 1,506 917 0 36
70.0% thereafter; Telephone
- --Richmond, Virginia.... and Other: 30.0%
Hotel Maison de Ville(2)
6/08 274 Rooms: 15.0% of first $890; 1,384 410 33 11
60.0% of next $210; 70.0%
thereafter; F&B: 5.0% of first
- --New Orleans, $430; 10.0% thereafter;
Louisiana.............. Telephone and Other: 15.0%
Hilton Hotel--Toledo
6/08 832 Rooms: 15.0% of first $2,400; 4,615 1,020 239 55
60.0% of next $650; 70.0%
thereafter; F&B: 7.5% of first
$1,800; 22.5% thereafter;
Toledo, Ohio............ Telephone and Other: 20.0%
Holiday Inn Dallas DFW
Airport South(3)
6/08 2,410 Rooms: 25.0% of first $4,650; 8,848 3,540 449 60
60.0% of next $2,950; 70.0%
thereafter; F&B: 10.0% of
first $2,280; 30.0%
thereafter; Telephone and
- --Irving, Texas......... Other: 12.5%
Holiday Inn New Orleans
International Airport
6/08 2,099 Rooms: 25.0% of first $3,050; 6,181 3,216 149 115
65.0% of next $2,350; 75.0%
thereafter; F&B: 7.5% of first
$930; 20.0% thereafter;
- --Kenner, Louisiana..... Telephone and Other: 25.0%
Days Inn Ocean City(4)
6/08 719 Rooms: 30.0% of first $1,025; 2,111 1,222 0 34
70.0% thereafter; Telephone
- --Ocean City, Maryland.. and Other: 30.0%
</TABLE>
See notes on page 71.
68
<PAGE>
<TABLE>
<CAPTION>
LEASE TWELVE MONTHS ENDED
EXPIRATION SEPTEMBER 30, 1996
DATE BASE RENT PARTICIPATING ------------------------------------
(MONTH/ (DOLLARS IN RENT FORMULA PRO FORMA
HOTEL PROPERTIES YEAR) THOUSANDS) (DOLLARS IN THOUSANDS) PARTICIPATING RENT
------------------------ ---------- ----------- ------------------------------- --------------------------
PRO FORMA TELEPHONE
TOTAL AND
REVENUE ROOM F&B OTHER
--------- ------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL HOTELS
Holiday Inn Select-
Madison(5)(6)
--Madison, Wisconsin...
6/08 $1,597 Rooms: 25.0% of first $2,250; $ 6,011 $ 2,476 $ 319 $ 62
60.0% of next $1,950; 70.0%
thereafter; F&B: 10.0% of
first $1,900; 20.0%
thereafter; Telephone and
Other: 25.0%
Holiday Inn Park Center
Plaza(7)(8)
--San Jose,
California............ 6/08 1,091 Rooms: 20.0% of first $3,600; 5,343 1,976 128 169
65.0% of next $1,050; 75.0%
thereafter; F&B: 5.0% of first
$1,350; 10.0% thereafter;
Telephone and Other: 30.0%
Fred Harvey Albuquerque
Airport Hotel(9)
--Albuquerque, New
Mexico................ 6/08 1,202 Rooms: 25.0% of first $2,560; 4,640 1,834 106 111
60.0% of next $1,060; 70.0%
thereafter; F&B: 5.0% of first
$1,190; 10.0% thereafter;
Telephone and Other: 25.0%
Le Baron Airport
Hotel(10)(11)--
--San Jose,
California............ 6/08 1,323 Rooms: 20.0% of first $3,100; 6,122 2,751 176 156
60.0% of next $1,975; 70.0%
thereafter; F&B: 5.0% of first
$2,320; 15.0% thereafter;
Telephone and Other: 30.0%
Holiday Inn Mission
Valley(12)(13)
--San Diego,
California............ 6/08 1,542 Rooms: 25.0% of first $3,570; 5,368 2,120 75 99
65.0% of next $900; 75.0%
thereafter; F&B: 5.0% of first
$845; 10.0% thereafter;
Telephone and Other: 25.0%
ACQUIRED HOTELS
Days Inn Lake
Buena Vista(14)(15)
--Orlando, Florida..... 10/08 5,044 Rooms: 25.0% of first $2,531; 6,621 4,805* 43* 376*
60.0% of next $3,449, 70.0%
thereafter; F&B: 5.0% of first
$579; 10.0% thereafter;
Telephone and Other: 50.0%
Holiday Inn Resort
Monterey(16)(17)
--Monterey, 11/08 1,279 Rooms: 20.0% of first $3,189; 4,370 1,814 30 93
California............ 60.0% of next $1,636; 70.0%
thereafter; F&B: 2.5% of first
$740; 5.0% thereafter;
Telephone and Other: 50.0%
</TABLE>
See notes on page 71.
69
<PAGE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
LEASE SEPTEMBER 30, 1996
EXPIRATION ------------------------------------
DATE BASE RENT PARTICIPATING PRO FORMA
(MONTH/ (DOLLARS IN RENT FORMULA PARTICIPATING
HOTEL PROPERTIES YEAR) THOUSANDS) (DOLLARS IN THOUSANDS) RENT
----------------------------- ---------- ----------- ------------------------------- --------------------------
PRO FORMA TELEPHONE
TOTAL AND
REVENUE ROOM F&B OTHER
--------- ------- ------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ACQUIRED HOTELS
Hilton Hotel-Durham(18)
--Durham, North Carolina.... 1/09 $ 1,133 Rooms: 25.0% of first $2,075; $ 3,869 $ 1,380 $ 160 $ 38
60.0% of next $692; 70.0%
thereafter; F&B: 7.5% of first
$1,276; 15.0% thereafter;
Telephone and Other: 30.0%
------- ------- ------- ------ ------
TOTALS--Current Hotels....... 22,848 73,796 32,689 1,975 1,540
------- ------- ------- ------ ------
PROPOSED ACQUISITION HOTELS
Four Points by Sheraton(19)
--Marietta, Georgia......... 3/09 1,350 Rooms: 20.0% of first $2,400; 4,388 1,754 127 71
65.0% of next $1,150; 75.0%
thereafter; F&B: 7.5% of first
$1,090; 20.0% thereafter;
Telephone and Other: 30.0%
Sheraton Key Largo(20)(21)
--Key Largo, Florida........ 3/09 2,184 Rooms: 20.0% of first $3,950; 6,590 2,459 74 81
60.0% of next $1,875; 70.0%
thereafter; F&B: 2.5% of first
$1,674; 5.0% thereafter;
Telephone and Other: 25.0%
French Quarter Suites
Hotel(22)(23)
--Atlanta, Georgia.......... 3/09 1,373 Rooms: 25.0% of first $2,050; 4,191 2,231 65 49
65.0% of next $925; 75.0%
thereafter; F&B: 5.0% of first
$715; 10.0% thereafter;
Telephone and Other: 25.0%
Radisson Arlington Heights(24)
--Arlington Heights, 2/09 922 Rooms: 20.0% of first $2,450; 2,882 1,356 108 76
Illinois................... ------- 60.0% of next $820; 70.0% ------- ------- ------ ------
thereafter; F&B: 15.0% of
first $300; 60.0% thereafter;
Telephone and Other: 25.0%
TOTALS--Proposed Acquisition
Hotels...................... 5,829 18,051 7,800 374 277
------- ------- ------- ------ ------
TOTALS--All Hotels.......... $28,677 $91,847 $40,489* $2,349* $1,817*
======= ======= ======= ====== ======
</TABLE>
* The pro forma Participating Rent for the nine months ended September 30,
1995 and the twelve months ended December 31, 1996 is less than pro forma
Base Rent at the Days Inn Lake Buena Vista for these same periods. As a
result, pro forma Participating Rent for the twelve months ended September
30, 1996 has been increased by $447.
See notes on page 71.
70
<PAGE>
(1) If food & beverage ("F&B") revenue exceeds $1,000, Participating Rent
will include 5% of total F&B revenue.
(2) There will be an additional adjustment to the room department
Participating Rent thresholds of 4.0% in 1997.
(3) There will be an additional adjustment to the room department
Participating Rent thresholds of 2.0% in 1997 and 2.0% in 1998.
(4) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 30.0% of first $1,400; 70.0% thereafter; Telephone and Other:
30.0%. Base Rent will reset in 1997 to $800 and grow at CPI thereafter.
(5) There will be an additional adjustment to the room department
Participating Rent thresholds of 3.0% in 2000.
(6) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 25.0% of the first $2,500; 60.0% of next $2,400; 70.0% thereafter;
F&B: 10.0% of first $2,000; 20.0% thereafter; Telephone and Other: 30.0%.
Base Rent will reset in 1997 to $1,750 and grow at CPI thereafter.
(7) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 20.0% of first $3,875; 65.0% of next $1,300; 75.0% thereafter;
F&B: 5.0% of first $1,625; 10.0% thereafter; Telephone and Other: 30.0%.
Base Rent will reset in 1997 to $1,400 and grow at CPI thereafter.
(8) There will be an additional adjustment to the room department
Participating Rent thresholds of 2.0% in 1999 and 2.0% in 2000.
(9) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 25.0% of first $3,350; 60.0% of next $1,400; 70.0% thereafter;
F&B: 5.0% of first $1,350; 10.0% thereafter; Telephone and Other: 25.0%.
Base Rent will reset in 1997 to $1,400 and grow at CPI thereafter.
(10) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 20.0% of first $3,350; 60.0% of next $2,800; 70.0% thereafter;
F&B: 5.0 of first $1,850; 15.0% thereafter; Telephone and Other: 30.0%.
The Participating Rent formula will be reset in 1998 to the following:
Rooms: 20.0% of first $3,950; 60.0% of next $3,100; 70.0% thereafter;
F&B: 5.0% of first $1,950; 15.0% thereafter; Telephone and Other: 30.0%.
Base rent will reset in 1997 to $2,100 and grow at CPI thereafter.
(11) There will be an additional adjustment to the room department
Participating Rent thresholds of 4.0% in 1999.
(12) The Participating Rent formula will be reset in 1997 to the following:
Rooms: 25.0% of first $3,825; 65.0% of next $950; 75.0% thereafter; F&B:
5.0% of first $1,000; 10.0% thereafter; Telephone and Other: 25.0%. Base
Rent will reset in 1997 to $1,800 and grow at CPI thereafter.
(13) There will be an additional adjustment to the room department
Participating Rent thresholds of 3.0% in 1999.
(14) There will be an additional adjustment to the room department
Participating Rent thresholds of 2.0% in 1999 and 2.0% in 2000.
(15) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 25.0% of first $5,452; 60.0% of next $4,933; 70.0% thereafter;
F&B: 5.0% of first $745; 10.0% thereafter; Telephone and Other: 50.0%.
Base Rent will reset in 1998 to $4,624 and grow at CPI thereafter.
(16) There will be an additional adjustment to the room department
Participating Rent thresholds of 4.5% in 1999 and 3.0% in 2000.
(17) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 20.0% of first $3,023; 60.0% of next $1,973; 70.0% thereafter;
F&B: 2.5% of first $768; 5.0% thereafter; Telephone and Other: 50.0%.
Base Rent will reset in 1998 to $2,041 and grow at CPI thereafter.
(18) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 25.0% of first $2,460; 60.0% of next $911; 70.0% thereafter; F&B:
7.5% of first $1,522; 15.0% thereafter; Telephone and Other: 30.0%. Base
Rent will reset in 1998 to $1,564 and grow at CPI thereafter.
(19) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 25.0% of first $2,625; 65.0% of next $1,275; 75.0% thereafter;
F&B: 7.5% of first $1,130; 20.0% thereafter; Telephone and Other 30.0%.
Base Rent will be reset to $1,460 and grow at CPI thereafter.
(20) There will be an additional adjustment to the room department
Participating Rent thresholds of 2.5% in 1999 and 2.5% in 2000 and 1.0%
in 2001.
71
<PAGE>
(21) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 20.0% of first $3,875; 60.0% of next $2,200; 70.0% thereafter;
F&B: 2.5% of first $1,737; 5.0% thereafter; Telephone and Other: 25.0%.
Base Rent will reset in 1998 to $2,284 and grow at CPI thereafter.
(22) There will be an additional adjustment to the room department
Participating Rent thresholds of 3.0% in 1999 and 1.0% in 2000.
(23) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 25.0% of first $2,450; 65.0% of next $1,050; 75.0% thereafter;
F&B: 5.0% of first $742; 10.0% thereafter; Telephone and Other: 25.0%.
Base Rent will reset in 1998 to $1,466 and grow at CPI thereafter.
(24) The Participating Rent formula will be reset in 1998 to the following:
Rooms: 20.0% of first $2,575; 60.0% of next $1,000; 70.0% thereafter;
F&B: 7.5% of first $1,100; 15.0% thereafter; Telephone and Other: 25.0%.
Base Rent will reset in 1998 to $1,162 and grow at CPI thereafter.
Other than real estate and personal property taxes and assessments, rent
payable under the ground leases, casualty insurance, including loss of income
insurance, capital impositions and capital replacements and refurbishments
(determined in accordance with generally accepted accounting principles),
which are obligations of the Company, the Participating Leases require the
Lessee to pay rent, liability insurance (see "Insurance and Property Taxes and
Assessments"), all costs and expenses and all utility and other charges
incurred in the operation of the Hotels. The Participating Leases also provide
for rent reductions and abatements in the event of damage or destruction or a
partial taking of any Hotel as described under "Damage to Hotels" and
"Condemnation of Hotels."
Lessee Capitalization; Lessee Pledge. At the time of the IPO, the partners
of the Lessee (i) capitalized the Lessee with $500,000 in cash and (ii)
pursuant to the Lessee Pledge, pledged 275,000 OP Units to the Company to
secure the Lessee's obligations under the Participating Leases. OP Units
subject to the Lessee Pledge may be released therefrom without duplication,
(a) on a one-for-one basis as the Lessee acquires OP Units or shares of Common
Stock or (b) upon the contribution to the Lessee of cash or an increase in
undistributed earnings in an amount equal to the then current market value of
the OP Units to be released from the Lessee Pledge.
Distribution Restrictions. The Lessee may not pay any distributions to its
partners (except for the purpose of permitting its partners to pay taxes on
the income attributable to them from the Lessee and except for distributions
relating to interest or dividends received by the Lessee from cash or
securities held by it) or make any other distributions to affiliates of the
Lessee, other than limited amounts relating to Lessee overhead or pursuant to
the Management Agreements, until the Lessee's net worth equals the greater of
(i) $6.0 million or (ii) 17.5% of actual rent payments from hotels leased to
the Lessee during the preceding calendar year (annualized for 1996) (the
"Lessee Distribution Restriction"). During the period of the Lessee
Distribution Restriction, the Lessee will be required, subject to compliance
with applicable securities laws, to purchase annually Common Stock on the open
market or, if any such purchase would violate the ownership limitation in the
Company's Charter, or at the option of the Operating Partnership, OP Units, in
an amount equal to the Lessee's cash flow attributable to the Participating
Leases for the preceding fiscal year (after establishing a reserve for partner
tax distributions). For purposes of calculating the net worth threshold for
the Lessee Distribution Restriction, annual rent payments will be determined
on a calendar year basis and will be annualized for any partial calendar year.
If the Lessee's net worth exceeds the net worth threshhold for the Lessee
Distribution Restriction, the Lessee may make distributions to its partners,
provided that, after such distribution, the Lessee's net worth equals or
exceeds the net worth threshold for the Lessee Distribution Restriction and
provided that at such time there exists no Event of Default (as defined in the
Participating Leases) under the Participating Leases. All Common Stock or OP
Units acquired by the Lessee during the period of the Lessee Distribution
Restriction may not be sold or transferred for a period of two years after
their acquisition (other than to partners in the Lessee) unless, following
such transfer, the net worth threshhold for the Lessee Distribution
Restriction is satisfied.
Subordination of Management Fees. The Lessee has engaged AGHI to operate the
Current Hotels and will engage AGHI to operate three of the Proposed
Acquisition Hotels. See "--The Management Agreements." The Participating
Leases provide that effective upon written notice by the Company of any
monetary Event of Default
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under the Participating Leases or a default under the FF&E Note, and during
the continuance thereof, no management fees will be paid to AGHI with respect
to any Hotel. Any deferred management fee will accrue without interest until
any such default has been cured. In addition, each Management Agreement which
the Lessee enters into must provide that AGHI will repay to the Company any
payments made to it by the Lessee while any such default has occurred and is
continuing.
Maintenance and Improvements. The Participating Leases obligate the Company
to establish annually a reserve for capital improvements at each Current Hotel
(including the periodic replacement or refurbishment of FF&E). The aggregate
amount of such reserves is equal 4.0% of total revenue for each Current Hotel
(which, on a consolidated pro forma basis for the twelve months ended
September 30, 1996, represented approximately 5.4% of room revenue). Any
unexpended amounts will remain the property of the Company upon termination of
the Participating Leases. Otherwise, the Lessee will be required, at its
expense, to maintain the Current Hotels in good order and repair, except for
ordinary wear and tear, and to make non-structural, foreseen and unforeseen,
and ordinary and extraordinary, repairs (other than capital repairs) which may
be necessary and appropriate to keep the Current Hotels in good order and
repair.
The Lessee is not obligated to bear the cost of any capital improvements or
capital repairs to the Current Hotels. With the consent of the Company,
however, the Lessee, at its expense, may make capital additions, modifications
or improvements to the Hotels, provided that such action does not
significantly alter their character or purposes and maintains or enhances the
value of the Hotels. All such alterations, replacements and improvements are
subject to all the terms and provisions of the Participating Leases and will
become the property of the Company upon termination of the Participating
Leases. The Company owns substantially all personal property (other than
inventory) not affixed to, or deemed a part of, the real estate or
improvements at the Current Hotels, but does not own such personal property
which would cause any portion of the rents under the Participating Leases not
to qualify as "rents from real property" for REIT income test purposes. See
"Federal Income Tax Considerations--Requirements for Qualification as a REIT--
Income Tests" and "Certain Relationships and Transactions--Sale of Personal
Property."
Insurance and Property Taxes and Assessments. The Company is responsible for
paying for (i) real estate and personal property taxes and assessments at the
Current Hotels (except to the extent that personal property associated with
the Current Hotels is owned by the Lessee), (ii) casualty insurance on the
Current Hotels and (iii) business interruption insurance covering the Base
Rent and Participating Rent. The aggregate real estate and personal property
tax obligations for the Current Hotels during the twelve months ended
September 30, 1996 was approximately $2.8 million. The Lessee is required to
pay or reimburse the Company for all liability insurance on the Current
Hotels, with extended coverage, including comprehensive general public
liability, workers' compensation and other insurance appropriate and customary
for properties similar to the Current Hotels and naming the Company as an
additional named insured.
Events of Default. Events of Default under the Participating Leases and the
Lease Master Agreement include, among others, the following:
(i) the failure by the Lessee to pay Base or Participating Rent when due
and the continuation of such failure for a period of ten days after receipt
by the Lessee of notice from the Company;
(ii) the failure by the Lessee to observe or perform any other term of a
Participating Lease or the Lease Master Agreement and the continuation of
such failure for a period of 30 days after receipt by the Lessee of notice
from the Company thereof, unless the Lessee is diligently proceeding to
cure, in which case the cure period will be extended to 180 days;
(iii) if the Lessee shall generally not be paying its debts as they
become due or file a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, make a general
assignment for the benefit of its creditors, consent to the appointment of
a custodian, receiver, trustee or other similar officer with respect to it
or any substantial part of its assets, be adjudicated insolvent or take
corporate action for the purpose of any of the foregoing;
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(iv) if the Lessee is liquidated or dissolved or commences proceedings to
effect the same, or ceases to do business or sells all or substantially all
of its assets;
(v) if the Lessee voluntarily discontinues operations of a Current Hotel
for more than three days, except as a result of damage, destruction,
condemnation or force majeure; or
(vi) if an event of default beyond applicable cure periods occurs under
the Franchise License with respect to any Current Hotel as a result of any
action or failure to act by the Lessee or its agents (including AGHI).
In addition, a default of the type described above will result in a cross-
default of all other Participating Leases to which the Lessee is a party.
Indemnification. Under each of the Participating Leases, the Lessee has
agreed to indemnify, and is obligated to hold harmless, the Company from and
against all liabilities, costs and expenses (including reasonable attorneys'
fees and expenses) incurred by, imposed upon or asserted against the Company
on account of, among other things, (i) any accident or injury to persons or
property on or about the Current Hotels, including claims under liquor
liability, "dram shop" or similar laws; (ii) any misuse by the Lessee or any
of its agents of the leased property; (iii) any environmental liability
(except to the extent such liability results from a pre-existing condition)
(see "Environmental Matters" below); (iv) taxes and assessments in respect of
the Current Hotels (other than real estate and personal property taxes and
assessments (other than on property owned by the Lessee) and income taxes of
the Company on income attributable to the Current Hotels and capital
impositions); (v) any breach of the Participating Leases by the Lessee; or
(vi) any breach of any subleases related to the Current Hotels, provided,
however, that such indemnification does not require the Lessee to indemnify
the Company against the Company's own negligent acts or omissions or willful
misconduct.
Assignment and Subleasing. The Lessee is not permitted to sublet all or any
part of the Current Hotels or assign its interest under any of the
Participating Leases, other than to an affiliate of the Lessee, without the
prior written consent of the Company. The Company has generally agreed to
consent to any sublease of any portion of any Current Hotel that sells
alcoholic beverages to the Beverage Corporations (as defined in "Formation
Transactions") or of a retail portion of any Current Hotel (provided such
sublease will not cause any portion of the Rents to fail to qualify as "rents
from real property" for REIT income qualification test purposes). See
"Sublease" below. No assignment or subletting will release the Lessee from any
of its obligations under the Participating Leases.
Damage to Hotels. In the event of damage to or destruction of any Current
Hotel covered by insurance which then renders the hotel unsuitable for its
intended use and occupancy, the Company may elect not to repair, rebuild or
restore the hotel, in which event the Participating Lease shall terminate, and
the Company generally shall be entitled to retain any proceeds of insurance
related to such damage or destruction. In the event the Company terminates a
Participating Lease under such circumstances, the Company, at its option, must
either (i) pay the Lessee the fair market value of the Lessee's leasehold
interest in the remaining term of the lease (which amount will be determined
by discounting to present value, for each year of the remainder of the lease
term, cash flow attributable to such lease after deducting the cost component
of the applicable management fees, at an annual discount rate of 12% (for the
purposes of such calculation, the annual cash flow for each remaining year of
the lease term shall be equal to the cash flow attributable to such lease for
the twelve months ended on the lease termination date)) or (ii) offer to lease
to the Lessee a substitute hotel on terms that would create a leasehold
interest in such hotel with a fair market value equal to or exceeding the fair
market value of the Lessee's remaining leasehold interest under the
Participating Lease to be terminated.
In the event that damage to or destruction of a Hotel which is covered by
insurance does not render such hotel unsuitable for its intended use and
occupancy as a hotel, the Company or, at the Company's option, the Lessee,
generally will be obligated to repair or restore such hotel. In the event of
material damage to or destruction of any Hotel which is not covered by
insurance, the Company may either repair, rebuild or restore the hotel (at the
Company's expense) to substantially the same condition as existed immediately
prior to such damage or terminate the Participating Lease without penalty. In
the event of non-material damage to a Current Hotel, the Company is required
to repair, rebuild or restore the hotel at its expense. During any period
required for repair or restoration of any damaged or destroyed Hotel, rent
will be equitably abated.
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Condemnation of Hotels. In the event of a total condemnation of a Current
Hotel, the relevant Participating Lease will terminate with respect to such
hotel as of the date of taking, and the Company and the Lessee will be
entitled to their shares of any condemnation award in accordance with the
provisions of the Participating Lease. In the event of a partial taking which
does not render the hotel unsuitable for the Lessee's use, the Lessee shall
restore the untaken portion of the hotel to a complete architectural unit, and
the Company shall contribute to the cost of such restoration that part of the
condemnation award required for such restoration.
Termination of Participating Leases upon Disposition of the Current
Hotels. In the event the Company enters into an agreement to sell or otherwise
transfer a Current Hotel, the Company will have the right to terminate the
Participating Lease with respect to such hotel upon 30 days' prior written
notice upon either (i) paying the Lessee the fair market value of the Lessee's
leasehold interest in the remaining term of the Participating Lease to be
terminated (which amount will be determined by discounting to present value,
for each year of the remainder of the lease term, cash flow attributable to
such lease after deducting the cost component of the applicable management
fees, at an annual discount rate of 12% (for the purposes of such calculation,
the annual cash flow for each remaining year of the lease term shall be equal
to the cash flow attributable to such lease for the twelve months ended on the
lease termination date)) or (ii) offering to lease to the Lessee a substitute
hotel on terms that would create a leasehold interest in such hotel with a
fair market value equal to or exceeding the fair market value of the Lessee's
remaining leasehold interest under the Participating Lease to be terminated.
Termination of Participating Leases upon Change in Tax Laws. In the event
that changes in federal income tax laws allow the Company or a subsidiary or
affiliate to directly operate hotels, the Company will have the right to
terminate all, but not less than all, Participating Leases with the Lessee, in
which event the Company will pay the Lessee the fair market value of the
remaining term of the Participating Leases.
Franchise Licenses. The Company has agreed that the Lessee will be the
licensee under each of the Franchise Licenses on the Hotels. Holiday Inn,
Promus (on behalf of Hampton Inn), Marriott and Hilton have agreed that upon
the occurrence of certain events of default by the Lessee under a Franchise
License, such franchisors will temporarily transfer the Franchise License for
the hotel to an operator designated by the Company and acceptable to such
franchisor to allow the new operator time to apply for a new Franchise
License. The Company intends to seek similar temporary operational rights with
respect to new Franchise Licenses that are expected to be entered into with
Wyndham, DoubleTree, Crowne Plaza, Westin and Sheraton. There can be no
assurance the Company will receive such temporary operational rights in any
new Franchise Licenses with such franchisors. See "Franchise Agreements."
Sublease. In order to facilitate compliance with state and local liquor laws
and regulations, the Lessee subleases those areas of the Current Hotels that
comprise the restaurant and other areas where alcoholic beverages are served
to the Beverage Corporations. In accordance with the terms of the Beverage
Subleases, each Beverage Corporation is obligated to pay to the Lessee rent
payments equal to 30% of each such corporation's annual gross revenues
generated from the sale of food and beverages generated from such areas;
however, pursuant to the Participating Leases, such subleases will not reduce
the Participating Rent payments to the Company, which it is entitled to
receive from such food and beverage sales.
Other Lease Covenants. The Lessee has agreed that during the term of the
Participating Leases it will maintain a ratio of total debt to Consolidated
Net Worth (as determined in the Participating Leases) of less than or equal to
50.0%, exclusive of capitalized leases and the FF&E Note. In the event the
Lessee is required to pledge any of its assets to the Company's lenders in
connection with a Company hotel financing, and such assets are subsequently
sold in a foreclosure proceeding, the Lessee will be entitled to be reimbursed
by the Company for the fair market value of such assets.
Inventory. The initial standard inventory of goods and supplies required in
the operation of the hotels has been purchased at the Lessee's expense and is
owned by the Lessee. Any inventory used by the Lessee in the operation of each
Current Hotel shall, upon termination of its Participating Lease, be purchased
by the Company or its designee for its fair market value.
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Approval of Managers by Company. The Company has the right to approve (which
approval will not be unreasonably withheld) the engagement by the Lessee of
any operator of a Current Hotel other than AGHI or an affiliate of AGHI. The
Company has the right to approve the payment of management fees to AGHI under
the Management Agreements in excess of 3.5% of the gross revenues at a
particular hotel.
THE MANAGEMENT AGREEMENTS
AGHI
The Lessee has engaged AGHI to manage the Current Hotels and will engage
AGHI to manage three of the Proposed Acquisition Hotels pursuant to the
Management Agreements. The following is a summary of the Management Agreements
and certain related agreements:
Management Agreement Terms. Each Management Agreement has an initial twelve-
year term. In the event of the extension or renewal of the term of the
applicable Participating Lease, the Management Agreement will be similarly
extended or renewed.
Management Fees. Each Management Agreement requires the Lessee to pay AGHI a
monthly base fee equal to 1.5% of gross revenues, plus an incentive fee of up
to 2.0% of gross revenues. AGHI is entitled to receive an incentive fee equal
to 0.025% of annual gross revenues for each 0.1% increase in annual gross
revenues over the gross revenues for the preceding twelve-month period up to
the maximum incentive fee. Such incentive fee is payable quarterly and is
adjusted at the end of each calendar year to reflect actual results. Every
four years the basis upon which the incentive fee is calculated is required to
be renegotiated between the Lessee and the Manager. The payment of the
management fees to AGHI by the Lessee are subordinate to the Lessee's
obligations to the Company under the Participating Leases. The management fees
payable to AGHI during 1996 and 1997, respectively, will be earned only to the
extent that the Lessee's income during each such year exceeds the sum of rent
payable under the Participating Leases, plus Lessee overhead expense, plus
$50,000. Each Management Agreement requires AGHI to repay to the Lessee within
60 days after the end of each such year any management fees previously paid
but not earned by AGHI under the Management Agreements. In addition, the
Lessee has agreed to reimburse AGHI at cost for all expenses incurred in
supervising capital improvements to be performed at the hotels. AGHI will be
reimbursed, at the rate of $1,500 per month for each full-service hotel and
$1,000 per month for each limited-service hotel for accounting and financial
services performed by AGHI, which will be funded by the Lessee under the
Participating Leases. See "The Hotels--The Participating Leases--Subordination
of Management Fees."
Termination of Participating Lease. In the event of a termination of a
Participating Lease for a Hotel, the Management Agreement for such hotel also
will terminate.
Obligation to Purchase Common Stock. Messrs. Jorns and Wiles, who are
stockholders of AGHI and are also executive officers of the Company, have
agreed to use 50.0% of the dividends (net of the tax liability attributed to
such dividends) received by them from AGHI that are attributable to AGHI's
earnings from the management of hotels owned by the Company (as determined in
good faith by such officers) to purchase, subject to compliance with
applicable securities laws, annually in the open market, during each of the
twelve years following the closing of the IPO, additional shares of Common
Stock, or, if any such purchase would violate the ownership limitation in the
Company's Charter, or at the option of the Operating Partnership, OP Units.
Certain Transfer Restrictions. The stockholders of AGHI have agreed, for so
long as more than 50.0% of the Management Agreements with respect to the
Initial Hotels remain in place, to grant to the Lessee or its designee a right
of first refusal to acquire, under certain circumstances, any stock of AGHI
that is proposed to be sold in a Change of Control Transaction (as defined
below). The Lessee has agreed to assign this right to the Company or its
designee. This right is subordinate to a right of first refusal in favor of
AGHI and the existing stockholders of AGHI set forth in AGHI's existing
stockholders' agreement. For this purpose, a Change in Control Transaction
means a sale of stock in AGHI that will result in the ability of a person
(other than a current stockholder of AGHI) and his or its controlled
Affiliates to elect at least a majority of the Board of Directors of
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AGHI. A Change in Control Transaction does not include (i) an underwritten
public offering of common stock of AGHI, (ii) the transfer of stock to a
spouse of an AGHI stockholder, (iii) the transfer of stock to a trust for the
benefit of the spouse and/or children of an AGHI stockholder, or (iv) the
transfer of stock to any corporation or other entity of which a stockholder
controls at least 50.0% of the voting interests. The stockholders of AGHI have
also agreed to grant to the Lessee or its designee, for so long as more than
50.0% of the initial Management Agreements remain in place, a right of first
offer to acquire such stockholders' interests in AGHI prior to any proposed
merger or business combination transaction involving AGHI that would result in
the stockholders of AGHI or their affiliates holding less than 25.0% of the
interests in the surviving entity. The Lessee has agreed to assign this right
to the Company or its designee.
Wyndham
The Lessee has advised the Company that it expects to engage Wyndham to
manage the Four Points by Sheraton. It is expected that the management
agreement with Wyndham will have an initial twelve year term and will provide
for the payment of a base management fee equal to 1.5% of gross revenues at
the hotel plus an incentive management fee of up to 1.5% of gross revenues.
Wyndham will be entitled to receive the incentive management fee during the
first two years of the term of the agreement if (i) annualized 1997 gross
revenues for the Hotel exceed 1996 gross revenues for the hotel by at least 6%
and (ii) 1998 gross revenues for the hotel exceed 1996 gross revenues for the
hotel by at least 12%. Thereafter, the incentive management fee will be earned
if annual gross revenues for the hotel exceed the gross revenues for the hotel
for the prior year by at least the percentage increase in CPI for such year.
The Lessee's payment of the base management fee to Wyndham will be
subordinated to the payment of Base Rent under the Participating Lease
relating to the hotel and the Lessee's payment of the incentive management fee
will be subordinated to the payment of Participating Rent under such lease. In
addition, Wyndham will be reimbursed by the Lessee, at a rate of $4,900 per
month, for accounting and financial services performed by Wyndham. The
retention of Wyndham as a manager of the Four Points by Sheraton is subject to
the execution of a definitive management agreement with the Lessee.
Accordingly, there can be no assurance that the terms of the management
agreement will not change or that Wyndham will ultimately agree to manage the
hotel upon its acquisition by the Company or in the future.
MORTGAGE INDEBTEDNESS
The Holiday Inn Dallas DFW South is subject to non-recourse mortgage
indebtedness in the outstanding principal amount of $14.1 million as of
September 30, 1996 (the "DFW South Loan"). The DFW South Loan was entered into
on January 30, 1996, bears interest at the rate of 8.75% per annum and is
payable in equal monthly installments of principal and interest of
approximately $125,930 each. The DFW South Loan matures on January 1, 2011, at
which time a balloon payment in the amount of approximately $6,120,000 will be
due and payable. The loan may not be prepaid in whole or in part until after
February 1, 1998 and after such date may only be prepaid in whole with payment
of a yield maintenance premium generally equal to the discounted present value
of all interest payments due between the prepayment date and maturity of the
loan.
The Courtyard by Marriott-Meadowlands is subject to non-recourse mortgage
indebtedness that secures two notes in the outstanding principal amounts of
approximately $4.6 million and $576,000, respectively, as of September 30,
1996 (the "Secaucus Loans"). The $4.6 million portion of the Secaucus Loans,
which was entered into on December 30, 1993, bears interest at a rate of 7.5%
per annum and is payable in equal monthly installments of principal and
interest of approximately $39,300 each. This portion of the Secaucus Loans
matures on January 1, 2001, at which time a balloon payment in the amount of
approximately $3,985,000 will be due and payable.
The $508,500 portion of the Secaucus Loans was entered into on January 11,
1996, bears interest at a rate of 7.89% per annum and is payable in equal
monthly installments of principal and interest of approximately $14,750 that
will fully amortize the loan as of January 1, 2001. In connection with the IPO
and the transfer of the Courtyard by Marriott-Meadowlands hotel to a
subsidiary of the Operating Partnership, the Company agreed to guarantee to
the holder of the Secaucus Loans payment of rent under the ground lease
relating to the hotel ($150,000 per annum), real estate taxes ($159,600 for
the twelve months ended September 30, 1996) and capital reserves required by
the Secaucus Loans (4% of the gross revenues), and guarantee that, after a
default under the
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Secaucus Loans, Base Rent from the Participating Lease will be applied to the
Secaucus Loans, in each case until such loans are satisfied or such hotel is
transferred (by foreclosure or otherwise) to the holder of such loans.
In connection with the planned purchase by the Company of the French Quarter
Suites Hotel, the Company will assume a non-recourse mortgage note encumbering
the hotel in the outstanding principal amount, as of September 30, 1996, of
approximately $9.6 million (the "French Quarter Loan"). The French Quarter
Loan was entered into on June 14, 1995, bears interest at the rate of 9.75%
per annum and is payable in equal monthly installments of principal and
interest of approximately $93,100 each. The French Quarter Loan matures on
July 1, 2002, at which time a balloon payment of approximately $8.2 million
will be due and payable.
In connection with the planned purchase of the Radisson Arlington Heights,
the Company will assume a one-year mortgage note in the principal amount of
approximately $8.2 million (the "Radisson Loan"). The Radisson Loan bears
interest at the rate of 7.5% per annum, and will require quarterly payments in
arrears of interest only of $154,100. The Radisson Loan will mature on the one
year anniversary of the date of the closing of the purchase of that hotel, at
which time a balloon payment of approximately $8.2 million will be due and
payable.
LINE OF CREDIT
Neither the Company's Bylaws nor its Charter limits the amount of
indebtedness the Company may incur. To ensure that the Company has sufficient
liquidity to conduct its operations, including funding the acquisition of
additional hotels, making renovations and capital improvements to hotels and
for working capital requirements, the Company has access to the Line of
Credit. The Line of Credit is secured by, among other things, first mortgage
liens on all of the Current Hotels, other than Holiday Inn Dallas DFW Airport
South and Courtyard by Marriott-Meadowlands, and is expected to be secured by
two of the Proposed Acquisition Hotels. The Line of Credit also will be
secured by a mortgage lien on any subsequently acquired hotels purchased
without outstanding mortgage indebtedness. While the Company has a maximum
borrowing limit of up to $100 million under the Line of Credit, the Company's
aggregate advances under the Line of Credit are limited to the lesser of (i)
40% of the aggregate appraised value of the Current Hotels and any other hotel
securing the Line of Credit after giving effect to the Company's use of
proceeds from any indebtedness towards hotel acquisitions and certain
renovations and capital improvements, (ii) 40% of the aggregate purchase price
of the Current Hotels and any other hotel acquisitions securing the Line of
Credit after giving effect to the Company's use of proceeds from any
indebtedness towards hotel acquisitions and certain renovations and capital
improvements, and (iii) the combined trailing twelve months EBITDA (generally
defined as net income of the Company before interest expense, taxes,
depreciation and amortization to the extent each reduces net income) generated
by the Hotels and any other hotels securing the Line of Credit, multiplied by
5.0. The Company is currently negotiating with its lenders to increase the
borrowing limit under the Line of Credit to $150 million. The Company expects
to pay commitment and other fees of approximately $700,000 in connection with
such increase. There can be no assurance that the Company will successfully
negotiate and consummate the proposed amendment to the Line of Credit. In
addition, the Line of Credit provides that the lenders must consent to any
development activities by the Company other than development in connection
with the limited expansion of existing hotels. Also, the Line of Credit
lenders must approve the lessee, manager and the franchise brand of any hotel
securing the Line of Credit in the future. In addition, the Line of Credit
requires that the current limited partners of the Lessee own no less than 65%
of the limited partnership interests of the Lessee at all times.
Outside of the Line of Credit, the Company and its subsidiaries may not
incur any additional debt or recourse obligations, without the consent of its
Line of Credit lenders, other than the debt assumed in connection with the
acquisition of the Holiday Inn Dallas DFW Airport South and Courtyard by
Marriott-Meadowlands Hotel. Accordingly, the Company's acquisitions of the
Radisson Arlington Heights and the French Quarter Suites Hotel are subject to
the approval of the Company's lenders under the Line of Credit. The Line of
Credit expires on July 31, 1999 and is subject to extension under certain
circumstances for an additional one-year term. Borrowings under the Line of
Credit bear interest at 30-day, 60-day or 90-day LIBOR, (5.50%, 5.53% and
5.56% at December 31, 1996), at the option of the Company, plus 1.85% per
annum, payable monthly in arrears. Economic conditions could result in higher
interest rates, which could increase debt service requirements on
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borrowings under the Line of Credit and which could reduce the amount of Cash
Available for Distribution. See "Risk Factors--Risks of Leverage; No Limits on
Indebtedness."
GROUND LEASES
Four of the Current Hotels are subject to ground leases with third parties
with respect to the land underlying each such hotel. The ground leases are
triple net leases which require the tenant to pay all expenses of owning and
operating the hotel, including real estate taxes and structural maintenance
and repair. One of the Proposed Acquisition Hotels is subject to a ground
lease with the state of Florida for certain offshore real property accessible
by the guests of the hotel.
The Courtyard by Marriott-Meadowlands is subject to a ground lease with
respect to approximately 0.37 acres. The ground lease terminates in March
2036, with two ten-year options to renew. The lease requires a fixed rent
payment equal to $150,000 per year, subject to a 25.0% increase every five
years thereafter beginning in 2001 and a percentage rent payment equal to 3.0%
of gross room revenues.
The Fred Harvey Albuquerque Airport Hotel is subject to a ground lease with
respect to approximately 10 acres. The ground lease terminates in December
2013, with two five-year options to renew. The lease requires a fixed rent
payment equal to $19,180 per year subject to annual consumer price index
adjustment and a percentage rent payment equal to 5.0% of gross room revenues,
3.0% of gross receipts from the sale of alcoholic beverages, 2.0% of gross
receipts from the sale of food and non-alcoholic beverages and 1.0% of gross
receipts from the sale of other merchandise or services. The lease also
provides the landlord with the right, subject to certain conditions, to
require the Company, at its expense, to construct 100 additional hotel rooms
if the occupancy rate at the hotel is 85.0% or more for 24 consecutive months
and to approve any significant renovations scheduled at the hotel. The
occupancy rate at the Fred Harvey Albuquerque Airport Hotel for the twelve
months ended September 30, 1996 was 81.8%. See "Risk Factors--Contingent
Obligation to Construct Additional Hotel Rooms."
The Hilton Hotel-Toledo is subject to a ground lease with respect to
approximately 8.8 acres. The ground lease terminates in June 2026, with four
successive renewal options, each for a ten-year term. The lease requires
annual rent payments equal to $25,000, increasing to $50,000 or $75,000 if
annual gross room revenues exceed $3.5 million or $4.5 million, respectively.
The Le Baron Airport Hotel is subject to a ground sublease with respect to
approximately 5.3 acres, which in turn is subject to a ground lease covering a
larger tract of land. The sublease terminates in 2022, with one 30-year option
to renew. The sublease requires the greater of a fixed minimum annual rent of
$75,945 (increasing to an annual minimum rent of $100,000 if the option is
exercised) or, in the aggregate, 4.0% of gross room revenues, 2.0% of gross
food receipts, and 3.0% of gross bar and miscellaneous operations receipts.
The sublease also provides the sublessor with the right to approve any
significant renovations scheduled at the hotel.
The Sheraton Key Largo property includes approximately 42,500 square feet of
off-shore bay bottom land in Florida Bay on which a commercial marina is
operated pursuant to a lease from the Board of Trustees of the Internal
Improvement Trust Fund of the State of Florida, as lessor. The lease, which
terminates in May 2021, requires an annual lease fee of approximately $3,100.
SKL of Florida, Inc., the lessee under the lease and the seller of the hotel,
will assign its interest in the lease to the Company upon the closing of the
purchase of the hotel. However, the lessor will not give its consent to the
assignment of lessee's interest in the lease until after the Company has
acquired the hotel. Accordingly, there can be no assurance that the Company
will obtain the lessor's consent to the assignment.
FRANCHISE CONVERSIONS AND OTHER CAPITAL IMPROVEMENTS
The Company has budgeted approximately $29.9 million for additional capital
improvements in connection with the planned renovation and conversion of the
Holiday Inn Select-Madison, the Holiday Inn Park Center Plaza, the Fred Harvey
Albuquerque Airport Hotel, the Le Baron Airport Hotel, the Days Inn Ocean
City, the Holiday Inn Mission Valley, the Holiday Inn Dallas DFW Airport
South, the Holiday Inn New Orleans International Airport, the Days Inn Lake
Buena Vista and the Holiday Inn Resort Monterey to new franchise brands. In
addition, the Company has budgeted for 1997 approximately $14.5 million to
renovate and refurbish
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the Proposed Acquisition Hotels. In certain circumstances, such renovations
and improvements are being completed in connection with franchisor
requirements. A description of the renovations and improvements that are
anticipated to occur at each such hotel and their anticipated costs are set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Franchise Conversions and Other Capital Improvements."
In addition, the Company has budgeted for 1997 approximately $3.4 million
for additional capital improvements in connection with certain renovations and
improvements that are anticipated to be made at certain of the Current Hotels
that will not undergo a conversion of franchise brands. Such improvements
include upgrading the guest rooms and public areas at the Hilton Hotel-Toledo,
adding 42 guest rooms to the Hilton Hotel-Durham and upgrading the public
areas and the restaurant at the Holiday Inn Dallas DFW Airport West.
FRANCHISE AGREEMENTS
Thirteen of the Current Hotels and three of the Proposed Acquisition Hotels
are operated under Franchise Licenses with nationally recognized hotel
companies. In addition, two of the Current Hotels that are not currently
subject to franchise agreements are expected to become subject to franchise
agreements during the second quarter of 1997. The Company anticipates that
most of the additional hotels in which it invests will be operated under
Franchise Licenses. The Company believes that the public's perception of
quality associated with a franchisor is an important feature in the operation
of a hotel. Franchisors provide a variety of benefits for franchisees, which
include national advertising, publicity, and other marketing programs designed
to increase brand awareness, training of personnel, continuous review of
quality standards, and centralized reservation systems.
The Franchise Licenses generally specify certain management, operating,
recordkeeping, accounting, reporting, and marketing standards and procedures
with which the Lessee must comply. The Franchise Licenses obligate the Lessee
to comply with each franchisor's standards and requirements with respect to
training of operational personnel, safety, maintaining specified insurance,
the types of services and products ancillary to guest room services that may
be provided by the Lessee, display of signage, and the type, quality, and age
of FF&E included in guest rooms, lobbies, and other common areas.
The Franchise Licenses provide for termination at each franchisor's option
upon the occurrence of certain events, including the Lessee's failure to pay
royalties and fees or perform its other covenants under the respective license
agreement, bankruptcy, abandonment of the franchise, commission of a felony,
assignment of the license without the consent of the franchisor, or failure to
comply with applicable law in the operation of the relevant Hotel. Certain of
the Franchise Licenses require that the Company guarantee the payment of
franchise fees, liquidated damages and termination fees on behalf of the
Lessee. The Lessee is not entitled to terminate the Franchise Licenses unless
it receives the prior written consent of the Company. The Franchise Licenses
do not renew automatically upon expiration. The Lessee is responsible for
making all payments under the Franchise Licenses to the franchisors. Under the
franchise agreements, the Lessee pays franchise royalty fees ranging from 2.0%
to 5.0% of room revenue.
HILTON(R), HILTON INN(R), AND THE STYLIZED H(R) ARE REGISTERED TRADEMARKS OF
HILTON HOTELS CORPORATION ("HILTON HOTELS"). NEITHER HILTON INNS, INC. NOR
HILTON HOTELS NOR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS OR
EMPLOYEES (COLLECTIVELY, THE "HILTON ENTITIES") SHALL IN ANY WAY BE DEEMED AN
ISSUER OR UNDERWRITER OF THE SHARES OF COMMON STOCK OFFERED HEREBY NOR HAS ANY
OF THE HILTON ENTITIES ENDORSED OR APPROVED THE OFFERING. THE HILTON ENTITIES
HAVE NOT ASSUMED, AND SHALL NOT HAVE, ANY LIABILITY OR RESPONSIBILITY FOR ANY
FINANCIAL STATEMENTS OR OTHER FINANCIAL INFORMATION CONTAINED HEREIN OR ANY
PROSPECTUS OR ANY WRITTEN OR ORAL COMMUNICATIONS REGARDING THE SUBJECT MATTER
HEREOF. A GRANT OF A HILTON FRANCHISE LICENSE FOR CERTAIN OF THE HOTELS IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL
OR ENDORSEMENT BY ANY OF THE HILTON ENTITIES (OR ANY OF THEIR AFFILIATES,
SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE
LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
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COURTYARD BY MARRIOTT(R) IS A REGISTERED TRADEMARK OF MARRIOTT
INTERNATIONAL, INC., WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF
THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT OF A
COURTYARD BY MARRIOTT FRANCHISE LICENSE FOR CERTAIN OF THE HOTELS IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL
OR ENDORSEMENT BY MARRIOTT INTERNATIONAL, INC. (OR ANY OF ITS AFFILIATES,
SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE
LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
HOLIDAY INN(R) AND CROWNE PLAZA(R) ARE REGISTERED TRADEMARKS OF AND HOLIDAY
INN SELECTSM IS A REGISTERED SERVICE MARK OF, HOLIDAY INNS FRANCHISING, INC.
("HOLIDAY INNS"). HOLIDAY INNS HAS NOT ENDORSED OR APPROVED THE OFFERING OR
ANY OF THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS NOR
DOES HOLIDAY INNS HAVE ANY INTEREST IN THE COMPANY, THE LESSEE, OR THE COMMON
STOCK OFFERED HEREBY, EXCEPT AS A FRANCHISOR. A GRANT OF A HOLIDAY INN,
HOLIDAY INN SELECT, OR CROWNE PLAZA FRANCHISE LICENSE FOR CERTAIN OF THE
HOTELS IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR
IMPLIED APPROVAL OR ENDORSEMENT BY HOLIDAY INNS (OR ANY OF ITS AFFILIATES,
SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE
LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
HAMPTON INN(R) IS A REGISTERED TRADEMARK OF PROMUS HOTELS, INC. NEITHER
PROMUS HOTELS, INC., ITS PARENT, SUBSIDIARIES, DIVISIONS NOR AFFILIATES HAVE
ENDORSED OR APPROVED THE OFFERING. A GRANT OF A HAMPTON INN LICENSE FOR THE
HOTEL IS NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR
IMPLIED APPROVAL OR ENDORSEMENT BY PROMUS HOTELS, INC. (OR ANY OF ITS
AFFILIATES, SUBSIDIARIES OR DIVISIONS) OF THE COMPANY, THE OPERATING
PARTNERSHIP, THE LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
WYNDHAM GARDEN(R) IS A REGISTERED TRADEMARK AND WYNDHAMTM AND THE WYNDHAM
WTM LOGO ARE TRADEMARKS OF WYNDHAM IP CORPORATION, A SUBSIDIARY OF WYNDHAM
HOTEL CORPORATION ("WYNDHAM"). NEITHER WYNDHAM NOR ANY OF ITS OFFICERS,
DIRECTORS, AGENTS AND EMPLOYEES SHALL IN ANY WAY BE DEEMED AN ISSUER OR
UNDERWRITER OF THE SHARES OF COMMON STOCK OFFERED HEREBY. A GRANT OF A WYNDHAM
FRANCHISE LICENSE FOR CERTAIN OF THE HOTELS IS NOT INTENDED AS, AND SHOULD NOT
BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL OR ENDORSEMENT BY WYNDHAM
(OR ANY OF ITS AFFILIATES, SUBSIDIARIES OR DIVISIONS) OF THE COMPANY, THE
OPERATING PARTNERSHIP, THE LESSEE OR THE COMMON STOCK OFFERED HEREBY. WYNDHAM
AND ITS OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES HAVE NOT ASSUMED AND SHALL
NOT HAVE ANY LIABILITY OR RESPONSIBILITY ARISING OUT OF OR RELATED TO THE
OFFER OR SALE OF THE COMMON STOCK OFFERED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LIABILITY OR RESPONSIBILITY FOR ANY FINANCIAL STATEMENTS,
PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
WRITTEN OR ORAL COMMUNICATIONS REGARDING THE SUBJECT MATTER HEREOF.
DAYS INN(R), RAMADA(R) AND RAMADA LIMITED(R) ARE REGISTERED TRADEMARKS OF
HFS INCORPORATED, WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF
THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT OF A
DAYS INN OR A RAMADA FRANCHISE LICENSE FOR CERTAIN OF THE HOTELS IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL
OR ENDORSEMENT BY HFS INCORPORATED (OR ANY OF ITS AFFILIATES, SUBSIDIARIES, OR
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DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE LESSEE, OR THE
COMMON STOCK OFFERED HEREBY.
DOUBLETREE HOTEL(R) AND DOUBLETREE GUEST SUITES(R) ARE REGISTERED TRADEMARKS
OF DOUBLETREE CORPORATION WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR
ANY OF THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A
GRANT OF A (FRANCHISE/LICENSE) FOR CERTAIN OF THE HOTELS IS NOT INTENDED AS,
AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL OR
ENDORSEMENT BY DOUBLETREE CORPORATION (OR ANY OF ITS AFFILIATES, SUBSIDIARIES
OR DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE LESSEE OR THE
COMMON STOCK OFFERED HEREBY.
SMALL LUXURY HOTELS(R) IS A REGISTERED TRADEMARK OF SMALL LUXURY HOTELS OF
THE WORLD LIMITED, WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF
THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT OF A
SMALL LUXURY HOTELS AFFILIATION LICENSE FOR CERTAIN OF THE HOTELS IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL
OR ENDORSEMENT BY SMALL LUXURY HOTELS OF THE WORLD LIMITED (OR ANY OF ITS
AFFILIATES, SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE OPERATING
PARTNERSHIP, THE LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
RADISSON HOTELS(R) IS A REGISTERED TRADEMARK OF CARLSON COMPANIES, INC.,
WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF THE FINANCIAL
RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT OF A RADISSON
HOTELS LICENSE FOR CERTAIN OF THE HOTELS IS NOT INTENDED AS, AND SHOULD NOT BE
INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL OR ENDORSEMENT BY CARLSON
COMPANIES, INC. (OR ANY OF ITS AFFILIATES, SUBSIDIARIES, OR DIVISIONS) OF THE
COMPANY, THE OPERATING PARTNERSHIP, THE LESSEE, OR THE COMMON STOCK OFFERED
HEREBY.
SHERATON(R) AND FOUR POINTS ARE REGISTERED TRADEMARKS OF ITT CORP., WHICH
HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF THE FINANCIAL RESULTS OF
THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT OF A SHERATON OR A FOUR
POINTS HOTELS LICENSE FOR CERTAIN OF THE HOTELS IS NOT INTENDED AS, AND SHOULD
NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL OR ENDORSEMENT BY ITT
CORP. (OR ANY OF ITS AFFILIATES, SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY,
THE OPERATING PARTNERSHIP, THE LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
WESTIN RESORTS(R) AND WESTIN HOTELS & RESORTS(R) ARE REGISTERED TRADEMARKS
OF THE PARTNERSHIP OF STARWOOD CAPITAL GROUP, L.P., GOLDMAN SACHS & CO. AND
NOMURA ASSET CAPITAL CORPORATION, WHICH HAS NOT ENDORSED OR APPROVED THE
OFFERING OR ANY OF THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS
PROSPECTUS. A GRANT OF A WESTIN LICENSE FOR CERTAIN OF THE HOTELS IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL
OR ENDORSEMENT BY THE PARTNERSHIP OF STARWOOD CAPITAL GROUP, L.P., GOLDMAN
SACHS & CO. AND NOMURA ASSET CAPITAL CORPORATION (OR ANY OF THEIR AFFILIATES,
SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE OPERATING PARTNERSHIP, THE
LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
LUXURY HOTELS OF AMERICA(R) IS A REGISTERED TRADEMARK OF SMALL LUXURY HOTELS
OF THE WORLD LIMITED, WHICH HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY
OF THE FINANCIAL RESULTS OF THE HOTELS SET FORTH IN THIS PROSPECTUS. A GRANT
OF A LUXURY HOTELS OF AMERICA AFFILIATION LICENSE FOR CERTAIN OF THE HOTELS IS
NOT INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED
APPROVAL OR ENDORSEMENT BY SMALL LUXURY HOTELS OF THE WORLD LIMITED
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(OR ANY OF ITS AFFILIATES, SUBSIDIARIES, OR DIVISIONS) OF THE COMPANY, THE
OPERATING PARTNERSHIP, THE LESSEE, OR THE COMMON STOCK OFFERED HEREBY.
All other trademarks appearing in this Prospectus are the property of their
respective holders.
EMPLOYEES
The Company is self-administered and employs Messrs. Jorns, Wiles, Barr,
Valentine and three additional individuals as well as appropriate support
personnel to manage its operations.
ENVIRONMENTAL MATTERS
Under various federal, state, and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances. Furthermore, a
person who arranges for (or transports for) the disposal or treatment of a
hazardous or toxic substance at a property owned by another may be liable for
the costs of removal or remediation of such substance released into the
environment at that property. The costs of remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to promptly remediate such substances, may adversely affect the
owner's ability to sell such real estate or to borrow using such real estate
as collateral. In connection with the ownership and operation of the Hotels,
the Company, the Operating Partnership or the Lessee, as the case may be, may
be potentially liable for such costs.
Phase I ESAs have been performed on all of the Hotels by qualified
independent environmental engineers. The purpose of the Phase I ESAs is to
identify potential sources of contamination for which the Hotels may be
responsible and to assess the status of environmental regulatory compliance.
The Phase I ESAs include historical reviews of the Hotels, reviews of certain
public records, preliminary investigations of the sites and surrounding
properties, screening for the presence of ACMs, polychlorinated biphenyls
("PCBs"), underground storage tanks, and the preparation and issuance of a
written report. The Phase I ESAs do not include invasive procedures, such as
soil sampling or ground water analysis.
The ESAs have not revealed any environmental liability or compliance
concerns that the Company believes would have a material adverse effect on the
Company's business, assets, results of operation, or liquidity, nor is the
Company aware of any material environmental liability or concerns.
Nevertheless, it is possible that the Phase I ESAs did not reveal all
environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which the Company is
currently unaware. Moreover, no assurances can be given that (i) future laws,
ordinances or regulations will not impose any material environmental liability
or (ii) the current environmental condition of the Hotels will not be affected
by the condition of the properties in the vicinity of the Hotels (such as the
presence of leaking underground storage tanks) or by third parties unrelated
to the Operating Partnership or the Company.
In reliance upon the Phase I ESAs, the Company believes the Hotels are in
material compliance with all federal, state and local ordinances and
regulations regarding hazardous or toxic substances and other environmental
matters. Neither the Company nor, to the knowledge of the Company, any of the
current owners of the Hotels has been notified by any governmental authority
of any material noncompliance, liability or claim relating to hazardous or
toxic substances or other environmental substances in connection with any of
its hotels.
OPTIONS TO PURCHASE AND RIGHTS OF FIRST REFUSAL
Pursuant to the option agreements relating to the Option Hotels (the "Option
Agreements"), the Company has the option and right of first refusal to acquire
AGHI's (i) 50.0% partnership interest in the partnership that owns the Boise,
Idaho Option Hotel and (ii) 16.7% partnership interest in the partnership that
owns the Durham, North Carolina Option Hotel. The Option Agreements provide
that for a period of two years after the opening of each such hotel, the
Company will have the right to purchase AGHI's interests in each such hotel at
a price equal
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to AGHI's percentage interest in such hotel times 110.0% of the cost of
developing such hotel (including mortgage debt) for the first year; during the
second year of such options, the purchase price will be increased by any
percentage increase in the CPI. The purchase price will be payable (i) by
taking title to AGHI's interest in such hotel subject to a pro rata portion of
the applicable owning partnership's debt and (ii) by paying the balance of
such purchase price in cash or OP Units, at the option of AGHI. AGHI may sell
its interests in the Option Hotels free and clear of these options prior to
the expiration of the two-year option period provided that it gives notice to
the Company and extends to the Company a right of first refusal to acquire
such interests on the same terms as that of the proposed sale. The exercise of
the option or right of first refusal may require approval of the partners in
the partnerships which own the Option Hotels that are not affiliated with
AGHI, including the approvals of such partners to a Participating Lease
relating to such Option Hotels. The Boise, Idaho Option Hotel was opened in
October 1996. The Durham, North Carolina Option Hotel is currently under
development and is expected to open during the first quarter of 1997. AGHI
will not seek such approval until after the Company has exercised its option
or rights of first refusal, and there can be no assurance that such approval
will be granted.
COMPETITION
The hotel industry is highly competitive. Each of the Hotels is located in a
developed area that includes other hotel properties. The number of competitive
hotel properties in a particular area could have a material adverse effect on
occupancy, ADR and REVPAR of the Hotels or at hotel properties acquired in the
future.
The Company may be competing for investment opportunities with entities that
have substantially greater financial resources than the Company. These
entities may generally be able to accept more risk than the Company can
prudently manage, including risks with respect to the creditworthiness of a
hotel operator or the geographic proximity of its investments. Competition may
generally reduce the number of suitable investment opportunities offered to
the Company and increase the bargaining power of property owners seeking to
sell. Further, the Company believes competition from entities organized for
purposes substantially similar to the Company's objectives could increase
significantly if the Company is successful. There is no restriction in the
Participating Leases or the Management Agreements on the Lessee's or AGHI's
ability to lease or manage hotels which may compete with the Company's hotels.
Although not currently anticipated, AGHI and the Lessee may manage or lease
(but may not acquire or develop) hotels that compete with the Company's
hotels.
INSURANCE
The Company carries comprehensive liability, fire, extended coverage and
business interruption insurance with respect to the Current Hotels, with
policy specifications, insured limits and deductibles customarily carried for
similar hotels. The Company will carry similar insurance with respect to any
other hotels developed or acquired in the future. There are, however, certain
types of losses (such as losses arising from wars, certain losses arising from
hurricanes and earthquakes, and losses arising from other acts of nature) that
are not generally insured because they are either uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in the
affected hotel, as well as the anticipated future revenues from such hotel,
and would continue to be obligated on any mortgage indebtedness or other
obligations related to the hotel. Any such loss could adversely affect the
business of the Company. Management of the Company believes the Current Hotels
are adequately insured in accordance with industry practices.
LEGAL PROCEEDINGS
Neither the Company nor the Operating Partnership is currently involved in
any material litigation nor, to the Company's knowledge, is any material
litigation currently threatened against the Company or the Operating
Partnership. AGHI and the Lessee have advised the Company that they currently
are not involved in any material litigation, other than routine litigation
arising in the ordinary course of business, substantially all of which is
expected to be covered by liability insurance.
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FORMATION TRANSACTIONS
The Primary Contributors are Steven D. Jorns, Bruce G. Wiles, and Kenneth E.
Barr, each of whom is an executive officer of the Company, and James E.
Sowell, Lewis W. Shaw II and Kenneth W. Shaw, each of whom is an affiliate of
the Lessee and AGHI and, where applicable, the term "Primary Contributors"
includes their respective controlled affiliates and associates (including
spouses).
Simultaneously with the closing of the IPO, the Company consummated the
Formation Transactions, which included the following:
. The Company sold 8,075,000 shares of Common Stock in the IPO. All of the
net proceeds to the Company from the Offering were contributed to AGH GP
and AGH LP, which, in turn, contributed such proceeds, together with
certain other assets acquired from the Plan (as described below), to the
Operating Partnership in exchange for an approximate 81.3% interest in
the Operating Partnership. AGH GP, a wholly owned subsidiary of the
Company and the sole general partner of the Operating Partnership
received a 1.0% interest in the Operating Partnership. AGH LP, also a
wholly owned subsidiary of the Company, received an approximate 80.3%
limited partnership interest in the Operating Partnership;
. The Company acquired, directly or indirectly, a 100.0% interest in each
of the Initial Hotels for an aggregate of 1,896,996 OP Units, 137,008
shares of Common Stock, approximately $91.0 million in cash, and the
assumption of approximately $52.9 million in mortgage indebtedness (of
which amount, approximately $33.5 million was repaid from the net
proceeds of the IPO, as follows):
. The Operating Partnership acquired from the Primary Contributors
interests in six of the Initial Hotels (Holiday Inn Dallas DFW
Airport West, Holiday Inn Dallas DFW Airport South, Hotel Maison de
Ville, Hampton Inn Richmond Airport, Courtyard by Marriott-
Meadowlands and Hilton Hotel-Toledo) and the Primary Contributors'
contract right to acquire the Holiday Inn Park Center Plaza in
exchange for 560,178 OP Units (valued at approximately $9.9 million,
based on the offering price in the IPO);
. The Company acquired from the Plan interests in five of the Initial
Hotels (Hampton Inn Richmond Airport, Holiday Inn Dallas DFW Airport
West, Hotel Maison de Ville, Courtyard by Marriott-Meadowlands and
Hilton Hotel-Toledo) in exchange for 137,008 shares of Common Stock
(valued at approximately $2.4 million, based on the offering price
in the IPO), and the Company, in turn, contributed such interests to
the Operating Partnership in exchange for 137,008 OP Units; and
. The Operating Partnership acquired, directly or as assignee of the
Primary Contributors' contract rights, interests in eight of the
Initial Hotels from parties that are unaffiliated with the Primary
Contributors in exchange for an aggregate 1,336,818 OP Units (valued
at approximately $23.7 million, based on the offering price in the
IPO) and approximately $91.0 million in cash.
. The Operating Partnership reimbursed AGHI for approximately $900,000 in
direct out-of-pocket expenses incurred in connection with the
acquisition of the Initial Hotels, including legal, environmental and
engineering expenses;
. The Operating Partnership leased each Initial Hotel to the Lessee for a
term of twelve years pursuant to a Participating Lease, which requires
Base Rent to be paid on a weekly basis and Participating Rent to be paid
on a monthly basis;
. The Operating Partnership received from the Primary Contributors options
to acquire their interests in the two Option Hotels (see "The Hotels--
Options to Purchase and Rights of First Refusal");
. The Lessee contracted with AGHI to operate the Initial Hotels under
separate Management Agreements providing for the subordination of the
payment of the management fees to the Lessee's obligation to pay rent to
the Operating Partnership under the Participating Leases;
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. The Operating Partnership established the Line of Credit;
. In order to facilitate compliance with state and local liquor laws and
regulations, the Lessee subleased (the "Beverage Subleases") those areas
of the Initial Hotels where alcoholic beverages are served to special
purpose corporations, eleven of which are wholly owned by Mr. Jorns
(collectively, the "Beverage Corporations"). The Beverage Corporations
are contractually obligated to pay to the Lessee rent payments equal to
30% of gross revenues net of cost of goods sold and certain related
taxes from the sale of food and beverages generated from such areas;
however, pursuant to the Participating Leases, such subleases do not
reduce the Participating Rent payments to the Company, which it is
entitled to receive from such food and beverage sales; and
. In order for the Company to qualify as a REIT, the Operating Partnership
sold certain personal property relating to certain of the Initial Hotels
to the Lessee in exchange for one or more five-year amortizing recourse
promissory notes in the aggregate principal amount of $315,000 that is
secured by such personal property (collectively, the "FF&E Note");
BENEFITS TO THE OFFICERS AND THE PRIMARY CONTRIBUTORS
As a result of the Formation Transactions, officers of the Company and the
Primary Contributors received the following benefits:
. Mr. Jorns received 89,441 OP Units, Mr. Wiles received 26,846 OP Units,
Mr. Barr received 10,000 OP Units, Mr. Sowell received 256,120 OP Units,
Mr. Lewis W. Shaw II received 89,441 OP Units, and Mr. Kenneth W. Shaw
received 88,330 OP Units, as consideration for their interests in six of
the Initial Hotels and the assignment of the contract right in respect
of one additional Initial Hotel. The OP Units received by Messrs. Jorns,
Wiles, Barr, Sowell, Shaw and Shaw (which are exchangeable for cash, or
at the Company's option for Common Stock, at any time after one year
following the completion of the IPO) were valued at approximately $1.6
million, $476,516, $177,500, $4.5 million, $1.6 million and $1.6 million
(based on the offering price in the IPO), respectively, and are more
liquid than their interests in the Initial Hotels;
. Messrs. Jorns, Wiles, Barr and Valentine were granted options to acquire
225,000, 75,000, 40,000 and 20,000 shares of Common Stock, respectively,
at the offering price in the IPO, which are exercisable in four equal
annual installments commencing on the date of grant;
. Messrs. Jorns, Wiles, Barr and Valentine received stock awards of
30,000, 10,000, 6,000 and 4,000 shares of restricted Common Stock,
respectively, which vest over a four-year period commencing on the date
of grant;
. The Operating Partnership reimbursed AGHI for approximately $900,000 for
direct out-of-pocket expenses incurred in connection with the
acquisition of the Initial Hotels, including legal, environmental and
engineering expenses;
. The Operating Partnership repaid approximately $3.75 million of
indebtedness guaranteed by AGHI;
. Certain tax consequences to the Primary Contributors resulting from the
conveyance of their interests in the Initial Hotels to the Operating
Partnership, were deferred;
. Through its operation of the Initial Hotels pursuant to the
Participating Leases, the Lessee, which is owned by Messrs. Jorns,
Wiles, Barr, Sowell, Shaw and Shaw, is entitled to all of the cash flow
from the Initial Hotels after the payment of operating expenses,
management fees and rent under the Participating Leases (which cash
flow, after establishing a reserve for tax distributions to its
partners, the Lessee will use annually, until its net worth equals the
greater of (i) $6.0 million or (ii) 17.5% of actual rent payments from
Hotels leased to the Lessee during the preceding calendar year, to
purchase interests in the Company). Pursuant to the Management
Agreements, AGHI, which is owned by Messrs. Jorns, Wiles, Sowell, Shaw
and Shaw, will receive management fees from the Lessee in an amount
initially equal to a base fee of 1.5% of gross revenues plus an
incentive fee of
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up to 2.0% of gross revenues that will be earned incrementally upon
reaching certain gross revenue targets. The management fees payable to
AGHI are subordinate to the rent payments due to the Company under the
Participating Leases. Prior to 1998, all unpaid management fees are
forfeited; thereafter, unpaid management fees are deferred without
interest until such time that all rent is paid by the Lessee to the
Company; and
. Through its operations of the areas of eleven of the Initial Hotels that
serve alcoholic beverages, the Beverage Corporations, which are wholly
owned by Mr. Jorns, are entitled to all cash flow from food and beverage
sales generated from such areas after the payment of rent to the Lessee
equal to 30% of gross revenues from such sales; such arrangement will
not, however, reduce Participating Rent payments to the Company, which
it is entitled to receive from such food and beverage sales.
VALUATION OF INTERESTS
The initial valuation of the Company was determined primarily based upon a
capitalization of the Company's estimated Cash Available for Distribution and
other factors rather than on the basis of each hotel's cost or appraised
value.
The purchase prices for the interests acquired by the Company from parties
unaffiliated with the Primary Contributors were determined pursuant to arm's-
length negotiations. The allocation of consideration among the Primary
Contributors was determined through negotiation and through the Company's
determination of the percentage of estimated adjusted cash flow that is
required to pay the Company's stockholders a specified initial annual
distribution rate, which rate was based upon prevailing market conditions. The
allocation of consideration among the Primary Contributors, in certain
instances, also was affected by performance-oriented structures contained in
the applicable contributing partnership agreements and reallocations of
benefits to be derived among certain of the contributing partners unrelated to
capitalization rates or market values of the Initial Hotels.
TRANSFER OF INITIAL HOTELS
The Company's interest in the Initial Hotels was acquired pursuant to
various agreements. These acquisitions were subject to all of the terms and
conditions of such agreements. The Company assumed all obligations relating to
the Initial Hotels that may arise after the transfer.
The agreements effecting the transfer of the assets or direct or indirect
interest of the partners and other holders of equity in the entities selling
the Initial Hotels contain representations and warranties from each such
person concerning title to the interests being transferred and the absence of
liens or other encumbrances thereon. Certain of the Primary Contributors
agreed to make additional representations with respect to the Company and the
Initial Hotels concerning the operation of such Initial Hotels, environmental
matters and other representations and warranties customarily found in similar
documents and also agreed to indemnify the Company against breaches of such
representations and warranties. These representations and warranties survive
until July 31, 1997.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors consists of five members, four of whom are
Independent Directors (as defined in "Policies and Objectives with Respect to
Certain Activities--Conflict of Interest Policies--Charter and Bylaw
Provisions"). The Board of Directors is divided into three classes serving
staggered three-year terms. The Company has four executive officers and three
other professionals and appropriate support staff. Certain information
regarding the directors, proposed directors and executive officers of the
Company is set forth below.
<TABLE>
<CAPTION>
CLASS / TERM
NAME POSITION AGE EXPIRATION
---- -------- --- --------------
<S> <C> <C> <C>
Steven D. Jorns............ Chairman of the Board, Chief 48 Class I/1997
Executive Officer, and
President
Bruce G. Wiles............. Executive Vice President 45 --
Kenneth E. Barr............ Executive Vice President, 48 --
Chief Financial Officer,
Secretary
and Treasurer
Russ C. Valentine.......... Senior Vice President-- 51 --
Acquisitions
H. Cabot Lodge III......... Independent Director 41 Class II/1998
James R. Worms............. Independent Director 51 Class II/1998
James McCurry.............. Independent Director 48 Class III/1999
Kent R. Hance.............. Independent Director 54 Class III/1999
</TABLE>
Steven D. Jorns became the Chairman of the Board, Chief Executive Officer
and President of the Company in April 1996. Mr. Jorns is the founder of and
has served since its formation in 1981 as Chairman of the Board, Chief
Executive Officer and President of AGHI. Prior to forming AGHI, Mr. Jorns
spent seven years with an affiliate of General Growth Companies overseeing
that company's hotel portfolio. Prior to that, Mr. Jorns was associated with
Hospitality Motor Inns, a division of Standard Oil of Ohio, and held marketing
positions with Holiday Inns, Inc. Mr. Jorns is a graduate of Oklahoma State
University with a degree in Hotel and Restaurant Administration. He has been
honored by that University as one of its distinguished alumni. He has served
on the Hotel and Restaurant Advisory Boards for two universities and was
selected by Lodging Hospitality Magazine as a "Rising Star" of the Industry in
1992.
Bruce G. Wiles became an Executive Vice President of the Company in April
1996. Mr. Wiles has served since 1989 as an Executive Vice President of AGHI,
where he is responsible for AGHI's acquisition and development activities. Mr.
Wiles has more than fourteen years of experience in the hospitality industry.
Prior to joining AGHI in 1989, Mr. Wiles was a Senior Vice President for
Integra, a Dallas-based, NYSE hotel management and restaurant company. At
Integra, his duties included evaluating hotel acquisitions and overseeing real
estate development, as well as the acquisition and negotiation of all real
estate based financing. Prior to joining Integra in 1986, Mr. Wiles was a
founder and President of Bruce G. Wiles and Associates, Ltd., a real estate
development and brokerage concern, which specialized in hospitality and
development transactions. Mr. Wiles previously served as President of R.W.
Pulley and Associates, Ltd., a large Honolulu-based real estate syndicator and
developer of condominiums and commercial space. Mr. Wiles was also previously
associated with KPMG Peat Marwick and Grant Thornton, serving the real estate
development and lending industries. Mr. Wiles graduated Summa Cum Laude from
Georgetown University and became a Certified Public Accountant in 1973.
Kenneth E. Barr became an Executive Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company in April 1996. Mr. Barr has served
since 1994 as a Senior Vice President of AGHI, where he directs the Accounting
and Finance Department. At AGHI, Mr. Barr is responsible for financial
management and controllership functions, including financial reporting,
internal audits, treasury activities, and training functions. Prior to joining
AGHI, Mr. Barr held a senior financial position with Richfield Hotel
Management,
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Inc., a national hotel management company. Prior to joining Richfield Hotel
Management, Inc. in 1991, Mr. Barr served as a partner in charge of the audit
practice of Laventhol & Horwath in Dallas and was also a member of that firm's
National Audit Advisory Board. Mr. Barr holds a Bachelor of Business
Administration from the University of Oklahoma. He is a Certified Public
Accountant in Texas, Oklahoma and Puerto Rico.
Russ C. Valentine became Senior Vice-President--Acquisitions of the Company
in April 1996. Mr. Valentine has served since 1990 as a Senior Vice
President--Acquisitions of AGHI. Prior to joining AGHI, Mr. Valentine was a
Principal with Laventhol & Horwath, in charge of the firm's Dallas and
Southwest Real Estate and Hospitality Consulting Practice. Prior to joining
Laventhol & Horwath in January 1983, Mr. Valentine was a Senior Vice
President--Acquisitions for Prime Financial Partnership, L.P., a real estate
and development company listed on the American Stock Exchange. Mr. Valentine's
responsibilities with Prime Financial included acquisition, negotiation and
financing of hotel and other real estate investments. Mr. Valentine received
his Master of Business Administration degree from the School of Hotel,
Restaurant and Institutional Management at Michigan State University. He also
earned a Master of Arts degree from Wayne State University and a Bachelor of
Arts degree from Louisiana State University.
H. Cabot Lodge III became a director of the Company in July 1996. Mr. Lodge
is a co-founder and has served since October 1995 as Chairman of the Board of
Superconducting Core Technologies, Inc., a wireless telecommunications
equipment manufacturer. From August 1983 to August 1995, he was a Managing
Director and Executive Vice President of W.P. Carey & Co., a New York real
estate investment bank that specializes in long term net-leases with
corporations and manages in excess of $1.5 billion in assets, nine real estate
public limited partnerships and three real estate investment trusts. Mr. Lodge
is also a principal of Carmel Lodge, LLC, a New York based merchant bank. Mr.
Lodge earned a Bachelor of Arts degree from Harvard College and a Masters of
Business Administration degree from the Harvard Business School. He is a
member of the Board of Directors of TelAmerica Media, Inc., Carey
Institutional Properties, and Corporate Property Associates 12.
James R. Worms became a director of the Company in July 1996. Mr. Worms has
served since August 1995 as a Managing Director of William E. Simon & Sons
L.L.C., a private investment firm and merchant bank and President of William
E. Simon & Sons Realty, through which the firm conducts its real estate
activities. Prior to joining William E. Simon & Sons, Mr. Worms was employed
since March 1987 by Salomon Brothers Inc, an international investment banking
firm, most recently as a managing director. Mr. Worms received a Bachelor of
Arts degree from the University of California, Los Angeles, a Masters of
Business Administration from the University of California at Los Angeles'
Anderson School of Business, and a Juris Doctor degree from the Hastings
College of Law.
James B. McCurry became a director of the Company in July 1996. Mr. McCurry
served from December 1994 through December 1996 as Chief Executive Officer of
NeoStar Retail Group, Inc. ("NeoStar"), a specialty retailer of consumer
software. Currently, Mr. McCurry is a business consultant. NeoStar filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in September
1996. From April 1983 to December 1994, Mr. McCurry was the Chairman of
Babbage's Inc., a consumer software retailer, which merged with Software Etc.
Stores, Inc. in December of 1994 to form NeoStar. Mr. McCurry received a
Masters of Business Administration with High Distinction from Harvard Business
School and a Bachelor of Arts with High Honors from the University of Florida.
He is a member of the Board of Directors of Pacific Sunwear of California,
Inc.
Kent R. Hance became a director of the Company in July 1996. Mr. Hance has
been since 1994 a law partner in the firm Hance, Scarborough, Woodward &
Weisbart, L.L.P., Austin, Texas, and from 1991 to 1994 he was a law partner in
the firm of Hance and Gamble. From 1985 to 1987, Mr. Hance was a law partner
with Boyd, Viegal and Hance. Mr. Hance served as a member of the Texas
Railroad Commission from 1987 until 1991 and as its Chairman from 1989 until
1991. From 1979 to 1985, he served as a member of the United States Congress.
Mr. Hance served as a State Senator in the State of Texas from 1975 to 1979
and was a professor of business law at Texas Tech University from 1969 to
1973. Mr. Hance earned a Bachelor of Business Administration degree from Texas
Tech University and a Juris Doctor degree from the University of Texas Law
School.
89
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Company is managed by a five-member Board of Directors, a majority of
whom are Independent Directors. The Board of Directors has an Audit Committee,
a Compensation Committee and a Leasing Committee.
Audit Committee. The Audit Committee consists of Messrs. Hance and McCurry.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public
accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees, and reviews the adequacy of the Company's internal
accounting controls.
Compensation Committee. The Compensation Committee consists of Messrs. Hance
and Worms. The Compensation Committee determines compensation of the Company's
executive officers and administers the 1996 Plan.
Leasing Committee. The Leasing Committee consists of Messrs. Lodge and
Worms. Leasing Committee reviews not less frequently than annually the
Lessee's compliance with the terms of the Participating Leases and reviews and
approves the terms of any new leases between the Company and the Lessee.
The Company may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated
by the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee during 1996 consisted of Messrs. Hance
and Worms, neither of whom was, prior to or during 1996, an officer or
employee of the Company. Neither of such persons had any relationships
requiring disclosure under applicable rules and regulations.
EXECUTIVE COMPENSATION
The Company was organized as a Maryland corporation on April 12, 1996 and
commenced operations upon the completion of its IPO on July 31, 1996. The
following table sets forth information, for the fiscal year ended December 31,
1996, regarding the compensation of the Company's Chief Executive Officer. No
executive officer of the Company earned annual salary and bonus in excess of
$100,000 during the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATIONS
AWARDS
----------------------------
RESTRICTED
ANNUAL COMPENSATION AWARDS
---------------------------------- -------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION($) AWARD(S)$/(2) OPTIONS/(#)(3) COMPENSATION
------------------ ------- --------- -------- --------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven D. Jorns......... 1996 41,667 None None $532,500 225,000 None
Chief Executive
Officer and President
</TABLE>
- --------
(1) Includes compensation only during the period from July 31, 1996
(inception) through December 31, 1996.
(2) In connection with the IPO, the Company granted Mr. Jorns stock awards of
30,000 shares of restricted Common Stock, 6,000 of which vested on the
date of grant and the remainder vest over a four-year period from the date
of grant. Calculation is based on a per share price of Common Stock of
$17.75, the offering price in connection with the IPO.
(3) In connection with the IPO, the Company granted incentive stock options
("ISOs") and nonqualified options to Mr. Jorns to purchase shares of
Common Stock. Of the 225,000 options granted to Mr. Jorns, 202,468 are
nonqualified stock options and 22,532 are ISOs, 56,250 of which vested on
the date of grant and the remainder become exercisable over a three-year
period from the date of grant.
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<PAGE>
The executive officers, including Mr. Jorns, receive health and disability
insurance benefits which do not exceed 10% of their respective salaries. These
benefits are also provided to all other employees of the Company.
OPTION GRANTS
The following table sets forth information regarding grants of stock options
to the Company's executive officers during the 1996 fiscal year. The options
were granted pursuant to the 1996 Plan. See "Management--Stock Incentive
Plans."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATE OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Jorns......... 225,000 62.50% $17.75 7/24/06 $ 2,511,000 $ 6,365,250
Bruce G. Wiles.......... 75,000 20.83 17.75 7/24/06 837,000 2,121,750
Kenneth E. Barr......... 40,000 11.11 17.75 7/24/06 446,400 1,131,600
Russ C. Valentine....... 20,000 5.56 17.75 7/24/06 223,200 565,800
</TABLE>
The options granted to Messrs. Jorns, Wiles, Barr and Valentine were granted
as of July 25, 1996 at an exercise price of $17.75 per share, the per share
price of the Common Stock in the IPO. Each of such options becomes exercisable
over four equal annual installments, commencing on the date of grant and
expires on the tenth anniversary of the date of grant.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1996 DECEMBER 31, 1996(2)
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Steven D. Jorns......... None None 56,250/168,750 $ 337,500 $ 1,012,500
Bruce G. Wiles.......... None None 18,750/56,250 112,500 337,500
Kenneth E. Barr......... None None 10,000/30,000 60,000 180,000
Russ C. Valentine....... None None 5,000/15,000 30,000 90,000
</TABLE>
- --------
(1) No options were exercised in 1996.
(2) Represents the number of shares of Common Stock underlying the options
(excluding options the exercise price of which was more than the market
value of the underlying securities) times the market price at December 31,
1996 of $23.75, minus the exercise price.
EMPLOYMENT AGREEMENTS
At the closing of the IPO, the Company entered into an employment agreement
with Mr. Jorns, pursuant to which Mr. Jorns serves as Chairman of the Board,
Chief Executive Officer and President of the Company for a term of five years
at an initial annual base compensation of $100,000, subject to any increases
in base compensation approved by the Compensation Committee. In addition, at
the closing of the IPO, the Company entered into employment agreements with
Messrs. Wiles, Barr and Valentine, pursuant to which Mr. Wiles served as
Executive Vice President, Mr. Barr served as Executive Vice President and
Chief Financial Officer
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<PAGE>
and Mr. Valentine served as Senior Vice President--Acquisitions, each for a
term of five years, at an annual base compensation of $90,000, $80,000 and
$60,000, respectively, subject to any increases in base compensation approved
by the Compensation Committee. In addition to base salary, each such Executive
Officer is entitled under his employment agreement to receive annual
performance-based compensation as determined by the Compensation Committee.
Upon termination of an officer's employment agreement other than for cause, or
by such officer for "good reason" (as such term is defined in each officer's
employment agreement), each of such officers is entitled to receive severance
benefits in an amount equal to the greater of (i) the aggregate of all
compensation due such officer during the balance of the term of the employment
agreement or (ii) 1.99 times the "base amount" as determined in the Code. In
addition, such employment agreements provide for the grant of the options and
the stock awards described under "--Stock Incentive Plans--The 1996 Plan"
below.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid an annual fee of
$17,000. In addition, each such director is paid $750 for attendance at each
meeting of the Company's Board of Directors and $500 for attendance at each
meeting of a committee of the Company's Board of which such director is a
member. The annual retainer fee is paid to such directors 50.0% in cash and
50.0% in shares of Common Stock. Meeting fees are paid in cash. Directors who
are employees of the Company do not receive any fees for their service on the
Board of Directors or a committee thereof. In addition, the Company reimburses
directors for their out-of-pocket expenses incurred in connection with their
service on the Board of Directors.
In connection with the IPO, each non-employee director was granted
nonqualified options to purchase 10,000 shares of Common Stock at an exercise
price of $17.75 per share (the offering price in connection with the IPO) that
vest in three annual installments commencing on the date of grant. Any non-
employee director who ceases to be a director will forfeit the right to
receive any options not previously vested. See "--Stock Incentive Plans--The
Directors' Plan."
STOCK INCENTIVE PLANS
The 1996 Plan and the Directors' Plan were approved and adopted for the
purposes of (i) attracting and retaining employees, directors, and other
service providers with ability and initiative, (ii) providing incentives to
those deemed important to the success of the Company and related entities, and
(iii) aligning the interests of these individuals with the interests of the
Company and its stockholders through opportunities for increased stock
ownership.
The 1996 Plan
Administration. The 1996 Plan is administered by the Compensation Committee.
The Compensation Committee may delegate certain of its authority to administer
the 1996 Plan. The Compensation Committee may not, however, delegate its
authority with respect to grants and awards to individuals subject to Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As
used in this summary, the term "Administrator" means the Compensation
Committee or its delegate, as appropriate.
Eligibility. Each employee of the Company or of an affiliate of the Company
or any other person whose efforts contribute to the Company's performance,
(other than employees of the Lessee and AGHI who are not also employees of the
Company), including an employee who is a member of the Board, but excluding
non-employee directors of the Company, is eligible to participate in the 1996
Plan. The Administrator will select the individuals who will participate in
the 1996 Plan ("Participants"), but no person may participate in the 1996 Plan
while he is a member of the Compensation Committee. The Administrator may,
from time to time, grant stock options, stock awards, incentive awards, or
performance shares to Participants.
Options. Options granted under the 1996 Plan may be ISOs or nonqualified
stock options. An option entitles a Participant to purchase shares of Common
Stock from the Company at the option price. The option
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<PAGE>
price may be paid in cash, with shares of Common Stock, or with a combination
of cash and Common Stock. The option price will be fixed by the Administrator
at the time the option is granted, but the price cannot be less than 100.0%
for existing employees (85.0% in connection with the hiring of new employees)
of the shares' fair market value on the date of grant. The exercise price of
an ISO may not be less than 100.0% of the shares' fair market value on the
date of grant, 110.0% of the fair market value in the case of an ISO granted
to a ten percent stockholder of the Company or of certain affiliates of the
Company. Options may be exercised at such times and subject to such conditions
as may be prescribed by the Administrator but the maximum term of an option is
ten years in the case of an ISO or five years in the case of an ISO granted to
a ten percent stockholder.
ISOs may only be granted to employees of the Company or an affiliate;
however, no employee may be granted ISOs (under the 1996 Plan or any other
plan of the Company or an affiliate) that are first exercisable in a calendar
year for Common Stock having an aggregate fair market value (determined as of
the date the option is granted) exceeding $100,000. In addition, no
Participant may be granted options in any calendar year for more than 250,000
shares of Common Stock.
Stock Awards. Participants also may be awarded shares of Common Stock
pursuant to a stock award. A Participant's rights in a stock award may be
nontransferable or forfeitable or both unless certain conditions prescribed by
the Administrator are satisfied. These conditions may include, for example, a
requirement that the Participant continue employment with the Company for a
specified period or that the Company or the Participant achieve stated,
performance-related objectives. The objectives may be stated with reference to
the fair market value of the Common Stock or the Company's, a subsidiary's, or
an operating unit's return on equity, earnings per share, total earnings,
earnings growth, return on capital, Funds From Operations or return on assets.
A stock award that is not immediately vested and nonforfeitable will be
restricted, in whole or in part, for a period of at least three years;
provided, however, that the period shall be at least one year in the case of a
stock award that is subject to objectives based on one or more of the
foregoing performance criteria. The maximum number of shares of Common Stock
that may be issued in respect of stock awards granted under the 1996 Plan
cannot exceed 50,000 shares of Common Stock.
Incentive Awards. Incentive awards also may be granted under the 1996 Plan.
An incentive award is an opportunity to earn a bonus, payable in cash, upon
attainment of stated performance objectives. The objectives may be stated with
reference to the fair market value of the Common Stock or on the Company's, a
subsidiary's, or an operating unit's return on equity, earnings per share,
total earnings, earnings growth, return on capital, Funds From Operations or
return on assets. The period in which performance will be measured will be at
least one year. No Participant may receive an incentive award payment in any
calendar year that exceeds the lesser of (i) 100.0% of the Participant's base
salary (prior to any salary reduction or deferral election) as of the date of
grant of the incentive award or (ii) $250,000.
Performance Share Awards. The 1996 Plan also provides for the award of
performance shares. A performance share award entitles the Participant to
receive a payment equal to the fair market value of a specified number of
shares of Common Stock if certain standards are met. The Administrator will
prescribe the requirements that must be satisfied before a performance share
award is earned. These conditions may include, for example, a requirement that
the Participant continue employment with the Company for a specified period or
that the Company or the Participant achieve stated, performance-related
objectives. The objectives may be stated with reference to the fair market
value of the Common Stock or on the Company's, a subsidiary's, or an operating
unit's return on equity, earnings per share, total earnings, earnings growth,
return on capital, Funds From Operations or return on assets. To the extent
that performance shares are earned, the obligation may be settled in cash, in
Common Stock, or by a combination of the two. No Participant may be granted
performance shares for more than 12,500 shares of Common Stock in any calendar
year.
Share Authorization. All awards made under the 1996 Plan will be evidenced
by written agreements between the Company and the Participant. A maximum of
900,000 shares of Common Stock may be issued under the 1996 Plan. The share
limitation and the terms of outstanding awards shall be adjusted, as the
Compensation
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Committee deems appropriate, in the event of a stock dividend, stock split,
combination, reclassification, recapitalization or other similar event.
Termination and Amendment. No option or stock award may be granted and no
performance shares may be awarded under the 1996 Plan more than ten years
after the earlier of (i) the date that the 1996 Plan is adopted by the Board
or (ii) the date that it is approved by the Company's stockholders. The Board
may amend or terminate the 1996 Plan at any time, but, except as set forth in
the immediately preceding paragraph, an amendment will not become effective
without stockholder approval if the amendment materially (i) increases the
number of shares of Common Stock that may be issued under the 1996 Plan (other
than an adjustment as described above), (ii) changes the eligibility
requirements, or (iii) increases the benefits that may be provided under the
1996 Plan.
Initial Awards. The Board of Directors approved prior to the IPO the grant
of ISOs and nonqualified options to Messrs. Jorns, Wiles, Barr and Valentine
to purchase up to 225,000, 75,000, 40,000 and 20,000 shares of Common Stock,
respectively. The options granted to Messrs. Jorns, Wiles, Barr and Valentine
are exercisable in four equal annual installments, commencing on July 25,
1996, subject to continued employment through the applicable vesting date.
Both the ISOs and the nonqualified options are exercisable for ten years from
the date of grant at the fair market value of the Common Stock on the date of
grant. The options are ISOs to the extent permitted under the ISO "$100,000
limitation" described above. In addition, Messrs. Jorns, Wiles, Barr and
Valentine were granted restricted stock awards with respect to 30,000, 10,000,
6,000 and 4,000 shares of Common Stock, respectively. The awards vest, subject
to continued employment, through the applicable vesting date, pursuant to a
schedule beginning on the date of grant as follows: 10.0% on the date of grant
(July 25, 1996), 20.0% on each of the first and second anniversaries and 25.0%
on each of the third and fourth anniversaries of the date of grant. Prior to
vesting, such officers will be entitled to vote and receive dividends with
respect to such restricted shares of Common Stock.
Transferability. Under the 1996 Plan, Participants may be permitted to
transfer non-qualified stock options to certain family members or trusts for
the benefit of family members, provided the Participant does not receive any
consideration for the transfer. In addition, nonqualified options, incentive
awards and awards of Performance Shares may be transferable to the extent
permitted under Rule 16b-3 promulgated under the Exchange Act.
Certain Federal Income Tax Consequences Relating to Options. In general, a
Participant will not recognize taxable income upon the grant or exercise of an
ISO. However, upon the exercise of an ISO, the excess of the fair market value
of the shares received on the date of exercise over the exercise price of the
shares will be treated as an adjustment to alternative minimum taxable income.
When a Participant disposes of shares acquired by exercise of an ISO, the
Participant's gain (the difference between the sale proceeds and the price
paid by the Participant for the shares) upon the disposition will be taxed as
capital gain, provided the Participant (i) does not dispose of the shares
within two years after the date of grant nor within one year after the date of
exercise, and (ii) exercises the option while an employee of the Company or of
an affiliate of the Company or within three months after termination of
employment for reasons other than death or disability. If the first condition
is not met, the Participant generally will realize ordinary income in the year
of the disqualifying disposition. If the second condition is not met, the
Participant generally will recognize ordinary income upon exercise of the
option.
In general, a Participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date
of exercise over the exercise price of the option. Special timing rules may
apply to a Participant who is subject to Section 16(a) of the Exchange Act.
The employer (either the Company or its affiliate) will be entitled to claim
a federal income tax deduction on account of the exercise of a nonqualified
option. The amount of the deduction will be equal to the ordinary income
recognized by the Participant. The employer will not be entitled to a federal
income tax deduction on
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account of the grant of any option or the exercise of an ISO. The employer may
claim a federal income tax deduction on account of certain disqualifying
dispositions of Common Stock acquired upon the exercise of an ISO.
Section 162(m) of the Code places a limitation of $1,000,000 on the amount
of compensation payable to each of the named executive officers that the
Company may deduct for federal income tax purposes. The limit does not apply
to certain performance-based compensation paid under a plan that meets the
requirements of the Code and regulations promulgated thereunder. While the
1996 Plan generally complies with the requirements for performance-based
compensation, options granted at less than 100% of fair market value and stock
awards granted under the 1996 Plan will not satisfy those requirements.
The Directors' Plan
Share Authorization. A maximum of 100,000 shares of Common Stock may be
issued under the Directors' Plan. The share limitation and terms of
outstanding awards shall be adjusted, as the Compensation Committee deems
appropriate, in the event of a stock dividend, stock split, combination,
reclassification, recapitalization or other similar event.
Eligibility. The Directors' Plan provides for the grant of options to
purchase Common Stock and the award of shares of Common Stock to each eligible
director of the Company. No director who is an employee of the Company is
eligible to participate in the Directors' Plan.
Options. Pursuant to the Directors' Plan, each Independent Director was
awarded nonqualified options to purchase 10,000 shares of Common Stock on July
25, 1996 (the date the registration statement relating to the Common Stock
sold in the IPO was declared effective by the Commission) (each such director,
a "Founding Director"). Each eligible director who is not a Founding Director
(a "Non-Founding Director") will receive nonqualified options to purchase
10,000 shares of Common Stock on the date of the meeting of the Company's
stockholders at which the Non-Founding Director is first elected to the Board
of Directors. The options granted to Founding Directors upon effectiveness of
the registration statement relating to the IPO have an exercise price equal to
the public offering price in the IPO of $17.75 per share and vest in three
annual installments (with respect to 3,333, 3,333 and 3,334 shares,
respectively) beginning on the date of grant, subject to the Director's
continuous service through such vesting date. The exercise price of options
under future grants will be 100% of the fair market value of the Common Stock
on the date of grant and will vest in the same manner. The exercise price may
be paid in cash, cash equivalents acceptable to the Compensation Committee,
Common Stock or a combination thereof. Options granted under the Directors'
Plan are exercisable for ten years from the date of grant. Upon termination of
service as a director, options which have not vested are forfeited and vested
options may be exercised until they expire.
Certain Federal Income Tax Consequences Relating to Options. Generally, an
eligible director does not recognize any taxable income, and the Company is
not entitled to a deduction upon the grant of an option. Upon the exercise of
an option, the eligible director recognizes ordinary income equal to the
excess of the fair market value of the shares acquired over the option
exercise price, if any. Special rules may apply as a result of Section 16 of
the Exchange Act. The Company is generally entitled to a deduction equal to
the compensation taxable to the eligible director as ordinary income. Eligible
directors may be subject to backup withholding requirements for federal income
tax.
Share Awards. The Directors' Plan also provides for the annual award of
shares of Common Stock to each eligible director ("Director Share Awards").
The number of shares so awarded will be the number of whole shares that has a
fair market value most nearly equal to $8,500 (i.e., 50.0% of the annual
retainer fee otherwise payable to the director). No more than 20,000 shares
will be awarded as Director Share Awards during the term of the Directors'
Plan. See "--Compensation of Directors." Such shares will vest immediately
upon grant and will be nonforfeitable. Director Share Awards were made to each
Founding Director on July 25, 1996 (the date that the registration statement
relating to the IPO was declared effective by the Commission) and to each Non-
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Founding Director on the date of the meeting of the Company's stockholders at
which the Non-Founding Director is first elected to the Board. Thereafter,
Director Share Awards will be made at the first meeting of the Board of
Directors following the annual meeting of the Company's stockholders.
Amendment and Termination. The Directors' Plan provides that the Board may
amend or terminate the Plan, but the terms of the Plan relating to the amount,
price and timing of awards under the Plan may not be amended more than once
every six months other than to comport with changes in the Code, or the rules
and regulations thereunder. An amendment will not become effective without
stockholder approval if the amendment materially (i) increases the number of
shares that may be issued under the Directors' Plan, (ii) changes the
eligibility requirements, or (iii) increases the benefits that may be provided
under the Directors' Plan. No options may be granted nor Director Shares
Awards made under the Directors' Plan after December 31, 2006.
LIMITATION OF LIABILITY AND INDEMNIFICATION
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 the MGCL.
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 disposition 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 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
also permits 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, under the
MGCL, 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.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require,
among other matters, that the Company indemnify its executive officers
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and directors to the fullest extent permitted by law and advance to the
executive officers and directors all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted. Under the agreements, the Company must also indemnify and advance
all expenses incurred by executive officers and directors seeking to enforce
their rights under the indemnification agreements and may cover executive
officers and directors under the Company's directors' and officers' liability
insurance. Although the form of indemnification agreement offers substantially
the same scope of coverage afforded by law, it provides greater assurance to
directors and executive officers that indemnification will be available
because, as a contract, it cannot be modified unilaterally in the future by
the Board of Directors or the stockholders to eliminate the rights it
provides.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIPS AMONG OFFICERS AND DIRECTORS
Mr. Jorns is an executive officer, director and securityholder of each of
the Company, the Lessee, AGHI and the Beverage Corporations. Mr. Wiles is an
executive officer and stockholder of the Company and is an executive officer,
director and securityholder of each of the Lessee and AGHI. Mr. Barr is an
executive officer and stockholder of the Company, an executive officer and
securityholder of the Lessee and an executive officer of AGHI. Mr. Valentine
is an executive officer and stockholder of the Company and is an executive
officer of AGHI.
ACQUISITION OF INTERESTS IN CERTAIN OF THE INITIAL HOTELS
One or more of Messrs. Jorns, Wiles and Barr and their respective affiliates
owned equity interests or contract rights relating to certain of the Initial
Hotels prior to the acquisition of such hotels by the Company. Such persons
and affiliates received an aggregate of 126,287 OP Units in exchange for such
interests in these Initial Hotels. Upon exercise of their rights to exchange
such OP Units (which rights are not exercisable until July 1997), such persons
and entities may receive cash or, at the Company's option, an aggregate of
126,287 shares of Common Stock. See "Partnership Agreement--Exchange Rights."
In addition, the Operating Partnership reimbursed AGHI for approximately
$900,000 in direct out-of-pocket expenses incurred in connection with the
acquisition of the Initial Hotels. Also, the Operating Partnership repaid
approximately $3.75 million of indebtedness guaranteed by AGHI in connection
with the Formation Transactions. For a discussion of the consideration to be
received by Messrs. Jorns, Wiles and Barr and their affiliates in connection
with the Operating Partnership's acquisition of the Initial Hotels and the
formation of the Company, see "Formation Transactions."
SHARED SERVICES AND OFFICE SPACE AGREEMENT
The Company has entered into a shared services and office space agreement
with AGHI pursuant to which AGHI provides the Company with office space and
limited support personnel for the Company's headquarters at 3860 West
Northwest Highway, Dallas, Texas 75220 for an annual fee of approximately
$103,000.
OPTIONS TO PURCHASE AND RIGHTS OF FIRST REFUSAL
Pursuant to the Option Agreements, the Company has the option and right of
first refusal to acquire AGHI's (i) 50.0% partnership interest in the
partnership that owns the Boise, Idaho Option Hotel, and (ii) 16.7%
partnership interest in the partnership that owns the Durham, North Carolina
Option Hotel. The Option Agreements provide that for a period of two years
after the opening of each such hotel, the Company will have the right to
purchase AGHI's interests in each such hotel at a price equal to AGHI's
percentage interest in such hotel times 110% of the cost of developing such
hotel (including mortgage debt) for the first year; during the second year of
such option, the purchase price will be increased by any percentage increase
in the CPI. The purchase price will be payable (i) by taking title to AGHI's
interest in such hotels subject to a pro rata portion of the applicable owning
partnership's debt and (ii) by paying the balance of such purchase price in
cash or OP Units, at the option of AGHI. AGHI may sell its interests in the
Option Hotels free and clear of these options prior to the expiration of the
two-year option period, provided that it gives notice to the Company and
extends to the Company a right of first refusal to acquire such interests on
the same terms as that of the proposed sale. The exercise of the option or
right of first refusal may require approval of the partners in the
partnerships which own the Option Hotels that are not affiliated with AGHI,
including the approval by such partners of a Participating Lease relating to
such Option Hotels. The Boise, Idaho Option Hotel was opened in October 1996,
and the Durham, North Carolina Option Hotel is currently under development and
is expected to be open during the first quarter of 1997. AGHI will not seek
such approval until after the Company has exercised its option or right of
first refusal, and there can be no assurance that such approval will be
granted.
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EMPLOYMENT AGREEMENTS AND STOCK INCENTIVE PLANS
The Company has entered into an employment agreement with Mr. Jorns,
pursuant to which Mr. Jorns serves as Chairman, Chief Executive Officer, and
President of the Company for a term expiring on July 31, 2001 at an initial
annual base compensation of $100,000, subject to any increases in base
compensation approved by the Compensation Committee. In addition, the Company
has entered into employment agreements with Messrs. Wiles, Barr and Valentine,
pursuant to which Mr. Wiles serves as Executive Vice President, Mr. Barr
serves as Executive Vice President and Chief Financial Officer and Mr.
Valentine serves as Senior Vice President--Acquisitions, each for a term
expiring on July 31, 2001, at an annual base compensation of $90,000, $80,000
and $60,000, respectively, subject to any increases in base compensation
approved by the Compensation Committee. In addition to base salary, each such
executive officer is entitled under his employment agreement to receive annual
performance-based compensation as determined by the Compensation Committee.
Upon termination of such employment agreements other than for cause, or by
such officer for "good reason" (as such term is defined in each officer's
employment agreement), each of such officers will be entitled to receive
severance benefits in an amount equal to the greater of (i) the aggregate of
all compensation due such officer during the balance of the term of the
employment agreement or (ii) 1.99 times the "base amount" as determined in the
Code. In addition, such employment agreements provide for the grant of options
to Messrs. Jorns, Wiles, Barr and Valentine to purchase up to 225,000, 75,000,
40,000 and 20,000 shares of Common Stock, respectively, which will become
exercisable in four equal annual installments, commencing on the date of the
grant. The employment agreements also provide for the grant of stock awards to
Messrs. Jorns, Wiles, Barr and Valentine with respect to 30,000, 10,000, 6,000
and 4,000 shares of restricted Common Stock, respectively, which vest over a
four-year period commencing on the date of grant. See "Management--Stock
Incentive Plans--The 1996 Plan."
PURCHASE OF PERSONAL PROPERTY
In order for the Company to qualify as a REIT, the Operating Partnership
sold certain personal property relating to certain of the Initial Hotels to
the Lessee for $315,000, which amount was paid by issuing the FF&E Note to the
Operating Partnership. The FF&E Note is recourse to the Lessee and bears
interest at the rate of 10.0% per annum and requires the payment of quarterly
installments of principal and interest of approximately $20,000 that will
fully amortize the FF&E Note over a five-year period expiring on July 31,
2001.
THE PARTICIPATING LEASES
The Company and the Lessee have entered into the Participating Leases, each
with a term of twelve years from the inception of the lease, relating to the
Current Hotels. The Company anticipates that similar Participating Leases will
be entered into with respect to the Proposed Acquisition Hotels upon their
acquisition and any additional hotel properties acquired by the Company in the
future. See "The Hotels--The Participating Leases." Pursuant to the terms of
the Participating Leases, the Lessee is required to pay the greater of Base
Rent or Percentage Rent and certain other additional charges and is entitled
to all profits from the operation of the Hotels after the payment of operating
and other expenses. See "Selected Financial Information--The Lessee." In
addition, the Company has entered into a Lease Master Agreement which sets
forth the terms of the Lessee Pledge and certain other matters.
THE MANAGEMENT AGREEMENTS
The Lessee and AGHI entered into the Management Agreements, each with a term
of twelve years from the date of the acquisition of the applicable hotel,
relating to the management of the Current Hotels. The Company anticipates that
similar Management Agreements will be entered into with AGHI with respect to
three of the Proposed Acquisition Hotels and selected additional hotel
properties leased by the Company to the Lessee in the future. Pursuant to the
Management Agreements, AGHI is entitled to receive a base fee of 1.5% of gross
revenues, plus an incentive fee of up to 2.0% of gross revenues based on the
hotels achieving certain increases in revenue. The payment of management fees
to AGHI by the Lessee is subordinate to the Lessee's obligations to the
Company under the Participating Leases. See "The Hotels--The Management
Agreements."
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THE BEVERAGE CORPORATIONS
In order to facilitate compliance with state and local liquor laws and
regulations, the Lessee subleases those areas of the Current Hotels that
comprise the restaurant and other areas where alcoholic beverages are served
to the Beverage Corporations, fourteen of which are wholly owned by Mr. Jorns.
In accordance with the terms of the Beverage Subleases, each Beverage
Corporation is obligated to pay to the Lessee rent payments equal to 30% of
each such corporation's annual gross revenues generated from the sale of food
and beverages generated from such areas; however, pursuant to the
Participating Leases, such subleases will not reduce the Participating Rent
payments to the Company, which it is entitled to receive from such food and
beverage sales. The Lessee is expected to enter into similar sublease
arrangements with the Beverage Corporations upon purchase of the Proposed
Acquisition Hotels.
AGHI, THE LESSEE AND OTHER OPERATORS
American General Hospitality, Inc.
AGHI was founded in 1981 by Mr. Jorns, the Company's Chairman of the Board,
Chief Executive Officer and President. As of December 31, 1996, AGHI's
management portfolio consisted of 64 hotels containing an aggregate of
approximately 11,200 guest rooms. According to Hotel & Motel Management, a
leading hotel trade publication, AGHI was the nation's fourth largest
independent hotel management company in 1995, based upon number of hotels
under management. AGHI has a national presence, with operating experience in
40 states, involving 212 different hotels. AGHI has developed seven hotels
from the ground up. Recently, AGHI completed development of a Courtyard by
Marriott in Boise, Idaho and has a Courtyard by Marriott under development in
Durham, North Carolina for which the Company has limited purchase options. See
"The Hotels--Options to Purchase and Rights of First Refusal." These hotels
include four Hampton Inns, two Courtyards by Marriott, one Holiday Inn, and
one Embassy Suites. AGHI has in the past acquired fifteen hotels, containing a
total of 2,638 guest rooms, under various franchises and affiliations,
including Hilton, Courtyard by Marriott, Embassy Suites, Holiday Inn, Hampton
Inn, and Days Hotel as well as the prestigious Small Luxury Hotels
affiliation. In addition, AGHI has been involved in the repositioning and
redevelopment of approximately 70 hotels that operated under various national
franchise brands. The operations of AGHI are fully integrated with
capabilities in all phases of acquisition, development, and management of
hotel properties.
The Company believes that it will benefit significantly from the hotel
management experience of AGHI. AGHI manages all of the Current Hotels and is
expected to be retained by the Lessee as manager of three of the Proposed
Acquisition Hotels. Management expects that the Company also will benefit from
AGHI's significant historical operating experience during various economic
cycles.
AGHI has significant relationships with major hotel franchisors including
Hilton, Marriott, Wyndham Hotels, DoubleTree Hotels, Holiday Inn, Sheraton,
Promus Hotels, Radisson, the Choice Hotels family of brands and the HFS
Incorporated family of brands. The Company believes that these relationships
enhance the Company's ability to evaluate hotel brand affiliations without
restrictive ties to any one franchisor's brands. Pursuant to the terms of the
Management Agreements, and for so long as AGHI is managing hotels for the
benefit of the Company, AGHI has agreed to limit its business activities to
managing and operating Company-owned hotels and hotels owned by third parties.
See "The Hotels--The Management Agreements." Except for the two Option Hotels,
for which the Company has purchase options on AGHI's interests in such hotels,
and one other hotel that was excluded from the IPO (see "Risk Factors--
Conflicts of Interest--Conflicts Relating to Continued Ownership of Other
Hotel Properties"), AGHI's activities are limited to managing and operating
Company-owned hotels and hotels owned by third parties. See "The Hotels--
Options to Purchase and Rights of First Refusal."
The Lessee has contracted with AGHI to manage the Current Hotels under an
incentive compensation structure (as described below). The Lessee has advised
the Company that it will retain AGHI to manage three of the Proposed
Acquisition Hotels pursuant to the same incentive compensation structure.
Messrs. Jorns and Wiles, two executive officers of the Company, own
collectively approximately 21.0% of AGHI. The remaining interests in AGHI are
owned by persons unaffiliated with the Company, who also hold interests in the
Lessee.
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AGH Leasing, L.P.
The Company leases each Current Hotel to the Lessee pursuant to a separate
Participating Lease and expects to lease each of the Proposed Acquisition
Hotels to the Lessee. In addition, selected newly acquired hotels may be
leased by the Company to the Lessee. Messrs. Jorns, Wiles and Barr, executive
officers of the Company, own collectively approximately 23.0% of the Lessee.
The remaining interests in the Lessee are owned by persons unaffiliated with
the Company, who also hold interests in AGHI. Each Participating Lease has a
term of twelve years from the inception of the lease, subject to earlier
termination upon the occurrence of certain events. Under the Participating
Leases, the Lessee will be obligated to make fixed monthly Base Rent payments
to the Company and quarterly Participating Rent payments to the Company. See
"The Hotels--The Participating Leases--Lessee Capitalization; Lessee Pledge."
The Lessee is also required to provide to the Company monthly financial and
operating information about each of the Hotels, quarterly unaudited and annual
audited financial statements of the Lessee, and any other information material
to the Lessee's continuing ability to perform its obligations under the
Participating Leases. The Company will include this information in its
periodic reports filed with the Securities and Exchange Commission (the
"Commission") under the Exchange Act.
Other Operators
The Company intends to selectively seek other qualified hotel brand
owner/operators and hotel management companies, in addition to the Lessee and
AGHI, to lease and/or manage certain of the Company's future new hotel
acquisitions. The Company, with the consent of its Line of Credit lenders,
anticipates that it will lease hotels to independent hotel operators or, as a
condition to entering into a Participating Lease with the Lessee, will require
the Lessee to retain an independent hotel manager in connection with selected
acquisitions, provided such lessee or manager has, in the Company's judgment,
(i) certain unique knowledge of the hotel or the market in which the hotel
operates that will enhance the revenues that could be expected to be generated
by the hotel, (ii) a proven track record for implementing product, brand and
repositioning strategies, (iii) a significant national or regional lodging
industry reputation or (iv) substantial financial resources. In addition, the
Company will seek to develop lessee or management relationships with operators
which are capable of providing the Company with additional acquisition
opportunities that satisfy its investment criteria. The Company believes that
the use of a flexible lessee or manager structure, coupled with the continued
expansion of its brand and franchise relationships, will result in additional
acquisition opportunities for the Company. The Lessee has advised the Company
that it expects to retain Wyndham to manage the Company's Four Points by
Sheraton hotel following its acquisition by the Company. According to public
filings, Wyndham Hotel Corporation is a NYSE listed company which, as of
December 31, 1996, operated or franchised in excess of 75 hotels.
Certain Terms of the Participating Leases, the Management Agreements and
Certain Related Agreements
In an effort to align the interests of AGHI and the Lessee with the
interests of the Company's stockholders, the Participating Leases, the
Management Agreements and certain related agreements provide for the
following:
. the partners of the Lessee have (i) capitalized the Lessee with $500,000
in cash and (ii) pursuant to the Lessee Pledge, pledged to the Company
275,000 OP Units having a value of approximately $4.9 million, based on
the IPO offering price of the Common Stock, to the Company to secure the
Lessee's obligations under the Participating Leases; OP Units subject to
the Lessee Pledge may be released therefrom without duplication (a) on a
one-for-one basis as the Lessee acquires OP Units or shares of Common
Stock or (b) upon the contribution to the Lessee of cash or an increase
in undistributed earnings in an amount equal to the then current market
value of the OP Units released from the Lessee Pledge;
. until the Lessee's net worth equals the greater of (i) $6.0 million and
(ii) 17.5% of actual rent payments from Hotels leased to the Lessee
during the preceding calendar year (annualized for 1996), the Lessee
will not pay any distributions to its partners (except for the purpose
of permitting its partners to pay
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taxes on the income attributable to them from the operations of the
Lessee and except for distributions relating to interest or dividends
received by the Lessee from cash or securities held by it) (the "Lessee
Distribution Restriction") and will be required during this period,
subject to compliance with applicable securities laws, to use its cash
flow attributable to the Participating Leases (after establishing a
reserve for partner tax distributions) to purchase interests in the
Company, which interests may not be sold or transferred for a period of
two years after their acquisition (other than to partners in the Lessee
if, following such transfer, the net worth threshold of the Lessee
Distribution Restriction is satisfied);
. management fees paid to AGHI by the Lessee under the Management
Agreements are performance based, with a base fee equal to 1.5% of gross
revenues plus an incentive fee of up to 2.0% of gross revenues that will
be earned incremental upon reaching certain gross revenue targets;
. base and incentive management fees payable by the Lessee to AGHI are
subordinated to the Lessee's rent obligations to the Company under the
Participating Leases;
. monetary and certain other defaults by the Lessee under each
Participating Lease will result in a cross-default of all other
Participating Leases to which the Lessee is a party;
. Messrs. Jorns and Wiles, who are stockholders of AGHI and are also
executive officers of the Company, have agreed to use 50% of the
dividends (net of the tax liability attributed to such dividends)
received by them from AGHI that are attributable to AGHI's earnings from
the management of hotels owned by the Company (as determined in good
faith by such officers) to purchase, subject to compliance with
applicable securities laws, additional interests in the Company during
each of the twelve years following the closing of the IPO;
. each Participating Lease provides that the failure on the part of the
Lessee to materially comply with the terms of a Participating Lease
would give the Company the right to terminate such lease, repossess the
applicable hotel and enforce the payment obligations under the lease;
. AGHI has established bonus eligibility criteria for its officers and
employees that are keyed to the amount of incentive fees AGHI earns
under the Management Agreements; in addition, subject to applicable
securities laws limitations, 25.0% of such bonuses, if earned, will be
paid by AGHI to its senior executives in interests in the Company; and
. the Board of Directors has established a Leasing Committee, consisting
entirely of Independent Directors, that reviews not less frequently than
annually the Lessee's compliance with the terms of the Participating
Leases and reviews and approves the terms of each new Participating
Lease between the Company and the Lessee.
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PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 31, 1996 certain information
regarding the beneficial ownership of shares of Common Stock by (i) each
director of the Company, (ii) each executive officer of the Company, (iii) by
all directors and executive officers of the Company as a group and (iv) by
persons who own more than 5.0% of the shares of Common Stock. Except as
otherwise described below, all shares are owned directly and the indicated
person has sole voting and investment power. The number of shares of Common
Stock includes the number of shares of Common Stock that such person could
receive if he exchanged his OP Units for shares of Common Stock under certain
circumstances.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(1)
------------------------ --------------------- --------
<S> <C> <C>
Kenneth E. Barr(2)....................... 26,779 *
Kent R. Hance(3)......................... 6,192 *
Steven D. Jorns(4)....................... 177,958 2.1%
H. Cabot Lodge III(5).................... 3,692 *
James McCurry(5)......................... 3,692 *
Russ C. Valentine(6)..................... 11,840 *
Bruce G. Wiles(7)........................ 57,948 *
James R. Worms(8)........................ 4,692 *
Executive officers and directors as a
group
(8 persons)............................. 292,793 3.5%
Morgan Stanley Group Inc. and Morgan
Stanley Asset Management Inc.(9)........ 1,170,300 14.2%
</TABLE>
- --------
* Represents less than 1.0% of the class.
(1) Assumes that all OP Units held by each named person are exchanged for
shares of Common Stock. The total number of shares outstanding used in
calculating the percentage assumes that none of the OP Units held by other
persons are exchanged for shares of Common Stock. Pursuant to the Exchange
Agreement, OP Units are not exchangeable for shares of Common Stock until
July 31, 1997, the first anniversary date of the closing of the IPO.
(2) Includes (a) 10,000 shares of Common Stock that have vested under options
granted pursuant to the 1996 Plan, (b) 6,000 shares of restricted Common
Stock that constitute stock awards, (c) 600 shares of Common Stock
purchased through open market transactions after the IPO, (d) 79 shares of
Common Stock held by the Plan and attributable to Mr. Barr, (e) 10,000 OP
Units issued to Mr. Barr in connection with the Formation Transactions and
(f) 100 shares of Common Stock purchased by Mr. Barr through open market
transactions since the IPO, as custodian on behalf of a family member,
with respect to which Mr. Barr disclaims beneficial ownership.
(3) Includes (a) 3,333 shares of Common Stock that have vested under options
granted pursuant to the Directors' Plan, (b) 359 shares of Common Stock
issued pursuant to the Directors' Plan and (c) 2,500 shares of Common
Stock purchased through open market transactions after the IPO.
(4) Includes (a) options to purchase 56,250 shares of Common Stock that have
vested under options granted pursuant to the 1996 Plan, (b) 30,000 shares
of restricted Common Stock that constitute stock awards, (c) 100 shares of
Common Stock purchased through open market transactions after the IPO, (d)
70,337 OP Units issued to Mr. Jorns in connection with the Formation
Transactions, (e) 19,104 OP Units issued to Mr. Jorns' wife in connection
with the Formation Transactions and (f) 2,167 shares of Common Stock held
by the Plan and attributable to Mr. Jorns.
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(5) Includes (a) 3,333 shares of Common Stock that have vested under options
granted pursuant to the Directors' Plan and (b) 359 shares of Common Stock
issued pursuant to the Directors' Plan.
(6) Includes (a) options to purchase 5,000 shares of Common Stock that have
vested under options granted pursuant to the 1996 Plan, (b) 4,000 shares
of restricted Common Stock that constitute stock awards, (c) 1,000 shares
of Common Stock purchased through open market transactions after the IPO
and (d) 1,840 shares of Common Stock held by the Plan and attributable to
Mr. Valentine.
(7) Includes (a) 18,750 shares of Common Stock that have vested under options
granted pursuant to the 1996 Plan, (b) 10,000 shares of restricted Common
Stock that constitute stock awards, (c) 2,352 shares of Common Stock held
by the Plan and attributable to Mr. Wiles and (d) 26,846 OP Units issued
to Mr. Wiles in connection with the Formation Transactions.
(8) Includes (a) 3,333 shares of Common Stock that have vested under options
granted pursuant to the Directors Plan, (b) 359 shares of Common Stock
issued pursuant to the Directors' Plan and (c) 1,000 shares of Common
Stock purchased through open market transactions after the IPO.
(9) Beneficial ownership information is based on the Schedule 13G jointly
filed by Morgan Stanley Group Inc. (1585 Broadway, New York, New York
10036) and Morgan Stanley Asset Management Inc. (1221 Avenue of the
Americas, New York, New York 10020), dated November 8, 1996.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of (i) the capital stock of the Company
and (ii) certain provisions of Maryland law and of the Charter and Bylaws of
the Company does not purport to be complete and is subject to and qualified in
its entirety by reference to Maryland law described herein, and to the Charter
and Bylaws of the Company.
GENERAL
Under its Charter, the Company has the authority to issue 100,000,000 shares
of Common Stock, $0.01 par value per share. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations.
COMMON STOCK
All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other class
or series of stock, holders of shares of Common Stock are entitled to receive
dividends on such stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution
to its stockholders in the event of its liquidation, dissolution or winding up
after payment of or adequate provision for all known debts and liabilities of
the Company.
Subject to the provisions of the Charter regarding the restrictions on
transfer of stock, each outstanding share of Common Stock entitles the holder
to one vote on all matters submitted to a vote of stockholders, including the
election of directors and, except as provided with respect to any other class
or series of stock, the holders of such shares will possess the exclusive
voting power. There is no cumulative voting in the election of directors,
which means that the holders of a majority of the outstanding shares of Common
Stock can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors.
Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of the Company. Shares of Common Stock will have
equal dividend, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be
cast on the matter) is set forth in the corporation's charter. The Charter
provides that, with the exception of certain amendments to the Charter, the
affirmative vote of holders of shares entitled to cast a majority of all votes
entitled to be cast on such matters will be sufficient to approve the
aforementioned transactions.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK
The Company believes that the power of the Board of Directors to issue
additional authorized but unissued shares of Common Stock will provide the
Company with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs which might arise. The additional
shares of Common Stock will be available for issuance without further action
by the Company's stockholders, unless such action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
the Company's securities may be listed or traded.
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RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of stock.
Specifically, not more than 50.0% in value of the Company's outstanding shares
of stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year, and the shares of stock of the Company must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of
twelve months or during a proportionate part of a shorter taxable year. Those
two requirements do not apply until after the first taxable year for which the
Company makes an election to be taxed as a REIT. See "Federal Income Tax
Considerations--Requirements for Qualification as a REIT." In addition, the
Company must meet certain requirements regarding the nature of its gross
income in order to qualify as a REIT. One such requirement is that at least
75.0% of the Company's gross income for each calendar year must consist of
rents from real property and income from certain other real property
investments. The rents received by the Operating Partnership and the
Subsidiary Partnerships from the Lessee will not qualify as rents from real
property, which could result in loss of REIT status for the Company, if the
Company owns, actually or constructively, 10.0% or more of the ownership
interests in the Lessee, within the meaning of section 856(d)(2)(B) of the
Code. See "Federal Income Tax Considerations--Requirements for Qualification
as a REIT--Income Tests."
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Charter, subject to certain exceptions
described below, provides that no person may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 9.8% of the
outstanding shares of any class of Common Stock (subject to the Look-Through
Ownership Limitation applicable to certain stockholders, as described below).
Certain types of entities, such as pension trusts qualifying under section
401(a) of the Code, mutual funds qualifying as regulated investment companies
under section 851 of the Code, and corporations, will be looked through for
purposes of the "closely held" test in section 856(h) of the Code. Subject to
certain limited exceptions, the Charter will allow such an entity under the
Look-Through Ownership Limitation to own up to 15.0% of the shares of any
class or series of the Company's stock, provided that such ownership does not
cause any beneficial owner of such entity to exceed the Ownership Limitation
or otherwise result in a violation of the tests described in clauses (ii),
(iii) and (iv) of the second sentence of the succeeding paragraph.
Any transfer of Common Stock that would (i) result in any person owning,
directly or indirectly, Common Stock in excess of the Ownership Limitation (or
the Look-Through Ownership Limitation, if applicable), (ii) result in Common
Stock being owned by fewer than 100 persons (determined without reference to
any rules or attribution), (iii) result in the Company being "closely held"
within the meaning of section 856(h) of the Code, or (iv) cause the Company to
own, actually or constructively, 9.9% or more of the ownership interests in a
tenant of the Company's, the Operating Partnership's or a Subsidiary
Partnership's real property, within the meaning of section 856(d)(2)(B) of the
Code, will be void ab initio, and the intended transferee will acquire no
rights in such shares of Common Stock.
Subject to certain exceptions described below, any purported transfer of
Common Stock that would (i) result in any person owning, directly or
indirectly, shares of Common Stock in excess of the Ownership Limitation (or
the Look-Through Ownership Limitation, if applicable), (ii) result in the
shares of Common Stock being owned by fewer than 100 persons (determined
without reference to any rules of attribution), (iii) result in the Company
being "closely held" within the meaning of section 856(h) of the Code, or (iv)
cause the Company to own, actually or constructively, 10.0% or more of the
ownership interests in a tenant of the Company's, the Operating Partnership's
or a Subsidiary Partnership's real property, within the meaning of section
856(d)(2)(B) of the Code, will be designated as "Shares-in-Trust" and will be
transferred automatically to a trust (a "Trust"), effective on the day before
the purported transfer of such shares of Common Stock. The record holder of
the shares of Common Stock that are designated as Shares-in-Trust (the
"Prohibited Owner") will be required to submit such number of shares of Common
Stock to the Company for registration in the name of the trustee of the Trust
(the "Trustee"). The Trustee will be designated by the Company but will not be
affiliated with the Company. The beneficiary of the Trust (the "Beneficiary")
will be one or more charitable organizations named by the Company.
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Shares-in-Trust will remain issued and outstanding shares of Common Stock
and will be entitled to the same rights and privileges as all other shares of
the same class or series. The Trustee will receive all dividends and
distributions on the Shares-in-Trust and will hold such dividends or
distributions in trust for the benefit of the Beneficiary. The Trustee will
vote all Shares-in-Trust. The Trustee will designate a permitted transferee of
the Shares-in-Trust, provided that the permitted transferee (i) purchases such
Shares-in-Trust for valuable consideration and (ii) acquires such Shares-in-
Trust without such acquisition resulting in another transfer to another Trust.
The Prohibited Owner with respect to Shares-in-Trust will be required to
repay to the Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares become
Shares-in-Trust. Any vote taken by a Prohibited Owner prior to the Company's
discovery that the Shares-in-Trust were held in trust will be rescinded as
void ab initio and recast by the Trustee, in its sole and absolute discretion;
provided, however, that if the Company 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 generally will
receive from the Trustee the lesser of (i) the price per share such Prohibited
Owner paid for the shares of Common Stock that were designated as Shares-in-
Trust (or, in the case of a gift or devise, the Market Price (as defined
below) per share on the date of such transfer) or (ii) the price per share
received by the Trustee from the sale of such Shares-in-Trust. Any amounts
received by the Trustee in excess of the amounts to be paid to the Prohibited
Owner will be distributed to the Beneficiary.
The Shares-in-Trust will be deemed to have been offered for sale to the
Company, 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 a gift or devise, the Market Price per share on the date of such
transfer) or (ii) the Market Price per share on the date that the Company, or
its designee, accepts such offer. Subject to the Trustee's ability to
designate a permitted transferee, the Company will have the right to accept
such offer for a period of 90 days after the later of (i) the date of the
purported transfer which resulted in the creation of such Shares-in-Trust or
(ii) the date the Company determines in good faith that a transfer resulting
in such Shares-in-Trust occurred.
"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 NYSE or, if the shares of Common Stock are not listed or
admitted to trading on the NYSE, 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 Common Stock are
listed or admitted to trading or, if the shares of Common 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 Common 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 Common Stock
selected by the Board of Directors. "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or,
if the shares of Common 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.
Any person who acquires or attempts to acquire Common Stock in violation of
the foregoing restrictions, or any person who owned shares of Common Stock
that were transferred to a Trust, will be required (i) to give immediately
written notice to the Company of such event and (ii) to provide to the Company
such other information as the Company may request in order to determine the
effect, if any, of such transfer on the Company's status as a REIT.
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All persons who own, directly or indirectly, more than 5.0% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding shares of Common Stock must, within 30 days after January 1 of
each year, provide to the Company a written statement or affidavit stating (i)
the name and address of such direct or indirect owner, (ii) the number of
shares of Common Stock owned directly or indirectly, and (iii) a description
of how such shares are held. In addition, each direct or indirect stockholder
shall provide to the Company such additional information as the Company may
request in order to determine the effect, if any, of such ownership the
Company's status as a REIT and to ensure compliance with the Ownership
Limitation.
The Ownership Limitation or the Look-Through Ownership Limitation, as
applicable, generally will not apply to the acquisition of shares of Common
Stock by an underwriter that participates in a public offering of such shares.
In addition, the Board of Directors, upon such conditions as the Board of
Directors may direct, may exempt a person from the Ownership Limitation or the
Look-Through Ownership Limitation, as applicable, under certain circumstances.
All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above.
The Ownership Limitation could have the effect of delaying, deferring or
preventing a takeover or other transaction in which holders of some, or a
majority, of shares of Common Stock might receive a premium from their shares
of Common Stock over the then prevailing market price or which such holders
might believe to be otherwise in their best interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and the
Company's Charter and Bylaws does not purport to be complete and is subject to
and qualified in its entirety by reference to Maryland law and the Company's
Charter and Bylaws.
NUMBER OF DIRECTORS; CLASSIFICATION OF THE BOARD OF DIRECTORS
The Charter and Bylaws provide that the number of directors will consist of
not less than three nor more than fifteen persons, as determined by the
affirmative vote of a majority of the members of the entire Board of
Directors. At all times, a majority of the directors shall be Independent
Directors, except that upon the death, removal, incapacity or resignation of
an Independent Director, such requirement shall not be applicable for 60 days.
There are five directors, four of whom are Independent Directors. The holders
of Common Stock are entitled to vote on the election or removal of directors,
with each share entitled to one vote. Any vacancy will be filled, at any
regular meeting or at any special meeting called for that purpose, by a
majority of the remaining directors, except that a vacancy resulting from an
increase in the number of directors must be filled by a majority of the entire
Board of Directors.
Pursuant to the Charter, the Board of Directors is divided into three
classes of directors. The initial terms of the first, second and third classes
will expire in 1997, 1998 and 1999, respectively. As the term of each class
expires, directors in that class will be elected by the stockholders of the
Company for a term of three years and until their successors are duly elected
and qualify. Classification of the Board of Directors is intended to assure
the continuity and stability of the Company's business strategies and policies
as determined by the Board of Directors. Because holders of Common Stock will
have no right to cumulative voting in the election of directors, at each
annual meeting of stockholders, the holders of a majority of the shares of
Common Stock will be able to elect all of the successors of the class of
directors whose terms expire at that meeting.
The classified board provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult, which
could delay, defer, discourage or prevent an attempt by a third party to
obtain control of the Company or other transaction, even though such an
attempt or other transaction might be beneficial to the Company and its
stockholders. At least two annual meetings of stockholders, instead of one,
will generally be required to effect a change in a majority of the Board of
Directors. Thus, the classified board provision could increase the likelihood
that incumbent directors will retain their positions. See "Risk Factors--
Potential Anti-Takeover Effect of Certain Provisions of Maryland Law and of
the Company's Charter and Bylaws."
REMOVAL; FILLING VACANCIES
The Bylaws provide that, unless the Board of Directors otherwise determines,
any vacancies will be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum. Any directors so elected shall
hold office until the next annual meeting of stockholders. The Charter
provides that directors may be removed, with or without cause, only by the
affirmative vote of the holders of at least 75.0% of votes entitled to be cast
in the election of the directors. This provision, when coupled with the
provision of the Bylaws authorizing the Board of Directors to fill vacant
directorships precludes stockholders from removing incumbent directors except
upon a substantial affirmative vote and filling the vacancies created by such
removal with their own nominees.
LIMITATION OF LIABILITY AND INDEMNIFICATION
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
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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 obligates the Company, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition 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,
and 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 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
also permits 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 Maryland 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 Maryland 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. Indemnification under the provisions of
the MGCL is not deemed exclusive of any other rights, by indemnification or
otherwise, to which an officer or director may be entitled under the Company's
Charter or Bylaws, or under resolutions of stockholders or directors, contract
or otherwise. It is the position of the Commission that indemnification of
directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
The Company also has purchased and maintains insurance on behalf of all of
its directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Company, whether or not
the Company is required or has the power to indemnify them against the same
liability.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10.0% or more of the voting
power of such corporation's shares or an affiliate of such corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10.0% or more of the voting power of the then-outstanding
voting shares of such corporation (an "Interested Stockholder") or an
affiliate thereof are prohibited for five years after the most recent date on
which the Interested Stockholder became an Interested Stockholder. Thereafter,
any such business combination must be recommended by the board of directors of
such corporation and approved by the affirmative vote of at least (a) 80.0% of
the votes entitled to be cast by holders of outstanding voting shares of such
corporation and (b) two-thirds of the votes entitled to be cast by holders of
voting shares of such corporation
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other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's stockholders receive a minimum price (as defined
in the MGCL) for their shares and the consideration is received in cash or in
the same form as previously paid by the Interested Stockholder for its shares.
These provisions of the MGCL do not apply, however, to business combinations
that are approved or exempted by the board of directors of the corporation
prior to the time that the Interested Stockholder becomes an Interested
Stockholder.
CONTROL SHARE ACQUISITION STATUTE
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares owned by the acquiror, by officers or by directors
who are employees of the corporation. "Control Shares" are voting shares
which, if aggregated with all other such shares previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquiror to exercise voting power in electing directors
within one of the following ranges of voting power: (i) one-fifth or more but
less than one-third, (ii) one-third or more but less than a majority, or (iii)
a majority or more of all voting power. Control Shares do not include shares
the acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquiror or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquiror in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in the context
of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange, if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws
of the corporation.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's Common Stock. There can be no assurance that such provision will not
be amended or eliminated at any time in the future.
AMENDMENT TO THE CHARTER
The Charter of the Company may be amended by the affirmative vote of holders
of shares entitled to cast a majority of all votes entitled to be cast on such
an amendment; provided, however, (i) no term or provision of
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the Charter may be added, amended or repealed in any respect that would, in
the determination of the Board of Directors, cause the Company not to qualify
as a REIT under the Code, (ii) certain provisions of the Charter, including
provisions relating to the classification of directors, the removal of
directors, Independent Directors, preemptive rights of holders of stock and
the indemnification and limitation of liability of officers and directors may
not be amended or repealed and (iii) provisions imposing cumulative voting in
the election of directors may not be added to the Charter, unless, in each
such case, such action is approved by the affirmative vote of the holders of
not less than two-thirds of all the votes entitled to be cast on the matter.
DISSOLUTION OF THE COMPANY
The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than a majority of all of the votes entitled to be
cast on the matter.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to the Company's notice of the meeting, (ii) by the Board of
Directors or (iii) by a stockholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and
(b) with respect to special meetings of stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of the
meeting, (ii) by the Board of Directors or (iii) provided that the Board of
Directors has determined that directors shall be elected at such meeting, by a
stockholder who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in the Bylaws.
MEETINGS OF STOCKHOLDERS
The Company's Bylaws provide that annual meetings of stockholders shall be
held on a date and at the time set by the Board of Directors during the month
of May each year (commencing in May 1997). Special meetings of the
stockholders may be called by (i) the President of the Company, (ii) the Chief
Executive Officer or (iii) the Board of Directors. As permitted by the MGCL,
the Bylaws of the Company provide that special meetings must be called by the
Secretary of the Company upon the written request of the holders of shares
entitled to cast not less than a majority of all votes entitled to be cast at
the meeting.
OPERATIONS
The Charter requires the Board of Directors generally to use commercially
reasonable efforts to cause the Company to qualify as a REIT.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS
The business combination provisions and, if the applicable provision in the
Bylaws is rescinded, the control share acquisition provisions of the MGCL, the
provisions of the Charter on classification of the Board of Directors and
removal of directors and the advance notice provisions of the Bylaws could
delay, defer or prevent a transaction or a change in control of the Company
that might involve a premium price for holders of Common Stock or otherwise be
in their best interest.
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POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's policies with respect to
investment, financing, conflicts of interest and certain other activities. The
policies with respect to these activities have been determined by the Board of
Directors of the Company and may be amended or revised from time to time at
the discretion of the Board of Directors without a vote of the stockholders of
the Company, except that (i) changes in certain policies with respect to
conflicts of interest must be consistent with legal requirements and (ii)
certain policies with respect to competition are imposed pursuant to contracts
that cannot be amended without the consent of all parties thereto.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate
In addition to the Hotels, the Company intends to acquire equity interests
in hotels and related properties throughout the United States and, on a
limited basis, elsewhere in North America. Additional acquisitions could be
made directly or by the Operating Partnership or other entities controlled by
the Company, if any exist. The Company's investment objective is to maximize
current returns to stockholders through increases in Cash Available for
Distribution and to increase long-term returns to stockholders through
appreciation in the value of the Common Stock. The Company intends to achieve
these objectives by participating in increased profits from the Hotels
pursuant to the Participating Leases and by the selective acquisition and
development of hotel properties.
Although the Company presently anticipates that additional investments in
hotel properties will be made through the Operating Partnership, additional
investments may be made directly by the Company or other entities controlled
by the Company, if any exist. Such investments may be financed, in whole or in
part, with excess cash flow, borrowings or subsequent issuances of shares of
Common Stock or other securities issued by the Company or by entities
controlled by the Company.
Investments in Other Entities
The Company also may participate with other entities in property ownership,
through joint ventures or other types of co-ownership. Equity investments may
be subject to existing mortgage financing and other indebtedness that may have
priority over the equity interests in the Company.
Investments in Real Estate Mortgages and Securities of Other Issuers
While the Company will emphasize equity hotel investments, it may, in its
discretion, invest in mortgage and other real estate interests, including
securities of REITs and other issuers. Subject to compliance with applicable
REIT asset test requirements (see "Federal Income Tax Considerations--
Requirements for Qualification as a REIT--Asset Tests"), the Company will have
no limit on the amount or percentage of assets represented by one investment
or investment type. The Company does not presently intend to invest in
securities of REITs or other issuers. The Company also does not presently
intend to trade or underwrite securities or to make investments for the
purpose of exercising control over other issuers. The Company may invest in
participating or convertible mortgages if it concludes that by doing so it may
benefit from the cash flow or any appreciation in the value of the subject
property. Such mortgages are similar to equity participations, because they
permit the lender to either participate in increasing revenues from the
property or convert some or all of the mortgage to equity.
FINANCING
The Company intends to make additional investments in hotel properties and
may incur indebtedness to make such investments or to meet the distribution
requirements imposed by the REIT provisions of the Code, to
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the extent that cash flow from the Company's investments and working capital
is insufficient to fund such investments or distributions.
To ensure that the Company has sufficient liquidity to conduct its
operations, including making investments in additional hotel properties and
funding its anticipated distribution obligations and financing costs, the
Company has access to the Line of Credit. Borrowings under the Line of Credit
have been utilized to purchase the Acquired Hotels and will be utilized to
purchase the Proposed Acquisition Hotels, and additional funds may be used to
acquire additional properties. The Line of Credit is secured by a first
mortgage lien on fourteen of the Current Hotels. The Line of Credit will be
secured by two of the Proposed Acquisition Hotels and by subsequently acquired
properties that are purchased with borrowings under the Line of Credit. The
Company intends to continue to maintain a conservative capital structure and
expects to continue to limit consolidated indebtedness (measured at the time
the debt is incurred) to no more than 45.0% of the Company's investment in
hotels. The Company is currently negotiating with its Line of Credit lenders
to increase its borrowing limit to $150 million. There can be no assurance
that the Company will successfully consummate such proposed amendment to the
Line of Credit.
Borrowings may be incurred through the Operating Partnership or the Company.
Indebtedness incurred by the Company may be in the form of bank borrowings,
secured and unsecured, and publicly and privately placed debt instruments.
Indebtedness incurred by the Operating Partnership may be in the form of
purchase money obligations to the sellers of hotels, publicly or privately
placed debt instruments, financing from banks, institutional investors or
other lenders, any of which indebtedness may be unsecured or may be secured by
mortgages or other interests in the hotels owned by the Operating Partnership.
Such indebtedness may be recourse to all or any part of the hotels of the
Company or the Operating Partnership, or may be limited to the particular
hotel to which the indebtedness relates. The proceeds from any borrowings by
the Company or the Operating Partnership may be used for the payment of
distributions or dividends, working capital, to refinance existing
indebtedness or to finance acquisitions, expansions, additions or renovations
of hotel properties. See "Federal Income Tax Considerations--Requirements for
Qualification as a REIT--Annual Distribution Requirements."
If the Board of Directors determines to raise additional equity capital, the
Board will have the authority, without stockholder approval, to issue
additional shares of Common Stock in any manner (and on such terms and for
such consideration) as it deems appropriate, including in exchange for
property. Existing stockholders have no preemptive right to purchase shares
issued in any such offering, and any such issuance might cause a dilution of a
stockholder's investment in the Company.
The Company may make investments other than as previously described,
although it does not currently intend to do so. See "Federal Income Tax
Considerations--Requirements for Qualification as a REIT--Asset Tests."
HOTEL OPERATOR POLICY
The Company intends to selectively seek other qualified hotel brand
owner/operators and hotel management companies, in addition to the Lessee and
AGHI, to lease and/or manage certain of the Company's future new hotel
acquisitions. The Company anticipates that it will lease hotels to independent
hotel operators or, as a condition to entering into a Participating Lease with
the Lessee, will require the Lessee to retain an independent hotel manager in
connection with selected acquisitions. The Company will seek lessee or
management relationships with hotel operating companies that have
demonstrated, in the Company's judgment, (i) certain unique knowledge of the
hotel or the market in which such hotel operates, (ii) a proven track record
for implementing product, brand and operational repositioning strategies,
(iii) a significant national or regional lodging industry reputation or (iv)
substantial financial resources. In addition, the Company will seek to develop
lessee or management relationships with operators that are capable of
providing the Company with additional acquisition opportunities that satisfy
its investment criteria. The Company believes that the use of a flexible
lessee or manager structure, coupled with the continued expansion of its brand
and franchise relationships, will
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result in additional acquisition opportunities for the Company. The Lessee has
advised the Company that it expects to retain Wyndham to manage the Company's
Four Points by Sheraton hotel following its acquisition. According to public
filings, Wyndham is an NYSE listed company which, as of December 31, 1996,
operated or franchised in excess of 75 hotels. See "The Hotels--Management
Agreements--Wyndham."
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies and entered into certain agreements
designed to minimize potential conflicts of interest. The Company's Board of
Directors is subject to certain provisions of Maryland law, which are designed
to eliminate or minimize certain potential conflicts of interest. However,
there can be no assurance that these policies will always be successful in
eliminating the influence of such conflicts, and if they are not successful,
decisions could be made that might fail to reflect fully the interests of all
stockholders.
Charter and Bylaw Provisions
The Company's Charter, with limited exceptions, requires that a majority of
the Company's Board of Directors be comprised of persons who are not officers
or employees of the Company, affiliates of officers or employees of the
Company or affiliates of any advisor to the Company under an advisory
agreement, any lessee or contract manager of any hotel of the Company, any of
its subsidiaries, or any partnership which is an affiliate of the Company
(each such person, an "Independent Director"). The Charter provides that such
provisions relating to Independent Directors may not be amended, altered,
changed or repealed without the affirmative vote of all of the Independent
Directors and the affirmative vote of the holders of not less than two-thirds
of the votes entitled to be cast on such a matter. In addition, the Company's
Bylaws provide that any action pertaining to any transaction in which the
Company 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 Company, any affiliated lessee or
affiliated contract manager of any property of the Company or any affiliate of
the foregoing, has any direct or indirect interest other than as a result of
such person's status as a director, officer or stockholder of the Company,
must be approved by the affirmative vote of a majority of the Independent
Directors even if the Independent Directors constitute less than a quorum.
The Operating Partnership
A conflict of interest may arise between the Company, as a general and
limited partner of the Operating Partnership, and the other Limited Partners
of the Operating Partnership, which may include affiliates of AGHI and the
Lessee, due to the differing potential tax liability to the Company and the
other Limited Partners from the subsequent sale of certain Hotels by the
Operating Partnership resulting from the differing tax bases of the Company
and such affiliates associated with such hotels. In an effort to address this
and other potential conflicts of interest, the Company's Bylaws provide that
the Company's decision with respect to the subsequent sale of a Hotel
purchased from a Primary Contributor or their affiliates must be made by a
majority of the Independent Directors. The Partnership Agreement of the
Operating Partnership gives AGH GP, as general partner of the Operating
Partnership, full, complete and exclusive discretion in managing and
controlling the business of the Operating Partnership and in making all
decisions affecting the business and assets of the Operating Partnership.
Options to Purchase and Rights of First Refusal
Pursuant to the Option Agreements, the Company has an option and right of
first refusal to acquire the Option Hotels. The Independent Directors will
determine whether the Company should exercise its right to acquire either
Option Hotel under the Option Agreements. See "Certain Relationships and
Transactions--Options to Purchase and Rights of First Refusal." In addition,
the Independent Directors must approve the terms of any acquisition from AGHI
of the Ramada Limited--Madison, Wisconsin. See "Risk Factors--Conflicts of
Interest--Conflicts Relating to Continued Ownership of Other Hotel
Properties."
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Provisions of the MGCL
Pursuant to the MGCL, each director of the Company is required to discharge
his duties in good faith, in a manner he reasonably believes to be in the best
interest of the Company and with the care that an ordinarily prudent person in
a like position would exercise under similar circumstances. In addition, under
the MGCL, a contract or other transaction between the Company and a director
or between the Company and any other corporation or other entity in which a
director of the Company is a director or has a material financial interest is
not void or voidable solely on the grounds of such interest, the presence of
the director at the meeting at which the contract or transaction is approved
or the director's vote in favor thereof if (a) the fact of the common
directorship or interest is disclosed or known to (i) the board of directors
or committee, and the board or committee authorizes, approves or ratifies the
contract or transaction by the affirmative vote of a majority of disinterested
directors, even if the disinterested directors constitute less than a quorum,
or (ii) the stockholders entitled to vote, and the transaction or contract is
authorized, approved or ratified by a majority of the votes cast by the
stockholders entitled to vote other than the votes of shares owned of record
or beneficially by the interested director or corporation, firm or other
entity, or (b) the transaction or contract is fair and reasonable to the
Company.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company has the authority to offer shares of stock or other securities
and to repurchase or otherwise reacquire its shares or any other securities
and may engage in such activities in the future. As described under "Shares
Available for Future Sale," the Company may (but is not obligated to) issue
shares of Common Stock to holders of OP Units upon exercise of the Exchange
Rights (as defined below). The Company has not engaged in trading,
underwriting or agency distribution or sale of securities of other issuers,
nor has the Company invested in the securities of other issuers other than the
Operating Partnership for the purpose of exercising control over such issuers.
The Company has not made any loans to third parties, although it has made
certain loans to the Lessee (see "Formation Transactions"), and it may in the
future make loans to third parties, including, without limitation, to joint
ventures in which it participates. The Company intends to make investments in
such a way that it will not be treated as an investment company under the
Investment Company Act of 1940, as amended.
WORKING CAPITAL RESERVES
The Company will maintain working capital reserves in amounts that the Board
of Directors determines to be adequate to meet normal contingencies in
connection with the operation of the Company's business and investments.
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SHARES AVAILABLE FOR FUTURE SALE
Upon the completion of the Offering 13,787,405 shares of Common Stock will
be issued and outstanding, 1,896,996 shares of Common Stock will be reserved
for potential issuance upon exchange of 1,896,996 OP Units and an additional
948,564 shares of Common Stock will be reserved for grants of options and
stock awards to officers and directors of the Company pursuant to the 1996
Plan and the Directors' Plan (the "Company Options"). All of the Common Stock
issued in the Offering will be freely tradeable by persons, other than
affiliates of the Company, without restriction under the Securities Act,
subject to certain limitations on ownership set forth in the Charter. See
"Description of Capital Stock--Restrictions on Transfer." The 162,405 shares
of restricted Common Stock issued in connection with the acquisition of
certain Hotels, the 1,896,996 shares of Common Stock available for issuance
upon exchange of OP Units issued in connection with the Formation
Transactions, the 1,436 shares of restricted Common Stock, and the 50,000
shares of restricted Common Stock, of which 5,000 have vested, which have been
granted to the Company's executive officers under the 1996 Plan and any shares
of Common Stock or shares of Common Stock available for issuance upon exchange
of OP Units issued in connection with the Wyndham Alliance (collectively,
"Restricted Shares") are "restricted" securities under the meaning of Rule 144
under the Securities Act and may be sold only pursuant to an effective
registration statement under the Securities Act or an applicable exemption,
including an exemption under Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, if two years have elapsed
since the later of the date of acquisition of Restricted Shares from the
Company or the date of acquisition of Restricted Shares from any "affiliate"
of the Company, as that term is defined under the Securities Act, the acquiror
or subsequent holder is entitled to sell within any three-month period a
number of shares of Common Stock that does not exceed the greater of 1.0% of
the then outstanding Common Stock or the average weekly trading volume of
Common Stock on all exchanges and reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain restrictions on the manner of
sales, notice requirements and the availability of current public information
about the Company. If three years have elapsed since the date of acquisition
of Restricted Shares from the Company or from an "affiliate" of the Company,
and the acquiror or subsequent holder thereof is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a sale, such
person would be entitled to sell such Common Stock in the public market under
Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
Certain holders of Common Stock and OP Units issued in connection with the
Formation Transactions and the acquisition of certain Hotels have agreed with
Smith Barney Inc. and/or the Company, subject to limited exceptions, not to
sell, offer or contract to sell, grant any option for the sale of, or
otherwise dispose of or transfer any Common Stock or OP Units or any
securities convertible into or exchangeable or exercisable for Common Stock or
OP Units, until July 31, 1997, without the prior written consent of Smith
Barney Inc. and/or the Company. Wyndham has agreed, subject to limited
exceptions, not to sell, offer or contract to sell, grant any options for the
sale of, or otherwise transfer any Common Stock or OP Units acquired by it
pursuant to the Wyndham Alliance for a period of six months from the date of
the acquisition of such Common Stock or OP Units. The Company has agreed to
file a registration statement with the Commission by October 1997 with respect
to sales of (i) Common Stock received upon exchange of OP Units issued in the
Formation Transactions, (ii) 25,397 shares of Common Stock issued in
connection with the acquisition of one of the Current Hotels and (iii) any
shares of Common Stock issued or received upon the exchange of OP Units
pursuant to the Wyndham Alliance. The Company is obligated to maintain the
effectiveness of such registration statement until a date to be agreed upon or
until such time as all of the shares registered pursuant to such registration
statement (a) have been disposed of pursuant to such registration statement,
(b) have been otherwise distributed pursuant to Rule 144, or (c) have been
otherwise transferred in a transaction resulting in the transferee receiving
Common Stock no longer deemed to be "restricted securities." In addition, the
Company has granted to Wyndham certain demand and piggyback registration
rights in connection with any Restricted Shares issued pursuant to the Wyndham
Alliance.
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The Company has also filed a registration statement on Form S-8 with respect
to the shares of Common Stock issuable in respect of the exercise of the
Company Options. Shares of Common Stock issued upon the exercise of the
Company Options will be available for sale in the public market without
restriction to the extent they are held by persons who are not affiliates of
the Company and, to the extent they are held by affiliates, pursuant to Rule
144 under the Securities Act, without observance of the holding period
requirement. The existence of such agreements by the Company may adversely
affect the terms upon which the Company can obtain additional equity financing
in the future.
The Company's Common Stock trades on the NYSE under the symbol "AGT." No
prediction can be made as to the effect, if any, that the Offering, or future
sales of shares, or the availability of shares for future sale will have on
the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Restricted Shares in the public
market (or the perception that such sales could occur) might adversely affect
prevailing market prices for the Common Stock.
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PARTNERSHIP AGREEMENT
The following summary of the Partnership Agreement, and the descriptions of
certain provisions thereof set forth elsewhere in this Prospectus, is
qualified in its entirety by reference to the Partnership Agreement.
MANAGEMENT
The Operating Partnership is organized as a Delaware limited partnership
with AGH GP, as general partner, AGH LP, as a limited partner, and certain of
the Primary Contributions and other persons unaffiliated with the Primary
Contributors, as additional limited partners (the "Partnership Agreement").
Pursuant to the Partnership Agreement, AGH GP, as the sole general partner of
the Operating Partnership (the "General Partner"), has full, exclusive and
complete responsibility and discretion in the management and control of the
Operating Partnership, and the Limited Partners in their capacity as such have
no authority to transact business for, or participate in the management
activities or decisions of, the Operating Partnership. However, any amendment
to the Partnership Agreement, other than amendments that (i) add to the
obligations of the General Partner, (ii) reflect the admission or withdrawal
of partners, (iii) set forth the rights or preferences of additional
partnership interests issued by the Operating Partnership, (iv) reflect a
change that does not adversely affect Limited Partner, and (v) are necessary
to satisfy legal requirements, requires the consent of Limited Partners
holding more than 50.0% of the OP Units held by such Limited Partners. The
consent of each adversely affected partner is required for any amendment that
would affect a Limited Partner's liability or right to receive distributions
or that would dissolve the Operating Partnership prior to December 31, 2046
(other than as a result of certain mergers or consolidations).
TRANSFERABILITY OF INTERESTS
Subject to limited exceptions, AGH GP and AGH LP may not voluntarily
withdraw from the Operating Partnership or transfer or assign their interests
in the Operating Partnership unless the transaction in which such withdrawal
or transfer occurs results in the Limited Partners' receiving property in an
amount equal to the amount they would have received had they exercised their
Exchange Rights immediately prior to such transaction, or unless the
successors to AGH GP and AGH LP contribute substantially all of their assets
to the Operating Partnership in return for an interest in the Operating
Partnership. With certain exceptions, the Limited Partners may transfer their
OP Units, in whole or in part, without the consent of the General Partner.
CAPITAL CONTRIBUTION
The Company, through AGH GP and AGH LP, contributed to the Operating
Partnership substantially all of the net proceeds of the IPO, in consideration
of which AGH GP received an approximate 1.0% general partnership interest and
AGH LP received an approximate 80.3% limited partnership interest in the
Operating Partnership. Since the IPO, the Company through AGH GP and AGH LP,
made certain additional contributions to the Operating Partnership thereby
increasing its interest therein to approximately 81.4%. The Partnership
Agreement provides that if the Operating Partnership requires additional funds
at any time or from time to time in excess of funds available to the Operating
Partnership from borrowing or capital contributions, the Company may borrow
such funds from a financial institution or other lender and lend such funds to
the Operating Partnership on the same terms and conditions as are applicable
to the Company's borrowing of such funds. Under the Partnership Agreement, the
Company generally is obligated to contribute, through AGH GP and AGH LP, the
proceeds of any stock offering as additional capital to the Operating
Partnership. Moreover, the Company is authorized, through AGH GP and AGH LP,
to cause the Operating Partnership to issue partnership interests for less
than fair market value if the Company has concluded in good faith that such
issuance is in the best interests of the Company and the Operating
Partnership. If the Company so contributes additional capital to the Operating
Partnership, AGH GP and AGH LP will receive additional OP Units, and their
percentage interests in the Operating Partnership will be increased on a
proportionate basis based upon the amount of such additional capital
contributions and the value of the Operating Partnership at the time of such
contributions. Conversely, the percentage interests of the Limited Partners,
other than AGH LP, will be decreased on a proportionate basis in the event of
additional capital contributions by the Company.
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EXCHANGE RIGHTS
Pursuant to the Exchange Rights Agreement among the Company, the Operating
Partnership and the Limited Partners other than AGH LP (the "Exchange
Agreement"), such Limited Partners received rights (the "Exchange Rights")
that enable them to cause the Operating Partnership to exchange each OP Unit
for cash equal to the value of one share of Common Stock (or, at the Company's
election, the Company may purchase each OP Unit offered for exchange for one
share of Common Stock). The Company may not satisfy a Limited Partner's
Exchange Right by delivery of Common Stock, if and to the extent that the
delivery of Common Stock upon exercise of such rights would (i) be prohibited
under the Charter, (ii) otherwise jeopardize the REIT status of the Company,
or (iii) cause the acquisition of shares of Common Stock by such exchanging
Limited Partner to be "integrated" with any other distribution of shares of
Common Stock for purposes of complying with the Securities Act. The Exchange
Rights may be exercised at any time after July 31, 1997 (one year following
the closing of the IPO), provided that a Limited Partner may not exercise the
Exchange Rights for less than 1,000 OP Units or, if such Limited Partner holds
less than 1,000 OP Units, for all of the OP Units held by such Limited
Partner. Prior to July 31, 1997, the Exchange Rights may be exercised (but
only for cash) by a lender to whom any OP Units may have been pledged,
provided that such pledge was permissible in light of the lock-up agreements
described in "Shares Available for Future Sale." The aggregate number of
shares of Common Stock currently issuable upon exercise of the Exchange Rights
is 1,896,996. The number of shares of Common Stock issuable upon exercise of
the Exchange Rights will be adjusted upon the occurrence of share splits,
mergers, consolidations or similar pro rata share transactions, which
otherwise would have the effect of diluting the ownership interests of the
Limited Partners or the stockholders of the Company. See "Shares Available for
Future Sale."
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreements among the Company and the
Limited Partners other than AGH LP and the sellers of certain of the Hotels
(the "Sellers"), and Wyndham (together, the "Registration Rights Agreements"),
the Limited Partners or the Sellers, as the case may be, have, or will have,
certain rights to require the registration for resale of the shares of Common
Stock held by them or received by them upon exchange of their OP Units. Such
rights include the right to include such shares in a registration statement
that the Company intends to file prior to October 1997. Wyndham has also been
granted certain demand and piggyback registration rights. The Company is
required to bear the costs of such registration statements exclusive of
underwriting discounts, commissions and certain other costs attributable to,
and to be borne by, the selling stockholders.
OPERATIONS
The Partnership Agreement requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT, to avoid any federal income or excise tax
liability imposed under the Code and to ensure that the Operating Partnership
will not be classified as a "publicly traded partnership" for purposes of
section 7704 of the Code.
In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, the Operating Partnership pays all
administrative costs and expenses of the Company, AGH GP and AGH LP (the
"Company Expenses"), and the Company Expenses are treated as expenses of the
Operating Partnership. The Company Expenses generally include (i) all expenses
relating to the formation of the Company and the Operating Partnership, (ii)
all expenses relating to the public offering and registration of securities by
the Company, (iii) all expenses associated with the preparation and filing of
any periodic reports by the Company under federal, state or local laws or
regulations, (iv) all expenses associated with compliance by the Company, AGH
GP and AGH LP with laws, rules and regulations promulgated by any regulatory
body and (v) all other operating or administrative costs of AGH GP incurred in
the ordinary course of its business on behalf of the Operating Partnership.
The Company Expenses, however, do not include any administrative and operating
costs and expenses incurred by the Company that are attributable to hotel
properties or partnership interests in a
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Subsidiary Partnership that are owned by the Company directly rather than
through the Operating Partnership. The Company does not own any of the Hotels
directly.
DISTRIBUTIONS AND ALLOCATIONS
The Partnership Agreement provides that the Operating Partnership will
distribute cash from operations (including net sale or refinancing proceeds,
but excluding net proceeds from the sale of the Operating Partnership's
property in connection with the liquidation of the Operating Partnership) on a
quarterly (or, at the election of the General Partner, more frequent) basis,
in amounts determined by the General Partner in its sole discretion, to the
partners in accordance with their respective percentage interests in the
Operating Partnership. Upon liquidation of the Operating Partnership, after
payment of, or adequate provision for, debts and obligations of the Operating
Partnership, including any partner loans, any remaining assets of the
Operating Partnership will be distributed to all partners with positive
capital accounts in accordance with their respective positive capital account
balances.
Profit and loss of the Operating Partnership for each fiscal year of the
Operating Partnership generally will be allocated among the partners in
accordance with their respective interests in the Operating Partnership.
Taxable income and loss will be allocated in the same manner, subject to
compliance with the provisions of Code sections 704(b) and 704(c) and the
Treasury Regulations promulgated thereunder.
TERM
The Operating Partnership will continue until December 31, 2046, or until
sooner dissolved upon (i) the withdrawal of the General Partner (unless a
majority of remaining partners elect to continue the business of the Operating
Partnership), (ii) the election by the General Partner to dissolve the
Operating Partnership (which election, prior to December 31, 2046, requires
the consent of a majority of the Limited Partners other than AGH LP), (iii)
the entry of a decree of judicial dissolution of the Operating Partnership,
(iv) the sale of all or substantially all the assets and properties of the
Operating Partnership, or (v) the bankruptcy or insolvency of AGH GP, unless
all of the remaining partners elect to continue the business of the Operating
Partnership.
TAX MATTERS
Pursuant to the Partnership Agreement, the General Partner will be the tax
matters partner of the Operating Partnership and, as such, will have authority
to handle tax audits and to make tax elections under the Code on behalf of the
Operating Partnership.
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FEDERAL INCOME TAX CONSIDERATIONS
The Company operates in such a manner so as to meet the Code requirements
for qualification as a REIT for federal income tax purposes. However, no
assurance can be given that such requirements will be met or that the Company
will be so qualified at any time. Based on various assumptions relating to the
organization and operation of the Company and the Operating Partnership and
representations made by the Company and the Operating Partnership as to
certain factual matters, including matters related to the organization and
operation of the Company, the Operating Partnership and the Subsidiary
Partnerships, in the opinion of Counsel, Battle Fowler LLP, the Company
qualifies to be taxed as a REIT under the Code commencing with its taxable
year ending December 31, 1996 and the Operating Partnership and the Subsidiary
Partnerships will be treated as partnerships for federal income tax purposes.
Counsel will not review the Company's operating results and no assurance can
be given that the Company's actual operating results will meet the REIT
requirements on a continuing basis.
The opinions described herein represent Counsel's best legal judgment as to
the most likely outcome of an issue if the matter were litigated. Opinions of
counsel have no binding effect or official status of any kind, and in the
absence of a ruling from the IRS, there can be no assurance that the IRS will
not challenge the conclusion or propriety of any of Counsel's opinions. The
Company does not intend to apply for a ruling from the IRS that it qualifies
as a REIT.
The following summary includes a discussion of the material federal income
tax considerations associated with an investment in the Common Stock being
sold in the Offering. The summary should not be construed as tax advice. The
provisions governing treatment as a REIT are highly technical and complex, and
this summary is qualified in its entirety by the applicable Code provisions,
the rules and regulations promulgated thereunder and administrative and
judicial interpretations thereof. Moreover, this summary does not deal with
all tax aspects that might be relevant to a particular prospective stockholder
in light of his personal circumstances and it does not deal with particular
types of stockholders that are subject to special treatment under the Code,
such as tax-exempt organizations, insurance companies, financial institutions
or broker-dealers, and (with the exception of the general discussion below)
foreign corporations and persons who are not citizens or residents of the
United States.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF COMMON STOCK, OF
THE COMPANY'S ELECTION TO BE TAXED AS A REIT AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
REQUIREMENTS FOR QUALIFICATION AS A REIT
In General. Under the Code, a trust, corporation or unincorporated
association meeting certain requirements (see "--Structural Requirements") may
elect to be treated as a REIT for purposes of federal income taxation. If a
valid election is made, then, subject to certain conditions, the Company's
income which is distributed to its stockholders generally will be taxed to
such stockholders without being subject to tax at the Company level. This
substantially eliminates the "double taxation" (taxation at both the corporate
and stockholder levels) that typically results from the use of corporate
investment vehicles. However, the Company will be taxed at regular corporate
rates on any of its income that is not distributed to the stockholders. (See
"--Taxation of the Company.") Once made, the election to be taxed as a REIT
continues in effect until voluntarily revoked or automatically terminated by
the Company's failure to qualify as a REIT for a taxable year. If the
Company's election to be treated as a REIT is terminated automatically or is
voluntarily revoked, the Company will not be eligible to elect such status
until the fifth taxable year after the first taxable year for which the
Company's election was terminated. However, in the event such election is
terminated automatically, the four-year prohibition on a subsequent election
to be taxed as a REIT is not applicable if (i) the Company did not
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willfully fail to file a timely return with respect to the termination taxable
year, (ii) the inclusion of any incorrect information in such return was not
due to fraud with intent to evade tax, and (iii) the Company establishes that
its failure to meet the requirements was due to reasonable cause and not to
willful neglect.
The Company will make an election to be treated as a REIT commencing with
its taxable year ending December 31, 1996.
Structural Requirements. To be eligible to be taxed as a REIT, the Company
must satisfy certain structural and organizational requirements. Among the
requirements are the following: (i) the shares of Common Stock must be
transferable, (ii) the shares of Common Stock must be held by 100 or more
persons during at least 335 days of a taxable year of twelve months (or during
a proportionate part of a taxable year of less than twelve months) (the "100-
person requirement"), and (iii) no more than 50% of the value of the
outstanding shares of Common Stock may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of each taxable
year (the "five or fewer" requirement). The requirements of (ii) and (iii) are
not applicable to the first taxable year for which the Company makes an
election to be treated as a REIT. However, the Company anticipates that it
will issue a sufficient amount of Common Stock with sufficient diversity of
ownership to satisfy requirements (ii) and (iii). The Company expects, and
intends to take all necessary measures within its control to ensure, that the
beneficial ownership of the Company will at all times be held by 100 or more
persons. In addition, the Company's Charter contains certain restrictions on
the ownership and transfer of the Company's stock which are designed to help
ensure that the Company will be able to satisfy the "five or fewer"
requirement. If the Company were to fail to satisfy the "five or fewer"
requirement, the Company's status as a REIT would terminate, and the Company
would not be able to prevent such termination. See "--Failure to Qualify as a
REIT" and "Description of Capital Stock--Restrictions on Transfer."
If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary,"
that subsidiary is disregarded for federal income tax purposes, and all
assets, liabilities and items of income, deduction and credit of the
subsidiary are treated as assets, liabilities and such items of the REIT
itself. A "qualified REIT subsidiary" is a corporation all of the stock of
which has been owned by the REIT from the commencement of such corporation's
existence. The Company has two wholly owned subsidiary corporations, AGH GP
and AGH LP, which are "qualified REIT subsidiaries." Consequently, AGH GP and
AGH LP will not be subject to federal corporate income taxation, although they
may be subject to state and local taxation. The Company also may have
additional corporate subsidiaries in the future.
Income Tests. In order to qualify and to continue to qualify as a REIT, the
Company must satisfy three income tests for each taxable year. First, at least
75% of the Company's annual gross income (excluding annual gross income from
certain sales of property held primarily for sale to customers in the ordinary
course of business) must be derived directly or indirectly from investments
relating to real property or mortgages on real property or certain temporary
investments. Second, at least 95% of the Company's annual gross income
(excluding gross income from certain sales of property held primarily for sale
in the ordinary course of business) must be derived directly or indirectly
from any of the sources qualifying for the 75% test and from dividends,
interest, and gain from the sale or disposition of stock or securities. Third,
subject to certain exceptions in the year in which the Company is liquidated,
(i) short-term gains from sales of stock or securities, (ii) gains from sales
of property (other than foreclosure property) held primarily for sale to
customers in the ordinary course of business and (iii) gains from the sale or
other taxable disposition of real property (including interests in real
property and mortgages on real property) held for less than four years (other
than from involuntary conversions and foreclosure property) must represent in
the aggregate less than 30% of the Company's annual gross income. In applying
these tests, because the Company is a partner in the Operating Partnership,
which is in turn a partner, either directly or indirectly, in the Subsidiary
Partnerships, the Company will be treated as realizing its proportionate share
of the income and loss of these respective partnerships, as well as the
character of such income or loss, and other partnership items, as if the
Company owned its proportionate share of the assets owned by these
partnerships directly.
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Substantially all of the income received by the Company is expected to be
rental income from the Rents. In order to qualify as "rents from real
property" for purposes of satisfying the 75% and 95% gross income tests,
several conditions must be satisfied. First, the amount of rent must not be
based in whole or in part on the income or profits of any person, although
rents generally will qualify as rents from real property if they are based on
a fixed percentage of receipts or sales. Second, rents received from a tenant
will not qualify as "rents from real property" if the Company or an owner of
10% or more of the Company, directly or constructively, owns 10% or more of
such tenant (a "Related Party Tenant"). Third, if rent attributable to
personal property leased in connection with a lease of real property is
greater than 15% of the total rent received under the lease, the portion of
rent attributable to such personal property will not qualify as "rents from
real property." Finally, the Company generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an "independent contractor" from whom the Company derives no
income. However, the "independent contractor" requirement does not apply to
the extent the services rendered by the Company are customarily furnished or
rendered in connection with the rental of the real property (i.e., services
which are not considered rendered to the occupant of the property). Pursuant
to the Participating Leases, the Lessee has leased from the Operating
Partnership the land, buildings, improvements, furnishings, and equipment
comprising the Hotels for a term of twelve years and will also lease the land,
buildings, improvements, furnishings and equipment comprising the Proposed
Acquisition Hotels for a term of twelve years. The Participating Leases
provide that the Lessee will be obligated to pay to the Operating Partnership
(i) the greater of Base Rent or Participating Rent and (ii) Additional
Charges. Participating Rent is calculated by multiplying fixed percentages by
various revenue categories for each of the Hotels and Proposed Acquisition
Hotels. Generally, both Base Rent and the thresholds in the Participating Rent
formulas will be adjusted for inflation. Base Rent accrues and is required to
be paid monthly. Participating Rent is payable quarterly, with a yearly
adjustment based on actual results.
In order for Base Rent, Participating Rent, and Additional Charges to
constitute "rents from real property," the Participating Leases must be
respected as true leases for federal income tax purposes and not treated as
service contracts, joint ventures or some other type of arrangement. The
determination of whether the Participating Leases are true leases depends on
an analysis of all the surrounding facts and circumstances. In making such a
determination, courts have considered a variety of factors, including: (i) the
intent of the parties, (ii) the form of the agreement, (iii) the degree of
control over the property that is retained by the property owner (e.g.,
whether the lessee has substantial control over the operation of the property
or whether the lessee was required simply to use its best efforts to perform
its obligations under the agreement), and (iv) the extent to which the
property owner retains the risk of loss with respect to the property (e.g.,
whether the lessee bears the risk of increases in operating expenses or the
risk of damage to the property) or the potential for economic gain (e.g.,
appreciation) with respect to the property.
In addition, Code section 7701(e) provides that a contract that purports to
be a service contract (or a partnership agreement) is treated instead as a
lease of property if the contract is properly treated as such, taking into
account all relevant factors, including whether or not: (i) the service
recipient is in physical possession of the property, (ii) the service
recipient controls the property, (iii) the service recipient has a significant
economic or possessory interest in the property (e.g., the property's use is
likely to be dedicated to the service recipient for a substantial portion of
the useful life of the property, the recipient shares the risk that the
property will decline in value, the recipient shares in any appreciation in
the value of the property, the recipient shares in increases in the property's
operating costs, or the recipient bears the risk of damage to or loss of the
property), (iv) the service provider does not bear any risk of substantially
diminished receipts or substantially increased expenditures if there is
nonperformance under the contract, (v) the service provider does not use the
property concurrently to provide significant services to entities related to
the service recipient, and (vi) the total contract price does not
substantially exceed the rental value of the property for the contract period.
Since the determination of whether a service contract should be treated as a
lease is inherently factual, the presence or absence of any single factor may
not be dispositive in every case.
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Battle Fowler LLP is of the opinion that the Participating Leases will be
treated as true leases for federal income tax purposes. Such opinion is based,
in part, on the following facts: (i) the Operating Partnership or a Subsidiary
Partnership, as applicable, and the Lessee intend for their relationship to be
that of a lessor and lessee and such relationship will be documented by lease
agreements, (ii) the Lessee will have the right to exclusive possession and
use and quiet enjoyment of the Hotels and the Proposed Acquisition Hotels
during the term of the Participating Leases, (iii) the Lessee will bear the
cost of, and be responsible for, day-to-day maintenance and repair of the
Hotels and the Proposed Acquisition Hotels and generally will control how the
Hotels and the Proposed Acquisition Hotels are operated and maintained, (iv)
the Lessee will bear all of the costs and expenses of operating the Hotels and
the Proposed Acquisition Hotels (including the cost of any inventory used in
their operation) during the term of the Participating Leases (other than real
estate and personal property taxes, casualty insurance and capital
improvements (determined in accordance with generally accepted accounting
principles)), (v) the Lessee will benefit from any savings in the costs of
operating the Hotels and the Proposed Acquisition Hotels during the term of
the Participating Leases, (vi) the Lessee will indemnify the Company against
all liabilities imposed upon or asserted against the Company during the term
of the Participating Leases by reason of, among other things, (A) accident,
injury to or death of persons, or loss of or damage to property occurring at
the Hotels and the Proposed Acquisition Hotels or (B) the Lessee's use,
management, maintenance or repair of the Hotels and the Proposed Acquisition
Hotels, (vii) the Lessee is obligated to pay substantial fixed rent for the
period of use of the Hotels and the Proposed Acquisition Hotels, and (viii)
the Lessee stands to incur substantial losses (or reap substantial gains)
depending on how successfully it operates the Hotels and the Proposed
Acquisition Hotels.
Investors should be aware that there are no controlling Treasury
Regulations, published rulings, or judicial decisions involving leases with
terms substantially the same as the Participating Leases that discuss whether
such leases constitute true leases for federal income tax purposes. Therefore,
the opinion of Battle Fowler LLP with respect to the relationship between the
Operating Partnership or a Subsidiary Partnership, as applicable, and the
Lessee is based upon all of the facts and circumstances and upon rulings and
judicial decisions involving situations that are considered to be analogous.
Opinions of counsel are not binding upon the IRS or any court, and there can
be no complete assurance that the IRS will not assert successfully a contrary
position. If the Participating Leases are recharacterized as service contracts
or partnership agreements, rather than true leases, part or all of the
payments that the Operating Partnership and the Subsidiary Partnerships
receive from the Lessee would not be considered rent or would not otherwise
satisfy the various requirements for qualification as "rents from real
property." In that case, the Company likely would not be able to satisfy
either the 75% or 95% gross income tests and, as a result, would lose its REIT
status.
As noted above, the Rents attributable to personal property leased in
connection with the lease of the real property comprising a Hotel must not be
greater than 15% of the Rents received under the Participating Lease. The
Rents attributable to the personal property in a Hotel is the amount that
bears the same ratio to total rent for the taxable year as the average of the
adjusted bases of the personal property in the Hotel at the beginning and at
the end of the taxable year bears to the average of the aggregate adjusted
bases of both the real and personal property comprising the Hotel at the
beginning and at the end of such taxable year (the "Adjusted Basis Ratio").
With respect to each Hotel (or interest therein) that the Operating
Partnership acquires for cash, the aggregate initial adjusted bases of the
real and personal property generally will be allocated among real and personal
property based on relative fair market values. The Company has obtained
appraisals of the personal property for each Proposed Acquisition Hotel that
the Operating Partnership will acquire for cash. The Participating Leases
provide that the Adjusted Basis Ratio for each Hotel shall not exceed 15%. The
Participating Leases further provide that the Lessee will cooperate in good
faith and use its best efforts to prevent the Adjusted Basis Ratio for any
Hotel from exceeding 15%, which cooperation includes the purchase by Lessee at
fair market value of enough personal property at such Hotel so that the
Adjusted Basis Ratio for such Hotel is less than 15%. In the event that the
amount of personal property relating to certain of the Hotels will result in
an Adjusted Basis Ratio in excess of 15% and therefore would cause a portion
of the Rents received attributable to such Hotels to not qualify as rents from
real property, the Operating Partnership will sell a portion of such personal
property relating to such Hotels to the Lessee in exchange for the FF&E Note.
In addition, the Participating Leases provide that if
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future renovations and refurbishments to a Hotel would cause the Adjusted
Basis Ratio for such Hotel to exceed 15%, the Operating Partnership and/or a
Subsidiary Partnership, if applicable, has the right to sell as much personal
property to the Lessee as necessary so that the Adjusted Basis Ratio does not
exceed 15% for such Hotel. The interest income derived from the FF&E Note will
be qualifying income for the 95% gross income test but not for the 75% gross
income test. Finally, amounts in the Company's reserve for capital
expenditures may not be expended to acquire additional personal property for a
Hotel to the extent that such acquisition would cause the Adjusted Basis Ratio
for that Hotel to exceed 15%. The Company does not expect the Adjusted Basis
Ratio for any Hotel to exceed 15% and therefore expects that the portion of
rents received attributable to personal property will be treated as rents from
real property. However, there can be no assurance that the IRS would not
assert that the personal property acquired by the Operating Partnership or a
Subsidiary Partnership had a value in excess of the appraised value, or that a
court would not uphold such assertion. If such a challenge were successfully
asserted, a portion of the rents received under the Participating Leases would
not qualify as rents from real property. However, the Company does not expect
such an amount, if any, when combined with any other income that is
nonqualifying income for purposes of the 95% gross income test, to exceed 5%
of the Company's annual gross income, which would cause the Company to lose
its status as a REIT.
As noted earlier, in order to be treated as "rents from real property," the
Participating Rent must not be based in whole or in part on the income or
profits of any person. The Participating Rent, however, will qualify as "rents
from real property" if it is based on percentages of receipts or sales and the
percentages (i) are fixed at the time the Participating Leases are entered
into, (ii) are not renegotiated during the term of the Participating Leases in
a manner that has the effect of basing Participating Rent on income or
profits, and (iii) conform with normal business practice. More generally, the
Participating Rent will not qualify as "rents from real property" if,
considering the Participating Leases and all the surrounding circumstances,
the arrangement does not conform with normal business practice, but is in
reality used as a means of basing the Participating Rent on income or profits.
Since the Participating Rent is based on fixed percentages of the gross
revenues from the Hotels that are established in the Participating Leases, and
the Company has represented that the percentages (i) will not be renegotiated
during the terms of the Participating Leases in a manner that has the effect
of basing the Participating Rent on income or profits and (ii) conform with
normal business practice, the Participating Rent should not be considered
based in whole or in part on the income or profits of any person. Furthermore,
the Company has represented that, with respect to other hotel properties that
it acquires in the future, if any, it will not charge rent for any property
that is based in whole or in part on the income or profits of any person
(except by reason of being based on a fixed percentage of gross revenues, as
described above).
As noted above, rent received from a Related Party Tenant does not qualify
as "rents from real property." Thus, the Company must not own, actually or
constructively, 10% or more of the Lessee. Applicable constructive ownership
rules generally provide that, if 10% or more in value of the stock of the
Company is owned, directly or indirectly, by or for any person, the Company is
considered as owning the stock owned, directly or indirectly, by or for such
person. The Limited Partners of the Operating Partnership may acquire Common
Stock (at the Company's option) by exercising their Exchange Rights. In
addition, during the period of the Lessee Distribution Restriction, the Lessee
will be required, subject to compliance with applicable securities laws, to
purchase annually Common Stock on the open market or, if any such purchase
would violate the ownership limitation in the Company's Charter, at the option
of the Operating Partnership, OP Units from the Operating Partnership, in an
amount equal to the Lessee's cash flow attributable to the Participating
Leases for the preceding fiscal year (after establishing a reserve for partner
tax distributions). In addition, Messrs. Jorns and Wiles are required to use
50% of the after-tax dividends received by them from AGHI that are
attributable to AGHI's earnings from the management of hotels owned by the
Company to purchase annually in the open market shares of Common Stock. The
Exchange Agreement provides that the Company may not satisfy an exchanging
Limited Partner's
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Exchange Right by delivery of Common Stock, if and to the extent the delivery
of Common Stock upon the exercise of such rights would cause the Company to
own, actually or constructively, 10% or more of the ownership interest in a
tenant of the Company's, the Operating Partnership's or a Subsidiary
Partnership's real property, within the meaning of section 856(d)(2)(B) of the
Code. The Charter likewise prohibits a stockholder of the Company from owning
Common Stock that would cause the Company to own, actually or constructively,
10% or more of the ownership interests in a tenant of the Company's, the
Operating Partnership's or a Subsidiary Partnership's real property, within
the meaning of section 856(d)(2)(B) of the Code. Thus, the Company should
never own, actually or constructively, 10% of more of the Lessee. However,
because the Code's constructive ownership rules for purposes of the Related
Party Tenant rules are broad and it is not possible to monitor continually
direct and indirect transfers of Common Stock, no absolute assurance can be
given that such transfers or other events of which the Company has no
knowledge will not cause the Company to own constructively 10% or more of the
Lessee at some future date.
A fourth requirement noted above for qualification of the Rents as "rents
from real property" is that the Company cannot furnish or render noncustomary
services to the tenants of the Hotels and Proposed Acquisition Hotels, or
manage or operate the Hotels and Proposed Acquisition Hotels, other than
through an independent contractor who is adequately compensated and from whom
the Company itself does not derive or receive any income. Provided that the
Participating Leases are respected as true leases, the Company should satisfy
this requirement, because AGHI, pursuant to the Management Agreements, will be
performing services to such tenants for the Lessee, which will lease the
Hotels and Proposed Acquisition Hotels from the Operating Partnership. Neither
the Company, the Operating Partnership nor any Subsidiary Partnership will
furnish or provide any services to a tenant, and none of such entities will
contract with any other person to provide any such services. The Company has
represented that if the Company decides to render noncustomary services to
tenants in the future, it will do so through an independent contractor from
which it will not receive any income.
If a portion of the Rents from a particular hotel property does not qualify
as "rents from real property" because the amount attributable to personal
property exceeds 15% of the total Rents for a taxable year, the portion of the
Rents that is attributable to personal property will not be qualifying income
for purposes of either the 75% or 95% gross income tests. A portion of the
Rent paid to the Company by the Lessee will be allocable to the Franchise
Licenses. Appraisals obtained by the Company indicate that the Franchise
Licenses represent less than 1.0% of the total value of the Company's assets.
Because the Company does not expect the total amount of Rents attributable to
personal property plus any other non-qualifying income it receives (including
any amounts attributable to the Franchise Licenses) to exceed 5% of its annual
gross income, the Company's REIT status should not be affected. If, however,
the Rents do not qualify as "rents from real property" because either (i) the
Participating Rent is considered based on income or profits of the Lessee,
(ii) the Company owns, actually or constructively, 10% or more of the Lessee,
or (iii) the Company furnishes noncustomary services to the tenants of the
Hotels and Proposed Acquisition Hotels, or manages or operates the Hotels and
Proposed Acquisition Hotels, other than through a qualifying independent
contractor, none of the Rents would qualify as "rents from real property." In
that case, the Company likely would lose its REIT status because it would be
unable to satisfy either the 75% or 95% gross income tests.
In addition to the Rents, the Lessee is required to pay to the Operating
Partnership Additional Charges. To the extent that Additional Charges
represent either (i) reimbursements of amounts that the Lessee is obligated to
pay to third parties or (ii) penalties for nonpayment or late payment of such
amounts, Additional Changes should qualify as "rents from real property." To
the extent, however, that Additional Charges represent interest that is
accrued on the late payment of the Rents or Additional Charges, Additional
Charges would not qualify as "rents from real property," but instead would be
treated as interest that qualifies for the 95% gross income test.
Based on the foregoing, the Rents and the Additional Charges should qualify
as "rents from real property" for purposes of the 75% and 95% gross income
tests, except to the extent that the Additional Charges represent interest
that is accrued on the late payment of the Rents or the Additional Charges
(which will be qualifying gross income for the 95% test but not the 75% test).
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The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales. Furthermore, interest from a loan that is based on the
residual cash proceeds from sale of the property securing the loan will be
treated as gain from the sale of the secured property.
It is possible that, from time to time, the Company, the Operating
Partnership or a Subsidiary Partnership will enter into hedging transactions
with respect to one or more of its assets or liabilities. Any such hedging
transactions could take a variety of forms. If the Company, the Operating
Partnership or a Subsidiary Partnership enters into an interest rate swap or
cap contract to hedge any variable rate indebtedness incurred to acquire or
carry real estate assets, any periodic income or gain from the disposition of
such contract should be qualifying income for purposes of the 95% gross income
test, but not for the 75% gross income test. Furthermore, any such contract
would be considered a "security" for purposes of applying the 30% gross income
test. To the extent that the Company, the Operating Partnership or a
Subsidiary Partnership hedges with other types of financial instruments or in
other situations, it may not be entirely clear how the income from those
transactions will be treated for purposes of the various income tests that
apply to REITs under the Code. The Company intends to structure any hedging
transactions in a manner that does not jeopardize its status as a REIT.
If the sum of the income realized by the Company (whether directly or
through its interest in the Operating Partnership or the Subsidiary
Partnerships) which does not satisfy the requirements of the 95% gross income
test (collectively, "Non-Qualifying Income"), exceeds 5% of the Company's
gross income for any taxable year, the Company's status as a REIT would be
jeopardized. The Company has represented that the amount of its Non-Qualifying
Income will not exceed 5% of the Company's annual gross income for any taxable
year.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a REIT for such year if
the Company's failure to meet such tests was due to reasonable cause and not
to willful neglect, the Company attaches a schedule of the sources of its
income to its return, and any incorrect information on the schedule was not
supplied fraudulently with the intent to evade tax. It is not possible to
specify the circumstances under which the Company may be entitled to the
benefit of these relief provisions. Even if these relief provisions apply, a
100% tax is imposed on the net income attributable to the greater of the
amount by which the Company failed the 75% test or the 95% test. Failure to
comply with the 30% gross income test is not excusable; therefore, if the
Company fails to meet the requirements of the 30% gross income test, its
status as a REIT automatically terminates regardless of the reason for such
failure.
Asset Tests. At the close of each quarter of its taxable year, the Company
also must satisfy two tests relating to the nature and diversification of its
assets. First, at least 75% of the value of the Company's total assets must be
represented by real estate assets (including its allocable share of real
estate assets held by the Operating Partnership and the Subsidiary
Partnerships), stock or debt instruments held for not more than one year
purchased with the proceeds of an issuance of stock or long-term (at least
five years) debt of the Company, cash, cash items and government securities.
Second, no more than 25% of the Company's total assets may be represented by
securities other than those that can satisfy the 75% asset test described in
the preceding sentence. Of the investments included in the 25% asset class,
the value of any one issuer's securities (excluding shares in qualified REIT
subsidiaries such as AGH GP and AGH LP or another REIT and excluding
partnership interests such as those in the Operating Partnership and in any
Subsidiary Partnerships) owned by the Company may not exceed 5% of the value
of the Company's total assets, and the Company may not own more than 10% of
any one issuer's outstanding voting securities (excluding securities of a
qualified REIT subsidiary or another REIT and excluding partnership
interests). The Company has represented that, as of the date of the Offering,
(i) at least 75% of the value of its total assets will be represented by real
estate assets, cash and cash items (including receivables), and government
securities and (ii) it will not own any securities that do not satisfy the 25%
asset requirement. In addition, the Company has represented that it will not
acquire or dispose, or cause the Operating
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Partnership or a Subsidiary Partnership to acquire or dispose, of assets in
the future in a way that would cause it to violate either asset requirement.
See "--Other Tax Considerations--State and Local Taxes."
Annual Distribution Requirements. In order to qualify as a REIT, the Company
must distribute to the holders of shares of Common Stock an amount at least
equal to (A) the sum of 95% of (i) the Company's "real estate investment trust
taxable income" (computed without regard to the deduction for dividends paid
and excluding any net capital gain) plus (ii) the excess of the net income, if
any, from foreclosure property over the tax on such income, minus (B) the
excess of the sum of certain items of non-cash income (income attributable to
leveled stepped rents, original issue discount on purchase money debt, or a
like-kind exchange that is later determined to be taxable over 5% of the
amount determined under clause (i) above). Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before the Company timely files its tax return for such year and if
paid on or before the first regular distribution date after such declaration.
The amount distributed must not be preferential--i.e., each holder of shares
of Common Stock must receive the same distribution per share. A REIT may have
more than one class of stock, as long as distributions within each class are
pro rata and non-preferential. Such distributions are taxable to holders of
Common Stock (other than tax-exempt entities or nontaxable persons, as
discussed below) in the year in which paid, even though such distributions
reduce the Company's taxable income for the year in which declared. To the
extent that the Company does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its "real estate investment
trust taxable income," it will be subject to tax thereon at regular corporate
tax rates. Finally, as discussed below, the Company may be subject to an
excise tax if it fails to meet certain other distribution requirements.
The Company expects, and intends to take measures within its control, to
make quarterly distributions to the holders of shares of Common Stock in an
amount sufficient to satisfy the requirements of the annual distribution test.
In this regard, the Partnership Agreement authorizes AGH GP, as general
partner, to take such steps as are necessary to distribute to the partners of
the Operating Partnership an amount sufficient to permit the Company to meet
the annual distribution requirements. However, it is possible that the
Company, from time to time, may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement, or to distribute such greater
amount as may be necessary to avoid income and excise taxation, due to timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company, or if the amount
of nondeductible expenses, such as principal amortization or capital
expenditures exceeds the amount of noncash deductions, such as depreciation.
In the event that such timing differences occur, the Company may find it
necessary to cause the Operating Partnership to arrange for borrowings or
liquidate some of its investments in order to meet the annual distribution
requirement, or attempt to declare a consent dividend, which is a hypothetical
distribution to holders of shares of Common Stock out of the earnings and
profits of the Company. The effect of such a consent dividend (which, in
conjunction with dividends actually paid, must not be preferential to those
holders who agree to such treatment) would be that such holders would be
treated for federal income tax purposes as if they had received such amount in
cash and they then had immediately contributed such amount back to the Company
as additional paid-in capital. This would result in taxable income to those
holders without the receipt of any actual cash distribution but would also
increase their tax basis in their shares of Common Stock by the amount of the
taxable income recognized.
If the Company fails to meet the 95% distribution test due to an adjustment
to the Company's income by reason of a judicial decision or by agreement with
the IRS, the Company may pay a "deficiency dividend" to holders of shares of
Common Stock in the taxable year of the adjustment, which dividend would
relate back to the year being adjusted. In such case, the Company also would
be required to pay interest plus a penalty to the IRS. However, a deficiency
dividend cannot be used to meet the 95% distribution test if the failure to
meet such test was due to the Company's failure to distribute sufficient
amounts to the holders of shares of Common Stock.
In addition, if the IRS successfully challenged the Company's deduction of
all or a portion of the salary and bonus it pays to officers who are also
holders of shares of Common Stock, such payments could be
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recharacterized as dividend distributions to such employees in their capacity
as stockholders. If such distributions were viewed as preferential
distributions, they would not count toward the 95% distribution test.
FAILURE TO QUALIFY AS A REIT
The Company's treatment as a REIT for federal income tax purposes will be
terminated automatically if the Company fails to meet the requirements
described above and any available relief provisions do not apply. In such
event, the Company will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates, and
distributions to holders of shares of Common Stock will not be deductible by
the Company. All distributions to holders of shares of Common Stock will be
taxable as ordinary income to the extent of current and accumulated earnings
and profits of the Company and distributions in excess thereof will be treated
first as a tax free return of capital (to the extent of a holder's tax basis
in his shares of Common Stock) and then as gain realized from the sale of
shares of Common Stock. Corporate stockholders will be eligible for the
dividends received deduction to the extent that distributions are made out of
earnings and profits. As noted above, the Company will not be eligible to
elect REIT status again until the beginning of the fifth taxable year after
the year during which the Company's qualification was terminated, unless the
Company meets certain relief requirements. Failure to qualify for even one
year could result in the Company incurring substantial indebtedness (to the
extent borrowings are feasible) or liquidating substantial investments in
order to pay the resulting corporate income taxes.
TAXATION OF THE COMPANY
In General. For any taxable year in which the Company qualifies as a REIT,
it will generally not be subject to federal income tax on that portion of its
REIT taxable income which is distributed to stockholders (except income or
gain with respect to foreclosure property, which will be taxed at the highest
corporate rate--currently 35%). If the Company were to fail to qualify as a
REIT, it would be taxed at rates applicable to corporations on all its income,
whether or not distributed to holders of shares of Common Stock. Even if it
qualifies as a REIT, the Company will be taxed on the portion of its REIT
taxable income which it does not distribute to the holders of shares of Common
Stock, such as taxable income retained as reserves.
100 Percent Tax. The Company will be subject to a 100% tax on (i) the
greater of the net income attributable to the amount by which it fails the 75%
income test or the 95% income test; and (ii) any net income derived from a
"prohibited transaction" (i.e., the sale of "dealer" property by the Company).
The imposition of any such tax on the Company would reduce the amount of cash
available for distribution to holders of shares of Common Stock.
A "dealer" is one who holds property primarily for sale to customers in the
ordinary course of its trade or business. All inventory required in the
operation of the Hotels and Proposed Acquisition Hotels will be owned by the
Lessee under the terms of the Participating Leases. Accordingly, the Company
believes no asset owned by the Company, the Operating Partnership or a
Subsidiary Partnership is held for sale to customers and that a sale of any
such asset will not be in the ordinary course of business of the Company, the
Operating Partnership or a Subsidiary Partnership. Whether property is held
"primarily for sale to customers in the ordinary course of a trade or
business" depends, however, on the facts and circumstances in effect from time
to time, including those related to a particular property. Nevertheless, the
Company will attempt to comply with the terms of safe harbor provisions in the
Code prescribing when asset sales will not be characterized as prohibited
transactions. Complete assurance cannot be given, however, that the Company
can comply with the safe harbor provisions of the Code or avoid owning
property that may be characterized as property held primarily for sale to
customers in the ordinary course of a trade or business. Because a
determination of "dealer status" is necessarily dependent upon facts which
will occur in the future, Counsel cannot render an opinion on this issue.
Tax on Net Income from Foreclosure Property. The Company will be subject to
a tax at the highest rate applicable to corporations (currently 35%) on any
"net income from foreclosure property." "Foreclosure property" is property
acquired by the Company as a result of a foreclosure proceeding or by
otherwise reducing
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such property to ownership by agreement or process of law. "Net income from
foreclosure property" is the gross income derived during the taxable year from
foreclosure property, less applicable deductions, but only to the extent such
income does not qualify under the 75% income test and 95% income test. As a
result of the rules with respect to foreclosure property, if the Lessee
defaults on its obligations under a Participating Lease for a Hotel or
Proposed Acquisition Hotel, the Company terminates the Participating Lease,
and the Company is unable to find a replacement lessee for such Hotel or
Proposed Acquisition Hotel within 90 days of such foreclosure, gross income
from hotel operations conducted by the Company from such Hotel or Proposed
Acquisition Hotel would cease to qualify for the 75% and 95% gross income
tests and, thus, the Company would fail to qualify as a REIT. However,
although it is unclear under the Code, if the hotel operations were conducted
by an independent contractor, it may be possible for the Hotel or Proposed
Acquisition Hotel to cease to be foreclosure property two years after such
foreclosure, (which period could be extended an additional four years).
Alternative Minimum Tax. The Company will be subject to the alternative
minimum tax on undistributed items of tax preference allocable to it. Code
Section 59(d) authorizes the Treasury to issue regulations allocating items of
tax preference between a REIT and its stockholders. Such regulations have not
yet been issued; however, the Company does not anticipate any significant
items of tax preference.
Excise Tax. In addition to the tax on any undistributed income, the Company
would also be subject to a 4% excise tax on the amount if any by which (i) the
sum of (A) 85% of its REIT taxable income for a calendar year, (B) 95% of any
net capital gain for such year and (C) any undistributed amounts (for purpose
of avoiding this excise tax) from prior years, exceeds (ii) the amount
actually distributed by the Company to holders of shares of Common Stock
during the calendar year (or declared as a dividend during the calendar year,
if distributed during the following January) as ordinary income dividends. The
imposition of any excise tax on the Company would reduce the amount of cash
available for distribution to holders of shares of Common Stock. The Company
intends to take all necessary measures within its control to avoid imposition
of the excise tax.
Tax on Built-In Gain of Certain Assets. If a C corporation elects to be
taxed as a REIT, or if assets of a C corporation are transferred to a REIT in
a transaction in which the REIT has a carryover basis in the assets acquired,
such C corporation generally will be treated as if it sold all of its assets
to such REIT at their respective fair market values and liquidated immediately
thereafter, recognizing and paying tax on all gain. However, under such
circumstances under present law, the REIT is permitted to make an election
under which the C corporation will not recognize gain and instead the REIT
will be required to recognize gain and pay any tax thereon only if it disposes
of such assets during the subsequent 10-year period (the "10-Year Rule"). The
Company intends to make the appropriate election to obtain the above-described
tax consequences. Thus, if the Company acquires any asset from a C corporation
as a result of a merger or other nontaxable exchange, and the Company
recognizes gain on the disposition of such asset during the 10-year period
following acquisition of the asset, then such gain will be subject to tax at
the highest regular corporate rate to the extent the Built-In Gain (the excess
of (a) the fair market value of such asset as of the date of acquisition over
(b) the Company's adjusted basis in such asset as of such date) on the sale of
such asset exceeds any Built-In Loss arising from the disposition during the
same taxable year of any other assets acquired in the same transaction, where
Built-In Loss equals the excess of (x) the Company's adjusted basis in such
other assets as of the date of acquisition over (y) the fair market value of
such other assets as of such date.
TAXATION OF STOCKHOLDERS
Taxable U.S. Stockholders
Dividend Income. Distributions from the Company (other than distributions
designated as capital gains dividends) will be taxable to holders of shares of
Common Stock which are not tax-exempt entities as ordinary income to the
extent of the current or accumulated earnings and profits of the Company.
Distributions from the Company which are designated (by notice to stockholders
within 30 days after the close of the Company's tax year or with its annual
report) as capital gains dividends by the Company will be taxed as long-term
capital gains to taxable holders of shares of Common Stock to the extent that
they do not exceed the Company's actual net
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capital gain for the taxable year. Holders of shares of Common Stock that are
corporations may be required to treat up to 20% of any such capital gains
dividends as ordinary income. Such distributions, whether characterized as
ordinary income or as capital gain, are not eligible for the 70% dividends
received deduction for corporations.
Distributions from the Company to holders which are not designated as
capital gains dividends and which are in excess of the Company's current and
accumulated earnings and profits are treated as a return of capital to such
holders and reduce the tax basis of a holder's shares of Common Stock (but not
below zero). Any such distribution in excess of the tax basis is taxable to
any such holder that is not a tax-exempt entity as gain realized from the sale
of the shares of Common Stock, taxable as described below.
The declaration by the Company of a consent dividend would result in taxable
income to consenting holders of shares of Common Stock (other than tax-exempt
entities) without any corresponding cash distributions. See "--Requirements
for Qualification as a REIT--Annual Distribution Requirements."
Portfolio Income. Dividends paid to holders of shares of Common Stock will
be treated as portfolio income. Such income therefore will not be subject to
reduction by losses from passive activities (i.e., any interest in a rental
activity or in a trade or business in which the holder does not materially
participate, such as certain interests held as a limited partner) of any
holder who is subject to the passive activity loss rules. Such distributions
will, however, be considered investment income which may be offset by certain
investment expense deductions.
No Flow-Through of Losses. Holders of shares of Common Stock will not be
permitted to deduct any net operating losses or capital losses of the Company.
Sale of Shares. A holder of shares of Common Stock who sells shares will
recognize taxable gain or loss equal to the difference between (i) the amount
of cash and the fair market value of any property received on such sale or
other disposition and (ii) the holder's adjusted basis in such shares. Gain or
loss recognized by a holder of shares of Common Stock who is not a dealer in
securities and whose shares have been held for more than one year will
generally be taxable as long-term capital gain or loss.
Back-up Withholding. Distributions from the Company will ordinarily not be
subject to withholding of federal income taxes, except as discussed under
"Foreign Stockholders." Withholding of income tax at a rate of 31% may be
required, however, by reason of a failure of a holder of shares of Common
Stock to supply the Company or its agent with the holder's taxpayer
identification number. Such "backup" withholding also may apply to a holder of
shares of Common Stock who is otherwise exempt from backup withholding
(including a nonresident alien of the United States and, generally, a foreign
entity) if such holder fails to properly document his status as an exempt
recipient of distributions. Each holder will therefore be asked to provide and
certify his correct taxpayer identification number or to certify that he is an
exempt recipient.
TAX-EXEMPT STOCKHOLDERS
Non-taxability of Dividend Income. In general, a holder of shares of Common
Stock which is a tax-exempt entity will not be subject to tax on distributions
from the Company. The IRS has ruled that amounts distributed as dividends by a
qualified REIT do not constitute unrelated business taxable income ("UBTI")
when received by certain tax-exempt entities. Thus, distributions paid to a
holder of shares of Common Stock which is a tax-exempt entity and gain on the
sale of shares of Common Stock by a tax-exempt entity (other than those tax-
exempt entities described below) will not be treated as UBTI, even if the
Company incurs indebtedness in connection with the acquisition of real
property (through its percentage ownership of the Operating Partnership and
the Subsidiary Partnerships) provided that the tax-exempt entity has not
financed the acquisition of its shares of Common Stock of the Company.
For tax-exempt entities which are social clubs, voluntary employee
beneficiary associations, supplemental unemployment benefit trusts, and
qualified group legal services plans exempt from federal income taxation under
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Code Sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, income
from an investment in the Company will constitute UBTI unless the organization
is able to properly deduct amounts set aside or placed in reserve for certain
purposes so as to offset the UBTI generated by its investment in the Company.
Such prospective investors should consult their own tax advisors concerning
these "set aside" and reserve requirements.
In the case of a "qualified trust" (generally, a pension or profit-sharing
trust) holding shares in a REIT, the beneficiaries of such a trust are treated
as holding shares in the REIT in proportion to their actuarial interests in
the qualified trust, instead of treating the qualified trust as a single
individual (the "look through exception"). A qualified trust that holds more
than 10% of the shares of a REIT is required to treat a percentage of REIT
dividends as UBTI if the REIT incurs debt to acquire or improve real property.
This rule applies, however, only if (i) the qualification of the REIT depends
upon the application of the "look through" exception (described above) to the
restriction on REIT shareholdings by five or fewer individuals, including
qualified trusts (see "Description of Capital Stock--Restrictions on
Transfer"), and (ii) the REIT is "predominantly held" by qualified trusts,
i.e., if either (x) a single qualified trust held more than 25% by value of
the interests in the REIT or (y) one or more qualified trusts, each owning
more than 10% by value, held in the aggregate more than 50% of the interests
in the REIT. The percentage of any dividend paid (or treated as paid) to such
a qualified trust that is treated as UBTI is equal to the amount of modified
gross income (gross income less directly connected expenses) from the
unrelated trade or business of the REIT (treating the REIT as if it were a
qualified trust), divided by the total modified gross income of the REIT. A de
minimis exception applies where the percentage is less than 5%. Because the
Company expects the shares of Common Stock to be widely held, this provision
should not result in UBTI to any tax-exempt entity.
Foreign Stockholders
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, foreign estates
and foreign trusts (collectively, "Foreign Investors") are complex, and no
attempt will be made herein to provide more than a summary of such rules.
Prospective Foreign Investors should consult their own tax advisors to
determine the impact of federal, state and local income tax laws on an
investment in the shares of Common Stock, including any reporting
requirements, as well as the tax treatment of such an investment under their
home country laws.
Foreign Investors which are not engaged in the conduct of a business in the
United States and who purchase shares of Common Stock will generally not be
considered as engaged in the conduct of a trade or business in the United
States by reason of ownership of such shares. The taxation of distributions by
the Company to Foreign Investors will depend upon whether such distributions
are attributable to operating income or are attributable to sales or exchanges
by the Company of its United States Real Property Interests ("USRPIs"). USRPIs
are generally direct interests in real property located in the United States
and interests in domestic corporations in which the fair market value of its
USRPIs exceeds a certain percentage.
The Company anticipates that a substantial portion of the distributions to
holders of shares of Common Stock will be attributable to receipt of Rent by
the Company. To the extent that such distributions do not exceed the current
or accumulated earnings and profits of the Company, they will be treated as
dividends and will be subject to a withholding tax equal to 30% of the gross
amount of the dividend, which tax will be withheld and remitted to the IRS by
the Company. Such 30% rate may be reduced by United States income tax treaties
in effect with the country of residence of the Foreign Investor; however, a
Foreign Investor must furnish a completed IRS Form 1001 to the Company to
secure such a reduction. Distributions in excess of the Company's earnings and
profits will be treated as a nontaxable return of capital to a Foreign
Investor to the extent of the basis of his shares of Common Stock, and any
excess amount will be treated as an amount received in exchange for the sale
of his shares of Common Stock and treated under the rules described below for
the sale of Common Stock.
Distributions which are attributable to net capital gains realized from the
disposition of USRPIs (i.e., the Hotels and Proposed Acquisition Hotels) by
the Company will be taxed as though the Foreign Investors were
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engaged in a trade or business in the United States and the distributions were
gains effectively connected with such trade or business. Thus, a Foreign
Investor would be entitled to offset its gross income by allowable deductions
and would pay tax on the resulting taxable income at the graduated rates
applicable to United States citizens or residents. For both individuals and
corporations, the Company must withhold a tax equal to 35% of all dividends
that could be designated by the Company as capital gain dividends. To the
extent that such withholding exceeds the actual tax owed by the Foreign
Investor, a Foreign Investor may claim a refund from the IRS.
The Company or any nominee (e.g., a broker holding shares in street name)
may rely on a certificate of non-foreign status on Form W-8 or Form W-9 to
determine whether withholding is required on gains realized from the
disposition of USRPIs. A domestic person (a "nominee") who holds shares of
Common Stock on behalf of a Foreign Investor will bear the burden of
withholding, provided that the Company has properly designated the appropriate
portion of a distribution as a capital gain dividend.
It is anticipated that the shares owned directly or indirectly by Foreign
Investors will be less than 50% in value of the shares of Common Stock and
therefore the Company will be a "domestically controlled REIT." Accordingly,
shares of Common Stock held by Foreign Investors in the United States will not
be considered USRPIs and gains on sales of such shares will not be taxed to
such Foreign Investors as long as the seller is not otherwise considered to be
engaged in a trade or business in the United States. (The same rule applies to
gains attributable to distributions in excess of the Foreign Investor's cost
for its shares, discussed above.) Similarly, a foreign corporation not
otherwise subject to United States tax which distributes shares of Common
Stock to its stockholders will not be taxed under this rule.
The IRS is authorized to impose annual reporting requirements on certain
United States and foreign persons directly holding USRPIs. The required
reports are in addition to any necessary income tax returns, and do not
displace existing reporting requirements imposed on Foreign Investors by the
Agricultural Foreign Investment Disclosure Act of 1978 and the International
Investment Survey Act of 1976. As of the date of this Prospectus, the IRS has
not exercised its authority to impose reporting under this provision.
Furthermore, because shares in a domestically controlled REIT do not
constitute a USRPI, such reporting requirements are not expected to apply to a
Foreign Investor in the Company. However, the Company is required to file an
information return with the IRS setting forth the name, address and taxpayer
identification number of the payee of distributions from the Company (whether
the payee is a nominee or is the actual beneficial owner).
STATEMENT OF STOCK OWNERSHIP
The Company is required to demand annual written statements from the record
holders of designated percentages of its shares of Common Stock disclosing the
actual owners of the shares of Common Stock. The Company must also maintain,
within the Internal Revenue District in which it is required to file its
federal income tax return, permanent records showing the information it has
received as to the actual ownership of such shares of Common Stock and a list
of those persons failing or refusing to comply with such demand.
TAX ASPECTS OF THE OPERATING PARTNERSHIP
The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership and the Subsidiary Partnerships. The discussion does not cover
state or local tax laws or any federal tax laws other than income tax laws.
Classification as a Partnership. A substantial portion the Company's real
estate investments will be made through the Operating Partnership and the
Subsidiary Partnerships, certain of which will hold interests in other
partnerships. In general, partnerships are "pass-through" entities which are
not subject to federal income tax. Instead, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit
of a partnership, and are subject to tax thereon, without regard to whether
the partners receive cash distributions from the partnership. The Company will
be entitled to include in its REIT taxable income its distributive share
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of the income of any partnership (including the Operating Partnership) in
which it has an interest and to deduct its distributive share of the losses of
any partnership (including the Operating Partnership) in which it has an
interest only if each such partnership is classified for federal income tax
purposes as a partnership rather than as an association taxable as a
corporation.
Under recently issued regulations ("check the box regulations"), an
organization with two or more members will be classified as a partnership on
or after January 1, 1997 unless it elects to be treated as an association (and
therefore taxable as a corporation) or falls within one of several specific
provisions which define a corporation. For entities which were in existence
prior to January 1, 1997 (such as the Operating Partnership and the Subsidiary
Partnerships), the claimed classification by the entity will be respected for
all periods prior to January 1, 1997 if (i) the entity had a reasonable basis
for its claimed classification under the law prior to January 1, 1997; (ii)
the entity and all members thereof recognized the federal tax consequence of
any change in the entity's classification within the sixty (60) months prior
to January 1, 1997; and (iii) neither the entity nor any member was notified
in writing on or before May 8, 1996 that the classification of the entity was
under examination (in which case the entity's classification would be
determined in the examination). An exception to partnership classification
under the "check the box regulations" exists for a "publicly traded
partnership" (i.e., a partnership in which interests are traded on an
established securities market or are readily tradable on a secondary market or
the substantial equivalent thereof). A publicly traded partnership is treated
as a corporation unless at least 90% of the gross income of such partnership,
for each taxable year the partnership is a publicly traded partnership,
consists of "qualifying income." "Qualifying income" includes income from real
property rents, gain from the sale or other disposition of real property,
interest and dividends.
The IRS has issued final regulations providing limited safe harbors from the
definition of a publicly traded partnership. Pursuant to one of those safe
harbors (the "Private Placement Exclusion"), interests in a partnership will
not be treated as readily tradable on a secondary market or the substantial
equivalent thereof if (i) all of the partnership interests are issued in a
transaction that is not required to be registered under the Securities Act and
(ii) the partnership does not have more than 100 partners at any time during
the taxable year (taking into account as a partner each person who indirectly
owns an interest in the partnership through a partnership, grantor trust, or S
corporation (a "flow-through entity"), but only if (a) substantially all the
value of the beneficial owner's interest in the flow-through entity is
attributable to the flow-through entity's interest (direct or indirect) in the
partnership, and (b) a principal purpose of the use of the tiered arrangement
is to permit the partnership to satisfy the 100-partner limitation).
All of the partnership interests in the Operating Partnership and the
Subsidiary Partnerships will be issued in transactions that are not required
to be registered under the Securities Act. In addition, upon the closing of
the Offering, in the aggregate, the Operating Partnership and the Subsidiary
Partnerships will not have more than 100 partners (even taking into account
indirect ownership of such partnerships through partnerships, grantor trusts,
and S corporations). Thus, the Operating Partnership and each Subsidiary
Partnership should satisfy the Private Placement Exclusion.
None of the Operating Partnership and the Subsidiary Partnerships has
requested and none intends to request, a ruling from the IRS that it will be
classified as a partnership for federal income tax purposes. Instead, at the
closing of the Offering, Battle Fowler LLP will deliver its opinion that,
based on the provisions of the partnership agreement of the Operating
Partnership and each Subsidiary Partnership, certain factual assumptions, and
certain representations described in the opinion, the Operating Partnership
and each Subsidiary Partnership pursuant to the provisions of the "check the
box regulations" as well as the law prior to January 1, 1997 will be treated
for federal income tax purposes as partnerships and not as associations
taxable as corporations or as publicly traded partnerships. Unlike a tax
ruling, an opinion of counsel is not binding upon the IRS, and no assurance
can be given that the IRS will not challenge the status of the Operating
Partnership and each Subsidiary Partnership as partnerships for federal income
tax purposes. If such challenge were sustained by a court, the Operating
Partnership and each Subsidiary Partnership would be treated as corporations
for federal income tax purposes, as described below. In addition, the opinion
of Battle Fowler LLP is based on existing law, which is to a great extent the
result of administrative and judicial interpretation. No assurance can be
given that administrative or judicial changes would not modify the conclusions
expressed in the opinion.
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If for any reason any partnership in which the Company has an interest was
taxable as a corporation rather than as a partnership for federal income tax
purposes, the Company likely would not be able to satisfy the asset
requirements for REIT status. See "--Requirements for Qualification as a
REIT--Asset Tests." In addition, any change in the partnership status of such
entities for tax purposes might be treated as a taxable event in which case
the Company might incur a tax liability without any related cash distribution.
See "--Income Taxation of the Operating Partnership and Its Partners--Basis in
Operating Partnership Interest." Further, items of income and deduction of
such partnerships would not pass through to its partners (including the
Company), and such partners would be treated as stockholders for tax purposes.
The partnerships in which the Company has an interest would be required to pay
income tax at corporate tax rates on their net income, and distributions to
their partners would constitute dividends that would not be deductible in
computing the relevant entities' taxable income.
Under a regulatory "anti-abuse" rule (the "Anti-Abuse Rule"), the IRS may
(i) recast a transaction involving the use of a partnership to reflect the
underlying economic arrangement under the partnership provisions of the Code
(the "Partnership Provisions"), or (ii) prevent the use of a partnership to
circumvent the intended purpose of a Code provision. The Anti-Abuse Rule
contains an example in which a corporation that elects to be treated as a REIT
contributes substantially all of the proceeds from a public offering to a
partnership in exchange for a general partnership interest. The example
concludes that the use of the partnership is not inconsistent with the intent
of the Partnership Provisions and, thus, cannot be recast by the IRS. However,
the Exchange Rights do not conform in all respects to the redemption rights
contained in the foregoing example. Moreover, the Anti-Abuse Rule is
extraordinarily broad in scope and is applied based on an analysis of all of
the facts and circumstances. As a result, there can be no assurance that the
IRS will not attempt to apply the Anti-Abuse Rule to the Company. If the
conditions of the Anti-Abuse Rule are met, the IRS is authorized to take
appropriate enforcement action, including disregarding the Operating
Partnership for federal income tax purposes or treating one or more of the
partners as nonpartners. Any such action potentially could jeopardize the
Company's status as a REIT.
INCOME TAXATION OF THE OPERATING PARTNERSHIP AND ITS PARTNERS
Operating Partnership Allocations. As noted above, the Company must include
in its REIT taxable income its distributive share of the income and losses of
any partnership in which it has an interest. Although the provisions of a
partnership agreement generally will determine the allocation of income and
losses among partners, such allocations will be disregarded for tax purposes
under Section 704(b) of the Code if they do not have "substantial economic
effect" or otherwise do not comply with the provisions of Section 704(b) of
the Code and Treasury Regulations.
If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners in respect of such item. The allocations of taxable income and loss
of partnerships in which the Company has an interest are intended to comply
with the requirements of Section 704(b) of the Code and Treasury Regulations.
Basis in Operating Partnership Interest. The Company's adjusted tax basis in
each of the partnerships in which it has an interest generally (i) will be
equal to the amount of cash and the basis of any other property contributed to
such partnership by the Company, (ii) will be increased by (a) its allocable
share of such partnership's income and (b) its allocable share of any
indebtedness of such partnership and (iii) will be reduced, but not below
zero, by the Company's allocable share of (a) such partnership's loss and (b)
the amount of cash and the fair market value of any property distributed to
the Company, and by constructive distributions resulting from a reduction in
the Company's share of indebtedness of such partnership.
If the Company's allocable share of the loss (or portion thereof) of any
partnership in which it has an interest would reduce the adjusted tax basis of
the Company's partnership interest in such partnership below zero, the
recognition of such loss will be deferred until such time as the recognition
of such loss (or portion thereof) would not reduce the Company's adjusted tax
basis below zero. To the extent that distributions from a partnership to the
Company, or any decrease in the Company's share of the nonrecourse
indebtedness of a partnership (each
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such decrease being considered a constructive cash distribution to the
partners), would reduce the Company's adjusted tax basis below zero, such
distributions (including such constructive distributions) would constitute
taxable income to the Company. Such distributions and constructive
distributions normally would be characterized as long-term capital gain if the
Company's interest in such partnership has been held for longer than the long-
term capital gain holding period (currently one year).
Depreciation Deductions Available to the Operating Partnership. The Proposed
Acquisition Hotels will be acquired for cash. The Company will allocate the
purchase price among land, building and personal property and will claim
depreciation deductions based on prescribed tax depreciation rates.
OTHER TAX CONSIDERATIONS
State and Local Taxes. The tax treatment of the Company and holders of
shares of Common Stock in states having taxing jurisdiction over them may
differ from the federal income tax treatment. Accordingly, only a very limited
discussion of state taxation of the Company, the shares of Common Stock or the
holders of shares of Common Stock is provided herein, and no representation is
made as to the tax status of the Company (other than with respect to the Texas
franchise tax, as discussed below), the shares of Common Stock or the holders
of shares of Common Stock in such states. However, holders of shares of Common
Stock should note that certain states impose a withholding obligation on
partnerships carrying on a trade or business in a state having partners who
are not resident in such state. The Partnership Agreement contains a provision
which permits the Operating Partnership to withhold a portion of a non-
resident partner's distribution (e.g., a distribution to the Company) and to
pay such withheld amount to the taxing state as agent for the non-resident
partner. Most (but not all) states follow the Code in their taxation of REITs.
In such states, the Company should generally not be liable for tax and should
be able to file a claim for refund and obtain any withheld amount from the
taxing state. However, due to the time value of money, the requirement of the
Operating Partnership to withhold on distributions to the Company will reduce
the yield on an investment in shares of Common Stock. Each holder of shares of
Common Stock should consult his own tax advisor as to the status of the shares
of Common Stock under the respective state tax laws applicable to him.
In particular, Texas imposes a franchise tax upon corporations that do
business in Texas. The Company is organized as a Maryland corporation and has
an office in Texas. AGH LP is organized as a Nevada corporation and will not
have any contacts with Texas other than ownership of its limited partnership
interest in the Operating Partnership. The Operating Partnership is registered
in Texas as a foreign limited partnership qualified to transact business in
Texas.
The Texas franchise tax is imposed on a corporation doing business in Texas
with respect to the corporation's net "taxable capital" (generally, financial
accounting net worth, with certain adjustments) and its net "taxable earned
surplus" (generally, a corporation's federal taxable income, with certain
adjustments) apportioned to Texas. A corporation's taxable capital and taxable
earned surplus are apportioned to Texas based on a fraction, the numerator of
which is the corporation's gross receipts from business transacted in Texas,
and the denominator of which is the corporation's gross receipts from its
entire business, with the amount and timing of such gross receipts being
generally determined in accordance with generally accepted accounting
principles (in the case of "taxable capital") and the Code (in the case of
taxable earned surplus). For purposes of determining the source of gross
receipts, dividends and interest received by a corporation are generally
apportioned based upon the state of incorporation of a corporate payor or a
corporate debtor, respectively. A similar rule applies to receipts by a
corporation from a limited liability company. Thus, interest and dividends
received by a corporation from another corporation or distributions and
interest received by a corporation from a limited liability company will not
be treated as gross receipts from business transacted in Texas unless the
payor is incorporated or organized, respectively, in Texas. To calculate the
tax on net taxable capital, receipts reflecting the corporation's share of net
profits from a partnership are apportioned to Texas if the partnership's
principal place of business (the location of its day-to-day operations) is in
Texas; however, if the corporation's share of the gross receipts from the
partnership is treated as revenue of the corporation under generally accepted
accounting principles, then the receipts of the partnership are apportioned
based on normal apportionment rules as if the receipts were received directly
by the corporation. For purposes of the tax on net taxable earned surplus,
receipts are apportioned as though the corporation directly received the
receipts from the underlying activities of
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the partnership. The franchise tax on "net taxable capital" ("taxable capital"
apportioned to Texas) is imposed at the rate of .25% of a corporation's net
taxable capital. The franchise tax rate on "net taxable earned surplus"
("taxable earned surplus" apportioned to Texas) is 4.5%. The Texas franchise
tax is generally equal to the greater of the tax on "net taxable capital" and
the tax on "net taxable earned surplus." The Texas franchise tax is not
applied on a consolidated group basis. In addition, with respect to REITs
organized as corporations, the Comptroller of Public Accounts (the
"Comptroller") has taken the position administratively that the tax on net
taxable earned surplus is determined based upon the income of such corporation
prior to reduction for the dividends-paid deduction available to REITs. Any
Texas franchise tax that the Company is required to pay will reduce the Cash
Available for Distribution by the Company to its stockholders.
The Comptroller has issued a rule providing that a corporation is not
considered to be doing business in Texas for purposes of the Texas franchise
tax imposed on net taxable capital solely by virtue of its ownership of an
interest as a limited partner in a limited partnership that does business in
Texas. The same rule provides, however, that a corporation is considered to be
doing business in Texas if it owns an interest as a general partner in a
partnership that does business in Texas. A parallel rule for purposes of the
tax on net taxable earned surplus, by negative implication, incorporates the
taxable capital nexus standards, including the limited partner exception. The
Comptroller has verified these results in private determinations. The
Comptroller also has expressed informally its view that a corporation is not
considered to be doing business in Texas for Texas franchise tax purposes
merely because the corporation owns stock in another corporation that does
business in Texas.
In accordance with these pronouncements by the Comptroller, AGH GP will be
treated as doing business in Texas because it will be the general partner of
the Operating Partnership, and the Operating Partnership will be doing
business in Texas. Accordingly, AGH GP will be subject to the Texas franchise
tax. The Company will be treated as doing business in Texas because it will
have an office in Texas. Accordingly, the Company will be subject to the Texas
franchise tax. However, the Company anticipates that its only source of gross
receipts for Texas franchise tax purposes will be dividends from its two
wholly owned qualified REIT subsidiaries, AGH GP and AGH LP, which are both
Nevada corporations. Since dividends are sourced to the state of incorporation
of a corporate payor for gross receipts apportionment purposes (although
dividends received from another member of a consolidated group are not taken
into account as a gross receipt or earned surplus for purposes of computing
the franchise tax on net taxable earned surplus), the Company does not
anticipate that any significant portion of its "taxable capital" or "taxable
earned surplus" will be apportioned to Texas. As a result, the Company's Texas
franchise tax liability is not expected to be substantial. Further, based on
the pronouncements by the Comptroller, AGH LP will not be treated as doing
business in Texas merely as a result of its status as a limited partner of the
Operating Partnership. As long as AGH LP is not otherwise doing business in
Texas, AGH LP should not be subject to the Texas franchise tax. Finally, two
limited liability companies that have been formed to be general partners of
the Subsidiary Partnerships likewise will be subject to the Texas franchise
tax under the foregoing rules because they are treated like corporations for
Texas franchise tax purposes and they have taxable nexus with Texas by virtue
of being general partners in two Subsidiary Partnerships that own real
property in Texas. However, since these limited liability companies only own
1.0% general partnership interests, the Texas franchise tax due from these
entities will not be substantial. Two other limited liability companies have
been formed, one of which will own a hotel located outside of Texas and the
other of which will be the general partner in a limited partnership owning a
hotel located outside of Texas. Thus, while these limited liability companies
will be conducting activities that will create taxable nexus with Texas, these
companies will generate all of their gross receipts from non-Texas sources and
thus will not be required to pay a material amount of Texas franchise tax.
The Company has received a private determination from the Comptroller that
verifies the foregoing Texas franchise tax consequences of this structure.
There can be no assurance, however, that the Comptroller will not revoke the
pronouncements upon which that determination is based. In addition, that
determination will not be binding upon the Comptroller to the extent the
Company or its subsidiaries fail to comply with the factual representations
set forth in the determination.
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The Operating Partnership and the Subsidiary Partnerships (other than the
Subsidiary Partnership organized as a limited liability company) will not be
subject to the Texas franchise tax under the laws in existence as of the date
of this Prospectus. There can be no assurance, however, that the Texas
legislature will not in the future expand the scope of the Texas franchise tax
to apply to limited partnerships such as the Operating Partnership and the
Subsidiary Partnerships organized as limited partnerships under state law.
Coopers & Lybrand L.L.P., special tax consultant to the Company ("Special
Tax Consultant"), has reviewed the discussion in this section with respect to
Texas franchise tax matters and is of the opinion that it accurately
summarizes the Texas franchise tax matters expressly described herein. The
Special Tax Consultant expresses no opinion on any other federal or state tax
considerations affecting the Company or a holder of Common Stock, including,
but not limited to, other Texas franchise tax matters not specifically
discussed above.
Possible Legislative or Other Actions Affecting Tax Consequences; Possible
Adverse Tax Legislation. Prospective stockholders should recognize that the
present federal income tax treatment of an investment in the Company may be
modified by legislative, judicial or administrative action at any time and
that any such action may affect investments and commitments previously made.
The rules dealing with federal income taxation are constantly under
legislative and administrative review, resulting in revisions of regulations
and revised interpretations of established concepts as well as statutory
changes. Revisions in federal tax laws and interpretations thereof could
adversely affect the tax consequences of an investment in the Company.
Current Texas franchise tax law applies only to corporations and limited
liability companies. Thus, partnerships engaged in business in Texas,
including the Subsidiary Partnerships that own property in Texas, presently
are not subject to the Texas franchise tax. The corporate general partners in
those partnerships, however, are subject to the Texas franchise tax. It is
expected that Texas legislators and/or the Comptroller will propose or
recommend, as the case may be, statutory amendments subjecting all comparable
limited partners to the franchise tax or expanding the application of the
Texas franchise tax to include certain non-corporate businesses, specifically
including partnerships, in the franchise tax base. It cannot be predicted
whether such proposals will be adopted by the legislature. If such proposals
are enacted, AGH LP and/or Subsidiary Partnerships that own property in Texas
would be subjected to the then applicable Texas franchise tax.
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UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement, dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
the number of shares of Common Stock set forth opposite the name of such
Underwriter.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
Smith Barney Inc...............................................
Legg Mason Wood Walker, Incorporated...........................
Montgomery Securities..........................................
Prudential Securities Incorporated.............................
The Robinson-Humphrey Company, Inc.............................
---------
Total...................................................... 5,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to the
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the Underwriters' over-allotment
option described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., Legg Mason Wood Walker,
Incorporated, Montgomery Securities, Prudential Securities Incorporated and
The Robinson-Humphrey Company, Inc. are acting as representatives (the
"Representatives"), propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this Prospectus
and to offer part of the shares to certain dealers at a price which represents
a concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the public offering,
the public offering price, concessions and reallowances to dealers may be
changed by the Underwriters.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 825,000 additional shares
of Common Stock at the price to the public set forth on the cover page of this
Prospectus minus the underwriting discounts and commissions. The Underwriters
may exercise such option solely for the purpose of covering over-allotments,
if any, in connection with the Offering.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities that may be incurred in connection with the Offering,
including liabilities under the Securities Act.
The Common Stock is traded on the NYSE under the symbol "AGT." In order to
maintain the requirements for listing the shares of Common Stock on the NYSE,
the Underwriters have undertaken to sell lots of 100 or more shares of Common
Stock.
The Company and its officers and directors agreed in connection with the IPO
that, for a period of one year ending July 25, 1997, they would not, without
the prior written consent of Smith Barney Inc., sell, offer to sell, solicit
and offer to buy, contract to sell, grant any option to purchase or otherwise
transfer or dispose of any shares of Common Stock or any other securities
convertible into, or exercisable for, shares of Common Stock.
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EXPERTS
The Consolidated Financial Statements of American General Hospitality
Corporation as of September 30, 1996 and for the period from July 31, 1996
through September 30, 1996 and the related financial statement schedule; the
Combined Financial Statements of the AGH Predecessor Hotels as of December 31,
1994 and 1995 and July 30, 1996 and for each of the three years in the period
ended December 29, 1995 and for the period from December 30, 1995 through July
30, 1996 and the related financial statement schedule; the Combined Financial
Statements of the Other Initial Hotels as of December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 and the
related financial statement schedule, and the Financial Statements of the Days
Inn Lake Buena Vista as of December 31, 1995 and for the year then ended;
included in this Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their reports thereon included
elsewhere herein and in the Registration Statement. Such Financial Statements
and financial statement schedules are included in reliance upon such reports
given on their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Battle Fowler LLP, New York, New York. In addition,
the description of federal income tax consequences contained in the section of
the Prospectus entitled "Federal Income Tax Considerations" is based on the
opinion of Battle Fowler LLP, New York, New York. The description of Texas
franchise tax matters contained in the section of the Prospectus entitled
"Federal Income Tax Considerations--Other Tax Considerations," is based on the
opinion of Coopers & Lybrand L.L.P., Dallas, Texas. The validity of the shares
of Common Stock offered hereby will be passed upon for the Underwriters by
Hunton & Williams. Battle Fowler LLP and Hunton & Williams will rely on
Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland as to certain matters
of Maryland law.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-11 (of which this Prospectus
is a part) under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference and the exhibits and schedules hereto. For further information
regarding the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement and such exhibits and schedules.
The Registration Statement and the exhibits and schedules forming a part
thereof filed by the Company with the Commission can be inspected and copies
obtained from the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a site on the World Wide Web, the address of which is
http://www.sec.gov, that contains reports, proxy and information statements
and other information regarding issuers, such as the Company, that file
electronically with the Commission. Such reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
National Association of Securities Dealers, 1735 K Street, N.W., Washington,
D.C. 20006, which supervises the NYSE on which the Company's Common Stock is
traded.
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The Company is required to file reports and other information with the
Commission pursuant to the Exchange Act, in addition to any other legal or
NYSE requirements. The Company furnishes its stockholders with annual reports
containing consolidated financial statements audited by its independent
certified public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three
quarters of each fiscal year. The Company includes in such reports annual
audited and quarterly unaudited financial statements for the Lessee.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the information that has
been incorporated by reference in this Prospectus (not including exhibits to
the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Requests for such copies should be directed to
American General Hospitality Corporation, 3860 West Northwest Highway, Suite
300, Dallas, Texas 75220 (telephone (214) 904-2000), Attention: Kenneth E.
Barr.
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GLOSSARY
Unless the context otherwise requires, the following capitalized terms have
the meanings set forth below for the purposes of this Prospectus.
"1996 Plan" means the American General Hospitality Corporation 1996
Incentive Plan.
"ACMs" means asbestos-containing materials.
"Acquired Hotels" means the Days Inn Lake Buena Vista, the Holiday Inn
Resort-Monterey and the Hilton Hotel--Durham.
"ADA" means the Americans with Disabilities Act of 1990, as amended.
"Additional Charges" means certain amounts of money, including interest
accrued on any late payments or charges, that the Lessee will be obligated to
pay to the Company in addition to Base Rent or Participating Rent, pursuant to
the Participating Leases.
"Adjusted Basis Ratio" means, for each Hotel, the ratio that the average of
the adjusted bases of the personal property in a Hotel at the beginning and at
the end of a taxable year bears to the average of the aggregate adjusted bases
of both the real and personal property comprising the Hotel at the beginning
and at the end of a taxable year.
"ADR" means average daily room rate.
"AGH GP" means AGH GP, Inc., a Nevada corporation and wholly owned
subsidiary of the Company, which is the sole general partner of the Operating
Partnership.
"AGH LP" means AGH LP, Inc., a Nevada corporation and wholly owned
subsidiary of the Company, which is a Limited Partner of the Operating
Partnership.
"AGH Predecessor Hotels" means the following four Initial Hotels that were
acquired primarily from partnerships controlled by stockholders of AGHI: the
Holiday Inn Dallas DFW Airport West, Courtyard by Marriott-Meadowlands, Hotel
Maison de Ville, and the Hampton Inn Richmond Airport.
"AGHI" means American General Hospitality, Inc., which operates the Current
Hotels pursuant to the Management Agreements, and certain of its affiliates.
"Alliance Securities" means those shares of Common Stock or OP Units issued
to Wyndham Hotel Corporation and its affiliates pursuant to the Wyndham
Alliance.
"Anti-Abuse Rule" means the regulations issued by the United States Treasury
Department under the Partnership Provisions of the Code that authorize the
IRS, in certain "abusive" transactions involving partnerships, to disregard
the form of a transaction and recast it for federal tax purposes as it deems
appropriate.
"Base Rent" means the fixed obligation of the Lessee to pay a sum certain in
weekly rent under each of the Participating Leases.
"Beverage Corporations" means those corporations wholly owned by Steven D.
Jorns that sublease from the Lessee the portion of fourteen of the Current
Hotels that sell alcoholic beverages.
"Beverage Subleases" means those subleases between the Lessee and the
Beverage Corporations relating to the sublease of the areas at the Current
Hotels where alcoholic beverages are sold.
"Board of Directors" means the Board of Directors of the Company.
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"Bylaws" means the Bylaws of the Company.
"Cash Available for Distribution" means Funds From Operations adjusted for
amortization of deferred financing costs, franchise transfer costs and
unearned officers' compensation, less reserves for capital expenditures.
"Charter" means the charter of the Company filed for record with the State
Department of Assessments and Taxation of Maryland, as may be amended from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, $0.01 par value per share,
of the Company.
"Company" means American General Hospitality Corporation, a Maryland
corporation, which was incorporated on April 12, 1996, together with AGH GP,
AGH LP, and the Operating Partnership, and any subsidiaries thereof.
"Company Expenses" means all administrative costs and expenses of the
Company, AGH GP, and AGH LP.
"Comptroller" means the office of the Texas State Comptroller of Public
Accounts.
"Counsel" means Battle Fowler LLP.
"CPI" means the United States Consumer Price Index, All Urban Consumers,
U.S. City Average, All Items (1982-84 = 100).
"Current Hotels" means the sixteen hotels that the Company currently owns.
"DFW South Loan" means the non-recourse mortgage on Holiday Inn Dallas DFW
Airport South in the outstanding principal amount as of September 30, 1996 of
approximately $14.1 million.
"Director Share Awards" means the annual award of shares of Common Stock to
each eligible director under the Directors' Plan.
"Directors' Plan" means the American General Hospitality Corporation Non-
Employee Directors' Incentive Plan.
"ESAs" means phase I environmental site assessments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agreement" means that Exchange Rights Agreement among the Company,
the Operating Partnership and the Limited Partners, other than AGH LP.
"Exchange Rights" means, pursuant to the Partnership Agreement, the rights
of the Limited Partners, other than AGH LP, to cause the Operating Partnership
to exchange each OP Unit in exchange for cash or, at the Company's election,
one share of Common Stock.
"F&B" means food and beverage.
"FF&E" means furniture, fixtures and equipment.
"FF&E Note" means collectively the one or more five-year amortizing recourse
promissory notes in the aggregate principal amount of $315,000 issued by the
Lessee to the Operating Partnership in connection with the sale by the
Operating Partnership of certain personal property relating to certain of the
Initial Hotels.
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"Foreign Investors" means nonresident alien individuals, foreign
corporations, foreign partnerships and foreign trusts and estates.
"Formation Transactions" means the principal transactions in connection with
the formation of the Company and the acquisition of the Initial Hotels.
"Franchise Licenses" means those franchise licenses relating to the
franchised Hotels.
"French Quarter Loan" means the non-recourse note in the outstanding
principal amount of approximately $9.6 million, as of September 30, 1996, to
be assumed by the Company in connection with the purchase of the French
Quarter Suites Hotel.
"Funds From Operations" means income (loss) before minority interest
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization (excluding amortization of
financing costs), and after adjustments for unconsolidated partnerships and
joint ventures.
"General Partner" means AGH GP, Inc., a Nevada corporation.
"Hotels" means collectively the Current Hotels and the Proposed Acquisition
Hotels.
"Independent Directors" means a director of the Company who is not an
officer or employee of the Company, any affiliate of an officer or employee or
any affiliate of any advisor to the Company under an advisory agreement, any
lessee of any property of the Company, any subsidiary of the Company or any
partnership which is an affiliate of, the Company.
"Initial Hotels" means the thirteen hotels that the Company acquired
pursuant to the Formation Transactions at the time of the IPO.
"IPO" means the Company's initial public offering of Common Stock.
"IRS" means the U.S. Internal Revenue Service.
"ISOs" means incentive stock options.
"Lease Master Agreement" means the agreement between the Operating
Partnership and the Lessee which sets forth the terms of the Lessee's required
capitalization and certain other matters.
"Lessee" means AGH Leasing, L.P., which leases the Hotels from the Operating
Partnership pursuant to the Participating Leases.
"Limited Partners" means the limited partners of the Operating Partnership.
"Line of Credit" means the Company's $100 million line of credit with
Societe Generale, Southwest Agency, Bank One Texas, N.A. and certain other
lenders.
"Lock-up Period" means the one-year period that expires in July 1997.
"Look-Through Ownership Limitation" means the ownership of as much as 15.0%
of any class of the Company's stock by mutual funds and certain other
entities.
"Management Agreements" means the agreements between AGHI and the Lessee to
operate the Hotels.
"MGCL" means the Maryland General Corporation Law, as may be amended from
time to time.
"NAREIT" means the National Association of Real Estate Investment Trusts.
"NYSE" means the New York Stock Exchange, Inc.
"Offering" means the offering of Common Stock which is the subject of the
Prospectus.
"Offering Price" means the assumed public offering price of the Common Stock
of $24.125 per share (which was the last reported sale price on the NYSE on
January 9, 1997).
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"OP Units" means units of limited partnership interest in the Operating
Partnership.
"Operating Partnership" means American General Hospitality Operating
Partnership, L.P., a limited partnership organized under the laws of Delaware.
Unless the context requires otherwise, Operating Partnership includes any
subsidiaries of the Operating Partnership.
"Option Hotels" means the two Courtyard by Marriott currently located in
Boise, Idaho and in Durham, North Carolina in which AGHI holds an interest.
"Other Initial Hotels" means the following nine Initial Hotels that were
acquired primarily from persons unaffiliated with AGHI in connection with the
IPO and the related Formation Transactions: the Holiday Inn Dallas DFW Airport
South, Hilton Hotel-Toledo, Holiday Inn New Orleans International Airport,
Holiday Inn Park Center Plaza, Holiday Inn Select-Madison, Holiday Inn Mission
Valley, Le Baron Airport Hotel, Days Inn Ocean City, and Fred Harvey
Albuquerque Airport Hotel.
"Ownership Limitation" means the ownership of more than 9.8% of any class of
the Company's outstanding stock by any person.
"Participating Leases" means the operating leases between the Lessee and the
Operating Partnership pursuant to which the Lessee leases the current Hotels
from the Operating Partnership.
"Participating Rent" means rent based on percentages of room revenue, food
and beverage revenue and telephone and other revenue payable by the Lessee
pursuant to the Participating Leases.
"Partnership Agreement" means the partnership agreement relating to the
Operating Partnership.
"Partnership Provisions" means the partnership provisions of the Code.
"PCBs" means polychlorinated biphenyls.
"Plan" means AGHI's Retirement Savings Plan.
"Portfolio Purchase" means the Company's proposed acquisition of the Four
Points by Sheraton Hotel, the French Quarter Suites Hotel and the Sheraton Key
Largo from French Quarter Holdings, Inc. for an aggregate purchase price of
approximately $59.1 million.
"Primary Contributors" means Steven D. Jorns, Bruce G. Wiles, Kenneth E.
Barr, James E. Sowell, Lewis W. Shaw II, and Kenneth W. Shaw (who are the
principals of AGHI and/or the Lessee) and where applicable includes their
respective controlled affiliates and associates (including spouses).
"Proposed Acquisition Hotels" means collectively the Four Points by
Sheraton, Sheraton Key Largo, French Quarter Suites Hotel and the Radisson
Arlington Heights.
"Radisson Loan" means the one-year mortgage note in the principal amount of
approximately $8.2 million to be assumed by the Company in connection with the
purchase of Radisson Arlington Heights.
"Registration Rights Agreements" means the Registration Rights Agreement
among the Company and the Limited Partners other than AGH LP and the Plan, the
Registration Rights Agreement entered into by the Company in connection with
acquisition of certain Hotels and the Registration Rights Agreement that will
be entered into between the Company and Wyndham pursuant to the Wyndham
Alliance.
"REIT" means real estate investment trust as defined in Section 856 of the
Code.
"Related Party Tenant" under the Code means, a tenant of the Company's real
property in which the Company, or an owner of 10.0% or more of the Company,
directly or constructively owns 10.0% or more of the ownership interests.
"Rents" means, collectively, Base Rent and Participating Rent.
146
<PAGE>
"REVPAR" means average total revenue per available room and is determined by
dividing room revenue by available rooms for the applicable period.
"Secaucus Loans" means the two promissory notes secured by a non-recourse
mortgage on the Courtyard by Marriott-Meadowlands hotel that were in the
outstanding principal amount as of September 30, 1996 of approximately $4.6
million and $508,500, respectively.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary Partnerships" means one or more subsidiary partnerships, joint
ventures, general partnerships and limited liability companies through which
the Operating Partnership owns certain of the Hotels.
"Treasury Regulations" means the income tax regulations promulgated under
the Code.
"UBTI" means unrelated business taxable income.
"Underwriters" means the underwriters named in the Prospectus relating to
the Offering.
"Weighted Average Daily Room Rate" means the total guest room revenue
derived from all of the Hotels divided by the total number of guest rooms sold
at all of the Hotels.
"Weighted Average Occupancy" means the total number of guest rooms sold at
all of the Hotels divided by the total number of guest rooms available at all
of the Hotels.
"Wyndham" means Wyndham Hotel Corporation, together with its subsidiaries.
"Wyndham Alliance" means the strategic alliance between the Company and
Wyndham.
147
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
American General Hospitality Corporation
Pro Forma Statements of Operations for the Year Ended December 31, 1995,
the Twelve Months Ended September 30, 1996 and the Nine Months Ended
September 30, 1996 and 1995 (unaudited)................................ F-3
Pro Forma Consolidated Balance Sheet as of September 30, 1996
(unaudited)............................................................ F-10
Report of Independent Accountants....................................... F-14
Consolidated Balance Sheet as of September 30, 1996..................... F-15
Consolidated Statement of Operations for the Period from July 31, 1996
(inception of operations) through September 30, 1996................... F-16
Consolidated Statement of Shareholders' Equity for the Period from April
12, 1996 (date of capitalization) through September 30, 1996........... F-17
Consolidated Statement of Cash Flows for the Period from July 31, 1996
(inception of operations) through September 30, 1996................... F-18
Notes to Consolidated Financial Statements.............................. F-19
Schedule III--Real Estate and Accumulated Depreciation as of September
30, 1996............................................................... F-26
AGH Leasing, L.P.
Pro Forma Combined Statements of Operations for the Year Ended December
31, 1995, the Twelve Months Ended September 30, 1996 and the Nine
Months Ended September 30, 1996 and 1995 (unaudited)................... F-27
Balance Sheet as of September 30, 1996 (unaudited)...................... F-34
Statement of Operations for the Period from July 31, 1996 (inception of
operations) through September 30, 1996 (unaudited)..................... F-35
Statement of Cash Flows for the Period from July 31, 1996 (inception of
operations) through September 30, 1996 (unaudited)..................... F-36
Notes to Financial Statements........................................... F-37
AGH Predecessor Hotels
The AGH Predecessor Hotels represent four of the Initial Hotels
acquired, concurrent with the Company's initial public offering
primarily from limited partnerships controlled by shareholders of
American General Hospitality, Inc. The AGH Predecessor Hotels are
deemed to be the predecessor of the Company.
Report of Independent Accountants....................................... F-40
Combined Balance Sheets as of December 30, 1994, December 29, 1995 and
July 30, 1996.......................................................... F-41
Combined Statements of Operations for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-42
Combined Statements of Equity for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-43
Combined Statements of Cash Flows for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-44
Notes to Combined Financial Statements.................................. F-45
Schedule III--Real Estate and Accumulated Depreciation as of July 30,
1996................................................................... F-50
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Other Initial Hotels
The Other Initial Hotels represent nine of the Initial Hotels acquired,
concurrent with the Company's initial public offering, primarily from
parties unaffiliated with the Company through contracts with the
sellers acquired from an AGHI affiliate.
Report of Independent Accountants....................................... F-51
Combined Balance Sheets as of December 31, 1994 and 1995 (audited) and
June 30, 1996 (unaudited).............................................. F-52
Combined Statements of Operations for each of the Three Years in the
Period Ended
December 31, 1995 (audited) and the Six Months Ended June 30, 1996
(unaudited)............................................................ F-53
Combined Statements of Equity for each of the Three Years in the Period
Ended
December 31, 1995 (audited) and the Six Months Ended June 30, 1996
(unaudited)............................................................ F-54
Combined Statements of Cash Flows for each of the Three Years in the
Period Ended
December 31, 1995 (audited) and the Six Months ended June 30, 1996
(unaudited)............................................................ F-55
Notes to Combined Financial Statements.................................. F-56
Schedule III--Real Estate and Accumulated Depreciation as of December
31, 1995............................................................... F-62
Days Inn Lake Buena Vista hotel
Represents the Days Inn Lake Buena Vista hotel in Orlando, Florida (one
of the Acquired Hotels) acquired by the Company on October 22, 1996.
Audited financial statements are provided in accordance with the
significant business acquisition rules and regulations of the
Securities and Exchange Commission.
Report of Independent Accountants....................................... F-63
Balance Sheets as of December 31, 1995 (audited) and September 30, 1996
(unaudited)............................................................ F-64
Statements of Operations for the Year Ended December 31, 1995 (audited)
and the Nine Months Ended September 30, 1996 and 1995 (unaudited)...... F-65
Statements of Equity for the Year Ended December 31, 1995 (audited) and
the Nine Months Ended September 30, 1996 and 1995 (unaudited).......... F-66
Statements of Cash Flows for the Year Ended December 31, 1995 (audited)
and the Nine Months Ended September 30, 1996 and 1995 (unaudited)...... F-67
Notes to Financial Statements........................................... F-68
</TABLE>
F-2
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995, THE TWELVE MONTHS ENDED SEPTEMBER 30,
1996 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
The following unaudited Pro Forma Statements of Operations of the Company
for the year ended December 31, 1995, the twelve months ended September 30,
1996, and the nine months ended September 30, 1996 and 1995 are presented as
if the consummation of the IPO and related Formation Transactions, the
acquisition of all Hotels and the consummation of the Offering and application
of the net proceeds therefrom had occurred on January 1, 1995 and all of the
Hotels had been leased pursuant to the Participating Leases as of that date.
Such information should be read in conjunction with the Financial Statements
included in this Prospectus. In management's opinion, all adjustments
necessary to reflect the effects of the IPO, the acquisition of all Hotels and
the consummation of the Offering have been made.
The following unaudited Pro Forma Statements of Operations are not
necessarily indicative of what the results of operations of the Company would
have been assuming such transactions had been completed on January 1, 1995,
nor does it purport to represent the results of operations for future periods.
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
OFFERING
PROPOSED AND LINE
INITIAL ACQUIRED ACQUISITION OF
HOTELS HOTELS HOTELS CREDIT TOTAL
----------- ---------- ----------- -------- -----------
(A) (A) (A) (B)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Participating Lease
revenue (C).......... $24,754,071 $7,967,997 $ 7,247,372 $39,969,440
Interest income (D)... 31,500 31,500
----------- ---------- ----------- -------- -----------
Total revenue......... 24,785,571 7,967,997 7,247,372 40,000,940
----------- ---------- ----------- -------- -----------
Depreciation (E)...... 7,404,235 1,699,594 2,063,454 11,167,283
Amortization (F)...... 702,628 123,117 14,000 $235,714 1,075,459
Real estate and
personal property
taxes and property
insurance (G)........ 2,165,073 961,139 1,401,044 4,527,256
General and
administrative (H)... 1,137,857 240,918 321,225 1,700,000
Ground lease expense
(G).................. 881,217 881,217
Amortization of
unearned officers'
compensation (I)..... 88,750 88,750
Interest expense (J).. 1,886,733 1,548,488 (316,001) 3,119,220
----------- ---------- ----------- -------- -----------
Total expenses........ 14,266,493 3,024,768 5,348,211 (80,287) 22,559,185
----------- ---------- ----------- -------- -----------
Income before minority
interest............... 10,519,078 4,943,229 1,899,161 80,287 17,441,755
Minority interest (K)... 1,967,068 2,109,544
----------- -----------
Net income applicable to
common shareholders.... $ 8,552,010 $15,332,211
=========== ===========
Net income per common
share.................. $ 1.04 $ 1.11
=========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,262,008 13,787,405
=========== ===========
</TABLE>
See notes beginning on page F-5.
F-3
<PAGE>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL
JULY 31,
1996 OFFERING
THROUGH PROPOSED AND
SEPTEMBER PRO FORMA INITIAL ACQUIRED ACQUISITION LINE OF
30, 1996 ADJUSTMENTS HOTELS HOTELS HOTELS CREDIT TOTAL
---------- ----------- ----------- ---------- ----------- -------- -----------
(L) (M) (A) (A) (A) (B)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Participating Lease
revenue (C).......... $5,218,526 $22,246,651 $27,465,177 $8,739,652 $ 8,450,400 $44,655,229
Interest income (D)... 32,227 (727) 31,500 31,500
---------- ----------- ----------- ---------- ----------- -------- -----------
Total revenue......... 5,250,753 22,245,924 27,496,677 8,739,652 8,450,400 44,686,729
---------- ----------- ----------- ---------- ----------- -------- -----------
Depreciation (E)...... 1,008,874 5,075,499 6,084,373 1,699,594 2,063,454 9,847,421
Amortization (F)...... 116,572 586,056 702,628 123,117 14,000 $235,714 1,075,459
Real estate and per-
sonal property taxes
and property insur-
ance (G)............. 511,115 1,854,319 2,365,434 961,139 1,401,044 4,727,617
General and adminis-
trative (H).......... 194,226 943,631 1,137,857 240,918 321,225 1,700,000
Ground lease expense
(G).................. 218,000 744,993 962,993 962,993
Amortization of
unearned officers'
compensation (I)..... 14,792 73,958 88,750 88,750
Interest expense (J).. 347,622 1,039,876 1,387,498 1,548,488 183,234 3,119,220
---------- ----------- ----------- ---------- ----------- -------- -----------
Total expenses........ 2,411,201 10,318,332 12,729,533 3,024,768 5,348,211 418,948 21,521,460
---------- ----------- ----------- ---------- ----------- -------- -----------
Income before minority
interest............... 2,839,552 11,927,592 14,767,144 5,714,884 3,102,189 23,165,269
Minority interest (K)... 545,102 2,761,456 2,801,792
---------- ----------- -----------
Net income applicable to
common shareholders.... $2,294,450 $12,005,688 $20,363,477
========== =========== ===========
Net income per common
share.................. $ 0.29 $ 1.45 $ 1.48
========== =========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 8,262,008 13,787,405
========== =========== ===========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL
JULY 31,
1996 OFFERING
THROUGH PROPOSED AND
SEPTEMBER PRO FORMA INITIAL ACQUIRED ACQUISITION LINE OF
30, 1996 ADJUSTMENTS HOTELS HOTELS HOTELS CREDIT TOTAL
---------- ----------- ----------- ---------- ----------- -------- -----------
(L) (M) (A) (A) (A) (B)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Participating Lease
revenue (C).......... $5,218,526 $16,308,885 $21,527,411 $6,798,749 $ 6,830,070 $35,156,230
Interest income (D)... 32,227 (8,602) 23,625 23,625
---------- ----------- ----------- ---------- ----------- ------- -----------
Total revenue......... 5,250,753 16,300,283 21,551,036 6,798,749 6,830,070 35,179,855
---------- ----------- ----------- ---------- ----------- ------- -----------
Depreciation (E)...... 1,008,874 3,490,162 4,499,036 1,274,695 1,547,590 7,321,321
Amortization (H)...... 116,572 410,399 526,971 90,775 10,500 176,786 805,032
Real estate and per-
sonal property taxes
and property insur-
ance (G)............. 511,115 1,262,960 1,774,075 609,185 1,050,783 3,434,043
General and adminis-
trative (H).......... 194,226 659,167 853,393 180,689 240,918 1,275,000
Ground lease expense
(G).................. 218,000 504,245 722,245 722,245
Amortization of
unearned officers'
compensation (I)..... 14,792 51,771 66,563 66,563
Interest expense (J).. 347,622 810,090 1,157,712 1,174,270 2,465 2,334,447
---------- ----------- ----------- ---------- ----------- ------- -----------
Total expenses........ 2,411,201 7,188,794 9,599,995 2,155,344 4,024,061 179,251 15,958,651
---------- ----------- ----------- ---------- ----------- ------- -----------
Income before minority
interest............... 2,839,552 9,111,489 11,951,041 4,643,405 2,806,009 19,221,204
Minority interest (K)... 545,102 2,234,845 2,324,765
---------- ----------- -----------
Net income applicable to
common shareholders.... $2,294,450 $ 9,716,196 $16,896,439
========== =========== ===========
Net income per common
share.................. $ 0.29 $ 1.18 $ 1.23
========== =========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,002,331 8,262,008 13,787,405
========== =========== ===========
</TABLE>
See notes beginning on page F-5.
F-4
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PROPOSED OFFERING
INITIAL ACQUIRED ACQUISITION AND LINE
HOTELS HOTELS HOTELS OF CREDIT TOTAL
----------- ---------- ----------- --------- -----------
(A) (A) (A) (B)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Participating Lease
revenue (C).......... $18,816,305 $6,027,094 $5,627,042 $30,470,441
Interest income (D)... 23,625 23,625
----------- ---------- ---------- --------- -----------
Total revenue......... 18,839,930 6,027,094 5,627,042 30,494,066
----------- ---------- ---------- --------- -----------
Depreciation (E)...... 5,553,176 1,274,695 1,547,590 8,375,461
Amortization (F)...... 526,971 90,775 10,500 $ 176,786 805,032
Real estate and
personal property
taxes and property
insurance (G)........ 1,623,805 609,185 1,050,783 3,283,773
General and
administrative (H)... 853,392 180,689 240,919 1,275,000
Ground lease expense
(G).................. 660,913 660,913
Amortization of
unearned officers'
compensation (I)..... 66,563 66,563
Interest expense (J).. 1,157,712 1,174,270 2,465 2,334,447
----------- ---------- ---------- --------- -----------
Total expenses........ 10,442,532 2,155,344 4,024,062 179,251 16,801,189
----------- ---------- ---------- --------- -----------
Income before minority
interest............... 8,397,398 3,871,750 1,602,980 (179,251) 13,692,877
Minority interest (K) .. 1,570,313 1,656,125
----------- -----------
Net income applicable to
common shareholders.... $ 6,827,085 $12,036,752
=========== ===========
Net income per common
share.................. $ 0.83 $ 0.87
=========== ===========
Weighted average number
of shares of Common
Stock outstanding...... 8,262,008 13,787,405
=========== ===========
</TABLE>
(A) Represents the pro forma statements of operations of the Initial Hotels,
Acquired Hotels and Proposed Acquisition Hotels as if all of the Hotels were
acquired on January 1, 1995 and leased to the Lessee pursuant to the
Participating Leases since that date.
(B) Represents amortization of deferred loan costs associated with the
expected commitment to be received by the Company to increase the borrowing
capacity under the Line of Credit to $150 million. Also represents adjustments
to interest expense due to the change in borrowings outstanding after
adjustments for the Offering and Line of Credit.
(C) Represents lease payments from the Lessee to the Operating Partnership
pursuant to the Participating Leases calculated on a pro forma basis by
applying the rent provisions of the Participating Leases to the revenues of
the Hotels. The departmental revenue thresholds in the Participating Lease are
seasonally adjusted for interim periods and certain of the Participating Lease
formulas adjust in January 1997 or January 1998. See "The Hotels--The
Participating Leases."
F-5
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO STATEMENTS OF OPERATIONS
The Participating Lease revenue is comprised of the following:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
31, 1995 1996 1996 1995
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Base rent............... $28,677,000 $28,677,000 $21,507,750 $21,507,750
Excess of Participating
Rent over Base Rent.... 11,292,440 15,978,229 13,648,480 8,962,691
----------- ----------- ----------- -----------
Total Participating
Lease revenue........ $39,969,440 $44,655,229 $35,156,230 $30,470,441
=========== =========== =========== ===========
</TABLE>
(D) Represents interest income on the advance to Lessee for the purchase of
certain furniture, fixtures and equipment from the Company ($315,000). The
advance to Lessee is due over five years commencing July 31, 1996 and bears
interest at 10% per annum.
(E) Represents depreciation on the Hotels. Pro forma depreciation is
computed based upon estimated useful lives of 39 years for buildings and
improvements and 5 years for furniture, fixtures and equipment. These
estimated useful lives are based on management's knowledge of the properties
and the hotel industry in general.
At September 30, 1996, the Company's pro forma investment in hotel
properties, at cost, consists of the following:
<TABLE>
<CAPTION>
AGH OTHER PROPOSED
PREDECESSOR INITIAL ACQUIRED ACQUISITION
HOTELS HOTELS HOTELS HOTELS TOTAL
----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Land.................... $ 1,496,515 $ 11,311,000 $ 6,004,000 $ 7,289,375 $ 26,100,890
Building and
improvements........... 19,293,233 134,699,284 52,234,800 63,417,567 269,644,884
Furniture, fixtures and
equipment.............. 2,847,464 6,560,598 1,801,200 2,186,813 13,396,075
----------- ------------ ----------- ----------- ------------
$23,637,212 $152,570,882 $60,040,000 $72,893,755 $309,141,849
=========== ============ =========== =========== ============
</TABLE>
(F) Represents amortization of deferred loan costs related to the Line of
Credit, amortization of franchise transfer costs and amortization of
organizational costs and other deferred expenses. Deferred loan costs of
$3,325,000 (at cost) are amortized utilizing a method which approximates the
interest method over four years which is the term of the Line of Credit.
Franchise transfer costs of $949,000 (at cost) are amortized over the term of
the related franchise agreements which approximates 10 years. Organizational
costs and other deferred expenses of $1,340,286 (at cost) are amortized over
terms ranging from 5 to 12 years.
F-6
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO STATEMENTS OF OPERATIONS--(CONTINUED)
(G) Represents amounts to be paid by the Operating Partnership. Such amounts
were derived from the historical amounts paid with respect to the Hotels
adjusted for the probable real estate and personal property tax increases.
Four of the Other Initial Hotels (Holiday Inn Park Plaza, LeBaron Airport
Hotel, Holiday Inn Mission Valley and Hilton Hotel--Toledo) and one Acquired
Hotel (Days Inn Lake Buena Vista) are located in states which require tax
reassessments based primarily on the price as specified in a sale to an
unrelated third party.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
PROPOSED
INITIAL ACQUIRED ACQUISITION
HOTELS HOTELS HOTELS TOTAL
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Real estate and personal
property taxes..................... $1,854,104 $803,866 $1,240,000 $3,897,970
Property insurance.................. 310,969 157,273 161,044 629,286
---------- -------- ---------- ----------
Total real estate and
personal property taxes
and insurance.................... $2,165,073 $961,139 $1,401,044 $4,527,256
========== ======== ========== ==========
Ground lease expense................ $ 881,217 $ 881,217
========== ==========
</TABLE>
<TABLE>
<CAPTION>
COMBINED
HISTORICAL
JULY 31, TWELVE MONTHS ENDED SEPTEMBER 30, 1996
1996 ------------------------------------------
THROUGH PROPOSED
SEPTEMBER PRO FORMA INITIAL ACQUIRED ACQUISITION
30, 1996 ADJUSTMENTS HOTELS HOTELS HOTELS TOTAL
---------- ----------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate and
personal property
taxes................. $ 419,376 $1,589,431 $2,008,807 $803,866 $1,240,000 $4,052,673
Property insurance..... 91,739 264,888 356,627 157,273 161,044 674,944
--------- ---------- ---------- -------- ---------- ----------
Total real estate and
personal property
taxes and
insurance........... $ 511,115 $1,854,319 $2,365,434 $961,139 $1,401,044 $4,727,617
========= ========== ========== ======== ========== ==========
Ground lease expense... $ 218,000 $ 744,993 $ 962,993 $ 962,993
========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
COMBINED
HISTORICAL
JULY 31, NINE MONTHS ENDED SEPTEMBER 30, 1996
1996 ------------------------------------------
THROUGH PROPOSED
SEPTEMBER PRO FORMA INITIAL ACQUIRED ACQUISITION
30, 1996 ADJUSTMENTS HOTELS HOTELS HOTELS TOTAL
---------- ----------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate and
personal
property taxes........ $ 419,376 $1,088,832 $1,508,208 $507,980 $ 930,000 $2,946,188
Property insurance..... 91,739 174,128 265,867 101,205 120,783 487,855
--------- ---------- ---------- -------- ---------- ----------
Total real estate and
personal property
taxes and
insurance........... $ 511,115 $1,262,960 $1,774,075 $609,185 $1,050,783 $3,434,043
========= ========== ========== ======== ========== ==========
Ground lease expense... $ 218,000 $ 504,245 $ 722,245 $ 722,245
========= ========== ========== ==========
</TABLE>
F-7
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO STATEMENTS OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------
PROPOSED
INITIAL ACQUIRED ACQUISITION
HOTELS HOTELS HOTELS TOTAL
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Real estate and personal property
taxes.............................. $1,390,578 $507,980 $ 930,000 $2,828,558
Property insurance.................. 233,227 101,205 120,783 455,215
---------- -------- ---------- ----------
Total real estate and personal
property taxes and insurance..... $1,623,805 $609,185 $1,050,783 $3,283,773
========== ======== ========== ==========
Ground lease expense................ $ 660,913 $ 660,913
========== ==========
</TABLE>
(H) Represents general and administrative expenses to be paid by the
Operating Partnership. The following annual general and administrative
expenses are based on historical general and administrative expenses as well
as estimated 1997 expenses:
<TABLE>
<S> <C>
Salaries and wages (including directors fees)................ $ 688,500
Professional fees............................................ 334,500
Directors' and officers' insurance........................... 94,500
Allocated rent, supplies and other........................... 103,000
Other operating expenses..................................... 479,500
----------
$1,700,000
==========
</TABLE>
(I) Represents amortization of unearned officers' compensation represented
by an aggregate of 50,000 shares of restricted Common Stock issuable to
executive officers which shares vest 10% at the date of grant (5,000 shares at
$17.75 per share, the price per Common Stock issued in the IPO).
(J) Represents interest expense on the following debt for the year ended
December 31, 1995:
<TABLE>
<S> <C>
Holiday Inn Dallas DFW Airport South(1)....................... $1,181,102
Courtyard by Marriott--Meadowlands(2)......................... 389,630
French Quarter Suites Hotel(3)................................ 932,081
Radisson Arlington Heights(4)................................. 616,407
----------
$3,119,220
==========
</TABLE>
Interest expense for the twelve months ended September 30, 1996 and the nine
months ended September 30, 1996 and 1995 are calculated in the same manner as
the year ended December 31, 1995 interest expense.
(1) Represents debt assumed by the Operating Partnership of approximately
$14.1 million collateralized by the Holiday Inn Dallas DFW Airport South
hotel. Principal payments are based on a 20 year amortization and interest
is due monthly. The debt matures on February 1, 2011 and bears interest at
a fixed rate of 8.75%.
(2) Represents two notes assumed by the Operating Partnership totalling
approximately $5.2 million collateralized by the Courtyard by Marriott-
Meadowlands. Principal payments on the debt instruments are based on a 25
year and 5 year amortization, respectively, and interest is due monthly.
The debt matures on December 1, 2000 and January 1, 2001, respectively, and
bears interest at fixed rates of 7.5% and 7.89%, respectively.
F-8
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO STATEMENTS OF OPERATIONS--(CONTINUED)
(3) Represents debt assumed by the Operating Partnership of approximately
$9.6 million collateralized by the French Quarter Suites Hotel. The debt
matures in July 2002 and bears interest at a fixed rate of 9.75%.
(4) Represents debt assumed by the Operating Partnership of approximately
$8.2 million collateralized by the Radisson Arlington Heights. Interest
only payments are due quarterly in arrears. The debt will mature not
earlier than the first anniversary of the acquisition by the Operating
Partnership and bears interest at a fixed rate of 7.5%.
Approximately $3.0 million of borrowings under the Line of Credit were
borrowed to fund construction and renovations and were outstanding since
September 18, 1996. The Line of Credit interest expense is based on the 30-day
LIBOR plus 1.85% (7.3%). Such borrowings are collateralized by first mortgage
liens on the Hotels excluding the hotels which collateralize other borrowings
described previously.
As of December 31, 1996, the Company had invested approximately $10.7
million in capital improvements and renovations at the Current Hotels. The
Company has budgeted for 1997 approximately $33.3 million for additional
renovations and refurbishments at these hotels. In addition, the Company has
budgeted approximately $14.5 million to be spent on renovations and
refurbishments at the four Proposed Acquisition Hotels during 1997. Interest
expense related to borrowings incurred after September 30, 1996 to fund these
estimated costs over the next twelve months is not included in the pro forma
statements of operations.
(K) Calculated as 12.1% of income before minority interest.
(L) Represents the Company's historical statement of operations for the
period from July 31, 1996 (inception of operations) to September 30, 1996.
(M) Represents the pro forma statement of operations of the Initial Hotels
for periods prior to July 31, 1996 (inception of operations) adjusted for the
acquisition of the Initial Hotels by the Company and related Formation
Transactions.
F-9
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
The following unaudited Pro Forma Consolidated Balance Sheet is presented as
if the acquisition of the Acquired Hotels and the Proposed Acquisition Hotels
and the comsummation of the Offering and the application of the net proceeds
therefrom as set forth under the caption "Use of Proceeds" had occurred on
September 30, 1996. Such pro forma information is based upon the consolidated
balance sheet of the Company and should be read in conjunction with the
Financial Statements included in this Prospectus. In management's opinion, all
adjustments necessary to reflect the effects of the acquisition of all Hotels
and the consummation of the Offering have been made.
The following Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the financial position of the Company would have been
assuming such transactions had been completed on September 30, 1996, nor does
it purport to represent the future financial position of the Company.
<TABLE>
<CAPTION>
ACQUIRED HOTELS OFFERING AND
AND PROPOSED LINE OF
HISTORICAL ACQUISITION HOTELS CREDIT PRO FORMA
------------ ------------------ ------------- ------------
(A) (B) (C)
<S> <C> <C> <C> <C>
ASSETS
Investment in hotel
properties, net........ $175,613,813 $132,933,755 (D) $308,547,568
Cash and cash
equivalents............ 4,186,235 (3,686,235)(E) $8,353,733 (E) 8,853,733
Accounts receivable,
net.................... 4,100,406 4,100,406
Deferred expenses, net.. 3,106,315 1,567,000 (F) 825,000 (F) 5,498,315
Other assets............ 538,323 538,323
Advances to Lessee...... 315,000 315,000
------------ ------------ ------------- ------------
Total assets........ $187,860,092 $130,814,520 $ 9,178,733 $327,853,345
============ ============ ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt.................... $ 19,297,508 $ 17,778,565 (G) $ 37,076,073
Debt, Line of Credit.... 3,000,000 111,435,955 (H) $(114,435,955)(H) 0
Distributions payable... 2,790,057 2,790,057
Accounts payable,
accrued expenses and
other liabilities...... 6,069,701 1,100,000 (I) 125,000 (I) 7,294,701
Minority interest in
Operating Partnership.. 29,303,428 (63,703)(J) 4,724,069 (J) 33,963,794
------------ ------------ ------------- ------------
Total liabilities... 60,460,694 130,250,817 (109,586,886) 81,124,625
------------ ------------ ------------- ------------
Stockholders' equity:
Common stock.......... 82,620 254 (K) 55,000 (K) 137,874
Additional paid-in
capital.............. 128,163,784 563,449 (L) 118,710,619 (L) 247,437,852
Unearned officers'
compensation......... (872,708) (872,708)
Retained earnings..... 25,702 25,702
------------ ------------ ------------- ------------
Total stockholders'
equity............. 127,399,398 563,703 118,765,619 246,728,720
------------ ------------ ------------- ------------
Total liabilities
and stockholders'
equity............. $187,860,092 $130,814,520 $ 9,178,733 $327,853,345
============ ============ ============= ============
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet.
F-10
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Represents the historical balance sheet of the Company as of September 30,
1996.
(B) Represents the acquisition of the assets relating to the Acquired Hotels
and the Proposed Acquisition Hotels, including estimated closing costs. The
acquisitions are financed through borrowings under the Company's Line of
Credit, assumption of indebtedness, cash on hand (including net proceeds from
the Offering--See Note E) and issuance of 25,397 shares of restricted Common
Stock. Additionally deferred expenses of $1,300,000 related to the Days Inn
Lake Buena Vista hotel and $267,000 of franchise transfer costs related to the
Acquired Hotels and Proposed Acquisition Hotels were incurred. See following
notes.
(C) Represents the net proceeds from the Offering and related allocation to
minority interest and deferred financing fees which are expected to be
incurred as the Company expects to receive a commitment from its lenders to
increase its Line of Credit.
(D) Increase represents the purchase of the following Acquired Hotels and
Proposed Acquisition Hotels, including estimated closing costs (the purchase
included only the land, building and improvements and furniture, fixtures and
equipment except for the $1.3 million allocated to deferred costs from the
Days Inn Lake Buena Vista hotel acquisition):
Purchase of Acquired Hotels, including closing costs:
<TABLE>
<S> <C>
Days Inn Lake Buena Vista.................................. $ 31,850,000
Holiday Inn Resort Monterey................................ 15,790,000
Hilton Hotel--Durham....................................... 12,400,000
------------
Total increase due to the purchase of the Acquired Hotels.. 60,040,000
------------
Purchase of the Proposed Acquisition Hotels, including estimated
closing costs:
Radisson Arlington Heights................................. 12,918,755
Four Points by Sheraton.................................... 17,300,000
French Quarter Suites Hotel................................ 16,300,000
Sheraton Key Largo......................................... 26,375,000
------------
Total increase due to the purchase of the Proposed
Acquisition Hotels........................................ 72,893,755
------------
Total increase due to the purchase of the Acquired Hotels
and Proposed Acquisition Hotels........................... $132,933,755
============
</TABLE>
The allocation of the Acquired Hotels' and Proposed Acquisition Hotels'
purchase price to the assets acquired consists of the following:
<TABLE>
<CAPTION>
PROPOSED
ACQUIRED ACQUISITION
HOTELS HOTELS TOTAL
----------- ----------- ------------
<S> <C> <C> <C>
Land................................ $ 6,004,000 $ 7,289,375 $ 13,293,375
Building and improvements........... 52,234,800 63,417,567 115,652,367
Furniture, fixtures and equipment... 1,801,200 2,186,813 3,988,013
----------- ----------- ------------
$60,040,000 $72,893,755 $132,933,755
=========== =========== ============
</TABLE>
The acquisitions have been accounted for as purchases.
As of December 31, 1996, the Company had invested approximately $10.7
million in capital improvements and renovations at the Current Hotels. The
Company has budgeted for 1997 approximately $33.3 million for
F-11
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
additional renovations and refurbishments at these hotels. In addition, the
Company has budgeted approximately $14.5 million to be spent on renovations
and refurbishments at the four Proposed Acquisition Hotels during 1997. These
estimated costs which will be made over the next twelve months are not
included in the Pro Forma Consolidated Balance Sheet. The capital improvements
are anticipated to be allocated to furniture, fixtures and equipment (30%) and
buildings and improvements (70%), which will be depreciated over 5 years and
39 years, respectively. This depreciation is not included in the Statements of
Operations.
(E) Net decrease represents the following:
<TABLE>
<CAPTION>
ACQUIRED
HOTELS AND
PROPOSED OFFERING AND
ACQUISITION LINE OF
HOTELS CREDIT TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Gross proceeds of the Offering....... $132,687,500 $132,687,500
Underwriters' discount............... (7,297,812) (7,297,812)
Other expected expenses of the
Offering............................ (1,900,000) (1,900,000)
Cash payments to acquire the Acquired
Hotels, including closing costs (The
Company also issued restricted
Common Stock of $500,000)........... $(59,540,000) (59,540,000)
Cash payments to acquire the Proposed
Acquisition Hotels including closing
costs (The Company also assumed debt
of $17,778,565)..................... (54,015,190) (54,015,190)
Payment of anticipated loan costs
related to the Line of Credit....... (700,000) (700,000)
Payment of franchise transfer costs
and other deferred expenses......... (1,567,000) (1,567,000)
Borrowings (payments) under Line of
Credit.............................. 111,435,955 (114,435,955) (3,000,000)
------------ ------------ ------------
$ (3,686,235) $ 8,353,733 $ 4,667,498
============ ============ ============
</TABLE>
The Company's borrowing limit under its Line of Credit is $100 million. The
Company expects to receive a commitment from its lenders to increase the line
to $150 million. The Company will be required to utilize a portion of the net
proceeds from the Offering to fund the acquisition of certain of the Proposed
Acquisition Hotels.
(F) Net increase represents the following:
<TABLE>
<S> <C>
Deferred costs related to the acquisition of Days Inn Lake
Buena Vista................................................. $1,300,000
Franchise transfer costs relating to the Acquired Hotels and
Proposed Acquisition Hotels................................. 267,000
----------
1,567,000
Deferred loan costs related to the Line of Credit............ 825,000
----------
$2,392,000
==========
</TABLE>
Deferred loan costs related to the expected increase in the borrowing limit
under the Company's Line of Credit consist of a commitment fee, attorney fees,
appraisal costs, surveys, etc. to be paid from the proceeds of the Offering
($700,000) and a fee payable at the date the Company exercises its option to
extend the term of the Line of Credit ($125,000).
F-12
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(G) Represents debt assumed in connection with the acquisitions of the
Radisson Arlington Heights ($8,218,755) and the French Quarter Suites Hotel
($9,559,810). The Radisson Arlington Heights debt bears interest at a fixed
rate of 7.5% and will mature not earlier than the first anniversary of the
acquisition by the Operating Partnership. The French Quarter Suites Hotel debt
bears interest at a fixed rate of 9.75% and matures on July 2002. Each hotel
collateralizes the related debt.
(H) Represents the repayment of borrowings after the purchase of the
Acquired Hotels and Proposed Acquisition Hotels and related transactions and
use of the net proceeds from the Offering. The Company's borrowing limit under
its Line of Credit is $100 million. The Company expects to receive a
commitment from its lenders to increase the Line of Credit to $150 million.
(I) Represents deferred loan costs which are payable at the date the Company
exercises its option to extend the term of the Line of Credit. Also includes
$1.1 million which represents the estimated amount payable to the seller of
the Radisson Arlington Heights under the sellers right to receive a 25% profit
interest in the net cash flow and proceeds from certain capital transactions
generated at the hotel; provided however the Company has the option to
purchase the profit interest for an amount equal to 25% of the fair market
value of the hotel less the aggregate of $11.2 million plus the cost of any
additional expansion of the hotel at any time after the fourth anniversary of
the completion of renovations at the hotel.
(J) Represents the recognition of minority interest in the Operating
Partnership that will not be owned by the Company (12.1%).
(K) Represents the $0.01 par value of the Common Stock issued in connection
with the acquisition of the Days Inn Lake Buena Vista hotel and the Offering.
(L) Represents the following proposed transactions:
<TABLE>
<S> <C>
Gross proceeds of the Offering............................ $132,687,500
Underwriters' discount.................................... (7,297,812)
Other estimated expenses of the Offering.................. (1,900,000)
Par value of Common Stock................................. (55,254)
Shares issued in connection with the acquisition of the
Days Inn Lake Buena Vista hotel ......................... 500,000
Allocation to minority interest in Operating
Partnership.............................................. (4,660,366)
------------
$119,274,068
============
</TABLE>
The pro forma consolidated balance sheet does not include any proceeds from
the sale of Common Stock or OP Units (the "Alliance Securities") under the
Wyndham Alliance. In connection with the conversion of a hotel to the Wyndham
brand, Wyndham will acquire the Alliance Securities with a value equal to nine
times the estimated franchise fee that is payable to Wyndham during the first
twelve months such hotel is operated as a Wyndham hotel.
The Company anticipates the Le Baron Airport Hotel to be converted to the
Wyndham brand in April 1997. Accordingly, approximately $2.5 million of
Alliance Securities are anticipated being sold pursuant to the Wyndham
Alliance for this hotels.
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying consolidated balance sheet and financial
statement schedule of American General Hospitality Corporation as of September
30, 1996 and the related consolidated statements of operations, shareholders'
equity and cash flows for the period from July 31, 1996 (inception of
operations) through September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
General Hospitality Corporation as of September 30, 1996 and the consolidated
results of their operations and their cash flows for the period from July 31,
1996 (inception of operations) through September 30, 1996 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Dallas, Texas
November 27, 1996, except for Note 10,
as to which the date is January 8, 1997
F-14
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in hotel properties:
Land and land improvements.......................................... $ 12,523,202
Buildings and improvements.......................................... 152,052,563
Furniture, fixtures and equipment................................... 10,018,789
Construction-in-progress............................................ 3,580,951
------------
178,175,505
Less: accumulated depreciation....................................... (2,561,692)
------------
Net investment in hotel properties................................... 175,613,813
Cash and cash equivalents............................................ 4,186,235
Percentage lease receivable--AGH Leasing, L.P........................ 4,093,764
Deferred expenses, net............................................... 3,106,315
Other assets......................................................... 544,965
Note receivable--Lessee.............................................. 315,000
------------
Total assets..................................................... $187,860,092
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt................................................................. $ 19,297,508
Debt, Line of Credit................................................. 3,000,000
Distributions payable................................................ 2,790,057
Accounts payable, accrued expenses and other liabilities............. 6,069,701
Minority interest in Operating Partnership........................... 29,303,428
------------
Total liabilities................................................ 60,460,694
------------
Commitments and contingencies (Notes 4 and 5)
Shareholders' equity:
Common stock $0.01 par value per share, 100,000,000 shares
authorized,
8,262,008 shares issued and outstanding............................. 82,620
Additional paid-in capital........................................... 128,163,784
Unearned officers' compensation...................................... (872,708)
Earnings in excess of distributions.................................. 25,702
------------
Total shareholders' equity....................................... 127,399,398
------------
Total liabilities and shareholders' equity....................... $187,860,092
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 31, 1996 (INCEPTION OF OPERATIONS) THROUGH SEPTEMBER
30, 1996
<TABLE>
<S> <C>
Revenues:
Participating Lease revenue ....................................... $5,218,526
Interest income ................................................... 32,227
----------
Total revenue ................................................... 5,250,753
----------
Expenses:
Depreciation ...................................................... 1,008,874
Amortization of deferred loan costs ............................... 104,167
Amortization of franchise fees..................................... 10,877
Amortization of other deferred expenses............................ 1,528
Real estate and personal property taxes and property insurance .... 511,115
General and administrative ........................................ 194,226
Ground lease expense .............................................. 218,000
Amortization of unearned officers' compensation ................... 14,792
Interest expense .................................................. 347,622
----------
Total expenses .................................................. 2,411,201
----------
Income before minority interest ..................................... 2,839,552
Minority interest ................................................... 545,102
----------
Net income applicable to common shareholders .................... $2,294,450
==========
Per Common Share Information:
Net income per common share ..................................... $ 0.29
==========
Weighted average number of common shares outstanding ................ 8,002,331
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 12, 1996 (DATE OF CAPITALIZATION) THROUGH SEPTEMBER
30, 1996
<TABLE>
<CAPTION>
ADDITIONAL UNEARNED EARNINGS IN
COMMON STOCK PAID-IN OFFICERS' EXCESS OF
SHARES DOLLARS CAPITAL COMPENSATION DISTRIBUTIONS TOTAL
--------- ------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common
shares, net of offering
expenses and allocation
to minority interest
($1,974,994)........... 8,212,008 $82,120 $127,276,784 $127,358,904
Issuance of officers'
shares................. 50,000 500 887,000 $(887,500)
Distributions declared
September 28, 1996
($0.2746 per share).... $(2,268,748) (2,268,748)
Amortization of unearned
officers'
compensation........... 14,792 14,792
Net income.............. 2,294,450 2,294,450
--------- ------- ------------ --------- ----------- ------------
Balance at September 30,
1996................... 8,262,008 $82,620 $128,163,784 $(872,708) $ 25,702 $127,399,398
========= ======= ============ ========= =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 31, 1996 (INCEPTION OF OPERATIONS) THROUGH SEPTEMBER
30, 1996
<TABLE>
<S> <C>
Cash flow from operating activities:
Net income................................................... $ 2,294,450
Adjustments to reconcile net income to net cash provided by
operating
activities, net of effects of acquisitions:
Depreciation............................................... 1,008,874
Amortization............................................... 131,364
Minority interest.......................................... 545,102
Changes in assets and liabilities:
Percentage lease receivable--AGH Leasing, L.P.............. (4,093,764)
Payment of organization costs and franchise fees........... (722,887)
Other assets............................................... (544,965)
Accounts payable, accrued expenses and other liabilities... 6,069,701
-------------
Net cash flow provided by operating activities........... 4,687,875
-------------
Cash flows from investing activities:
Purchase of hotel properties and related assets.............. (126,645,935)
Improvements and additions to hotel properties............... (3,580,951)
-------------
Net cash flow used in investing activities............... (130,226,886)
-------------
Cash flows from financing activities:
Proceeds from borrowings..................................... 13,000,000
Net proceeds from public offering............................ 129,333,898
Principal payments on borrowings............................. (10,108,752)
Payments for deferred loan costs............................. (2,500,000)
-------------
Net cash flow provided by financing activities........... 129,725,146
-------------
Net change in cash and cash equivalents...................... 4,186,135
Cash and cash equivalents as of July 31, 1996 (inception of
operations)................................................... 0
-------------
Cash and cash equivalents as of September 30, 1996............. $ 4,186,135
=============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 309,435
=============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
Organization--American General Hospitality Corporation (the "Company" or the
"Registrant") was incorporated and formed on April 12, 1996 as a Maryland
corporation which intends to qualify as a real estate investment trust
("REIT"). The Company commenced operations on July 31, 1996 (see Initial
Public Offering discussion below). Upon commencement of operations, the
Company acquired equity interests in 13 hotels (the "Initial Hotels"). Four of
the Initial Hotels (the "AGH Predecessor Hotels") were acquired primarily from
limited partnerships controlled by the shareholders of American General
Hospitality, Inc. (the "AGHI Affiliates"). The remaining nine Initial Hotels
(the "Other Initial Hotels") were acquired primarily from parties unaffiliated
with the Company through contracts with the sellers acquired from an AGHI
affiliate.
Upon completion of the initial public offering described below, the Company,
through wholly owned subsidiaries, acquired an approximate 81.3% equity
interest in American General Hospitality Operating Partnership, L.P. (the
"Operating Partnership"). A wholly owned subsidiary of the Company is the sole
general partner of the Operating Partnership. The Operating Partnership and
entities which it controls own the Initial Hotels and lease them to AGH
Leasing, L.P. (the "Lessee"), which is owned, in part, by certain officers of
the Company, under operating leases ("Participating Leases") which provide for
rent based on the revenues of the Initial Hotels. The Lessee has entered into
management agreements pursuant to which the Initial Hotels are managed by
American General Hospitality, Inc. ("AGHI").
Initial Public Offering--As of July 31, 1996, the Company completed an
initial public offering of 7,500,000 shares of its common stock and an
additional 575,000 shares of common stock were issued by the Company on August
28, 1996 upon exercise of the underwriters' over-allotment option at a price
per common share of $17.75 (the "IPO"). In addition, concurrently with the
July 31, 1996 closing of the IPO, the Company acquired interests in five of
the Initial Hotels from the AGHI Employee Retirement Savings Plan (the
"Retirement Plan") in exchange for 137,008 shares. Upon consummation of the
IPO, the Company contributed all of the net proceeds of the IPO ($129.3
million after deducting IPO expenses), together with interests in five of the
Initial Hotels acquired in connection with the Retirement Plan acquisition, to
AGH GP, Inc. ("General Partner") and AGH LP, Inc. ("Limited Partner"), which,
in turn, contributed such proceeds and interests to the Operating Partnership
in exchange for an approximate 81.3% equity interest in the Operating
Partnership. The General Partner, a wholly owned subsidiary of the Company,
owns a 1.0% interest in the Operating Partnership. The Limited Partner, also a
wholly owned subsidiary of the Company, owns an approximate 80.3% limited
partnership interest in the Operating Partnership.
Also on July 31, 1996 the Operating Partnership acquired directly or
indirectly the remaining interests in each of the Initial Hotels for an
aggregate of 1,896,996 units of limited partnership interest in the Operating
Partnership ("OP Units") (560,178 OP Units to the Primary Contributors, which
consist of the principals of AGHI and the Lessee and certain of their
respective affiliates and 1,336,818 OP Units to parties unaffiliated with the
Primary Contributors) and approximately $91.0 million in cash to parties
unaffiliated with the Primary Contributors. At the time of their acquisition,
the Initial Hotels were subject to approximately $52.9 million in mortgage
indebtedness of which approximately $33.5 million was repaid from the net
proceeds of the Offering and the initial draw from the Line of Credit. On
August 28, 1996, the outstanding borrowings under the Line of Credit were
repaid with proceeds of the exercise of the underwriters' over-allotment
option. The Operating Partnership reimbursed AGHI for approximately $900,000
for direct out-of-pocket expenses incurred in connection with the acquisition
of the Initial Hotels, including legal, environmental and engineering
expenses. In addition, concurrent with the consummation of the IPO, the
Operating Partnership sold certain personal property relating to certain of
the Initial Hotels to the Lessee in exchange for a series of three five-year
recourse promissory notes in the aggregate principal amount of $315,000 that
are collateralized by such personal property.
Upon the closing of the Offering, the Company closed a $100 million line of
credit with a consortium of banks led by Societe Generale, Southwest Agency
and Bank One, Texas, N.A. (the "Line of Credit"). The Line
F-19
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of Credit is collateralized by, among other things, first mortgage liens on
all of the Initial Hotels, other than the Holiday Inn Dallas DFW Airport South
and the Courtyard by Marriott-Meadowlands, which hotels collateralize other
indebtedness. The Line of Credit has an initial term of three years that is
subject to extension under certain circumstances for an additional one-year
term. Borrowings under the Line of Credit bear interest at 30-day, 60-day or
90-day LIBOR (the "London Interbank Offered Rate"), at the option of the
Company, plus 1.85% per annum, payable monthly in arrears or one-half percent
in excess of the prime rate.
At September 30, 1996, the Company owned a 81.3% interest in the Operating
Partnership. The Operating Partnership owned 13 hotels and leased them to the
Lessee. The Lessee has entered into management agreements pursuant to which
all hotels are managed by AGHI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation--The consolidated financial statements include
the accounts of the Company and the Operating Partnership. All significant
intercompany balances and transactions have been eliminated.
Investment in Hotel Properties--Hotel properties are stated at cost and are
depreciated using the straight-line method over estimated useful lives of 39
years for buildings and improvements and 5 to 7 years for furniture, fixtures
and equipment.
The Company periodically reviews the carrying value of each of its
investments in hotel properties to determine if circumstances exist indicating
an impairment in the carrying value of the investment in hotel property or
that depreciation periods should be modified. If facts or circumstances
support the possibility of impairment, the Company will prepare a projection
of the undiscounted future cash flows, without interest charges, of the
specific hotel property and determine if the investment in hotel property is
recoverable based on the undiscounted future cash flows. Management of the
Company does not believe that their are any factors or circumstances
indicating impairment of any of its investment in hotel properties.
Maintenance and repairs are charged to operations as incurred; major
renewals and improvements are capitalized. Upon the sale or disposition of a
fixed asset, the asset and related accumulated depreciation accounts are
removed from the accounts and the related gain or loss is included in
operations.
Cash and Cash Equivalents--All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Deferred Expenses--Organizational costs of approximately $40,287, deferred
loan costs of approximately $2,500,000 and franchise fees of approximately
$682,600 at September 30, 1996 are stated at cost. Amortization of
organization costs is computed using the straight-line method over five years.
Amortization of deferred loan costs is computed using the effective yield
method over the original term of the related debt of four years. Amortization
of franchise fees is computed using the straight-line method over the average
life of the franchise agreements of approximately 10 years. Accumulated
amortization at September 30, 1996 is $116,572.
Revenue Recognition--Percentage Lease revenue is recognized when earned from
the Lessee under the Percentage Lease agreements (see Note 4). The
Participating Lease revenue is based on a percentage of room revenues, food
and beverage revenues and telephone and other revenues. The departmental
revenue thresholds in the Participating Leases are seasonally adjusted for
interim periods and the Participating Lease formulas adjust effective January
1, 1997 by a percentage equal to the percentage increase in the Consumer Price
Index as compared to the prior year. Additionally, seven of the Initial Hotels
will have further adjustments to the Participating Lease formulas due to the
significant renovations expected to be completed on those hotels in 1997. The
Lessee is in compliance with its obligations stipulated in the Percentage
Leases.
F-20
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At September 30, 1996, the Lessee owed the Company $4,093,764 under the
Participating Leases which was paid in November 1996.
Net Income Per Common Share--Net income per common share is computed by
dividing net income applicable to common shareholders by the weighted average
number of common shares and equivalents outstanding. Common share equivalents
that have a dilutive effect represent the restricted shares issued to certain
officers. For the period from July 31, 1996 through September 30, 1996, the
outstanding common stock options had an immaterial dilutive effect.
Distributions--The Company pays regular quarterly distributions which are
dependent on receipt of distributions from the Operating Partnership.
Income Taxes--The Company intends to qualify as a REIT under Section 856
through 860 of the Internal Revenue Code. Accordingly, no provision for
federal income taxes has been reflected in the consolidated financial
statements.
Earnings and profits, which will determine the taxability of distributions
to shareholders, will differ from income reported for financial reporting
purposes due to the differences for federal tax purposes primarily in the
estimated useful lives used to compute depreciation.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk--The Company places cash deposits at a major
bank. At September 30, 1996, bank account balances exceeded Federal Deposit
Insurance Corporation limits by approximately $2.5 million. Management
believes credit risk related to these deposits is minimal.
3. DEBT OBLIGATIONS
Debt at September 30, 1996 consists of the following:
<TABLE>
<S> <C>
First mortgage note payable in monthly installments including
interest at the fixed rate of 8.75%; maturing on February 1, 2011
at which time a balloon payment of approximately $6,120,000 will
be due and payable collateralized by the Holiday Inn Dallas DFW
Airport South hotel............................................... $14,069,257
First mortgage note payable in monthly installments including
interest at the fixed rate of 7.5%; maturing on December 1, 2001
at which time a balloon payment of approximately $3,985,000 will
be due and payable collateralized by the Courtyard by Marriott-
Meadowlands hotel................................................. 4,579,142
Construction loan payable in monthly installments including
interest at the fixed rate of 7.89%; maturing on January 1, 2001
collateralized by the Courtyard by Marriott-Meadowlands hotel..... 649,109
-----------
19,297,508
Line of Credit..................................................... 3,000,000
-----------
Total debt obligations............................................. $21,297,508
===========
</TABLE>
F-21
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has an $100 million Line of Credit which matures on July 31,
1999. At September 30, 1996, the Company has approximately $57 million
available for borrowing under the Line of Credit ($41.2 million after closing
the Days Inn Lake Buena Vista Hotel acquisition and its admission into the
approved borrowing base--see note 10). The Company expects that its borrowing
capacity under the Line of Credit will increase to approximately $100 million,
assuming all additional borrowings are used to fund capital improvements to
the hotels or the acquisition of additional hotels. Borrowings under the Line
of Credit bear interest at 30-day, 60-day or 90-day LIBOR, at the option of
the Company, plus 1.85% per annum (7.28% at September 30, 1996), payable
monthly in arrears or one-half percent in excess of prime rate.
The Line of Credit is collateralized by the Company's investment in hotel
properties other than the hotel properties collateralizing the previous debt
obligations.
Aggregate annual principal payments for the Company's debt at September 30,
1996 are as follows.
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
Remainder of 1996............................................. $ 135,499
1997.......................................................... 557,816
1998.......................................................... 584,965
1999.......................................................... 3,614,586
2000.......................................................... 646,906
2001 and thereafter........................................... 16,757,736
-----------
$22,297,508
===========
</TABLE>
4. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
Franchise and Management Fees
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements which
expire from 1998 to 2013. Franchise costs are based upon varying percentages
of gross room revenue ranging from 1.0% to 5.0%. These fees are paid by the
Lessee. No franchise costs were incurred for the Le Baron Airport Hotel or the
Hotel Maison de Ville.
The hotels are managed by AGHI on behalf of the Lessee. The Lessee pays AGHI
a base management fee of 1.5% of total revenue and an incentive fee of up to
2.0% of total revenue. The incentive fee, if applicable, is equal to 0.025% of
annual total revenue for each 0.1% increase in annual total revenue over the
total revenues for the preceding twelve month period up to the maximum
incentive fee.
Each hotel, except the Le Baron Airport Hotel and the Hotel Maison de Ville,
is required to remit varying percentages of gross room revenues ranging from
1.0% to 5.0% to the various franchisors for sales and advertising expenses
incurred to promote the hotel at the national level. Additional sales and
advertising costs are incurred at the local property level. These fees are
paid by the Lessee.
Participating Leases
The Lessee has future lease commitments to the Company under the
Participating Leases which expire in July, 2008. Minimum future rental income
(i.e., base rents) under these noncancellable Participating Leases at
September 30, 1996 is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------------
<S> <C>
Remainder of 1996........................................... $ 5,109,002
1997........................................................ 20,096,208
1998........................................................ 20,849,816
1999........................................................ 21,631,684
2000........................................................ 22,442,872
2001 and thereafter......................................... 200,608,680
------------
Total................................................... $290,738,262
============
</TABLE>
F-22
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the Participating Leases, the Company is obligated to pay the costs of
real estate and personal property taxes, property insurance and maintaining
underground utilities and structural elements of the Initial Hotels.
Additionally, the Company is required to establish annual minimum reserves
equal to 4.0% of total revenue for each of the Hotels which will be utilized
by the Lessee for the replacement and refurbishment of furniture, fixtures &
equipment ("FF&E") and other capital expenditures to enhance the competitive
position of the Hotels. At September 30, 1996, $425,710 of cash is reserved
for capital investments.
Ground Leases
Four of the Initial Hotels are subject to ground leases with third parties
with respect to the land underlying each such hotel. The ground leases are
triple net leases which require the tenant to pay all expenses of owning and
operating the hotel, including real estate taxes and structural maintenance
and repair.
The Courtyard by Marriott-Meadowlands is subject to a ground lease with
respect to approximately 0.37 acres. The ground lease terminates in March,
2036, with two ten-year options to renew. The lease requires a fixed rent
payment equal to $150,000 per year, subject to a 25.0% increase every five
years thereafter beginning in 2001 and a percentage rent payment equal to 3.0%
of gross room revenues.
The Fred Harvey Albuquerque Airport Hotel is subject to a ground lease with
respect to approximately 10 acres. The ground lease terminates in December
2013, with two five-year options to renew. The lease requires a fixed rent
payment equal to $19,180 per year subject to annual consumer price index
adjustment and a percentage rent payment equal to 5.0% of gross room revenues,
3.0% of gross receipts from the sale of alcoholic beverages, 2.0% of gross
receipts from the sale of food and non-alcoholic beverages and 1.0% of gross
receipts from the sale of other merchandise or services. The lease also
provides the landlord with the right, subject to certain conditions, to
require the Company, at its expense, to construction 100 additional hotel
rooms if the occupancy rate at the hotel is 85.0% or more for 24 consecutive
months and to approve any significant renovations scheduled at the hotel. The
occupancy rate at the Fred Harvey Albuquerque Airport Hotel for the twelve
months ended September 30, 1996 was 81.8%.
The Hilton Hotel-Toledo is subject to a ground lease with respect to
approximately 8.8 acres. The ground lease terminates in June 2026, with four
successive renewal options, each for a ten-year term. The lease requires
annual rent payments equal to $25,000, increasing to $50,000 or $75,000 if
annual gross room revenues exceed $3.5 million or $4.5 million, respectively.
The Le Baron Airport Hotel is subject to a ground sublease with respect to
approximately 5.3 acres, which in turn is subject to a ground lease covering a
larger tract of land. The sublease terminates in 2022, with one 30-year option
to renew. The sublease requires the greater of a fixed minimum annual rent of
$75,945 (increasing to an annual minimum rent of $100,000 if the option is
exercised) or, in the aggregate, 4.0% of gross room revenues, 2.0% of gross
food receipts, and 3.0% of gross bar and miscellaneous operations receipts.
The sublease also provides the sublessor with the right to approve any
significant renovations scheduled at the hotel.
Minimum future rental payments for the Company at September 30, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
Remainder of 1996.................................... $ 98,550
1997................................................. 343,846
1998................................................. 361,416
1999................................................. 366,866
2000................................................. 372,725
2001 and thereafter.................................. 18,425,301
-----------
Total.............................................. $19,968,704
===========
</TABLE>
F-23
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. EMPLOYEE BENEFITS
The Board of Directors adopted the American General Hospitality Corporation
1996 Incentive Plan (the "1996 Plan") and the American General Hospitality
Corporation Non-Employee Directors' Incentive Plan (the "Directors' Plan".)
The 1996 Plan--Each employee of the Company or of an affiliate of the
Company (other than employees of the Lessee and AGHI who are not also
employees of the Company), or any other person whose efforts contribute to the
Company's performance is eligible to participate in the 1996 Plan. The
Compensation Committee of the Board of Directors may grant stock options,
stock awards, incentive awards or performance shares to participants. Under
the 1996 Plan, the total number of shares available for grant is 900,000
shares of Common Stock of which not more than 50,000 shares may be granted as
stock awards.
The Directors' Plan--A maximum of 100,000 shares of Common Stock may be
issued under the Directors' Plan. The Directors' Plan provides that each
director will be awarded nonqualified options to purchase 10,000 shares of
Common Stock at the fair market value at the date of grant.
Concurrent with the IPO, the Company granted to the Company's officers and
directors options ("Options") to acquire an aggregate 400,000 shares of Common
Stock at an exercise price of $17.75 per share (the Offering Price) and stock
awards ("Awards") representing 50,000 shares of restricted Common Stock. The
Options and Awards vest and are exercisable over five years. The Options
expire in 2006. As of September 30, 1996, no options had been exercised.
Employment Agreements--The Company entered into an employment agreement with
Mr. Steven D. Jorns, the Company's Chairman of the Board, President and Chief
Executive Officer for a term of five years at an initial annual base
compensation of $100,000, subject to any increases in base compensation
approved by the Compensation Committee. In addition, the Company entered into
employment agreements with three other executive officers each for a term of
five years at an aggregate annual base compensation of $230,000.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107 requires all
entities to disclose the fair value of certain financial instruments in their
financial statements. Accordingly, the Company reports the carrying amount of
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other liabilities at cost which approximates fair value due to
the short maturity of these instruments. The carrying amount of the Company's
debt obligations approximates fair value due to the Company's ability to
obtain such borrowings at comparable interest rates.
7. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in
October 1995. This statement encourages companies to recognize stock-based
compensation using new fair value accounting rules and requires companies not
adopting such rules to include fair value financial disclosures. The Company
has elected to adopt the disclosure requirements and has determined that the
additional disclosures as a result of this pronouncement are not significant.
8. NON-CASH INVESTING AND FINANCING ACTIVITIES.
The Operating Partnership issued 506,825 OP Units to AGHI Affiliates,
137,008 shares of restricted common stock to the Retirement Plan and cash of
$282,229 in exchange for the AGH Predecessor Hotels' investment in hotel
properties of $22,757,560 (recorded at carryover historical cost) and assumed
related debt of $20,114,415, resulting in an assumed net surplus of
$2,643,145.
F-24
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Operating Partnership issued 1,336,818 OP Units to parties unaffiliated
with the Primary Contributors, 53,353 OP Units to the Primary Contributors and
assumed $14,138,270 of indebtedness in exchange for partial interests in four
Initial Hotels.
The Operating Partnership advanced $315,000 in the form of a note receivable
to the Lessee for the purchase of FF&E.
The Company issued 50,000 shares of restricted common stock to four
executive officers which, at the date of issuance, were valued at $17.75 per
share.
At September 28, 1996, $2,790,057 in distributions to common share and OP
Unit holders had been declared but not yet paid.
9. PRO FORMA INFORMATION (UNAUDITED)
Due to the impact of the IPO and related Formation Transactions including
the acquisitions of the Initial Hotels, the historical results of operations
may not be indicative of future results of operations and net income per
common share. The following unaudited pro forma information for the year ended
December 31, 1995 and the nine months ended September 30, 1996 are presented
as if the transactions previously described had occurred on January 1, 1995,
and all of the hotels had been leased to the Lessee pursuant to the Percentage
Leases since that date.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Participating lease revenue........... $24,754,071 $21,527,411
Net income applicable to common
shareholders......................... $ 8,552,010 $ 9,716,196
Net income per common share........... $ 1.04 $ 1.18
Weighted average number of common
shares outstanding................... 8,262,008 8,262,008
</TABLE>
10. SUBSEQUENT EVENTS
On October 22, 1996, the Company and the Operating Partnership purchased
100.0% of the limited and general partnership interest in the Lake Buena Vista
Partners, Ltd. (the "Partnership") from the partners of the Partnership,
Kessler Lake Buena Vista, Ltd., Milstein Lake Buena Vista Limited Partnership
and Edward L. Milstein. The Partnership, which owns the 490 room Days Inn Lake
Buena Vista Resort & Suites in Lake Buena Vista, Florida (the "Days Inn Lake
Buena Vista hotel"), was acquired for a purchase price of $30,500,000, plus
estimated closing costs of $300,000, which is payable as follows: (i)
$30,000,000 in cash, and (ii) $500,000 through the issuance of 25,397 shares
of restricted common stock of the Company. In connection with this
acquisition, the Operating Partnership also entered into agreements to
purchase a license and an association membership, as well as construction,
design and other services related to the Days Inn Lake Buena Vista hotel from
parties affiliated with one of the sellers for approximately $2,350,000.
On November 21, 1996, the Company and the Operating Partnership purchased
the 204-room Holiday Inn Resort Monterey from an unrelated third party for a
purchase price of approximately $15.5 million in cash plus estimated closing
costs of $300,000. The cash required to acquire the hotel was provided from
borrowings under the Line of Credit.
On January 2, 1997, the Company's board of directors approved the filing of
a registration statement on Form S-11 for the issuance of 5,500,000 shares of
Common Stock.
On January 8, 1997, the Company and the Operating Partnership purchased the
152-room Hilton Hotel in Durham, North Carolina from an unrelated third party.
The acquisition cost of approximately $12.1 million was provided by cash on
hand and borrowings from the Line of Credit.
The Company has entered into contracts to purchase four hotels (the
"Proposed Acquisition Hotels") for an aggregate purchase price, including
closing costs, of approximately $72.9 million. The closing of the purchase of
each of the Proposed Acquisition Hotels is subject to satisfactory completion
of various closing conditions.
F-25
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED GROSS AMOUNTS AT
SUBSEQUENT TO WHICH CARRIED
INITIAL COST ACQUISITION AT COST OF PERIOD
------------------------ -------------------- ------------------------ ACCUMULATED
DEPRECIATION
BUILDING BUILDING BUILDING BUILDING
AND AND AND AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL IMPROVEMENTS
----------- ------------ ----------- ------------ ------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Courtyard by
Marriott
Meadowlands
Secaucus, NJ $ 5,228,251 $ 4,780,496 $ 965,831 $ 5,746,327 $ 5,746,327 $ 341,828
Hampton Inn
Richmond Airport
Richmond, VA $ 505,000 3,590,369 $28,405 464,211 $ 533,405 4,054,580 4,587,985 166,862
Holiday Inn
Dallas DFW
Airport West
Bedford, TX 816,515 6,532,118 23,442 1,173,901 839,957 7,706,019 8,545,976 203,264
Hotel Maison De
Ville
New Orleans, LA 175,000 1,641,777 39,126 1,040,180 214,126 2,681,957 2,896,083 107,981
Holiday Inn
Dallas DFW
Airport South
Dallas, TX 14,069,257 2,468,943 20,986,013 2,468,943 20,986,013 23,454,956 89,670
Holiday Inn Park
Center Plaza
San Jose, CA 1,249,414 10,869,901 1,249,414 10,869,901 12,119,315 46,442
Fred Harvey
Albuquerque
Airport Hotel
Albuquerque, NM 9,037,689 9,037,689 9,037,689 38,607
Holiday Inn
Select--Madison
Madison, WI 2,135,059 18,148,002 2,135,059 18,148,002 20,283,061 77,526
Holiday Inn New
Orleans
International
Airport
Kenner, LA 2,391,580 20,328,433 2,391,580 20,328,433 22,720,013 86,819
Days Inn Ocean
City
Ocean City, MD 736,514 6,407,673 736,514 6,407,673 7,144,187 27,364
Le Baron Airport
Hotel
San Jose, CA 19,102,129 19,102,129 19,102,129 81,596
Holiday Inn
Mission Valley
San Diego, CA 1,954,204 17,001,577 1,954,204 17,001,577 18,955,781 72,613
Hilton Hotel--
Toledo
Toledo, OH 9,982,263 9,982,263 9,982,263 42,812
----------- ----------- ------------ ------- ---------- ----------- ------------ ------------ ----------
$19,297,508 $12,432,229 $148,408,440 $90,973 $3,644,123 $12,523,202 $152,052,563 $164,575,765 $1,383,384
=========== =========== ============ ======= ========== =========== ============ ============ ==========
<CAPTION>
NET LIFE
BOOK VALUE UPON WHICH
BUILDING DEPRECIATION
AND DATE OF DATE OF IN STATEMENT
DESCRIPTION IMPROVEMENTS CONSTRUCTION ACQUISITION IS COMPUTED
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Courtyard by
Marriott
Meadowlands
Secaucus, NJ $ 5,404,499 1989 1993 39 YRS
Hampton Inn
Richmond Airport
Richmond, VA 4,421,123 1972 1994 39 YRS
Holiday Inn
Dallas DFW
Airport West
Bedford, TX 8,342,712 1974 1995 39 YRS
Hotel Maison De
Ville
New Orleans, LA 2,788,102 1778 1994 39 YRS
Holiday Inn
Dallas DFW
Airport South
Dallas, TX 23,365,286 1974 1996 39 YRS
Holiday Inn Park
Center Plaza
San Jose, CA 12,072,873 1975 1996 39 YRS
Fred Harvey
Albuquerque
Airport Hotel
Albuquerque, NM 8,999,082 1972 1996 39 YRS
Holiday Inn
Select--Madison
Madison, WI 20,205,535 1987 1996 39 YRS
Holiday Inn New
Orleans
International
Airport
Kenner, LA 22,633,194 1973 1996 39 YRS
Days Inn Ocean
City
Ocean City, MD 7,116,823 1989 1996 39 YRS
Le Baron Airport
Hotel
San Jose, CA 19,020,533 1974 1996 39 YRS
Holiday Inn
Mission Valley
San Diego, CA 18,883,168 1970 1996 39 YRS
Hilton Hotel--
Toledo
Toledo, OH 9,939,451 1987 1996 39 YRS
------------
$163,192,381
============
</TABLE>
<TABLE>
<CAPTION>
PERIOD JULY 31
THROUGH
SEPTEMBER 30,
1996
--------------
<S> <C>
(a) Reconciliation of Land and Buildings and Improvements:
Balance at July 31, 1996(1) $ 20,078,175
Additions for the period 144,497,590
------------
Balance at September 30, 1996 $164,575,765
============
(b) Reconciliation of Accumulated Depreciation:
Balance at July 31, 1996(1) $ 737,503
Depreciation for the period 645,881
------------
Balance at September 30, 1996 $ 1,383,384
============
</TABLE>
- -----
(1) Represents amounts from AGH Predecessor Hotels as of July 30, 1996
F-26
<PAGE>
LESSEE
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995, THE TWELVE MONTHS ENDED SEPTEMBER 30,
1996 ANDTHE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
The following unaudited Pro Forma Combined Statements of Operations are
presented as if the consummation of the IPO and related Formation
Transactions, the acquisition of all Hotels, and the consummation of the
Offering and the application of the net proceeds therefrom had occurred on
January 1, 1995, and all of the Hotels had been leased by the Lessee pursuant
to the Participating Leases since that date. Such information should be read
in conjunction with the Financial Statements included in this Prospectus. In
management's opinion, all adjustments necessary to reflect the effects of the
Offering have been made.
The following unaudited Pro Forma Combined Statements of Operations are not
necessarily indicative of what results of operations of the Lessee would have
been assuming such transactions had been completed on January 1, 1995, nor
does it purport to represent the results of operations for future periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------
REDUCTION
PROPOSED IN
INITIAL ACQUIRED ACQUISITION MANAGEMENT
HOTELS HOTELS HOTELS FEES TOTAL
----------- ----------- ----------- ---------- -----------
(A) (A) (A) (D)
<S> <C> <C> <C> <C> <C>
Revenues:
Room revenue (B)....... $55,330,171 $14,240,840 $17,353,861 $86,924,872
Food and beverage
revenue (B)........... 18,191,504 3,791,094 5,136,591 27,119,189
Other revenue (B)...... 4,363,432 2,107,943 1,099,925 7,571,300
----------- ----------- ----------- -----------
Total revenue........ 77,885,107 20,139,877 23,590,377 121,615,361
----------- ----------- ----------- -----------
Expenses:
Property operating
costs and expenses
(C) .................. 29,624,254 7,435,674 8,911,869 45,971,797
General and
administrative (C).... 7,020,088 1,655,888 2,007,890 10,683,866
Advertising and
promotion............. 4,625,086 1,282,980 1,593,413 7,501,479
Repairs and
maintenance........... 3,296,167 1,093,827 1,198,947 5,588,941
Utilities.............. 3,546,149 975,778 1,159,955 5,681,882
Management fees (D).... 2,352,918 290,533 825,494 $(621,625) 2,847,320
Franchise costs (E).... 2,117,338 531,368 423,279 3,071,985
Depreciation (F)....... 63,000 63,000
Amortization (G).......
Real estate and
personal property
taxes, and property
insurance (H).........
Interest expense (I)... 31,500 31,500
Other expense.......... 58,084 69,288 26,779 154,151
Participating Lease
expenses (J).......... 24,754,071 7,967,997 7,247,372 39,969,440
----------- ----------- ----------- --------- -----------
Total expenses....... 77,488,655 21,303,333 23,394,998 (621,625) 121,565,361
----------- ----------- ----------- --------- -----------
Net income (loss).... $ 396,452 $(1,163,456) $ 195,379 $ 621,625 $ 50,000
=========== =========== =========== ========= ===========
</TABLE>
See Notes to Pro Forma Combined Statements of Operations
F-27
<PAGE>
LESSEE
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
HISTORICAL ---------------------------------------------------------------
JULY 31, 1996 REDUCTION
THROUGH PROPOSED IN
SEPTEMBER 30, PRO FORMA INITIAL ACQUIRED ACQUISITION MANAGEMENT
1996 ADJUSTMENTS HOTELS HOTELS HOTELS FEES TOTAL
------------- ----------- ----------- ----------- ----------- ----------- ------------
(K) (L) (A) (A) (A) (D)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Room revenue(B)........ $11,185,140 $47,987,870 $59,173,010 $16,019,734 $19,129,484 $ 94,322,228
Food and beverage
revenue(B)............ 2,982,331 15,760,495 18,742,826 3,383,889 5,040,569 27,167,284
Other revenue(B)....... 623,824 3,706,521 4,330,345 2,191,319 1,057,461 7,579,125
----------- ----------- ----------- ----------- ----------- ------------
Total revenue........ 14,791,295 67,454,886 82,246,181 21,594,942 25,227,514 129,068,637
----------- ----------- ----------- ----------- ----------- ------------
Expenses:
Property operating
costs and
expenses(C)........... 5,396,204 26,036,759 31,432,963 7,491,963 9,199,720 48,124,646
General and
administrative(C)..... 1,205,355 6,473,025 7,678,380 1,695,474 1,947,405 11,321,259
Advertising and
promotion............. 772,999 3,990,029 4,763,028 1,270,207 1,685,641 7,718,876
Repairs and
maintenance........... 522,792 2,638,439 3,161,231 1,159,370 1,355,018 5,675,619
Utilities.............. 668,296 2,815,050 3,483,346 958,666 1,175,433 5,617,445
Management fees(D)..... 390,736 1,737,469 2,128,205 306,292 845,455 $(1,176,729) 2,103,223
Franchise costs(E)..... 404,025 1,874,711 2,278,736 597,206 439,681 3,315,623
Depreciation(F)........ 10,500 52,500 63,000 63,000
Amortization(G)........
Real estate and
personal property
taxes, and property
insurance(H)..........
Interest expense(I).... 5,250 26,250 31,500 31,500
Other expense.......... 17,448 229,223 246,671 42,316 103,230 392,217
Participating Lease
expenses(J)........... 5,218,526 22,246,651 27,465,177 8,739,652 8,450,400 44,655,229
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total expenses....... 14,612,131 68,120,106 82,732,237 22,261,146 25,201,983 (1,176,729) 129,018,637
----------- ----------- ----------- ----------- ----------- ----------- ------------
Net income (loss).... $ 179,164 $ (665,220) $ (486,056) $ (666,204) $ 25,531 $ 1,176,729 $ 50,000
=========== =========== =========== =========== =========== =========== ============
</TABLE>
See Notes to Pro Forma Combined Statements of Operations
F-28
<PAGE>
LESSEE
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------------------
HISTORICAL
JULY 31, 1996 PROPOSED
THROUGH PRO FORMA INITIAL ACQUIRED ACQUISITION
SEPTEMBER 30, 1996 ADJUSTMENTS HOTELS HOTELS HOTELS TOTAL
------------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues: (K) (L) (A) (A) (A)
Room revenue(B)........ $11,185,140 $35,215,932 $46,401,072 $13,007,136 $15,076,705 $ 74,484,913
Food and beverage
revenue(B)............ 2,982,331 10,885,595 13,867,926 2,506,558 3,807,353 20,181,837
Other revenue(B)....... 623,824 2,518,325 3,142,149 1,569,630 803,544 5,515,323
----------- ----------- ----------- ----------- ----------- ------------
Total revenue........ 14,791,295 48,619,852 63,411,147 17,083,324 19,687,602 100,182,073
----------- ----------- ----------- ----------- ----------- ------------
Expenses:
Property operating
costs and
expenses(C)........... 5,396,204 18,079,623 23,475,827 5,711,823 7,014,060 36,201,710
General and
administrative(C)..... 1,205,355 4,334,289 5,539,644 1,299,295 1,465,561 8,304,500
Advertising and
promotion............. 772,999 2,880,823 3,653,822 990,380 1,269,292 5,913,494
Repairs and
maintenance........... 522,792 1,989,338 2,512,130 912,824 1,057,226 4,482,180
Utilities.............. 668,296 1,961,997 2,630,293 723,214 892,165 4,245,672
Management fees(D)..... 390,736 1,185,515 1,576,251 243,952 651,657 2,471,860
Franchise costs(E)..... 404,025 1,266,021 1,670,046 483,131 356,035 2,509,212
Depreciation(F)........ 10,500 36,750 47,250 47,250
Amortization(G)........
Real estate and
personal property
taxes, and property
insurance(H)..........
Interest expense(I).... 5,250 18,375 23,625 23,625
Other expense.......... 17,448 171,139 188,587 6,211 78,927 273,725
Participating Lease
expenses(J)........... 5,218,526 16,308,885 21,527,411 6,798,749 6,830,070 35,156,230
----------- ----------- ----------- ----------- ----------- ------------
Total expenses....... 14,612,131 48,232,755 62,844,886 17,169,579 19,614,993 99,629,458
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss).... $ 179,164 $ 387,097 $ 566,261 $ (86,255) $ 72,609 $ 552,615
=========== =========== =========== =========== =========== ============
</TABLE>
See Notes to Pro Forma Combined Statements of Operations
F-29
<PAGE>
LESSEE
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------------
PROPOSED
INITIAL ACQUIRED ACQUISITION
HOTELS HOTELS HOTELS TOTAL
----------- ----------- ----------- -----------
(A) (A) (A)
<S> <C> <C> <C> <C>
Revenues:
Room revenue(B).............. $42,558,233 $11,228,242 $13,301,082 $67,087,557
Food and beverage
revenue(B).................. 13,316,604 2,913,763 3,903,375 20,133,742
Other revenue(B)............. 3,175,236 1,486,254 846,008 5,507,498
----------- ----------- ----------- -----------
Total revenue.............. 59,050,073 15,628,259 18,050,465 92,728,797
----------- ----------- ----------- -----------
Expenses:
Property operating costs and
expenses(C)................. 21,667,118 5,656,273 6,726,209 34,049,600
General and
administrative(C)........... 4,881,352 1,259,709 1,526,046 7,667,107
Advertising and promotion.... 3,515,880 1,003,153 1,177,064 5,696,097
Repairs and maintenance...... 2,647,066 847,281 901,155 4,395,502
Utilities.................... 2,693,096 740,326 876,687 4,310,109
Management fees(D)........... 1,800,964 228,193 631,696 2,660,853
Franchise costs(E)........... 1,508,648 417,293 339,633 2,265,574
Depreciation(F).............. 47,250 47,250
Amortization(G)..............
Real estate and personal
property taxes, and
property insurance(H).......
Interest expense(I).......... 23,625 23,625
Other expense................ 33,183 2,476 35,659
Participating Lease
expenses(J)................. 18,816,305 6,027,094 5,627,042 30,470,441
----------- ----------- ----------- -----------
Total expenses............. 57,601,304 $16,212,505 $17,808,008 91,621,817
----------- ----------- ----------- -----------
Net income (loss).......... $ 1,448,769 $ (584,246) $ 242,457 $ 1,106,980
=========== =========== =========== ===========
</TABLE>
See Notes to Pro Forma Combined Statements of Operations
F-30
<PAGE>
LESSEE
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The pro forma combined statements of operations of the Lessee include the
results of operations of the hotels leased from the American General
Hospitality Operating Partnership, L.P. (the "Operating Partnership") due to
the Lessee's control over the operations of the hotels during the twelve-year
term of the Participating Leases. The Lessee has complete discretion in
establishing room rates and all rates for hotel goods and services. Likewise,
all operating expenses of the hotels are under the control of the Lessee. The
Lessee has the right to manage or to enter into management contracts with
other parties to manage the hotels. If the Lessee elects to enter into
management contracts with parties other than American General Hospitality,
Inc. ("AGHI"), the Lessee must obtain the prior written consent of the
Company, which consent may not be unreasonably withheld. The Lessee, with the
written consent of the Company, has entered into management agreements
pursuant to which all of the Hotels will be managed by AGHI, except for the
Four Points by Sheraton which will be managed by Wyndham under substantially
the same terms as the AGHI management agreements.
The Lessee's results of operations are seasonal. The aggregate room revenues
in the second and third quarters in the pro forma statements of operations are
generally higher than room revenues in the first and fourth quarters of each
fiscal year. Consequently, the following Lessee pro forma statements of
operations reflect net income in the second and third quarters and a net loss
in the fourth quarter.
(A) Represents the pro forma statements of operations of the Initial Hotels,
Acquired Hotels and Proposed Acquisition Hotels as if all of the Hotels were
leased by the Lessee pursuant to the Participating Leases commencing on
January 1, 1995.
(B) Represents historical room and food and beverage revenues of the Hotels
adjusted for telephone commissions totalling approximately $122,648 to conform
the Hotels' commission structure to the structure under new contracts AGHI
will have with its telecommunications providers. Also includes other revenue
of approximately $1.1 million, $1.0 million, $680,000, and $746,000 for the
year ended December 31, 1995, twelve months ended September 30, 1996, nine
months ended September 30, 1996 and nine months ended September 30, 1995,
respectively, in connection with a cash flow guarantee from one of the sellers
of the Days Inn Lake Buena Vista hotel.
(C) Reflects the historical expenses of the Hotels less expenses which are
not expected to be incurred by the Lessee. The expenses not expected to be
incurred by the Lessee consist primarily of the following:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED TWELVE MONTHS ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1996 1995
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Property operating costs
and expenses:
Certain changes in
employee benefits...... $(155,002) $ (80,222) $ (41,168) $(115,947)
Operating lease
expense................ (277,673) (180,820) (110,930) (207,783)
--------- --------- --------- ---------
$(432,675) $(261,042) $(152,098) $(323,730)
========= ========= ========= =========
General and
administrative
expenses:
Certain changes in
employee benefits...... $ (24,431) $ (11,980) $ (6,209) $ (18,660)
Operating lease
expense................ (32,054) (24,038) (15,556) (23,572)
Owner related
expenses............... (264,448) (181,710) (119,059) (201,797)
--------- --------- --------- ---------
$(320,933) $(217,728) $(140,824) $(244,029)
========= ========= ========= =========
</TABLE>
The elimination of historical expenses for certain changes in employee
benefits represents changes in employee benefits at two hotels to conform to
the benefits provided by AGHI. The elimination of certain
F-31
<PAGE>
LESSEE
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
historical operating lease expenses results from the pay-off of certain
operating leases of the Hotels at closing. The elimination of historical owner
related expenses represents the elimination of various charges from the owners
at four of the Hotels, which related to personal expenditures.
(D) Represents new management fees to be incurred under the Management
Agreements. The new management fees consist of a base fee of 1.5% of total
revenue and an incentive fee of up to 2.0% of total revenue. The incentive
fee, if applicable, is equal to 0.025% of annual total revenue for each 0.1%
increase in annual total revenues over the total revenues for the preceding
twelve month period up to the maximum incentive fee. Such incentive fee is
payable quarterly and is adjusted at the end of each calendar year to reflect
actual results. Every four years the basis upon which the incentive fee is
calculated shall be renegotiated between the Lessee and AGHI. The payment of
the management fees to AGHI by the Lessee is subordinate to the Lessee's
obligations to the Company under the Participating Lease. The full management
fees payable during 1996 and 1997 will be earned only to the extent that the
Lessee has net income equal to or greater than $50,000. If the Lessee's net
income is below $50,000 in 1996 and or 1997, management fees are forfeited by
AGHI to increase the Lessee's net income to $50,000. All historical management
fees have been eliminated.
(E) Represents the historical franchise fees of the Hotels. Franchise fees
associated with the hotel conversions are not included in the pro forma
statements of operations since other impacts including possible revenue
enhancements and operating expense reductions are also not included.
(F) Historical depreciation expense at the Hotels has been eliminated due to
depreciation being recorded by the Operating Partnership. Represents
depreciation related to the $315,000 of furniture, fixtures and equipment
("FF&E") purchased by the Lessee from the Operating Partnership. The FF&E is
depreciated over an estimated useful life of 5 years.
(G) Historical deferred loan costs and the related amortization has been
eliminated since the Lessee is not expected to incur similar costs.
(H) Real estate and personal property taxes, and property insurance expense
at the Hotels has been eliminated since it is to be paid by the Operating
Partnership.
(I) Any future interest expense related to debt for the Hotels will be
incurred and paid by the Operating Partnership. Interest expense relates to an
advance made by the Operating Partnership to the Lessee for the FF&E purchase.
The advance of $315,000 bears interest at 10% and is due over five years
commencing July 31, 1996.
(J) Represents lease payments to the Operating Partnership from the Lessee
pursuant to the Participating Leases calculated on a pro forma basis by
applying the rent provisions of the Participating Leases to the revenues of
the Hotels. The departmental revenue thresholds in the Participating Leases
are seasonally adjusted for interim periods and certain of the Participating
Lease formulas adjust beginning January 1, 1997. See "The Hotels--The
Participating Leases."
The Participating Lease expense is comprised of the following:
<TABLE>
<CAPTION>
TWELVE NINE MONTHS NINE MONTHS
YEAR ENDED MONTHS ENDED ENDED ENDED
DECEMBER SEPTEMBER SEPTEMBER SEPTEMBER
31, 1995 30, 1996 30, 1996 30, 1995
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Base Rent.................... $28,677,000 $28,677,000 $21,507,750 $21,507,750
Excess of Participating Rent
over Base Rent.............. 11,292,440 15,978,229 13,648,480 8,962,691
----------- ----------- ----------- -----------
Total Participating Lease
expense................. $39,969,440 $44,655,229 $35,156,230 $30,470,441
=========== =========== =========== ===========
</TABLE>
F-32
<PAGE>
LESSEE
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
(K) Represents the Lessee's historical statement of operations for the
period from July 31, 1996 (inception of operation) to September 30, 1996.
(L) Represents the Lessee's pro forma statement of operations for periods
prior to July 31, 1996 adjusted for the leasing of the Initial Hotels pursuant
to the Participating Leases commencing on January 1, 1996.
F-33
<PAGE>
AGH LEASING, L.P.
BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in hotel properties, at cost:
Furniture, fixtures and equipment............................... $ 315,000
Less accumulated depreciation................................... (10,500)
----------
Net investment in hotel properties................................ 304,500
Cash and cash equivalents......................................... 5,994,553
Accounts receivable, net of allowance for doubtful accounts of
$5,500........................................................... 2,414,921
Inventories....................................................... 366,653
Prepaid expenses.................................................. 462,960
Other assets...................................................... 46,987
----------
Total assets.................................................... $9,590,574
==========
LIABILITIES AND PARTNERS CAPITAL
Accounts payable, trade........................................... $ 472,191
Participating lease payable, American General Hospitality
Operating Partnership, L.P. ..................................... 4,093,764
Advance from American General Hospitality Operating Partnership,
L.P. ............................................................ 315,000
Accrued expenses and other liabilities............................ 4,030,455
----------
Total liabilities............................................... 8,911,410
----------
Commitments and contingencies (Notes 1 and 2)
Partners' capital................................................. 500,000
Net income........................................................ 179,164
----------
Total partners' capital......................................... 679,164
----------
Total liabilities and partners' capital......................... $9,590,574
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
AGH LEASING, L.P.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 31, 1996 (INCEPTION OF OPERATIONS) THROUGH
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenues:
Room revenue..................................................... $11,185,140
Food and beverage revenue........................................ 2,982,331
Other revenue.................................................... 623,824
-----------
Total revenue.................................................. 14,791,295
-----------
Expenses:
Property operating costs and expenses............................ 3,135,269
Food and beverage costs and expenses............................. 2,260,935
General and administrative....................................... 1,205,355
Advertising and promotion........................................ 772,999
Repairs and maintenance.......................................... 522,792
Utilities........................................................ 668,296
Management fees.................................................. 390,736
Franchise costs.................................................. 404,025
Depreciation..................................................... 10,500
Interest expense................................................. 5,250
Other expense.................................................... 17,448
Participating Lease expenses..................................... 5,218,526
-----------
Total expenses................................................. 14,612,131
-----------
Net income..................................................... $ 179,164
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
AGH LEASING, L.P.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 31, 1996 (INCEPTION OF OPERATIONS) THROUGH
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flow from operating activities:
Net income....................................................... $ 179,164
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.................................................... 10,500
Changes in assets and liabilities:
Accounts receivable............................................ (2,414,921)
Inventories.................................................... (366,653)
Prepaid expenses............................................... (462,960)
Other assets................................................... (46,987)
Accounts payable, trade........................................ 472,191
Participating lease payable, American General Hospitality
Operating Partnership, L.P. .................................. 4,093,764
Accrued expenses and other liabilities......................... 4,030,455
-----------
Net cash provided by operating activities...................... 5,494,553
-----------
Cash flows from financing activities:
Capital contributions............................................ 500,000
-----------
Net change in cash and cash equivalents........................... 5,994,553
Cash and cash equivalents at beginning of period.................. 0
-----------
Cash and cash equivalents at end of period........................ $ 5,994,553
===========
Supplemental schedule of cash flow information and non cash investing and
financing activities:
Cash paid during the period for interest........................ $ 0
===========
</TABLE>
The Operating Partnership advanced $315,000 in the form of a note
receivable to the Lessee for the purchase of furniture, fixtures and
equipment.
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
AGH LEASING, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
Organization--AGH Leasing, L.P. (the "Lessee"), was formed on May 29, 1996
as a Delaware limited partnership. Upon completion of the initial public
offering described below and commencement of operations on July 31, 1996,
American General Hospitality Corporation (the "Company") acquired an
approximate 81.3% interest in American General Hospitality Operating
Partnership, L.P. (the "Operating Partnership"). In order for the Company to
qualify as a real estate investment trust ("REIT"), neither the Company nor
the Operating Partnership can operate hotels; therefore, the Operating
Partnership, which owns 13 hotels (the "Initial Hotels"), leases the Initial
Hotels to the Lessee under operating leases ("Participating Leases") which
provide for rent based on the revenues of the Initial Hotels.
The financial statements of the Lessee include the results of operations of
the hotels leased from the Operating Partnership due to the Lessee's control
over the operations of the hotels during the 12 year term of the Participating
Leases. The Lessee has complete discretion in establishing room rates and all
rates for hotel goods and services. Likewise, all operating expenses of the
hotels are under the control of the Lessee. The Lessee has the right to manage
or to enter into management contracts with other parties to manage the hotels.
If the Lessee elects to enter into management contracts with parties other
than American General Hospitality, Inc. ("AGHI"), the Lessee must obtain the
prior written consent of the Operating Partnership, which consent may not be
unreasonably withheld. The Lessee, with the written consent of the Operating
Partnership, has entered into management agreements pursuant to which all of
the Initial Hotels are managed by AGHI. The Lessee is owned in part by certain
executive officers of the Company and AGHI.
The Lessee's results of operations are seasonal. The aggregate room revenues
in the second and third quarters of each fiscal year may be higher than room
revenues in the first quarter and may be much higher than room revenues in the
fourth quarter of each fiscal year. Consequently, the Lessee may have net
income in the second and third quarters and may have a net loss in the fourth
quarter.
Initial Public Offering--As of July 31, 1996, the Company completed an
initial public offering of 7,500,000 shares of its common stock and an
additional 575,000 shares of common stock were issued by the Company on August
28, 1996 upon exercise of the underwriters' over-allotment option at a price
per common share of $17.75 (the "IPO"). Upon consummation of the IPO, the
Company contributed all of the net proceeds of the IPO to the Operating
Partnership in exchange for an approximate 81.3% equity interest in the
Operating Partnership. The Operating Partnership used such funds to purchase
certain of the Initial Hotels, repay debt and other obligations of the Initial
Hotels, and for working capital.
Upon consummation of the IPO, the partners of the Lessee capitalized the
Lessee with $500,000 cash and pledged 275,000 units of limited partnership
interest in the Operating Partnership ("OP Units") to the Company to secure
the Lessee's obligations under the Participating Leases.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Properties--Hotel properties consist principally of FF&E
and are stated at the lower of cost or net realizable value and are
depreciated using the straight-line method over estimated useful lives ranging
from 3 to 7 years.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
Cash and Cash Equivalents--All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Inventories--Inventories consisting primarily of food and beverage items and
are stated at the lower of cost (generally, first-in first-out) or market.
F-37
<PAGE>
AGH LEASING, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
Income Taxes--The Lessee is a Texas limited partnership which is not a
taxable entity. The results of operations are included in the tax returns of
the partners. The partnerships' tax returns and the amount of allocable income
or loss are subject to examination by federal and state taxing authorities. If
such examinations result in changes to income or loss, the tax liability of
the partners could be changed accordingly.
Revenue Recognition--Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk--The Lessee places cash deposits at a major
bank. At September 30, 1996, bank account balances exceeded Federal Deposit
Insurance Corporation limits by approximately $3.3 million. Management
believes credit risk related to these deposits is minimal.
3. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements which
expire from 1998 to 2013. Franchise costs are based upon varying percentages
of gross room revenue ranging from 1.0% to 5.0%. These fees are paid by the
Lessee. No franchise costs were incurred for the Le Baron Airport Hotel or the
Hotel Maison de Ville.
The Initial Hotels are managed by AGHI on behalf of the Lessee. The Lessee
pays AGHI a base management fee of 1.5% of total revenue and an incentive fee
of up to 2.0% of total revenue. The incentive fee, if applicable, is equal to
0.025% of annual total revenue for each 0.1% increase in annual total revenue
over the total revenues for the preceding twelve month period up to the
maximum incentive fee. Such incentive fee is payable quarterly and is adjusted
at the end of each calendar year to reflect actual results. Every four years
the basis upon which the incentive fee is calculated shall be renegotiated
between the Lessee and AGHI. The payment of the management fees to AGHI by the
Lessee is subordinate to the Lessee's obligations to the Company under the
Participating Leases. The full management fees payable during 1996 and 1997,
will be earned only to the extent that the Lessee has net income equal to or
greater than $50,000. If the Lessee's net income is below $50,000 in 1996 and
or 1997 management fees are forfeited by AGHI to increase the Lessee's income
to $50,000.
Each hotel, except the Le Baron Airport Hotel and the Hotel Maison de Ville,
is required to remit varying percentages of gross room revenue ranging from
1.0% to 5.0% to the various franchisors for sales and advertising expenses
incurred to promote the hotel at the national level. Additional sales and
advertising costs are incurred at the local property level. These fees are
prepaid by the Lessee.
F-38
<PAGE>
The Lessee has future lease commitments to the Company under the
Participating Leases which expire in July, 2008. The Participating Lease
expenses are based on a percentage of room revenues, food and beverage
revenues and telephone and other revenues. The departmental revenue thresholds
in the Participating Leases are seasonally adjusted for interim periods and
the Participating Lease formulas adjust effective January 1, 1997 by a
percentage equal to the percentage increase in the Consumer Price Index as
compared to the prior year. Additionally, several of the Initial Hotels will
have further adjustments to the Participating Lease formulas due to the
significant renovations expected to be completed in those hotels in 1997.
Minimum future rental expense (i.e. base rents) under these noncancellable
Participating Leases is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------------
<S> <C>
Remainder of 1996............................................. $ 5,109,002
1997.......................................................... 20,096,208
1998.......................................................... 20,849,816
1999.......................................................... 21,631,684
2000.......................................................... 22,442,872
2001 and thereafter........................................... 200,608,680
------------
Total......................................................... $290,738,262
============
</TABLE>
Four of the Initial Hotels are subject to ground leases with third parties
with respect to the land underlying each such hotel. The ground leases are
triple net leases which require the tenant to pay all expenses of owning and
operating the hotel, including real estate taxes and structural maintenance
and repair. The Company is responsible for payments under the ground leases.
4. PRO FORMA INFORMATION
Due to the impact of the IPO and related Formation Transactions, the
historical results of operations may not be indicative of future results of
operations. The following unaudited pro forma information of the Lessee is
presented as if the consummation of IPO and the related Formation Transactions
had occurred on January 1, 1995 and all of the Initial Hotels had been leased
pursuant to the Participating Leases since that date.
In management's opinion, all adjustments necessary to reflect the effects of
the IPO and related Formation Transactions have been made. The pro forma
information does not purport to present what the actual results of operations
of the Lessee would have been if the previously mentioned transactions had
occurred on such date or to project the future financial position or results
of operations of the Lessee for any future period.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Room revenue.......................... $55,330,171 $46,401,072
Total revenue......................... $77,885,107 $63,411,147
Percentage lease expenses............. $24,754,071 $21,527,411
Net income............................ $ 396,452 $ 566,261
</TABLE>
5. SUBSEQUENT EVENTS
As of January 8, 1997, the Lessee and the Operating Partnership entered into
three operating lease agreements for three hotels which were acquired by the
Operating Partnership. The leases are substantially similar to the other
Participating Lease agreements between the Lessee and the Operating
Partnership. The base rent for the three hotels will be approximately
$6,539,000 for 1997, subject to completion of planned renovations and other
activities.
F-39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying combined balance sheets and financial
statement schedule of the AGH Predecessor Hotels (described in Note 1) as of
December 30, 1994, December 29, 1995, and July 30, 1996, and the related
combined statements of operations, equity and cash flows for the period from
December 30, 1993 through December 31, 1993, the years ended December 30, 1994
and December 29, 1995 and for the period from December 30, 1995 through July
30, 1996. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the AGH
Predecessor Hotels as of December 30, 1994, December 29, 1995 and July 30,
1996 and the combined results of their operations and their cash flows for the
period from December 30, 1993 through December 31, 1993, the years ended
December 30, 1994 and December 29, 1995 and for the period from December 30,
1995 through July 30, 1996 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand L.L.P.
Dallas, Texas
September 19, 1996
F-40
<PAGE>
AGH PREDECESSOR HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 29, JULY 30,
1994 1995 1996
------------ ------------ -----------
ASSETS
<S> <C> <C> <C>
Investment in hotel properties, at
cost
Land............................... $ 680,000 $ 1,496,515 $ 1,496,515
Buildings and improvements......... 11,162,793 18,427,855 18,581,660
Furniture, fixtures and equipment.. 3,028,860 3,439,484 4,232,203
----------- ----------- -----------
14,871,653 23,363,854 24,310,378
Less accumulated depreciation........ (409,067) (945,502) (1,552,818)
----------- ----------- -----------
Net investment in hotel properties 14,462,586 22,418,352 22,757,560
Cash and cash equivalents............ 615,066 857,608 1,415,865
Restricted cash...................... 130,386 441,445 386,827
Accounts receivable, net............. 109,719 281,169 305,097
Inventories.......................... 41,407 55,611 63,937
Prepaid expenses..................... 44,400 166,463 162,985
Deferred expenses.................... 50,212 370,046 365,621
Other assets......................... 9,000 85,410 156,538
----------- ----------- -----------
Total assets..................... $15,462,776 $24,676,104 $25,614,430
=========== =========== ===========
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C> <C>
Debt................................. $11,016,322 $19,277,646 $20,114,415
Accounts payable, trade.............. 199,312 560,862 481,993
Accrued expenses and other
liabilities......................... 419,643 832,889 719,213
----------- ----------- -----------
Total liabilities................ 11,635,277 20,671,397 21,315,621
----------- ----------- -----------
Commitments and contingencies (Note
4)
Capital.............................. 4,145,000 5,812,391 5,627,391
Accumulated deficit.................. (317,501) (1,807,684) (1,328,582)
----------- ----------- -----------
Total equity......................... 3,827,499 4,004,707 4,298,809
----------- ----------- -----------
Total liabilities and equity..... $15,462,776 $24,676,104 $25,614,430
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-41
<PAGE>
AGH PREDECESSOR HOTELS
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 30, 1993 THROUGH DECEMBER 31, 1993,
THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 29, 1995 AND
FOR THE PERIOD FROM DECEMBER 30, 1995 THROUGH JULY 30, 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Room revenue................. $ 17,941 $ 3,431,654 $ 9,020,479 $ 6,770,568
Food and beverage revenue.... 6,158 552,697 1,293,238 1,175,807
Other revenue................ 1,448 223,211 568,415 432,750
-------- ----------- ----------- -----------
Total revenue.............. 25,547 4,207,562 10,882,132 8,379,125
-------- ----------- ----------- -----------
Expenses:
Property operating costs and
expenses.................... 2,907 1,070,415 2,610,089 1,911,317
Food and beverage costs and
expenses.................... 1,115 503,537 1,318,712 1,072,852
General and administrative... 1,922 561,140 1,270,163 954,143
Advertising and promotion.... 966 308,497 663,285 468,248
Repairs and maintenance...... 809 195,279 478,552 338,456
Utilities.................... 217,496 509,142 370,969
Management fees.............. 1,022 162,151 383,607 295,538
Franchise costs.............. 155,206 332,274 270,950
Depreciation................. 46,982 362,085 2,409,211 607,316
Amortization................. 2,428 70,843 37,879
Real estate and personal
property taxes, and property
insurance................... 831 177,717 389,955 245,263
Interest expense............. 430,535 1,572,244 1,129,060
Other expense................ 347,570 364,238 198,032
-------- ----------- ----------- -----------
Total expenses............. 56,554 4,494,056 12,372,315 7,900,023
-------- ----------- ----------- -----------
Net income (loss).......... $(31,007) $ (286,494) $(1,490,183) $ 479,102
======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-42
<PAGE>
AGH PREDECESSOR HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
EQUITY
-----------
<S> <C>
Balance, December 30, 1993
Net loss......................................................... $ (31,007)
Capital contributions............................................ 1,600,000
-----------
Balance, December 31, 1993 1,568,993
Net loss......................................................... (286,494)
Capital contributions............................................ 3,086,000
Distributions.................................................... (541,000)
-----------
Balance, December 30, 1994 3,827,499
Net loss......................................................... (1,490,183)
Capital contributions............................................ 1,863,118
Distributions.................................................... (195,727)
-----------
Balance, December 29, 1995 4,004,707
Net income....................................................... 479,102
Capital contributions............................................ 50,000
Distributions.................................................... (235,000)
-----------
Balance, July 30, 1996............................................ $ 4,298,809
===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-43
<PAGE>
AGH PREDECESSOR HOTELS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 30, 1993 THROUGH DECEMBER 31, 1993,
THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 29, 1995 AND
FOR THE PERIOD FROM DECEMBER 30, 1995 THROUGH JULY 30, 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Cash flow from operating
activities:
Net income (loss)........... $ (31,007) $ (286,494) $ (1,490,183) $ 479,102
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities
Depreciation .............. 46,982 362,085 2,409,211 607,316
Amortization............... 2,428 70,843 37,879
Changes in assets and
liabilities...............
Restricted cash (130,386) (311,059) (23,928)
Accounts receivable....... (8,120) (101,599) (171,450) (8,326)
Inventories............... (8,275) (33,132) (14,204) 3,478
Prepaid expenses.......... (15,770) (28,630) (122,063) (71,128)
Other assets.............. (9,000) (76,410)
Franchise agreements...... (170,500) (13,680)
Organization costs........ (13,139) (108,677) (86,691)
Accounts payable, trade... 440 198,872 361,550 (105,854)
Accrued expenses and other
liabilities.............. 163,366 256,277 413,246 54,618
---------- ---------- ------------ ----------
Net cash provided by
(used in)
operating activities... 147,616 217,282 790,304 872,786
---------- ---------- ------------ ----------
Cash flows from investing
activities:
Improvements and additions
to hotel
properties................. (1,294,387) (2,199,840) (946,524)
Acquisition of hotel
properties, net
of cash acquired (5,879,500) (7,697,767) (8,165,137)
---------- ---------- ------------ ----------
Net cash used in
investing activities.... (5,879,500) (8,992,154) (10,364,977) (946,524)
---------- ---------- ------------ ----------
Cash flows from financing
activities:.................
Proceeds from borrowings.... 4,875,000 6,350,000 10,357,250 1,056,237
Principal payments on
borrowings................. (208,678) (2,095,926) (219,468)
Payments for deferred loan
costs...................... (39,500) (111,500) (19,774)
Capital contributions....... 1,600,000 3,086,000 1,863,118 50,000
Distributions paid.......... (541,000) (195,727) (235,000)
---------- ---------- ------------ ----------
Net cash provided by
financing
activities.............. 6,475,000 8,646,822 9,817,215 631,995
---------- ---------- ------------ ----------
Net change in cash and cash
equivalents................. 743,116 (128,050) 242,542 558,257
Cash and cash equivalents at
beginning of
periods 743,116 615,066 857,608
---------- ---------- ------------ ----------
Cash and cash equivalents at
end of periods.............. $ 743,116 $ 615,066 $ 857,608 $1,415,865
========== ========== ============ ==========
Supplemental disclosures of
cash flow
information:
Cash paid during the year
for interest............... $ 430,535 $ 1,572,244 $1,017,316
========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements
F-44
<PAGE>
AGH PREDECESSOR HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION, BASIS OF PRESENTATION AND PROPOSED INITIAL PUBLIC OFFERING
Organization--American General Hospitality Corporation (the "Company" or the
"Registrant") was incorporated and formed on April 12, 1996, as a Maryland
corporation which intends to qualify as a real estate investment trust
("REIT"). The Company commenced operations on July 31, 1996 (see Initial
Public Offering discussion below). Upon commencement of operations, the
Company acquired equity interests in 13 hotels (the "Initial Hotels"). Four of
the Initial Hotels (the "AGH Predecessor Hotels") were acquired primarily from
limited partnerships controlled by the shareholders of American General
Hospitality, Inc. (the "AGHI Affiliates"). The remaining nine Initial Hotels
(the "Other Initial Hotels") were acquired primarily from parties unaffiliated
with the Company through contracts with the sellers acquired from an AGHI
affiliate.
Upon completion of the initial public offering described below, the Company,
through wholly owned subsidiaries, acquired an approximate 81.3% equity
interest in American General Hospitality Operating Partnership, L.P. (the
"Operating Partnership"). A wholly owned subsidiary of the Company is the sole
general partner of the Operating Partnership. The Operating Partnership and
entities which it controls own the Initial Hotels and lease them to AGH
Leasing, L.P. (the "Lessee"), which is owned, in part, by certain officers of
the Company, under operating leases ("Participating Leases") which provide for
rent based on the revenues of the Initial Hotels. The Lessee has entered into
management agreements pursuant to which all of the Initial Hotels are managed
by American General Hospitality, Inc. ("AGHI").
Basis of Presentation--The accompanying combined financial statements of the
AGH Predecessor Hotels have been presented on a combined basis due to common
ownership and management and because the entities were the subject of a
business combination with the Company upon consummation of the proposed
initial public offering.
The AGH Predecessor Hotels consist of the 165 room Courtyard by Marriott-
Meadowlands located in Secaucus, New Jersey (purchased land, buildings and
improvements, and furniture, fixtures and equipment ("FF&E") for cash in
December 1993 for approximately $5.9 million), the 23 room Hotel Maison de
Ville located in New Orleans, Louisiana (purchased land, buildings and
improvements, and FF&E for cash in August 1994 for approximately $2.5
million), the 124 room Hampton Inn Richmond Airport located in Richmond,
Virginia (purchased land, buildings and improvements, and FF&E for cash in
December 1994 for approximately $5.1 million) and the 243 room Holiday Inn
Dallas DFW Airport West located in Bedford, Texas (purchased land, buildings
and improvements, and FF&E for cash in June 1995 for approximately $8.0
million).
The acquisition of each AGH Predecessor Hotel has been accounted for as a
purchase and accordingly, the results of operations for each AGH Predecessor
Hotel has been included in the combined statements of operations since the
respective dates of acquisition.
Initial Public Offering--As of July 31, 1996, the Company completed an
initial public offering of 7,500,000 shares of its common stock and an
additional 575,000 shares of common stock were issued by the Company on August
28, 1996 upon exercise of the underwriters' over-allotment option at a price
per common share of $17.75 (the "IPO"). Upon consummation of the IPO, the
Company contributed all of the net proceeds of the IPO to the Operating
Partnership in exchange for an approximate 81.3% equity interest in the
Operating Partnership. The Operating Partnership used such funds to purchase
certain of the Initial Hotels, repay debt and other obligations of the Initial
Hotels, and for working capital.
F-45
<PAGE>
AGH PREDECESSOR HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Properties--Hotel properties are stated at the lower of
cost or net realizable value and are depreciated using the straight-line
method over estimated useful lives ranging from 39 years for building and
improvements and 3 to 7 years for FF&E.
Management of the AGHI Affiliates review the carrying value of each property
to determine if circumstances exist indicating an impairment in the carrying
value of the investment of the hotel property or that depreciation periods
should be modified. If facts or circumstances support the possibility of
impairment, management of the AGHI Affiliates will prepare a projection of the
undiscounted future cash flows, without interest charges, of the specific
hotel property and determine if the investment in hotel property is
recoverable based on the undiscounted future cash flows. Management of the
AGHI Affiliates does not believe that there are any factors or circumstances
indicating impairment of any of its investment in hotel properties.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
Cash and Cash Equivalents--All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Restricted Cash--Restricted cash consists primarily of amounts held in
escrow for capital and property tax reserves.
Inventories--Inventories consisting primarily of food and beverage items and
are stated at the lower of cost (generally, first-in first-out) or market.
Deferred Expenses--Deferred expenses primarily consist of deferred loan
costs, franchise fees and organization costs and are recorded at cost.
Amortization of deferred loan cost is computed using the effective yield
method based upon the terms of the loan agreements. Amortization of franchise
fees is computed using the straight-line method based upon the terms of the
agreements. Amortization of organization costs is computed using the straight-
line method over five years. Accumulated amortization at July 30, 1996, is
$111,150.
Income Taxes--The AGH Predecessor Hotels are owned by Texas limited
partnerships which are not taxable entities. The results of operations are
included in the tax returns of the partners. The partnerships' tax returns and
the amount of allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to income
or loss, the tax liability of the partners could be changed accordingly. The
Company intends to qualify as a REIT under the Code, and will therefore not be
subject to corporate income taxes. Accordingly, the combined statements of
operations contain no provision for federal income taxes.
Revenue Recognition--Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-46
<PAGE>
AGH PREDECESSOR HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk--Management of the AGHI Affiliates places cash
deposits at a major bank. At July 30, 1996, bank account balances exceeded
Federal Deposit Insurance Corporation limits by approximately $700,000.
Management believes credit risk related to these deposits is minimal.
Recently Issued Statement of Financial Accounting Standards--The AGH
Predecessor Hotels adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" during the year ended December 29, 1995.
The adoption of SFAS No. 121 has no material effect on the AGH Predecessor
Hotels' financial statements.
3. DEBT
Debt as of December 30, 1994, December 29, 1995 and July 30, 1996, consists
of the following:
<TABLE>
<CAPTION>
JULY 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
First mortgage notes payable in various
monthly installments including interest
at rates ranging from LIBOR plus 4.25%
(5.44% at December 29, 1995) to prime
plus 1% (8.5% at December 29, 1995);
maturing at various dates from August
1999 through December 2001............... $10,916,322 $17,666,294 $17,547,924
Product improvement plan note payable in
various monthly installments including
interest at LIBOR plus 4.25%............. 1,511,352 1,907,090
Note payable to AGHI...................... 100,000 100,000
Construction loan payable in monthly
installments including interest at the
fixed rate of 7.89%; maturing on January
1, 2001.................................. 659,401
----------- ----------- -----------
$11,016,322 $19,277,646 $20,114,415
=========== =========== ===========
</TABLE>
All debt is collateralized by the investment in hotel properties.
Aggregate annual principal payments for the AGHI Affiliates' debt at July
30, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
Remaining five months of 1996................................ $ 825,647
1997......................................................... 786,928
1998......................................................... 818,102
1999......................................................... 2,225,175
2000......................................................... 12,952,549
2001 and thereafter.......................................... 2,506,014
-----------
$20,114,415
===========
</TABLE>
4. COMMITMENTS
Management fees represent amounts paid to AGHI based upon percentages of
gross revenue ranging from 3% to 4%.
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements expiring in
2005 (Holiday Inn), 2007 (Hampton Inn), and 2013 (Courtyard by Marriott).
Franchise costs are based upon varying percentages of gross room revenue
ranging from 4% to 5%. No franchise costs were incurred for the Hotel Maison
de Ville.
F-47
<PAGE>
AGH PREDECESSOR HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Each hotel, except for the Hotel Maison de Ville, is required to remit
varying percentages of gross room revenue ranging from 1.5% to 4% to the
various franchisors for sales and advertising expenses incurred to promote the
hotel at the national level. Additional sales and advertising costs are
incurred at the local property level.
The AGHI Affiliates lease the Courtyard by Marriott-Meadowlands hotel land,
under a noncancellable operating lease agreement which expires in 2036. The
AGHI Affiliates have the option to extend the lease for an additional twenty
years upon the same terms. The lease provides for contingent rental payments
based on 3% of gross room revenue which for the periods ended December 30,
1994, December 29, 1995 and July 30, 1996 approximated 65% of the aggregate
rental expense under the operating lease. Additionally, certain equipment is
leased under noncancellable operating lease agreements expiring at varying
intervals through August 1996. Minimum future rental payments required under
operating leases as of July 30, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
Remaining five months of 1996 ............................... $ 95,975
1997 ........................................................ 175,300
1998 ........................................................ 187,800
1999 ........................................................ 187,800
2000 ........................................................ 189,690
2001 and thereafter.......................................... 14,242,650
-----------
$15,079,215
===========
</TABLE>
Rental expense was $311,007 and $360,011 and $188,357 for the years ended
December 30, 1994, December 29, 1995 and the period ended July 30, 1996,
respectively.
As a result of the IPO and the resulting prepayment of debt, a portion of
the proceeds of the IPO was utilized to pay prepayment penalties on two notes
payable totaling approximately $734,000.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards 107 requires all entities to
disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the AGHI Affiliates report the carrying amount of
cash and cash equivalents, restricted cash, accounts payable, accrued expenses
and other liabilities at cost which approximates fair value due to the short
maturity of these instruments. The carrying amount of the AGHI Affiliates'
debt approximates fair value due to the AGHI Affiliates ability to obtain such
borrowings at comparable interest rates.
6. PRO FORMA INFORMATION (UNAUDITED)
Due to the impact of the acquisitions discussed in Note 1, the historical
results of operations may not be indicative of future results of operations.
The following unaudited pro forma condensed combined statements of operations
for the years ended December 30, 1994 and December 29, 1995 are presented as
if the hotel acquisitions described in Note 1 occurred on January 1, 1994.
The unaudited pro forma condensed combined statements of operations do not
purport to represent what actual results of operations would have been if the
acquisitions had occurred on such date or to project results
F-48
<PAGE>
AGH PREDECESSOR HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
for any future period. The following unaudited pro forma information does not
include pro forma adjustments related to the proposed initial public offering
and related transactions.
<TABLE>
<CAPTION>
1994 1995
----------- ------------
<S> <C> <C>
Total revenue................................. $11,171,889 $ 12,927,954
Hotel operating expenses...................... 8,257,439 8,905,916
Depreciation.................................. 1,198,055 2,618,055
Interest...................................... 2,543,015 1,973,765
Other corporate expenses...................... 761,215 791,599
----------- ------------
Net loss...................................... $(1,587,835) $ (1,361,381)
=========== ============
</TABLE>
7. SUBSEQUENT EVENT
As discussed in Note 1, the four AGH Predecessor Hotels were acquired by the
Operating Partnership on July 31, 1996. The Company and the Operating
Partnership exchanged shares of Common Stock and OP Units for interests in the
selling entities and certain net assets were transferred at historical cost
basis. In addition, the hotels were refinanced upon acquisition and post-
acquisition debt is different than the historical debt reflected in the
accompanying financial statements. Furthermore, all management agreements were
terminated and new management agreements were implemented. The combined
financial statements do not reflect any of the transactions in connection with
the IPO and related transactions.
The AGH Predecessor Hotels repaid in full the December 29, 1995 outstanding
debt of $100,000 and the accounts payable of $195,000 to AGHI.
F-49
<PAGE>
AGH PREDECESSOR HOTELS
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF JULY 30, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT GROSS AMOUNTS AT WHICH ACCUMULATED
INITIAL COST TO ACQUISITION CARRIED AT CLOSE OF PERIOD DEPRECIATIONS
----------------------- -------------------- ----------------------------------- BUILDINGS
ENCUM- BUILDING AND BUILDING AND BUILDING AND AND IMPROV-
DESCRIPTION BRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL EMENTS
----------- ----------- ---------- ------------ ------- ------------ ---------- ------------ ----------- -------------
(A) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Courtyard by $ 5,257,770 $ 4,780,496 $ 259,189 $ 5,039,685 $ 5,039,685 $317,967
Marriott
Meadowlands
Secaucus, N.J.
Hampton Inn 4,763,550 $505,000 3,590,369 246,049 $ 505,000 3,836,418 4,341,418 150,258
Richmond Airport
Richmond, VA
Holiday Inn DFW 8,557,090 816,515 6,532,118 963,609 816,515 7,495,727 8,312,242 171,138
West
Bedford, TX
Hotel Mason 1,536,005 175,000 1,641,777 568,053 175,000 2,209,830 2,384,830 98,140
DeVille
New Orleans, LA
----------- ---------- ----------- ------- ---------- ---------- ----------- ----------- --------
$20,114,415 $1,496,515 $16,544,760 $2,036,900 $1,496,515 $18,581,660 $20,078,175 $737,503
=========== ========== =========== ======= ========== ========== =========== =========== ========
<CAPTION>
NET BOOK LIFE UPON
VALUE WHICH
BUILDINGS DATE OF DATE DEPRECIATION
AND IMPROV- CON- OF AC- IN STATEMENT
DESCRIPTION EMENTS STRUCTION QUISITION IS COMPUTED
----------- ----------- --------- --------- ------------
<S> <C> <C> <C> <C>
Courtyard by $ 4,721,718 1989 12/30/93 40 YRS
Marriott
Meadowlands
Secaucus, N.J.
Hampton Inn 4,191,160 1972 12/29/94 40 YRS
Richmond Airport
Richmond, VA
Holiday Inn DFW 8,141,104 1974 6/7/95 40 YRS
West
Bedford, TX
Hotel Mason 2,286,690 1788 8/8/94 40 YRS
DeVille
New Orleans, LA
-----------
$19,340,672
===========
</TABLE>
(a) Reconciliation of land and buildings and improvements:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 4,780,496
Additions during the year 1994:
Improvements 7,062,297
-----------
Balance at December 30, 1994 11,842,793
Additions during the year 1995 8,081,577
-----------
Balance at December 29, 1995 19,924,370
Additions for the year to date
July 30, 1996: 153,805
-----------
Balance at July 30, 1996 $20,078,175
===========
(b) Reconciliation of Accumulated Depreciation
Balance at beginning of year
January 1, 1994 $ 46,982
Depreciation for the year 1994: 185,175
-----------
Balance at December 30, 1994 232,157
Depreciation for the year 1995: 274,250
-----------
Balance at December 29, 1995 506,407
Depreciation for the year to date
July 30, 199 231,096
-----------
Balance at July 30, 1996 $ 737,503
===========
</TABLE>
F-50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying combined balance sheets and financial
statement schedule of the Other Initial Hotels (described in Note 1) as of
December 31, 1994 and 1995 and the related combined statements of operations,
equity and cash flows for each of the three years in the period ended December
31, 1995. These combined financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 1 to the financial statements and are not
intended to be a complete presentation of the Other Initial Hotels.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Other Initial
Hotels as of December 31, 1994 and 1995, and the combined results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand L.L.P.
Dallas, Texas
April 8, 1996
F-51
<PAGE>
OTHER INITIAL HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
ASSETS ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Investments in hotel properties, at
cost:
Land and land improvement......... $ 9,174,723 $ 9,174,723 $ 9,174,723
Buildings and improvements........ 70,574,085 73,047,848 71,582,742
Furniture, fixtures and
equipment........................ 21,948,731 21,999,984 24,438,661
------------ ------------ ------------
101,697,539 104,222,555 105,196,126
Less accumulated depreciation....... (33,171,163) (36,842,175) (38,542,112)
------------ ------------ ------------
Net investment in hotel properties.. 68,526,376 67,380,380 66,654,014
Cash and cash equivalents........... 2,514,782 4,247,740 5,847,809
Restricted cash..................... 1,006,323 1,454,731 1,957,813
Accounts receivable, net............ 1,917,888 1,677,438 2,856,684
Inventories......................... 571,883 735,266 647,266
Prepaid expenses.................... 379,842 477,443 486,957
Deferred expenses................... 462,933 558,706 650,306
Other assets........................ 661,774 90,669 30,218
------------ ------------ ------------
Total assets.................... $ 76,041,801 $ 76,622,373 $ 79,131,067
============ ============ ============
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C> <C>
Debt................................ $ 46,013,273 $ 43,861,547 $ 51,374,169
Capital lease obligation............ 2,862,995 2,625,082 2,499,589
Accounts payable, trade............. 884,218 768,251 957,638
Payable to affiliates............... 2,145,068 2,231,449 1,998,191
Accrued expenses and other
liabilities........................ 3,819,118 3,847,515 3,535,184
------------ ------------ ------------
Total liabilities............... 55,724,672 53,333,844 60,364,771
------------ ------------ ------------
Commitments and contingencies (Note
4)
Capital............................. 11,960,065 6,588,382 (3,569,391)
Retained earnings................... 8,357,064 16,700,147 22,335,687
------------ ------------ ------------
Total equity.................... 20,317,129 23,288,529 18,766,296
------------ ------------ ------------
Total liabilities and equity.... $ 76,041,801 $ 76,622,373 $ 79,131,067
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-52
<PAGE>
OTHER INITIAL HOTELS
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
JUNE 30,
1993 1994 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Room revenue................. $36,811,936 $40,109,552 $44,736,447 $23,779,491
Food and beverage revenue.... 15,446,922 15,826,164 16,424,522 8,260,931
Other revenue................ 4,678,562 3,169,064 3,579,485 1,827,603
----------- ----------- ----------- -----------
Total revenue.............. 56,937,420 59,104,780 64,740,454 33,868,025
----------- ----------- ----------- -----------
Expenses:
Property operating costs and
expenses.................... 11,639,735 11,611,249 12,583,203 6,519,270
Food and beverage costs and
expenses.................... 12,023,204 12,331,905 12,741,884 6,312,164
General and administrative... 4,877,037 5,398,014 5,780,741 2,904,924
Advertising and promotion.... 3,735,277 3,822,370 3,874,160 2,237,109
Repairs and maintenance...... 2,744,397 2,564,251 2,719,954 1,437,289
Utilities.................... 2,898,837 3,021,303 2,945,878 1,326,429
Management fees.............. 799,987 933,961 1,285,385 723,653
Franchise costs.............. 1,403,567 1,492,504 1,701,346 714,856
Depreciation................. 5,550,188 5,344,060 5,498,602 2,110,088
Amortization................. 250,459 277,887 152,588 192,777
Real estate and personal
property taxes, and property
insurance................... 1,632,849 1,651,113 1,481,258 722,903
Interest expense............. 4,667,281 4,340,948 4,734,958 2,161,521
Other expense................ 909,555 820,168 897,414 869,511
----------- ----------- ----------- -----------
Total expenses............. 53,132,373 53,609,733 56,397,371 28,232,494
----------- ----------- ----------- -----------
Revenues over expenses..... $ 3,805,047 $ 5,495,047 $ 8,343,083 $ 5,635,531
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-53
<PAGE>
OTHER INITIAL HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
EQUITY
-----------
<S> <C>
Balance, December 31, 1992......................................... $19,706,810
Revenues over expenses........................................... 3,805,047
Distributions.................................................... (3,743,317)
-----------
Balance, December 31, 1993......................................... 19,768,540
Revenues over expenses........................................... 5,495,047
Capital contributions............................................ 1,803,806
Distributions.................................................... (6,750,264)
-----------
Balance, December 31, 1994......................................... 20,317,129
Revenues over expenses........................................... 8,343,083
Capital contributions............................................ 1,486,050
Distributions.................................................... (6,857,733)
-----------
Balance, December 31, 1995......................................... 23,288,529
Revenues over expenses (unaudited)............................... 5,635,531
Capital contributions (unaudited)................................ 1,674,711
Distributions.................................................... (11,832,475)
-----------
Balance, June 30, 1996 (unaudited)................................. $18,766,296
===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-54
<PAGE>
OTHER INITIAL HOTELS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
JUNE 30,
1993 1994 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flow from operating
activities: (UNAUDITED)
Revenues over expenses.. $ 3,805,047 $ 5,495,047 $ 8,343,083 $ 5,635,531
Adjustments to reconcile
revenues over expenses
to net cash provided by
operating activities:
Depreciation.......... 5,550,188 5,344,060 5,498,602 2,110,088
Amortization.......... 250,459 277,887 152,588 192,777
Changes in assets and
liabilities:
Restricted cash....... (501,015) 128,081 (448,408)
Accounts receivable... 208,742 393,847 240,450 (1,179,246)
Inventories........... 17,473 17,928 (163,383) 88,000
Prepaid expenses...... (84,011) (53,658) (97,601) (9,514)
Other assets.......... (511,774) 1,546,499 571,105 60,451
Franchise agreements.. (78,804) (4,000)
Organization costs.... (135,928) (3,239) (82,727)
Accounts payable,
trade................ (311,030) 141,223 (115,967) 189,387
Payable to
affiliates........... 129,927 66,559 86,381 (233,258)
Accrued expenses and
other liabilities.... 881,626 357,616 28,397 (312,331)
Restricted cash....... (503,082)
----------- ----------- ----------- -----------
Net cash provided by
operating
activities......... 9,220,900 13,711,089 14,092,008 5,956,076
----------- ----------- ----------- -----------
Cash flows from investing
activities:
Improvements and
additions to hotel
properties............. (1,274,727) (4,903,592) (4,352,606) (1,383,722)
----------- ----------- ----------- -----------
Cash flows from financing
activities:
Proceeds from
borrowings............. 493,713 202,287 638,538 7,965,739
Principal payments on
borrowings............. (4,374,090) (2,662,272) (2,790,264) (453,117)
Payments on capital
lease obligation....... (206,194) (221,486) (237,913) (125,493)
Payments for deferred
loan costs............. (189,152) (245,122) (201,650)
Capital contributions... 1,803,806 1,486,050 1,674,711
Distributions paid...... (3,743,317) (6,750,264) (6,857,733) (11,832,475)
----------- ----------- ----------- -----------
Net cash used in
financing
activities......... (7,829,888) (7,817,081) (8,006,444) (2,972,285)
----------- ----------- ----------- -----------
Net change in cash and
cash equivalents......... 116,285 990,416 1,732,958 1,600,069
Cash and cash equivalents
at beginning of period... 1,408,081 1,524,366 2,514,782 4,247,740
----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period......... $ 1,524,366 $ 2,514,782 $ 4,247,740 $ 5,847,809
=========== =========== =========== ===========
Supplemental disclosures
of cash flow information:
Cash paid during the
year for interest...... $ 4,793,349 $ 4,275,522 $ 4,590,280 $ 2,215,191
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-55
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization--American General Hospitality Corporation (the "Company"), a
newly organized Maryland corporation which intends to qualify as a real estate
investment trust ("REIT"), has been formed to acquire equity interests in 13
hotels (the "Initial Hotels"). Four of the Initial Hotels (the "AGH
Predecessor Hotels") were acquired primarily from limited partnerships
controlled by the shareholders of American General Hospitality, Inc. (the
"AGHI Affiliates"). The remaining nine Initial Hotels (the "Other Initial
Hotels") were acquired primarily from parties controlled by persons
unaffiliated with AGHI.
Upon completion of the proposed initial public offering described below, the
Company acquired a 80.2% equity interest in American General Hospitality
Operating Partnership, L.P. (the "Operating Partnership"). A wholly owned
subsidiary of the Company is the sole general partner of the Operating
Partnership. The Operating Partnership owns the Initial Hotels and leases them
to AGH Leasing, L.P. (the "Lessee") under operating leases ("Participating
Leases") which provide for rent based on the revenues of the Initial Hotels.
The Lessee has entered into management agreements pursuant to which all of the
Initial Hotels will be managed by American General Hospitality, Inc. ("AGHI").
Basis of Presentation--The accompanying combined financial statements of the
Other Initial Hotels have been presented on a combined basis due to
anticipated common ownership and management since each of the entities are
expected to be the subject of a business combination with the Company upon
consummation of the proposed initial public offering. The Other Initial Hotels
consist of the following:
<TABLE>
<CAPTION>
PROPERTY NAME LOCATION NO. OF ROOMS
------------- -------- ------------
<S> <C> <C>
Holiday Inn Dallas DFW Airport
South............................. Irving, Texas 409
Hilton Hotel-Toledo................ Toledo, Ohio 213
Holiday Inn New Orleans
International Airport............. Kenner, Louisiana 304
Holiday Inn Park Center Plaza...... San Jose, California 231
Holiday Inn Select-Madison......... Madison, Wisconsin 227
Holiday Inn Mission Valley......... San Diego, California 318
Le Baron Airport Hotel............. San Jose, California 327
Days Inn Ocean City................ Ocean City, Maryland 162
Fred Harvey Albuquerque Airport
Hotel............................. Albuquerque, New Mexico 266
</TABLE>
Two hotels are owned by entities that conduct business as taxable
corporations and were managed so that income taxes were the responsibility of
the owners. The remaining hotels are owned by various partnerships for income
tax purposes. These financial statements have been prepared to show the
operations and financial position of the combined Other Initial Hotels,
substantially all of whose assets and operations have been acquired by the
Company. The Company intends to qualify as a REIT and will not pay any federal
income taxes, therefore the financial statements have been presented on a
pretax basis.
Initial Public Offering--As of July 31, 1996, the Company completed an
initial public offering of 7,500,000 shares of its common stock and an
additional 575,000 shares of common stock were issued by the Company on August
28, 1996, upon exercise of the underwriters' over-allotment option at a price
per common share of $17.75 (the "IPO"). Upon consummation of the IPO, the
Company contributed all of the net proceeds of the IPO to the Operating
Partnership in exchange for an approximate 81.3% equity interest in the
Operating Partnership. The Operating Partnership used such funds to purchase
certain of the Initial Hotels, repay debt and other obligations of the Initial
Hotels, and for working capital.
F-56
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Properties--Hotel properties are stated at the lower of
cost or net realizable value and are depreciated using the straight-line
method over estimated useful lives ranging from 31 to 40 years for building
and improvements and 5 to 7 years for furniture, fixtures and equipment.
The respective owners of the Other Initial Hotels review the carrying value
of each property to determine if circumstances exist indicating an impairment
in the carrying value of the investment of the hotel property or that
depreciation periods should be modified. If facts or circumstances support the
possibility of impairment, the respective owners of the Other Initial Hotels
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the specific hotel property and determine if the
investment in hotel property is recoverable based on the undiscounted future
cash flows. The respective owners of the Other Initial Hotels do not believe
that there are any factors or circumstances indicating impairment of any of
its investment in hotel properties.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
Cash and Cash Equivalents--All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Restricted Cash--Restricted cash consists primarily of amounts held in
escrow for capital and property tax reserves.
Inventories--Inventories consist primarily of food and beverage items;
china; glass and silver; and linen and are stated at the lower of cost
(generally, first-in, first-out) or market.
Deferred Expenses--Deferred expenses primarily consist of deferred loan
costs, franchise fees, and organization costs. Amortization of deferred loan
cost is computed using the effective yield method based upon the terms of the
loan agreements. Amortization of franchise fees is computed using the
straight-line method based upon the terms of the agreements. Amortization of
organization costs is computed using the straight-line method over five years.
Accumulated amortization at December 31, 1994 and 1995 is $892,441 and
$1,045,029, respectively.
Income Taxes--Seven of the nine hotels are included in various limited
partnerships which are not taxable entities. The results of operations are
included in the tax returns of the partners. The partnerships' tax returns and
the amount of allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to income
or loss, the tax liability of the partners could be changed accordingly. The
Company proposes to qualify as a REIT under the Code and will therefore not be
subject to corporate income taxes. Accordingly, the combined statements of
operations contain no provision for federal income taxes.
Revenue Recognition--Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-57
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk--The Other Initial Hotels place cash deposits
at major banks. At December 31, 1995, bank account balances exceeded Federal
Deposit Insurance Corporation limits by approximately $2.5 million. Management
believes credit risk related to these deposits is minimal.
Significant Customer--The owner of the Hilton Hotel-Toledo is a major
customer of the Hilton Hotel-Toledo. In 1995, 20% of the hotel's room revenue
was attributed to other businesses of the owner.
Recently Issued Statement of Financial Accounting Standards--The Other
Initial Hotels adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" during the year ended December 31, 1995. The
adoption of SFAS No. 121 had no material effect on the AGH Acquisition Hotels'
financial statements.
3. DEBT
Debt at December 31, 1994 and 1995 consists of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
First mortgage notes payable in various monthly
installments including interest at fixed rates
ranging from 8.5% to 10% maturing at various dates
through October 1, 2004.............................. $18,028,545 $15,959,484
First mortgage notes payable in various monthly
installments including interest at the commercial
paper rate (5.81% at December 31, 1995) plus 4.75%
maturing at July 15, 1997............................ 5,655,275 5,915,904
First mortgage notes payable in quarterly installments
including interest at the prime rate (8.5% at
December 31, 1995) maturing at October 30, 1999...... 7,692,000 7,575,000
First mortgage note payable in monthly installments
including interest at the federal funds rate (6% at
December 31, 1995) plus 2.5% maturing at July 10,
1997................................................. 10,695,513 10,319,709
Product improvement plan loans payable in various
monthly installments including interest at rates
ranging from the bank reference rate (7.8% at
December 31, 1995) plus .5% to 12% maturing at
various dates through April 1, 2001.................. 3,825,000 4,091,450
Other non-current debt................................ 116,940
----------- -----------
$46,013,273 $43,861,547
=========== ===========
</TABLE>
All debt is collateralized by the investments in hotel properties.
Aggregate annual principal payments for the Other Initial Hotels debt at
December 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
1996.......................................................... $13,408,767
1997.......................................................... 11,420,835
1998.......................................................... 8,220,838
1999.......................................................... 1,209,019
2000 and thereafter........................................... 9,602,088
-----------
Total..................................................... $43,861,547
===========
</TABLE>
F-58
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In December 1993, the partnership which owns the Holiday Inn New Orleans
International Airport hotel received $1,814,609 as a full pay-off from a
default on the lease of the hotel in 1992 which resulted in the default of the
mortgage. The $1,814,609 proceeds were transferred to the lender and applied
as a reduction of the principal balance on the nonrecourse mortgage loan to
cure the default. The payoff of $1,814,609 is recognized as other revenue. The
partnership has agreed that the $1,814,609 received in connection with the
promissory note payoff will be netted from funds they may be entitled to
receive in the future in connection with their bankruptcy claims against the
lessee.
4. LEASES
The Fred Harvey Albuquerque Airport Hotel has a noncancellable capital
building lease expiring in December 2013 and a noncancellable operating land
lease that also expires in December 2013; both leases include two five-year
options to renew the leases. The Le Baron Airport Hotel has a noncancellable
operating land lease expiring in July 2002, with one option to renew for an
additional 30 years. The Hilton Hotel-Toledo has a noncancellable operating
land lease that expires in December 2026, with four successive options to
renew the lease. Additionally, certain equipment is leased under
noncancellable lease agreements expiring at varying intervals through April
1998. The Fred Harvey Albuquerque Airport Hotel and the Le Baron Airport Hotel
land leases provide for contingent rental payments based on varying
percentages of revenues which for the years ended December 31, 1994 and 1995
approximated 50% of the aggregate rental expense under the operating leases.
Additionally, the Fred Harvey Albuquerque Airport Hotel land lease requires
the owner to add at least 100 more guest rooms if the average occupancy at the
hotel is 85% or greater for 24 consecutive months.
Leased capital assets included in buildings and improvements at December 31,
1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Building and improvements....................... $ 4,620,000 $ 4,620,000
Accumulated depreciation........................ (3,323,102) (3,424,155)
----------- -----------
$ 1,296,898 $ 1,195,845
=========== ===========
</TABLE>
Minimum future rental payments required under these capital leases (together
with the present value of net minimum lease payments) and operating leases
that have an initial term or remaining noncancellable lease terms in excess of
one year at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
---- ---------- ----------
<S> <C> <C>
1996.............................................. $ 438,236 $ 409,014
1997.............................................. 438,236 299,327
1998.............................................. 438,236 228,613
1999.............................................. 438,236 216,331
2000 and thereafter............................... 2,674,704 3,707,785
---------- ----------
Total minimum lease payment....................... 4,427,648 $4,861,070
==========
Less imputed interest............................. 1,802,566
----------
Present value of net minimum lease payments....... $2,625,082
==========
</TABLE>
Rental expense was $584,924, $676,531, and $705,943 for the years ended
December 31, 1993, 1994, and 1995, respectively.
F-59
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS
Management fees represent amounts paid to affiliated parties based upon
percentages of gross revenue ranging from 1.5% to 3.0%.
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of hotel franchise agreements expiring in
various years ranging from 1998 to 2007. Franchise costs are based upon
varying percentages of gross room revenue ranging from 1.8% to 6.5%.
Each hotel is required to remit varying percentages of gross room revenue
ranging from 1.5% to 4% to the various franchisors for sales and advertising
expenses incurred to promote the hotel at the national level. Additional sales
and advertising costs are incurred at the local property level.
As a result of the IPO and the resulting prepayment of debt, a selling
partnership will pay prepayment penalties on one note payable totalling
approximately $504,000.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards 107 requires all entities to
disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the Other Initial Hotels report the carrying amount
of cash and cash equivalents, restricted cash, accounts payable, accrued
expenses and other liabilities at cost which approximates fair value due to
the short maturity of these instruments. The carrying amount of the Other
Initial Hotels' debt approximates fair value due to the Other Initial Hotels'
ability to obtain such borrowings at comparable interest rates.
7. RELATED PARTY TRANSACTIONS
During 1993, 1994, and 1995, the owner of the Fred Harvey Albuquerque
Airport Hotel paid for all accounts payable, payroll and other miscellaneous
payments for the hotel. The hotel's outstanding payable to the owner for these
payments, included in accounts payable, was $118,512 and $204,893 at December
31, 1994 and 1995, respectively. In addition, an affiliate of the Fred Harvey
Albuquerque Airport Hotel made payments for the hotel in 1992, totalling
$389,000, which are still outstanding and included in accounts payable as of
December 31, 1995.
The Holiday Inn Park Center Plaza paid an annual management fee to an
officer of the entity owning the hotel for the years ending December 31, 1993,
1994 and 1995 of $60,000, $90,000 and $70,000, respectively.
An oral agreement for purchasing and management/financial services exists
between the Le Baron Airport Hotel and an affiliate of the owner. Fees (based
on 2% of gross revenues) paid to the affiliate for the years ending December
31, 1993, 1994 and 1995 are $139,947, $156,041 and $161,009, respectively.
As of December 31, 1995, the Holiday Inn Mission Valley hotel has a $312,500
receivable from its owners.
8. SUBSEQUENT EVENTS
On January 30, 1996, the Holiday Inn Dallas DFW Airport South hotel entered
into a long-term mortgage indebtedness agreement with a financial institution,
for proceeds of $14,250,000 at a fixed interest rate of 8.75% that matures on
February 1, 2011. Proceeds from the loan were used to repay the outstanding
debt of $5,915,904 and for distributions to the owners.
F-60
<PAGE>
OTHER INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
As discussed in Note 1, the nine Other Initial Hotels were acquired by the
Company subsequent to April 8, 1996. The acquisitions were accounted for by
the Company under the purchase method of accounting. Accordingly, the cost
basis of the hotels changed to reflect the acquisition prices of the hotels by
the Company. In addition, with the exception of the Holiday Inn Dallas DFW
Airport South, the hotels were refinanced upon acquisition and postacquisition
debt is different than the historical debt reflected in the accompanying
financial statements. All management agreements were terminated concurrently
with the sales of the hotels to the Company. The combined financial statements
do not reflect any of the transactions in connection with the acquisitions of
the nine hotels by the Company.
F-61
<PAGE>
OTHER INITIAL HOTELS
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST CAPITALIZED GROSS AMOUNTS AT
SUBSEQUENT TO WHICH CARRIED
INITIAL COST ACQUISITION AT CLOSE OF PERIOD ACCUMULATED
----------------------- --------------------- ----------------------------------- DEPRECIATION
BUILDING BUILDING BUILDING BUILDING
AND AND AND AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL IMPROVEMENTS
----------- ------------ ---- ------------ -------- ------------ ---------- ------------ ----------- ------------
(A) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn
Dallas DFW
Airport South
Irving, TX...... $ 5,915,904 $ 500,000 $ 2,810,500 $461,129 $ 1,144,140 $ 961,129 $ 3,954,640 $ 4,915,769 $ 360,051
Holiday Inn Park
Center Plaza
San Jose, CA.... 4,768,192 236,463 2,356,705 6,392,404 236,463 8,749,109 8,985,572 3,662,314
Fred Harvey
Albuquerque
Airport Hotel
Albuquerque,
NM.............. 7,995,562 1,655,118 9,650,680 9,650,680 302,770
Holiday Inn
Select-Madison
Madison, WI..... 4,231,600 2,615,614 7,050,569 2,215,924 2,615,614 9,266,493 11,882,107 3,802,233
Holiday Inn New
Orleans
International
Airport
Kenner, LA...... 7,440,696 2,567,967 12,179,629 3,390,411 2,567,967 15,570,040 18,138,007 1,847,633
Days Inn Ocean
City
Ocean City, MD.. 500,000 4,230,000 524,000 500,000 4,754,000 5,254,000 438,194
Le Baron Airport
Hotel
San Jose, CA.... 3,163,996 7,000,000 270,716 7,270,716 7,270,716 4,777,777
Holiday Inn
Mission Valley
San Diego, CA... 10,766,159 2,293,550 5,354,094 1,697,161 2,293,550 7,051,255 9,344,805 782,460
Hilton Hotel-
Toledo Toledo,
OH.............. 7,575,000 6,753,093 27,822 6,780,915 6,780,915 580,558
----------- ---------- ----------- -------- ----------- ---------- ----------- ----------- -----------
$43,861,547 $8,713,594 $55,730,152 $461,129 $17,317,696 $9,174,723 $73,047,848 $82,222,571 $16,553,990
=========== ========== =========== ======== =========== ========== =========== =========== ===========
<CAPTION>
NET LIFE
BOOK VALUE UPON WHICH
BUILDING DEPRECIATION
AND DATE OF DATE OF IN STATEMENT
DESCRIPTION IMPROVEMENTS CONSTRUCTION ACQUISITION IS COMPUTED
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Holiday Inn
Dallas DFW
Airport South
Irving, TX...... $ 4,555,718 1974 1993 40 YRS
Holiday Inn Park
Center Plaza
San Jose, CA.... 5,323,258 1975 1975 40 YRS
Fred Harvey
Albuquerque
Airport Hotel
Albuquerque,
NM.............. 9,347,910 1972 1988 27 YRS
Holiday Inn
Select-Madison
Madison, WI..... 8,079,874 1987 1987 40 YRS
Holiday Inn New
Orleans
International
Airport
Kenner, LA...... 16,290,374 1973 1988 40 YRS
Days Inn Ocean
City
Ocean City, MD.. 4,815,806 1989 1992 40 YRS
Le Baron Airport
Hotel
San Jose, CA.... 2,492,939 1974 1974 40 YRS
Holiday Inn
Mission Valley
San Diego, CA... 8,562,345 1970 1991 40 YRS
Hilton Hotel-
Toledo Toledo,
OH.............. 6,200,357 1987 1993 40 YRS
------------
$65,668,581
============
</TABLE>
(a) Reconciliation of Land and Buildings and Improvements:
<TABLE>
<S> <C>
Balance at January 1, 1994...... $76,600,731
Additions during the year 1994:
Improvements................... 3,148,077
-----------
Balance at December 31, 1994.... 79,748,808
Additions during the year
1995........................... 2,473,763
-----------
Balance at December 31, 1995.... $82,222,571
===========
</TABLE>
(b) Reconciliation of Accumulated Depreciation:
<TABLE>
<S> <C>
Balance at January 1, 1994...... $12,044,953
Depreciation for the year
1994........................... 2,250,929
-----------
Balance at December 31, 1994.... 14,295,882
Depreciation for the year
1995........................... 2,258,108
-----------
Balance at December 31, 1995.... $16,553,990
===========
</TABLE>
F-62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying balance sheet of the Days Inn Lake Buena
Vista hotel (described in Note 1) as of December 31, 1995 and the related
statements of operations, equity and cash flows for the period then ended.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Days Inn Lake Buena
Vista hotel as of December 31, 1995, and the result of its operations and its
cash flows for the period then ended in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
November 26, 1996
F-63
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER
1995 30 1996
ASSETS ----------- -----------
(UNAUDITED)
<S> <C> <C>
Investments in hotel properties, at cost:
Land and land improvement........................... $ 2,096,028 $ 2,096,028
Buildings and improvements.......................... 18,859,256 18,889,376
Furniture, fixtures and equipment................... 3,165,265 3,623,972
----------- -----------
24,120,549 24,609,376
Less accumulated depreciation......................... (1,003,306) (1,754,155)
----------- -----------
Net investment in hotel properties.................... 23,117,243 22,855,221
Cash and cash equivalents............................. 73,606 258,807
Restricted cash....................................... 8,340 418,947
Accounts receivable, net.............................. 409,542 323,559
Inventories........................................... 20,972 13,925
Prepaid expenses...................................... 58,580 98,168
Deferred expenses..................................... 304,581 246,407
Other assets.......................................... 2,151
----------- -----------
Total assets...................................... $23,995,015 $24,215,034
=========== ===========
LIABILITIES AND EQUITY
Debt.................................................. $20,000,000 $20,000,000
Capital lease obligation.............................. 253,506
Accounts payable, trade............................... 261,583 130,769
Accrued expenses and other liabilities................ 50,660 790,740
----------- -----------
Total liabilities................................. 20,312,243 21,175,015
----------- -----------
Commitments and contingencies (Note 4)................
Capital............................................... 4,292,000 3,242,000
Accumulated deficit................................... (609,228) (201,981)
----------- -----------
Total equity...................................... 3,682,772 3,040,019
----------- -----------
Total liabilities and equity...................... $23,995,015 $24,215,034
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER ----------------------
31 1995 1995 1996
---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Room revenue............................. $6,825,271 $5,438,660 $6,337,410
Food and beverage revenue................ 810,066 671,266 561,985
Other revenue............................ 668,959 511,060 594,208
---------- ---------- ----------
Total revenue.......................... 8,304,296 6,620,986 7,493,603
---------- ---------- ----------
Expenses:
Property operating costs and expenses.... 2,054,677 1,632,694 1,703,115
Food and beverage costs and expenses..... 627,923 496,344 478,086
General and administrative............... 782,649 575,386 623,056
Advertising and promotion................ 468,824 328,469 441,557
Repairs and maintenance.................. 485,870 354,280 400,059
Utilities................................ 512,447 415,098 409,586
Management fees.......................... 131,004 98,253 144,007
Franchise costs.......................... 443,643 353,513 411,932
Depreciation............................. 929,559 697,170 750,849
Amortization............................. 77,043 57,651 58,174
Real estate and personal property taxes,
and property insurance ................. 459,228 399,197 424,267
Interest expense......................... 1,770,833 1,333,333 1,241,668
---------- ---------- ----------
Total expense.......................... 8,743,700 6,741,388 7,086,356
---------- ---------- ----------
Net income (loss)...................... $ (439,404) $ (120,402) $ 407,247
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-65
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
EQUITY
----------
<S> <C>
Balance, December 31, 1994 $4,430,176
Net loss.......................................................... (439,404)
Distributions..................................................... (308,000)
----------
Balance December 31, 1995 3,682,772
Net income (unaudited)............................................ 407,247
Distributions (unaudited)......................................... (1,050,000)
----------
Balance, September 30, 1996 (unaudited)............................. $3,040,019
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
STATEMENTS OF CASH FLOWS
FOR THE YEAR MONTHS ENDED DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
DECEMBER 31 ------------------------
1995 1995 1996
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)....................... $ (439,404) $ (120,402) $ 407,247
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation.......................... 929,559 697,170 750,849
Amortization.......................... 77,043 57,651 58,174
Changes in assets and liabilities:
Restricted cash....................... 30,827 (686,417) (410,607)
Accounts receivable................... (125,246) (121,875) 85,983
Inventories........................... (1,833) (1,609) 7,047
Prepaid expenses...................... 69,876 88,342 (39,588)
Other assets.......................... (2,151) (2,151) 2,151
Organization costs.................... (15,679) (15,679)
Accounts payable, trade............... 113,824 (29,042) (130,814)
Accrued expenses and other
liabilities.......................... (369,360) 347,603 740,080
---------- ---------- -----------
Net cash provided by operating
activities......................... 267,456 213,591 1,470,522
---------- ---------- -----------
Cash flows from investing activities:
Improvements and additions to hotel
properties............................. (496,076) (380,902) (224,299)
---------- ---------- -----------
Cash flows from financing activities:
Payments on capital lease obligation.... (11,022)
Distributions paid...................... (308,000) (108,000) (1,050,000)
---------- ---------- -----------
Net cash used in financing
activities......................... (308,000) (108,000) (1,061,022)
---------- ---------- -----------
Net change in cash and cash equivalents .. (536,620) (275,311) 185,201
Cash and cash equivalents at beginning of
period................................... 610,226 610,226 73,606
---------- ---------- -----------
Cash and cash equivalents at end of
periods.................................. $ 73,606 $ 334,915 $ 258,807
========== ========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest.. $1,770,833 $1,333,333 $ 1,241,668
========== ========== ===========
</TABLE>
Supplemental schedule of non cash financing activities:
The Partnership entered into a capital lease obligation in the amount of
$264,528 in August 1996.
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization--American General Hospitality Operating Partnership, L.P.
acquired a 100% ownership interest in a 490 room Days Inn hotel located in
Lake Buena Vista, Florida (the "Days Inn Lake Buena Vista hotel") from parties
controlled by persons unaffiliated with the Operating Partnership on October
22, 1996. The Operating Partnership, a subsidiary of American General
Hospitality Corporation (the "Company") which is a Maryland corporation that
intends to qualify as a real estate investment trust ("REIT"), which was
established to acquire, own and lease hotel properties. The Company completed
its initial public offering on July 31, 1996.
Basis of Presentation--The accompanying financial statements of the Days Inn
Lake Buena Vista hotel have been presented on a basis consistent with the
Company due to the anticipated common ownership and management since the
entity will be the subject of a business combination with the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Hotel Property--The hotel property is stated at the lower of
cost or net realizable value and is depreciated using the straight-line method
over estimated useful lives ranging from 39 years for building and
improvements and 3 to 7 years for furniture, fixtures and equipment.
The owners of the Days Inn Lake Buena Vista hotel review the carrying value
of the property to determine if circumstances exist indicating an impairment
in the carrying value of the investment of the hotel property or that
depreciation periods should be modified. If facts or circumstances support the
possibility of impairment, the owners of the Days Inn Lake Buena Vista hotel
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the specific hotel property and determine if the
investment in hotel property is recoverable based on the undiscounted future
cash flows. The owners of the Days Inn Lake Buena Vista hotel do not believe
that there are any factors or circumstances indicating impairment of any of
its investment in hotel properties.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and the related accumulated depreciation are removed
from the accounts and the gain or loss is included in operations.
Cash and Cash Equivalents--All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents.
Restricted Cash--Restricted cash consists primarily of amounts held in
escrow for capital and property tax reserves.
Inventories--Inventories consist of food and beverage items and are stated
at the lower of cost (generally, first-in first-out) or market.
Deferred Expenses--Deferred expenses primarily consist of organization
costs. Amortization of organization costs is computed using the straight-line
method over five years. Accumulated amortization at December 31, 1995 is
$83,245.
Income Taxes--The Days Inn Lake Buena Vista hotel is included in a limited
partnership which is not a taxable entity. The results of operations are
included in the tax returns of the partners. The partnership's tax return and
the amount of allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to income
or loss, the tax liability of the partners could be changed accordingly.
F-68
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition--Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk--At December 31, 1995, bank account balances
exceeded Federal Deposit Insurance Corporation limits by approximately
$148,642.
Recently Issued Statement of Financial Accounting Standards--The Days Inn
Lake Buena Vista hotel adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long Lived Assets to be Disposed Of" during the year ended December 31, 1995.
The adoption of SFAS No. 121 had no material effect on the AGH Orlando
Acquisition Hotel's financial statements.
Interim Financial Information--The unaudited interim financial statements as
of September 30, 1996 and for the nine months ended September 31, 1995 and
1996 have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The notes to the interim financial
statements included herein are intended to highlight significant changes to
the notes to the December 31, 1995 financial statements and present interim
disclosures required by the SEC. The accompanying interim financial statements
reflect, in the opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such adjustments are of
a normal and recurring nature.
3. DEBT
Debt as of December 31, 1995, consists of a $20,000,000 first mortgage note
payable in monthly interest-only payments at the prime rate (8.5% at December
31, 1995) through December 31, 1997, and monthly principal plus interest
payments at prime plus 1.5% from January 1998 through the maturity date of
November 30, 2004. A final principal payment of $17,642,267 is due at
maturity. All debt is collateralized by the investment in hotel property.
Aggregate annual principal payments for the Days Inn Lake Buena Vista
hotel's debt at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
1998.......................................................... $ 261,764
1999.......................................................... 306,837
2000 and thereafter........................................... 19,431,399
-----------
Total..................................................... $20,000,000
===========
</TABLE>
F-69
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS
Management fees represent amounts paid to an affiliated party. The basic
management fee is $10,917 per month. The incentive management fee is paid
based on net cash flow as follows:
Net Cash Flow ("NCF") Incentive Fee
- -------------------- -------------
Less than $600,000.........................................................None
$ 600,000-$ 750,000....................$ 29,000 x [NCF--$600,000) / $150,000]
$ 750,001-$ 900,000...........$ 29,000 +[31,000 x (NCF--$750,000) / $150,000]
$ 900,001-$1,000,000.........$ 60,000 + [$14,000 x (NCF--$900,000) / $100,000]
$1,000,001-$1,200,000......$ 74,000 + [$101,000 x (NCF--$1,000,000) / $200,000]
$1,200,001-$1,500,000......$175,000 + [$116,000 x (NCF--$1,200,000) / $300,000]
Greater than $1,500,000...$291,000 + [$.0045 x (annual gross room revenues less
gross room revenues at date on which
NCF surpassed $1,500,000)] to a
maximum of 20% x (NCF--$1,500,000)
An incentive management fee of $45,754 was paid as of September 30, 1996. No
incentive fee was paid in 1995. Net cash flow for a particular year is defined
in the management agreement as gross revenues attributable to the property
less (i) all amounts required to service indebtedness, (ii) operating expenses
including the basic management fee, and (iii) all reserves including but not
limited to the 3% FF&E reserve.
Franchise costs represent the annual expense for franchise royalties and
reservation services under the terms of the franchise agreement expiring in
2004. Franchise costs are based upon 6.5% of gross room revenue.
The Days Inn Lake Buena Vista hotel pays, on a program by program basis, the
franchisor for sales and advertising expenses incurred to promote the hotel at
the national level. These costs are included in advertising and promotion
expenses in the Statements of Operations. Additional sales and advertising
costs are incurred at the local property level.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards 107 requires all entities to
disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the Days Inn Lake Buena Vista hotel reports the
carrying amount of cash and cash equivalents, restricted cash, accounts
payable, accrued expenses and other liabilities at cost which approximates
fair value due to the short maturity of these instruments. The carrying amount
of the Days Inn Lake Buena Vista hotel's debt approximates fair value due to
the Days Inn Lake Buena Vista hotel's ability to obtain such borrowings at
comparable interest rates.
6. RELATED PARTY TRANSACTIONS
The Days Inn Lake Buena Vista hotel's annual management fee for all periods
presented was paid to a company owned by Richard Kessler, a partner of the
Days Inn Lake Buena Vista hotel.
The Days Inn Lake Buena Vista hotel purchased property insurance for all
periods presented from an entity affiliated with Howard Milstein, a partner of
the Days Inn Lake Buena Vista hotel.
7. SUBSEQUENT EVENTS
In August 1996, the Days Inn Lake Buena Vista hotel entered into a capital
lease obligation in exchange for equipment. Leased capital assets included in
furniture, fixtures, and equipment as of September 30, 1996, were $264,528
with $16,613 in accumulated depreciation.
F-70
<PAGE>
DAYS INN LAKE BUENA VISTA HOTEL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On October 22, 1996, the Company and the Operating Partnership purchased
100.0% of the limited and general partnership interest in the Days Inn Lake
Buena Vista Partnership, L.P. (the "Partnership") from the limited partners of
the Partnership, Kessler Lake Buena Vista, Ltd., Milstein Lake Buena Vista
Limited Partnership and Edward L. Milstein. The Partnership, which owns the
Days Inn Lake Buena Vista hotel was acquired for a purchase price of
$30,500,000, plus estimated closing costs of $300,000, which is payable as
follows: (i) $30,000,000 in cash, and (ii) $500,000 through the issuance of
25,397 shares of restricted common stock of the Company. In connection with
this acquisition, the Operating Partnership also entered into agreements to
purchase a license and an association membership, as well as construction,
design and other services related to the Days Inn Lake Buena Vista hotel from
parties affiliated with one of the sellers for approximately $2,350,000.
The cash required to acquire the Partnership was provided from borrowings
under the Company's Line of Credit.
F-71
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUAL-
IFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 16
The Company.............................................................. 28
Use of Proceeds.......................................................... 38
Price Range of Common Stock and Distribution Policy...................... 39
Capitalization........................................................... 40
Selected Financial Information........................................... 41
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 46
The Hotel Industry....................................................... 54
The Hotels............................................................... 55
Formation Transactions................................................... 85
Management............................................................... 88
Certain Relationships and Transactions................................... 98
AGHI, the Lessee and Other Operators 101
Principal Stockholders................................................... 103
Description of Capital Stock............................................. 105
Certain Provisions of Maryland Law and of the Company's Charter and
Bylaws.................................................................. 109
Policies and Objectives with Respect to Certain Activities............... 113
Shares Available for Future Sale......................................... 117
Partnership Agreement.................................................... 119
Federal Income Tax Considerations........................................ 122
Underwriting............................................................. 140
Experts.................................................................. 141
Legal Matters............................................................ 141
Additional Information................................................... 141
Glossary................................................................. 143
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,500,000 Shares
[LOGO OF AMERICAN GENERAL HOSPITALITY CORPORATION APPEARS HERE]
Common Stock
-----------
PROSPECTUS
, 1997
-----------
Smith Barney Inc.
Legg Mason Wood Walker
Incorporated
Montgomery Securities
Prudential Securities Incorporated
The Robinson-Humphrey Company, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 shares of
Common Stock.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 45,521
NASD filing fee................................................ 15,522
NYSE listing fee............................................... 14,800
Printing, engraving and mailing expenses....................... 300,000
Accountant's fees and expenses................................. 250,000
Blue Sky fees and expenses..................................... 5,000
Legal fees..................................................... 500,000
Transfer agent's fees.......................................... 1,500
Miscellaneous expenses......................................... 767,657
----------
Total........................................................ $1,900,000
==========
</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 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 were issued by the Company in reliance on the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Act"). The shares
sold by the Company on April 12, 1996 were redeemed by the Company for $100
upon closing of the IPO. In connection with the IPO, the Company also issued
137,008 shares of Common Stock to the Plan, valued at approximately $2.4
million, based on the offering price of the shares in the IPO, 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 were purchased by the Plan and issued by the Company in reliance on the
exemption provided by Section 4(2) of the Act.
In connection with the acquisition of the Days Inn Lake Buena Vista on
October 22, 1996, the Company issued 25,397 shares of Common Stock to an
investor, valued at approximately $500,000 based on the value of the shares at
the time of closing of the transaction, in exchange for his interest in the
hotel. The shares of Common Stock were issued for investment purposes only,
and not with a view to any resale, fractionalization or distribution thereof.
The shares of Common Stock were purchased by that investor and issued by the
Company in reliance on the exemption provided by Section 4(2) of the Act.
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.
II-1
<PAGE>
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 disposition 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 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
also permits 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 Maryland 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 Maryland 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 has purchased 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 Statements of Operations for the Year Ended December 31, 1995,
the Twelve Months Ended September 30, 1996 and the Nine Months Ended
September 30, 1996 and 1995 (unaudited)................................ F-3
Pro Forma Consolidated Balance Sheet as of September 30, 1996
(unaudited)............................................................ F-10
Report of Independent Accountants....................................... F-14
Consolidated Balance Sheet as of September 30, 1996..................... F-15
Consolidated Statement of Operations for the Period from July 31, 1996
(inception of operations) through September 30, 1996................... F-16
Consolidated Statement of Shareholders' Equity for the Period from April
12, 1996 (date of capitalization) through September 30, 1996........... F-17
Consolidated Statement of Cash Flows for the Period from July 31, 1996
(inception of operations) through September 30, 1996................... F-18
Notes to Consolidated Financial Statements.............................. F-19
Schedule III--Real Estate and Accumulated Depreciation as of September
30, 1996............................................................... F-26
AGH Leasing, L.P.
Pro Forma Combined Statements of Operations for the Year Ended December
31, 1995, the Twelve Months Ended September 30, 1996 and the Nine
Months Ended September 30, 1996 and 1995 (unaudited)................... F-27
Balance Sheet as of September 30, 1996 (unaudited)...................... F-34
Statement of Operations for the Period from July 31, 1996 (inception of
operations) through September 30, 1996 (unaudited)..................... F-35
Statement of Cash Flows for the Period from July 31, 1996 (inception of
operations) through September 30, 1996 (unaudited)..................... F-36
Notes to Financial Statements........................................... F-37
AGH Predecessor Hotels
Report of Independent Accountants....................................... F-40
Combined Balance Sheets as of December 30, 1994, December 29, 1995 and
July 30, 1996.......................................................... F-41
Combined Statements of Operations for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-42
Combined Statements of Equity for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-43
Combined Statements of Cash Flows for the Period from December 30, 1993
through December 31, 1993, the Years Ended December 30, 1994 and
December 29, 1995 and for the period from December 30, 1995 through
July 30, 1996.......................................................... F-44
Notes to Combined Financial Statements.................................. F-45
Schedule III--Real Estate and Accumulated Depreciation as of July 30,
1996................................................................... F-50
Other Initial Hotels
Report of Independent Accountants....................................... F-51
Combined Balance Sheets as of December 31, 1994 and 1995 (audited) and
June 30, 1996 (unaudited).............................................. F-52
Combined Statements of Operations for each of the Three Years in the
Period Ended
December 31, 1995 (audited) and the Six Months Ended June 30, 1996
(unaudited)............................................................ F-53
Combined Statements of Equity for each of the Three Years in the Period
Ended
December 31, 1995 (audited) and the Six Months Ended June 30, 1996
(unaudited)............................................................ F-54
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
Combined Statements of Cash Flows for each of the Three Years in the
Period Ended
December 31, 1995 (audited) and the Six Months ended June 30, 1996
(unaudited)............................................................ F-55
Notes to Combined Financial Statements.................................. F-56
Schedule III--Real Estate and Accumulated Depreciation as of December
31, 1995............................................................... F-62
</TABLE>
<TABLE>
<S> <C>
Days Inn Lake Buena Vista Hotel
</TABLE>
<TABLE>
<S> <C>
Report of Independent Accountants....................................... F-63
Balance Sheets as of December 31, 1995 (audited) and September 30, 1996
(unaudited)............................................................ F-64
Statements of Operations for the Year Ended December 31, 1995 (audited)
and the Nine Months Ended September 30, 1996 and 1995 (unaudited)...... F-65
Statements of Equity for the Year Ended December 31, 1995 (audited) and
the Nine Months Ended September 30, 1996 and 1995 (unaudited).......... F-66
Statements of Cash Flows for the Year Ended December 31, 1995 (audited)
and the Nine Months Ended September 30, 1996 and 1995 (unaudited)...... F-67
Notes to Financial Statements........................................... F-68
</TABLE>
II-4
<PAGE>
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*1.1 --Form of Underwriting Agreement
**2.1 --Sale and Contribution Agreement for Holiday Inn Select-Madison
**2.2 --Purchase and Sale Agreement for Holiday Inn Park Center Plaza
**2.3 --Hotel Purchase Agreement for Fred Harvey Albuquerque Airport Hotel
**2.4 --Hotel Purchase Agreement for Le Baron Airport Hotel
**2.5 --Real Estate Sale Agreement for Days Inn Ocean City
**2.6 --Purchase and Sale Agreement and Escrow Instructions for Holiday Inn
Mission Valley
***2.7 --Purchase Agreement for Days Inn Lake Buena Vista
2.8 --Purchase and Sale Agreement by and between Theodore H. Kruttschnitt,
III & Catherine M. Kruttschnitt and American General Hospitality
Operating Partnership, L.P.
2.9 --Hotel Purchase Agreement by and between American General Hospitality
Operating Partnership, L.P. and Renthotel Durham, L.L.C.
2.10 --Hotel Purchase Agreement by and between SNA of Georgia, Inc. and
American General Hospitality Operating Partnership, L.P.
2.11 --Hotel Purchase Agreement by and between SKL of Florida, Inc. and
American General Hospitality Operating Partnership, L.P.
2.12 --Hotel Purchase Agreement by and between French Quarter Suites, Inc.
and American General Hospitality Operating Partnership, L.P.
*2.13 --Purchase Agreement for Radisson Arlington Heights
**2.14 --Contribution Agreement for Holiday Inn New Orleans International
Airport
**2.15 --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-Toledo
**2.16 --Contribution Agreement (GP) for Holiday Inn Dallas DFW Airport South
**2.17 --Omnibus Option Agreement (Cash) for Holiday Inn Dallas DFW Airport
South
**2.18 --Omnibus Option Agreement (OP Units) for Holiday Inn Dallas DFW
Airport South
**2.19 --Option Agreement for Holiday Inn Dallas DFW Airport West
**2.20 --Omnibus Option Agreement (OP Units) for Hotel Maison de Ville
**2.21 --Omnibus Option Agreement (Cash) for Hotel Maison de Ville
**2.22 --Option Agreement for Hotel Maison de Ville
**2.23 --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
**3.1 --Articles of Incorporation of the Registrant
**3.2 --Articles of Amendment and Restatement of the Registrant
**3.3 --Bylaws of the Registrant
**3.4 --Form of Second Articles of Amendment and Restatement 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.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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 --Credit Agreement among the American General Hospitality Operating
Partnership, L.P., Societe Generale, Southwest Agency, Bank One,
Texas, N.A. and the banks named therein
**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 Shared Services Office Space Agreement
**10.18 --Form of Option Agreement and Right of First Offer/Refusal between
1815 Hotel Associates Limited Partnership and American General
Hospitality Operating Partnership, L.P. (with respect to the
Durham, North Carolina Option Hotel)
**10.19 --Form of Indemnification Agreement between the Registrant and its
executive officers and directors
**10.20 --Form of Option Agreement and Right of First Offer/Refusal between
Broadway Morrison Limited Partnership and American General
Hospitality Operating Partnership, L.P. (with respect to the
Boise, Idaho Option Hotel)
**10.21 --Form of Management Company Master Agreement among AGH Leasing,
L.P., American General Hospitality, Inc., Steven D. Jorns and
Bruce G. Wiles.
*10.22 --Wyndham Alliance Master Agreement
*21.1 --Subsidiaries of the Company
*23.1 --Consent of Battle Fowler LLP (included in Exhibits 5.1 and 8.1
hereto)
**23.2 --Consent of Coopers & Lybrand L.L.P. as to its 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)
</TABLE>
- --------
* To be filed by Amendment.
** Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (Registration No. 333-4568) and incorporated by reference as an
exhibit to this Registration Statement.
*** Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated October 22, 1996, filed with the Commission on November 5, 1996.
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.
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*1.1 --Form of Underwriting Agreement
**2.1 --Sale and Contribution Agreement for Holiday Inn Select-Madison
**2.2 --Purchase and Sale Agreement for Holiday Inn Park Center Plaza
**2.3 --Hotel Purchase Agreement for Fred Harvey Albuquerque Airport Hotel
**2.4 --Hotel Purchase Agreement for Le Baron Airport Hotel
**2.5 --Real Estate Sale Agreement for Days Inn Ocean City
**2.6 --Purchase and Sale Agreement and Escrow Instructions for Holiday Inn
Mission Valley
***2.7 --Purchase Agreement for Days Inn Lake Buena Vista
2.8 --Purchase and Sale Agreement by and between Theodore H. Kruttschnitt,
III & Catherine M. Kruttschnitt and American General Hospitality
Operating Partnership, L.P.
2.9 --Hotel Purchase Agreement by and between American General Hospitality
Operating Partnership, L.P. and Renthotel Durham, L.L.C.
2.10 --Hotel Purchase Agreement by and between SNA of Georgia, Inc. and
American General Hospitality Operating Partnership, L.P.
2.11 --Hotel Purchase Agreement by and between SKL of Florida, Inc. and
American General Hospitality Operating Partnership, L.P.
2.12 --Hotel Purchase Agreement by and between French Quarter Suites, Inc.
and American General Hospitality Operating Partnership, L.P.
*2.13 --Purchase Agreement for Radisson Arlington Heights
**2.14 --Contribution Agreement for Holiday Inn New Orleans International
Airport
**2.15 --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-Toledo
**2.16 --Contribution Agreement (GP) for Holiday Inn Dallas DFW Airport South
**2.17 --Omnibus Option Agreement (Cash) for Holiday Inn Dallas DFW Airport
South
**2.18 --Omnibus Option Agreement (OP Units) for Holiday Inn Dallas DFW
Airport South
**2.19 --Option Agreement for Holiday Inn Dallas DFW Airport West
**2.20 --Omnibus Option Agreement (OP Units) for Hotel Maison de Ville
**2.21 --Omnibus Option Agreement (Cash) for Hotel Maison de Ville
**2.22 --Option Agreement for Hotel Maison de Ville
**2.23 --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
**3.1 --Articles of Incorporation of the Registrant
**3.2 --Articles of Amendment and Restatement of the Registrant
**3.3 --Bylaws of the Registrant
**3.4 --Form of Second Articles of Amendment and Restatement 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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 --Credit Agreement among the American General Hospitality Operating
Partnership, L.P., Societe Generale, Southwest Agency, Bank One,
Texas, N.A. and the banks named therein
**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 Shared Services Office Space Agreement
**10.18 --Form of Option Agreement and Right of First Offer/Refusal between
1815 Hotel Associates Limited Partnership and American General
Hospitality Operating Partnership, L.P. (with respect to the
Durham, North Carolina Option Hotel)
**10.19 --Form of Indemnification Agreement between the Registrant and its
executive officers and directors
**10.20 --Form of Option Agreement and Right of First Offer/Refusal between
Broadway Morrison Limited Partnership and American General
Hospitality Operating Partnership, L.P. (with respect to the
Boise, Idaho Option Hotel)
**10.21 --Form of Management Company Master Agreement among AGH Leasing,
L.P., American General Hospitality, Inc., Steven D. Jorns and
Bruce G. Wiles.
*10.22 --Wyndham Alliance Master Agreement
*21.1 --Subsidiaries of the Company
*23.1 --Consent of Battle Fowler LLP (included in Exhibits 5.1 and 8.1
hereto)
**23.2 --Consent of Coopers & Lybrand L.L.P. as to its 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)
</TABLE>
- --------
* To be filed by Amendment.
** Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (Registration No. 333-4568) and incorporated by reference as an
exhibit to this Registration Statement.
*** Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated October 22, 1996, filed with the Commission on November 5, 1996.
<PAGE>
EXHIBIT 2.8
PURCHASE AND SALE AGREEMENT
By and Between
THEODORE H. KRUTTSCHNITT, III & CATHERINE M. KRUTTSCHNITT
("Seller")
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
("Buyer")
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made and entered into as of
the _______ day of November, 1996 (the "Effective Date") by and between
Theodore H. Kruttschnitt, III and Catherine M. Kruttschnitt (collectively,
"Seller"), and American General Hospitality Operating Partnership, L.P.
("Buyer").
R E C I T A L S
- - - - - - - -
This Agreement is made with respect to the following facts and circumstances:
A. Seller owns certain real property commonly known as the Holiday Inn
Resort, with the street address of 1000 Aguajito Road, Monterey, California
93940, which real property, together with certain personal property is
collectively referred to in this Agreement as the "Property" and is more
particularly defined below.
B. Subject to the terms and conditions herein, Seller desires to sell and
Buyer desires to purchase the Property and certain other assets related to the
Property.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
Seller and Buyer agree as follows:
1. PURCHASE AND SALE.
1.1 Property. Subject to the terms and conditions hereof, Seller
--------
hereby agrees to sell, convey and assign to Buyer, and Buyer hereby agrees to
purchase and accept from Seller on the Closing Date (as defined below) the
following (collectively, the "Property"):
1.1.1 The real property which is legally described on Exhibit
1.1.1 attached hereto, together with any and all rights, privileges, easements,
appurtenances, advantages, streets, alleys, strips, gores, mineral rights and
water rights appurtenant thereto, which are owned by Seller (the "Land");
1.1.2 All buildings and other improvements and fixtures of every
kind and description located in, on, over or under the Land including without
limitation those certain buildings consisting of approximately 204 hotel rooms
and suites, any apparatus, equipment and appliances incorporated therein and
used in connection with the operation and occupancy thereof, such as heating and
air conditioning systems, facilities used to provide any utility service,
ventilation, or other services thereto, parking lots or structures, landscaping
and roadways (all of which are collectively referred to as the "Improvements").
The Land and Improvements are collectively referred to as the "Real Property";
1.1.3 All tangible personal property of any type owned by Seller
and relating to the ownership, leasing, advertising, use, maintenance or
operation of the Real Property and located at the Real Property (collectively,
"Personal Property");
-1-
<PAGE>
1.1.4 To the extent assignable the interest of Seller in (i) the
leases, licenses, occupancy agreements, airline agreements, corporate accounts
agreements, advance booking agreements, convention reservation agreements and
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, all as
identified in Exhibit 1.1.4 attached hereto, which are in effect on the Closing
Date (the "Leases"); (ii) any commission agreements, advertising contracts,
service contracts and equipment leases to be assumed by Buyer as described on
Exhibit 1.1.4 attached hereto; (iii) all current licenses (exclusive of the
Commitment Agreement, as defined below), permits, certificates of occupancy,
approvals and entitlements issued or granted in connection with the Real
Property and the businesses operated thereon as well as any and all development
rights and any other intangible rights, interests or privileges relating to or
used in connection with the Real Property; (iv) subject to the provisions of a
standard Holiday Inn License Agreement to be obtained by Buyer, the right to use
the current names of the Property, logos, trademarks, tradenames and symbols and
promotional materials; and (v) all transferrable warranties, guarantees or
sureties relating to the Real Property or the Personal Property, all of which
shall be assigned by Seller to Buyer pursuant to the form described in Section
8.1.3 below ("Assignment"). The Leases, commission agreements, advertising
contracts, service contracts and equipment leases to be assigned by Seller and
assumed by Buyer are limited to those specifically described on Exhibit 1.1.4
attached hereto;
1.1.5 To the extent assignable, all of Seller's interest in
prepaid rents and deposits existing as of the Closing, 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 and in
connection with all such deposits including deposits for advance reservations,
banquets and future services, Buyer shall be solely responsible following the
Closing for performance of such future services and other obligations with
respect to such deposits;
1.1.6 To the extent assignable, all of Seller's interest in all
current books and records, promotional material, telephone numbers, 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 (without cost to Seller) and has the
right to convey and deliver which are used in Seller's ownership or use of the
Land, the Improvements or the Personal Property, whether any of the foregoing
are in hard copy form or in computerized data storage form; 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;
1.1.7 To the extent assignable, all of Seller's interest in
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 provided, however, that
Buyer agrees that Seller has no responsibility for the content or accuracy of
any reports or other documents prepared by third parties; an d
1.1.8 To the extent assignable, all of 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 free and
clear of all qualifications and encumbrances other than the obligation to pay
the applicable utility company
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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, if any, ever issued and relating to the Land or Improvements.
1.2 Excluded Matters. Buyer shall not acquire any rights to non-
----------------
transferrable computer software or to any leased equipment at the Property that
is not described on Exhibit 1.1.4. Seller shall have no obligation to sell,
convey or transfer to Buyer and Buyer shall have no right to purchase the city
ledger receivables, credit card receivables or any other receivables or any
operating cash banks existing in connection with the Property as the Closing
Date. Further, Buyer shall not acquire any rights in connection with or incur
any obligations with respect to Seller's accounts payable or any other debts in
connection with the Property existing as of the Closing Date.
2. PURCHASE PRICE.
Buyer shall pay as the total purchase price for the Property and the
Property's liquor license (the "Purchase Price") the sum of (i) Fifteen Million
Five Hundred Fifty-Five Thousand Dollars ($15,555,000); and (ii) an amount equal
to Seller's substantiated cost for all useable inventories at the Property of
food and nonalcoholic beverages, all unopened bottles of alcoholic beverages,
all inventories of operating and promotional supplies, and at Buyer's option if
Buyer chooses to purchase such items, all opened bottles of alcoholic beverages.
The Purchase Price shall be paid as follows:
2.1 Initial Deposit. No later than one (1) business day following
---------------
the Effective Date, Buyer shall cause One Hundred Fifty Thousand Dollars
($150,000.00) (the "Initial Deposit") to be delivered into Escrow (as defined
below).
2.2 Additional Deposit. No later than one (1) business day following
------------------
the Due Diligence Date (as defined below) and provided Buyer has waived or
approved the due diligence condition set forth in Section 7.2.5, Buyer will
cause an additional Three Hundred Thousand Dollars ($300,000.00) (the
"Additional Deposit") to be delivered into Escrow.
2.3 Interest on Deposit. The Initial Deposit and the Additional
-------------------
Deposit shall be held by the Title Company (as defined below) as an earnest
money deposit towards the Purchase Price. The Initial Deposit and thereafter
the Additional Deposit, if made, shall be held in Escrow in a federally insured
interest bearing account or other investment suitable for daily investment. The
Initial Deposit shall sometimes be referred to as the "Deposit" until the
Additional Deposit is delivered into Escrow, at which time the term "Deposit"
shall refer to the sum of the Initial Deposit and the Additional Deposit.
2.4 Disposition of Deposit. At the Closing (as defined below) the
----------------------
Deposit shall be applied and credited toward the payment of the Purchase Price.
If Escrow does not close, and the Agreement is terminated in a manner governed
by Sections 7.3 or 13, the Deposit will be disbursed as provided in such
Sections. If the Escrow does not close and neither Section 7.3 nor Section 13
applies, the Deposit together with interest accrued thereon shall be promptly
returned to Buyer unless the provisions of Section 17 are applicable, in which
case the disposition of the Deposit together with interest accrued thereon shall
be governed by the provisions of Section 17. Notwithstanding any provision to
the contrary contained in this Agreement, Buyer shall not be eligible for return
of its Deposit unless it has first delivered to Seller all copies
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of all Due Diligence Materials (as defined hereafter) exclusive of any materials
which have been generated by Buyer and which are of a proprietary or
confidential nature, together with Buyer's written confirmation that all such
Due Diligence Materials have been delivered to Seller.
2.5 Cash Balance. On or before the Closing Date, Buyer shall deliver
------------
into Escrow in immediately available funds the balance of the Purchase Price.
3. TITLE.
3.1 Vesting of Title. At Closing, Seller shall convey fee title to
----------------
the Real Property to Buyer by deed (as further described in Section 8.1.1
below), subject to the Permitted Exceptions (as defined below), and shall convey
Seller's interest in the remainder of the Property and the Liquor License to
Buyer by bill of sale and assignment (as further described in Sections 8.1.2 and
8.1.3 below).
3.2 Buyer's Title Insurance. At Closing, the Title Company shall
-----------------------
issue to Buyer an ALTA extended coverage owner's form of title insurance policy
in the amount Fifteen Million Four Hundred Ninety Thousand Dollars ($15,490,000)
insuring that fee simple title to the Real Property is vested in Buyer subject
only to the Permitted Exceptions ("Buyer's Title Policy"). Buyer shall be
entitled to request that the Title Company provide, at Buyer's cost and expense,
such additional endorsements to the Buyer's Title Policy as Buyer may reasonably
require, provided that such endorsements shall be at no cost or additional
liability to Seller and the Closing shall not be delayed as a result of Buyer's
request.
4. ESCROW.
4.1 Opening of Escrow. Seller shall deliver a fully executed
-----------------
counterpart of this Agreement into escrow ("Escrow") to be established at First
American Title Insurance Co., 2 Salinas Street, Salinas, CA 93901; Attention:
Lisa Ramirez [telephone: 408/424-0317] ("Title Company") within one (1)
business day following the Effective Date. The Buyer shall cause the Initial
Deposit to be delivered into Escrow as provided in Section 2.1. In the event
that California law requires that conveyance of the liquor license be processed
through a separate escrow, then Buyer and Seller shall mutually agree on the
selection of the separate escrow holder and Sixty-Five Thousand Dollars
($65,000) of the total Purchase Price shall be allocated to and paid through the
separate escrow.
4.2 Instructions to Title Company. Seller and Buyer shall each be
-----------------------------
entitled to submit escrow instructions to the Title Company in connection with
the Closing of the Escrow. Seller and Buyer shall in addition execute such
further escrow instructions as the Title Company may reasonably require in
connection with the Closing. In the event of any conflict between the terms and
conditions of this Agreement and the provisions of any escrow instructions
prepared by Seller, Buyer or the Title Company, the terms and conditions of this
Agreement shall control.
5. CLOSING.
5.1 Closing. Subject to the provisions of Section 16.9, the purchase
-------
and sale of the Property as contemplated by this Agreement, including but not
limited to the recordation of the Deed (as defined below) and the completion of
the other matters required by this Agreement to be done contemporaneously (the
"Closing") shall occur on Wednesday, November 20, 1996 or such earlier date as
is selected by Buyer and Seller upon at least two (2) business days prior
written notice to the Title Company.
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The date on which the Closing actually occurs shall be referred to as the
"Closing Date". Notwithstanding any other provision of this Agreement, the
Closing with respect to the Property shall not be delayed for reason of any
possible delay in the conveyance of the liquor license.
5.2 Failure to Close. If the Closing does not occur on or before
----------------
date set forth in Section 5.1 above, then in the absence of a written agreement
between the parties to extend the Closing Date, either party hereto may elect to
terminate this Agreement upon giving written notice of such termination to the
other and to the Title Company. In such event, except in a case where the
provisions of Section 17 are applicable, the Deposit together with interest
accrued thereon shall be promptly returned to Buyer.
6. DUE DILIGENCE.
6.1 Due Diligence Period. The period commencing on the Effective
--------------------
Date and continuing through 5:00 p.m. PST on November 15, 1996 (the "Due
Diligence Date") shall be referred to as the "Due Diligence Period".
6.2 Available information . Seller shall make available to Buyer the
----------------------
following documents and materials (collectively, the "Due Diligence Materials"):
6.2.1 Property Files. Except as provided in Section 6.2.2
--------------
below, Seller shall make available to Buyer and Buyer's agents and
representatives, upon reasonable notice and during normal business hours, all
books, records, files, financial records, property tax bills, and other
information in the possession or control of Seller relating to the ownership,
operation, advertising, construction, use or occupancy of the Property, or any
portion of the Property. Seller shall furnish Buyer copies of such materials as
Buyer may request. In particular but without limiting the foregoing, Seller
shall make the following available to the extent that Seller has such materials
in its possession or control: all structural reviews, architectural drawings and
engineering, soils, seismic, geologic and architectural reports, and all
financial statements and budgets for the Property for the current year to date
and each of the five (5) years prior to the year of this Agreement, 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 Property; (4) management fees;
(5) maintenance, repairs and other expenses relating to the management and
operation of the Property; (6) historical occupancy statistics for the Property;
and (7) all capital expenditures made during the aforementioned periods. Except
as to Confidential Information (as defined hereafter), Buyers' representatives
shall have access to all financial and other information relating to the
Property, to the extent that Seller has such materials in its possession or
control, and Seller (at no cost to Seller) shall reasonably cooperate with Buyer
and Buyer's independent public accountants in connection with the preparation of
audited financial statements with respect to the Property.
6.2.2 Confidential Information. Notwithstanding anything herein
------------------------
to the contrary, "Due Diligence Materials" shall not include, and Seller shall
have no obligation to furnish or otherwise make available to Buyer, any of the
following documents: (i) any documents, instruments or agreements evidencing,
securing or relating to the mortgage loan currently encumbering the Property,
(ii) any internal or third-party appraisals of the Property or any reports or
analyses concerning the valuation of the Property, (iii) any correspondence or
analyses regarding past, pending or proposed real property tax appeals, (iv) any
information received from or concerning any other potential purchaser of the
Property, (vi) any information
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related to the 1985 sale of the Property to Monterey Hotel Associates or the
subsequent litigation/arbitration related to such sale, (vii) any Federal or
State personal income tax returns, or (viii) any information or documentation
that is privileged or otherwise legally protected from disclosure under
applicable law (collectively, the "Confidential Information"). Seller
represents to Buyer that following the Closing, Buyer will not suffer any
material damage with respect to the Property by reason of information with
respect to the Property contained in the Confidential Information and not
otherwise available to Buyer in the Due Diligence Materials (as defined below)
or known by Buyer prior to the Closing.
6.3 Title Report; Permitted Exceptions. As soon as possible after
----------------------------------
the Effective Date, Buyer shall obtain, and cause a copy to be delivered to
Seller of, a current Commitment for Title Insurance (the "Title Report") for the
Real Property prepared by the Title Company, together with a copy of all
documents listed as exceptions therein. Buyer shall, as soon as possible after
the Effective Date, obtain, and deliver to Seller a copy of, an ALTA/ACSM Real
Property Title Survey (with Table A supplements) (the "Survey") prepared by a
licensed engineer which Survey shall be current and sufficient to provide the
basis for an ALTA extended coverage owner's policy of title insurance without
boundary, encroachment or survey exceptions. In connection with the Survey,
Buyer shall cause the Title Company to issue an ALTA supplement to the Title
Report reflecting any and all exceptions, if any, indicated by the Survey (the
"ALTA Supplement"). Within five (5) days following receipt by Buyer of the last
to be received among the Title Report, copies of the documents listed as
exceptions, the ALTA Supplement and the Survey (and in any event no later than
two (2) business days prior to the Due Diligence Date), Buyer shall give notice
(the "Title Notice") to Seller of the exceptions to title as shown on the Title
Report, its exceptions, the ALTA Supplement and the Survey, approved by Buyer
and those disapproved by Buyer. Seller shall have five (5) days after the date
of the Title Notice is received (and in all events no later than one (1)
business day prior to the Due Diligence Date) to effect good faith efforts,
without any obligation to incur costs therein, to have the objected to title
exceptions removed to the reasonable satisfaction of Buyer, provided that
"insuring around" shall not be an acceptable removal of any exception. Seller
shall be considered to have removed any objected to title exception in the event
that Seller contractually undertakes in writing an obligation to remove such
exception on or prior to the Closing and thereafter, on or prior the Closing,
completes such removal. If within such time, Seller declines or fails to have
all of such title exceptions removed, Buyer shall have the option within five
(5) days of the date of the Title Notice (but in no event later than the Due
Diligence Date) to either (i) terminate this Agreement by notice to Seller, in
which case all rights and obligations hereunder of each party shall be at an end
(except those matters which are specifically stated in this Agreement to survive
the termination) and the Deposit together with interest accrued thereon shall be
promptly returned to Buyer; or (ii) elect to accept title to the Property as it
then is, but Buyer shall have no other option or remedy. The title exceptions
as shown on the Title Report (and the ALTA Supplement) and Survey approved by
Buyer, as well as those title exceptions, if any, initially disapproved by Buyer
but thereafter accepted shall be referred to herein as the "Permitted
Exceptions". The "Permitted Exceptions" shall in addition include any
encumbrances or liens voluntarily created by Buyer on the Real Property. If
Buyer fails to timely give the Title Notice to Seller or fails to make the
elections set forth in (i) or (ii) above on or before the Due Diligence Date,
then Buyer shall be deemed to have elected to terminate this Agreement in which
event all rights and obligations hereunder of each party shall be at an end
(except those matters which are specifically stated in this Agreement to survive
the termination) and the Deposit together with interest thereon shall be
promptly returned to Buyer. Seller shall reasonably cooperate with Buyer with
respect to obtaining the Title Report, Survey and ALTA Supplement, if any.
6.4 Inspection; Right of Entry. Buyer shall have the right, during
--------------------------
the Due Diligence Period and subject to the terms and conditions of Section 6.5
below, (i) to enter the Real Property to inspect all aspects of the Property and
conduct inventories (including the performance of environmental audits of the
Real
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<PAGE>
Property in accordance with the terms of Sections 6.4.1 and 6.4.2 below and the
obtaining of a product improvement plan from Franchisor (below defined)), upon
reasonable notice to Seller, provided that Buyer does not unreasonably disturb
any business or other tenant operations or activities on the Real Property, and
(ii) to contact representatives of tenants and/or third parties who have
executed service contracts, Leases or other agreements with Seller or Seller's
representatives regarding the Real Property. Buyer shall coordinate all such
contacts through Seller's General Manager, John Lloyd. Seller shall cooperate
with Buyer in notifying tenants as to Buyer's inspection thereof. Except as
provided in Section 9.2.1 below, any and all costs of Buyer's inspection of the
Real Property shall be borne solely by Buyer.
6.4.1 Phase I Environment Audit. During the Due Diligence
-------------------------
Period, Buyer may conduct (or have conducted on its behalf by an environmental
auditor) a Phase I environmental audit of the Real Property, subject to the
terms and conditions of Sections 6.4.2 and 6.5 below. Buyer shall not conduct a
Phase II environmental audit of the Real Property nor conduct any invasive
testing of the Real Property without the prior written consent of Seller, which
consent shall not be unreasonably withheld. Seller shall also provide Buyer as
part of the Due Diligence Materials a copy of the Phase 1 Environmental Site
Assessment and Limited Asbestos Survey dated June 25, 1996 and produced by SECOR
International Incorporated.
6.4.2 Environmental Conditions. In the event that Buyer shall
------------------------
conduct a Phase I environmental audit of the Real Property, Buyer shall provide
Seller with at least forty-eight (48) hours' prior written notice of its intent
thereof. Buyer shall not disclose to any third party, other than Buyer's
consultants, agents, attorneys, lenders and securities agents, the results of
any of Buyer's inspections or testing of the Real Property (collectively,
"Investigations"). Prior to performing any of the Investigations, Buyer shall
obtain any required permits and authorizations and shall pay all applicable fees
required by any public body or agency in connection therewith. Seller shall be
entitled to have a representative present at all times in connection with any
inspections by Buyer of the Real Property.
6.5 Indemnity; Return; Copies. Buyer shall indemnify, defend by
-------------------------
counsel reasonably acceptable to Seller, and hold Seller harmless from and
against any cost, expense, claim, liability or demand, including reasonable
attorneys' fees, arising from such entry by Buyer or from the performance of any
testing or other Investigations of the Real Property by Buyer, except with
respect to any loss or liability incurred by Seller resulting from the mere
discovery by Buyer of the presence of hazardous substances at the Property or
the existence of other defects with respect to the Property. If this
transaction does not close for any reason, Buyer shall repair any damage to the
Real Property resulting form Buyer's entry onto the Real Property, including any
tests and other Investigations. At Seller's request, Buyer shall deliver to
Seller copies of all written reports relating to the Investigations with respect
to the Real Property. The aforesaid indemnity and other agreements of Buyer set
forth in this Section 6.5 shall survive without limitation the termination or
other expiration of this Agreement. Buyer shall, in addition, furnish to Seller
evidence of insurance coverage maintained by Buyer reasonably satisfactory to
Seller, which coverage shall be applicable in connection with any inspections by
Buyer or by its representatives of the Real Property.
6.6 General Conditions. Buyer shall have right to review and
------------------
approve, in its sole discretion, during the Due Diligence Period, the Due
Diligence Materials, feasibility, franchise licensing, liquor licensing, title
to the property and any physical or other items set forth in Sections 6.2, 6.3
and 6.4 above. In the event that Buyer does not approve each such item by
giving written notice of such approval to Seller on or before the Due Diligence
Date, this Agreement shall terminate, all rights and obligations hereunder of
each party shall be at an end (except those matters which are specifically
stated in the Agreement to survive the termination), and the Deposit together
with interest thereon shall be promptly returned to Buyer. At any time
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during the pendency of this Agreement and upon request by Seller, Buyer shall
promptly deliver to Seller copies of all Due Diligence Materials and other
studies and reports pertaining to the Property. In the event that Buyer gives
written notice of its approval pursuant to this Section 6.6, then the conditions
precedent for the benefit of Buyer as set forth in Sections 7.2.5 and 7.2.7
shall be considered to have been satisfied and Buyer shall have no further
rights to assert the conditions set forth in either of such Sections.
6.7 Estoppel Certificates. Within two (2) business days following
---------------------
the Effective Date, Seller shall deliver to each of the commercial tenants of
the Real Property an estoppel certificate in connection with the respective
Leases (collectively, the "Estoppel Certificates"). The Estoppel Certificates
shall be in the form attached hereto as Exhibit 6.7, and Seller shall request of
each tenant that such form be executed and promptly returned to Buyer.
7. CONDITIONS TO CLOSING.
7.1 Seller's Conditions. The obligation of Seller to sell and convey
-------------------
the Property pursuant to this Agreement is subject to the satisfaction on or
before the Closing Date (or such earlier date as is specifically set forth in
this Agreement) of all of the following conditions precedent, which conditions
are for the benefit of Seller only and the satisfaction of which may be waived
only in writing by Seller:
7.1.1 Buyer's Deliveries. Delivery and execution by Buyer of
------------------
all monies, items and instruments required to be delivered by Buyer pursuant to
this Agreement;
7.1.2 Buyer's Representations. Buyer's warranties and
-----------------------
representations set forth herein shall be true and correct as of the Closing
Date;
7.1.3 Buyer's Performance. Buyer shall have performed each and
-------------------
every agreement to be performed by Buyer pursuant to this Agreement.
7.1.4 Holiday Inns. With reference to the Commitment Agreement
------------
(as defined below), Buyer shall have effective as of the Closing (i) executed a
new license agreement with the Franchisor (as defined below) or (ii) caused the
Franchisor to cancel the existing Commitment Agreement and in either event shall
have provided to Seller the Holiday Inn Indemnification (as defined below) all
in accordance with the provisions of Section 16.17.
7.1.5 Buyer's Approval. Buyer shall have given its written
----------------
approval on or prior to the Due Diligence Date of the matters described in and
in accordance with the provisions of Section 6.6.
7.2 Buyer's Conditions. The obligation of Buyer to acquire the
------------------
Property pursuant to this Agreement is subject to the satisfaction on or before
the Closing Date (or such earlier date as is specifically set forth in this
Agreement) of all of the following conditions precedent which conditions are for
the benefit of Buyer only and the satisfaction of which may be waived only in
writing by Buyer:
7.2.1 Seller's Deliveries. Delivery and execution by Seller of
-------------------
all instruments and other items required to be delivered by Seller pursuant to
this Agreement;
7.2.2 Seller's Representations. Seller's warranties and
------------------------
representations set forth herein shall be true and correct as of the Closing
Date;
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7.2.3 Seller's Performance. Seller shall have performed each
--------------------
and every agreement to be performed by Seller pursuant to this Agreement;
7.2.4 Buyer's Title Policy. As of the Closing, the Title
--------------------
Company shall have issued or shall have committed to issue, upon the sole
condition of the payment of its regularly scheduled premium, the Buyer's Title
Policy;
7.2.5 Due Diligence Materials. Buyer's inspection and approval
-----------------------
on or prior to the Due Diligence Date of the matters described in Section 6.6
including the Due Diligence Materials, the Title Report and all other physical
environmental, legal and other matters relating to the Property which Buyer may,
in Buyer's sole discretion, elect to investigate;
7.2.6 Estoppel Certificates. Each of the Estoppel Certificates
---------------------
fully executed by each of the tenants of the respective Leases without material
modification shall have been received by Buyer at least five business days prior
to the scheduled date of Closing; and
7.2.7 Board Approval. The Board of Directors of the real estate
--------------
investment trust with which Buyer is affiliated shall, by the Due Diligence
Date, have approved this Agreement and consummation of the purchase herein
contemplated.
7.3 Failure of Conditions. If any of the conditions set forth in
---------------------
Sections 7.1 or 7.2 are not timely satisfied or waived, for any reason other
than the default of Buyer or Seller under this Agreement, then this Agreement
and the rights and obligations of Buyer and Seller shall terminate and be of no
further force or effect except as to those matters as specifically stated in
this Agreement to survive termination, in which case the Title Company is hereby
instructed to return promptly to the party which placed such items into Escrow
all funds (including the Deposit together with interest accrued thereon to be
promptly returned to Buyer) and documents which are held by the Title Company on
the date of termination.
8. DELIVERIES INTO ESCROW.
8.1 Deliveries by Seller. Seller shall deliver or cause to be
--------------------
delivered into Escrow the following documents duly executed and acknowledged
where appropriate:
8.1.1 Deed. Standard-form grant deed (the "Deed") in the form
----
set forth on Exhibit 8.1.1 attached hereto conveying the Real Property to Buyer
as provided in this Agreement;
8.1.2 Bill of Sale. Bill of Sale (the "Bill of Sale") in the
------------
form set forth on Exhibit 8.1.2 attached hereto conveying the Personal Property
to Buyer;
8.1.3 Assignment. The Assignment, together with schedule(s) of
----------
the matters being assigned, in the form set forth on Exhibit 8.1.3 attached
hereto;
8.1.4 FIRPTA. Certificate of non-foreign status to confirm that
------
Buyer is not required to withhold part of the Purchase Price pursuant to Section
1445 of the Internal Revenue Code of 1986, as amended;
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8.1.5 Form 590. Franchise Tax Board Form 590;
--------
8.1.6 Seller Authority. Such proof of Seller's authority and
----------------
authorization to enter into this Agreement and consummate the transaction
contemplated hereby and such proof of the power and authority of the
individual(s) executing and/or delivering any instruments, documents or
certificates on behalf of Seller to act for and bind Seller as may be reasonably
required by the Title Company;
8.1.7 Miscellaneous Items. To the extent not previously
-------------------
delivered to Buyer, all plans and specifications with respect to the
Improvements, all keys, access cards, and combinations for the Property (which
shall be properly tagged for identification), all books and records, and
originals of all of the documents, contracts, leases and agreements that have
not already been delivered to Buyer; and
8.1.8 Other Documents. Such other documents as may be
---------------
reasonably necessary and appropriate to complete the Closing of the transaction
contemplated herein, including without limitation, such documents as may be
required in connection with transfer of the liquor license which transfer may be
through a separate escrow.
8.2 Deliveries by Buyer. Buyer shall deliver or cause to be
-------------------
delivered into Escrow the following items and documents duly executed and
acknowledged where appropriate:
8.2.1 Cash. The cash portion of the Purchase Price and such
----
additional sums as are necessary to pay the Buyer's share of closing costs,
prorations and any fees as more particularly set forth in Section 9 below;
8.2.2 Assignment. The Assignment;
----------
8.2.3 Buyer's Authority. Such proof of Buyer's authority and
-----------------
authorization to enter into this Agreement and consummate the transaction
contemplated by this Agreement, and such proof of the power and authority of the
individual(s) executing and/or delivering any instruments, documents or
certificates on behalf of Buyer to act for and bind Buyer as may be reasonably
required by the Title Company;
8.2.4 Holiday Inn Indemnification. The Holiday Inn
---------------------------
Indemnification (as defined below); and
8.2.5 Other Documents. Such other documents as may be
---------------
reasonably necessary and appropriate to complete the Closing of the transaction
contemplated herein, including without limitation, such documents as may be
required in connection with transfer of the liquor license which transfer may be
through a separate escrow.
8.3 Tenant Notification Letters. Seller shall execute a tenant
---------------------------
notification letter in the form attached hereto as Exhibit 8.3 to each
commercial tenant of the Real Property (the "Tenant Notification Letter"),
indicating the change of ownership of the Property with the name and address of
the Buyer and the Closing Date, and shall upon the Closing deliver an executed
Tenant Notification Letter to Buyer with respect to each tenant of the Real
Property.
8.4 Delivery to Buyer Upon Closing. Seller shall deliver possession
------------------------------
of the Property to Buyer upon the Closing.
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8.5 Delivery Following Closing. Following the Closing, Seller shall
--------------------------
promptly deliver to Buyer such other matters and documents related to the
Property which are in the possession of Seller and which Buyer may reasonably
request.
9. PRORATIONS; CLOSING COSTS; CREDITS.
9.1 Prorations.
----------
9.1.1 Rent. Rents, revenues, and other income from the Property
----
shall be prorated through Escrow as of 12:01 a.m. on the Closing Date.
9.1.2 Taxes. All non-delinquent real estate, sales, room taxes
-----
and other taxes and assessments related to the Property shall be prorated
through Escrow. In the case of real estate taxes, the proration shall be based
on the actual current tax bill as of 12:01 a.m. on the Closing Date. If after
the Closing, a refund of real estate taxes is rendered or supplemental real
estate taxes are assessed against the Property by reason of any event occurring
prior to the Closing Date, or if actual taxes and assessment are different from
those used in prorating, Buyer and Seller shall adjust the proration of the real
estate taxes following the Closing. Any delinquent taxes on the Property shall
be paid at the Closing by Seller. All assessment installment payments which are
due and payable prior to the Closing Date shall be paid at the Closing by
Seller. Seller shall have no obligation to pay any assessment amounts not then
due and payable.
9.1.3 Expenses, Debts and Other Obligations. Operating expenses
-------------------------------------
and all other customary charges or costs incident to the ownership of the
Property shall be prorated through Escrow as of 12:01 a.m. on the Closing Date.
Seller shall be responsible for all expenses, debts and other obligations
arising or accruing and attributable to the Property prior to the Closing Date,
and Buyer shall be responsible for such debts, expenses and other obligations
arising and accruing on or after the Closing Date, provided however that Seller
shall reimburse Buyer an amount equal to Seven Dollars ($7.00) per room rented
the night prior to the Closing Date as an estimate of the cost of housekeeping.
To the extent possible, Seller and Buyer shall obtain utilities billings and
meter readings as of the Closing Date and all operating expenses shall be
prorated based upon the information then available. Seller and Buyer shall make
any adjustments required to be made subsequent to the Closing in the event the
information available at the Closing is incorrect.
9.1.4 Service Contracts, Leases and All Other Agreements. The
--------------------------------------------------
amounts payable under the service contracts (the "Service Contracts"), Leases
and all other agreements which shall be assumed pursuant to the provisions of
the Assignment, shall be prorated through Escrow on an accrual basis as of 12:01
a.m. on the Closing Date. Seller shall pay all amounts due thereunder which
accrue prior to the Closing Date, and Buyer shall pay all amounts accruing on
the Closing Date and thereafter. Buyer shall have no responsibility for leases,
service contracts or other agreements not specifically being assumed by Buyer
pursuant to this Agreement.
9.1.5 Inventories. Commencing approximately thirty (30) hours
-----------
before Closing, Seller and Buyer (or their separate representatives) shall
conduct an inventory of all inventories for which additional sums are to be paid
at Closing, Seller shall provide cost substantiations, and Buyer shall pay for
same in cash at Closing.
9.1.6 Miscellaneous Prorations. Seller shall receive a credit
------------------------
through escrow in the
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amount of all utility deposits and Buyer shall receive a credit through escrow
in the amount of all guest advance deposits (with Buyer assuming liability
therefore) existing as of the Closing and Seller and Buyer will pro-rate through
escrow as of 12:01 a.m. on the Closing Date the amount of all guest ledger
receivables, and Buyer shall receive a credit for all tenant security deposits
(with Buyer assuming liability therefor). Buyer shall not acquire any rights or
incur any obligations with respect to Seller's accounts payable or other debts,
city ledger receivables, credit card receivables or operating cash banks at the
Property.
9.1.7 Calculation of Prorations. All prorations shall be made
-------------------------
on the basis of the actual number of days of the year and month which have
elapsed as of 12:01 a.m. on the Closing Date.
9.1.8 Subsequent Adjustments. Within sixty (60) days after the
----------------------
Closing Date or such longer period as may be required, Buyer and Seller will
make a further adjustment to account for proration corrections and also
adjustments for all other matters of proration which may have accrued prior to
the Closing Date but which were not prorated in the initial prorations.
9.2 Closing Costs.
-------------
9.2.1 Seller's Costs. Seller shall pay (i) the premium for the
--------------
CLTA portion of the Buyer's Title Policy; and (ii) fifty percent (50%) of: the
cost of the Survey, all sales taxes and transfer taxes, if any, miscellaneous
recording costs and escrow fees and costs.
9.2.2 Buyer's Costs. Buyer shall pay (i) the incremental
-------------
premium for the ALTA portion of Buyer's Title Policy and the premium for any
endorsements; (ii) any and all costs related to Buyer's lender and loan
documents, if any; and (iii) fifty percent (50%) of: the cost of the Survey, all
sales taxes and transfer taxes, if any, miscellaneous recording costs and escrow
fees and costs.
9.3 Other Expenses. Buyer and Seller shall each pay all legal and
--------------
professional fees and fees of other consultants incurred by Buyer and Seller,
respectively.
10. OPERATION OF PROPERTY PENDING THE CLOSING. Following the Effective
Date and pending the Closing, the Seller shall operate the Property in
accordance with the following:
10.1 Normal Course of Business. Seller shall continue to operate,
-------------------------
manage and maintain the Property in such condition so that the Property shall be
in the same condition as of the Closing Date as it is as of the Effective Date,
reasonable wear and tear and casualty excepted. Following the Effective Date
Seller shall operate the Property in accordance with applicable law in all
material respects. Seller shall maintain all existing insurance policies in
connection with the Property and shall keep in effect and renew all licenses and
permits applicable to the Property.
10.2 Further Encumbrances. Without the prior written consent of
--------------------
Buyer, Seller shall not voluntarily execute any documents or otherwise take any
action which will have the result of placing a recorded lien against the
Property. Seller shall pay all valid obligations accruing prior to the Closing
which may subject the Property to mechanic's lien.
10.3 New Leases. Seller will not enter into any new leases or
----------
extend, renew or in any fashion modify any of the existing Leases (unless
pursuant to a valid exercise of a tenant option set forth in a Lease) or enter
into any new contracts that are not cancelable on no more than thirty (30) days
notice without
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the prior written approval of Buyer which consent shall not be unreasonably
withheld.
11. REPRESENTATIONS AND WARRANTIES.
11.1 No Representations or Warranties by Seller. Except as expressly
------------------------------------------
set forth in this Agreement, Seller has not made any warranty or representation
of any kind whatsoever, express or implied, written or oral, concerning the
Property.
11.2 Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to Buyer that:
11.2.1 Authority. This Agreement constitutes the valid and
---------
binding obligation of Seller and is enforceable against Seller in accordance
with its terms. The execution of this Agreement, delivery of money and all
required documents, Seller's performance of this Agreement and the transaction
contemplated hereby have been duly authorized by the requisite action on the
part of Seller.
11.2.2 Restrictions and Regulations. To the best of Seller's
----------------------------
knowledge there are no violations of private restrictions or governmental
regulations relating to the Property including, without limitation, the
Americans With Disabilities Act and environmental laws.
11.2.3 Taxes. Except for the amounts disclosed by the tax
-----
bills for all real property taxes and personal property taxes, and notices for
any assessments or bonds relating to the Property provided by Seller to Buyer no
later than ten (10) days prior to the Due Diligence Date, to the best of
Seller's knowledge, no real property taxes or other assessments have been
assessed against the Property for the current tax year and all taxes and
assessments (or current instruments payable) for prior years have been paid.
11.2.4 Leases and Other Agreements. Other than as relates to
---------------------------
regular nightly hotel guests occupying rooms/suites of the Property, there are
no leases, subleases, occupancies or tenancies in effect pertaining to the
Property, except the Leases, copies of all of which have been delivered by
Seller. No Lease has been modified, amended or altered, and no currently
outstanding concessions, abatements or adjustments have been granted to any
tenant, except as scheduled in Exhibit 1.1.4. Following the Closing neither
Buyer nor the Property shall be bound by any contract or agreement except those
contracts and agreements set forth on Exhibit 1.1.4 attached hereto.
11.2.5 Access. To the best of Seller's knowledge, no fact or
------
condition exists which may result in the termination or reduction of the current
access from the Property to existing roads and highways.
11.2.6 Miscellaneous. To the best of Seller's knowledge,
-------------
there are no:
(a) pending arbitration proceedings or unsatisfied
arbitration awards, or judicial proceedings or orders respecting awards, which
might become a lien on the Property;
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(b) pending unfair labor practice charges or
complaints, labor disputes, or unsatisfied unfair labor practice orders or
judicial proceedings or orders with respect thereto;
(c) 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 antidiscrimination laws or
executive orders;
(d) condemnation proceedings pending or threatened with
regard to all or any part of the Property; or
(e) other pending, threatened or actual litigation
claims, charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affects the Property or might become a lien
on the Property or might affect the validity or enforceability of this
Agreement.
11.2.7 Bankruptcy. No petition in bankruptcy (voluntary or
----------
otherwise), assignment for the benefit of creditors, or petition seeking
reorganization or arrangement or other action under federal or state bankruptcy
laws is pending against or contemplated by Seller.
11.2.8 Vehicle. There are no vehicles owned and exclusively
-------
employed by Seller in connection with the Property.
11.2.9 Financial Statements. The statements of operations for
--------------------
years ended December 31, 1995, 1994, 1993, 1992 and 1991 and for the month of
August and year to date 1996 with respect to the Property which are listed on
Exhibit 11.3 to this Agreement, to the best of Seller's knowledge are correct
and complete in all material respects and present accurately in all material
respects the results of operations of the Property for the periods indicated.
11.2.10 Confidential Information. Seller represents to Buyer
------------------------
that following the Closing, Buyer will not suffer any material damage with
respect to the Property by reason of information with respect to the Property
contained in the Confidential Information and not otherwise available to Buyer
in the Due Diligence Materials or known by Buyer prior to the Closing.
11.2.11 True as of Closing. Each representation and warranty in
------------------
this Agreement is true, correct and complete in all material respects, and those
contained in this Section 11.2 shall be continuing and shall be true, correct
and materially complete as of the Closing with the same force and effect as if
remade by Seller in a separate certificate at that time and shall survive the
Closing for a period of one (1) year and shall have no effect thereafter.
11.2.12 Material Changes. Seller shall promptly notify Buyer of
----------------
any change in any condition with respect to the Property or any event or
circumstance which makes any representation or warranty of Seller under this
agreement materially untrue or misleading, or any covenant of Seller under this
Agreement incapable of being performed.
11.2.13 Seller's Knowledge. For purposes of this Section 11.2,
------------------
all references to Seller's knowledge shall be limited to the current personal
actual knowledge, as distinguished from implied, imputed and constructive
knowledge, of Theodore H. Kruttschnitt, III and/or Catherine M. Kruttschnitt,
which
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<PAGE>
individuals are not required to make any independent investigations regarding
the subject matter of the representation or warranty being made, provided,
however, that Seller shall make reasonable inquiry of John Lloyd, Seller's
General Manager of the Property.
11.3 Limitation on Representations and Warranties of Seller. Except
------------------------------------------------------
as expressly set forth in Section 11.2, Seller has made no representations or
warranties of any kind whatsoever with respect to the Property and Buyer hereby
acknowledges that except as expressly set forth in Section 11.2, Buyer is
purchasing the Property in an "AS-IS" and "WHERE IS" condition as of the Closing
Date subject to all facts, circumstances, conditions and defects. Buyer further
acknowledges that Buyer has conducted, or will prior to the expiration of the
Due Diligence Period conduct, physical inspections of the Property and undertake
such investigation with respect to the Property as Buyer has deemed necessary or
appropriate including, but without limitation, a review of all environmental
matters with respect to the Property, the physical aspects of the Property
including the physical aspects of all Improvements, all zoning and building code
requirements in connection with the Property, the availability of all utilities
with respect to the Property, and any and all other matters relating to the
Property which Buyer has considered appropriate to investigate. Except as
expressly set forth in Section 11.2, no representations or warranties have been
made or are made and no responsibility has been or is assumed by Seller or by
any partner, officer, person, firm, agent or representative acting or purporting
to act on behalf of Seller as to any matters concerning the Property, including,
without limitation, the condition or repair of the Property or the value,
expense of operation or income potential thereof or as to any other fact or
condition which has or might affect the Property or the condition, repair,
value, expense of operation or income potential of the Property or any portion
thereof. The parties agree that all understandings and agreements heretofore
made between them or their respective agents or representatives are merged in
this Agreement and the exhibits hereto annexed, which alone fully and completely
express their agreement, and that this Agreement has been entered into with the
Buyer satisfied that the Seller has afforded and will afford pursuant to the
provisions of this Agreement Buyer with the opportunity for full investigation
of the Property. Buyer is not relying upon any statement or representation by
Seller unless such statement or representation is specifically included in
Section 11.2. Buyer acknowledges that Seller has requested Buyer to inspect
fully the Property and investigate all matters relevant thereto and (except as
to the express representations of Seller in Section 11.2) to rely solely upon
the results of Buyer's own inspections or other information obtained or
otherwise available to Buyer, rather than any information that has been provided
by Seller to Buyer. Except as expressly set forth in Section 11.2, Seller is
not making any representation or warranty with respect to the physical condition
of the Property or the fitness of the Property or any portion of the Property
for any particular purpose or the presence or absence of any hazardous materials
and except as expressly provided in Section 11.2 to the contrary, Buyer
acknowledges that Buyer is relying solely on its own inspections with respect to
the Property in electing to purchase the Property pursuant to the terms of this
Agreement. Without limiting the above, Buyer on behalf of itself and its
successors and assigns waives and releases Seller and its successors and assigns
from any and all demands, claims, legal or administrative proceedings, losses,
liabilities, damages, penalties, fines, liens, judgments, costs or expenses
whatsoever (including, without limitation, attorneys' fees and costs), whether
direct or indirect, known or unknown, foreseen or unforeseen, arising from or
relating to the physical condition of the Property or any law or regulation
applicable thereto, including the presence or alleged presence of asbestos or
harmful or toxic substances in, on, under or about the Property including,
without limitation, any claims under or on account of (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as the same may
have been or may be amended form time to time, and similar state statutes, and
any regulations promulgated thereunder, (ii) any other federal, state or local
law, ordinance, rule or regulation, now or hereafter in effect, that deals with
or otherwise in any manner relates to, environmental matters of any kind,
(iii) the common law, or (iv) this Agreement except to the extent of any express
obligations undertaken by Seller in this Agreement
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<PAGE>
or any exhibits, including but not limited to any express representations or
warranties. Seller believes that prior to the Effective Date it has provided to
Buyer copies of all of the records, documents and other materials which are
listed on Exhibit 11.3 attached hereto. With respect to the above waiver by
Buyer, Buyer expressly waives all rights under California Civil Code Section
1542, which provides that:
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.
11.4 Buyer's Representations and Warranties. Buyer represents and
--------------------------------------
warrants to Seller that:
11.4.1 Authority to Execute; Organization. Subject only to
----------------------------------
the approval of this Agreement by the Board of Directors of the real estate
investment trust with which Buyer is affiliated as provided in Section 7.2.7,
this Agreement constitutes the valid and binding obligation of Buyer and is
enforceable against Buyer in accordance with its terms. Buyer represents that
it is a limited partnership, is validly formed and duly organized in good
standing under the laws of the State of Delaware, and the execution of this
Agreement, delivery of money and all required documents, Buyer's performance of
this Agreement and the transaction contemplated hereby have been duly authorized
by the requisite action on the part of the partnership except for approval of
said Board of Directors. Buyer in addition represents that it is duly qualified
to conduct business in the State of California.
11.4.2 Financial Condition. Buyer's financial condition is as
-------------------
represented to Seller on the Effective Date and shall not have materially
adversely changed prior to the Closing Date. No petition in bankruptcy
(voluntary or otherwise), assignment for the benefit of creditors, or petition
seeking reorganization or arrangement or other action under federal or state
bankruptcy laws is pending against or contemplated by Buyer.
11.4.3 No Encumbrance. Prior to Closing, Buyer shall neither
--------------
encumber nor cause any liens to be created against the Property in any way, nor
shall Buyer, at any time, record this Agreement or a memorandum thereof.
11.4.4 Principal. Buyer is acting as a principal in this
---------
transaction.
11.4.5 Due Diligence. By the Due Diligence Date, Buyer, in
-------------
reliance on Seller's representations and warranties under Section 11.2: (i)
will have inspected the Property fully and completely at its expense (or will
have had the opportunity to do so to Buyer's satisfaction) and will have
ascertained to its satisfaction the extent to which the Property complies with
applicable zoning, building, environmental, health and safety and all other
laws, codes and regulations, and (ii) based upon its own investigations,
inspections, tests and studies, will have determined whether to purchase the
Property and to assume Seller's obligations arising after the Closing Date under
the Leases and contracts set forth on Exhibit 1.1.4 hereto.
11.4.6 ERISA. Buyer will not use the assets of an employee
-----
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") in the performance or discharge of its
obligations hereunder, including the acquisition of the Property. Buyer shall
not assign its interest hereunder to any person or entity which would use any
such assets for any such purpose.
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<PAGE>
12. INDEMNIFICATION.
12.1 Indemnification of Buyer. Seller hereby agrees to indemnify
------------------------
Buyer against, and to hold Buyer harmless from, all losses, damages, costs and
expenses whatsoever including without limitation reasonable legal fees and
disbursements, incurred by Buyer relating to the Property which arise, result
from or relate to (i) acts, occurrences or matters that took place, prior to the
Closing and during Seller's period of ownership to the extent that any such
claim described in this clause (i) is covered by the comprehensive general
liability insurance policy maintained by Seller or otherwise covered pursuant to
applicable insurance coverage maintained by Seller and in this connection Seller
represents and warrants that Seller has during the period of its ownership
maintained and continues to maintain comprehensive general liability insurance
coverage; or (ii) any breach of any of the representations, warranties or
covenants of Seller set forth in Section 11.2 of this Agreement. The indemnity
obligation of Seller as set forth in this Section 12.1 shall be subject to the
limitation on assertion of claims set forth in Section 16.18 and shall survive
the Closing subject to the time limitations set forth in Section 16.18 provided
however that there shall be no time limitation (other than limitations imposed
by statutes of limitation generally applicable) with respect to the matters
described in clause (i) above.
12.2 Defense of Claims Against Buyer. With respect to any claim for
-------------------------------
which Buyer has requested indemnification under Section 12.1, Seller shall be
entitled to assume the defense of any related litigation, arbitration or other
proceeding, provided that Buyer may at its election and expense, participate in
such defense, and provided further that if there is any difference of opinion or
strategy with respect to the defense of such action or the assertion of
counterclaims to be brought with respect thereto, Seller's counsel will, after
consultation with Buyer's counsel, determine the actual strategy, defense or
counterclaim to be employed. At Seller's reasonable request, Buyer will
cooperate with Seller in the preparation of any defense or any such claim and
Seller will reimburse Buyer for any reasonable expenses incurred in connection
with such request. If Seller does not elect to assume the defense of any such
matter, Buyer shall have the right, at Seller's sole expense, to employ counsel
reasonably acceptable to Seller to defend such matter and Seller at its cost
shall be entitled to participate in such defense, provided that if there is any
difference of opinion or strategy with respect to the defense of such action or
the assertion of counterclaims to be brought with respect thereto, Buyer's
counsel will, after consultation with Seller's counsel, determine the actual
strategy, defense and/or counterclaim to be employed.
12.3 Indemnification of Seller. Buyer hereby agrees to indemnify
-------------------------
Seller against, and to hold Seller harmless from, all losses, damages, costs and
expenses whatsoever including without limitation reasonable legal fees and
disbursements, incurred by Seller relating to the Property which arise, result
from or relate to (i) acts, occurrences or matters that take place, subsequent
to the Closing and during Buyer's period of ownership to the extent that any
such claim described in this clause (i) is covered by the comprehensive general
liability insurance policy maintained by Buyer or otherwise covered pursuant to
applicable insurance coverage maintained by Buyer and in this connection Buyer
represents and warrants that Buyer will during the period of its ownership
maintain comprehensive general liability insurance coverage with respect to the
general liability claims as contemplated by this clause (i); or (ii) any breach
of any of the representations, warranties or covenants of Buyer set forth in
Section 11.4 of this Agreement.
12.4 Defense of Claims Against Seller. With respect to any claim for
--------------------------------
which Seller has requested indemnification under Section 12.3, Buyer shall be
entitled to assume the defense of any related litigation, arbitration or other
proceeding, provided that Seller may at its election and expense, participate in
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such defense, and provided further that if there is any difference of opinion or
strategy with respect to the defense of such action or the assertion of
counterclaims to be brought with respect thereto, Buyer's counsel will, after
consultation with Seller's counsel, determine the actual strategy, defense or
counterclaim to be employed. At Buyer's reasonable request, Seller will
cooperate with Buyer in the preparation of any defense or any such claim and
Buyer will reimburse Seller for any reasonable expenses incurred in connection
with such request. If Buyer does not elect to assume the defense of any such
matter, Seller shall have the right, at Buyer's sole expense, to employ counsel
reasonably acceptable to Buyer to defend such matter and Buyer at its cost shall
be entitled to participate in such defense, provided that if there is any
difference of opinion or strategy with respect to the defense of such action or
the assertion of counterclaims to be brought with respect thereto, Seller's
counsel will after consultation with Buyer's counsel, determine the actual
strategy, defense and/or counterclaim to be employed.
13. CASUALTY OR CONDEMNATION.
13.1 Casualty. Prior to the Closing, and notwithstanding the pendency
--------
of this Agreement, the entire risk of loss or damage by earthquake, flood,
landslide, fire or other casualty shall be borne and assumed by Seller, except
as otherwise provided in this Section 13.1. If, prior to the Closing, any part
of the Real Property is damaged or destroyed by earthquake, flood, landslide,
fire or other casualty, Seller shall immediately notify Buyer of such fact
whether or not such loss is material, and provide to Buyer all relevant
insurance information. If such damage or destruction is "material", Buyer shall
have the option to terminate this Agreement upon notice to Seller given not
later than ten (10) days after receipt of Seller's notice. For purposes of this
Section 13.1, "material" shall be deemed to be (i) any uninsured damage or
destruction to the Property; (ii) any insured damage or destruction where the
costs of repair or replacement is estimated to be Two Hundred Thousand Dollars
($200,000) or more or shall take more than sixty (60) days to repair, or (iii)
any insured damage or destruction where the insurance proceeds available (plus
deductible to be paid by Seller) is insufficient to repair the Property so as to
return the Property to its condition prior to the occurrence of the damage or
destruction; provided, however, in the case of uninsured or underinsured damage
or destruction, Seller may, at Seller's option elect to repair such damage and
destruction and keep this Agreement in full force and effect so long as such
repair can be and is completed by Seller prior to the scheduled Closing Date.
If Buyer does not exercise this option to terminate this Agreement, or the
casualty is not material, neither party shall have the right to terminate this
Agreement, but Seller shall assign and turn over to Buyer, and Buyer shall be
entitled to receive and keep all insurance proceeds payable to it with respect
to such destruction plus Seller shall pay over to Buyer an amount equal to the
deductible amount with respect to the insurance and the parties shall proceed to
the Closing pursuant to the terms hereof without modification of the terms of
this Agreement and without any reduction in the Purchase Price. If Buyer does
not elect to terminate this Agreement by reason of any casualty, Buyer shall
have the right to participate in any adjustment in the insurance claim. If
Buyer does terminate this Agreement pursuant to this Section 13.1, this
Agreement shall terminate, all rights and obligations hereunder of each party
shall be at an end and the Title Company is hereby instructed to return promptly
to the party which placed such items into Escrow all funds (including the
Deposit together with interest accrued thereon to be promptly returned to Buyer)
and documents which are held by the Title Company on the date of termination.
13.2 Condemnation . In the event that all or any substantial portion
-------------
of the Real Property shall be taken in condemnation or under the right of
eminent domain after the Effective Date and before the Closing, Buyer may, at
its option either (a) terminate this Agreement by written notice thereof to
Seller and receive an immediate refund of the Deposit, together with any
interest earned thereon, or (b) proceed to close the transaction contemplated
herein pursuant to the terms hereof in which event Seller shall assign and turn
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<PAGE>
over to Buyer, and Buyer shall be entitled to receive and keep all awards for
the taking by eminent domain which accrue to Seller and there shall be no
reduction in the Purchase Price. For purposes of this provision, a "substantial
portion" of the Real Property shall mean (i) any portion of the Real Property is
taken that in any material respect lessens Buyer's ability to use the Property
for its intended purpose; (ii) the access to the Real Property or available
parking area therefore is reduced or restricted; or (iii) any of the
Improvements are taken. In the event that a portion of the Real Property less
than a substantial portion is taken, Buyer shall proceed to close the
transaction contemplated herein and there shall be no reduction in the Purchase
Price and Seller shall assign and turn over to Buyer and Buyer shall be entitled
to receive and keep all awards for the taking by eminent domain which accrue to
Seller.
14. COMMISSIONS.
Seller agrees to pay the brokerage commission, if any, due from Seller
to William McDermott of TRI Commercial Real Estate Services, Inc. Neither Mr.
McDermott nor TRI Commercial Real Estate Services, Inc. has acted as the agent
of Buyer in the pending transaction. Buyer represents and warrants to the
Seller that no real estate broker or agent has been authorized to act on Buyer's
behalf. Buyer and Seller each indemnifies the other party and agrees to defend
and hold the other party harmless from any and all demands or claims which now
or hereafter may be asserted against the other party for any brokerage fees,
commissions or similar types of compensation which may be claimed by any broker
as a result of the indemnifying party's acts in connection with this
transaction, except as otherwise provided herein.
15. NOTICES.
All notices, requests or demands to a party hereunder shall be in
writing and shall be given or served upon the other party by personal service,
by certified return receipt requested or registered mail, postage prepaid, or by
Federal Express or other nationally recognized commercial courier, charges
prepaid, addressed as set forth below. Any such notice, demand, request or
other communication shall be deemed to have been received upon the earlier of
personal delivery thereof, three (3) business days after having been mailed as
provided above, or one (1) business day after delivery through a commercial
courier, as the case may be. Notices may be given by facsimile and shall be
effective upon the transmission of such facsimile notice provided that the
facsimile notice is transmitted on a business day and a copy of the facsimile
notice together with evidence of its successful transmission indicating the date
and time of transmission is sent on the day of transmission by recognized
overnight carrier for delivery on the immediately succeeding business day. Each
party shall be entitled to modify its address by notice given in accordance with
this Section 15.
If to Seller: THEODORE H. KRUTTSCHNITT, III
One Bay Plaza
1350 Bayshore Blvd., Suite 850
Burlingame, CA 94010
Fax #: (415) 348-0273
With a copy to: WALTER F. MERKLE, ESQ.
Kay & Merkle
100 The Embarcadero, Penthouse
San Francisco, CA 94105
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<PAGE>
Fax #: (415) 512-9277
And with a copy to: HARRIS DUBROW
One Bay Plaza
1350 Bayshore Blvd., Suite 850
Burlingame, CA 94010
Fax #: (415) 348-0201
If to Buyer: AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
3860 West Northwest Highway, Suite 300
Dallas, TX 75220
Attn: Steven D. Jorns, or
Bruce G. Wiles
Fax #: (214) 351-0568
With a copy to: CALHOUN & STACY, PLLC
5700 Nations Bank Plaza
901 Main Street
Dallas, TX 75202
Attn Parker Nelson
Fax #: (214) 748-1421
16. MISCELLANEOUS.
16.1 Time. Time is of the essence in the performance of each party's
----
obligation hereunder.
16.2 Attorneys' Fees. If any legal action, arbitration or other
---------------
proceeding is commenced to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to an award of its attorneys' fees and
expenses.
16.3 No Waiver. No waiver by any party of the performance or
---------
satisfaction of any covenant or condition shall be valid unless in writing and
shall not be considered to be a waiver by such party of any other covenant or
condition hereunder.
16.4 Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties regarding the Property and supersedes all prior agreements,
whether written or oral, between the parties regarding the same subject. This
Agreement may only be modified in writing.
16.5 Survival. The provisions of this Agreement shall not merge with
--------
the delivery of the Deed but shall, except as otherwise provided in this
Agreement, survive the Closing.
16.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the heirs, executors, administrators and successors and
assigns of Seller and Buyer; provided,
- 20 -
<PAGE>
however, that Buyer shall not assign Buyer's rights and obligations pursuant to
this Agreement to any party without the prior written consent of Seller, which
consent shall not be unreasonably withheld.
16.7 Severability. In the case that any one or more of the
------------
provisions contained in this Agreement are for any reason 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.
16.8 Purchase Price Allocation. Buyer and Seller agree to exert
-------------------------
their best efforts prior to Closing to agree on a mutual allocation of the
Purchase Price between Land, Improvements and Personal Property. In the event
that Buyer and Seller are unable to timely agree upon such allocation, Buyer and
Seller agree that no allocation shall be referenced in this Agreement or in any
other agreements or documents executed in connection with this Agreement.
16.9 1031 Exchange. Buyer agrees to reasonably cooperate with
-------------
Seller by executing such documents or taking such action as may be reasonably
required in connection with a tax free exchange pursuant to Section 1031 of the
Internal Revenue Code of 1986 as amended provided that (i) the transaction
contemplated by this Agreement shall not be conditioned upon completion of such
exchange; (ii) Buyer shall not be required to execute any agreements or to
acquire any property in connection with the exchange and shall not be required
to take title to any real property, other than the Property, in connection with
the exchange; (iii) any inconsistency between the provisions of any documents
executed in connection with the proposed exchange and the provisions of this
Agreement shall be governed by this Agreement; (iv) Buyer shall not incur any
liability or cost by reason of the exchange, and to the extent that any costs or
expenses (including reasonable attorneys fees) are incurred by Buyer, Seller
shall reimburse Buyer therefor on demand, and Seller shall indemnify, defend and
hold Buyer harmless from and against any or all obligations or liabilities or
losses incurred by Buyer solely relating to the exchange; (v) in no event shall
the Closing pursuant to this Agreement be delayed by Seller for more than twenty
(20) business days by reason of the exchange; and (vi) any and all
representations, warranties, agreements and covenants made by Seller pursuant to
this Agreement shall continue to be the obligation of Seller regardless of the
use of any intermediary in connection with the proposed tax free exchange.
16.10 Captions. Paragraph titles or captions contained in this
--------
Agreement are inserted as a matter of convenience only and for reference, and in
no way define, limit, extend or describe the scope of this Agreement.
16.11 Exhibits. All exhibits attached hereto shall be
--------
incorporated herein by reference as if set out herein in full.
16.12 Relationship of the Parties. The parties acknowledge that
---------------------------
neither party is an agent for the other party, and that neither party shall or
can bind or enter into agreements for the other party.
16.13 Governing Law. This Agreement and the legal relations
-------------
between the parties hereto shall be governed by and be construed in accordance
with the laws of the State of California.
16.14 Review by Counsel. The parties acknowledge that each party
-----------------
and its counsel have reviewed and approved this Agreement, and the parties
hereby agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the
- 21 -
<PAGE>
interpretation of this Agreement or any amendments or exhibits hereto.
16.15 Confidentiality. The parties hereto shall not disclose any
---------------
of the material terms of this Agreement (except to the extent as may be required
by law or as required by the Title Company or the officers, directors, partners,
agents, and employees of the parties hereto or Buyer's attorney's, accountants
and securities agents in the ordinary course of business) without the prior
written consent of the other party.
16.16 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall constitute an original. This Agreement shall
only be effective if a counterpart is signed by both Seller and Buyer.
16.17 Holiday Inns. The Property is currently subject to a
------------
Commitment Agreement to Issue a Holiday Inn License Agreement (the "Commitment
Agreement") with Holiday Inns Franchising, Inc. (the "Franchisor"). Effective
at Closing, Buyer will (i) execute a new License Agreement with the Franchisor,
or (ii) cause the Franchisor to cancel the existing Commitment Agreement. In
any such event, Buyer shall pay for all fees directly related to any termination
of the existing Commitment Agreement. In all events, Buyer shall pay any and
all fees or other costs of any kind whatsoever in connection with or related to
the execution of any new License Agreement with the Franchisor or with any other
franchisor in connection with the Property. Seller shall pay all sums arising
or accruing in connection with the Commitment Agreement (exclusive only of the
termination fees to be paid by Buyer as provided immediately above) prior to the
Closing. Prior to the Closing, Buyer shall deliver to Seller through escrow an
indemnification of Seller and its affiliates (the "Holiday Inn Indemnification")
from any liability under the existing Commitment Agreement accruing on or after
the Closing Date which Holiday Inn Indemnification shall be in a form reasonably
acceptable to Seller and Buyer.
16.18 Limitation on Claim. Notwithstanding any provision to the
-------------------
contrary contained in this Agreement, the period of time during which Buyer may
assert a claim against Seller by reason of a breach or an alleged breach of any
of the representations, warranties or covenants of Seller as made herein, shall
be limited to a period of one year following the date of Closing. In the event
that Buyer fails to give Seller written notice of any asserted claim prior to
the expiration of such period, then upon the expiration of such period Buyer
shall be deemed to have released Seller with respect to any such unasserted
claim. Further, no claim for breach of any representation or warranty of Seller
shall be actionable if the breach in question results from or is based on a
condition, state of facts or other matter which was known to Buyer prior to the
Closing.
16.19 Limitation on Liability. Notwithstanding any provision to
-----------------------
the contrary contained in this Agreement, if Closing occurs as contemplated by
this Agreement and the Property is sold from Seller to Buyer, the liability of
Seller in connection with any breach or alleged breach of the provisions of this
Agreement shall in all events be limited to an aggregate amount of One Million
Dollars ($1,000,000.00) and in no event whatsoever shall Seller be responsible
for or obligated to Buyer in connection with any breach of any provisions of
this Agreement, including without limitation, the provisions of Section 11.2 for
an aggregate amount in excess of such amount.
16.20 Union Agreement. Following the Closing Date, Buyer will
---------------
not, be obligated for any obligations accruing prior to the Closing Date with
respect to employees employed by Seller at the Property or with respect to union
contracts in effect with respect to the Property. Following the Closing Date,
however, Buyer will be obligated to enter into a new union contract with respect
to the Property. Further, following the Closing Date, Buyer shall be obligated
to hire (and maintain employed for a minimum period of ninety (90) days) all of
the union employees of Seller working at the Property immediately prior to the
Closing save and
- 22 -
<PAGE>
except for only a maximum of ten (10) such union employees which Buyer may
decline to hire. Further, following the Closing Date, Buyer will not take any
action which would be construed as a "plant closing" or "mass layoff" as those
terms are defined in the WARN Act. All accrued salaries, wages, bonuses,
severance and other compensation, vacation, sick leave, workmen's compensation,
welfare benefits, deferred compensation, pension and profit sharing plan costs,
401(k) costs, and costs of other retirement plans, insurance benefits, and other
employee benefits of employees employed by Seller with respect to the Property
accrued as of 12:01 a.m. on the Closing Date shall remain the responsibility of
the Seller.
16.21 Liquor Licenses. Seller shall convey and assign its
---------------
alcoholic beverage, liquor, beer and/or wine licenses and/or permits with
respect to the Property (the "Liquor Licenses") to Buyer or its lessee or
management company at Closing as part of the licenses assigned to Buyer
hereunder. Buyer or its lessee or management company (hereinafter "Operator")
for the Property shall execute such forms, license applications and other
documents as may be necessary for the Operator to obtain all Liquor Licenses
necessary to operate any restaurants, bars and lounges presently located within
the Property, and Seller shall reasonably cooperate with the Operator in filing
such forms, applications and other documents. If such Liquor Licenses cannot be
obtained by Operator until after Closing, then Seller covenants and agrees that
Seller shall cooperate reasonably with Operator in keeping open the bars and
lounges and liquor facilities of the Property between the Closing and the time
when such Liquor Licenses are obtained by Operator, or a period not to exceed
sixty (60) days following the Closing Date, whichever is less (unless Operator
has during this time period following Closing diligently and continuously sought
to obtain such Liquor Licenses, in which event Operator shall have the right to
obtain an extension of such time period from Seller, not to exceed two (2)
thirty-day (30 day) extensions) by entering into a "Liquor License Agreement"
for the continued operation of and under the Liquor Licenses with respect to the
Property, mutually acceptable to Seller and Operator (and Buyer) in their
reasonable discretion, pursuant to which (i) Operator (and Buyer) 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 form the restaurants, bars
and lounges located at the Property during said period of time, and (ii)
Operator shall reimburse Seller for Seller's costs in maintaining the Liquor
Licenses in full force and effect. 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. Upon the occurrence of and following the
Closing, notwithstanding any provision to the contrary set forth in this
Agreement, Buyer shall be unconditionally and absolutely bound to acquire the
Liquor Licenses subject only to approval of the applicable governmental
agencies. In the event that the Operator (other than Buyer, if any) is unable
to obtain the necessary approvals of the applicable governmental agencies then
Buyer shall obtain such approvals or shall designate a new entity to serve as
operator in order to effect as soon as possible completion of the securing of
the necessary approvals. Notwithstanding any provision to the contrary
contained in this Agreement to the extent that the transfer of the Liquor
Licenses is processed through a separate escrow, then all matters to be
performed pursuant to the provisions of this Agreement in connection with the
Liquor Licenses shall be performed through such separate escrow, including
without limitation payment of the portion of the Purchase Price allocated to the
Liquor Licenses (i.e., $65,000) and delivery of such documentation as is
required in connection with transfer of the Liquor Licenses.
16.22 Gift Certificates. Seller and the Property, primarily for
-----------------
the reason of guest relations, have issued certain certificates which are valid
for future guest stays or free meals. Such certificates generally provide a
specific expiration date and provide that they are valid only on a basis of
"space available" and "not valid during special event times or holidays".
Seller estimates that with request to such certificates, the aggregate number of
room nights to be actually presented back to the Property will be approximately
forty (40)
- 23 -
<PAGE>
room nights and fifteen (15) meals. Buyer agrees to honor such certificates
without charge to Seller. During the pendency of this Agreement, Seller agrees
not to issue any additional certificates.
16.23 Trade Scrip. In the ordinary course of business, Seller has
-----------
periodically issued trade scrip which is usable at the Property and/or Seller's
other hotels in exchange for goods and services received at the Property and/or
Seller's other hotels. All such trade scrip carries the legend: "In the event
that California Innkeepers should sell or lease any property listed on the
reverse, Scrip cannot be honored at that property thereafter." Following the
Closing, Buyer agrees not to honor any such trade scrip that may be presented to
the Property.
17. REMEDIES.
17.1 Buyer's Default. If Buyer breaches this Agreement which
---------------
default continues uncured for a period of ten (10) days after written notice
thereof to Buyer, and the transaction contemplated by this Agreement fails to
close by reason thereof, Seller shall be entitled to terminate this Agreement
and retain the amount of the Deposit plus any accrued interest thereon (the
"Specified Sum") as liquidated damages. SELLER AND BUYER ACKNOWLEDGE THAT
SELLER'S DAMAGES WOULD BE DIFFICULT TO DETERMINE, AND AFTER NEGOTIATION THE
PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE
EFFECTIVE DATE, THE SPECIFIED SUM IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES.
SELLER AND BUYER FURTHER AGREE THAT THIS SECTION IS INTENDED TO AND DOES
LIQUIDATE THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE SELLER'S EXCLUSIVE
REMEDY AGAINST BUYER, BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A
BREACH BY BUYER OF ITS OBLIGATIONS TO CONSUMMATE THE TRANSACTION CONTEMPLATED BY
THIS AGREEMENT. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY
CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY
WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED
DAMAGES PROVISION.
--------------------------- -----------------------
Buyer's Initials Seller's Initials
17.2 Seller's Default. If Seller breaches this Agreement which
----------------
default continues uncured for a period of ten (10) days after written notice
thereof to Seller from Buyer, and the transaction contemplated by this Agreement
fails to close by reason thereof, then Buyer as its sole remedies, shall have
the right to any one of the following:
(a) Terminate this Agreement by written notice given to Seller
within fifteen (15) days of the expiration of said 10-day period, in which event
the Deposit shall be returned to Buyer by the Title Company; or
(b) Seek damages not to exceed an amount equal to the total amount
that Buyer has placed in escrow hereunder as the Deposit; or
(c) Seek specific performance of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
- 24 -
<PAGE>
SELLER: BUYER:
THEODORE H. KRUTTSCHNITT, III AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
a Delaware limited partnership
By: ________________________
By:_____________________________________
CATHERINE M. KRUTTSCHNITT
Name:___________________________________
By: ________________________ Its:____________________________________
An original, fully executed copy of this Agreement, together with the Initial
Deposit, has been received by the Title Company's agent this _______________ day
of ________________, 1996, and by execution hereof the Title Company's
agent hereby covenants and agrees to be bound by the terms of this Agreement.
FIRST AMERICAN TITLE INSURANCE COMPANY
By:____________________________________________
Printed Name:__________________________________
Its:___________________________________________
- 25 -
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit 1.1.1 Legal Land Description
Exhibit 1.1.4 Schedule of Leases, Agreements and Contracts
Exhibit 6.7 Form of Estoppel Certificates
Exhibit 8.1.1 Form of Deed
Exhibit 8.1.2 Form of Bill of Sale
Exhibit 8.1.3 Form of Assignment
Exhibit 8.3 Form of Tenant Notification Letter
Exhibit 11.3 List of Records, Documents and Other Materials (_____ pages)
</TABLE>
The exhibits and/or schedules identified above which comprise a part of this
Exhibit 2.8 have not been included as part of this Exhibit. The Registrant
agrees to furnish supplementally a copy of any such omitted schedule or exhibit
upon request.
- 26 -
<PAGE>
EXHIBIT 2.9
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
AS PURCHASER
AND
RENTHOTEL DURHAM, L.L.C.,
AS SELLER
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1
THE CONTRACT......................................................... 1
------------
ARTICLE 2
HOTEL................................................................ 4
-----
ARTICLE 3
PURCHASE PRICE....................................................... 4
--------------
3.1. Purchase Price................................................. 5
--------------
3.2. Allocations.................................................... 5
-----------
3.3. Earnest Money.................................................. 6
-------------
ARTICLE 4
TITLE DELIVERIES..................................................... 6
----------------
4.1. Deed........................................................... 6
----
4.2. Bill of Sale................................................... 6
------------
4.3. Title Commitment............................................... 7
----------------
4.4. UCC Search..................................................... 7
----------
4.5. Survey......................................................... 8
------
ARTICLE 5
HOTEL DOCUMENTS, INSPECTION AND OBJECTIONS........................... 8
------------------------------------------
5.1. Inspections.................................................... 8
-----------
5.2. Hotel Documents................................................ 10
---------------
5.3. Review Period.................................................. 11
-------------
ARTICLE 6
PERMITTED EXCEPTIONS................................................. 11
6.1. Permitted Exceptions........................................... 12
--------------------
ARTICLE 7
LEASES, OCCUPANCY AGREEMENTS, FF&E LEASES, AND SERVICE CONTRACTS..... 12
----------------------------------------------------------------
7.1. Schedules...................................................... 12
---------
ARTICLE 8
OPERATION OF HOTEL................................................... 12
------------------
8.1. Interim Operation.............................................. 14
-----------------
8.2. Mechanics Liens................................................ 14
---------------
8.3. Notices of Violation........................................... 15
--------------------
8.4. Third Party Consents........................................... 15
--------------------
8.5. Estoppel Letters............................................... 15
----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 9
REPRESENTATIONS AND COVENANTS........................................ 15
-----------------------------
9.1. Representations by Purchaser.................................. 16
----------------------------
9.2. Representations by Seller..................................... 20
-------------------------
9.3. Subsequent Developments....................................... 20
-----------------------
9.4. Limitation on Further Sales Efforts........................... 21
-----------------------------------
9.5. Shadow Management............................................. 21
-----------------
9.6. Access to Records and Financial Information................... 22
-------------------------------------------
9.7. Seller's Indemnity............................................ 22
------------------
9.8. Purchaser's Indemnity......................................... 22
---------------------
9.9. Seller's Actual Knowledge..................................... 22
-------------------------
9.10. Investigation................................................. 23
-------------
9.11. Sign.......................................................... 23
----
ARTICLE 10
CONDITIONS PRECEDENT TO THE CLOSING.................................. 23
-----------------------------------
10.1. Seller's Obligations.......................................... 23
--------------------
10.2. Seller's Representations and Warranties....................... 23
---------------------------------------
10.3. Title Policy.................................................. 24
------------
10.4. Franchisor and Lender Conditions.............................. 24
--------------------------------
ARTICLE 11
CLOSING AND CLOSING DOCUMENTS........................................ 24
-----------------------------
11.1. Closing....................................................... 24
-------
11.2. Seller's Deliveries........................................... 26
-------------------
11.3. Purchaser's Deliveries........................................ 26
----------------------
11.4. Prorations.................................................... 27
----------
11.5. Document Preparation and Closing Costs........................ 28
--------------------------------------
11.6. Reconciliation and Final Payment.............................. 28
--------------------------------
11.7. Accounts Payable.............................................. 28
----------------
11.8. Accounts Receivable........................................... 28
-------------------
ARTICLE 12
CASUALTY AND CONDEMNATION............................................ 28
-------------------------
12.1. Risk of Loss; Notice.......................................... 29
--------------------
12.2. Purchaser's Termination Right................................. 29
-----------------------------
12.3. Procedure for Closing......................................... 29
---------------------
ARTICLE 13
DEFAULT AND REMEDIES................................................. 29
--------------------
13.1. Purchaser's Default........................................... 30
-------------------
13.2. Seller's Default.............................................. 30
----------------
13.3. Survival...................................................... 30
--------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 14
BROKERS...................................................................... 30
-------
14.1. Identity of Brokers................................................... 31
-------------------
14.2. Indemnification by Seller............................................. 31
-------------------------
14.3. Indemnification by Purchaser.......................................... 31
----------------------------
ARTICLE 15
FRANCHISE.................................................................... 31
---------
15.1. Franchise............................................................. 32
---------
ARTICLE 16........................................................................ 32
LIQUOR LICENSE
--------------
16.1. Liquor Licenses....................................................... 33
---------------
ARTICLE 17........................................................................ 33
MISCELLANEOUS................................................................ 33
-------------
17.1. Notices............................................................... 34
-------
17.2. Entire Agreement; Modifications and Waivers; Cumulative Remedies...... 34
----------------------------------------------------------------
17.3. Exhibits.............................................................. 34
--------
17.4. Successors and Assigns................................................ 34
----------------------
17.5. Article Headings...................................................... 35
----------------
17.6. Governing Law......................................................... 35
-------------
17.7. Time Periods.......................................................... 35
------------
17.8. Counterparts.......................................................... 35
------------
17.9. Survival.............................................................. 35
--------
17.10. Further Acts.......................................................... 35
------------
17.11. Severability.......................................................... 36
------------
17.12. Attorneys' Fees....................................................... 36
---------------
17.13. Qualification on Confidentiality...................................... 36
--------------------------------
17.14. Rules of Construction................................................. 36
---------------------
17.15. Dependent Contract.................................................... 36
------------------
17.16. Seller's Right of Access to Employment and Other Records.............. 36
--------------------------------------------------------
</TABLE>
<PAGE>
HOTEL PURCHASE AGREEMENT
------------------------
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of the date
last below written by and between RENTHOTEL DURHAM, L.L.C., a North Carolina
limited liability company ("Seller"), and American General Hospitality
Operating Partnership, L.P., a Delaware limited partnership ("Purchaser").
RECITALS:
--------
A. Seller is the owner of the Hotel (as hereinafter defined) currently
licensed and operated as a Doubletree hotel.
B. Purchaser is affiliated with, and owned directly or indirectly in part
by, American General Hospitality Corporation, a Maryland corporation that has
elected to be taxed as a real estate investment trust ("REIT").
C. Seller desires to sell the Hotel to Purchaser, and Purchaser desires
to purchase the Hotel from Seller, 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 sell and convey the Hotel to Purchaser
and Purchaser agrees to purchase and accept 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 and Seller's businesses operated with respect thereto:
(a) The real property located at 3800 Hillborough Road, Durham, North
Carolina 27705, 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");
HOTEL PURCHASE AGREEMENT - Page 1
- ------------------------
<PAGE>
(b) The six (6) story, approximately 152 room hotel, 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, maintenance, use or operation of the Land or
Improvements as of the date hereof and owned by Seller (or acquired by Seller
and so employed prior to Closing, as defined below), including, but not limited
to, all furniture, furnishings, 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, serving
pieces and other restaurant and bar equipment, apparatus and utensils
(collectively, the "FF&E");
(d) All merchandise, supplies, inventory and other items owned by
Seller and used for the operation and maintenance of guest rooms, guest
services, 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 except to the extent any applicable law prohibits the
transfer of unopened alcoholic beverages (if applicable, the Purchase Price
shall be reduced by Seller's substantiated cost thereof), office supplies and
stationery, advertising and promotional materials, towels, washcloths,
mattresses, pillows, linens and bedding, 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");
(e) To the extent owned by Seller and assignable, (i) all leases,
licenses, and other agreements with respect to tenancies of the nature of space
leases, together with all amendments, modifications, renewals and extensions
thereof and all guaranties by third parties of the obligations of tenants,
licensees, and similarly situated parties thereunder (the "Leases"), and (ii)
all occupancy agreements, "trade-out" agreements, advance booking agreements,
convention reservation agreements, or other similar agreements, other than
Leases and other than guest or room bookings, 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 holder of the occupancy right and similarly
situated parties thereunder (the "Occupancy Agreements");
(f) To the extent owned by Seller and assignable, all prepaid rents
and deposits, including, but not limited to, utility deposits, refundable
security deposits and rental deposits, and
HOTEL PURCHASE AGREEMENT - Page 2
- ------------------------
<PAGE>
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
cash portion of 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 the Deposits so received or credited;
(g) Any and all of the following to the extent owned by Seller and
assignable 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:
(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 (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, unless otherwise herein provided), permits,
franchises (including without limitation hotel franchise license
agreements), 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 (collectively the "Licenses");
(iv) Trade names, trade styles, trade marks, service 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 and cannot be transferred to Purchaser by
this Agreement);
(v) 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");
(vi) Leases of any FF&E and other contracts permitting the use
of any FF&E at the Improvements (including, without limitation, vehicles,
reservations and other such franchise related systems and related satellite
programing leases and contracts) (collectively, the "FF&E Leases");
HOTEL PURCHASE AGREEMENT - Page 3
- ------------------------
<PAGE>
(h) To the extent owned by Seller and 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, and the foregoing right shall include, but not be limited to the
following, to the extent assignable and owned by Seller, (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");
(i) 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");
(j) All books and records, promotional material, telephone numbers,
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 ownership or use of 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, (i) 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
(ii) that Seller's and Seller's manager's accounting software shall not be
conveyed; and
(k) Seller's active guest ledger, tray ledger, petty cash, cash
drawers, and house accounts as of 2:00 A.M. on the Closing Date but excluding
Seller's accounts receivable, reserves, and bank accounts (the "Cash and
Equivalents"). The Cash and Equivalents shall be separately paid for by
Purchaser by adding the amount thereof to the Purchase Price at Closing.
The Hotel shall be conveyed, assigned, and transferred to Purchaser at Closing,
(i) free and clear of all mortgages, debts, liens, encumbrances, management
agreements, security interests, other encumbrances, and prior assignments and
conveyances, and (ii) free and clear of all licenses, leases, franchises, and
other agreements, and all conditions, restrictions, rights-of-way, easements,
encroachments, claims and other matters affecting title, except for those
matters specifically set forth on Exhibit B attached hereto and as described in
---------
Section 6.1 below (the "Conveyance Standard").
ARTICLE 3
PURCHASE PRICE
--------------
3.1. Purchase Price. The total price (the "Purchase Price") for which
--------------
Seller agrees to sell
HOTEL PURCHASE AGREEMENT - Page 4
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<PAGE>
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 $12,000,000.00 plus the sum of the Cash and
Equivalents, subject to adjustments as herein provided, in immediately available
funds payable to Seller at the Closing.
3.2. Allocations. Subject to adjustments in accordance with the terms of
-----------
this Agreement, the Purchase Price shall be allocated among the Land,
Improvements, FF&E, and the other components of the Hotel in the manner
determined by Purchaser and Seller prior to the end of the Review Period.
3.3. Earnest Money.
-------------
(a) For the purpose of securing the performance of Purchaser under
the terms and provisions of this Agreement, Purchaser has delivered the Earnest
Money (below defined) to the Title Company (below defined). The term "Earnest
Money" means an irrevocable, unconditional letter of credit in favor of Seller
issued by Bank One, Texas, N.A., in the amount of $107,000.00, which, by its
terms, will be paid to Seller on presentment accompanied by a certification by
Seller that Purchaser has defaulted under this Agreement, together with any
other sums or letters of credit 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. All interest accruing on any cash portion
of the Earnest Money 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 any cash
portion of 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.
(b) Within three (3) business days of the execution hereof, Purchaser
shall deliver to the Title Company a similar letter of credit in the amount of
$133,000.00 so that the aggregate amount of the Earnest Money is then
$240,000.00.
(c) If this Agreement shall then still be in effect, within three (3)
business days after the end of the Review Period (below defined), Purchaser
shall deliver to the Title Company a similar letter of credit in the amount of
$120,000.00 so that the aggregate amount of the Earnest Money is then
$360,000.00.
(d) If this Agreement shall then still be in effect, on or before
November 15, 1996, Purchaser shall deliver to the Title Company a similar letter
of credit in the amount of $176,000.00 so that the aggregate amount of the
Earnest Money is then $536,000.00.
HOTEL PURCHASE AGREEMENT - Page 5
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<PAGE>
(e) All letters of credit constituting part of the Earnest Money
shall (or if already deposited and not thus providing shall immediately be made
to) (i) name the Title Company as an additional beneficiary thereunder, and (ii)
have an expiration date of no earlier than February 3, 1997. All such letters
of credit shall, if necessary, no fewer than five (5) days prior to the then
scheduled Closing Date, be extended so that expiration shall be no earlier than
thirty (30) days following the then scheduled Closing Date, failing in which the
Title Company shall draw the letters of credit and thereafter maintain the
Earnest Money under the terms of Section 3.3 above.
(f) Purchaser reserves the right to make all Earnest Money deposits
in cash and, with respect to any Earnest Money deposits which are made in the
form of letters of credit, to substitute cash therefor and thereupon receive the
return of the letters of credit for which cash has been substituted.
ARTICLE 4
TITLE DELIVERIES
----------------
4.1. Deed. On the Closing Date, Seller shall convey, transfer, and assign
----
title to the Hotel to Purchaser. The Land, Improvements and Appurtenances shall
be conveyed to Purchaser by Seller's Special Warranty Deed in a form reasonably
acceptable to both Purchaser and Seller ("Seller's Deed") conveying good,
indefeasible, and insurable fee simple title to the Land and Improvements, in
accordance with the Conveyance Standard.
4.2. Bill of Sale. Seller's interest in all FF&E, Supplies, Warranties,
------------
Licenses, Tradenames, Plans and Specs, Utility Reservations, Records, Deposits,
Cash and Equivalents, and other personal property shall be conveyed to Purchaser
(and/or, at Purchaser's option, Purchaser's 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")
conveying good title to all such property in accordance with the Conveyance
Standard..
4.3. Title Commitment. As soon as practicable but no later than thirty
----------------
(30) days after the execution of this Agreement, Purchaser shall obtain (and
promptly deliver a copy to Seller) the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
for Chicago Title Insurance Company ("Chicago") or other title company
designated by Purchaser, issued through Chicago Title Insurance Company, 350 N.
St. Paul, Suite 250, Dallas, Texas 75201, Attention: Ms. Nancy Colaluca
(214/720-4000) (the "Title Company"), for the most recent form of ALTA owner's
policy and the 1970 form of Loan Policy (modified to include the Creditors'
Rights exception), covering the Land and Improvements, in the full amount of the
Purchase Price 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
HOTEL PURCHASE AGREEMENT - Page 6
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<PAGE>
comprehensive coverage owner's policy and loan policy (as above provided) 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, all deeds and other conveyance documents evidencing transfer of title into
Seller, lien instruments, leases, plats, surveys, reservations, restrictions,
and easements.
4.4. UCC Search. As soon as practicable but no later than thirty (30) days
----------
after the execution of this Agreement, Purchaser shall obtain (and promptly
deliver a copy to Seller) current written reports on those names requested by
Purchaser (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.
4.5. Survey. As soon as practicable but no later than thirty (30) days
------
after the execution of this Agreement, Purchaser shall obtain (and promptly
deliver a copy to Seller) 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"). Except as Purchaser shall
otherwise direct, the Survey must be prepared, and the field work surveying must
be conducted, in accordance with the current 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, except as Purchaser shall otherwise direct,
shall (i) accurately show 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 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 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
HOTEL PURCHASE AGREEMENT - Page 7
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<PAGE>
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
provided that the Title Company shall accept such description to be used in the
Owner Policy of Title Insurance, in Seller's Deed, and in any Mortgagee Policy
of Title Insurance and any mortgage to be delivered to any lender at Closing.
ARTICLE 5
HOTEL DOCUMENTS, INSPECTION AND OBJECTIONS
------------------------------------------
5.1. Inspections. Seller shall give Purchaser and Purchaser's agents and
-----------
representatives reasonable access to the Hotel, upon at least 48 hours prior
notice to Jerry Herman or his designee, during normal business hours prior to
the end of the Review Period and the right to physically inspect the Hotel and
to conduct soil tests, environmental tests and inspections, and 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). Seller may accompany Purchaser and its agents
and representatives in any such inspections. The costs and expenses of
Purchaser's investigation shall be borne solely by Purchaser and Purchaser shall
indemnify and hold Seller harmless from any cost, claim or expense in connection
therewith. Purchaser shall also be allowed during the Review Period to obtain
(and promptly deliver a copy to Seller) from Franchisor (as defined in Section
15.1 below) an evaluation from Franchisor incident to the customary terms of
Franchisor granting a new license ("Franchisor Evaluation"), at Purchaser's sole
cost and expense. 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, except that Purchaser may disclose such information as
provided in Section 17.13 and/or 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;
(ii) Financial statements, operating statements, budgets and
Federal and State income tax returns for the Hotel, to the extent that such
items have been prepared, for the current year to date and each of the
years prior to the year of this Agreement that Seller has owned the Hotel
(the "Financial Statements"), and, to the extent not reflected in such
items and reasonably available to Seller, itemization of (1) annual
insurance premiums for
HOTEL PURCHASE AGREEMENT - Page 8
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<PAGE>
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; further, to the extent
in Seller's possession, Seller shall deliver all items of the nature of the
Financial Statements and other itemizations as above described for the
period prior to the date that Seller acquired the Hotel but Seller
expressly disclaims any representation or warranty with respect to any such
items;
(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) That certain suvey prepared by S.D. Puckett & Assoc.,
Inc., dated July 25, 1995, and, 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 and/or improvements
surveys, engineering reports and subsurface studies affecting the Hotel. If
the Hotel is purchased by Purchaser, to the extent assignable, 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 including, without limitation, a schedule of media and
advertising commitments and programs (the "Schedule of 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 Seller in connection
therewith which would be binding on Purchaser after Closing;
(viii) [Deleted]
(ix) To the extent in Seller's possession or control, all
notices received from governmental authorities in connection with the Hotel
within the most recent twelve (12) months;
(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
HOTEL PURCHASE AGREEMENT - Page 9
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<PAGE>
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) Seller's franchise agreement and guest comments results
with respect to the Hotel;
(xiii) The most recent inventory of the FF&E and Supplies to the
extent such inventory exists;
(xiv) A schedule of the Deposits and the Utility Reservations
(the "Schedule of Deposits and Utility Reservations");
(xv) Standard market segment reports identifying the aggregate
segments by month for 1996 and including the number of room nights and rate
information, and group business information for 1996 (as well as tentative and
other booking information for 1997) identifying the number of groups, the
average daily rates, the receivables by collection category, all significant
tradeouts, any special services (such as transportation or food and/or beverage
service) included in the rate or otherwise committed, and the termination dates
of the various agreements giving rise to the foregoing; and
(xvi) Such other documents or information to the extent in
Seller's possession or control as may be reasonably requested by Purchaser
no later than twenty (20) days after the execution hereof.
5.3. Review Period.
-------------
(a) Purchaser shall have until thirty (30) days following the
execution of this Agreement 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 (the "Title
Objections"). If Purchaser shall so notify Seller of Title Objections, Seller
may elect to cure and eliminate such objections within five (5) days from the
date on which Seller receives Purchaser's Title Objections (for purposes of this
sentence, "eliminate" shall not include "insuring around" unless (i) the Title
Objection has a quantifiable value of less than $100,000.00, or (ii) Purchaser,
in its sole discretion, agrees thereto). If Seller so cures, or within said
five-day period unconditionally commits in writing so to cure prior to Closing
(the "Committed Title Cure Matters"), Purchaser shall not have the right to
terminate this Agreement because of the cured Title Objections or the Committed
Title Cure Matters. If the Committed Title Cure Matters are not cured by
Closing, such failure shall be a Seller default hereunder. Any such matters to
which Purchaser does not object and any Title Objections which Seller neither
cures nor commits to be Committed Title Cure Matters shall be Permitted
Exceptions if Purchaser does not terminate this Agreement under Section 5.3(b)
below.
HOTEL PURCHASE AGREEMENT - Page 10
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<PAGE>
(b) Purchaser shall have until forty-five (45) days following the
execution of this Agreement (the "Review Period") to notify Seller in writing if
Purchaser, in Purchaser's sole discretion, is not satisfied with the results of
any matter relating to the Hotel for any reason whatsoever (other than the
Franchisor Evaluation and other than the Title Objections which are cured or
which have become Committed Title Cure Matters under Section 5.3(a) above) or if
the REIT's Board or Directors or lender shall fail to approve this Agreement or
the Dependent Contract (below defined). Purchaser may terminate this Agreement
by giving written notice of termination to Seller at any time prior to the end
of the Review Period. If this Agreement closes, Purchaser shall be responsible
for the costs of the improvements required by the Franchisor Evaluation,
provided that if the Franchisor Evaluation results in estimated costs of
improvements in excess of four percent (4%) of gross revenues from the Hotel for
the twelve (12) full calendar month period immediately preceding the date of
this Agreement, then Seller may, at Seller's sole election, notify Purchaser in
writing, within ten (10) days of Seller's receipt of a copy of the Franchisor
Evaluation, that Seller will credit such excess against the Purchase Price at
Closing. If Seller fails to elect to credit such excess, Purchaser may
terminate this Agreement by giving written notice of termination to Seller at
any time prior to the later to occur of the end of the Review Period or ten (10)
days following the end of Seller's 10-day notification period, as above
provided. If Purchaser terminates this Agreement pursuant to this Section or
this Agreement terminates under Section 17.15 below, Seller shall be entitled to
retain and, to the extent it has not already done so, Purchaser shall deliver to
Seller a copy of 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 the originals of all documents
delivered to Purchaser pursuant to Section 5.2. 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 indemnification and repair obligation set forth in Section 5.1.
If Purchaser does not terminate this Agreement prior to the end of the Review
Period as provided herein, Purchaser shall be deemed to have waived 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 subject to the Permitted
Exceptions (below defined) and the delivered items, subject to the remaining
terms of this Agreement. By Closing, Seller shall, at Seller's expense, cancel
any and all management agreements affecting the Hotel and shall pay and cause
to be released all debts, liens, and encumbrances in any way affecting the Hotel
other than the Permitted Exceptions and any other matter expressly otherwise
agreed in this Agreement.
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 which
Seller is to discharge contemporaneous with Closing or which are 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, test items, or deliveries to which the
Purchaser does not object in accordance with Section 5.3 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
HOTEL PURCHASE AGREEMENT - Page 11
- ------------------------
<PAGE>
accordance with Section 5.3 shall be hereinafter referred to as the "Permitted
Exceptions." Permitted Exceptions also include matters described in Exhibit B,
---------
applicable building and zoning laws, regulations, and ordinances and the lien,
for taxes, assessments and governmental charges not yet due and payable;
provided that nothing in this Section 6.1 limits Purchaser's termination rights
under Section 5.3 above.
ARTICLE 7
LEASES, OCCUPANCY AGREEMENTS, 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, in all material
respects (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, 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 any kind (other than as
provided in clause (iv) below and other than guest room bookings) binding on the
Hotel or on Purchaser after Closing, other than the Service Contracts, FF&E
Leases, Leases and Occupancy Agreements, (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, franchisees, 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, Leases and Occupancy Agreements are in full force and
effect and, to Seller's actual knowledge, no default (beyond applicable grace or
cure periods) exists thereunder and no condition exists that, with the giving of
notice or passage of time, or both, would constitute a default, (vi) that no
Tenant has made any claim of any right of offset, and (vii) that, to Seller's
actual knowledge, the information provided under Section 5.2 (xv) above, when
delivered, will reflect the information contained in the Occupancy Agreements
and guest room bookings which is neither inaccurate nor incomplete in any
material respect.. 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 (in all cases
consistent with past practices):
(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
HOTEL PURCHASE AGREEMENT - Page 12
- ------------------------
<PAGE>
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
consistent with prior practice, (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, timely,
and ordinary manner, in accordance with accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years, (v)
remaining in substantial compliance with all current license and franchise
agreements, and (vi) maintaining the present level of insurance with respect to
the Hotel;
(b) Not commit waste of any portion of the Hotel affecting the value
of the Hotel in any material respect;
(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 Franchisor (as hereinafter defined) for the Hotel),
and all other applicable contractual arrangements relating to the Hotel;
(e) Not enter into (i) any new agreements of the nature of the
Occupancy Agreements or any amendments, modifications, renewals or extensions of
any existing Occupancy Agreements that are not consistent with Seller's prior
practice at the Hotel, or (ii) 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, except that Seller shall not be required to
obtain Purchaser's consent to any new agreement or to any renewal or extension
specifically permitted under the terms of an existing Service Contract, FF&E
Lease, or Lease on terms consistent with prudent commercial practice, provided
that any such new agreement or renewal or extension shall be terminable without
penalty on not more than thirty (30) days' notice, for Service Contracts and
FF&E Leases, and shall not exceed a term of six (6) months, for Leases, or in
any case cost in excess of $10,000.00, without Purchaser's prior written
consent, such consent not to be unreasonably withheld or delayed; provided that
Seller shall deliver to Purchaser a copy of any such new agreement or renewal or
extension whether or not such consent is required under this Section 8.1(e) at
the time that Seller updates the Schedules as provided in Section 9.3;
(f) Not cause or permit the removal of FF&E from the Hotel except for
the purpose of discarding and replacing, where needed or appropriate, worn
items, and timely make all repairs, maintenance, and replacements to keep the
Hotel and all FF&E in good operating condition;
(g) Keep Supplies adequately stocked, consistent with Seller's prior
practice, as if the sale of the Hotel hereunder were not to occur, including
without limitation, maintaining linens and bath towels and washcloths at least
at a 3-par level for all guest rooms in the Hotel;
HOTEL PURCHASE AGREEMENT - Page 13
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<PAGE>
(h) Not grant any bonus, free rent, rebate or other concession to any
present or future Tenant, not otherwise specifically granted in the operative
Lease, 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;
(j) [Deleted]
(k) Comply with all matters of the nature of the matters described in
subsections 9.2(j) and (k) below;
(l) Not sell or assign or enter into any agreement to sell or assign,
or to create or permit to exist (as of Closing) 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) Except to the extent consistent with prior practice, 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 and other
impositions levied or assessed on the Hotel or any part thereof prior to the
date on which the payment thereof is due.
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 restrictions, easements or similar matters issued by any
third party and all notices of violation of federal, state or municipal laws,
ordinances, orders, regulations or requirements issued, filed, or served by any
governmental agency having jurisdiction over the Hotel against or affecting the
Hotel, in either case which are issued on or before the Closing Date and of
which Seller has actual knowledge ("Notices of Violation") shall be promptly
disclosed to Purchaser.
8.4. Third Party Consents. Prior to the Closing Date, Seller shall,
--------------------
provided there is no material expense to Seller, use reasonable good faith
efforts and cooperate with Purchaser to obtain
HOTEL PURCHASE AGREEMENT - Page 14
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<PAGE>
all third party consents and approvals required in order for Purchaser to
purchase the Hotel but obtaining such consents shall not be a condition
precedent to Purchaser's obligations hereunder.
8.5. Estoppel Letters. Seller shall employ reasonable good faith efforts
----------------
to obtain from each Tenant (as defined in Section 7.1 above) under any Lease
affecting 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 will be true, 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 Delaware, 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 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) To Purchaser's actual knowledge, 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 action, suit or proceeding pending, or to Purchaser's
actual knowledge threatened, against or affecting the Purchaser in any court or
before any arbitrator or before any governmental agency or other instrumentality
which (a) in any manner raises any question
HOTEL PURCHASE AGREEMENT - Page 15
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<PAGE>
affecting the validity or enforceability of this Agreement or any other
agreement or instrument to which the Purchaser is a party or by which it is
bound and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of the Purchaser, (c) could materially and
adversely affect the ability of the Purchaser to perform its obligations
hereunder, or under any document to be delivered pursuant hereto, (d) could
create a lien on the Hotel, any part thereof or any interest therein or (e)
could adversely affect the Hotel, any part thereof or any interest therein or
the use, operation, condition or occupancy thereof.
(e) No Act of Bankruptcy (below defined) has occurred with respect to
the Purchaser. "Act of Bankruptcy" means that a party hereto or any general
partner or member thereof shall (a) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if an involuntary proceeding or case shall be commenced in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner or managing member, (2) the appointment of a receiver,
custodian, trustee or liquidator for such party or general partner or managing
member or all or any substantial part of its assets, or (3) other similar relief
under any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect), judgment, or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, in any such case for a period of 60
consecutive days.
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,
except to the extent that there are Subsequent Developments as contemplated by
Section 9.3 below, will be true, correct and complete as of the Closing Date
provided that each such representation and warranty is subject to, limited by,
and conditioned upon the information disclosed to Purchaser pursuant to the
terms of this Agreement:
(a) Seller is duly organized, validly existing and in good standing
under the laws of the State of North Carolina, 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
HOTEL PURCHASE AGREEMENT - Page 16
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<PAGE>
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. No person or entity owns any interest
in the Hotel other than Seller.
(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).
(c) To Seller's actual knowledge, and except to the extent that
certain items are to be discharged as of the Closing, none among the entry into,
the 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, operating agreement, 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 which will, in any one case or in the aggregate,
materially and adversely affect the ownership or operation of the Hotel or
Seller's ability to consummate the transactions contemplated hereby.
(d) No Act of Bankruptcy has occurred with respect to Seller.
(e) There are no union contracts or collective bargaining agreements
with respect to any employees at the Hotel, and 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 (i) to which Seller is a party or an
assignee, or (ii) binding upon the Hotel, relating to the ownership, occupancy,
operation or maintenance of the Land, Improvements, FF&E or Supplies, except for
(I) the Warranties previously disclosed to Purchaser, (II) guest or room
bookings and Occupancy Agreements, and (III) those Service Contracts, Leases,
and FF&E Leases as set forth in the Schedule of Service Contracts, Schedule of
Leases, and Schedule of FF&E Leases. With respect to all of the foregoing other
than guest or room bookings and Occupancy Agreements, to Seller's actual
knowledge, no default (beyond applicable grace or cure periods) exists.
(f) Seller has received no notice, and has no actual knowledge, that
it lacks any permit, license, certificates or authority necessary for the
present use and occupancy of the Improvements.
(g) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser.
(h) To Seller's actual knowledge, there are no:
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial proceedings or orders respecting awards, which might
become a lien on the Hotel;
HOTEL PURCHASE AGREEMENT - Page 17
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<PAGE>
(ii) pending unfair labor practice charges or complaints, labor
disputes, or unsatisfied unfair labor practice orders or judicial
proceedings or orders with respect thereto;
(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 antidiscrimination laws or
executive orders;
(iv) condemnation proceeding pending or threatened with regard
to all or any part of the Hotel; or
(v) other pending, 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") which Pending Claims could materially
adversely affect the financial condition or operation of the Hotel or Seller's
ability to perform under this Agreement.
(i) Seller has received no Notice of Violations.
(j) To Seller's actual knowledge, 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, and (iii) with all
limitations, requirements, restrictions, conditions, standards, prohibitions,
schedules and timetables contained in any of the foregoing. Seller expressly
makes no representation or warranty with respect to compliance of the Hotel with
the Americans with Disability Act of 1990, as amended, except that Seller has
received no Notice of Violation with respect thereto.
(k) With respect to environmental matters, Seller has no actual
knowledge: (i) of the presence of any "Hazardous Substances" (as defined below)
on or in the Hotel, or any portion thereof, except in strict accordance with
applicable law, or, (ii) of any spills, releases, discharges, or disposal of
Hazardous Substances that have occurred or are presently occurring on or onto
the Hotel, or any portion thereof, or (iii) of the presence of any PCB
transformers serving, or stored on, the Hotel, or any portion thereof, and
Seller has no actual knowledge of any failure to comply with any applicable
local, state or federal environmental laws, regulations, ordinances or
administrative or judicial orders relating to the generation, recycling, reuse,
sale, storage, handling, transport and disposal of any Hazardous Substances with
respect to the Hotel. As used herein, "Hazardous Substances" shall mean any
substance or material whose presence, nature, quantity or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
is either (1) regulated,
HOTEL PURCHASE AGREEMENT - Page 18
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<PAGE>
monitored or defined as a hazardous or toxic substance or waste by a
governmental authority, or (2) a basis for liability of the owner of the Hotel
to any governmental authority or third party, and "Hazardous Substances" shall
also include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil, or any products, by-products or components thereof, and asbestos.
(l) To Seller's actual knowledge, the use by Seller of any of the
Tradenames does not infringe any United States or state trademark, service mark,
or tradename laws existing at the Closing, or constitute actionable
appropriation of rights with respect to any other person, business or entity.
(m) All of Seller's or its manager's employees at the Hotel shall be
terminated as of the Closing Date. Purchaser will in no way be obligated for
any employees, or union contracts with respect to employees, employed by Seller
or its manager with regard to the Hotel either before or after the Closing. In
particular, neither Seller nor its manager 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 to any
employee of Seller or Seller's manager. Purchaser shall not have any liability
under any pension or profit sharing plan that Seller or its manager 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, seniority, worker's compensation, and welfare benefits, deferred
compensation, savings, pension, profit sharing, 401(k), and retirement plans,
and insurance and other benefits of all employees of the Hotel whether or not
re-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. Except as contemplated in Section 9.6
with respect to the personnel expressly identified therein, Seller shall not be
permitted to contact or engage in discussions with Seller's or manager's
employees except in conjunction with the shadow management contemplated in
Section 9.5, and then such contact and discussions shall be pursuant to a human
resources program and procedure with respect to the rehiring of such employees
that shall be consistent with Purchaser's standard rehiring program, the
procedures of which shall be disclosed to Jerry Herman or his designee in
advance, and which program shall be conducted with the least interruption to
Seller's business as is practicable.
(n) To Seller's actual knowledge, 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.
(o) To Seller's actual knowledge, 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.
HOTEL PURCHASE AGREEMENT - Page 19
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<PAGE>
(p) To Seller's actual knowledge, except as provided in the Permitted
Exceptions, there are no, and it has not received any written notice of, any
special taxes or assessments relating to the Hotel or any part thereof or any
planned public improvements that may result in a special tax or assessment
against the Hotel and any of same which are Permitted Exceptions shall be
current as of the Closing Date. Otherwise, all real estate, personal property,
sales, and other taxes assessed against the Seller in connection with the Hotel
or the operation of the Hotel which are due and payable have been paid in full
or will be paid in full by Seller by the Closing Date.
(q) To the best knowledge and belief of the Identified Persons (as
defined in Section 9.9 below), except as expressly set forth herein, all of
Seller's financial information delivered to Purchaser hereunder is correct and
complete in all material respects and presents accurately in all material
respects the results of the operations of the Hotel for the periods indicated.
Since the date of the last financial statement included in such financial
information, there has been no material adverse change in the financial
condition or in the operations of the Hotel.
(r) Not in limitation on any other provision hereof, there are no
cross-use, mutual access or similar agreements of any kind binding upon Seller
or the Hotel and benefitting any other person, entity, or property.
(s) To the best knowledge and belief of the Identified Persons,
Franchisor has not issued to Seller any written inspection reports or written
deficiency reports with respect to the Hotel.
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 of which Seller has knowledge ("Subsequent Developments") which
would cause any of Seller's representations or warranties contained in this
Agreement to be no longer accurate in any material respect. Without limiting
the foregoing, Seller shall deliver to Purchaser (i) within five (5) days after
the last day of each week through the week of Closing (facsimile delivery being
expressly approved), summaries of occupancies, rates, and total food and
beverage volumes, (ii) within twenty (20) days after the last day of each
calendar month through the month of Closing, updated Financial Statements, and
(iii) within twenty (20) days after the last day of each calendar month through
the month of Closing, an update, if any is necessary, of the Schedule of Service
Contracts, the Schedule of FF&E Leases, the Schedule of Leases, and the Schedule
of Deposits and Utility Reservations, along with a true copy of any new written
agreements described therein.
9.4. Limitation on Further Sales Efforts. Seller shall not execute other
-----------------------------------
offers prior to the termination of this Agreement in accordance with its terms
and shall not market the Hotel after the Review Period has expired and Purchaser
is fully committed to the transaction as contemplated herein, subject to the
terms hereof.
9.5. Shadow Management. Solely for the purpose of assisting Purchaser in
-----------------
connection with Purchaser's transition to ownership, Seller shall permit
Purchaser to establish and maintain a shadow management operation with respect
to the Hotel no earlier than two (2) weeks prior to the
HOTEL PURCHASE AGREEMENT - Page 20
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<PAGE>
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.
9.6. Access to Records and Financial Information. Purchaser and
-------------------------------------------
Purchaser's authorized representatives, auditors, agents, employees and lenders
shall have the right, prior to the end of the Review Period, at Purchaser's sole
cost, risk and expense, to enter upon and pass through the Hotel during normal
business hours and upon at least 48 hours prior notice to Jerry Herman or his
designee to examine and inspect 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, which are in Seller's possession or
control, and which have not been otherwise provided to Purchaser as required
elsewhere herein. No access will be allowed with respect to the Occupancy
Agreements or guest room bookings other than the information required in Section
5.2(xv) above. In addition, Purchaser may, upon at least 48 hours prior notice
to Jerry Herman or his designee, have its agents, employees or auditors conduct
an audit (the "Audit") of the books and records of the Hotel which Audit shall
be performed during the Review Period and shall be performed as one generally
continuous inspection and not subject to periods of interruption or delay the
intention being that Purchaser and its representatives, auditors, agents,
employees and lenders will make their best efforts to minimize disruption of
Seller's business while still being allowed the opportunity fully to review,
examine and inspect all such matters. In connection with Purchaser's
inspections and studies during the Review Period, upon at least 48 hours prior
notice to Jerry Herman or his designee, Purchaser may engage in discussions with
the Hotel's General Manager, Controller, Director of Engineering, and Director
of Marketing but is not to engage in discussions with any other Hotel personnel
without the specific prior approval of Jerry Herman or his designee which
approval for, but only for, other management personnel will not be unreasonably
withheld. Purchaser and its representatives and employees shall not
unreasonably interfere with the operation of the Hotel or the right to privacy
of guests and patrons 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 conformity with Regulation S-X of the Securities
and Exchange Commission (the "SEC") and to enable them to prepare a registration
statement, report or disclosure statement for filing with the SEC on behalf of
the REIT and/or its affiliates. Prior to the end of the Review Period, Seller
shall also provide to Purchaser's representatives a signed representation letter
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Hotel; provided, however, that any
information provided by Seller in such letter shall be limited to Seller's
actual knowledge and shall not expand the representations and
HOTEL PURCHASE AGREEMENT - Page 21
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<PAGE>
warranties made by Seller in this Agreement. During the Review Period, Seller
and Purchaser shall agree to the form of such letter.
9.7. Seller's Indemnity. Seller hereby indemnifies and agrees to 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 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 Seller
or third parties covered by insurance carried by Seller.
9.8. Purchaser's Indemnity. Purchaser hereby indemnifies and agrees to
---------------------
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 debt, act or cause of action occurring and accruing
subsequent to the Closing Date 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.
9.9. Seller's Actual Knowledge. For the purpose of this Agreement, the
-------------------------
phrase "Seller's knowledge" or "Seller's actual knowledge" means the actual
knowledge of the President of City Hotels USA and Heritage Hotel, Inc., the
President of C.H. Corp., the Senior Vice President and Director of Operations of
City Hotels USA, the Chief Financial Officer of City Hotels USA, and the Hotel's
General Manager ("Identified Persons"). "Actual knowledge" shall mean (a) facts
that are actually known to the Identified Persons and shall not include facts
that on any theory of law might be attributable to Seller or the Identified
Persons by reason of a principal-agent or other similar relationship but which
are not actually known to the Identified Persons; and (b) without inquiry, so
that neither Seller nor the Identified Persons shall be required to have
performed any due diligence, other than review of their files as to the subject
matter of the representations or warranties contained herein, with respect to
the matters covered by this Agreement.
9.10. Investigation. Purchaser acknowledges and agrees that, except as
-------------
expressly otherwise provided in this Agreement, it is relying on its own
independent factual, physical, and legal inspections and examinations of the
Hotel. Except as otherwise provided in this Agreement, Purchaser shall accept
the Hotel "AS IS", and "with all faults," and subject only to the terms and
conditions of this Agreement. EXCEPT AS PROVIDED IN THIS AGREEMENT, ALL EXPRESS
AND IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
ARE HEREBY DISCLAIMED. Purchaser acknowledges that Seller has not made any
representation, warranty, or statement, or held out any inducements to
Purchaser, other than those expressly made in this Agreement, and Seller shall
not be liable or bound in any manner by express or implied warranties,
guarantees, promises, statements, representations or information pertaining to
the Hotel, its physical or structural condition, permits, licenses, leases,
rents, income, cash flow, gross income, net income, profits, earnings,
occupancies, expenses or operations, or any other matter or thing, except as
specifically set forth in this Agreement. Purchaser acknowledges that Seller
shall not be bound or liable in any manner by any verbal or written statements,
representations or any information pertaining to the Hotel, furnished or claimed
to have been furnished by any person or
HOTEL PURCHASE AGREEMENT - Page 22
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<PAGE>
party, agent, contractors, engineer, consultant or employee, unless the same is
specifically set forth herein, and the parties acknowledge that all prior
communications and negotiations between the parties have been merged into this
Agreement.
9.11. Sign. Prior to Closing, Seller shall make its best efforts to cause
----
the Hotel sign that is currently in storage in conjunction with certain street
improvements to be replaced at the Hotel. In the event that such sign has not
been replaced prior to Closing, in conjunction with conveyance by Seller to
Purchaser of said sign as part of the Hotel (with possession subject to the
possession of the party currently in possession), Seller shall assign all of its
rights and claims with respect to said sign to Purchaser.
ARTICLE 10
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
Purchaser's obligations to consummate the Closing are subject to
Purchaser's termination rights under Section 5.3 prior to the end of the Review
Period and 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. The notice and cure
provisions of Section 13.2 apply to this Article 10. If the conditions of
Sections 10.1 or 10.2 fail, Article 13 shall apply. If the condition of Section
10.3 fails for any reason, 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.
10.1. Seller's Obligations. Seller shall have performed or shall perform
--------------------
concurrently with Closing all obligations of Seller hereunder which are to be
performed prior to or concurrently with Closing.
10.2. Seller's Representations and Warranties. Seller's representations
---------------------------------------
and warranties set forth in Section 9.2, exclusive of any Subsequent
Developments that Purchaser does not waive in writing, shall be true and correct
in all material respects as if made again on the Closing Date; provided that if
a change in circumstances not expressly contemplated by this Agreement and
relating to one or more representation or warranty is not the result of any act
or omission of Seller and does not result in a material diminution in the value
of the Hotel, then Purchaser shall be deemed to have waived such change.
10.3. Title Policy. Seller shall be able and willing to deliver title to
------------
the Land and Improvements which is insurable in accordance with and pursuant to
the Title Commitment as approved by Purchaser under the terms of this Agreement,
subject only to the Permitted Exceptions.
10.4. Franchisor and Lender Conditions. Franchisor has rights in the
--------------------------------
nature of first refusal, and the first trust lender with respect to the Hotel
has the right to prohibit pre-payment of its financing. Seller shall in good
faith diligently seek Franchisor's waiver of such right and such
HOTEL PURCHASE AGREEMENT - Page 23
- ------------------------
<PAGE>
lender's waiver of such prohibition and, to that end, shall immediately apply
for such waivers seeking written response within two weeks of the date of this
Agreement. Failure by Seller to deliver such waivers, in written form, to
Purchaser by the end of the Review Period shall be deemed to be a failure of the
conditions of this Section 10.4, and this Agreement and the Dependent Contract
shall automatically terminate under the terms of Section 5.3(b) above unless,
prior to the end of the Review Period, Purchaser, in a written notice to Seller,
shall have waived the condition of this Section 10.4.
ARTICLE 11
CLOSING AND CLOSING DOCUMENTS
-----------------------------
11.1. 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 upon ten (10) days notice before, January 8,
1997, though in no event, unless Seller and Purchaser mutually agree, before
January 2, 1997 (the "Closing Date"), or as otherwise set by agreement of the
parties.
11.2. Seller's Deliveries. At the Closing and at Seller's sole cost and
-------------------
expense, Seller shall deliver the following to the Title Company for delivery
to, or processing in accordance with the instructions of, Purchaser in addition
to all other items required to be delivered to Purchaser by Seller:
(a) Seller's Deed. Seller's Deed duly executed and acknowledged by
-------------
Seller;
(b) Bill of Sale. The Bill of Sale duly executed and acknowledged
------------
by Seller;
(c) Assignment and Assumption of Leases, FF&E Leases, Service
---------------------------------------------------------
Contracts and Occupancy Agreements. An Assignment and Assumption of all of the
- ----------------------------------
Leases, FF&E Leases, Service Contracts, and Occupancy Agreements, 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
9.7 and 9.8 above (the "Assignment");
(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 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 used in connection with the Hotel's operations;
HOTEL PURCHASE AGREEMENT - Page 24
- ------------------------
<PAGE>
(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, and the following documentation: (i) the
Certificate of the Secretary (or similarly appointed partner or member) of
Seller certifying attached copies of the articles of incorporation or
organization, By-Laws, operating agreement, partnership agreement, or other
organizational documentation, and enabling resolutions of Seller and all entity
constituents of Seller as true and correct, unamended, and continuing, and of
the incumbency of its or their officers, partners, or members, (ii) Certificates
of Existence and Good Standing from the Secretary of State of Seller's
incorporation or organization, and (iii) from the Secretary of State of the
state where the Hotel is located, a Certificate of Existence and Qualification
to Do Business in such state;
(g) [Deleted]
(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. To the extent in Seller's possession or
------------------
control, originals (or copies if no Originals exists) of all of the documents
and agreements covered by the foregoing that have not already been delivered to
Purchaser and all Occupancy Agreements;
(k) Updates. A complete list of all advance room reservations,
-------
functions and the like, in reasonable detail specified by Purchaser;
(l) Estoppel Letters. Either the estoppel letters or Seller's
----------------
certificates as described in Section 8.5 above together with written notice to
all Tenants under assumed Leases of the assignment of its Lease to Purchaser
hereunder; and
(m) Ratings. To the extent permitted under applicable law, documents
-------
of transfer necessary to transfer to the Purchaser Seller's employment rating
for workmens' compensation and state unemployment tax purposes.
(n) Termination of Agreements. Fully executed and effective
-------------------------
terminations of all management agreements with respect to the Hotel.
HOTEL PURCHASE AGREEMENT - Page 25
- ------------------------
<PAGE>
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 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.
11.3. Purchaser's Deliveries. At the Closing and at Purchaser's sole cost
----------------------
and expense, Purchaser shall deliver the following to the Title Company for
delivery 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) Assignment. 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
(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.
11.4. Prorations. All income and expenses with respect to the Hotel, and
----------
applicable to the period of time before and after Closing determined in
accordance with sound accounting principles consistently applied, shall be
allocated between Seller and Purchaser as set forth herein. Unless otherwise
explicitly provided in this Agreement, Seller shall be entitled to all income
and responsible for all expenses for the period of time up to but not including
the Closing Date, and Purchaser shall be entitled to all income and responsible
for all expenses for the period of time from, after and including the Closing
Date. 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:
(a) Hotel Taxes. Real estate taxes, personal property or use
-----------
taxes, assessments (special or otherwise), 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 same which are attributable to the Closing
Date and thereafter.
(b) Operating Costs. All costs and expenses of operating the
---------------
Hotel, including without limitation amounts paid or payable under the Service
Contracts, the FF&E Leases, the Leases, the Occupancy Agreements, and the
Licenses;
HOTEL PURCHASE AGREEMENT - Page 26
- ------------------------
<PAGE>
(c) Lease Rents. Rents under Leases and other revenues as and when
-----------
collected;
(d) 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 the
closing of such bars in the morning of the Closing Date (or in the preceding
evening, if applicable) 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. The amount of the Cash
and Equivalents shall be added to the Purchase Price;
(e) Miscellaneous. Fees and expenses for music, entertainment,
-------------
trade association dues, trade subscriptions, coin machine income, and washroom
and checkroom income;
(f) Deposits. Purchaser shall receive a cash credit in an amount
--------
equal to the sum of all prepaid rentals and all security deposits, utility
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
(g) 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.
11.5. Document Preparation and Closing Costs. The cost of preparing or
--------------------------------------
obtaining documents to be delivered by Purchaser to Seller pursuant to this
Agreement and Purchaser's attorney's fees and expenses shall be paid by
Purchaser. The cost of preparing or obtaining documents to be delivered by
Seller to Purchaser pursuant to this Agreement and Seller's attorneys fees and
expenses shall be paid by Seller. If Closing occurs hereunder, Purchaser shall
pay one-half, but in no event more than $10,715.00, of the Title Company's
escrow fees and all transfer and recording fees and taxes, Title Policy premiums
for the ALTA comprehensive coverage Owner Policy of Title Insurance pursuant to
the Title Commitment in the amount of the Purchase Price (any additional
endorsements and any loan title policy shall be Purchaser's expense), Survey
costs, all transfer, assumption and/or assignment fees and charges imposed by
any party with whom Seller has privity having an interest in the Hotel (other
than for Purchaser's debt instruments and except as provided in Sections 15.1
and 16.1 below) and other Closing costs and expenses, and Seller shall pay the
balance thereof. Purchaser shall pay all fees and charges with respect to
additional Title Policy
HOTEL PURCHASE AGREEMENT - Page 27
- ------------------------
<PAGE>
endorsements, any loan title policy, and Purchaser's debt instruments and as
provided in Sections 15.1 and 16.1 below.
11.6. Reconciliation and Final Payment. Seller and Purchaser shall
--------------------------------
reasonably cooperate after Closing to make a final determination of the
prorations required hereunder. Upon the final reconciliation of the prorations
under this Section and Section 11.4, 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.
11.7. 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 11.4 and 11.6 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.
11.8. Accounts Receivable. Purchaser shall not be obligated to collect
-------------------
any accounts receivable or revenues accrued prior to the Closing Date for
Seller, but if Purchaser collects same, such amounts will be remitted at least
once a month to Seller in the form received. These amounts shall specifically
include, without limitation, amounts collected from any taxing authority on
account of a successful tax contest resulting in a recovery of previously paid
taxes; to the extent any such tax recovery applicable to the period prior to the
Closing Date is in the form of credits or rebates in tax periods after the
Closing Date, the cash amount equivalent to such credits or rebates attributable
to the period prior to the Closing Date shall be promptly paid by Purchaser to
Seller. If Purchaser collects any accounts receivable or revenues which are not
attributed to any particular period, Purchaser shall use reasonable efforts to
ascertain from the payor the applicable period to which such receivables or
revenue apply, but if Purchaser is unable to do so, it will be presumed that
they first apply to post-Closing periods. Purchaser acknowledges that following
the Closing, Seller is permitted to collect accounts receivable accrued prior to
the Closing Date.
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 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.
HOTEL PURCHASE AGREEMENT - Page 28
- ------------------------
<PAGE>
12.2. 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.
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 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 ten (10) days from receipt of Seller's notice within which
to cure the specified default. If at the end of the ten (10) 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
HOTEL PURCHASE AGREEMENT - Page 29
- ------------------------
<PAGE>
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 default, and Seller shall have ten (10) days from receipt of Purchaser's
notice within which to cure the specified default. If at the end of the ten
(10) 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 ten (10) day
cure period, 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 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 Article 13.
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 The Robinson-
Humphrey Company (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.
HOTEL PURCHASE AGREEMENT - Page 30
- ------------------------
<PAGE>
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 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
FRANCHISE
---------
15.1. Franchise. Purchaser shall as soon as practicable make such
---------
application to Hilton Inns, Inc., ("Franchisor") as should be reasonably
required for the assignment and assumption of the existing franchise or license
agreement, as applicable, or for a new franchise or license, or for issuance of
a new franchise or license from a different franchisor, whichever Purchaser
chooses. Purchaser shall also utilize reasonable efforts to obtain such
assignment and assumption agreement or new franchise agreement. Seller
represents that its franchise or license is in full force and effect and that
there is no default thereunder or condition which, with the giving of notice or
passage of time, would constitute a default thereunder. Seller shall provide
such cooperation with Purchaser in connection with the obtaining of such license
or franchise from the Franchisor as Purchaser may reasonably request, but Seller
shall not be required to incur any costs or liability in connection therewith.
Purchaser shall pay any transfer fee with respect to the transfer of the
existing license or franchise agreement and shall pay any termination fees,
penalties or damages with respect to Seller's termination of its license or
franchise if Purchaser obtains a new license or franchise. Purchaser may freely
discuss the foregoing, including possible termination of the existing franchise
or license, with Franchisor. In the event that Purchaser shall take an
assignment of Seller's franchise or license or shall obtain a new franchise or
license from Franchisor, unless Purchaser shall otherwise notify Seller in
writing prior to Closing, and to the extent that Seller may do so, all
reservations terminals and systems equipment and software (exclusive of Seller's
manager's accounting software) shall be conveyed to Purchaser in the Bill of
Sale.
HOTEL PURCHASE AGREEMENT - Page 31
- ------------------------
<PAGE>
ARTICLE 16
LIQUOR LICENSE
--------------
16.1. Liquor Licenses. (a) Purchaser and Seller recognize that the
---------------
issuance of the Liquor License (defined below) is statutorily regulated pursuant
to North Carolina law, and is subject to the approval of the North Carolina
Department of Alcoholic Beverage Control and the City of Durham, as applicable
(the "ABC"). In order to comply with these statutory requirements, Purchaser
and any other parties to be holding a Liquor License shall execute applications
for issuance of the Liquor License, and Seller shall cooperate in completing
applications to the ABC. To the extent legally permissible, pending issuance of
the Liquor License, Purchaser or its designee (in this context, "Operator") may
enter into an interim arrangement with Seller for the use of the original Liquor
License, and, upon request of Purchaser, Seller shall join in such agreement;
provided, however, this interim arrangement shall be a temporary measure until
issuance of the Liquor License can be accomplished but in no event, without
Seller's consent, longer than ninety (90) days following Closing. This
provision shall survive the Closing.
(b) Purchaser shall be responsible for complying at its sole cost
and expense, with all statutes and regulations applicable to the issuance of the
Liquor License including, without limitation, paying all license and transfer
fees and costs of recordation and publication.
(c) As soon as is practicable after the date of execution of this
Agreement, Purchaser shall submit an application to the ABC for issuance of the
Liquor License. Purchaser shall use its best efforts and shall diligently
pursue the issuance of the Liquor License. Purchaser agrees to provide Seller
with written evidence that the applications for issuance of the Liquor License
have been timely filed and to act reasonably in connection with its
determination to obtain an issuance of the Liquor License or reach an interim
agreement with Operator and others holding the Liquor License.
(d) "Liquor Licenses" shall mean collectively (1) that certain ABC
License number 134525 issued to Seller by the ABC, and (2) any other alcoholic
beverage, liquor, beer and/or wine licenses and/or permits with respect to the
Hotel.
(e) If Operator and Seller enter into the interim agreement
described in subsection (a) above, (i) Purchaser and Operator 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, and (ii) Purchaser or
Operator shall reimburse Seller for Seller's costs in maintaining the Liquor
Licenses in full force and effect. 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. Purchaser shall be responsible for all
application and issuance fees for the transfer and/or issuance to Purchaser of
the Liquor Licenses.
HOTEL PURCHASE AGREEMENT - Page 32
- ------------------------
<PAGE>
ARTICLE 17
MISCELLANEOUS
-------------
17.1. 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, return receipt requested, or recognized overnight courier
requiring signature upon receipt, 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 Operating Partnership, L.P.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Steven D. Jorns or Bruce G. Wiles
with a copy to:
Calhoun & Stacy, PLLC
5700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202-5697
Attention: Parker Nelson
Seller's address for all purposes under this Agreement shall be the following:
C.H. Corp.
Rue de Livourne 13
B-1050 Brussels
Belgium
Attention: Victor Hasson, President
and to:
Heritage Hotel LLC
c/o City Hotels USA
4733 Bethesda Avenue, Suite 510
Bethesda, MD 20814
Attention: Jerry H. Herman, President
HOTEL PURCHASE AGREEMENT - Page 33
- ------------------------
<PAGE>
with a copy to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: Carol Weld King
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.
17.2. 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 allowed herein or by law, unless expressly
provided to the contrary herein.
17.3. Exhibits. All exhibits referred to in this Agreement and attached
--------
hereto are hereby incorporated in this Agreement by reference.
17.4. 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 so long as such entity is
controlled by Purchaser or the REIT, or by an affiliate of Purchaser or the
REIT, or the REIT, Purchaser or an affiliate of the REIT or Purchaser is an
investor or co-owner of such entity, and, in any case, and Purchaser provides
notice thereof to Seller prior to Closing. Any such assignment shall not
relieve Purchaser of its obligations hereunder. 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.
17.5. 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
HOTEL PURCHASE AGREEMENT - Page 34
- ------------------------
<PAGE>
of this Agreement or any part thereof and shall not be considered in
interpreting or construing this Agreement.
17.6. Governing Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State where the Hotel is located.
17.7. 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 in this Agreement.
17.8. 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.
17.9. 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 one (1) year, and all claims
with respect thereto must be made within eighteen (18) months after the Closing
Date. None of the foregoing shall be deemed to merge into, or be waived by,
Seller's Deed or any other closing documents. Each of Seller's representations,
warranties and covenants contained in this Agreement is intended for the benefit
of Purchaser and may be waived in whole or in part by Purchaser, but only by an
instrument in writing signed by Purchaser. No investigation, audit, inspection,
review or the like conducted by or on behalf of Purchaser shall be deemed to
terminate the effect of any such representations, warranties and covenants;
provided, however, that if Purchaser should discover any defect in any
representation or warranty of Seller during the Review Period and fail to
disclose such defect to Seller, then Purchaser shall not have a claim therefor
after Closing. Purchaser has the right to rely thereon and that each such
representation, warranty and covenant constitutes a material inducement to
Purchaser to execute this Agreement and to close the transaction contemplated
hereby and to pay the Purchase Price to Seller. Except as expressly set forth
herein, Seller makes no other representation or warranty with respect to any
matter relating to the Hotel or any part thereof.
17.10. 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.
HOTEL PURCHASE AGREEMENT - Page 35
- ------------------------
<PAGE>
17.11. 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.
17.12. 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.
17.13. Qualification on Confidentiality. Notwithstanding the
--------------------------------
confidentiality requirements elsewhere herein contained, it is acknowledged that
Purchaser is an affiliate of the REIT whose shares are traded to the general
public and that City Hotels, S.A., an affiliate of Seller, is also traded
publicly. In connection therewith, Purchaser and Seller will have the absolute
and unbridled right to market such securities and prepare all statements and
other papers, documents and instruments necessary or reasonably required in
Purchaser's or Seller's judgment as the case may be and that of their respective
attorneys and underwriters, to file same with the U.S. Securities and Exchange
Commission and/or similar state or foreign authorities, and to disclose therein
and thus to its underwriters, to the U.S. Securities and Exchange Commission
and/or to similar state or foreign authorities and to the public all of the
terms, conditions and provisions of this Agreement.
17.14. Rules of Construction. Singular words shall connote the plural
---------------------
number as well as the singular and vice versa, and the masculine shall include
the feminine and the neuter. Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement, and therefore any usual
rules of construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Agreement or any exhibits hereto.
17.15. Dependent Contract. Unless Purchaser and Seller mutually agree
------------------
otherwise, the Closing of this Agreement is conditioned upon there being no
failure of a condition precedent under Article 10 of that certain Hotel Purchase
Agreement (the "Dependent Contract") of the same date as this Agreement between
Renthotel Utah, L.C. ("RUL") and Purchaser providing for the sale and purchase
of the Salt Lake City Doubletree hotel located at 21 W. South Temple, Salt Lake
City, Utah 84101, provided that (i) if Purchaser is in default under the
Dependent Contract then Seller may, in addition to any rights or remedies
available under the Dependent Contract (or hereunder if a default by Purchaser
also exists hereunder), or (ii) if RUL is in default under the Dependent
Contract then Purchaser may, in addition to any rights or remedies available
under the Dependent Contract (or hereunder if a default by Seller also exists
hereunder), terminate this Agreement.
17.16. Seller's Right of Access to Employment and Other Records. Purchaser
--------------------------------------------------------
acknowledges and agrees Seller may require access after the Closing Date to
personnel, employment, financial, engineering and other records located at the
Hotel and under Purchaser's control. Purchaser agrees that Seller shall have
the ability from time to time during normal business hours, after giving
HOTEL PURCHASE AGREEMENT - Page 36
- ------------------------
<PAGE>
reasonable advance notice, to review any and all records relating to the Hotel
and its operations for the period prior to Closing related to any claim or
liability where the Seller may be responsible. This obligation of Purchaser
shall survive Closing.
(Signatures on next page)
HOTEL PURCHASE AGREEMENT - Page 37
- ------------------------
<PAGE>
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the ____ day of _______________________, 1996.
SELLER:
RENTHOTEL DURHAM, L.L.C.
By: C.H. Corp., a Delaware corporation, member
By: _______________________________
Victor Hassan, President
By: Heritage Hotel, LLC, a ____________ limited
liability company, member
By: Heritage Hotel, Inc., a ___________
corporation
By:_______________________________
Jerry H. Herman, President
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., a Nevada corporation,
general partner
By:_____________________________________
__________, Executive Vice President
HOTEL PURCHASE AGREEMENT - Signature Page
- ------------------------
<PAGE>
LIST OF EXHIBITS
- ----------------
Exhibit A - Legal Description of Land
Exhibit B - Permitted Exceptions
Exhibit 8.5 - Tenant Estoppel Letter
The exhibits and/or schedules identified above which comprise a part of this
Exhibit 2.9 have not been included as part of this Exhibit. The Registrant
agrees to furnish supplementally a copy of any such omitted schedule or exhibit
upon request.
<PAGE>
EXHIBIT 8.5
-----------
TENANT ESTOPPEL CERTIFICATE
---------------------------
WHEREAS, ________________________, a ___________ ("Landlord"), as landlord,
and _______________________ ("Tenant"), as tenant, entered into that certain
lease (the "Lease"), dated ________________, 19__ of certain premises more
particularly described in the Lease (the "Premises").
NOW, THEREFORE, Tenant hereby certifies as follows:
1. True and complete copies of the Lease and all agreements, amendments,
guarantees, side letters and other documents relating thereto are attached
hereto as Exhibit A and made a part hereof, and there are no other such
---------
agreements or documents.
2. The Lease has not been modified (except pursuant to documents attached
hereto as part of Exhibit A) and is in full force and effect.
---------
3. The Lease has not been assigned, mortgaged, pledged, or otherwise
encumbered, nor has all or any portion of the Premises been sublet.
4. Rent, additional rent and percentage rent required to be paid under
the Lease have been paid through ______________.
5. Tenant has accepted possession of and is now occupying the Premises.
6. To Tenant's knowledge, there exist no defaults on the part of Landlord
under the Lease; nor has any event occurred which, with the passage of time or
the giving of notice or both, would constitute a default by Landlord thereunder,
nor has Landlord suffered or permitted the occurrence of any such event.
7. Tenant has no offset, defense, claim or counterclaim, including,
without limitation, claims to "free" rent, concessions, rebates, or abatements
in rent, under the Lease.
8. The expiration date of the term of the Lease is _______________, and
except as set forth in the documents attached hereto as Exhibit A, Tenant has no
---------
option to renew the Lease or otherwise extend the term of the Lease.
9. Tenant has no option to purchase the Premises or any portion thereof,
or the building in which the Premises are located.
10. Tenant has no option to lease any other space in the building in which
the Premises are located.
1
<PAGE>
11. Any and all work to be performed by Landlord under the Lease has been
completed in accordance with the Lease and has been accepted by Tenant and all
reimbursements and allowances due to Tenant under the Lease in connection with
any work have been paid in full.
12. Tenant has deposited the sum of $ ____________ with Landlord as
security for the performance of Tenant's obligations under the Lease.
13. This certificate is binding upon the undersigned and may be relied
upon by Landlord, by any prospective purchaser of Premises, and by any lender
making a loan to such purchaser secured by a mortgage on the building in which
the Premises are located.
IN WITNESS WHEREOF, Tenant has duly executed this certificate this ___ day
of _______, 19___.
[TENANT NAME]
By:
Name:
Title:
2
<PAGE>
EXHIBIT 2.10
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. OR ITS ASSIGNS
as Purchaser
and
SNA OF GEORGIA, INC.
as Seller
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 The Contract................................................ 1
ARTICLE 2 Hotel....................................................... 2
ARTICLE 3 Purchase Price.............................................. 5
3.1 Purchase Price.............................................. 5
3.2 [INTENTIONALLY OMITTED]..................................... 5
3.3 Earnest Money............................................... 5
3.4 Simultaneous Acquisitions................................... 6
ARTICLE 4 Title Deliveries............................................ 6
4.1 Title Commitment............................................ 6
4.2 Survey...................................................... 7
ARTICLE 5 Hotel Documents, Inspecting and Objections.................. 7
5.1 Inspections................................................. 7
5.2 Hotel Documents............................................. 8
5.3 Purchaser's Review Period Termination Right................. 10
5.4 Operational Licenses........................................ 10
5.5 Procedure for Purchaser's Objections........................ 11
5.6 Permitted Exceptions........................................ 11
ARTICLE 6 Confidentiality............................................. 11
6.1 Press Releases.............................................. 11
6.2 Confidentiality............................................. 12
ARTICLE 7
Leases, FF&E Leases, and Service Contracts.................. 12
7.1 Schedules................................................... 12
ARTICLE 8 Operation of Hotel.......................................... 13
8.1 Interim Operation........................................... 13
8.2 Capital Program............................................. 15
8.3 Mechanics Liens............................................. 15
8.4 Notices of Violation........................................ 15
8.5 Third Party Consents........................................ 15
8.6 Estoppel Letters............................................ 16
8.7 Management Agreement Termination............................ 16
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.8 Hotel Employees............................................. 16
8.9 Shadow Management........................................... 17
8.10 Access to Records and Financial Information................. 17
ARTICLE 9 Representations and Covenants............................... 18
9.1 Representations by Purchaser................................ 18
9.2 Representations by Seller................................... 18
9.3 Subsequent Developments..................................... 21
9.4 Limitation on Further Sales Efforts......................... 21
9.5 Seller's Indemnity.......................................... 21
9.6 Purchaser's Indemnity....................................... 21
9.7 Liquor Licenses............................................. 21
9.8 Franchise Agreement......................................... 22
ARTICLE 10 Conditions Precedent to the Closing......................... 23
10.1 Seller's Obligations........................................ 23
10.2 Seller's Representations, Warranties
and Covenants............................................ 23
10.3 Transfer Subject Only to Permitted Exceptions............... 23
10.4 Consent of Boards of Directors.............................. 23
10.5 Consent of First Mortgagee.................................. 23
10.6 Simultaneous Closings....................................... 24
ARTICLE 11 Closing and Closing Documents............................... 24
11.1 Closing..................................................... 24
11.2 Seller's Deliveries......................................... 24
11.3 Purchaser's Deliveries...................................... 26
11.4 Prorations.................................................. 27
11.5 Closing Costs............................................... 29
11.6 Reconciliation and Final Payment............................ 30
ARTICLE 12 Casualty and Condemnation................................... 30
12.1 Risk of Loss; Notice........................................ 30
12.2 Purchaser's Termination Right............................... 30
12.3 Procedure for Closing....................................... 31
ARTICLE 13 Default and Remedies........................................ 31
13.1 Purchaser's Default......................................... 31
13.2 Seller's Default............................................ 31
13.3 Materiality................................................. 32
13.4 Cross-Default............................................... 32
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 14 Brokers..................................................... 33
14.1 Identity of Brokers......................................... 33
14.2 Indemnification by Seller................................... 33
14.3 Indemnification by Purchaser................................ 33
ARTICLE 15 Intentionally Omitted....................................... 33
ARTICLE 16 Miscellaneous............................................... 33
16.1 Notices .................................................... 33
16.2 Entire Agreement, Modifications and Waivers,
Cumulative Remedies....................................... 35
16.3 Exhibits.................................................... 35
16.4 Successors and Assigns...................................... 35
16.5 Article Headings............................................ 35
16.6 Governing Law............................................... 35
16.7 Time Periods................................................ 35
16.8 Counterparts................................................ 36
16.9 Survival.................................................... 36
16.10 Further Acts................................................ 36
16.11 Severability................................................ 36
16.12 Attorneys' Fees............................................. 36
16.13 REIT Audits................................................. 36
16.14 Tax-Deferred Exchange....................................... 37
16.15 [INTENTIONALLY OMITTED]..................................... 37
16.16 Covenant of French Quarter Holdings, Inc.................... 37
</TABLE>
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<PAGE>
SHERATON FOUR POINTS
HOTEL PURCHASE AGREEMENT
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of this 31st
day of December 1996 by and between SNA OF GEORGIA, INC., a Georgia corporation,
("Seller"), and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership, together with its successors and assigns
("Purchaser").
RECITALS:
A. Seller is the owner of the Hotel (as hereinafter defined) known as the
Sheraton Four Points Hotel Atlanta located in Marietta, Georgia.
B. Seller desires to sell the Hotel to Purchaser, and Purchaser desires to
purchase the Hotel from Seller, on the terms and conditions hereinafter set
forth.
C. Contemporaneously with the execution of this Agreement, Purchaser is
entering into other purchase agreements to acquire two (2) other hotels commonly
known as the French Quarter Suites in Atlanta, Georgia ("French Quarter Suites")
and the Sheraton Key Largo Hotel in Key Largo, Florida, ("Sheraton Key Largo")
owned, respectively, by French Quarter Suites, Inc. ("FQS") and SKL of Florida,
Inc. ("SKL") affiliates of Seller (the French Quarter Suites and the Sheraton
Key Largo are collectively referred to herein as the "Other Hotels").
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 and convey the Hotel to Purchaser
and Purchaser agrees to purchase and accept 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 real property located at 1775 Parkway Place, Marietta,
Georgia, 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 any way appertaining thereto
(collectively the "Land");
(b) The 10 story, 219 room hotel and all other buildings, structures,
fixtures, parking areas, and other improvements presently affixed to the Land
(collectively, the "Improvements");
(c) All right, title and interest of Seller in 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 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 copy machines, computers,
software, facsimile machines and other office equipment; 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, serving pieces and other restaurant and bar
equipment, apparatus and utensils (collectively, the "FF&E"). Seller agrees
that between the date of December 5, 1996 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, and provided that
such discarded items are replaced with items equal or greater in value to the
original value of such discarded items;
(d) All right, title and interest of Seller in all merchandise,
supplies, inventory 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 located within or relating to the
Improvements, including, without limitation, all food and beverage (alcoholic
and nonalcoholic) inventory, 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
-2-
<PAGE>
(collectively, the "Supplies"). Seller agrees that between the date of December
5, 1996 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. Purchaser agrees to credit Seller at Closing for
Seller's cost of all unopened and unused Supplies constituting food and beverage
inventory, and such unopened and unused food and beverage inventory shall not be
considered included within the Purchase Price;
(e) All right, title and interest of Seller in all leases, "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"). Purchaser shall assume in writing all
Leases at Closing;
(f) All prepaid rents and deposits held by Seller or its managing
agent, 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 cash portion of the Purchase Price (as defined below) in an
amount equal to the Deposits;
(g) To the extent assignable in accordance with applicable law and
agreement, any and all of Seller's right, title and interest in 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:
(i) Contracts and agreements, such as operations-related service
or maintenance contracts, restaurant consulting, utility contracts,
contracts for the purchase of supplies, insurance contracts, airline
agreements, corporate account agreements, travel agency agreements,
telephone service agreements, cable service agreements and yellow pages or
other advertising agreements (collectively, the "Service Contracts").
Purchaser shall execute a written assumption of all of the Service
Contracts except any management agreement with Innovative Hospitality
Management, Inc. ("IHM"). Purchaser shall bear the cost of any termination
fees on any of the Service Contracts;
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of Seller relating to the FF&E or the Improvements (collectively
the "Warranties");
-3-
<PAGE>
(iii) Licenses (including without limitation liquor, beer, wine,
bar and similar licenses and excluding the Franchise Agreement), permits
(including without limitation occupational, health, swimming pool and
elevator 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, Seller's interest in the names "Sheraton
Four Points" and "Sheraton Four Points Atlanta Northwest", otherwise
unprotected trade styles 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 and/or registered service mark of such hotel
chain and cannot be transferred to Purchaser by this Agreement);
(v) 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");
(vi) Leases of any FF&E and other contracts permitting the use of
any FF&E at the Improvements, all of which shall be assumed by Purchaser at
Closing (collectively, the FF&E Leases");
(h) To the extent transferable, Seller's interest, if any, in the
right to receive immediately on and after Closing water service, sanitary and
storm sewer service, electrical service, gas service, and telephone service on
and for the Land and Improvements in capacities that are 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 or other company for utility consumption after Closing,
including, but not limited to, the right to (i) present use of wastewater,
drainage, water and other existing utility facilities for the Land or
Improvements, (ii) all reservations of or commitments covering any such use,
and (iii) all deposits held by any such utility suppliers (the "Utility
Deposits"; all of the foregoing are referred to in this Agreement collectively
as the "Utility Reservations");
(i) 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, (iv) any leases of adjacent land of
facilities used in connection with the operation of the Hotel, and (v) the use
of all alleys,
-4-
<PAGE>
easements and rights-of-way, if any, abutting, adjacent or contiguous to or
adjoining the Land (collectively, the "Appurtenances");
(j) Copies and/or originals (to extent available from Seller's
existing files) of 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 ownership or use of 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 the original of any such material which constitutes a part of
Seller's consolidated or continuing business or financial records may be
retained by Seller;
(k) 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"); and
(l) The existing Sheraton franchise or license agreement with respect
to the Hotel (the "Franchise" or "Franchise Agreement"). Purchaser shall obtain
any requisite franchiser consents and Seller shall cooperate with Purchaser in
its efforts to procure said consent prior to expiration of the Review Period.
Provided, however, that the items listed on Exhibit B hereto (the "Excluded
---------
Assets") shall not be considered part of the Hotel in that they will not be
transferred to Purchaser at Closing and are hereby excluded from the definition
of Hotel.
The Hotel shall be conveyed, assigned, and transferred to Purchaser at Closing
free and clear (a "Free and Clear Conveyance") of all mortgages, debts, liens,
encumbrances except as specifically provided in writing by Purchaser and as
otherwise provided herein.
ARTICLE 3
Purchase Price
3.1 Purchase Price. The total price (the "Purchase Price") for which
--------------
Seller agrees to sell 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, is the sum of Fifteen Million Five Hundred
Thousand Dollars ($15,500,000.) subject to adjustments as herein provided, in
immediately available funds payable to Seller at the Closing.
3.2 [INTENTIONALLY OMITTED]
3.3 Earnest Money. For the purpose of securing the performance of
-------------
Purchaser under the terms and provisions of this Agreement and the purchase
agreements for the Other Hotels and as a condition precedent to Seller's
obligations hereunder and thereunder,
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<PAGE>
Purchaser shall post for deposit with First American Title Insurance Company
("First American"), within three (3) business days after the execution and
delivery of this Agreement, an unconditional, irrevocable letter of credit (the
"Letter of Credit") in the amount of $1,000,000 (the "Earnest Money") drawn on
Bank One, Texas, N.A. in a form reasonably acceptable to Seller. The Letter of
Credit shall have an expiration date of not earlier than April 30, 1997 and
shall name Seller as the beneficiary. First American shall act as escrow agent,
and shall hold the Letter of Credit in escrow pursuant to the terms of an escrow
agreement (the "Escrow Agreement") executed contemporaneously herewith. If the
Closing Date is adjourned for any reason and the expiration date of the Letter
of Credit is prior to the adjourned Closing Date, Purchaser shall, prior to the
expiration date of the Letter of Credit, deliver to First American an extension
of the Letter of Credit to a date which is not less than thirty (30) days past
the adjourned Closing Date. If the transactions contemplated by this Agreement
are not consummated in accordance with the terms hereof, the Letter of Credit
shall be disbursed pursuant to the terms of the Escrow Agreement. If the
transactions contemplated by this Agreement are consummated in accordance with
the terms hereof, the Letter of Credit shall be returned to Purchaser at the
Closing.
3.4 Simultaneous Acquisitions. It is the parties' intention to close on
-------------------------
the acquisition of this Hotel simultaneously with the closing on the Other
Hotels pursuant to separate purchase agreements which are being entered into
between Purchaser and affiliates of Seller contemporaneously with the execution
of this Agreement. Unless Purchaser notifies Seller in writing prior to the
expiration of the Review Period, Purchaser shall be deemed to have elected and
agreed to acquire the Hotels (i.e., Hotel and Other Hotels) in a simultaneous
transaction and shall be obligated to do so. The Purchase Price set forth above
is predicated on the simultaneous acquisition by Purchaser (or its assignee or
designee) of all three (3) hotels. If Purchaser notifies Seller prior to the
expiration of the Review Period that it elects to acquire the Hotel, but less
than all three (3) Hotels (i.e., Hotel and Other Hotels), the Purchase Price for
this Hotel shall be increased to Fifteen Million, Five Hundred Fifty Thousand
Dollars ($15,550,000). As used in this Agreement, the term "Purchase Price"
shall refer to the amount set forth in Section 3.1 or the amount set forth in
this Section 3.4, whichever is applicable.
ARTICLE 4
Title Deliveries
4.1 Title Commitment. On or before December 20, 1996, Seller shall
----------------
procure and deliver to Purchaser, at Seller's sole cost and expense therefor,
the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by First American, through Callaway Title and Escrow Services (the "Title
Company"), on the most recent form of ALTA owner's policy, covering the Land and
Improvements, in the full amount of the Purchase Price allocable to the Land and
the Improvements, setting forth the current status of the title to the Land and
Improvements, pursuant to which the Title Company agrees, subject to
satisfaction of the requirements of the Title Commitment, to
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issue to Purchaser at Closing an Owner Policy of Title Insurance (the "Title
Policy") on the most recent form of ALTA owner's policy; and
(b) Copies of all documents and instruments (as recorded, where
applicable) (the "Supporting Documents") provided by the Title Company and
referred to or identified in the Title Commitment, including, but not limited
to, all deeds and other conveyance documents evidencing transfer of title into
Seller.
4.2 Survey. Prior to the execution of this Agreement, Seller has provided
------
to Purchaser its most recent "as built" survey (the "Survey") of the Land and
Improvements. Purchaser, at Purchaser's sole cost and expense, shall be
responsible for obtaining an updated survey from this or any other surveyor (the
"New Survey"). If the New Survey contains a different legal description than
the one described on Exhibit A attached to this Agreement, Seller shall, at
---------
Closing, in addition to the Seller's Deed set out in Section 11.2(a), execute in
favor of Purchaser a quitclaim deed which shall convey any interest of Seller in
the Land using the New Survey legal description. In addition, such description
shall be used in the Title Policy.
ARTICLE 5
Hotel Documents, Inspecting and Objections
5.1 Inspections. 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, to conduct soil
tests, environmental tests and inspections, and 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, or by
tenants) and to examine any books, records and other financial information
pertaining to the Hotel located at the Hotel. 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
other than Seller's default, 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, subject to the provisions of Article 6 below. All
visits to the Hotel shall be pre-arranged with Mr. Charles Bud Pyles (telephone
number 305-852-5553 or 770-980-1900) or Mr. Raanan Ronnie Ben-Zur (telephone
number 011-972-3-535-0447) ("Seller's Representatives"). Purchaser's agents and
representatives shall refrain from discussing their due diligence with any Hotel
employees other than those approved by "Seller's Representatives" and, with
respect to those Hotel employees whom Purchaser is expressly authorized to
discuss the due diligence, Purchaser shall limit those discussions to inquiries
concerning the Hotel, and Purchaser shall not discuss the reason for its
inquiries. Purchaser shall and does hereby agree to indemnify, hold harmless
and defend Seller, its agents,
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officers, directors, and employees from and against any and all out-of-pocket
loss, damage, expense (including attorneys' fees and court costs), claim, demand
and the like arising in connection with the access and/or inspection rights
granted herein by Seller for the benefit of Purchaser.
5.2 Hotel Documents.
---------------
(a) As soon as practicable but in no event later than December 20,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies of the following, together with all amendments,
modifications, renewals or extensions thereof:
(i) All Licenses;
(ii) All Service Contracts and a schedule of such Service
Contracts (the "Schedule of Service Contracts");
(iii) 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;
(iv) A list of all current Hotel employees and their salaries or
wages and a general description of the employment benefits available to the
employees as a group, and copies of all employment agreements and/or union
contracts, if any;
(v) The Franchise Agreement and a current deficiency report and
the two most recent inspection reports of the franchiser of the Hotel;
(b) As soon as practicable but in no event later than December 27,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies 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) To the extent in Seller's possession and without any
requirement to compile any new statements, financial statements, balance
sheets, income statements, general ledgers (provided however that Seller
shall not be required to deliver copies of general ledgers to Purchaser but
Seller shall allow Purchaser and Purchaser's representatives reasonable
access to on-site copies of such general ledgers), budgets and Federal and
State income tax returns for the Hotel, for the
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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
A. 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; B. expenses incurred for water, electricity, natural gas, sewer
and other utility charges; C. total rents and revenues collected from
tenants and from hotel guests and other patrons of the Hotel; D. management
fees; E. maintenance, repairs and other expenses relating to the management
and operation of the Hotel; F. historical occupancy statistics for the
Hotel; and G. all capital expenditures made during the aforementioned
periods;
(iii) 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;
(iv) To the extent available to Seller in its existing files, 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, subject to the terms of any agreements with the professionals who
rendered said reports, 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;
(v) A rent roll including for each Lease A. the name of the
tenant; B. the suite; C. the base rental rate; D. the amount of prepaid
rent; E. the amount of each security deposit; F. the applicable percentage
rental rate, if any, and the means of calculation thereof; G. the date of
the Lease; and H. the expiration date of the Lease;
(vi) To the extent in Seller's possession or control, all written
notices received from governmental authorities in connection with the
Hotel;
(vii) All FF&E Leases and a schedule of such FF&E Leases (the
"Schedule of FF&E Leases");
(viii) A schedule of the Deposits and the Utility Reservations
(the "Schedule of Deposits and Utility Reservations");
(ix) Copies of the existing insurance policies covering the
Hotel;
(x) An unaudited balance sheet (the "Balance Sheet") of the Hotel
as of November 30, 1996 (the "Balance Sheet Date"), listing all
liabilities, accounts
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payable and accounts receivable of the Hotel as of such date. The Balance
Sheet will be prepared and certified by management to be A. in accordance
with the books and records of the Hotel, and B. to fairly present the
financial condition of the Hotel at the Balance Sheet Date;
(xi) A schedule of any litigation, arbitration or administrative
proceedings pending or material threatened (in writing) with respect to the
Hotel; and
(xii) To the extent available from Seller's existing files, such
other documents or information as may be reasonably requested by Purchaser
no later than ten (10) days after Seller's receipt of a written request
therefor.
Seller shall promptly notify Purchaser in writing upon one of Seller's
Representatives learning of any material inaccuracy, misstatement or omission in
any of the information furnished to Purchaser and shall supply Purchaser with
updated information or schedules, as required.
5.3 Purchaser's Review Period Termination Right. Purchaser shall have
-------------------------------------------
until 5:00 P.M. Eastern Time on January 24, 1997 (the "Review Period"), to
evaluate the Hotel and the matters reflected in Sections 4.1, 4.2, 4.3, 5.1,
5.2, 5.4 and 9.7 and to obtain the approval of the boards of directors of
Purchaser and American General Hospitality Corporation (the "REIT") to the terms
and conditions of, and the transactions contemplated by, this Agreement. In the
event Purchaser shall determine, in Purchaser's sole discretion, that the
results of the inspection and review are unsatisfactory, or either of the
Purchaser or the REIT are unable to obtain the requisite approval of their
respective board of directors, or for any other reason whatsoever, Purchaser
shall have the right to terminate this Agreement upon written notice to Seller
delivered at any time on or before the expiration of the Review Period. Upon
the proper termination of this Agreement by Purchaser, the Letter of Credit
shall be returned to Purchaser and thereafter neither party shall have any
further obligation or liability to the other under this Agreement, except with
respect to those provisions which expressly provide for the survival of such
termination and for the obligation to pay the cost of repairs, if any, set forth
in Section 5.1 and the return of all of the materials delivered by Seller to
Purchaser under this Agreement. If Purchaser fails to notify Seller of its
election to terminate this Agreement on or before the expiration of the Review
Period, then the Earnest Money shall be non-refundable to Purchaser, except to
the extent otherwise provided in this Agreement.
5.4 Operational Licenses. During the Review Period Purchaser shall have
--------------------
obtained, or determined that it will be able to obtain, all permits, licenses,
approvals and other authorizations necessary or desirable to operate the Hotel
and all restaurants. bars and lounges presently located in the Hotel, including,
without limitation, the Liquor Licenses (hereinafter defined in accordance with
Section 9.7 hereof. To that end, Sellers and Purchaser shall cooperate with
each other, and each shall execute such transfer forms, license
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<PAGE>
applications and other documents as may be necessary or customary for Purchaser
or its designees to obtain such permits, licenses, approvals and other
authorizations.
5.5 Procedure for Purchaser's Objections. At any time during the Review
------------------------------------
Period Purchaser may notify Seller in writing (an "Objection Notice") of any
objections Purchaser may have with respect to the Hotel or to any 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, or to the results of the inspections, tests, and studies
under Section 5.1 and any other tests or inspections of the Hotel made by
Purchaser, or to any Service Contracts, Leases, FF&E Leases, or Licenses or any
other matters pursuant to Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.4 and 9.7. If
Purchaser shall so notify Seller of any objections, Seller may elect to cure any
or all such objections by giving Purchaser notice of its intent to cure,
whereupon Seller shall be obligated to cure or remove the objections identified
in its notice on or before the Closing Date. In no event shall Seller be
obligated to cure any objections of Purchaser, except that Seller shall be
obligated to remove any existing mortgages and other monetary liens encumbering
the Hotel not caused or created by Purchaser, as well as any other encumbrances
created by Seller after the date hereof. In the event Purchaser has not elected
to terminate this Agreement pursuant to Section 5.3, any condition,
circumstance, document or other materials whatsoever concerning the Hotel which
is not expressly addressed by Purchaser in an Objection Notice prior to the
expiration of the Review Period shall be deemed accepted by Purchaser for all
purposes hereunder, and further shall be deemed Permitted Exceptions
notwithstanding anything contained herein to the contrary. By Closing, Seller
shall, at Seller's expense, cancel any and all management agreements with
respect to the operations of the Hotel.
5.6 Permitted Exceptions. Any title exceptions, test items, or deliveries
--------------------
or other items to which the Purchaser does not object in accordance with Section
5.5 shall be deemed "Permitted Exceptions", and, in addition, any title
exceptions, test items, or deliveries to which Purchaser objects that are not
cured and any other conditions permissible hereunder shall, upon consummation of
the Closing, be thereafter deemed and hereinafter referred to as "Permitted
Exceptions".
ARTICLE 6
Confidentiality
6.1 Press Releases. Prior to the end of the Review Period, either Seller
--------------
or Purchaser or their respective Affiliates may refer to this Agreement and the
transactions contemplated hereby in any filing pursuant to securities laws or
stock exchange listing obligations or as required by law or advised by counsel
to be in accordance with law. After the end of the Review Period, either Seller
or Purchaser or their respective Affiliates may issue press releases, and may
refer to this Agreement and the transactions contemplated hereby in any filing
pursuant to securities laws or stock exchange listing obligations or as required
by law or advised by counsel to be in accordance with law, provided that, with
respect to any press release, (i) Purchaser and Seller have each provided the
other with an
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<PAGE>
opportunity to review and comment upon such release, although any changes to
such release suggested by the other party shall be made in the sole discretion
of the party submitting it for review. Purchaser and Seller can disclose this
Agreement to their respective advisors, consultants and executive employees to
the extent necessary in order to expedite their obligations hereunder. As used
in this Agreement "Affiliate" shall have the meaning ascribed to it in Rule 12b-
2 of the General Rules and Regulations under the Securities and Exchange Act of
1934, as amended, and/or applicable Israeli securities laws, and, when used in
connection with Seller or Purchaser shall include each officer, director, and
partner thereof.
6.2 Confidentiality. Except to the extent otherwise provided herein,
---------------
required by law or advised by counsel to be in accordance with law, or expressly
addressed by Section 6.1, until the consummation of the transactions
contemplated by this Agreement, the parties hereto shall hold, and shall cause
each of their respective Affiliates to hold, all information and documents
obtained in connection with the transactions contemplated hereby confidential
including, any oral and written information concerning the Seller and the Hotel
received from the Seller or from a third party at the direction of the Seller
(collectively the "Due Diligence Material"). The Due Diligence Material shall
not be disclosed, discussed or made known without the prior written consent of
the Seller, except to the Purchaser's or the Purchaser's board of directors',
Purchaser's lender and its counsel, any hotel franchisors with whom Purchaser is
negotiating a franchise license agreement, any marketing company employed to do
feasibility studies, or any investment banking, accounting or legal advisers, or
any environmental or engineering consultants with whom Purchaser desires to
consult in connection with the proposed transaction. If the purchase and sale
contemplated hereby are not consummated for any reason whatever, each party
hereto shall, as soon as practicable but no later than fifteen (15) days after
the Closing Date, return all such information and documents (and any copies
thereof in such party's possession) to such other party hereto.
ARTICLE 7
Leases, FF&E Leases, and Service Contracts
7.1 Schedules. Subject to Section 9.3, Seller hereby warrants,
---------
represents, and certifies unto Purchaser that (i) the Schedule of Service
Contracts, Schedule of FF&E Leases, Schedule of Leases, and Schedule of Deposits
and Utility Reservations, when delivered on or before either December 20, 1996
or December 27, 1996 as provided in Sections 5.2(a) and 5.2(b), 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 contracts), and all Deposits,
Utility Deposits and Utility Reservations in effect at that time, (ii) 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) 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
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Closing, other than the Service Contracts, the FF&E Leases, and the Leases
assumed hereunder by Purchaser and, to the extent not terminated on or after
Closing in accordance with the terms thereof and hereof, the Franchise
Agreement, (iv) there are and will be no other written or oral agreements for
the use or occupancy of the Hotel binding on the Hotel or on Purchaser after
Closing with any tenants, licensees, franchisees, concessionaires or other
persons or entities (collectively, "Tenants", and individually, "Tenant") or any
guarantors of the Tenants' obligations (collectively "Guarantors", and
individually, "Guarantor") other than those disclosed by Seller or permitted
under Section 8.1(e) of this Agreement, (v) the Service Contracts, FF&E Leases,
and Leases are in full force and effect and, to Seller's knowledge, no material
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) no
Tenant has made any claim of any right of offset. The term "Tenant" shall refer
only to tenants under Leases only and not guests of the Hotel. It shall not be
deemed a violation of this Section 7.1 if there exists a Service Contract which
is not disclosed on the Schedule of Service Contracts provided such Service
Contract calls for monthly payments of not more than $1,000 and termination upon
forty-five (45) days.
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 for the relevant season as of the date of this Agreement in accordance
with Seller's prior practice, (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 the Franchise Agreement;
(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 a manner consistent with
prior practices
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(in particular, the license agreement between Seller and Franchisor (as
hereinafter defined) for the Hotel), and all other applicable and material
contractual arrangements relating to the Hotel;
(e) If Purchaser does not terminate this Agreement prior to expiration
of the Review Period, thereafter Seller shall not enter into any new agreements
of the nature of the Service Contracts, FF&E Leases, or Leases or any material
amendments, modifications, renewals or extensions of any existing Service
Contracts, FF&E Leases, or Leases without Purchaser's prior written consent,
except that Seller shall not be required to obtain Purchaser's consent to any
new agreement or any renewal or extension of existing agreements which may be
terminated on not more than forty-five (45) days' prior notice without cost or
expense. Prior to the expiration of the Review Period, Seller may enter into
new arms-length agreements of the nature of the Service Contracts, or any
amendments, modifications, renewals or extensions thereof in the ordinary course
of business without Purchaser's consent provided that Seller shall provide
Purchaser with a copy of any such instrument promptly after execution and
further provided that any such agreement may be terminated upon not more than
forty-five (45) days' prior notice without cost or expense;
(f) Not cause or permit the removal of FF&E from the Hotel except for
the purpose of discarding and replacing, where needed or appropriate, worn
items, and timely make all repairs, maintenance, and replacements to keep the
Hotel and all FF&E in good operating condition;
(g) Keep Supplies adequately stocked, consistent with Seller's current
business practice, as if the sale of the Hotel hereunder were not to occur;
(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 (in writing) after the
date of this Agreement, or if Seller's Representatives learn that any
representation or warranty contained in this Agreement has become materially
misleading or false;
(j) Not intentionally 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 other
than the Americans with Disabilities Act of 1990, as amended ("ADA"), it being
acknowledged by Purchaser that Seller is unaware of any violation thereof and
that Seller shall have no obligation to Purchaser to do anything further in
connection therewith;
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<PAGE>
(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 or other right currently in
existence which is significant to the operation, use, occupancy or maintenance
of the Hotel to expire, be canceled or otherwise terminated without Purchaser's
prior written consent unless such License shall be renewed or re-obtained in the
ordinary course of business;
(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 except as may be consistent with prior practices, and continue to book
contracts and reservations consistent with prior practices;
(o) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof on or before the
date on which the payment thereof is delinquent; and
(p) Not voluntarily alter the existing insurance coverage for the
Hotel.
8.2 Capital Program. Seller hereby covenants and agrees that it will
---------------
complete, prior to the Closing Date, all of the work described in Exhibit C
---------
hereto (the "Capital Program") at Seller's sole cost and expense, subject to
receipt of applicable permits which Seller shall use best efforts to obtain.
8.3 Mechanics Liens. Seller hereby represents, warrants, and covenants
---------------
that all work required to be done prior to the Closing Date under the Capital
Program described above or the terms of any Lease or License has been or will be
performed and fully paid for by Seller prior to or contemporaneously with the
Closing in accordance with the Capital Program, and all mechanics' and
materialmen's liens arising from any labor or material furnished prior to the
Closing Date at the instance of Seller will be discharged or bonded so as to be
omitted from Purchaser's Title Policy.
8.4 Notices of Violation. Seller hereby covenants and agrees that all
--------------------
written 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
affecting the Hotel on or before the Closing Date of which Seller has actual
knowledge shall be promptly disclosed to Purchaser.
8.5 Third Party Consents. Seller shall use its best efforts to obtain by
--------------------
January 7, 1997 the written consent of The Lincoln National Life Insurance
Corporation ("Lincoln") to the early prepayment of that certain promissory note,
in the original principal amount of $6,000,000, (the "First Note"), secured by a
Deed to Secure Debt, Assignment of Leases and Rents, and Security Agreement
(Senior Loan) (the "First Mortgage") held by the Lincoln
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<PAGE>
and the release of the First Mortgage and all loan documents executed in
connection with the existing financing secured by, among other things, the Hotel
(the "Lincoln Consent").
8.6 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 D. 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 D.
---------
8.7 Management Agreement Termination. Seller hereby covenants to
--------------------------------
Purchaser that Seller shall terminate any agreement with Seller's existing
managing agent, and that as of the Closing Date there will be no management
agreement or other contract with respect to the management of the Hotel in
effect at the Hotel.
8.8 Hotel Employees. Seller represents, warrants and covenants to
---------------
Purchaser that Purchaser will in no way be liable for any employees, or for any
employment agreements or union contracts with respect to employees, working at
or for the Hotel prior to the Closing Date and during Seller's period of
ownership of the Hotel (the "Hotel Employees"). In particular, neither Seller
nor Seller's managing agent will, between the date hereof and the date of
Closing, enter into any new written employment or union contracts or similar
agreements with respect to any employee of the Hotel that will be binding on the
Purchaser on or after the Closing. Purchaser will not be obligated to pay any
amount to any Hotel Employees except upon their rehiring by Purchaser or an
agent or tenant of Purchaser. Purchaser shall not have any liability under any
pension or profit sharing plan that Seller or Seller's managing agent or any
other party (other than Purchaser's own plans or that of its agents or tenants)
may have established with respect to the Hotel or the Hotel Employees. 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 benefits, deferred compensation, savings pension, profit sharing,
401K, and retirement plan, and insurance and other benefits through the day
preceding the Closing Date of all Hotel Employees, whether or not employed by
Purchaser, and for all liabilities of whatever kind with respect to all Hotel
Employees who are not employed by Purchaser. Seller hereby indemnities, defends
and saves harmless Purchaser with respect to the foregoing. Seller shall
terminate or cause its managing agent to terminate the Hotel Employees effective
as of 11:59 P.M. on the day before the Closing Date (it being understood that if
for any reason the Closing does not occur, such termination shall be deemed to
be rescinded ab initio) and shall pay to such employees all amounts owed to such
---------
employees including amounts owed on account of vested accrued and unpaid
benefits including vested vacation pay and vested sick leave. Purchaser shall
cause all of those Hotel Employees it desires to hire to be immediately rehired
effective as of 12:01 A.M. on the Closing Date (it being understood that if for
any reason the Closing does not occur, such rehiring shall be deemed void ab
--
initio)
- ------
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<PAGE>
upon such terms as Purchaser (or such other person or entity who may be
responsible for the rehiring) may elect. Notwithstanding anything stated herein
to the contrary, Purchaser shall endeavor to rehire a sufficient number of Hotel
Employees so as to avoid a violation of, or cause the applicability of, the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. (S) 2101 et seq.
-- ----
(the "WARN Act"), and Purchaser hereby indemnifies, defends and saves harmless
Seller for all costs and expenses (including attorneys' fees) caused by a WARN
Act violation in the control of or reasonably avoidable by Purchaser. Purchaser
shall be responsible for all employee obligations in respect of the rehired
Hotel Employees arising from and after such rehiring. Seller hereby agrees that
neither it nor its managing agent shall induce or solicit any Hotel Employee to
be hired by any affiliate of the Seller or its managing agent but specifically
excluding Charles T. Pyles and any Hotel Employee whom Purchaser decides not to
hire as of 12:01 A.M. on the Closing Date. Each of Seller and Purchaser shall
indemnify and hold the other harmless from and against any loss, cost, expense
(including reasonable attorneys' fees and disbursements actually incurred),
damage or liability any such party may suffer by reason of the other's default
under this Section.
8.9 Shadow Management. After expiration of the Review Period, Seller
-----------------
shall permit Purchaser to establish and maintain at its sole expense 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,
and (d) shall not be deemed to have assumed management responsibilities prior to
Closing by virtue of such shadow management.
8.10 Access to Records and Financial Information. Subject to the
-------------------------------------------
restrictions contained in Section 5.1 above, 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. Further, and
not in limitation of Section 5.2(ii) above, Purchaser's representatives shall
have access to all existing financial and other information relating to the
Hotel to enable them to prepare audited financial statements in conformity with
Regulation S-X of the Securities and Exchange Commission (the "SEC") and to
enable
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<PAGE>
them to prepare a registration statement, report or disclosure statement for
filing with the SEC on behalf of the REIT and/or its affiliates. Prior to the
end of the Review Period, Seller shall also provide to Purchaser's
representatives a signed representation letter sufficient to enable an
independent public accountant to render an opinion on the financial statements
related to the Hotel, such letter to be substantially in the form of Exhibit E
---------
hereto. To the extent that the Financial Statements provided by Seller pursuant
to Subsection 5.2(ii) hereof for the current year do not include any period up
to and including the Closing Date, Seller shall, within twenty-five (25) days
after the Closing Date, provide Purchaser with monthly unaudited Financial
Statements, including Balance Sheets and income statements applicable to such
period inclusive of the Closing Date.
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 will be true, 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 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; 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).
(c) Subject to Section 5.3 hereof, 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.
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
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<PAGE>
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 Georgia, 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, but is part of a U.S. based
real estate holding company).
(c) Subject to the Lincoln Consent being obtained, none among the
entry into, the 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; nor
will any of the foregoing require the consent of any party not otherwise
provided for in this Agreement.
(d) There are no material leases, management agreements, leasing
agent's agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements individually or in the aggregate (i) to which Seller is a party
or an assignee, or (ii) binding upon the Hotel, relating to the ownership,
occupancy, operation or maintenance of the Land, Improvements, FF&E or Supplies,
except for those Service Contracts, Leases, FF&E Leases and material warranties
previously disclosed to Purchaser in writing and Service Contracts.
(e) Seller has received no written 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) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser.
(g) To the best of Seller's knowledge and belief, there are, with
respect to the Hotel or to Seller, no:
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<PAGE>
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial proceedings or orders respecting awards;
(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice orders or judicial proceedings or orders
with respect thereto;
(iii) pending citations from 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;
(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 (in writing) or actual litigation
claims, charges, complaints, petitions or unsatisfied orders by or before
any administrative agency or court.
(all collectively, the "Pending Claims").
(h) Seller has received no Notice of Violations.
(i) 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 written notices, permits, licenses, registrations, certificates of
occupancy, applications, consents, zoning and/or building code restrictions,
variances, and/or other authorizations which are required for the use or
operation of the Hotel, (ii) except as disclosed in the Seller's deliveries
under Section 5.2 hereof, 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, 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.
(j) To Seller's knowledge without inquiry, the use by Purchaser of any
of the Tradenames will not infringe any United States or state trademark,
service mark, or tradename laws existing at the Closing, or constitute
actionable appropriation of rights with respect to any other person, business or
entity.
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<PAGE>
For purposes of this Agreement, the term "knowledge", "awareness", or other
phrase used herein to denote information of which the Seller has been informed
or is aware of, shall be limited to all information known or disclosed to the
following (herein referred to as the "Seller's Representatives") but without
independent inquiry: Charles T. Pyles, Raanan G. Ben-Zur and the present
department heads of the Hotel only.
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 of which Seller's Representatives become aware ("Subsequent
Developments") which would cause any of Seller's representations contained in
this Agreement to be no longer accurate in any material respect. If any such
subsequent development possibly causes a breach or violation of this Agreement,
Seller shall not be considered in breach or violation of this Agreement if
Purchaser (i) receives notice therefrom from Seller at least five (5) business
days prior to expiration of the Review Period and does not raise same in an
Objection Notice; or (ii) Purchaser consummates the acquisition of the Hotel,
upon the occurrence of either of which, such violation or breach shall be deemed
waived by Purchaser. Further, Seller shall have until January 15, 1997 to
confirm internally the accuracy of all representations, warranties, disclosures
and statements of Seller contained in this Section 9.2 or elsewhere in this
Agreement. If Seller discovers any inaccuracy in any such item, it shall not be
in breach or violation of this Agreement provided that Seller shall disclose
such item to Purchaser in writing by January 15, 1997.
9.4 Limitation on Further Sales Efforts. Seller shall 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.
9.5 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 liability, debt, act or cause of action occurring and accruing
prior to the Closing Date and arising from the ownership or operation of the
Hotel by Seller or its management agent prior to the Closing Date, including but
not limited to any claims by employees of Seller or third parties covered by
general liability insurance carried by Seller.
9.6 Purchaser's Indemnity. Purchaser agrees to indemnify and hold Seller
---------------------
harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees) which the Seller may suffer or incur by
reason of any liability, debt, act or cause of action occurring and accruing on
or subsequent to the Closing Date 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.
9.7 Liquor Licenses. If and to the extent expressly allowed by law, and
---------------
necessary because Purchaser has not obtained same by the Closing despite
diligent efforts to do so,
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<PAGE>
Seller shall assign or cause to be assigned 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 at Closing as part
of the Licenses. Purchaser or its lessee or management company (hereinafter
"Operator") for the Hotel shall execute such forms, license applications and
other documents as may be necessary for the Operator to obtain all Liquor
Licenses necessary to operate any restaurants, bars and lounges presently
located within the Hotel. If permitted under the laws of the jurisdiction in
which the Hotel is located, Operator shall execute and file all necessary forms,
applications and other documents (and Seller shall reasonably cooperate with the
Operator in filing such forms, applications and other documents) with the
appropriate liquor and alcoholic beverage authorities so that such acquisition
of the necessary Liquor Licenses shall take effect simultaneously with or upon
completion of Closing. If not so permitted, Operator agrees that it will
promptly execute all forms, all applications and other documents required to
effect such acquisition of such Liquor Licenses at the earliest date reasonably
practicable, consistent with the laws of the State where the Hotel is located,
in order that all Liquor Licenses may be acquired by Operator. Operator's
attempts to obtain the Liquor Licenses shall not diminish, prior to the Closing,
the full force and effect of the Liquor Licenses maintained by Seller in its
operation of the restaurants, lounges and bars presently located within the
Hotel. If such Liquor Licenses cannot be obtained by Operator until after
Closing, then Seller covenants and agrees that, if and to the extent expressly
allowed by law, Seller shall cooperate reasonably with Operator in keeping open
the bars and lounges and liquor facilities of the Hotel between the Closing and
the time when such Liquor Licenses are obtained by Operator for a period not to
exceed forty-five (45) days following the Closing Date by entering into a
"Liquor License Agreement" with the appropriate party for the continued
operation of and under the Liquor Licenses with respect to the Hotel, in form
acceptable to Seller in its reasonable discretion, pursuant to which, among
other things, (i) Operator shall indemnify, defend and hold Seller and its
agents harmless from any liability, damages, claims, costs, penalties, losses or
expenses (including reasonable attorney's fees and court costs) 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, and (ii) Operator shall
reimburse Seller for Seller's costs in maintaining the Liquor Licenses in full
force and effect. In no event shall Seller be required to cooperate with any
additional liquor or alcoholic beverage licenses which Seller does not possess
at the time of Closing.
9.8 Franchise Agreement. Purchaser acknowledges that the Franchise
-------------------
Agreement cannot be assigned without the consent of Sheraton Franchise
Corporation ("Sheraton"). Unless Purchaser decides to instruct Seller to
terminate the Franchise Agreement as therein permitted and in accordance
therewith and conditioned upon the Closing (the "Termination"), Purchaser agrees
to request the written agreement of Sheraton to either (i) the termination of
the existing Franchise Agreement and simultaneous execution of a new franchise
agreement between Sheraton and either the entity acquiring title to the Hotel or
such entity's net lessee (in either case, the "New Franchisee") or (ii) the
assignment by Seller to the New Franchisee of the Franchise Agreement.
Purchaser agrees to complete and submit to Sheraton a
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<PAGE>
franchise license application together with all supporting documentation
required by Sheraton, including, without limitation, management expertise and
financial credibility, all in accordance with Sheraton's review and approval
process. Seller agrees to cooperate with Purchaser in its efforts to cause
Sheraton to approve the New Franchisee as a franchisee or licensee of the
Property, each of them will execute and deliver at Closing all appropriate
documentation necessary to carry out the terms of this Section 9.8. If the
Closing occurs and the New Franchisee does not succeed to Seller's position
under the Franchise Agreement pursuant to either of subclauses (i) or (ii) of
the second sentence hereof, Purchaser agrees that it shall be responsible for
payment of all termination and similar fees due in connection with the
Termination under the Franchise Agreement, and Purchaser further agrees to
indemnify, hold harmless and defend Seller for all costs, claims, liabilities
and expenses incurred or arising prior to the Closing and asserted against
Seller with respect to the Franchise Agreement.
ARTICLE 10
Conditions Precedent to the Closing
Purchaser's obligations to consummate the Closing are subject to the
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. Notwithstanding the foregoing, Purchaser, in
its sole discretion, may waive any such condition by notice to Seller or Closing
the contemplated transaction.
10.1 Seller's Obligations. Seller shall have performed all material
--------------------
obligations of Seller hereunder which are to be performed prior to Closing.
10.2 Seller's Representations, Warranties and Covenants. Except as
--------------------------------------------------
otherwise expressly provided herein to the contrary, Seller'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.
10.3 Transfer Subject Only to Permitted Exceptions. On the Closing Date,
---------------------------------------------
the Hotel shall be subject only to the Permitted Exceptions; provided, however,
that any encumbrance or claim caused or created by Purchaser or its agents shall
be deemed a Permitted Exception.
10.4 Consent of Boards of Directors. The Board of Directors of Regent
------------------------------
Investments Ltd. shall, by written resolution on or before December 31, 1996,
consent to the sale of the Hotel to Purchaser's designee pursuant to the terms
and conditions of this Agreement.
10.5 Consent of First Mortgagee. On or before January 7, 1997, Lincoln
--------------------------
shall have consented in writing to the prepayment of the First Note secured by
the First Mortgage.
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<PAGE>
Notwithstanding anything to the contrary contained herein, the failure of
Lincoln to give such consent prior to January 7, 1997 shall not be deemed a
default hereunder by Seller.
10.6 Simultaneous Closings. The Closings of the Other Hotels shall occur
---------------------
contemporaneously with the Closing of this Hotel; provided, however, that if
Purchaser has timely notified Seller of its election pursuant to Section 3.4
hereof not to acquire all three (3) of the Hotels (i.e., the Hotel and the Other
Hotels) but instead only one or two of said hotels in accordance with Section
3.4, the Closing of such hotels will not be conditioned in any way upon the
acquisition by Purchaser of any hotel which Purchaser has opted not to purchase.
ARTICLE 11
Closing and Closing Documents
11.1 Closing. The consummation and closing (the "Closing") of the
-------
transaction contemplated under this Agreement shall take place at the offices of
Purchaser's lender's counsel in Dallas, Texas, or such other place as is
mutually agreeable to the parties, on any date between March 15, 1997 and March
31, 1997 of which Purchaser has notified Seller at least seven (7) days in
advance (the "Closing Date") or as otherwise set by written agreement of the
parties.
11.2 Seller's Deliveries. At the Closing and at Seller's sole cost and
-------------------
expense, Seller shall deliver or cause to be delivered the following to
Purchaser; in addition to all other items required to be delivered to Purchaser
by Seller:
(a) Seller's Deed. Seller's special or limited warranty deed in a
-------------
form reasonably acceptable to the Title Company ("Seller's Deed") conveying
good, indefeasible, and insurable fee simple title to the Land and Improvements,
free and clear of all mortgages, liens, encumbrances, leases, conditions,
restrictions, rights of way, easements, encroachments, claims, and other matters
of title except only the Permitted Exceptions;
(b) Bill of Sale. A "special or limited warranty" bill of sale
------------
transferring Seller's interest, if any, in all FF&E, Supplies, Warranties,
Licenses, Tradenames, Plans and Specs, Utility Reservations, Records, Deposits,
cash and equivalents, and other personal property in a form reasonably
acceptable to both Purchaser and Seller (the "Bill of Sale");
(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 in a form reasonably acceptable to, and duly executed by, both
Purchaser and Seller, containing indemnities similar to those set forth in
Sections 9.5 and 9.6 above (the "Assignment");
(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,
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<PAGE>
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, and (iii) Seller's 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 to Purchaser (or
Purchaser's designee) of any motor vehicles used in connection with the Hotel's
operations;
(f) Authority Documents. Reasonable evidence satisfactory to the
-------------------
Title Company that the person or persons executing the closing documents on
behalf of Seller have full right, power and authority to do so, and the
following documentation: (i) the Certificate of the Secretary of Seller
certifying attached copies of the Articles of Incorporation, By-Laws and
enabling resolutions as true and correct, unamended, and continuing, and of the
incumbency of its officers, (ii) Certificates of Existence and Good Standing
from the Secretary of State of the state of Seller's incorporation, and (iii)
from the Secretary of State of the state where the Hotel is located, a
Certificate of Existence and Qualification to Do Business in such state;
(g) Title Affidavit. Any affidavits of Seller in form and substance
---------------
reasonably acceptable to the Title Company, in order that the Title Policy may
be issued free and clear of the standard exceptions which the Title Company is
permitted under applicable law to remove or modify upon delivery of such an
affidavit;
(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 permitted
and 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, all Records, and all Licenses in Seller's
possession;
(j) Original Documents. Originals (to the extent available) of all of
------------------
the documents and agreements covered by the foregoing that have not already been
delivered to Purchaser will be left at the Hotel;
(k) Updates. A complete list of all advance room reservations,
-------
functions and the like, in reasonable detail;
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<PAGE>
(l) Estoppel Letters. Either the estoppel letters or Seller's
----------------
certificates as described in Section 8.5 above;
(m) Termination of Agreements. Fully executed and effective
-------------------------
terminations of all management agreements with respect to the Hotel that are not
assigned to and assumed by Purchaser under the terms hereof;
(n) Georgia Withholding Tax Affidavit. Seller shall provide Purchaser
---------------------------------
with an affidavit or other documentation, in form and substance sufficient to
demonstrate that Seller is exempt from the withholding requirements of O.C.G.A.
--------
(S)48-7-128. If Seller cannot satisfy the requirements of O.C.G.A. (S)48-7-128
--------
relative to exemption from withholding, Purchaser or its counsel shall withhold
and remit the amount required under said statutes;
(o) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement;
(p) Financial Covenant of Regent Investments Ltd. Regent Investments
--------------------------------------------
Ltd. ("Regent") hereby acknowledges and agrees that it shall not cause or permit
French Quarter Holding, Inc. ("FQH") to distribute assets to its shareholders if
such distribution would cause FQH's consolidated net asset value on a fair
market value basis to fall below $5,000,000 (according to audited financial
statements prepared by a nationally recognized accounting firm) for twelve (12)
months following the Closing. Regent is executing this Agreement for the sole
purpose of providing the covenant given in the preceding sentence.
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.
11.3 Purchaser's Deliveries. At the Closing and at Purchaser's sole cost
----------------------
and expense, Purchaser shall deliver or cause to be delivered the following to
Seller:
(a) Purchase Price. The Cash Portion of the Purchase Price, plus or
--------------
minus the adjustments to be made at the Closing in accordance with the terms of
this Agreement;
(b) Assignment. 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;
(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; and
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(e) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement.
11.4 Prorations. At Closing, the following items of revenue and expense
----------
shall be prorated and adjusted on an accrual basis taking into account all
prepaid expenses and accounts payable and other debts 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, if any, for the tax period in which the Closing
occurs shall be apportioned between Seller and Purchaser on a per diem basis
through and including 11:59 P.M. of the day preceding the Closing Date. If the
rate or amount of such taxes and sewer rents, if any, shall not be fixed prior
to the Closing Date, the adjustment thereof on the Closing Date shall be 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 tax period in which the Closing
occurs. As soon as the exact amount of such taxes, assessments and rents for
such period is ascertained, Seller and Purchaser shall readjust the amounts
thereof to be paid by each party to the end that Seller shall pay for such
taxes, assessments and rents attributable to the period of time prior to the
Closing Date and Purchaser shall pay for the period from and after the Closing
Date. Special assessments of any public or taxing authority assessed upon and
constituting liens or encumbrances on the Hotel, whether or not the 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 to the
extent due and payable on or prior to the Closing Date. If any such special
assessments 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; and Purchaser shall be responsible for special assessments levied
or assessed after the Closing Date and any other such special assessment levied
or assessed thereafter. With respect to any tax appeals which relate to the
period prior to the Closing Date, Purchaser covenants to pay to Seller upon
receipt thereof Seller's prorata share of any tax rebate, refund or adjustment.
Purchaser shall cooperate with Seller with respect to Seller's reasonable
inquiries relative thereto.
(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; but Seller shall be responsible for the payment of
all accounts payable with respect to the Hotel relating to services rendered or
goods provided prior to the Closing Date and Purchaser shall be responsible for
the payment of all accounts payable with respect to the Hotel relating to
services rendered or goods provided on or after the Closing Date;
(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
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<PAGE>
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) 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, 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 for the night before
Closing shall be apportioned fifty percent (50%) to Seller and fifty percent
(50%) to Purchaser. 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 Seller with banking institutions
are and shall remain the property of Seller and are not included in this sale
except for the cash and equivalents to be purchased by Purchaser at par. The
balance due on the city ledger and guest ledger and all other accounts
receivable of Seller as of the Closing Date ("Seller's Receivables") to the
extent received by Purchaser on behalf of Seller for a period of 90 days after
the Closing Date (the "Collection Period"). Any monies of Seller received by
Purchaser shall be held in trust by Purchaser for the benefit of Seller and
remitted to Seller promptly after receipt thereof by Purchaser without offset or
reduction. Seller shall, upon request, be provided with reasonable evidence and
documentation as to Purchaser's determination and collection of Seller's
Receivables. Purchaser shall not be obligated to commence any actions or
proceedings to collect any of the Seller's Receivables. If, at the expiration
of the Collection Period any of Seller's Receivables to be collected by
Purchaser have not been collected, Purchaser shall have no further obligation to
collect Seller's Receivables, but shall transfer the balance of Seller's
Receivables to Seller for collection;
(e) Supplies and Miscellaneous. No later than the day before closing,
--------------------------
Purchaser and Seller shall jointly conduct an inventory of all unopened and
unused food and beverage inventory at the Hotel. Said inventory shall be
updated by mutual agreement through the Closing Date. Seller shall receive a
credit equal to Sellers' cost of the unopened and unused food and beverage
inventory reflected on said inventory. Fees and expenses for coin machine
income and washroom and checkroom income;
(f) Deposits. Seller shall receive a cash credit in an amount equal
--------
to the sum of all Utility Deposits transferred to or accruing to the benefit of
Purchaser, and not retained by Seller at the Closing, and Purchaser shall
receive a credit for all reservation deposits, 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 not
transferred to Purchaser at Closing; and
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(g) Sales Taxes. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel for the period
prior to the time of proration as set forth herein will be paid by Seller to the
end that Purchaser shall be liable to pay all such sales, use and occupancy
taxes due or to become due in connection with revenues for the period after the
time of proration. Seller and Purchaser shall pay their respective share of all
sales, use and occupancy taxes due or to become due in connection with revenues
apportioned between Seller and Purchaser as provided in Subsection (d) of this
Section. Seller shall be entitled to receive and Purchaser shall promptly remit
if sent to Purchaser any rebates or refunds on such taxes paid by Seller
attributable to the period prior to the Closing.
11.5 Closing Costs. Seller shall pay (i) the cost of preparing or
-------------
obtaining documents or consents to be delivered by Seller to Purchaser pursuant
to this Agreement (specifically excluding, however, any sums paid or, to be paid
to the franchiser as a prerequisite to the assignment of the Franchise), (ii)
all transfer taxes, conveyance taxes, documentary stamps, and other similar
taxes, fees or charges payable to any governmental authority as a result of the
transfer of the Hotel, (iii) any fees or costs incurred in order to convey the
Hotel free and clear of all liens, encumbrances, conditions and exceptions other
than the Permitted Exceptions, (iv) the cost of the Title Policy, exclusive of
the cost of any endorsements thereto requested by Purchaser, (v) one-half of any
escrow fee imposed by the Title Company and (vi) the fees and disbursements of
its counsel. Purchaser shall pay (i) the cost of updating and recertifying the
Survey, (ii) recording fees and charges required to record the Seller's Deed,
(iii) any mortgage recording taxes, documentary stamps, intangibles tax and
other taxes, fees or charges payable to any governmental authority as a result
of any mortgage financing obtained by Purchaser for the acquisition of the
Hotel, (iv) the cost of any endorsements to the Title Policy, the Title Policies
for the Other Hotels and any endorsements thereto, (v) one-half of any escrow
fee imposed by the Title Company and (vi) the fees and disbursements of its
counsel. Any other expenses or charges incurred by the parties and not
expressly addressed in this Agreement shall be borne by the party incurring said
expense or charge. Other than payment of the items specifically listed in the
first sentence of this Section 11.5, payment of the brokerage commissions as
stated herein to be paid by Seller, prorations and adjustments as provided
herein, and expenses incurred by Seller by its own initiation, which costs shall
be borne by Seller as herein provided, and any fees and expenses incurred in
connection with: (i) the prepayment of the First Note secured by the First
Mortgage and the Lincoln Consent, (ii) the prepayment of that certain Promissory
Note (the "Second Note") in the original principal amount of $3,750,000 secured
by a Deed to Secure Debt, Assignment of Leases and Rents, and Security Agreement
(Junior Loan) (the "Second Mortgage") held by Harbor Hospitality Atlanta Limited
Partnership ("Harbor Hospitality") and the consent of Harbor Hospitality thereto
(the "Harbor Hospitality Consent"), and (iii) any other actions required to
achieve a Free and Clear Conveyance, subject to the Permitted Exceptions Seller
shall not be responsible for any other costs whatsoever incurred in connection
herewith, and Purchaser shall pay all other such costs, including, without
limitation, the items specifically listed in the second sentence of this Section
11.5, prorations and adjustments as provided herein, environmental audit or
review
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expenditures, all costs and fees related to Purchaser's line of credit
financing, and all other costs as provided herein to be paid by Purchaser.
Notwithstanding the foregoing, Seller shall be responsible for all costs
incurred solely because of Seller's willful misconduct or gross negligence.
11.6 Reconciliation and Final Payment. Seller and Purchaser shall
--------------------------------
reasonably cooperate after Closing to make a final determination of the
prorations required hereunder no later than 180 days after the Closing. Upon
the final reconciliation of the prorations under this Section and Section 11.4,
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. It is the
intent of the parties that all items herein which are subject to the prorations
made pursuant to Article 11 shall result in Seller receiving all of the economic
benefits and burdens of the Hotel with respect to the period prior to the
Closing, and Purchaser receiving all of the economic benefits and burdens of the
Hotel with respect to the period from and after the Closing Date, except for the
50/50 split in room revenues for the night prior to the Closing. The
obligations to calculate such prorations, make such reconciliations and pay any
such sums shall survive the Closing.
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 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 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 except for those obligations herein expressly
provided as surviving the termination of 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
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<PAGE>
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 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 actually
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 perform any of
its material obligations.or agreements 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 or when ratified
at Closing, then Seller, as its sole and exclusive remedy, shall have the right
to terminate this Agreement by giving Purchaser and the Escrow Agent 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 from the Escrow Agent 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 Letter of Credit 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 Letter of Credit 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 a default by Purchaser (i) Seller refuses or fails to consummate
the transaction contemplated by
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this Agreement, or (ii) otherwise fails in any material respect to perform any
of its material obligations or agreements hereunder, or if any representation or
warranty made by or on behalf of Seller herein shall have been materially
incorrect when made or when ratified at Closing in violation of the terms
hereof, 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, in which event the Letter of Credit shall be returned to
Purchaser by the Title Company promptly upon receipt of such notice; or
(b) Seek damages (but only if Seller's default is due to Seller's
intentional and willful refusal to close) 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 materially 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 Materiality. The parties acknowledge and agree that it is their
-----------
intention for purposes hereof that any analysis or determination as to the
materiality of a breach or violation of this Agreement shall be conducted only
by taking into consideration the materiality of such breach or violation in
light of the Purchase Price for the Hotel and the purchase prices of the Other
Hotels, so that the totality of the contemplated three (3) hotel transaction be
taken into account.
13.4 Cross-Default.
-------------
(a) Notwithstanding anything contained herein to the contrary, any
breach, default or violation of this Agreement by Purchaser whatsoever shall
constitute and for all purposes be automatically deemed a default under both of
the purchase agreements for the Other Hotels dated of even date herewith (as
amended from time to time).
(b) Notwithstanding anything contained herein to the contrary, in
the event that the Closing of the purchase and sale of either or both of the
Other Hotels is not consummated because of any breach, default or violation by
FQS or SKL under the purchase agreements for, respectively, the French Quarter
Suites and the Sheraton Key Largo other than a failure to obtain the consent of
State Street Bank and Trust Company to the assignment and assumption of the
First Mortgage on the French Quarter Suites (as described in Section 8.5 of the
purchase agreement for such hotel), which failure is not a default under this
Agreement, the Purchase Price hereunder shall remain Fifteen Million Five
Hundred Thousand Dollars ($15,500,000) subject to adjustments as provided
herein.
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<PAGE>
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 Neilston
Investments Ltd. and Development Resources International Limited (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 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 for the
period prior to the Closing Date.
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
Intentionally Omitted
ARTICLE 16
Miscellaneous
16.1 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, addressed to the party for which such notice, demand or
communication is intended at such party's address as set forth in this Section,
and sent by any national or international overnight
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receipted courier service and by electronically confirmed facsimile
transmission. Purchaser's address for all purposes under this Agreement shall
be the following:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality Corporation
3860 West Northwest Highway, Suite 300 Dallas, Texas 75220
Attention: Steven D. Jorns, President or Kenneth E. Barr, Executive Vice
President
Fax No. (214) 351-0568
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Douglas A. Raelson, Esq.
Fax No. (212) 856-7806
Seller's address for all purposes under this Agreement shall be the following:
c/o Regent Investments Ltd.
1, Hashikma Street
P. O. Box 51
Savion 56530, Israel
Attention: Mr. Raanan G. Ben-Zur
Fax No. 011-972-3-5350448
with a copy to:
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Keith E. Linch, Esq. and Jeffrey B. Berg, Esq.
Fax No. (404) 873-8737
Any address or name or facsimile number 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 or the facsimile confirmation.
The inability to deliver because of changed address or facsimile number 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. Notices, demands and other communications may be given by
the
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<PAGE>
parties' counsel which shall have the same force and effect as if given by the
parties themselves.
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 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 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. Purchaser may assign its rights under this
----------------------
Agreement to any limited partnership, limited liability company or other entity
controlling, controlled by or under common control with Purchaser for the
purpose of purchasing the Hotel or implementing the REIT so long as Purchaser
provides written notice thereof to Seller prior to Closing. 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.
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 where the Hotel is located.
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 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 OF EACH AND EVERY PROVISION OF THIS AGREEMENT.
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<PAGE>
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. Facsimile
signature pages shall be acceptable provided originals are posted promptly after
execution.
16.9 Survival. All covenants, agreements and indemnities contained in
--------
the Agreement which expressly 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 one (1) year. None
of the foregoing shall be deemed to merge into, or be waived by, Seller's Deed
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 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.
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, 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 reasonable attorneys' fees, expended or
incurred in connection therewith.
16.13 REIT Audits. Seller acknowledges and agrees that the REIT, through
-----------
its independent accountants, may conduct an audit of the REIT's financial
statements for purposes of the REIT complying with its public reporting
obligations under the Securities and Exchange Act of 1934, as amended (the
"Securities Act"). In connection therewith, Seller agrees that for a period of
twelve (12) months after the Closing Date, Seller shall cooperate and assist,
and to cause each of its Affiliates, its employees and representatives,to
cooperate and assist, in such audit in all respects reasonably requested by the
REIT and its independent accountants, including making Raanan G. Ben-Zur and/or
Charles T. Pyles available to
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provide any information necessary or appropriate for such audits and signing
standard management representation letters to the REIT's independent accountants
and to the REIT.
16.14 Tax-Deferred Exchange. Purchaser and Seller acknowledge that Seller
---------------------
may desire to structure its disposition of the Property in a manner intended by
it to constitute an exchange of the Property for property of a like kind
("Replacement Property") that is described in Section 1031 of the Internal
Revenue Code of 1986, as amended (an "Exchange"). Notwithstanding anything in
this Agreement to the contrary, Seller shall have the right to assign (provided
such assignment does not affect Seller's or Purchaser's rights and obligations
under this Agreement) its interest in this Agreement without Purchaser's consent
to such person or entity as Seller may designate to serve as a "qualified
intermediary" (within the meaning of Treasury Regulation (S)1.103(k)-1(g)(4))
for the sole purpose of enabling Seller to effect such an Exchange; provided,
however, that notwithstanding any such assignment, Seller shall not be released
from any of its liabilities, obligations or indemnities under this Agreement.
Purchaser shall cooperate in all reasonable respects with Seller to effect any
Exchange; provided however, that (a) Seller's ability to consummate an Exchange
shall not be a condition to the obligations of Seller under this Agreement, and
Purchaser does not warrant and shall not be responsible for any of the tax
consequences to Seller with respect to the transactions contemplated hereunder;
(b) Purchaser shall not be required to enter into any document or agreement (or
take title to any property) with respect to Seller's acquisition of any
Replacement Property; and (c) Purchaser shall not be required to incur any
additional cost or expense (including, without limitation, legal fees or taxes
of any kind) as a result of any Exchange. This paragraph shall survive Closing
without limitation.
16.15 [INTENTIONALLY OMITTED]
16.16 Covenant of French Quarter Holdings, Inc. French Quarter Holdings,
-----------------------------------------
Inc. ("FQH") is entering into this Agreement for the sole purpose of making the
following representations, warranties and covenants, all of which are deemed to
be a material inducement to Purchaser to enter into this Agreement:
(a) FQH either is or by the Closing Date will be the sole
shareholder of Seller.
(b) FQH hereby guarantees the truth and accuracy, in all material
respects, of, and the full and prompt performance, in all material respects, by
Seller of, all representations, warranties, covenants, indemnities, agreements
and promises of Seller hereunder which survive the Closing and the delivery of
the deed.
(c) FQH hereby acknowledges and agrees that it shall not distribute
assets to its shareholders if such distribution would cause FQH's consolidated
net asset value on a fair market value basis to fall below $5,000,000 (according
to audited financial statements
-37-
<PAGE>
prepared by a nationally recognized accounting firm) for twelve (12) months
following the Closing.
-38-
<PAGE>
[Signature Page for Sherton Four Points.]
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
SELLER:
SNA OF GEORGIA, INC.,
a Georgia corporation
By:___________________________________
Name:_________________________________
Title:________________________________
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada
corporation, its general partner
By:___________________________________
Name:_________________________________
Title:________________________________
WITH RESPECT TO SECTION 11.2(Q)
ONLY:
REGENT INVESTMENTS LTD.,
an Israel corporation
By:___________________________________
Name:_________________________________
Title:________________________________
-39-
<PAGE>
[Signature page for Sherton Four Points.]
WITH RESPECT TO SECTION 16.16
ONLY:
FRENCH QUARTER HOLDINGS, INC.,
a Georgia corporation
By:___________________________________
Name:_________________________________
Title:________________________________
-40-
<PAGE>
List of Exhibits
- ----------------
Exhibit A - Legal Description of Land
Exhibit B - Excluded Assets
Exhibit C - Capital Program
Exhibit D - Form of Tenant Estoppel Letter
Exhibit E - Form of Audit Representation Letter
The exhibits and/or schedules identified above which comprise a part of this
Exhibit 2.10 have not been included as part of this Exhibit. The Registrant
agrees to furnish supplementally a copy of any such omitted schedule or exhibit
upon request.
-41-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
A-1
<PAGE>
EXHIBIT B
EXCLUDED ASSETS
B-1
<PAGE>
EXHIBIT C
CAPITAL PROGRAM
C-1
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
WHEREAS,________________, _________________________ ("Landlord"), as
landlord, and ___________ ("Tenant"), as tenant, entered into that certain lease
(the "Lease"), dated_____, 19__ of certain premises more particularly described
in the Lease (the "Premises").
NOW, THEREFORE, Tenant hereby certifies as follows:
1. True and complete copies of the Lease and all agreements, amendments,
guarantees, side letters and other documents relating thereto are attached
hereto as Exhibit A and made a part hereof, and there are no other such
---------
agreements or documents.
2. The Lease has not been modified (except pursuant to documents attached
hereto as part of Exhibit A and is in full force and effect.
---------
3. The Lease has not been assigned, mortgaged, pledged, or otherwise
encumbered, nor has all or any portion of the Premises been sublet.
4. Rent, additional rent and percentage rent required to be paid under
the Lease have been paid through _________________________________.
5. Tenant has accepted possession of and is now occupying the Premises.
6. To Tenant's knowledge, there exist no defaults on the part of Landlord
under the Lease; nor has any event occurred which, with the passage of time or
the giving of notice or both, would constitute a default by Landlord thereunder,
nor has Landlord suffered or permitted the occurrence of any such event.
7. Tenant has no offset, defense, claim or counterclaim, including,
without limitation, claims to "free" rent, concessions, rebates, or abatements
in rent, under the Lease.
8. The expiration date of the term of the Lease is and, except as set
forth in the documents attached hereto as Exhibit A, Tenant has no option to
renew the Lease or otherwise extend the term of the Lease.
9. Tenant has no option to purchase the Premises or any portion thereof,
or the building in which the Premises are located.
10. Tenant has no option to lease any other space in the building in which
the Premises are located.
D-1
<PAGE>
11. Any and all work to be performed by Landlord under the Lease has been
completed in accordance with the Lease and has been accepted by Tenant and all
reimbursements and allowances due to Tenant under the Lease in connection with
any work have been paid in full.
12. Tenant has deposited the sum of $_________ with Landlord as security
for the performance of Tenant's obligations under the Lease.
13. This certificate is binding upon the undersigned and may be relied
upon by Landlord, by any prospective purchaser of the Premises, and by any
lender making a loan to such purchaser secured by a mortgage on the building in
which the Premises are located.
IN WITNESS WHEREOF, Tenant has duly executed this certificate this ____ day
of _________, 19___.
[TENANT NAME]
By:___________________________
Name:_________________________
D-2
<PAGE>
EXHIBIT E
AUDIT REPRESENTATION LETTER
CURRENT DATE
Coopers & Lybrand, L.L.P.
1999 Bryan Suite 3000
Dallas, Texas 75201
Gentlemen:
In connection with your audits of the trial balances of [NAME OF HOTEL] (the
"Hotel") as of [DATE] and [DATE] and for each of the three years in the period
ended [LATEST DATE], which will be combined with the other hotels to be acquired
by American General Hospitality Operating Partnership, L.P. and presented and
reported on as a group (the "Acquisition Hotels") for the purpose of expressing
an opinion as to whether the Acquisition Hotels financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of the Acquisition Hotels in conformity with generally accepted
accounting principles, we confirm, to the best of our knowledge and belief, as
of _________, the date of your report, the following representations made to you
during your audits.
Certain representations in this letter are described as being limited to those
matters that are material. Solely for the purpose of preparing this letter, the
term "material," when used in this letter, means any item or group of similar
items involving potential amounts of more than ____% of assets, liabilities,
shareholders' equity, or net income, as appropriate for the item. These
percentages are not intended to represent the materiality threshold for
financial reporting and disclosure purposes. Notwithstanding this, an item is
considered material, regardless of size, if it involves an omission or
misstatement of accounting information that, in the light of surrounding
circumstances, makes it probable that the judgment of a reasonable person
relying on the information would have been changed or influenced by the omission
or misstatement.
1. We are responsible for the fair presentation in the trial balances of
the financial position and results of operations of the Hotel in
conformity with generally accepted accounting principles.
2. We have made available to you all financial and accounting records and
related data and all minutes of the meetings of shareholders,
directors, and committees of directors [OR SUMMARIES OF ACTIONS OF
RECENT MEETINGS FOR WHICH MINUTES HAVE NOT YET BEEN PREPARED]. The
most recent meetings held were: [STATE BY GROUP AND DATE].
E-1
<PAGE>
3. There are no material transactions that have not been properly
recorded in the accounting records underlying the financial
statements.
4. There have been no:
a. Irregularities involving management or those employees who have
significant roles in the internal control structure.
b. Irregularities involving other employees that could have a
material effect on the financial statements.
c. Violations or possible violations of laws or regulations whose
effects should be considered for disclosure in the financial,
statements or as a basis for recording a loss contingency.
We understand the term "irregularities" to mean those matters
described in Statement on Auditing Standards No. 53.
5. There have been no communications from regulatory agencies concerning
noncompliance with or deficiencies in financial reporting practices
that could have a material effect on the trial balances in the event
of noncompliance.
6. The Hotel has complied with all aspects of debt and other contractual
agreements that would have a material effect on the trial balances in
the event of noncompliance.
7. The Hotel has satisfactory title to all owned assets. All liens,
encumbrances and security interests requiring disclosure in the trial
balances have been properly disclosed.
8. The receivables recorded in the trial balances represent the valid
claims against guests for charges arising on or before the balance
sheet date and are not subject to discount. These receivables have
been appropriately reduced to their estimated net realizable value.
9. Provision has been made to reduce excess or obsolete inventories to
their estimated net realizable value.
10. There are no material liabilities or gain or loss contingencies that
are required to be accrued or disclosed by Statement of Financial
Accounting Standards No. 5 that have not been accrued or disclosed.
There are no unasserted claims or assessments that our legal counsel
has advised us are probable of assertion and must be disclosed in
accordance with that Statement.
E-2
<PAGE>
11. Commitments for future purchases are for quantities not in excess of
anticipated requirements and at prices that will not result in loss.
Provision has been made for any material loss to be sustained in the
fulfillment of, or from the inability to fulfill, any sales
commitments.
12. We have no plans or intentions that may materially affect the carrying
value or classification or assets and liabilities.
13. The following have been properly recorded or disclosed in the trial
balances [IF NONE, INCLUDE UNDER A SEPARATE ITEM WITH THE INTRODUCTION
"THERE ARE NO..."]:
a. Related-party transactions and related amounts receivable or
payable, including sales, purchases, loans, transfers, leasing
arrangements, and guarantees.
(We understand the term "related party" to include those entities
described in Statement of Financial Accounting Standards No. 57.)
b. Capital stock repurchase options or agreements or capital stock
reserved for options, warrants, conversions, or other
requirements.
c. Arrangements with financial institutions involving compensating
balances, arrangements involving restrictions on cash balances
and lines of credit, or similar arrangements.
d. Financial instruments with off-balance-sheet risk and financial
instruments with concentrations of credit risk.
e. Guarantees, whether written or oral, under which the Hotel is
contingently liable to a bank or other lending institution.
f. Estimates for which both (a) it is at least reasonably possible
that the estimates will change in the near future (i.e., within
one year from the date of the trial balances) due to one or more
future confirming events, and (b) the effect of the change would
be material to the trial balances.
g. Concentrations that make the entity vulnerable to the risk of a
near term severe impact and for which it is at least reasonably
possible that events that could cause the severe impact will
occur in the near term. For the purpose of this letter, a
"severe impact" is a significant financially disruptive effect on
the normal functioning of the entity.
E-3
<PAGE>
[ADD SPECIAL-PURPOSE REPRESENTATIONS THAT MAY BE REQUIRED IN THIS LETTER IN
CERTAIN CIRCUMSTANCES, E.G., A STATEMENT THAT A VALUATION ALLOWANCE AGAINST
DEFERRED TAX ASSETS ARISING AFTER THE BALANCE SHEET DATE REPRESENTS MANAGEMENT'S
BEST ESTIMATE BASED ON THE WEIGHT OF AVAILABLE EVIDENCE AS PRESCRIBED IN FAS 109
OR A POSITIVE STATEMENT THAT NO SUCH ALLOWANCE IS NECESSARY. SEE OTHER EXAMPLES
AT ASM 300.]
No events have occurred subsequent to the balance sheet date that would require
adjustment to, or disclosure in, the trial balances.
____________________________________________
[Name and title of chief executive officer]
____________________________________________
[Name and title of chief financial officer]
E-4
<PAGE>
EXHIBIT 2.11
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. OR ITS ASSIGNS
as Purchaser
and
SKL OF FLORIDA, INC.
as Seller
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 The Contract.................................................. 1
ARTICLE 2 Hotel......................................................... 2
ARTICLE 3 Purchase Price................................................ 5
3.1 Purchase Price................................................ 5
3.2 [INTENTIONALLY OMITTED]....................................... 5
3.3 Earnest Money................................................. 5
3.4 Simultaneous Acquisitions..................................... 6
ARTICLE 4 Title Deliveries.............................................. 6
4.1 Title Commitment.............................................. 6
4.2 Survey........................................................ 7
ARTICLE 5 Hotel Documents, Inspecting and Objections.................... 7
5.1 Inspections................................................... 7
5.2 Hotel Documents............................................... 8
5.3 Purchaser's Review Period Termination Right................... 10
5.4 Operational Licenses.......................................... 10
5.5 Procedure for Purchaser's Objections.......................... 11
5.6 Permitted Exceptions.......................................... 11
ARTICLE 6 Confidentiality............................................... 11
6.1 Press Releases................................................ 11
6.2 Confidentiality............................................... 12
ARTICLE 7 Leases, FF&E Leases, and Service Contracts.................... 12
7.1 Schedules..................................................... 12
ARTICLE 8 Operation of Hotel............................................ 13
8.1 Interim Operation............................................. 13
8.2 Capital Program............................................... 15
8.3 Mechanics Liens............................................... 15
8.4 Notices of Violation.......................................... 15
8.5 Estoppel Letters.............................................. 15
8.6 Management Agreement Termination.............................. 16
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.7 Hotel Employees............................................... 16
8.8 Shadow Management............................................. 17
8.9 Access to Records and Financial Information................... 17
ARTICLE 9 Representations and Covenants................................. 18
9.1 Representations by Purchaser.................................. 18
9.2 Representations by Seller..................................... 18
9.3 Subsequent Developments....................................... 21
9.4 Limitation on Further Sales Efforts........................... 21
9.5 Seller's Indemnity............................................ 21
9.6 Purchaser's Indemnity......................................... 21
9.7 Liquor Licenses............................................... 21
9.8 Franchise Agreement........................................... 22
ARTICLE 10 Conditions Precedent to the Closing........................... 23
10.1 Seller's Obligations.......................................... 23
10.2 Seller's Representations, Warranties and Covenants........... 23
10.3 Transfer Subject Only to Permitted Exceptions................. 23
10.4 Consent of Boards of Directors................................ 23
10.5 Simultaneous Closings......................................... 23
ARTICLE 11 Closing and Closing Documents................................. 24
11.1 Closing....................................................... 24
11.2 Seller's Deliveries........................................... 24
11.3 Purchaser's Deliveries........................................ 26
11.4 Prorations.................................................... 27
11.5 Closing Costs................................................. 29
11.6 Reconciliation and Final Payment.............................. 30
ARTICLE 12 Casualty and Condemnation..................................... 30
12.1 Risk of Loss; Notice.......................................... 30
12.2 Purchaser's Termination Right................................. 30
12.3 Procedure for Closing......................................... 31
ARTICLE 13 Default and Remedies.......................................... 31
13.1 Purchaser's Default........................................... 31
13.2 Seller's Default.............................................. 31
13.3 Materiality................................................... 32
13.4 Cross-Default................................................. 32
ARTICLE 14 Brokers....................................................... 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
14.1 Identity of Brokers........................................... 33
14.2 Indemnification by Seller..................................... 33
14.3 Indemnification by Purchaser.................................. 33
ARTICLE 15 Intentionally Omitted......................................... 33
ARTICLE 16 Miscellaneous................................................. 33
16.1 Notices....................................................... 33
16.2 Entire Agreement, Modifications and Waivers,
Cumulative Remedies......................................... 35
16.3 Exhibits...................................................... 35
16.4 Successors and Assigns........................................ 35
16.5 Article Headings.............................................. 35
16.6 Governing Law................................................. 35
16.7 Time Periods.................................................. 35
16.8 Counterparts.................................................. 36
16.9 Survival...................................................... 36
16.10 Further Acts.................................................. 36
16.11 Severability.................................................. 36
16.12 Attorneys' Fees............................................... 36
16.13 REIT Audits................................................... 36
16.14 Radon Gas Notice.............................................. 37
16.15 Tax-Deferred Exchange......................................... 37
16.16 Covenant of French Quarter Holdings, Inc...................... 37
</TABLE>
-iii-
<PAGE>
SHERATON KEY LARGO
HOTEL PURCHASE AGREEMENT
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of this 31st
day of December 1996 by and between SKL OF FLORIDA, INC., a Florida corporation,
("Seller"), and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership, together with its successors and assigns
("Purchaser").
RECITALS:
A. Seller is the owner of the Hotel (as hereinafter defined) known as the
Sheraton Key Largo Hotel located in Key Largo, Florida.
B. Seller desires to sell the Hotel to Purchaser, and Purchaser desires to
purchase the Hotel from Seller, on the terms and conditions hereinafter set
forth.
C. Contemporaneously with the execution of this Agreement, Purchaser is
entering into other purchase agreements to acquire two (2) other hotels known
commonly as the French Quarter Suites, located in Atlanta, Georgia (the "French
Quarter Suites"), and the Sheraton Four Points Hotel Atlanta, located in
Marietta, Georgia (the "Sheraton Four Points") (the French Quarter Suites and
the Sheraton Four Points are referred to herein collectively as the "Other
Hotels"), owned respectively by French Quarter Suites, Inc. ("FQS") and SNA of
Georgia, Inc., ("SNA"), affiliates of Seller.
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 and convey the Hotel to Purchaser
and Purchaser agrees to purchase and accept 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 real property located at 97000 South Overseas Highway, Key
Largo, Florida, 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 any way
appertaining thereto (collectively the "Land");
(b) The 4 story, 200 room hotel and all other buildings, structures,
fixtures, parking areas, and other improvements presently affixed to the Land
(collectively, the "Improvements");
(c) All right, title and interest of Seller in 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 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 copy machines, computers,
software, facsimile machines and other office equipment; 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, serving pieces and other restaurant and bar
equipment, apparatus and utensils (collectively, the "FF&E"). Seller agrees
that between the date of December 5, 1996 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, and provided that
such discarded items are replaced with items equal or greater in value to the
original value of such discarded items;
(d) All right, title and interest of Seller in all merchandise,
supplies, inventory 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 located within or relating to the
Improvements, including, without limitation, all food and beverage (alcoholic
and nonalcoholic) inventory, 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
-2-
<PAGE>
(collectively, the "Supplies"). Seller agrees that between the date of December
5, 1996 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. Purchaser agrees to credit Seller at Closing for
Seller's cost of all unopened and unused Supplies constituting food and beverage
inventory, and such unopened and unused food and beverage inventory shall not be
considered included within the Purchase Price;
(e) All right, title and interest of Seller in all leases, "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"). Purchaser shall assume in writing all
Leases at Closing;
(f) All prepaid rents and deposits held by Seller or its managing
agent, 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 cash portion of the Purchase Price (as defined below) in an
amount equal to the Deposits;
(g) To the extent assignable in accordance with applicable law and
agreement, any and all of Seller's right, title and interest in 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:
(i) Contracts and agreements, such as operations-related service
or maintenance contracts, restaurant consulting, utility contracts,
contracts for the purchase of supplies, insurance contracts, airline
agreements, corporate account agreements, travel agency agreements,
telephone service agreements, cable service agreements and yellow pages or
other advertising agreements (collectively, the "Service Contracts").
Purchaser shall execute a written assumption of all of the Service
Contracts except any management agreement with Innovative Hospitality
Management, Inc. ("IHM"). Purchaser shall bear the cost of any termination
fees on any of the Service Contracts;
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of Seller relating to the FF&E or the Improvements (collectively
the "Warranties");
-3-
<PAGE>
(iii) Licenses (including without limitation liquor, beer, wine,
bar and similar licenses and excluding the Franchise Agreement), permits
(including without limitation occupational, health, swimming pool and
elevator 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, Seller's interest in the names "Sheraton
Key Largo Hotel" and "Sheraton Key Largo Resort," otherwise unprotected
trade styles 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 and/or registered service mark of such hotel chain and cannot be
transferred to Purchaser by this Agreement);
(v) 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");
(vi) Leases of any FF&E and other contracts permitting the use of
any FF&E at the Improvements, all of which shall be assumed by Purchaser at
Closing (collectively, the FF&E Leases");
(h) To the extent transferable, Seller's interest, if any, in the
right to receive immediately on and after Closing water service, sanitary and
storm sewer service, electrical service, gas service, and telephone service on
and for the Land and Improvements in capacities that are 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 or other company for utility consumption after Closing,
including, but not limited to, the right to (i) present use of wastewater,
drainage, water and other existing utility facilities for the Land or
Improvements, (ii) all reservations of or commitments covering any such use,
and (iii) all deposits held by any such utility suppliers (the "Utility
Deposits"; all of the foregoing are referred to in this Agreement collectively
as the "Utility Reservations");
(i) 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, (iv) any leases of adjacent land of
facilities used in connection with the operation of the Hotel, and (v) the use
of all alleys,
-4-
<PAGE>
easements and rights-of-way, if any, abutting, adjacent or contiguous to or
adjoining the Land (collectively, the "Appurtenances");
(j) Copies and/or originals (to extent available from Seller's
existing files) of 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 ownership or use of 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 the original of any such material which constitutes a part of
Seller's consolidated or continuing business or financial records may be
retained by Seller;
(k) 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"); and
(l) The existing Sheraton franchise or license agreement with respect
to the Hotel (the "Franchise" or "Franchise Agreement"). Purchaser shall obtain
any requisite franchiser consents and Seller shall cooperate with Purchaser in
its efforts to procure said consent prior to expiration of the Review Period.
Provided, however, that the items listed on Exhibit B hereto (the "Excluded
---------
Assets") shall not be considered part of the Hotel in that they will not be
transferred to Purchaser at Closing and are hereby excluded from the definition
of Hotel.
The Hotel shall be conveyed, assigned, and transferred to Purchaser at Closing
free and clear (a "Free and Clear Conveyance") of all mortgages, debts, liens,
encumbrances, except as specifically provided in writing by Purchaser and as
otherwise provided herein.
ARTICLE 3
Purchase Price
3.1 Purchase Price. The total price (the "Purchase Price") for which
--------------
Seller agrees to sell 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, is the sum Twenty-Five Million, Fifty Thousand
Dollars ($25,050,000), subject to adjustments as herein provided, in immediately
available funds payable to Seller at the Closing.
3.2 [INTENTIONALLY OMITTED]
3.3 Earnest Money. For the purpose of securing the performance of
-------------
Purchaser under the terms and provisions of this Agreement and the purchase
agreements for the Other Hotels (i.e., the Hotel and the Other Hotels
collectively) and as a condition precedent to Seller's obligations hereunder and
thereunder, Purchaser shall post for deposit with First
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American Title Insurance Company ("First American"), within three (3) business
days after the execution and delivery of this Agreement, an unconditional,
irrevocable letter of credit (the "Letter of Credit") in the amount of
$1,000,000 (the "Earnest Money") drawn on Bank One, Texas, N.A. in a form
reasonably acceptable to Seller. The Letter of Credit shall have an expiration
date of not earlier than April 30, 1997 and shall name Seller as the
beneficiary. First American shall act as escrow agent, and shall hold the
Letter of Credit in escrow pursuant to the terms of an escrow agreement (the
"Escrow Agreement") executed contemporaneously herewith. If the Closing Date is
adjourned for any reason and the expiration date of the Letter of Credit is
prior to the adjourned Closing Date, Purchaser shall, prior to the expiration
date of the Letter of Credit, deliver to First American an extension of the
Letter of Credit to a date which is not less than thirty (30) days past the
adjourned Closing Date. If the transactions contemplated by this Agreement are
not consummated in accordance with the terms hereof, the Letter of Credit shall
be disbursed pursuant to the terms of the Escrow Agreement. If the transactions
contemplated by this Agreement are consummated in accordance with the terms
hereof, the Letter of Credit shall be returned to Purchaser at the Closing.
3.4 Simultaneous Acquisitions. It is the parties' intention to close on
-------------------------
the acquisition of this Hotel simultaneously with the closing on the Other
Hotels pursuant to separate purchase agreements which are being entered into
between Purchaser and affiliates of Seller contemporaneously with the execution
of this Agreement. Unless Purchaser notifies Seller in writing prior to the
expiration of the Review Period, Purchaser shall be deemed to have elected and
agreed to acquire the Hotels (i.e., the Hotel and the Other Hotels) in a
simultaneous transaction and shall be obligated to do so. The Purchase Price
set forth above is predicated on the simultaneous acquisition by Purchaser (or
its assignee or designee) of all three (3) hotels. If Purchaser notifies Seller
prior to the expiration of the Review Period that it elects to acquire the
Hotel, but less than all three of the Hotels (i.e., the Hotel and the Other
Hotels), the Purchase Price for this Hotel shall be increased to Twenty-Seven
Million Dollars ($27,000,000). As used in this Agreement, the term "Purchase
Price" shall refer to the amount set forth in Section 3.1 or the amount set
forth in this Section 3.4, whichever is applicable.
ARTICLE 4
Title Deliveries
4.1 Title Commitment. On or before December 20, 1996, Seller shall
----------------
procure and deliver to Purchaser, at Seller's sole cost and expense therefor,
the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by Chicago Title Insurance Company ("Chicago"), through Katz, Barron, Squitero,
Faust & Berman, on the most recent form of ALTA owner's policy, covering the
Land and Improvements, in the full amount of the Purchase Price allocable to the
Land and the Improvements, setting forth the current status of the title to the
Land and Improvements, pursuant to which the Title Company agrees, subject to
satisfaction of the requirements of the
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Title Commitment, 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.
It is understood and agreed that the Title Insurance Policy will be issued by
Chicago through Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson (the
"Title Company").
(b) Copies of all documents and instruments (as recorded, where
applicable) (the "Supporting Documents") provided by the Title Company and
referred to or identified in the Title Commitment, including, but not limited
to, all deeds and other conveyance documents evidencing transfer of title into
Seller.
4.2 Survey. Prior to the execution of this Agreement, Seller has provided
------
to Purchaser its most recent "as built" survey (the "Survey") of the Land and
Improvements. Purchaser, at Purchaser's sole cost and expense, shall be
responsible for obtaining an updated survey from this or any other surveyor (the
"New Survey"). If the New Survey contains a different legal description than
the one described on Exhibit A attached to this Agreement, Seller shall, at
---------
Closing, in addition to the Seller's Deed set out in Section 11.2(a), execute in
favor of Purchaser a quitclaim deed which shall convey any interest of Seller in
the Land using the New Survey legal description. In addition, such description
shall be used in the Title Policy.
ARTICLE 5
Hotel Documents, Inspecting and Objections
5.1 Inspections. 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, to conduct soil
tests, environmental tests and inspections, and 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, or by
tenants) and to examine any books, records and other financial information
pertaining to the Hotel located at the Hotel. 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
other than Seller's default, 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, subject to the provisions of Article 6 below. All
visits to the Hotel shall be pre-arranged with Mr. Charles Bud Pyles (telephone
number 305-852-5553 or 770-980-1900) or Mr. Raanan Ronnie Ben-Zur (telephone
number 011-972-3-535-0447) ("Seller's Representatives"). Purchaser's agents and
representatives shall refrain from discussing their due diligence with any Hotel
employees other than those approved by "Seller's Representatives" and, with
respect to those Hotel employees whom Purchaser is expressly authorized to
discuss the due diligence, Purchaser shall limit those discussions to inquiries
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concerning the Hotel, and Purchaser shall not discuss the reason for its
inquiries. Purchaser shall and does hereby agree to indemnify, hold harmless
and defend Seller, its agents, officers, directors, and employees from and
against any and all out-of-pocket loss, damage, expense (including attorneys'
fees and court costs), claim, demand and the like arising in connection with the
access and/or inspection rights granted herein by Seller for the benefit of
Purchaser.
5.2 Hotel Documents.
---------------
(a) As soon as practicable but in no event later than December 20,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies of the following, together with all amendments,
modifications, renewals or extensions thereof:
(i) All Licenses;
(ii) All Service Contracts and a schedule of such Service
Contracts (the "Schedule of Service Contracts");
(iii) 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;
(iv) A list of all current Hotel employees and their salaries or
wages and a general description of the employment benefits available to the
employees as a group, and copies of all employment agreements and/or union
contracts, if any;
(v) The Franchise Agreement and a current deficiency report and
the two most recent inspection reports of the franchiser of the Hotel;
(b) As soon as practicable but in no event later than December 27,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies 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) To the extent in Seller's possession and without any
requirement to compile any new statements, financial statements, balance
sheets, income statements, general ledgers (provided, however, that Seller
shall not be required to deliver copies of general ledgers to Purchaser but
Seller shall give Purchaser
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reasonable access to on-site copies of the general ledgers), 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 A. 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; B. expenses
incurred for water, electricity, natural gas, sewer and other utility
charges; C. total rents and revenues collected from tenants and from hotel
guests and other patrons of the Hotel; D. management fees; E. maintenance,
repairs and other expenses relating to the management and operation of the
Hotel; F. historical occupancy statistics for the Hotel; and G. all capital
expenditures made during the aforementioned periods;
(iii) 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;
(iv) To the extent available to Seller in its existing files, 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, subject to the terms of any agreements with the professionals who
rendered said reports, 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;
(v) A rent roll including for each Lease A. the name of the
tenant; B. the suite; C. the base rental rate; D. the amount of prepaid
rent; E. the amount of each security deposit; F. the applicable percentage
rental rate, if any, and the means of calculation thereof; G. the date of
the Lease; and H. the expiration date of the Lease;
(vi) To the extent in Seller's possession or control, all written
notices received from governmental authorities in connection with the
Hotel;
(vii) All FF&E Leases and a schedule of such FF&E Leases (the
"Schedule of FF&E Leases");
(viii) A schedule of the Deposits and the Utility Reservations
(the "Schedule of Deposits and Utility Reservations");
(ix) Copies of the existing insurance policies covering the
Hotel;
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(x) An unaudited balance sheet (the "Balance Sheet") of the Hotel
as of November 30, 1996 (the "Balance Sheet Date"), listing all
liabilities, accounts payable and accounts receivable of the Hotel as of
such date. The Balance Sheet will be prepared and certified by management
to be A. in accordance with the books and records of the Hotel, and B. to
fairly present the financial condition of the Hotel at the Balance Sheet
Date;
(xi) A schedule of any litigation, arbitration or administrative
proceedings pending or material threatened (in writing) with respect to the
Hotel; and
(xii) To the extent available from Seller's existing files, such
other documents or information as may be reasonably requested by Purchaser
no later than ten (10) days after Seller's receipt of a written request
therefor.
Seller shall promptly notify Purchaser in writing upon one of Seller's
Representatives learning of any material inaccuracy, misstatement or omission in
any of the information furnished to Purchaser and shall supply Purchaser with
updated information or schedules, as required.
5.3 Purchaser's Review Period Termination Right. Purchaser shall have
-------------------------------------------
until 5:00 P.M. Eastern Time on January 24, 1997 (the "Review Period"), to
evaluate the Hotel and the matters reflected in Sections 4.1, 4.2, 4.3, 5.1,
5.2, 5.4 and 9.7 and to obtain the approval of the boards of directors of
Purchaser and American General Hospitality Corporation (the "REIT") to the terms
and conditions of, and the transactions contemplated by, this Agreement. In the
event Purchaser shall determine, in Purchaser's sole discretion, that the
results of the inspection and review are unsatisfactory, or either of the
Purchaser or the REIT are unable to obtain the requisite approval of their
respective board of directors, or for any other reason whatsoever, Purchaser
shall have the right to terminate this Agreement upon written notice to Seller
delivered at any time on or before the expiration of the Review Period. Upon
the proper termination of this Agreement by Purchaser, the Letter of Credit
shall be returned to Purchaser and thereafter neither party shall have any
further obligation or liability to the other under this Agreement, except with
respect to those provisions which expressly provide for the survival of such
termination and for the obligation to pay the cost of repairs, if any, set forth
in Section 5.1 and the return of all of the materials delivered by Seller to
Purchaser under this Agreement. If Purchaser fails to notify Seller of its
election to terminate this Agreement on or before the expiration of the Review
Period, then the Earnest Money shall be non-refundable to Purchaser, except to
the extent otherwise provided in this Agreement.
5.4 Operational Licenses. During the Review Period Purchaser shall have
--------------------
obtained, or determined that it will be able to obtain, all permits, licenses,
approvals and other authorizations necessary or desirable to operate the Hotel
and all restaurants. bars and lounges presently located in the Hotel, including,
without limitation, the Liquor Licenses (hereinafter defined in accordance with
Section 9.7 hereof. To that end, Sellers and
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Purchaser shall cooperate with each other, and each shall execute such transfer
forms, license applications and other documents as may be necessary or customary
for Purchaser or its designees to obtain such permits, licenses, approvals and
other authorizations.
5.5 Procedure for Purchaser's Objections. At any time during the Review
------------------------------------
Period Purchaser may notify Seller in writing (an "Objection Notice") of any
objections Purchaser may have with respect to the Hotel or to any 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, or to the results of the inspections, tests, and studies
under Section 5.1 and any other tests or inspections of the Hotel made by
Purchaser, or to any Service Contracts, Leases, FF&E Leases, or Licenses or any
other matters pursuant to Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.4 and 9.7. If
Purchaser shall so notify Seller of any objections, Seller may elect to cure any
or all such objections by giving Purchaser notice of its intent to cure,
whereupon Seller shall be obligated to cure or remove the objections identified
in its notice on or before the Closing Date. In no event shall Seller be
obligated to cure any objections of Purchaser, except that Seller shall be
obligated to remove any existing mortgages and other monetary liens encumbering
the Hotel not caused or created by Purchaser, as well as any other encumbrances
created by Seller after the date hereof. In the event Purchaser has not elected
to terminate this Agreement pursuant to Section 5.3, any condition,
circumstance, document or other materials whatsoever concerning the Hotel which
is not expressly addressed by Purchaser in an Objection Notice prior to the
expiration of the Review Period shall be deemed accepted by Purchaser for all
purposes hereunder, and further shall be deemed Permitted Exceptions
notwithstanding anything contained herein to the contrary. By Closing, Seller
shall, at Seller's expense, cancel any and all management agreements with
respect to the operations of the Hotel.
5.6 Permitted Exceptions. Any title exceptions, test items, or deliveries
--------------------
or other items to which the Purchaser does not object in accordance with Section
5.5 shall be deemed "Permitted Exceptions", and, in addition, any title
exceptions, test items, or deliveries to which Purchaser objects that are not
cured, the Bay Bottom Lease (as defined herein) and any other conditions
permissible hereunder shall, upon consummation of the Closing, be thereafter
deemed and hereinafter referred to as "Permitted Exceptions".
ARTICLE 6
Confidentiality
6.1 Press Releases. Prior to the end of the Review Period, either Seller
--------------
or Purchaser or their respective Affiliates may refer to this Agreement and the
transactions contemplated hereby in any filing pursuant to securities laws or
stock exchange listing obligations or as required by law or advised by counsel
to be in accordance with law. After the end of the Review Period, either Seller
or Purchaser or their respective Affiliates may issue press releases, and may
refer to this Agreement and the transactions contemplated hereby in any filing
pursuant to securities laws or stock exchange listing obligations or as required
by law or advised by counsel to be in accordance with law, provided that, with
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respect to any press release, (i) Purchaser and Seller have each provided the
other with an opportunity to review and comment upon such release, although any
changes to such release suggested by the other party shall be made in the sole
discretion of the party submitting it for review. Purchaser and Seller can
disclose this Agreement to their respective advisors, consultants and executive
employees to the extent necessary in order to expedite their obligations
hereunder. As used in this Agreement "Affiliate" shall have the meaning
ascribed to it in Rule 12b-2 of the General Rules and Regulations under the
Securities and Exchange Act of 1934, as amended, and/or applicable Israeli
securities laws, and, when used in connection with Seller or Purchaser shall
include each officer, director, and partner thereof.
6.2 Confidentiality. Except to the extent otherwise provided herein,
---------------
required by law or advised by counsel to be in accordance with law, or expressly
addressed by Section 6.1, until the consummation of the transactions
contemplated by this Agreement, the parties hereto shall hold, and shall cause
each of their respective Affiliates to hold, all information and documents
obtained in connection with the transactions contemplated hereby confidential
including, any oral and written information concerning the Seller and the Hotel
received from the Seller or from a third party at the direction of the Seller
(collectively the "Due Diligence Material"). The Due Diligence Material shall
not be disclosed, discussed or made known without the prior written consent of
the Seller, except to the Purchaser's or the Purchaser's board of directors',
Purchaser's lender and its counsel, any hotel franchisors with whom Purchaser is
negotiating a franchise license agreement, any marketing company employed to do
feasibility studies, or any investment banking, accounting or legal advisers, or
any environmental or engineering consultants with whom Purchaser desires to
consult in connection with the proposed transaction. If the purchase and sale
contemplated hereby are not consummated for any reason whatever, each party
hereto shall, as soon as practicable but no later than fifteen (15) days after
the Closing Date, return all such information and documents (and any copies
thereof in such party's possession) to such other party hereto.
ARTICLE 7
Leases, FF&E Leases, and Service Contracts
7.1 Schedules. Subject to Section 9.3, Seller hereby warrants,
---------
represents, and certifies unto Purchaser that (i) the Schedule of Service
Contracts, Schedule of FF&E Leases, Schedule of Leases, and Schedule of Deposits
and Utility Reservations, when delivered on or before either December 20, 1996
or December 27, 1996 as provided in Sections 5.2(a) and 5.2(b), 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 contracts), and all Deposits,
Utility Deposits and Utility Reservations in effect at that time, (ii) 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) there are and will be no
written or oral agreements of the nature of
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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 and, to the extent not terminated on or after
Closing in accordance with the terms thereof and hereof, the Franchise
Agreement, (iv) there are and will be no other written or oral agreements for
the use or occupancy of the Hotel binding on the Hotel or on Purchaser after
Closing with any tenants, licensees, franchisees, concessionaires or other
persons or entities (collectively, "Tenants", and individually, "Tenant") or any
guarantors of the Tenants' obligations (collectively "Guarantors", and
individually, "Guarantor") other than those disclosed by Seller or permitted
under Section 8.1(e) of this Agreement, (v) the Service Contracts, FF&E Leases,
and Leases are in full force and effect and, to Seller's knowledge, no material
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) no
Tenant has made any claim of any right of offset. The term "Tenant" shall refer
only to tenants under Leases only and not guests of the Hotel. It shall not be
deemed a violation of this Section 7.1 if there exists a Service Contract which
is not disclosed on the Schedule of Service Contracts provided such Service
Contract calls for monthly payments of not more than $1,000 and termination upon
forty-five (45) days.
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 for the relevant season as of the date of this Agreement in accordance
with Seller's prior practice, (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 the Franchise Agreement;
(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;
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(d) Keep, observe, and perform all its obligations under the Leases,
the FF&E Leases, the Service Contracts, the Licenses in a manner consistent with
prior practices (in particular, the license agreement between Seller and
Franchisor (as hereinafter defined) for the Hotel), and all other applicable and
material contractual arrangements relating to the Hotel;
(e) If Purchaser does not terminate this Agreement prior to expiration
of the Review Period, thereafter Seller shall not enter into any new agreements
of the nature of the Service Contracts, FF&E Leases, or Leases or any material
amendments, modifications, renewals or extensions of any existing Service
Contracts, FF&E Leases, or Leases without Purchaser's prior written consent,
except that Seller shall not be required to obtain Purchaser's consent to any
new agreement or any renewal or extension of existing agreements which may be
terminated on not more than forty-five (45) days' prior notice without cost or
expense. Prior to the expiration of the Review Period, Seller may enter into
new arms-length agreements of the nature of the Service Contracts, or any
amendments, modifications, renewals or extensions thereof in the ordinary course
of business without Purchaser's consent provided that Seller shall provide
Purchaser with a copy of any such instrument promptly after execution and
further provided that any such agreement may be terminated upon not more than
forty-five (45) days' prior notice without cost or expense;
(f) Not cause or permit the removal of FF&E from the Hotel except for
the purpose of discarding and replacing, where needed or appropriate, worn
items, and timely make all repairs, maintenance, and replacements to keep the
Hotel and all FF&E in good operating condition;
(g) Keep Supplies adequately stocked, consistent with Seller's current
business practice, as if the sale of the Hotel hereunder were not to occur;
(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 (in writing) after the
date of this Agreement, or if Seller's Representatives learn that any
representation or warranty contained in this Agreement has become materially
misleading or false;
(j) Not intentionally 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 other
than the Americans with Disabilities Act of 1990, as amended ("ADA"), it being
acknowledged by Purchaser that
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Seller is unaware of any violation thereof and that Seller shall have no
obligation to Purchaser to do anything further in connection therewith;
(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 or other right currently in
existence which is significant to the operation, use, occupancy or maintenance
of the Hotel to expire, be canceled or otherwise terminated without Purchaser's
prior written consent unless such License shall be renewed or re-obtained in the
ordinary course of business;
(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 except as may be consistent with prior practices, and continue to book
contracts and reservations consistent with prior practices;
(o) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof on or before the
date on which the payment thereof is delinquent; and
(p) Not voluntarily alter the existing insurance coverage for the
Hotel.
8.2 Capital Program. Seller hereby covenants and agrees that it will
---------------
complete, prior to the Closing Date, all of the work described in Exhibit C
---------
hereto (the "Capital Program") at Seller's sole cost and expense, subject to
receipt of applicable permits which Seller shall use best efforts to obtain.
8.3 Mechanics Liens. Seller hereby represents, warrants, and covenants
---------------
that all work required to be done prior to the Closing Date under the Capital
Program described above or the terms of any Lease or License has been or will be
performed and fully paid for by Seller prior to or contemporaneously with the
Closing in accordance with the Capital Program, and all mechanics' and
materialmen's liens arising from any labor or material furnished prior to the
Closing Date at the instance of Seller will be discharged or bonded so as to be
omitted from Purchaser's Title Policy.
8.4 Notices of Violation. Seller hereby covenants and agrees that all
--------------------
written 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
affecting the Hotel on or before the Closing Date of which Seller has actual
knowledge shall be promptly disclosed to Purchaser.
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
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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 D. 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 D.
---------
8.6 Management Agreement Termination. Seller hereby covenants to
--------------------------------
Purchaser that Seller shall terminate any agreement with Seller's existing
managing agent, and that as of the Closing Date there will be no management
agreement or other contract with respect to the management of the Hotel in
effect at the Hotel.
8.7 Hotel Employees. Seller represents, warrants and covenants to
---------------
Purchaser that Purchaser will in no way be liable for any employees, or for any
employment agreements or union contracts with respect to employees, working at
or for the Hotel prior to the Closing Date and during Seller's period of
ownership of the Hotel (the "Hotel Employees"). In particular, neither Seller
nor Seller's managing agent will, between the date hereof and the date of
Closing, enter into any new written employment or union contracts or similar
agreements with respect to any employee of the Hotel that will be binding on the
Purchaser on or after the Closing. Purchaser will not be obligated to pay any
amount to any Hotel Employees except upon their rehiring by Purchaser or an
agent or tenant of Purchaser. Purchaser shall not have any liability under any
pension or profit sharing plan that Seller or Seller's managing agent or any
other party (other than Purchaser's own plans or that of its agents or tenants)
may have established with respect to the Hotel or the Hotel Employees. 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 benefits, deferred compensation, savings pension, profit sharing,
401K, and retirement plan, and insurance and other benefits through the day
preceding the Closing Date of all Hotel Employees, whether or not employed by
Purchaser, and for all liabilities of whatever kind with respect to all Hotel
Employees who are not employed by Purchaser. Seller hereby indemnities, defends
and saves harmless Purchaser with respect to the foregoing. Seller shall
terminate or cause its managing agent to terminate the Hotel Employees effective
as of 11:59 P.M. on the day before the Closing Date (it being understood that if
for any reason the Closing does not occur, such termination shall be deemed to
be rescinded ab initio) and shall pay to such employees all amounts owed to such
---------
employees including amounts owed on account of vested accrued and unpaid
benefits including vested vacation pay and vested sick leave. Purchaser shall
cause all of those Hotel Employees it desires to hire to be immediately rehired
effective as of 12:01 A.M. on the Closing Date (it being understood that if for
any reason the Closing does not occur, such rehiring shall be deemed void ab
--
initio) upon such terms as Purchaser (or such other person or entity who may be
- ------
responsible for the rehiring) may elect. Notwithstanding anything stated herein
to the contrary, Purchaser shall endeavor to rehire a sufficient number of Hotel
Employees so as to avoid a violation of, or cause the applicability of, the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. (S) 2101 et seq.
-- ----
(the "WARN Act"), and Purchaser hereby indemnifies, defends and
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saves harmless Seller for all costs and expenses (including attorneys' fees)
caused by a WARN Act violation in the control of or reasonably avoidable by
Purchaser. Purchaser shall be responsible for all employee obligations in
respect of the rehired Hotel Employees arising from and after such rehiring.
Seller hereby agrees that neither it nor its managing agent shall induce or
solicit any Hotel Employee to be hired by any affiliate of the Seller or its
managing agent but specifically excluding Charles T. Pyles and any Hotel
Employee whom Purchaser decides not to hire as of 12:01 A.M. on the Closing
Date. Each of Seller and Purchaser shall indemnify and hold the other harmless
from and against any loss, cost, expense (including reasonable attorneys' fees
and disbursements actually incurred), damage or liability any such party may
suffer by reason of the other's default under this Section.
8.8 Shadow Management. After expiration of the Review Period, Seller
-----------------
shall permit Purchaser to establish and maintain at its sole expense 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,
and (d) shall not be deemed to have assumed management responsibilities prior to
Closing by virtue of such shadow management.
8.9 Access to Records and Financial Information. Subject to the
-------------------------------------------
restrictions contained in Section 5.1 above, 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. Further, and
not in limitation of Section 5.2(ii) above, Purchaser's representatives shall
have access to all existing financial and other information relating to the
Hotel to enable them to prepare audited financial statements in conformity with
Regulation S-X of the Securities and Exchange Commission (the "SEC") and to
enable them to prepare a registration statement, report or disclosure statement
for filing with the SEC on behalf of the REIT and/or its affiliates. Prior to
the end of the Review Period, Seller shall also provide to Purchaser's
representatives a signed representation letter sufficient to enable an
independent public accountant to render an opinion on the financial statements
related to the Hotel, such letter to be substantially in the form of Exhibit E
---------
hereto. To the
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extent that the Financial Statements provided by Seller pursuant to Subsection
5.2(ii) hereof for the current year do not include any period up to and
including the Closing Date, Seller shall, within twenty-five (25) days after the
Closing Date, provide Purchaser with monthly unaudited Financial Statements,
including Balance Sheets and income statements applicable to such period
inclusive of the Closing Date.
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 will be true, 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 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; 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).
(c) Subject to Section 5.3 hereof, 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.
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 Florida, 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
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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, but is part of a U.S. based
real estate holding company).
(c) None among the entry into, the 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; nor will any of the foregoing require the consent of any party not
otherwise provided for in this Agreement.
(d) There are no material leases, management agreements, leasing
agent's agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements individually or in the aggregate (i) to which Seller is a party
or an assignee, or (ii) binding upon the Hotel, relating to the ownership,
occupancy, operation or maintenance of the Land, Improvements, FF&E or Supplies,
except for those Service Contracts, Leases, FF&E Leases and material warranties
previously disclosed to Purchaser in writing and Service Contracts.
(e) Seller has received no written 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) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser.
(g) To the best of Seller's knowledge and belief, there are, with
respect to the Hotel or to Seller, no:
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial proceedings or orders respecting awards;
(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice orders or judicial proceedings or orders
with respect thereto;
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(iii) pending citations from 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;
(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 (in writing) or actual litigation
claims, charges, complaints, petitions or unsatisfied orders by or before
any administrative agency or court.
(all collectively, the "Pending Claims").
(h) Seller has received no Notice of Violations.
(i) 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 written notices, permits, licenses, registrations, certificates of
occupancy, applications, consents, zoning and/or building code restrictions,
variances, and/or other authorizations which are required for the use or
operation of the Hotel, (ii) except as disclosed in the capital expense budget
for the Sheraton Key Largo and in the Seller's deliveries under Section 5.2
hereof, 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, 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.
(j) To Seller's knowledge without inquiry, the use by Purchaser of any
of the Tradenames will not infringe any United States or state trademark,
service mark, or tradename laws existing at the Closing, or constitute
actionable appropriation of rights with respect to any other person, business or
entity.
(k) The sewage treatment facility servicing the Hotel is located on
the Land and Seller has received no written notice that such facility is in
violation of any laws applicable thereto.
For purposes of this Agreement, the term "knowledge", "awareness", or other
phrase used herein to denote information of which the Seller has been informed
or is aware of, shall be
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limited to all information known or disclosed to the following (herein referred
to as the "Seller's Representatives") but without independent inquiry: Charles
T. Pyles, Raanan G. Ben-Zur and the present department heads of the Hotel only.
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 of which Seller's Representatives become aware ("Subsequent
Developments") which would cause any of Seller's representations contained in
this Agreement to be no longer accurate in any material respect. If any such
subsequent development possibly causes a breach or violation of this Agreement,
Seller shall not be considered in breach or violation of this Agreement if
Purchaser (i) receives notice therefrom from Seller at least five (5) business
days prior to expiration of the Review Period and does not raise same in an
Objection Notice; or (ii) Purchaser consummates the acquisition of the Hotel,
upon the occurrence of either of which, such violation or breach shall be deemed
waived by Purchaser. Further, Seller shall have until January 15, 1997 to
confirm internally the accuracy of all representations, warranties, disclosures
and statements of Seller contained in this Section 9.2 or elsewhere in this
Agreement. If Seller discovers any inaccuracy in any such item, it shall not be
in breach or violation of this Agreement provided that Seller shall disclose
such item to Purchaser in writing by January 15, 1997.
9.4 Limitation on Further Sales Efforts. Seller shall 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.
9.5 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 liability, debt, act or cause of action occurring and accruing
prior to the Closing Date and arising from the ownership or operation of the
Hotel by Seller or its management agent prior to the Closing Date, including but
not limited to any claims by employees of Seller or third parties covered by
general liability insurance carried by Seller.
9.6 Purchaser's Indemnity. Purchaser agrees to indemnify and hold Seller
---------------------
harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees) which the Seller may suffer or incur by
reason of any liability, debt, act or cause of action occurring and accruing on
or subsequent to the Closing Date 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.
9.7 Liquor Licenses. If and to the extent expressly allowed by law, and
---------------
necessary because Purchaser has not obtained same by the Closing despite
diligent efforts to do so, Seller shall assign or cause to be assigned its
alcoholic beverage, liquor, beer and/or wine licenses and/or permits with
respect to the Hotel (the "Liquor Licenses") to Purchaser or its
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lessee or management company at Closing as part of the Licenses. Purchaser or
its lessee or management company (hereinafter "Operator") for the Hotel shall
execute such forms, license applications and other documents as may be necessary
for the Operator to obtain all Liquor Licenses necessary to operate any
restaurants, bars and lounges presently located within the Hotel. If permitted
under the laws of the jurisdiction in which the Hotel is located, Operator shall
execute and file all necessary forms, applications and other documents (and
Seller shall reasonably cooperate with the Operator in filing such forms,
applications and other documents) with the appropriate liquor and alcoholic
beverage authorities so that such acquisition of the necessary Liquor Licenses
shall take effect simultaneously with or upon completion of Closing. If not so
permitted, Operator agrees that it will promptly execute all forms, all
applications and other documents required to effect such acquisition of such
Liquor Licenses at the earliest date reasonably practicable, consistent with the
laws of the State where the Hotel is located, in order that all Liquor Licenses
may be acquired by Operator. Operator's attempts to obtain the Liquor Licenses
shall not diminish, prior to the Closing, the full force and effect of the
Liquor Licenses maintained by Seller in its operation of the restaurants,
lounges and bars presently located within the Hotel. If such Liquor Licenses
cannot be obtained by Operator until after Closing, then Seller covenants and
agrees that, if and to the extent expressly allowed by law, Seller shall
cooperate reasonably with Operator in keeping open the bars and lounges and
liquor facilities of the Hotel between the Closing and the time when such Liquor
Licenses are obtained by Operator for a period not to exceed forty-five (45)
days following the Closing Date by entering into a "Liquor License Agreement"
with the appropriate party for the continued operation of and under the Liquor
Licenses with respect to the Hotel, in form acceptable to Seller in its
reasonable discretion, pursuant to which, among other things, (i) Operator shall
indemnify, defend and hold Seller and its agents harmless from any liability,
damages, claims, costs, penalties, losses or expenses (including reasonable
attorney's fees and court costs) 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, and (ii) Operator shall reimburse Seller for
Seller's costs in maintaining the Liquor Licenses in full force and effect. In
no event shall Seller be required to cooperate with any additional liquor or
alcoholic beverage licenses which Seller does not possess at the time of
Closing.
9.8 Franchise Agreement. Purchaser acknowledges that the Franchise
-------------------
Agreement cannot be assigned without the consent of Sheraton Franchise
Corporation ("Sheraton"). Unless Purchaser decides to instruct Seller to
terminate the Franchise Agreement as therein permitted and in accordance
therewith and conditioned upon the Closing (the "Termination"), Purchaser agrees
to request the written agreement of Sheraton to either (i) the termination of
the existing Franchise Agreement and simultaneous execution of a new franchise
agreement between Sheraton and either the entity acquiring title to the Hotel or
such entity's net lessee (in either case, the "New Franchisee") or (ii) the
assignment by Seller to the New Franchisee of the Franchise Agreement.
Purchaser agrees to complete and submit to Sheraton a franchise license
application together with all supporting documentation required by Sheraton,
including, without limitation, management expertise and financial credibility,
all in
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accordance with Sheraton's review and approval process. Seller agrees to
cooperate with Purchaser in its efforts to cause Sheraton to approve the New
Franchisee as a franchisee or licensee of the Property, each of them will
execute and deliver at Closing all appropriate documentation necessary to carry
out the terms of this Section 9.8. If the Closing occurs and the New Franchisee
does not succeed to Seller's position under the Franchise Agreement pursuant to
either of subclauses (i) or (ii) of the second sentence hereof, Purchaser agrees
that it shall be responsible for payment of all termination and similar fees due
in connection with the Termination under the Franchise Agreement, and Purchaser
further agrees to indemnify, hold harmless and defend Seller for all costs,
claims, liabilities and expenses incurred or arising prior to the Closing and
asserted against Seller with respect to the Franchise Agreement.
ARTICLE 10
Conditions Precedent to the Closing
Purchaser's obligations to consummate the Closing are subject to the
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. Notwithstanding the foregoing, Purchaser, in
its sole discretion, may waive any such condition by notice to Seller or Closing
the contemplated transaction.
10.1 Seller's Obligations. Seller shall have performed all material
--------------------
obligations of Seller hereunder which are to be performed prior to Closing.
10.2 Seller's Representations, Warranties and Covenants. Except as
--------------------------------------------------
otherwise expressly provided herein to the contrary, Seller'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.
10.3 Transfer Subject Only to Permitted Exceptions. On the Closing Date,
---------------------------------------------
the Hotel shall be subject only to the Permitted Exceptions; provided, however,
that any encumbrance or claim caused or created by Purchaser or its agents shall
be deemed a Permitted Exception.
10.4 Consent of Boards of Directors. The Board of Directors of Regent
------------------------------
Investments Ltd. shall, by written resolution on or before December 31, 1996,
consent to the sale of the Hotel to Purchaser's designee pursuant to the terms
and conditions of this Agreement.
10.5 Simultaneous Closings. The Closings of the Other Hotels shall occur
---------------------
contemporaneously with the Closing of this Hotel; provided, however, that if
Purchaser has timely notified Seller of its election pursuant to Section 3.4
hereof not to acquire all three (3) of the Hotels (i.e., the Hotel and the Other
Hotels) but instead only one or two of said hotels
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in accordance with Section 3.4, the Closing of such hotels will not be
conditioned in any way upon the acquisition by Purchaser of any hotel which
Purchaser has opted not to purchase.
ARTICLE 11
Closing and Closing Documents
11.1 Closing. The consummation and closing (the "Closing") of the
-------
transaction contemplated under this Agreement shall take place at the offices of
Purchaser's lender's counsel in Dallas, Texas, or such other place as is
mutually agreeable to the parties, on any date between March 15, 1997 and March
31, 1997 of which Purchaser has notified Seller at least seven (7) days in
advance (the "Closing Date") or as otherwise set by written agreement of the
parties.
11.2 Seller's Deliveries. At the Closing and at Seller's sole cost and
-------------------
expense, Seller shall deliver or cause to be delivered the following to
Purchaser; in addition to all other items required to be delivered to Purchaser
by Seller:
(a) Seller's Deed. Seller's special or limited warranty deed in a
-------------
form reasonably acceptable to the Title Company ("Seller's Deed") conveying
good, indefeasible, and insurable fee simple title to the Land and Improvements,
free and clear of all mortgages, liens, encumbrances, leases, conditions,
restrictions, rights of way, easements, encroachments, claims, and other matters
of title except only the Permitted Exceptions;
(b) Bill of Sale. A "special or limited warranty" bill of sale
------------
transferring Seller's interest, if any, in all FF&E, Supplies, Warranties,
Licenses, Tradenames, Plans and Specs, Utility Reservations, Records, Deposits,
cash and equivalents, and other personal property in a form reasonably
acceptable to both Purchaser and Seller (the "Bill of Sale");
(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 in a form reasonably acceptable to, and duly executed by, both
Purchaser and Seller, containing indemnities similar to those set forth in
Sections 9.5 and 9.6 above (the "Assignment");
(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, and (iii) Seller's
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
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transfer of title from Seller to Purchaser (or Purchaser's designee) of any
motor vehicles used in connection with the Hotel's operations;
(f) Authority Documents. Reasonable evidence satisfactory to the
-------------------
Title Company that the person or persons executing the closing documents on
behalf of Seller have full right, power and authority to do so, and the
following documentation: (i) the Certificate of the Secretary of Seller
certifying attached copies of the Articles of Incorporation, By-Laws and
enabling resolutions as true and correct, unamended, and continuing, and of the
incumbency of its officers, (ii) Certificates of Existence and Good Standing
from the Secretary of State of the state of Seller's incorporation, and (iii)
from the Secretary of State of the state where the Hotel is located, a
Certificate of Existence and Qualification to Do Business in such state;
(g) Title Affidavit. Any affidavits of Seller in form and substance
---------------
reasonably acceptable to the Title Company, in order that the Title Policy may
be issued free and clear of the standard exceptions which the Title Company is
permitted under applicable law to remove or modify upon delivery of such an
affidavit;
(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 permitted
and 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, all Records, and all Licenses in Seller's
possession;
(j) Original Documents. Originals (to the extent available) of all of
------------------
the documents and agreements covered by the foregoing that have not already been
delivered to Purchaser will be left at the Hotel;
(k) Updates. A complete list of all advance room reservations,
-------
functions and the like, in reasonable detail;
(l) Estoppel Letters. Either the estoppel letters or Seller's
----------------
certificates as described in Section 8.5 above;
(m) Termination of Agreements. Fully executed and effective
-------------------------
terminations of all management agreements with respect to the Hotel that are not
assigned to and assumed by Purchaser under the terms hereof;
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(n) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement;
(o) Financial Covenant of Regent Investments Ltd. Regent Investments
--------------------------------------------
Ltd. ("Regent") hereby acknowledges and agrees that it shall not cause or permit
French Quarter Holding, Inc. ("FQH") to distribute assets to its shareholders if
such distribution would cause FQH's consolidated net asset value on a fair
market value basis to fall below $5,000,000 (according to audited financial
statements prepared by a nationally recognized accounting firm) for twelve (12)
months following the Closing. Regent is executing this Agreement for the sole
purpose of providing the covenant given in the preceding sentence.
(p) Bay Bottom Lease. Purchaser acknowledges that, to the extent
----------------
assignable, the Modified Sovereignty Submerged Lands Lease No. 440415645 ("Bay
Bottom Lease") may not be assigned to Purchaser until after the Closing is
consummated and agrees that such assignment shall not be a condition precedent
to the Closing and that Purchaser shall be responsible for obtaining the State
of Florida's consent to the assignment of the Bay Bottom Lease from Seller to
Purchaser; provided, however, that Seller agrees to and shall, without any cost
to Seller, cooperate with Purchaser in obtaining said consent. Purchaser and
Seller acknowledge and agree that in lieu of the State of Florida granting the
aforementioned consent, it may elect to enter into a new lease for the bay
bottom with the Purchaser, and that whether the State of Florida grants a
consent or enters into a new lease for the bay bottom with the Purchaser, or
otherwise, such agreements and assurances shall not be a condition precedent to
Closing. Purchaser shall have the sole responsibility to obtain whatever
agreements or assurances it desires. Notwithstanding anything to the contrary
contained herein, Purchaser may require Seller to provide a quit-claim
assignment of the Bay Bottom Lease (a "Quit-Claim Assignment"). The Bay Bottom
Lease is a Permitted Exception.
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.
11.3 Purchaser's Deliveries. At the Closing and at Purchaser's sole cost
----------------------
and expense, Purchaser shall deliver or cause to be delivered the following to
Seller:
(a) Purchase Price. The Cash Portion of the Purchase Price, plus or
--------------
minus the adjustments to be made at the Closing in accordance with the terms of
this Agreement;
(b) Assignment. 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;
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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; and
(e) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement.
11.4 Prorations. At Closing, the following items of revenue and expense
----------
shall be prorated and adjusted on an accrual basis taking into account all
prepaid expenses and accounts payable and other debts 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, if any, for the tax period in which the Closing
occurs shall be apportioned between Seller and Purchaser on a per diem basis
through and including 11:59 P.M. of the day preceding the Closing Date. If the
rate or amount of such taxes and sewer rents, if any, shall not be fixed prior
to the Closing Date, the adjustment thereof on the Closing Date shall be 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 tax period in which the Closing
occurs. As soon as the exact amount of such taxes, assessments and rents for
such period is ascertained, Seller and Purchaser shall readjust the amounts
thereof to be paid by each party to the end that Seller shall pay for such
taxes, assessments and rents attributable to the period of time prior to the
Closing Date and Purchaser shall pay for the period from and after the Closing
Date. Special assessments of any public or taxing authority assessed upon and
constituting liens or encumbrances on the Hotel, whether or not the 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 to the
extent due and payable on or prior to the Closing Date. If any such special
assessments 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; and Purchaser shall be responsible for special assessments levied
or assessed after the Closing Date and any other such special assessment levied
or assessed thereafter. With respect to any tax appeals which relate to the
period prior to the Closing Date, Purchaser covenants to pay to Seller upon
receipt thereof Seller's prorata share of any tax rebate, refund or adjustment.
Purchaser shall cooperate with Seller with respect to Seller's reasonable
inquiries relative thereto.
(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; but Seller shall be responsible for the payment of
all accounts payable with respect to the Hotel relating to services rendered or
goods provided prior to the Closing Date and Purchaser shall be responsible for
the payment of all accounts payable with respect to the Hotel relating to
services rendered or goods provided on or after the Closing Date;
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(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) 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, 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 for the night before
Closing shall be apportioned fifty percent (50%) to Seller and fifty percent
(50%) to Purchaser. 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 Seller with banking institutions
are and shall remain the property of Seller and are not included in this sale
except for the cash and equivalents to be purchased by Purchaser at par. The
balance due on the city ledger and guest ledger and all other accounts
receivable of Seller as of the Closing Date ("Seller's Receivables") to the
extent received by Purchaser on behalf of Seller for a period of 90 days after
the Closing Date (the "Collection Period"). Any monies of Seller received by
Purchaser shall be held in trust by Purchaser for the benefit of Seller and
remitted to Seller promptly after receipt thereof by Purchaser without offset or
reduction. Seller shall, upon request, be provided with reasonable evidence and
documentation as to Purchaser's determination and collection of Seller's
Receivables. Purchaser shall not be obligated to commence any actions or
proceedings to collect any of the Seller's Receivables. If, at the expiration
of the Collection Period any of Seller's Receivables to be collected by
Purchaser have not been collected, Purchaser shall have no further obligation to
collect Seller's Receivables, but shall transfer the balance of Seller's
Receivables to Seller for collection;
(e) Supplies and Miscellaneous. No later than the day before closing,
--------------------------
Purchaser and Seller shall jointly conduct an inventory of all unopened and
unused food and beverage inventory at the Hotel. Said inventory shall be
updated by mutual agreement through the Closing Date. Seller shall receive a
credit equal to Sellers' cost of the unopened and unused food and beverage
inventory reflected on said inventory. Fees and expenses for coin machine
income and washroom and checkroom income;
(f) Deposits. Seller shall receive a cash credit in an amount equal
--------
to the sum of all Utility Deposits transferred to or accruing to the benefit of
Purchaser, and not
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retained by Seller at the Closing, and Purchaser shall receive a credit for all
reservation deposits, 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 not transferred to Purchaser at
Closing; and
(g) Sales Taxes. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel for the period
prior to the time of proration as set forth herein will be paid by Seller to the
end that Purchaser shall be liable to pay all such sales, use and occupancy
taxes due or to become due in connection with revenues for the period after the
time of proration. Seller and Purchaser shall pay their respective share of all
sales, use and occupancy taxes due or to become due in connection with revenues
apportioned between Seller and Purchaser as provided in Subsection (d) of this
Section. Seller shall be entitled to receive and Purchaser shall promptly remit
if sent to Purchaser any rebates or refunds on such taxes paid by Seller
attributable to the period prior to the Closing.
11.5 Closing Costs. Seller shall pay (i) the cost of preparing or
-------------
obtaining documents or consents to be delivered by Seller to Purchaser pursuant
to this Agreement (specifically excluding, however, any sums paid or, to be paid
to the franchiser as a prerequisite to the assignment of the Franchise), (ii)
all transfer taxes, conveyance taxes, documentary stamps, and other similar
taxes, fees or charges payable to any governmental authority as a result of the
transfer of the Hotel, (iii) any fees or costs incurred in order to convey the
Hotel free and clear of all liens, encumbrances, conditions and exceptions other
than the Permitted Exceptions, (iv) one-half of any escrow fee imposed by the
Title Company and (v) the fees and disbursements of its counsel. Purchaser
shall pay (i) the cost of updating and recertifying the Survey, (ii) recording
fees and charges required to record the Seller's Deed, (iii) any mortgage
recording taxes, documentary stamps, intangibles tax and other taxes, fees or
charges payable to any governmental authority as a result of any mortgage
financing obtained by Purchaser for the acquisition of the Hotel, (iv) the cost
of the Title Policy, including any endorsements thereto and any endorsements to
the Title Policies for the Other Hotels, (v) one-half of any escrow fee imposed
by the Title Company and (vi) the fees and disbursements of its counsel. Any
other expenses or charges incurred by the parties and not expressly addressed in
this Agreement shall be borne by the party incurring said expense or charge.
Other than payment of the items specifically listed in the first sentence of
this Section 11.5, payment of the debt owed to French Quarter Holdings, Inc.
("FQH") as evidenced by that certain letter agreement between FQH and Seller,
dated on or about May 31, 1996, as amended, payment of the brokerage commissions
as stated herein to be paid by Seller, prorations and adjustments as provided
herein, expenses incurred by Seller by its own initiation and costs and expenses
of achieving a Free and Clear Conveyance subject to the Permitted Encumbrances,
which costs shall be borne by Seller as herein provided, Seller shall not be
responsible for any other costs whatsoever incurred in connection herewith, and
Purchaser shall pay all other such costs, including, without limitation, the
items specifically listed in the second sentence of this Section 11.5,
prorations and adjustments as provided herein, environmental audit or review
expenditures, all costs and
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fees related to Purchaser's line of credit financing, and all other costs as
provided herein to be paid by Purchaser. Notwithstanding the foregoing, Seller
shall be responsible for all costs incurred solely because of Seller's willful
misconduct or gross negligence.
11.6 Reconciliation and Final Payment. Seller and Purchaser shall
--------------------------------
reasonably cooperate after Closing to make a final determination of the
prorations required hereunder no later than 180 days after the Closing. Upon
the final reconciliation of the prorations under this Section and Section 11.4,
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. It is the
intent of the parties that all items herein which are subject to the prorations
made pursuant to Article 11 shall result in Seller receiving all of the economic
benefits and burdens of the Hotel with respect to the period prior to the
Closing, and Purchaser receiving all of the economic benefits and burdens of the
Hotel with respect to the period from and after the Closing Date, except for the
50/50 split in room revenues for the night prior to the Closing. The
obligations to calculate such prorations, make such reconciliations and pay any
such sums shall survive the Closing.
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 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 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 except for those obligations herein expressly
provided as surviving the termination of 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 in value.
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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 actually
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 perform any of
its material obligations.or agreements 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 or when ratified
at Closing, then Seller, as its sole and exclusive remedy, shall have the right
to terminate this Agreement by giving Purchaser and the Escrow Agent 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 from the Escrow Agent 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 Letter of Credit 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 Letter of Credit 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 a default by Purchaser (i) Seller refuses or fails to consummate
the transaction contemplated by this Agreement, or (ii) otherwise fails in any
material respect to perform any of its material obligations or agreements
hereunder, or if any representation or warranty made by or on behalf of Seller
herein shall have been materially incorrect when made or when ratified at
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<PAGE>
Closing in violation of the terms hereof, 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, in which event the Letter of Credit shall be returned to
Purchaser by the Title Company promptly upon receipt of such notice; or
(b) Seek damages (but only if Seller's default is due to Seller's
intentional and willful refusal to close) 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 materially 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 Materiality. The parties acknowledge and agree that it is their
-----------
intention for purposes hereof that any analysis or determination as to the
materiality of a breach or violation of this Agreement shall be conducted only
by taking into consideration the materiality of such breach or violation in
light of the Purchase Price for the Hotel and the purchase prices of the Other
Hotels, so that the totality of the contemplated three (3) hotel transaction be
taken into account.
13.4 Cross-Default.
-------------
(a) Notwithstanding anything contained herein to the contrary, any
breach, default or violation of this Agreement by Purchaser whatsoever shall
constitute and for all purposes be automatically deemed a default under both of
the purchase agreements for the Other Hotels dated of even date herewith (as
amended from time to time).
(b) Notwithstanding anything contained herein to the contrary, in
the event that the Closing of the purchase and sale of either or both of the
Other Hotels is not consummated because of any breach, default or violation by
FQS or SNA under the purchase agreements for, respectively, the French Quarter
Suites and the Sheraton Four Points, other than a failure to obtain the consent
of (i) State Street Bank and Trust Company to the assignment and assumption of
the First Mortgage on the French Quarter Suites (as described in Section 8.5 of
the purchase agreement for such hotel), or (ii) Lincoln National Life Insurance
Corporation to the early prepayment of the First Note secured by the First
Mortgage on the Sheraton Four Points (as described in Section 8.5 of the
purchase agreement for such hotel) (provided that each such failure is not a
default under this Agreement), the Purchase Price hereunder shall remain Twenty-
Five Million, Fifty Thousand Dollars ($25,050,000), subject to adjustments as
provided herein.
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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 Neilston
Investments Ltd. and Development Resources International Limited (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 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 for the
period prior to the Closing Date.
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
Intentionally Omitted
ARTICLE 16
Miscellaneous
16.1 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, addressed to the party for which such notice, demand or
communication is intended at such party's address as set forth in this Section,
and sent by any national or international overnight
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receipted courier service and by electronically confirmed facsimile
transmission. Purchaser's address for all purposes under this Agreement shall
be the following:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality Corporation
3860 West Northwest Highway, Suite 300 Dallas, Texas 75220
Attention: Steven D. Jorns, President or Kenneth E. Barr, Executive Vice
President
Fax No. (214) 351-0568
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Douglas A. Raelson, Esq.
Fax No. (212) 856-7806
Seller's address for all purposes under this Agreement shall be the following:
c/o Regent Investments Ltd.
1, Hashikma Street
P. O. Box 51
Savion 56530, Israel
Attention: Mr. Raanan G. Ben-Zur
Fax No. 011-972-3-5350448
with a copy to:
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Keith E. Linch, Esq. and Jeffrey B. Berg, Esq.
Fax No. (404) 873-8737
Any address or name or facsimile number 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 or the facsimile confirmation.
The inability to deliver because of changed address or facsimile number 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. Notices, demands and other communications may be given by
the
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parties' counsel which shall have the same force and effect as if given by the
parties themselves.
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 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 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. Purchaser may assign its rights under this
----------------------
Agreement to any limited partnership, limited liability company or other entity
controlling, controlled by or under common control with Purchaser for the
purpose of purchasing the Hotel or implementing the REIT so long as Purchaser
provides written notice thereof to Seller prior to Closing. 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.
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 where the Hotel is located.
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 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 OF EACH AND EVERY PROVISION OF THIS AGREEMENT.
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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. Facsimile
signature pages shall be acceptable provided originals are posted promptly after
execution.
16.9 Survival. All covenants, agreements and indemnities contained in
--------
the Agreement which expressly 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 one (1) year. None
of the foregoing shall be deemed to merge into, or be waived by, Seller's Deed
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 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.
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, 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 reasonable attorneys' fees, expended or
incurred in connection therewith.
16.13 REIT Audits. Seller acknowledges and agrees that the REIT, through
-----------
its independent accountants, may conduct an audit of the REIT's financial
statements for purposes of the REIT complying with its public reporting
obligations under the Securities and Exchange Act of 1934, as amended (the
"Securities Act"). In connection therewith, Seller agrees that for a period of
twelve (12) months after the Closing Date, Seller shall cooperate and assist,
and to cause each of its Affiliates, its employees and representatives,to
cooperate and assist, in such audit in all respects reasonably requested by the
REIT and its independent accountants, including making Raanan G. Ben-Zur and/or
Charles T. Pyles available to
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provide any information necessary or appropriate for such audits and signing
standard management representation letters to the REIT's independent accountants
and to the REIT.
16.14 RADON GAS NOTICE. PURSUANT TO FLORIDA STATUTES SECTION 404.056(7),
----------------
SELLERS HEREBY MAKE, AND PURCHASER HEREBY ACKNOWLEDGES, THE FOLLOWING
NOTIFICATION:
RADON GAS: RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS
ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSON WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT
EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN
FLORIDA. ADDITIONAL INFORMATION REGARDING RADON AND RADON TESTING MAY BE
OBTAINED FROM YOUR COUNTY PUBLIC HEALTH UNIT.
16.15 Tax-Deferred Exchange. Purchaser and Seller acknowledge that Seller
---------------------
may desire to structure its disposition of the Property in a manner intended by
it to constitute an exchange of the Property for property of a like kind
("Replacement Property") that is described in Section 1031 of the Internal
Revenue Code of 1986, as amended (an "Exchange"). Notwithstanding anything in
this Agreement to the contrary, Seller shall have the right to assign (provided
such assignment does not affect Seller's or Purchaser's rights and obligations
under this Agreement) its interest in this Agreement without Purchaser's consent
to such person or entity as Seller may designate to serve as a "qualified
intermediary" (within the meaning of Treasury Regulation (S)1.103(k)-1(g)(4))
for the sole purpose of enabling Seller to effect such an Exchange; provided,
however, that notwithstanding any such assignment, Seller shall not be released
from any of its liabilities, obligations or indemnities under this Agreement.
Purchaser shall cooperate in all reasonable respects with Seller to effect any
Exchange; provided however, that (a) Seller's ability to consummate an Exchange
shall not be a condition to the obligations of Seller under this Agreement, and
Purchaser does not warrant and shall not be responsible for any of the tax
consequences to Seller with respect to the transactions contemplated hereunder;
(b) Purchaser shall not be required to enter into any document or agreement (or
take title to any property) with respect to Seller's acquisition of any
Replacement Property; and (c) Purchaser shall not be required to incur any
additional cost or expense (including, without limitation, legal fees or taxes
of any kind) as a result of any Exchange. This paragraph shall survive Closing
without limitation.
16.16 Covenant of French Quarter Holdings, Inc. FQH, an affiliate of
-----------------------------------------
Seller, is the parent corporation of FQS and SNA. In consideration of Purchaser
entering into the purchase agreements for the Other Hotels, FQS is entering into
this Agreement for the sole purpose of making the following representations,
warranties and covenants, all of which are deemed to be a material inducement to
Purchaser to enter into this Agreement:
(a) FQH hereby guarantees the truth and accuracy, in all material
respects, of, and the full and prompt performance, in all material respects, by
Seller of, all
-37-
<PAGE>
representations, warranties, covenants, indemnities, agreements and promises of
Seller hereunder which survive the Closing and the delivery of the deed.
(b) FQH acknowledges and agrees that it shall not distribute assets
to its shareholders if such distribution would cause FQH's consolidated net
asset value on a fair market value basis to fall below $5,000,000 (according to
audited financial statements prepared by a nationally recognized accounting
firm) for twelve (12) months following the Closing.
-38-
<PAGE>
[Signature Page for Sherton Key Largo.]
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
SELLER:
SKL OF FLORIDA, INC.,
a Florida corporation
By:______________________________
Name:____________________________
Title:___________________________
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada corporation, its
general partner
By:______________________________
Name:____________________________
Title:___________________________
WITH RESPECT TO SECTION 11.2(Q) ONLY:
REGENT INVESTMENTS LTD.,
an Israel corporation
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE>
[Signature Page for Sherton Key Largo.]
WITH RESPECT TO SECTION 16.16 ONLY:
FRENCH QUARTER HOLDINGS, INC.,
a Georgia corporation
By:______________________________
Name:____________________________
Title:___________________________
-40-
<PAGE>
List of Exhibits
- ----------------
Exhibit A - Legal Description of Land
Exhibit B - Excluded Assets
Exhibit C - Capital Program
Exhibit D - Form of Tenant Estoppel Letter
Exhibit E - Form of Audit Representation Letter
The exhibits and/or schedules identified above which comprise a part of this
Exhibit 2.11 have not been included as part of this Exhibit. The Registrant
agrees to furnish supplementally a copy of such omitted schedule or exhibit upon
request.
-41-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
A-1
<PAGE>
EXHIBIT B
EXCLUDED ASSETS
B-1
<PAGE>
EXHIBIT C
CAPITAL PROGRAM
C-1
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
WHEREAS,___________________________, ________________________ ("Landlord"),
as landlord, and__________("Tenant"), as tenant, entered into that certain lease
(the "Lease"), dated_____, 19__ of certain premises more particularly described
in the Lease (the "Premises").
NOW, THEREFORE, Tenant hereby certifies as follows:
1. True and complete copies of the Lease and all agreements,
amendments, guarantees, side letters and other documents relating thereto are
attached hereto as Exhibit A and made a part hereof, and there are no other such
---------
agreements or documents.
2. The Lease has not been modified (except pursuant to documents attached
hereto as part of Exhibit A and is in full force and effect.
---------
3. The Lease has not been assigned, mortgaged, pledged, or otherwise
encumbered, nor has all or any portion of the Premises been sublet.
4. Rent, additional rent and percentage rent required to be paid under
the Lease have been paid through _____________________.
5. Tenant has accepted possession of and is now occupying the Premises.
6. To Tenant's knowledge, there exist no defaults on the part of Landlord
under the Lease; nor has any event occurred which, with the passage of time or
the giving of notice or both, would constitute a default by Landlord thereunder,
nor has Landlord suffered or permitted the occurrence of any such event.
7. Tenant has no offset, defense, claim or counterclaim, including,
without limitation, claims to "free" rent, concessions, rebates, or abatements
in rent, under the Lease.
8. The expiration date of the term of the Lease is and, except as set
forth in the documents attached hereto as Exhibit A, Tenant has no option to
renew the Lease or otherwise extend the term of the Lease.
9. Tenant has no option to purchase the Premises or any portion thereof,
or the building in which the Premises are located.
10. Tenant has no option to lease any other space in the building in which
the Premises are located.
D-1
<PAGE>
11. Any and all work to be performed by Landlord under the Lease has been
completed in accordance with the Lease and has been accepted by Tenant and all
reimbursements and allowances due to Tenant under the Lease in connection with
any work have been paid in full.
12. Tenant has deposited the sum of $______ with Landlord as security for
the performance of Tenant's obligations under the Lease.
13. This certificate is binding upon the undersigned and may be relied
upon by Landlord, by any prospective purchaser of the Premises, and by any
lender making a loan to such purchaser secured by a mortgage on the building in
which the Premises are located.
IN WITNESS WHEREOF, Tenant has duly executed this certificate this day of
_________________, 19___.
[TENANT NAME]
By:______________________________
Name:___________________________
D-2
<PAGE>
EXHIBIT E
AUDIT REPRESENTATION LETTER
CURRENT DATE
Coopers & Lybrand, L.L.P.
1999 Bryan Suite 3000
Dallas, Texas 75201
Gentlemen:
In connection with your audits of the trial balances of [NAME OF HOTEL] (the
"Hotel") as of [DATE] and [DATE] and for each of the three years in the period
ended [LATEST DATE], which will be combined with the other hotels to be acquired
by American General Hospitality Operating Partnership, L.P. and presented and
reported on as a group (the "Acquisition Hotels") for the purpose of expressing
an opinion as to whether the Acquisition Hotels financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of the Acquisition Hotels in conformity with generally accepted
accounting principles, we confirm, to the best of our knowledge and belief, as
of _____________________, the date of your report, the following representations
made to you during your audits.
Certain representations in this letter are described as being limited to those
matters that are material. Solely for the purpose of preparing this letter, the
term "material," when used in this letter, means any item or group of similar
items involving potential amounts of more than ____% of assets, liabilities,
shareholders' equity, or net income, as appropriate for the item. These
percentages are not intended to represent the materiality threshold for
financial reporting and disclosure purposes. Notwithstanding this, an item is
considered material, regardless of size, if it involves an omission or
misstatement of accounting information that, in the light of surrounding
circumstances, makes it probable that the judgment of a reasonable person
relying on the information would have been changed or influenced by the omission
or misstatement.
1. We are responsible for the fair presentation in the trial balances of
the financial position and results of operations of the Hotel in
conformity with generally accepted accounting principles.
2. We have made available to you all financial and accounting records and
related data and all minutes of the meetings of shareholders,
directors, and committees of directors [OR SUMMARIES OF ACTIONS OF
RECENT MEETINGS FOR WHICH MINUTES HAVE NOT YET BEEN PREPARED]. The
most recent meetings held were: [STATE BY GROUP AND DATE].
E-1
<PAGE>
3. There are no material transactions that have not been properly
recorded in the accounting records underlying the financial
statements.
4. There have been no:
a. Irregularities involving management or those employees who have
significant roles in the internal control structure.
b. Irregularities involving other employees that could have a
material effect on the financial statements.
c. Violations or possible violations of laws or regulations whose
effects should be considered for disclosure in the financial,
statements or as a basis for recording a loss contingency.
We understand the term "irregularities" to mean those matters
described in Statement on Auditing Standards No. 53.
5. There have been no communications from regulatory agencies concerning
noncompliance with or deficiencies in financial reporting practices
that could have a material effect on the trial balances in the event
of noncompliance.
6. The Hotel has complied with all aspects of debt and other contractual
agreements that would have a material effect on the trial balances in
the event of noncompliance.
7. The Hotel has satisfactory title to all owned assets. All liens,
encumbrances and security interests requiring disclosure in the trial
balances have been properly disclosed.
8. The receivables recorded in the trial balances represent the valid
claims against guests for charges arising on or before the balance
sheet date and are not subject to discount. These receivables have
been appropriately reduced to their estimated net realizable value.
9. Provision has been made to reduce excess or obsolete inventories to
their estimated net realizable value.
10. There are no material liabilities or gain or loss contingencies that
are required to be accrued or disclosed by Statement of Financial
Accounting Standards No. 5 that have not been accrued or disclosed.
There are no unasserted claims or assessments that our legal counsel
has advised us are probable of assertion and must be disclosed in
accordance with that Statement.
E-2
<PAGE>
11. Commitments for future purchases are for quantities not in excess of
anticipated requirements and at prices that will not result in loss.
Provision has been made for any material loss to be sustained in the
fulfillment of, or from the inability to fulfill, any sales
commitments.
12. We have no plans or intentions that may materially affect the carrying
value or classification or assets and liabilities.
13. The following have been properly recorded or disclosed in the trial
balances [IF NONE, INCLUDE UNDER A SEPARATE ITEM WITH THE INTRODUCTION
"THERE ARE NO..."]:
a. Related-party transactions and related amounts receivable or
payable, including sales, purchases, loans, transfers, leasing
arrangements, and guarantees.
(We understand the term "related party" to include those entities
described in Statement of Financial Accounting Standards No. 57.)
b. Capital stock repurchase options or agreements or capital stock
reserved for options, warrants, conversions, or other
requirements.
c. Arrangements with financial institutions involving compensating
balances, arrangements involving restrictions on cash balances
and lines of credit, or similar arrangements.
d. Financial instruments with off-balance-sheet risk and financial
instruments with concentrations of credit risk.
e. Guarantees, whether written or oral, under which the Hotel is
contingently liable to a bank or other lending institution.
f. Estimates for which both (a) it is at least reasonably possible
that the estimates will change in the near future (i.e., within
one year from the date of the trial balances) due to one or more
future confirming events, and (b) the effect of the change would
be material to the trial balances.
g. Concentrations that make the entity vulnerable to the risk of a
near term severe impact and for which it is at least reasonably
possible that events that could cause the severe impact will
occur in the near term. For the purpose of this letter, a
"severe impact" is a significant financially disruptive effect on
the normal functioning of the entity.
E-3
<PAGE>
[ADD SPECIAL-PURPOSE REPRESENTATIONS THAT MAY BE REQUIRED IN THIS LETTER IN
CERTAIN CIRCUMSTANCES, E.G., A STATEMENT THAT A VALUATION ALLOWANCE AGAINST
DEFERRED TAX ASSETS ARISING AFTER THE BALANCE SHEET DATE REPRESENTS MANAGEMENT'S
BEST ESTIMATE BASED ON THE WEIGHT OF AVAILABLE EVIDENCE AS PRESCRIBED IN FAS 109
OR A POSITIVE STATEMENT THAT NO SUCH ALLOWANCE IS NECESSARY. SEE OTHER EXAMPLES
AT ASM 300.]
No events have occurred subsequent to the balance sheet date that would require
adjustment to, or disclosure in, the trial balances.
____________________________________________
[Name and title of chief executive officer]
_____________________________________________
[Name and title of chief financial officer]
E-4
<PAGE>
EXHIBIT 2.12
HOTEL PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. OR ITS ASSIGNS
as Purchaser
and
FRENCH QUARTER SUITES, 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 [INTENTIONALLY OMITTED]........................................ 5
3.3 Earnest Money.................................................. 6
3.4 Simultaneous Acquisitions...................................... 6
ARTICLE 4 Title Deliveries............................................... 6
4.1 Title Commitment............................................... 6
4.2 Survey......................................................... 7
ARTICLE 5 Hotel Documents, Inspecting and Objections..................... 7
5.1 Inspections.................................................... 7
5.2 Hotel Documents................................................ 8
5.3 Purchaser's Review Period Termination Right.................... 10
5.4 Operational Licenses........................................... 10
5.5 Procedure for Purchaser's Objections........................... 11
5.6 Permitted Exceptions........................................... 11
ARTICLE 6 Confidentiality................................................ 11
6.1 Press Releases................................................. 11
6.2 Confidentiality................................................ 12
ARTICLE 7 Leases, FF&E Leases, and Service Contracts..................... 12
7.1 Schedules...................................................... 12
ARTICLE 8 Operation of Hotel............................................. 13
8.1 Interim Operation.............................................. 13
8.2 Capital Program................................................ 15
8.3 Mechanics Liens................................................ 15
8.4 Notices of Violation........................................... 15
8.5 Third Party Consents........................................... 16
8.6 Estoppel Letters............................................... 16
8.7 Management Agreement Termination............................... 16
8.8 Hotel Employees................................................ 16
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.9 Shadow Management.............................................. 17
8.10 Access to Records and Financial Information.................... 17
ARTICLE 9 Representations and Covenants.................................. 18
9.1 Representations by Purchaser................................... 18
9.2 Representations by Seller...................................... 19
9.3 Subsequent Developments........................................ 21
9.4 Limitation on Further Sales Efforts............................ 22
9.5 Seller's Indemnity............................................. 22
9.6 Purchaser's Indemnity.......................................... 22
9.7 Liquor Licenses................................................ 22
ARTICLE 10 Conditions Precedent to the Closing............................ 23
10.1 Seller's Obligations........................................... 23
10.2 Seller's Representations, Warranties
and Covenants................................................ 23
10.3 Transfer Subject Only to Permitted Exceptions.................. 23
10.4 Consent of Boards of Directors................................. 23
10.5 Consent of First Mortgagee..................................... 23
10.6 Simultaneous Closings.......................................... 24
ARTICLE 11 Closing and Closing Documents.................................. 24
11.1 Closing........................................................ 24
11.2 Seller's Deliveries............................................ 24
11.3 Purchaser's Deliveries......................................... 26
11.4 Prorations..................................................... 27
11.5 Closing Costs.................................................. 29
11.6 Reconciliation and Final Payment............................... 30
ARTICLE 12 Casualty and Condemnation...................................... 30
12.1 Risk of Loss; Notice........................................... 30
12.2 Purchaser's Termination Right.................................. 30
12.3 Procedure for Closing.......................................... 31
ARTICLE 13 Default and Remedies........................................... 31
13.1 Purchaser's Default............................................ 31
13.2 Seller's Default............................................... 32
13.3 Materiality.................................................... 32
13.4 Cross-Default.................................................. 32
ARTICLE 14 Brokers........................................................ 33
14.1 Identity of Brokers............................................ 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
14.2 Indemnification by Seller...................................... 33
14.3 Indemnification by Purchaser................................... 33
ARTICLE 15 Intentionally Omitted.......................................... 34
ARTICLE 16 Miscellaneous.................................................. 34
16.1 Notices........................................................ 34
16.2 Entire Agreement, Modifications and Waivers,
Cumulative Remedies.......................................... 35
16.3 Exhibits....................................................... 35
16.4 Successors and Assigns......................................... 35
16.5 Article Headings............................................... 36
16.6 Governing Law.................................................. 36
16.7 Time Periods................................................... 36
16.8 Counterparts................................................... 36
16.9 Survival....................................................... 36
16.10 Further Acts................................................... 36
16.11 Severability................................................... 36
16.12 Attorneys' Fees................................................ 37
16.13 REIT Audits.................................................... 37
16.14 Tax-Deferred Exchange.......................................... 37
16.15 [INTENTIONALLY DELETED]........................................ 37
16.16 Covenant of French Quarter Holdings, Inc....................... 38
</TABLE>
-iii-
<PAGE>
FRENCH QUARTER SUITES
HOTEL PURCHASE AGREEMENT
THIS HOTEL PURCHASE AGREEMENT (this "Agreement") is made as of this 31st
day of December 1996 by and between FRENCH QUARTER SUITES, INC., a Georgia
corporation, ("Seller"), and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership, together with its successors and assigns
("Purchaser").
RECITALS:
A. Seller is the owner of the Hotel (as hereinafter defined) known as the
French Quarter Suites located in Atlanta, Georgia.
B. Seller desires to sell the Hotel to Purchaser, and Purchaser desires to
purchase the Hotel from Seller, on the terms and conditions hereinafter set
forth.
C. Contemporaneously with the execution of this Agreement, Purchaser is
entering into other purchase agreements to acquire two (2) other hotels commonly
know as the Sheraton Four Points Hotel Atlanta, located in Marietta, Georgia
("Sheraton Four Points"), and the Sheraton Key Largo Hotel, located in Key
Largo, Florida ("Sheraton Key Largo"), respectively owned by SNA of Georgia,
Inc. ("SNA") and SKL of Florida, Inc. ("SKL"), affiliates of Seller (the
Sheraton Four Points and the Sheraton Key Largo are collectively referred to
herein as the "Other Hotels").
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 and convey the Hotel to Purchaser
and Purchaser agrees to purchase and accept 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 real property located at 2780 Whitley Road, Atlanta, Georgia,
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 any way appertaining thereto
(collectively the "Land");
(b) The 8 story, 155 suites and guest rooms hotel and all other
buildings, structures, fixtures, parking areas, and other improvements presently
affixed to the Land (collectively, the "Improvements");
(c) All right, title and interest of Seller in 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 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 copy machines, computers,
software, facsimile machines and other office equipment; 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, serving pieces and other restaurant and bar
equipment, apparatus and utensils (collectively, the "FF&E"). Seller agrees
that between the date of December 5, 1996 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, and provided that
such discarded items are replaced with items equal or greater in value to the
original value of such discarded items;
(d) All right, title and interest of Seller in all merchandise,
supplies, inventory 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 located within or relating to the
Improvements, including, without limitation, all food and beverage (alcoholic
and nonalcoholic) inventory, 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
-2-
<PAGE>
(collectively, the "Supplies"). Seller agrees that between the date of December
5, 1996 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. Purchaser agrees to credit Seller at Closing for
Seller's cost of all unopened and unused Supplies constituting food and beverage
inventory, and such unopened and unused food and beverage inventory shall not be
considered included within the Purchase Price;
(e) All right, title and interest of Seller in all leases, "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"). Purchaser shall assume in writing all
Leases at Closing;
(f) All prepaid rents and deposits held by Seller or its managing
agent, 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 cash portion of the Purchase Price (as defined below) in an
amount equal to the Deposits;
(g) To the extent assignable in accordance with applicable law and
agreement, any and all of Seller's right, title and interest in 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:
(i) Contracts and agreements, such as operations-related service
or maintenance contracts, restaurant consulting, utility contracts,
contracts for the purchase of supplies, insurance contracts, airline
agreements, corporate account agreements, travel agency agreements,
telephone service agreements, cable service agreements and yellow pages or
other advertising agreements (collectively, the "Service Contracts").
Purchaser shall execute a written assumption of all of the Service
Contracts except any management agreement with Innovative Hospitality
Management, Inc. ("IHM"). Purchaser shall bear the cost of any termination
fees on any of the Service Contracts;
(ii) Warranties, guaranties, indemnities, and claims for the
benefit of Seller relating to the FF&E or the Improvements (collectively
the "Warranties");
-3-
<PAGE>
(iii) Licenses (including without limitation liquor, beer,
wine, bar and similar licenses and excluding the Franchise Agreement),
permits (including without limitation occupational, health, swimming pool
and elevator 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, Seller's interest in the name "French
Quarter Suites" including, but not limited to, any rights pursuant to any
registration of such name with state or local authorities or elsewhere, any
agreement between Seller or Seller's predecessor-in-interest and any one or
more third parties regarding use of such name, otherwise unprotected trade
styles and other identifying material, and all variations thereof, together
with all related goodwill (collectively, the "Tradenames").
(v) 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");
(vi) Leases of any FF&E and other contracts permitting the use of
any FF&E at the Improvements, all of which shall be assumed by Purchaser at
Closing (collectively, the FF&E Leases");
(h) To the extent transferable, Seller's interest, if any, in the
right to receive immediately on and after Closing water service, sanitary and
storm sewer service, electrical service, gas service, and telephone service on
and for the Land and Improvements in capacities that are 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 or other company for utility consumption after Closing,
including, but not limited to, the right to (i) present use of wastewater,
drainage, water and other existing utility facilities for the Land or
Improvements, (ii) all reservations of or commitments covering any such use,
and (iii) all deposits held by any such utility suppliers (the "Utility
Deposits"; all of the foregoing are referred to in this Agreement collectively
as the "Utility Reservations");
(i) 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, (iv) any leases of adjacent land of
facilities used in connection with the operation of the Hotel, and (v) the use
of all alleys,
-4-
<PAGE>
easements and rights-of-way, if any, abutting, adjacent or contiguous to or
adjoining the Land (collectively, the "Appurtenances");
(j) Copies and/or originals (to extent available from Seller's
existing files) of 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 ownership or use of 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 the original of any such material which constitutes a part of
Seller's consolidated or continuing business or financial records may be
retained by Seller; and
(k) 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").
Provided, however, that the items listed on Exhibit B hereto (the "Excluded
---------
Assets") shall not be considered part of the Hotel in that they will not be
transferred to Purchaser at Closing and are hereby excluded from the definition
of Hotel.
The Hotel shall be conveyed, assigned, and transferred to Purchaser at Closing
free and clear (a "Free and Clear Conveyance") of all mortgages, debts, liens,
encumbrances, except (i) for a certain Deed to Secure Debt and Security
Agreement (the "First Mortgage") held by State Street Bank and Trust Company
("State Street Bank"), as Trustee for J.P. Morgan Commercial Mortgage Finance
Corporation, and the FUNB Loan Documents as hereinafter defined, and (ii) as
specifically provided in writing by Purchaser and as otherwise provided herein.
ARTICLE 3
Purchase Price
3.1 Purchase Price. The total price (the "Purchase Price") for which
--------------
Seller agrees to sell 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, is the sum of Eighteen Million Seventy-Five
Thousand Dollars ($18,075,000), subject to adjustments as herein provided, in
immediately available funds payable to Seller at the Closing. Seller and
Purchaser acknowledge that a portion of the Purchase Price will be paid by
Purchaser's assumption of the First Mortgage, such portion being equal to the
outstanding principal of that certain promissory note (the "First Note") secured
by the First Mortgage as of the Closing Date as documented by a written
statement from State Street Bank obtained by Seller on or before the Closing
Date.
3.2 [INTENTIONALLY OMITTED]
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3.3 Earnest Money. For the purpose of securing the performance of
-------------
Purchaser under the terms and provisions of this Agreement and the purchase
agreements for the Other Hotels and as a condition precedent to Seller's
obligations hereunder and thereunder, Purchaser shall post for deposit with
First American Title Insurance Company ("First American"), within three (3)
business days after the execution and delivery of this Agreement, an
unconditional, irrevocable letter of credit (the "Letter of Credit") in the
amount of $1,000,000 (the "Earnest Money") drawn on Bank One, Texas, N.A. in a
form reasonably acceptable to Seller. The Letter of Credit shall have an
expiration date of not earlier than April 30, 1997 and shall name Seller as the
beneficiary. First American shall act as escrow agent, and shall hold the
Letter of Credit in escrow pursuant to the terms of an escrow agreement (the
"Escrow Agreement") executed contemporaneously herewith. If the Closing Date is
adjourned for any reason and the expiration date of the Letter of Credit is
prior to the adjourned Closing Date, Purchaser shall, prior to the expiration
date of the Letter of Credit, deliver to First American an extension of the
Letter of Credit to a date which is not less than thirty (30) days past the
adjourned Closing Date. If the transactions contemplated by this Agreement are
not consummated in accordance with the terms hereof, the Letter of Credit shall
be disbursed pursuant to the terms of the Escrow Agreement. If the transactions
contemplated by this Agreement are consummated in accordance with the terms
hereof, the Letter of Credit shall be returned to Purchaser at the Closing.
3.4 Simultaneous Acquisitions. It is the parties' intention to close on
-------------------------
the acquisition of this Hotel simultaneously with the closing on the Other
Hotels pursuant to separate purchase agreements which are being entered into
between Purchaser and affiliates of Seller contemporaneously with the execution
of this Agreement. Unless Purchaser notifies Seller in writing prior to the
expiration of the Review Period, Purchaser shall be deemed to have elected and
agreed to acquire the Hotels (i.e., the Hotel and the Other Hotels) in a
simultaneous transaction and shall be obligated to do so. The Purchase Price
set forth above is predicated on the simultaneous acquisition by Purchaser (or
its assignee or designee) of all three (3) hotels. If Purchaser notifies Seller
prior to the expiration of the Review Period that it elects to acquire the
Hotel, but less than all three (3) of the Hotels (i.e., the Hotel and the Other
Hotels), the Purchase Price for this Hotel shall be increased to Nineteen
Million Five Hundred Seventy-Five Thousand Dollars ($19,575,000). As used in
this Agreement, the term "Purchase Price" shall refer to the amount set forth in
Section 3.1 or the amount set forth in this Section 3.4, whichever is
applicable.
ARTICLE 4
Title Deliveries
4.1 Title Commitment. On or before December 20, 1996, Seller shall
----------------
procure and deliver to Purchaser, at Seller's sole cost and expense therefor,
the following:
(a) A Commitment for Title Insurance (the "Title Commitment") issued
by First American, through Callaway Title and Escrow Services (the "Title
Company") on the most recent form of ALTA owner's policy, covering the Land and
Improvements, in the full
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amount of the Purchase Price allocable to the Land and the Improvements, setting
forth the current status of the title to the Land and Improvements, pursuant to
which the Title Company agrees, subject to satisfaction of the requirements of
the Title Commitment, 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.
(b) Copies of all documents and instruments (as recorded, where
applicable) (the "Supporting Documents") provided by the Title Company and
referred to or identified in the Title Commitment, including, but not limited
to, all deeds and other conveyance documents evidencing transfer of title into
Seller.
4.2 Survey. Prior to the execution of this Agreement, Seller has provided
------
to Purchaser its most recent "as built" survey (the "Survey") of the Land and
Improvements. Purchaser, at Purchaser's sole cost and expense, shall be
responsible for obtaining an updated survey from this or any other surveyor (the
"New Survey"). If the New Survey contains a different legal description than
the one described on Exhibit A attached to this Agreement, Seller shall, at
---------
Closing, in addition to the Seller's Deed set out in Section 11.2(a), execute in
favor of Purchaser a quitclaim deed which shall convey any interest of Seller in
the Land using the New Survey legal description. In addition, such description
shall be used in the Title Policy.
ARTICLE 5
Hotel Documents, Inspecting and Objections
5.1 Inspections. 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, to conduct soil
tests, environmental tests and inspections, and 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, or by
tenants) and to examine any books, records and other financial information
pertaining to the Hotel located at the Hotel. 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
other than Seller's default, 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, subject to the provisions of Article 6 below. All
visits to the Hotel shall be pre-arranged with Mr. Charles Bud Pyles (telephone
number 305-852-5553 or 770-980-1900) or Mr. Raanan Ronnie Ben-Zur (telephone
number 011-972-3-535-0447) ("Seller's Representatives"). Purchaser's agents and
representatives shall refrain from discussing their due diligence with any Hotel
employees other than those approved by "Seller's Representatives" and, with
respect to those Hotel employees whom Purchaser is expressly
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authorized to discuss the due diligence, Purchaser shall limit those discussions
to inquiries concerning the Hotel, and Purchaser shall not discuss the reason
for its inquiries. Purchaser shall and does hereby agree to indemnify, hold
harmless and defend Seller, its agents, officers, directors, and employees from
and against any and all out-of-pocket loss, damage, expense (including
attorneys' fees and court costs), claim, demand and the like arising in
connection with the access and/or inspection rights granted herein by Seller for
the benefit of Purchaser.
5.2 Hotel Documents.
---------------
(a) As soon as practicable but in no event later than December 20,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies of the following, together with all amendments,
modifications, renewals or extensions thereof:
(i) All Licenses;
(ii) All Service Contracts and a schedule of such Service
Contracts (the "Schedule of Service Contracts");
(iii) 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;
(iv) A list of all current Hotel employees and their salaries or
wages and a general description of the employment benefits available to the
employees as a group, and copies of all employment agreements and/or union
contracts, if any;
(v) The Franchise Agreement and a current deficiency report and
the two most recent inspection reports of the franchiser of the Hotel;
(b) As soon as practicable but in no event later than December 27,
1996, Seller, at Seller's sole cost and expense, will deliver to Purchaser true,
correct and complete copies 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) To the extent in Seller's possession and without any
requirement to compile any new statements, financial statements, balance
sheets, income statements, general ledgers (provided, however, that Seller
shall not be required to
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deliver copies of general ledgers to Purchaser but Seller shall allow
Purchaser and Purchaser's representatives reasonable access to on-site
copies of such general ledgers), 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 A. 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; B. expenses incurred for water,
electricity, natural gas, sewer and other utility charges; C. total rents
and revenues collected from tenants and from hotel guests and other patrons
of the Hotel; D. management fees; E. maintenance, repairs and other
expenses relating to the management and operation of the Hotel; F.
historical occupancy statistics for the Hotel; and G. all capital
expenditures made during the aforementioned periods;
(iii) 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;
(iv) To the extent available to Seller in its existing files, 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, subject to the terms of any agreements with the professionals who
rendered said reports, 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;
(v) A rent roll including for each Lease A. the name of the
tenant; B. the suite; C. the base rental rate; D. the amount of prepaid
rent; E. the amount of each security deposit; F. the applicable percentage
rental rate, if any, and the means of calculation thereof; G. the date of
the Lease; and H. the expiration date of the Lease;
(vi) To the extent in Seller's possession or control, all written
notices received from governmental authorities in connection with the
Hotel;
(vii) All FF&E Leases and a schedule of such FF&E Leases (the
"Schedule of FF&E Leases");
(viii) A schedule of the Deposits and the Utility Reservations
(the "Schedule of Deposits and Utility Reservations");
(ix) Copies of the existing insurance policies covering the
Hotel;
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(x) An unaudited balance sheet (the "Balance Sheet") of the
Hotel as of November 30, 1996 (the "Balance Sheet Date"), listing all
liabilities, accounts payable and accounts receivable of the Hotel as of
such date. The Balance Sheet will be prepared and certified by management
to be A. in accordance with the books and records of the Hotel, and B. to
fairly present the financial condition of the Hotel at the Balance Sheet
Date;
(xi) A schedule of any litigation, arbitration or
administrative proceedings pending or material threatened (in writing) with
respect to the Hotel; and
(xii) To the extent available from Seller's existing files, such
other documents or information as may be reasonably requested by Purchaser
no later than ten (10) days after Seller's receipt of a written request
therefor.
Seller shall promptly notify Purchaser in writing upon one of Seller's
Representatives learning of any material inaccuracy, misstatement or omission in
any of the information furnished to Purchaser and shall supply Purchaser with
updated information or schedules, as required.
5.3 Purchaser's Review Period Termination Right. Purchaser shall have
-------------------------------------------
until 5:00 P.M. Eastern Time on January 24, 1997 (the "Review Period"), to
evaluate the Hotel and the matters reflected in Sections 4.1, 4.2, 4.3, 5.1,
5.2, 5.4 and 9.7 and to obtain the approval of the boards of directors of
Purchaser and American General Hospitality Corporation (the "REIT") to the terms
and conditions of, and the transactions contemplated by, this Agreement. In the
event Purchaser shall determine, in Purchaser's sole discretion, that the
results of the inspection and review are unsatisfactory, or either of the
Purchaser or the REIT are unable to obtain the requisite approval of their
respective board of directors, or for any other reason whatsoever, Purchaser
shall have the right to terminate this Agreement upon written notice to Seller
delivered at any time on or before the expiration of the Review Period. Upon
the proper termination of this Agreement by Purchaser, the Letter of Credit
shall be returned to Purchaser and thereafter neither party shall have any
further obligation or liability to the other under this Agreement, except with
respect to those provisions which expressly provide for the survival of such
termination and for the obligation to pay the cost of repairs, if any, set forth
in Section 5.1 and the return of all of the materials delivered by Seller to
Purchaser under this Agreement. If Purchaser fails to notify Seller of its
election to terminate this Agreement on or before the expiration of the Review
Period, then the Earnest Money shall be non-refundable to Purchaser, except to
the extent otherwise provided in this Agreement.
5.4 Operational Licenses. During the Review Period Purchaser shall have
--------------------
obtained, or determined that it will be able to obtain, all permits, licenses,
approvals and other authorizations necessary or desirable to operate the Hotel
and all restaurants. bars and lounges presently located in the Hotel, including,
without limitation, the Liquor Licenses (hereinafter defined in accordance with
Section 9.7 hereof. To that end, Sellers and
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Purchaser shall cooperate with each other, and each shall execute such transfer
forms, license applications and other documents as may be necessary or customary
for Purchaser or its designees to obtain such permits, licenses, approvals and
other authorizations.
5.5 Procedure for Purchaser's Objections. At any time during the Review
------------------------------------
Period Purchaser may notify Seller in writing (an "Objection Notice") of any
objections Purchaser may have with respect to the Hotel or to any 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, or to the results of the inspections, tests, and studies
under Section 5.1 and any other tests or inspections of the Hotel made by
Purchaser, or to any Service Contracts, Leases, FF&E Leases, or Licenses or any
other matters pursuant to Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.4 and 9.7. If
Purchaser shall so notify Seller of any objections, Seller may elect to cure any
or all such objections by giving Purchaser notice of its intent to cure,
whereupon Seller shall be obligated to cure or remove the objections identified
in its notice on or before the Closing Date. In no event shall Seller be
obligated to cure any objections of Purchaser, except that Seller shall be
obligated to remove any existing mortgages, other than the First Mortgage, and
other monetary liens encumbering the Hotel not caused or created by Purchaser,
as well as any other encumbrances created by Seller after the date hereof. In
the event Purchaser has not elected to terminate this Agreement pursuant to
Section 5.3, any condition, circumstance, document or other materials whatsoever
concerning the Hotel which is not expressly addressed by Purchaser in an
Objection Notice prior to the expiration of the Review Period shall be deemed
accepted by Purchaser for all purposes hereunder, and further shall be deemed
Permitted Exceptions notwithstanding anything contained herein to the contrary.
By Closing, Seller shall, at Seller's expense, cancel any and all management
agreements with respect to the operations of the Hotel.
5.6 Permitted Exceptions. Any title exceptions, test items, or deliveries
--------------------
or other items to which the Purchaser does not object in accordance with Section
5.5 shall be deemed "Permitted Exceptions", and, in addition, any title
exceptions, test items, or deliveries to which Purchaser objects that are not
cured and any other conditions permissible hereunder shall, upon consummation of
the Closing, be thereafter deemed and hereinafter referred to as "Permitted
Exceptions".
ARTICLE 6
Confidentiality
6.1 Press Releases. Prior to the end of the Review Period, either Seller
--------------
or Purchaser or their respective Affiliates may refer to this Agreement and the
transactions contemplated hereby in any filing pursuant to securities laws or
stock exchange listing obligations or as required by law or advised by counsel
to be in accordance with law. After the end of the Review Period, either Seller
or Purchaser or their respective Affiliates may issue press releases, and may
refer to this Agreement and the transactions contemplated hereby in any filing
pursuant to securities laws or stock exchange listing obligations or as
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required by law or advised by counsel to be in accordance with law, provided
that, with respect to any press release, (i) Purchaser and Seller have each
provided the other with an opportunity to review and comment upon such release,
although any changes to such release suggested by the other party shall be made
in the sole discretion of the party submitting it for review. Purchaser and
Seller can disclose this Agreement to their respective advisors, consultants and
executive employees to the extent necessary in order to expedite their
obligations hereunder. As used in this Agreement "Affiliate" shall have the
meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under
the Securities and Exchange Act of 1934, as amended, and/or applicable Israeli
securities laws, and, when used in connection with Seller or Purchaser shall
include each officer, director, and partner thereof.
6.2 Confidentiality. Except to the extent otherwise provided herein,
---------------
required by law or advised by counsel to be in accordance with law, or expressly
addressed by Section 6.1, until the consummation of the transactions
contemplated by this Agreement, the parties hereto shall hold, and shall cause
each of their respective Affiliates to hold, all information and documents
obtained in connection with the transactions contemplated hereby confidential
including, any oral and written information concerning the Seller and the Hotel
received from the Seller or from a third party at the direction of the Seller
(collectively the "Due Diligence Material"). The Due Diligence Material shall
not be disclosed, discussed or made known without the prior written consent of
the Seller, except to the Purchaser's or the Purchaser's board of directors',
Purchaser's lender and its counsel, any hotel franchisors with whom Purchaser is
negotiating a franchise license agreement, any marketing company employed to do
feasibility studies, or any investment banking, accounting or legal advisers, or
any environmental or engineering consultants with whom Purchaser desires to
consult in connection with the proposed transaction. If the purchase and sale
contemplated hereby are not consummated for any reason whatever, each party
hereto shall, as soon as practicable but no later than fifteen (15) days after
the Closing Date, return all such information and documents (and any copies
thereof in such party's possession) to such other party hereto.
ARTICLE 7
Leases, FF&E Leases, and Service Contracts
7.1 Schedules. Subject to Section 9.3, Seller hereby warrants,
---------
represents, and certifies unto Purchaser that (i) the Schedule of Service
Contracts, Schedule of FF&E Leases, Schedule of Leases, and Schedule of Deposits
and Utility Reservations, when delivered on or before either December 20, 1996
or December 27, 1996 as provided in Sections 5.2(a) and 5.2(b), 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 contracts), and all Deposits,
Utility Deposits and Utility Reservations in effect at that time, (ii) 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
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extensions thereof), (iii) 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) there are and will
be no other written or oral agreements for the use or occupancy of the Hotel
binding on the Hotel or on Purchaser after Closing with any tenants, licensees,
franchisees, concessionaires or other persons or entities (collectively,
"Tenants", and individually, "Tenant") or any guarantors of the Tenants'
obligations (collectively "Guarantors", and individually, "Guarantor") other
than those disclosed by Seller or permitted under Section 8.1(e) of this
Agreement, (v) the Service Contracts, FF&E Leases, and Leases are in full force
and effect and, to Seller's knowledge, no material 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) no Tenant has made any claim of any right
of offset. The term "Tenant" shall refer only to tenants under Leases only and
not guests of the Hotel. It shall not be deemed a violation of this Section 7.1
if there exists a Service Contract which is not disclosed on the Schedule of
Service Contracts provided such Service Contract calls for monthly payments of
not more than $1,000 and termination upon forty-five (45) days.
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 for the relevant season as of the date of this Agreement in accordance
with Seller's prior practice, (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 the Franchise Agreement;
(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;
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(d) Keep, observe, and perform all its obligations under the Leases,
the FF&E Leases, the Service Contracts, the Licenses in a manner consistent with
prior practices (in particular, the license agreement between Seller and
Franchisor (as hereinafter defined) for the Hotel), and all other applicable and
material contractual arrangements relating to the Hotel;
(e) If Purchaser does not terminate this Agreement prior to expiration
of the Review Period, thereafter Seller shall not enter into any new agreements
of the nature of the Service Contracts, FF&E Leases, or Leases or any material
amendments, modifications, renewals or extensions of any existing Service
Contracts, FF&E Leases, or Leases without Purchaser's prior written consent,
except that Seller shall not be required to obtain Purchaser's consent to any
new agreement or any renewal or extension of existing agreements which may be
terminated on not more than forty-five (45) days' prior notice without cost or
expense. Prior to the expiration of the Review Period, Seller may enter into
new arms-length agreements of the nature of the Service Contracts, or any
amendments, modifications, renewals or extensions thereof in the ordinary course
of business without Purchaser's consent provided that Seller shall provide
Purchaser with a copy of any such instrument promptly after execution and
further provided that any such agreement may be terminated upon not more than
forty-five (45) days' prior notice without cost or expense;
(f) Not cause or permit the removal of FF&E from the Hotel except for
the purpose of discarding and replacing, where needed or appropriate, worn
items, and timely make all repairs, maintenance, and replacements to keep the
Hotel and all FF&E in good operating condition;
(g) Keep Supplies adequately stocked, consistent with Seller's current
business practice, as if the sale of the Hotel hereunder were not to occur;
(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 (in writing) after the
date of this Agreement, or if Seller's Representatives learn that any
representation or warranty contained in this Agreement has become materially
misleading or false;
(j) Not intentionally 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 other
than the Americans with Disabilities Act of 1990, as amended ("ADA"), it being
acknowledged by Purchaser that
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Seller is unaware of any violation thereof and that Seller shall have no
obligation to Purchaser to do anything further in connection therewith;
(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 or other right currently in
existence which is significant to the operation, use, occupancy or maintenance
of the Hotel to expire, be canceled or otherwise terminated without Purchaser's
prior written consent unless such License shall be renewed or re-obtained in the
ordinary course of business;
(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 except as may be consistent with prior practices, and continue to book
contracts and reservations consistent with prior practices;
(o) Pay or cause to be paid all taxes, assessments and other
impositions levied or assessed on the Hotel or any part thereof on or before the
date on which the payment thereof is delinquent; and
(p) Not voluntarily alter the existing insurance coverage for the
Hotel.
8.2 Capital Program. Seller hereby covenants and agrees that it will
---------------
complete, prior to the Closing Date, all of the work described in Exhibit C
---------
hereto (the "Capital Program") at Seller's sole cost and expense, subject to
receipt of applicable permits which Seller shall use best efforts to obtain.
8.3 Mechanics Liens. Seller hereby represents, warrants, and covenants
---------------
that all work required to be done prior to the Closing Date under the Capital
Program described above or the terms of any Lease or License has been or will be
performed and fully paid for by Seller prior to or contemporaneously with the
Closing in accordance with the Capital Program, and all mechanics' and
materialmen's liens arising from any labor or material furnished prior to the
Closing Date at the instance of Seller will be discharged or bonded so as to be
omitted from Purchaser's Title Policy.
8.4 Notices of Violation. Seller hereby covenants and agrees that all
--------------------
written 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
affecting the Hotel on or before the Closing Date of which Seller has actual
knowledge shall be promptly disclosed to Purchaser.
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8.5 Third Party Consents. Prior to the Closing Date, Seller and Purchaser
--------------------
shall each, at its own expense, use its best efforts and cooperate in good faith
with the other to obtain the written consent of State Street Bank (the "State
Street Bank Consent"), as Trustee under that certain Pooling and Servicing
Agreement, dated as of January 1, 1996, for J.P. Morgan Commercial Mortgage
Finance Corporation Mortgage Pass Through Certificates, Series 1996 - C2 by and
through the primary loan servicer, First Union Mortgage Corporation ("FUNB"), to
the assignment by Seller and the assumption by Purchaser's designee of the First
Mortgage and all other loan documents executed in connection with the existing
financing secured by, among other things, the Hotel (collectively, the "FUNB
Loan Documents"). Notwithstanding anything to the contrary contained herein,
the failure to obtain the State Street Bank Consent prior to the Closing Date
shall not be deemed to be a default hereunder by Seller or Purchaser.
8.6 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 D. 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 D.
---------
8.7 Management Agreement Termination. Seller hereby covenants to
--------------------------------
Purchaser that Seller shall terminate any agreement with Seller's existing
managing agent, and that as of the Closing Date there will be no management
agreement or other contract with respect to the management of the Hotel in
effect at the Hotel.
8.8 Hotel Employees. Seller represents, warrants and covenants to
---------------
Purchaser that Purchaser will in no way be liable for any employees, or for any
employment agreements or union contracts with respect to employees, working at
or for the Hotel prior to the Closing Date and during Seller's period of
ownership of the Hotel (the "Hotel Employees"). In particular, neither Seller
nor Seller's managing agent will, between the date hereof and the date of
Closing, enter into any new written employment or union contracts or similar
agreements with respect to any employee of the Hotel that will be binding on the
Purchaser on or after the Closing. Purchaser will not be obligated to pay any
amount to any Hotel Employees except upon their rehiring by Purchaser or an
agent or tenant of Purchaser. Purchaser shall not have any liability under any
pension or profit sharing plan that Seller or Seller's managing agent or any
other party (other than Purchaser's own plans or that of its agents or tenants)
may have established with respect to the Hotel or the Hotel Employees. 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 benefits, deferred compensation, savings pension, profit sharing,
401K, and retirement plan, and insurance and other benefits through the day
preceding the Closing Date of all Hotel Employees, whether or not employed by
Purchaser, and for all liabilities of whatever kind
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<PAGE>
with respect to all Hotel Employees who are not employed by Purchaser. Seller
hereby indemnities, defends and saves harmless Purchaser with respect to the
foregoing. Seller shall terminate or cause its managing agent to terminate the
Hotel Employees effective as of 11:59 p.m. on the day before the Closing Date
(it being understood that if for any reason the Closing does not occur, such
termination shall be deemed to be rescinded ab initio) and shall pay to such
---------
employees all amounts owed to such employees including amounts owed on account
of vested accrued and unpaid benefits including vested vacation pay and vested
sick leave. Purchaser shall cause all of those Hotel Employees it desires to
hire to be immediately rehired effective as of 12:01 a.m. on the Closing Date
(it being understood that if for any reason the Closing does not occur, such
rehiring shall be deemed void ab initio) upon such terms as Purchaser (or such
-- ------
other person or entity who may be responsible for the rehiring) may elect.
Notwithstanding anything stated herein to the contrary, Purchaser shall endeavor
to rehire a sufficient number of Hotel Employees so as to avoid a violation of,
or cause the applicability of, the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. (S) 2101 et seq. (the "WARN Act"), and Purchaser hereby
-- ----
indemnifies, defends and saves harmless Seller for all costs and expenses
(including attorneys' fees) caused by a WARN Act violation in the control of or
reasonably avoidable by Purchaser. Purchaser shall be responsible for all
employee obligations in respect of the rehired Hotel Employees arising from and
after such rehiring. Seller hereby agrees that neither it nor its managing
agent shall induce or solicit any Hotel Employee to be hired by any affiliate of
the Seller or its managing agent but specifically excluding Charles T. Pyles and
any Hotel Employee whom Purchaser decides not to hire as of 12:01 a.m. on the
Closing Date. Each of Seller and Purchaser shall indemnify and hold the other
harmless from and against any loss, cost, expense (including reasonable
attorneys' fees and disbursements actually incurred), damage or liability any
such party may suffer by reason of the other's default under this Section.
8.9 Shadow Management. After expiration of the Review Period, Seller
-----------------
shall permit Purchaser to establish and maintain at its sole expense 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,
and (d) shall not be deemed to have assumed management responsibilities prior to
Closing by virtue of such shadow management.
8.10 Access to Records and Financial Information. Subject to the
-------------------------------------------
restrictions contained in Section 5.1 above, Purchaser and Purchaser's
authorized representatives and
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<PAGE>
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. Further, and not in limitation of
Section 5.2(ii) above, Purchaser's representatives shall have access to all
existing financial and other information relating to the Hotel to enable them to
prepare audited financial statements in conformity with Regulation S-X of the
Securities and Exchange Commission (the "SEC") and to enable them to prepare a
registration statement, report or disclosure statement for filing with the SEC
on behalf of the REIT and/or its affiliates. Prior to the end of the Review
Period, Seller shall also provide to Purchaser's representatives a signed
representation letter sufficient to enable an independent public accountant to
render an opinion on the financial statements related to the Hotel, such letter
to be substantially in the form of Exhibit E hereto. To the extent that the
---------
Financial Statements provided by Seller pursuant to Subsection 5.2(ii) hereof
for the current year do not include any period up to and including the Closing
Date, Seller shall, within twenty-five (25) days after the Closing Date, provide
Purchaser with monthly unaudited Financial Statements, including Balance Sheets
and income statements applicable to such period inclusive of the Closing Date.
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 will be true, 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 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; 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).
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<PAGE>
(c) Subject to Section 5.3 hereof, 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.
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 Georgia, 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, but is part of a U.S. based
real estate holding company).
(c) Subject to the State Street Bank Consent being obtained, none
among the entry into, the 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; nor
will any of the foregoing require the consent of any party not otherwise
provided for in this Agreement.
(d) There are no material leases, management agreements, leasing
agent's agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements individually or in the aggregate (i) to which Seller is a party
or an assignee, or (ii) binding upon the Hotel, relating to the ownership,
occupancy, operation or maintenance of the Land, Improvements, FF&E or Supplies,
except for those Service Contracts, Leases, FF&E Leases and material warranties
previously disclosed to Purchaser in writing and Service Contracts.
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<PAGE>
(e) Seller has received no written 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) No party has any right or option to acquire the Hotel or any
portion thereof, other than Purchaser.
(g) To the best of Seller's knowledge and belief, there are, with
respect to the Hotel or to Seller, no:
(i) pending arbitration proceedings or unsatisfied arbitration
awards, or judicial proceedings or orders respecting awards;
(ii) pending unfair labor practice charges or complaints,
unsatisfied unfair labor practice orders or judicial proceedings or orders
with respect thereto;
(iii) pending citations from 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;
(iv) condemnation proceeding pending or, to Seller's knowledge,
threatened with regard to all or any part of the Hotel other than the
conveyance to the Georgia Department of Transportation ("DOT") of
approximately 0.0070 acres of the Land pursuant to a Right of Way Deed
given by French Quarter Suites, Inc. to the DOT, dated August 6, 1996 and
recorded in Book 10013, Page 388, Cobb County, Georgia, and an accompanying
Quit Claim Deed given by State Street Bank and Trust Company, dated
November 12, 1996 and recorded November 25, 1996 in Book 10013, Page 384,
in connection with a project designated by the DOT as the Windy Hill
Reliever Project and numbered STP-9036(3); or
(v) other pending or threatened (in writing) or actual litigation
claims, charges, complaints, petitions or unsatisfied orders by or before
any administrative agency or court.
(all collectively, the "Pending Claims").
(h) Seller has received no Notice of Violations.
(i) 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 written notices, permits, licenses, registrations, certificates of
occupancy, applications, consents, zoning and/or building code restrictions,
variances, and/or other authorizations which are required for the use or
operation of the Hotel, (ii) except as disclosed in the Seller's deliveries
under
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<PAGE>
Section 5.2 hereof, 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, 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.
(j) To Seller's knowledge without inquiry, the use by Purchaser of any
of the Tradenames will not infringe any United States or state trademark,
service mark, or tradename laws existing at the Closing, or constitute
actionable appropriation of rights with respect to any other person, business or
entity.
(k) Seller has received no written notice that its use of the name
"French Quarter Suites" is in violation of any other party's rights or is an
infringement of any registration or other legally protected rights.
For purposes of this Agreement, the term "knowledge", "awareness", or other
phrase used herein to denote information of which the Seller has been informed
or is aware of, shall be limited to all information known or disclosed to the
following (herein referred to as the "Seller's Representatives") but without
independent inquiry: Charles T. Pyles, Raanan G. Ben-Zur and the present
department heads of the Hotel only.
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 of which Seller's Representatives become aware ("Subsequent
Developments") which would cause any of Seller's representations contained in
this Agreement to be no longer accurate in any material respect. If any such
subsequent development possibly causes a breach or violation of this Agreement,
Seller shall not be considered in breach or violation of this Agreement if
Purchaser (i) receives notice therefrom from Seller at least five (5) business
days prior to expiration of the Review Period and does not raise same in an
Objection Notice; or (ii) Purchaser consummates the acquisition of the Hotel,
upon the occurrence of either of which, such violation or breach shall be deemed
waived by Purchaser. Further, Seller shall have until January 15, 1997 to
confirm internally the accuracy of all representations, warranties, disclosures
and statements of Seller contained in this Section 9.2 or elsewhere in this
Agreement. If Seller discovers any inaccuracy in any such item, it shall not be
in breach or violation of this Agreement provided that Seller shall disclose
such item to Purchaser in writing by January 15, 1997.
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<PAGE>
9.4 Limitation on Further Sales Efforts. Seller shall 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.
9.5 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 liability, debt, act or cause of action occurring and accruing
prior to the Closing Date and arising from the ownership or operation of the
Hotel by Seller or its management agent prior to the Closing Date, including but
not limited to any claims by employees of Seller or third parties covered by
general liability insurance carried by Seller.
9.6 Purchaser's Indemnity. Purchaser agrees to indemnify and hold Seller
---------------------
harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees) which the Seller may suffer or incur by
reason of any liability, debt, act or cause of action occurring and accruing on
or subsequent to the Closing Date 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.
9.7 Liquor Licenses. If and to the extent expressly allowed by law, and
---------------
necessary because Purchaser has not obtained same by the Closing despite
diligent efforts to do so, Seller shall assign or cause to be assigned 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 at Closing as part of the Licenses. Purchaser or its lessee
or management company (hereinafter "Operator") for the Hotel shall execute such
forms, license applications and other documents as may be necessary for the
Operator to obtain all Liquor Licenses necessary to operate any restaurants,
bars and lounges presently located within the Hotel. If permitted under the
laws of the jurisdiction in which the Hotel is located, Operator shall execute
and file all necessary forms, applications and other documents (and Seller shall
reasonably cooperate with the Operator in filing such forms, applications and
other documents) with the appropriate liquor and alcoholic beverage authorities
so that such acquisition of the necessary Liquor Licenses shall take effect
simultaneously with or upon completion of Closing. If not so permitted,
Operator agrees that it will promptly execute all forms, all applications and
other documents required to effect such acquisition of such Liquor Licenses at
the earliest date reasonably practicable, consistent with the laws of the State
where the Hotel is located, in order that all Liquor Licenses may be acquired by
Operator. Operator's attempts to obtain the Liquor Licenses shall not diminish,
prior to the Closing, the full force and effect of the Liquor Licenses
maintained by Seller in its operation of the restaurants, lounges and bars
presently located within the Hotel. If such Liquor Licenses cannot be obtained
by Operator until after Closing, then Seller covenants and agrees that, if and
to the extent expressly allowed by law, Seller shall cooperate reasonably with
Operator in keeping open the bars and lounges and liquor facilities of the Hotel
between the Closing and the time when such Liquor Licenses are obtained by
Operator for a period not to
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<PAGE>
exceed forty-five (45) days following the Closing Date by entering into a
"Liquor License Agreement" with the appropriate party for the continued
operation of and under the Liquor Licenses with respect to the Hotel, in form
acceptable to Seller in its reasonable discretion, pursuant to which, among
other things, (i) Operator shall indemnify, defend and hold Seller and its
agents harmless from any liability, damages, claims, costs, penalties, losses or
expenses (including reasonable attorney's fees and court costs) 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, and (ii) Operator shall
reimburse Seller for Seller's costs in maintaining the Liquor Licenses in full
force and effect. In no event shall Seller be required to cooperate with any
additional liquor or alcoholic beverage licenses which Seller does not possess
at the time of Closing.
ARTICLE 10
Conditions Precedent to the Closing
Purchaser's obligations to consummate the Closing are subject to the
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. Notwithstanding the foregoing, Purchaser, in
its sole discretion, may waive any such condition by notice to Seller or Closing
the contemplated transaction.
10.1 Seller's Obligations. Seller shall have performed all material
--------------------
obligations of Seller hereunder which are to be performed prior to Closing.
10.2 Seller's Representations, Warranties and Covenants. Except as
--------------------------------------------------
otherwise expressly provided herein to the contrary, Seller'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.
10.3 Transfer Subject Only to Permitted Exceptions. On the Closing Date,
---------------------------------------------
the Hotel shall be subject only to the Permitted Exceptions; provided, however,
that any encumbrance or claim caused or created by Purchaser or its agents shall
be deemed a Permitted Exception.
10.4 Consent of Boards of Directors. The Board of Directors of Regent
------------------------------
Investments Ltd. shall, by written resolution on or before December 31, 1996,
consent to the sale of the Hotel to Purchaser's designee pursuant to the terms
and conditions of this Agreement.
10.5 Consent of First Mortgagee. Prior to the Closing Date the State
--------------------------
Street Bank shall have consented to the sale of the Hotel to Purchaser's
designee subject to the First Mortgage. Notwithstanding anything to the
contrary contained herein, the failure of State
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<PAGE>
Street Bank to give such consent prior to the Closing Date shall not be deemed
to be a default hereunder by Seller.
10.6 Simultaneous Closings. The Closings of the Other Hotels shall occur
---------------------
contemporaneously with the Closing of this Hotel; provided, however, that if
Purchaser has timely notified Seller of its election pursuant to Section 3.4
hereof not to acquire all three (3) of the Hotels (i.e., the Hotel and the Other
Hotels) but instead only one or two of said hotels in accordance with Section
3.4, the Closing of such hotels will not be conditioned in any way upon the
acquisition by Purchaser of any hotel which Purchaser has opted not to purchase.
ARTICLE 11
Closing and Closing Documents
11.1 Closing. The consummation and closing (the "Closing") of the
-------
transaction contemplated under this Agreement shall take place at the offices of
Purchaser's lender's counsel in Dallas, Texas, or such other place as is
mutually agreeable to the parties, on any date between March 15, 1997 and March
31, 1997 of which Purchaser has notified Seller at least seven (7) days in
advance (the "Closing Date") or as otherwise set by written agreement of the
parties.
11.2 Seller's Deliveries. At the Closing and at Seller's sole cost and
-------------------
expense, Seller shall deliver or cause to be delivered the following to
Purchaser; in addition to all other items required to be delivered to Purchaser
by Seller:
(a) Seller's Deed. Seller's special or limited warranty deed in a
-------------
form reasonably acceptable to the Title Company ("Seller's Deed") conveying
good, indefeasible, and insurable fee simple title to the Land and Improvements,
free and clear of all mortgages, liens, encumbrances, leases, conditions,
restrictions, rights of way, easements, encroachments, claims, and other matters
of title except only the Permitted Exceptions;
(b) Bill of Sale. A "special or limited warranty" bill of sale
------------
transferring Seller's interest, if any, in all FF&E, Supplies, Warranties,
Licenses, Tradenames, Plans and Specs, Utility Reservations, Records, Deposits,
cash and equivalents, and other personal property in a form reasonably
acceptable to both Purchaser and Seller (the "Bill of Sale");
(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 in a form reasonably acceptable to, and duly executed by, both
Purchaser and Seller, containing indemnities similar to those set forth in
Sections 9.5 and 9.6 above (the "Assignment");
(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,
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<PAGE>
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, and (iii) Seller's 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 to Purchaser (or
Purchaser's designee) of any motor vehicles used in connection with the Hotel's
operations;
(f) Authority Documents. Reasonable evidence satisfactory to the
-------------------
Title Company that the person or persons executing the closing documents on
behalf of Seller have full right, power and authority to do so, and the
following documentation: (i) the Certificate of the Secretary of Seller
certifying attached copies of the Articles of Incorporation, By-Laws and
enabling resolutions as true and correct, unamended, and continuing, and of the
incumbency of its officers, (ii) Certificates of Existence and Good Standing
from the Secretary of State of the state of Seller's incorporation, and (iii)
from the Secretary of State of the state where the Hotel is located, a
Certificate of Existence and Qualification to Do Business in such state;
(g) Title Affidavit. Any affidavits of Seller in form and substance
---------------
reasonably acceptable to the Title Company, in order that the Title Policy may
be issued free and clear of the standard exceptions which the Title Company is
permitted under applicable law to remove or modify upon delivery of such an
affidavit;
(h) First Mortgage Consent. The consent of State Street Bank to the
----------------------
transfer of the Hotel to Purchaser's designee subject to the First Mortgage,
together with such other documents as may reasonably be required by such holder
in connection therewith;
(i) 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 permitted
and appropriate, any documents required effectively to transfer the Utility
Reservations by Seller to Purchaser;
(j) 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, all Records, and all Licenses in Seller's
possession;
(k) Original Documents. Originals (to the extent available) of all of
------------------
the documents and agreements covered by the foregoing that have not already been
delivered to Purchaser will be left at the Hotel;
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<PAGE>
(l) Updates. A complete list of all advance room reservations,
-------
functions and the like, in reasonable detail;
(m) Estoppel Letters. Either the estoppel letters or Seller's
----------------
certificates as described in Section 8.5 above;
(n) Termination of Agreements. Fully executed and effective
-------------------------
terminations of all management agreements with respect to the Hotel that are not
assigned to and assumed by Purchaser under the terms hereof;
(o) Georgia Withholding Tax Affidavit. Seller shall provide
---------------------------------
Purchaser with an affidavit or other documentation, in form and substance
sufficient to demonstrate that Seller is exempt from the withholding
requirements of O.C.G.A. (S)48-7-128. If Seller cannot satisfy the requirements
--------
of O.C.G.A. (S)48-7-128 relative to exemption from withholding, Purchaser or its
--------
counsel shall withhold and remit the amount required under said statutes;
(p) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement;
(q) Financial Covenant of Regent Investments Ltd. Regent Investments
--------------------------------------------
Ltd. ("Regent") hereby acknowledges and agrees that it shall not cause or permit
French Quarter Holding, Inc. ("FQH") to distribute assets to its shareholders if
such distribution would cause FQH's consolidated net asset value on a fair
market value basis to fall below $5,000,000 (according to audited financial
statements prepared by a nationally recognized accounting firm) for twelve (12)
months following the Closing. Regent is executing this Agreement for the sole
purpose of providing the covenant given in the preceding sentence.
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.
11.3 Purchaser's Deliveries. At the Closing and at Purchaser's sole cost
----------------------
and expense, Purchaser shall deliver or cause to be delivered the following to
Seller:
(a) Purchase Price. The Cash Portion of the Purchase Price, plus or
--------------
minus the adjustments to be made at the Closing in accordance with the terms of
this Agreement;
(b) Assignment. 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;
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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; and
(e) Closing Statement. A closing statement reflecting the Purchase
-----------------
Price and all credits, prorations and adjustments contemplated by this
Agreement.
(f) FUNB Loan Assignment. Purchaser shall execute all documents
--------------------
reasonably requested by State Street Bank in connection with the assignment and
assumption of the First Mortgage and the FUNB Loan Documents.
11.4 Prorations. At Closing, the following items of revenue and expense
----------
shall be prorated and adjusted on an accrual basis taking into account all
prepaid expenses and accounts payable and other debts 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, if any, for the tax period in which the Closing
occurs shall be apportioned between Seller and Purchaser on a per diem basis
through and including 11:59 P.M. of the day preceding the Closing Date. If the
rate or amount of such taxes and sewer rents, if any, shall not be fixed prior
to the Closing Date, the adjustment thereof on the Closing Date shall be 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 tax period in which the Closing
occurs. As soon as the exact amount of such taxes, assessments and rents for
such period is ascertained, Seller and Purchaser shall readjust the amounts
thereof to be paid by each party to the end that Seller shall pay for such
taxes, assessments and rents attributable to the period of time prior to the
Closing Date and Purchaser shall pay for the period from and after the Closing
Date. Special assessments of any public or taxing authority assessed upon and
constituting liens or encumbrances on the Hotel, whether or not the 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 to the
extent due and payable on or prior to the Closing Date. If any such special
assessments 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; and Purchaser shall be responsible for special assessments levied
or assessed after the Closing Date and any other such special assessment levied
or assessed thereafter. With respect to any tax appeals which relate to the
period prior to the Closing Date, Purchaser covenants to pay to Seller upon
receipt thereof Seller's prorata share of any tax rebate, refund or adjustment.
Purchaser shall cooperate with Seller with respect to Seller's reasonable
inquiries relative thereto.
(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; but Seller shall be responsible for the payment of
all accounts payable with
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respect to the Hotel relating to services rendered or goods provided prior to
the Closing Date and Purchaser shall be responsible for the payment of all
accounts payable with respect to the Hotel relating to services rendered or
goods provided on or after the Closing Date;
(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) 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, 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 for the night before
Closing shall be apportioned fifty percent (50%) to Seller and fifty percent
(50%) to Purchaser. 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 Seller with banking institutions
are and shall remain the property of Seller and are not included in this sale
except for the cash and equivalents to be purchased by Purchaser at par. The
balance due on the city ledger and guest ledger and all other accounts
receivable of Seller as of the Closing Date ("Seller's Receivables") to the
extent received by Purchaser on behalf of Seller for a period of 90 days after
the Closing Date (the "Collection Period"). Any monies of Seller received by
Purchaser shall be held in trust by Purchaser for the benefit of Seller and
remitted to Seller promptly after receipt thereof by Purchaser without offset or
reduction. Seller shall, upon request, be provided with reasonable evidence and
documentation as to Purchaser's determination and collection of Seller's
Receivables. Purchaser shall not be obligated to commence any actions or
proceedings to collect any of the Seller's Receivables. If, at the expiration
of the Collection Period any of Seller's Receivables to be collected by
Purchaser have not been collected, Purchaser shall have no further obligation to
collect Seller's Receivables, but shall transfer the balance of Seller's
Receivables to Seller for collection;
(e) Supplies and Miscellaneous. No later than the day before closing,
--------------------------
Purchaser and Seller shall jointly conduct an inventory of all unopened and
unused food and beverage inventory at the Hotel. Said inventory shall be
updated by mutual agreement through the Closing Date. Seller shall receive a
credit equal to Sellers' cost of the unopened
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and unused food and beverage inventory reflected on said inventory. Fees and
expenses for coin machine income and washroom and checkroom income;
(f) Deposits. Seller shall receive a cash credit in an amount equal
--------
to the sum of all Utility Deposits transferred to or accruing to the benefit of
Purchaser, and not retained by Seller at the Closing, and Purchaser shall
receive a credit for all reservation deposits, 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 not
transferred to Purchaser at Closing; and
(g) Sales Taxes. All sales, use and occupancy taxes, if any, due or
-----------
to become due in connection with revenues received from the Hotel for the period
prior to the time of proration as set forth herein will be paid by Seller to the
end that Purchaser shall be liable to pay all such sales, use and occupancy
taxes due or to become due in connection with revenues for the period after the
time of proration. Seller and Purchaser shall pay their respective share of all
sales, use and occupancy taxes due or to become due in connection with revenues
apportioned between Seller and Purchaser as provided in Subsection (d) of this
Section. Seller shall be entitled to receive and Purchaser shall promptly remit
if sent to Purchaser any rebates or refunds on such taxes paid by Seller
attributable to the period prior to the Closing.
(h) Reserves. The balance of all reserves, including, without limitation,
--------
the tax, insurance, and furniture, fixtures and equipment reserves for the
Property, held by FUNB, pursuant to the FUNB Loan Documents, shall be paid by
Purchaser to Seller in full as a credit on the Closing Statement or by other
means acceptable to Seller.
11.5 Closing Costs. Seller shall pay (i) the cost of preparing or
-------------
obtaining documents or consents to be delivered by Seller to Purchaser pursuant
to this Agreement (specifically excluding, however, any sums paid or, to be paid
to the franchiser as a prerequisite to the assignment of the Franchise), (ii)
all transfer taxes, conveyance taxes, documentary stamps, and other similar
taxes, fees or charges payable to any governmental authority as a result of the
transfer of the Hotel, (iii) any fees or costs incurred in order to convey the
Hotel free and clear of all liens, encumbrances, conditions and exceptions other
than the Permitted Exceptions, (iv) the cost of the Title Policy, exclusive of
the cost of any endorsements thereto requested by Purchaser, (v) one-half of any
escrow fee imposed by the Title Company and (vi) the fees and disbursements of
its counsel. Purchaser shall pay (i) the cost of updating and recertifying the
Survey, (ii) recording fees and charges required to record the Seller's Deed,
(iii) any mortgage recording taxes, documentary stamps, intangibles tax and
other taxes, fees or charges payable to any governmental authority as a result
of any mortgage financing obtained by Purchaser for the acquisition of the
Hotel, (iv) the cost of any endorsements to the Title Policy and to the Title
Policies for the Other Hotels and any endorsements thereto, (v) one-half of any
escrow fee imposed by the Title Company and (vi) the fees and disbursements of
its counsel. Any other expenses or charges incurred by the parties and not
expressly addressed in this Agreement shall be borne by the party incurring
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said expense or charge. Other than payment of the items specifically listed in
the first sentence of this Section 11.5, payment of the brokerage commissions as
stated herein to be paid by Seller, prorations and adjustments as provided
herein, and expenses incurred by Seller by its own initiation, which costs shall
be borne by Seller as herein provided, and any fees and expenses incurred in
connection with the assignment by Seller and assumption by Purchaser of the
First Mortgage, the State Street Bank Consent and any other actions required to
achieve a Free and Clear Conveyance subject to the Permitted Exceptions, Seller
shall not be responsible for any other costs whatsoever incurred in connection
herewith, and Purchaser shall pay all other such costs, including, without
limitation, the items specifically listed in the second sentence of this Section
11.5, prorations and adjustments as provided herein, environmental audit or
review expenditures, all costs and fees related to Purchaser's line of credit
financing, and all other costs as provided herein to be paid by Purchaser.
Notwithstanding the foregoing, Seller shall be responsible for all costs
incurred solely because of Seller's willful misconduct or gross negligence.
11.6 Reconciliation and Final Payment. Seller and Purchaser shall
--------------------------------
reasonably cooperate after Closing to make a final determination of the
prorations required hereunder no later than 180 days after the Closing. Upon
the final reconciliation of the prorations under this Section and Section 11.4,
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. It is the
intent of the parties that all items herein which are subject to the prorations
made pursuant to Article 11 shall result in Seller receiving all of the economic
benefits and burdens of the Hotel with respect to the period prior to the
Closing, and Purchaser receiving all of the economic benefits and burdens of the
Hotel with respect to the period from and after the Closing Date, except for the
50/50 split in room revenues for the night prior to the Closing. The
obligations to calculate such prorations, make such reconciliations and pay any
such sums shall survive the Closing.
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 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 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
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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 except for
those obligations herein expressly provided as surviving the termination of 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 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 actually
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 perform any of
its material obligations.or agreements 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 or when ratified
at Closing, then Seller, as its sole and exclusive remedy, shall have the right
to terminate this Agreement by giving Purchaser and the Escrow Agent 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 from the Escrow Agreement
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 Letter of Credit 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
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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 Letter of Credit 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 a default by Purchaser (i) Seller refuses or fails to consummate
the transaction contemplated by this Agreement, or (ii) otherwise fails in any
material respect to perform any of its material obligations or agreements
hereunder, or if any representation or warranty made by or on behalf of Seller
herein shall have been materially incorrect when made or when ratified at
Closing in violation of the terms hereof, 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, in which event the Letter of Credit shall be returned to
Purchaser by the Title Company promptly upon receipt of such notice; or
(b) Seek damages (but only if Seller's default is due to Seller's
intentional and willful refusal to close) 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 materially 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 Materiality. The parties acknowledge and agree that it is their
-----------
intention for purposes hereof that any analysis or determination as to the
materiality of a breach or violation of this Agreement shall be conducted only
by taking into consideration the materiality of such breach or violation in
light of the Purchase Price for the Hotel and the purchase prices of the Other
Hotels, so that the totality of the contemplated three (3) hotel transaction be
taken into account.
13.4 Cross-Default.
-------------
(a) Notwithstanding anything contained herein to the contrary, any
breach, default or violation of this Agreement by Purchaser whatsoever shall
constitute and for all purposes be automatically deemed a default under both of
the purchase agreements for the Other Hotels dated of even date herewith (as
amended from time to time).
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(b) If Purchaser has not exercised its option contained in Section
3.4 hereof, then notwithstanding anything contained herein to the contrary, in
the event that the Closing of the purchase and sale of either or both of the
Other Hotels is not consummated because of any breach, default or violation by
SNA or SKL under the purchase agreements for, respectively, the Sheraton Four
Points and Sheraton Key Largo, other than a failure to obtain the consent of
Lincoln National Life Insurance Corporation ("Lincoln") to the early prepayment
of the First Note secured by the First Mortgage on the Sheraton Four Points (as
described in Section 8.5 of the purchase agreement for such hotel), which
failure is not a default under this Agreement, the Purchase Price hereunder
shall remain Eighteen Million Seventy-Five Thousand Dollars ($18,075,000),
subject to adjustments as provided herein.
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 Neilston
Investments Ltd. and Development Resources International Limited (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 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 for the
period prior to the Closing Date.
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.
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ARTICLE 15
Intentionally Omitted
ARTICLE 16
Miscellaneous
16.1 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, addressed to the party for which such notice, demand or
communication is intended at such party's address as set forth in this Section,
and sent by any national or international overnight receipted courier service
and by electronically confirmed facsimile transmission. Purchaser's address for
all purposes under this Agreement shall be the following:
American General Hospitality Operating Partnership, L.P.
c/o American General Hospitality Corporation
3860 West Northwest Highway, Suite 300 Dallas, Texas 75220
Attention: Steven D. Jorns, President or Kenneth E. Barr, Executive Vice
President
Fax No. (214) 351-0568
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Douglas A. Raelson, Esq.
Fax No. (212) 856-7806
Seller's address for all purposes under this Agreement shall be the following:
c/o Regent Investments Ltd.
1, Hashikma Street
P. O. Box 51
Savion 56530, Israel
Attention: Mr. Raanan G. Ben-Zur
Fax No. 011-972-3-5350448
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with a copy to:
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Keith E. Linch, Esq. and Jeffrey B. Berg, Esq.
Fax No. (404) 873-8737
Any address or name or facsimile number 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 or the facsimile confirmation.
The inability to deliver because of changed address or facsimile number 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. Notices, demands and other communications may be given by
the parties' counsel which shall have the same force and effect as if given by
the parties themselves.
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 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 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. Purchaser may assign its rights under this
----------------------
Agreement to any limited partnership, limited liability company or other entity
controlling, controlled by or under common control with Purchaser for the
purpose of purchasing the Hotel or implementing the REIT so long as Purchaser
provides written notice thereof to Seller prior to Closing. 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
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reference is made in this Agreement to Purchaser, it shall include Purchaser's
successors and assigns under this Agreement.
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 where the Hotel is located.
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 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 OF EACH AND EVERY PROVISION OF THIS AGREEMENT.
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. Facsimile
signature pages shall be acceptable provided originals are posted promptly after
execution.
16.9 Survival. All covenants, agreements and indemnities contained in
--------
the Agreement which expressly 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 one (1) year. None
of the foregoing shall be deemed to merge into, or be waived by, Seller's Deed
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 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.
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
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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, 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 reasonable attorneys' fees, expended or
incurred in connection therewith.
16.13 REIT Audits. Seller acknowledges and agrees that the REIT, through
-----------
its independent accountants, may conduct an audit of the REIT's financial
statements for purposes of the REIT complying with its public reporting
obligations under the Securities and Exchange Act of 1934, as amended (the
"Securities Act"). In connection therewith, Seller agrees that for a period of
twelve (12) months after the Closing Date, Seller shall cooperate and assist,
and to cause each of its Affiliates, its employees and representatives,to
cooperate and assist, in such audit in all respects reasonably requested by the
REIT and its independent accountants, including making Raanan G. Ben-Zur and/or
Charles T. Pyles available to provide any information necessary or appropriate
for such audits and signing standard management representation letters to the
REIT's independent accountants and to the REIT.
16.14 Tax-Deferred Exchange. Purchaser and Seller acknowledge that Seller
---------------------
may desire to structure its disposition of the Property in a manner intended by
it to constitute an exchange of the Property for property of a like kind
("Replacement Property") that is described in Section 1031 of the Internal
Revenue Code of 1986, as amended (an "Exchange"). Notwithstanding anything in
this Agreement to the contrary, Seller shall have the right to assign (provided
such assignment does not affect Seller's or Purchaser's rights and obligations
under this Agreement) its interest in this Agreement without Purchaser's consent
to such person or entity as Seller may designate to serve as a "qualified
intermediary" (within the meaning of Treasury Regulation (S)1.103(k)-1(g)(4))
for the sole purpose of enabling Seller to effect such an Exchange; provided,
however, that notwithstanding any such assignment, Seller shall not be released
from any of its liabilities, obligations or indemnities under this Agreement.
Purchaser shall cooperate in all reasonable respects with Seller to effect any
Exchange; provided however, that (a) Seller's ability to consummate an Exchange
shall not be a condition to the obligations of Seller under this Agreement, and
Purchaser does not warrant and shall not be responsible for any of the tax
consequences to Seller with respect to the transactions contemplated hereunder;
(b) Purchaser shall not be required to enter into any document or agreement (or
take title to any property) with respect to Seller's acquisition of any
Replacement Property; and (c) Purchaser shall not be required to incur any
additional cost or expense (including, without limitation, legal fees or taxes
of any kind) as a result of any Exchange. This paragraph shall survive Closing
without limitation.
16.15 [INTENTIONALLY DELETED]
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16.16 Covenant of French Quarter Holdings, Inc. French Quarter Holdings,
-----------------------------------------
Inc. ("FQH") is entering into this Agreement for the sole purpose of making the
following representations, warranties and covenants, all of which are deemed to
be a material inducement to Purchaser to enter into this Agreement:
(a) FQH either is or by the Closing Date will be the sole
shareholder of Seller.
(b) FQH hereby guarantees the truth and accuracy, in all material
respects, of, and the full and prompt performance, in all material respects, by
Seller of, all representations, warranties, covenants, indemnities, agreements
and promises of Seller hereunder which survive the Closing and the delivery of
the deed.
(c) FQH acknowledges and agrees that it shall not distribute assets
to its shareholders if such distribution would cause FQH's consolidated net
asset value on a fair market value basis to fall below $5,000,000 (according to
audited financial statements prepared by a nationally recognized accounting
firm) for twelve (12) months following the Closing.
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[Signature Page for French Quarter Suites.]
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
SELLER:
FRENCH QUARTER SUITES, INC.,
a Georgia corporation
By:_________________________________
Name:_______________________________
Title:______________________________
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: AGH GP, Inc., a Nevada corporation, its
general partner
By:_________________________________
Name:_______________________________
Title:______________________________
WITH RESPECT TO SECTION 11.2(Q) ONLY:
REGENT INVESTMENTS LTD.,
an Israel corporation
By:_________________________________
Name:_______________________________
Title:______________________________
-39-
<PAGE>
{Signature Page for French Quarter Suites]
WITH RESPECT TO SECTION 16.16 ONLY:
FRENCH QUARTER HOLDINGS, INC.,
a Georgia corporation
By:_________________________________
Name:_______________________________
Title:______________________________
-40-
<PAGE>
List of Exhibits
- ----------------
Exhibit A - Legal Description of Land
Exhibit B - Excluded Assets
Exhibit C - Capital Program
Exhibit D - Form of Tenant Estoppel Letter
Exhibit E - Form of Audit Representation Letter
The exhibits and/or schedules identified above which comprise a part of this
Exhibit 2.12 have not been included as part of this Exhibit. The Registrant
agrees to furnish supplementally a copy of any such omitted schedule or exhibit
upon request.
-41-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
A-1
<PAGE>
EXHIBIT B
EXCLUDED ASSETS
B-1
<PAGE>
EXHIBIT C
CAPITAL PROGRAM
C-1
<PAGE>
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
WHEREAS, ____________________________________, ______________ ("Landlord"),
as landlord, and ________________ ("Tenant"), as tenant, entered into that
certain lease (the "Lease"), dated ________, 19__ of certain premises more
particularly described in the Lease (the "Premises").
NOW, THEREFORE, Tenant hereby certifies as follows:
1. True and complete copies of the Lease and all agreements, amendments,
guarantees, side letters and other documents relating thereto are attached
hereto as Exhibit A and made a part hereof, and there are no other such
---------
agreements or documents.
2. The Lease has not been modified (except pursuant to documents attached
hereto as part of Exhibit A and is in full force and effect.
---------
3. The Lease has not been assigned, mortgaged, pledged, or otherwise
encumbered, nor has all or any portion of the Premises been sublet.
4. Rent, additional rent and percentage rent required to be paid under
the Lease have been paid through _________________.
5. Tenant has accepted possession of and is now occupying the Premises.
6. To Tenant's knowledge, there exist no defaults on the part of Landlord
under the Lease; nor has any event occurred which, with the passage of time or
the giving of notice or both, would constitute a default by Landlord thereunder,
nor has Landlord suffered or permitted the occurrence of any such event.
7. Tenant has no offset, defense, claim or counterclaim, including,
without limitation, claims to "free" rent, concessions, rebates, or abatements
in rent, under the Lease.
8. The expiration date of the term of the Lease is and, except as set
forth in the documents attached hereto as Exhibit A, Tenant has no option to
renew the Lease or otherwise extend the term of the Lease.
9. Tenant has no option to purchase the Premises or any portion thereof,
or the building in which the Premises are located.
10. Tenant has no option to lease any other space in the building in which
the Premises are located.
D-1
<PAGE>
11. Any and all work to be performed by Landlord under the Lease has been
completed in accordance with the Lease and has been accepted by Tenant and all
reimbursements and allowances due to Tenant under the Lease in connection with
any work have been paid in full.
12. Tenant has deposited the sum of $_____________ with Landlord as
security for the performance of Tenant's obligations under the Lease.
13. This certificate is binding upon the undersigned and may be relied
upon by Landlord, by any prospective purchaser of the Premises, and by any
lender making a loan to such purchaser secured by a mortgage on the building in
which the Premises are located.
IN WITNESS WHEREOF, Tenant has duly executed this certificate this _____
day of ___________________, 19__.
[TENANT NAME]
By:_________________________
Name:_______________________
D-2
<PAGE>
EXHIBIT E
AUDIT REPRESENTATION LETTER
CURRENT DATE
Coopers & Lybrand, L.L.P.
1999 Bryan Suite 3000
Dallas, Texas 75201
Gentlemen:
In connection with your audits of the trial balances of [NAME OF HOTEL] (the
"Hotel") as of [DATE] and [DATE] and for each of the three years in the period
ended [LATEST DATE], which will be combined with the other hotels to be acquired
by American General Hospitality Operating Partnership, L.P. and presented and
reported on as a group (the "Acquisition Hotels") for the purpose of expressing
an opinion as to whether the Acquisition Hotels financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of the Acquisition Hotels in conformity with generally accepted
accounting principles, we confirm, to the best of our knowledge and belief, as
of__________, the date of your report, the following representations made to you
during your audits.
Certain representations in this letter are described as being limited to those
matters that are material. Solely for the purpose of preparing this letter, the
term "material," when used in this letter, means any item or group of similar
items involving potential amounts of more than ____% of assets, liabilities,
shareholders' equity, or net income, as appropriate for the item. These
percentages are not intended to represent the materiality threshold for
financial reporting and disclosure purposes. Notwithstanding this, an item is
considered material, regardless of size, if it involves an omission or
misstatement of accounting information that, in the light of surrounding
circumstances, makes it probable that the judgment of a reasonable person
relying on the information would have been changed or influenced by the omission
or misstatement.
1. We are responsible for the fair presentation in the trial balances of
the financial position and results of operations of the Hotel in
conformity with generally accepted accounting principles.
2. We have made available to you all financial and accounting records and
related data and all minutes of the meetings of shareholders,
directors, and committees of directors [OR SUMMARIES OF ACTIONS OF
RECENT MEETINGS FOR WHICH MINUTES HAVE NOT YET BEEN PREPARED]. The
most recent meetings held were: [STATE BY GROUP AND DATE].
E-1
<PAGE>
3. There are no material transactions that have not been properly
recorded in the accounting records underlying the financial
statements.
4. There have been no:
a. Irregularities involving management or those employees who have
significant roles in the internal control structure.
b. Irregularities involving other employees that could have a
material effect on the financial statements.
c. Violations or possible violations of laws or regulations whose
effects should be considered for disclosure in the financial,
statements or as a basis for recording a loss contingency.
We understand the term "irregularities" to mean those matters
described in Statement on Auditing Standards No. 53.
5. There have been no communications from regulatory agencies concerning
noncompliance with or deficiencies in financial reporting practices
that could have a material effect on the trial balances in the event
of noncompliance.
6. The Hotel has complied with all aspects of debt and other contractual
agreements that would have a material effect on the trial balances in
the event of noncompliance.
7. The Hotel has satisfactory title to all owned assets. All liens,
encumbrances and security interests requiring disclosure in the trial
balances have been properly disclosed.
8. The receivables recorded in the trial balances represent the valid
claims against guests for charges arising on or before the balance
sheet date and are not subject to discount. These receivables have
been appropriately reduced to their estimated net realizable value.
9. Provision has been made to reduce excess or obsolete inventories to
their estimated net realizable value.
10. There are no material liabilities or gain or loss contingencies that
are required to be accrued or disclosed by Statement of Financial
Accounting Standards No. 5 that have not been accrued or disclosed.
There are no unasserted claims or assessments that our legal counsel
has advised us are probable of assertion and must be disclosed in
accordance with that Statement.
E-2
<PAGE>
11. Commitments for future purchases are for quantities not in excess of
anticipated requirements and at prices that will not result in loss.
Provision has been made for any material loss to be sustained in the
fulfillment of, or from the inability to fulfill, any sales
commitments.
12. We have no plans or intentions that may materially affect the carrying
value or classification or assets and liabilities.
13. The following have been properly recorded or disclosed in the trial
balances [IF NONE, INCLUDE UNDER A SEPARATE ITEM WITH THE INTRODUCTION
"THERE ARE NO..."]:
a. Related-party transactions and related amounts receivable or
payable, including sales, purchases, loans, transfers, leasing
arrangements, and guarantees.
(We understand the term "related party" to include those entities
described in Statement of Financial Accounting Standards No. 57.)
b. Capital stock repurchase options or agreements or capital stock
reserved for options, warrants, conversions, or other
requirements.
c. Arrangements with financial institutions involving compensating
balances, arrangements involving restrictions on cash balances
and lines of credit, or similar arrangements.
d. Financial instruments with off-balance-sheet risk and financial
instruments with concentrations of credit risk.
e. Guarantees, whether written or oral, under which the Hotel is
contingently liable to a bank or other lending institution.
f. Estimates for which both (a) it is at least reasonably possible
that the estimates will change in the near future (i.e., within
one year from the date of the trial balances) due to one or more
future confirming events, and (b) the effect of the change would
be material to the trial balances.
g. Concentrations that make the entity vulnerable to the risk of a
near term severe impact and for which it is at least reasonably
possible that events that could cause the severe impact will
occur in the near term. For the purpose of this letter, a
"severe impact" is a significant financially disruptive effect on
the normal functioning of the entity.
E-3
<PAGE>
[ADD SPECIAL-PURPOSE REPRESENTATIONS THAT MAY BE REQUIRED IN THIS LETTER IN
CERTAIN CIRCUMSTANCES, E.G., A STATEMENT THAT A VALUATION ALLOWANCE AGAINST
DEFERRED TAX ASSETS ARISING AFTER THE BALANCE SHEET DATE REPRESENTS MANAGEMENT'S
BEST ESTIMATE BASED ON THE WEIGHT OF AVAILABLE EVIDENCE AS PRESCRIBED IN FAS 109
OR A POSITIVE STATEMENT THAT NO SUCH ALLOWANCE IS NECESSARY. SEE OTHER EXAMPLES
AT ASM 300.]
No events have occurred subsequent to the balance sheet date that would require
adjustment to, or disclosure in, the trial balances.
____________________________________________
[Name and title of chief executive officer]
____________________________________________
[Name and title of chief financial officer]
E-4
<PAGE>
EXHIBIT 10.10
$100,000,000
CREDIT AGREEMENT
Dated as of July 31, 1996
Among
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as the Borrower,
---------------
SOCIETE GENERALE, SOUTHWEST AGENCY
as Structuring Agent,
--------------------
BANK ONE, TEXAS, N.A.
as Administrative Agent,
-----------------------
and
THE BANKS NAMED HEREIN
as the Banks
------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE IDEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1.01 Certain Defined Terms......................................... 1
Section 1.02 Computation of Time Periods................................... 31
Section 1.03 Accounting Terms; Changes in GAAP............................. 31
Section 1.04 Types of Advances............................................. 32
Section 1.05 Miscellaneous................................................. 32
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT
<S> <C> <C>
Section 2.01 The Advances; Extension of Initial Maturity Date.............. 32
Section 2.02 Method of Borrowing........................................... 34
Section 2.03 Fees.......................................................... 37
Section 2.04 Reduction of the Commitments.................................. 38
Section 2.05 Repayment of Advances......................................... 39
Section 2.06 Interest, Late Payment Fee.................................... 39
Section 2.07 Prepayments................................................... 40
Section 2.08 Breakage Costs................................................ 43
Section 2.09 Increased Costs............................................... 43
Section 2.10 Payments and Computations..................................... 45
Section 2.11 Taxes......................................................... 47
Section 2.12 Illegality.................................................... 49
Section 2.13 Letters of Credit............................................. 49
Section 2.14 Determination of Borrowing Base............................... 52
Section 2.15 Bank Replacement.............................................. 53
Section 2.16 Sharing of Payments, Etc...................................... 54
Section 2.17 Collateral.................................................... 54
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III
CONDITIONS OF LENDING
<S> <C> <C>
Section 3.01 Conditions Precedent to Effectiveness of this Agreement......... 55
Section 3.02 Conditions Precedent for each Borrowing or Letter of Credit..... 57
Section 3.03 Conditions Precedent for Initial Borrowing or Letter of Credit.. 58
Section 3.04 Conditions Precedent to a Hotel Property Qualifying as an
Eligible Property............................................... 60
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
Section 4.01 Existence; Qualification; Partners; Subsidiaries................. 66
Section 4.02 Partnership and Corporate Power.................................. 68
Section 4.03 Authorization and Approvals...................................... 68
Section 4.04 Enforceable Obligations.......................................... 68
Section 4.05 Public Offering.................................................. 69
Section 4.06 Financial Statements............................................. 69
Section 4.07 True and Complete Disclosure..................................... 69
Section 4.08 Litigation....................................................... 70
Section 4.09 Use of Proceeds.................................................. 70
Section 4.10 Investment Company Act........................................... 70
Section 4.11 Taxes............................................................ 70
Section 4.12 Pension Plans.................................................... 71
Section 4.13 Condition of Hotel Property; Casualties; Condemnation............ 71
Section 4.14 Insurance........................................................ 72
Section 4.15 No Burdensome Restrictions; No Defaults.......................... 72
Section 4.16 Environmental Condition.......................................... 73
Section 4.18 Existing Mortgage Debt........................................... 74
Section 4.19 Title; Encumbrances.............................................. 74
Section 4.20 Leasing Arrangements............................................. 75
Section 4.21 Cash Management Systems.......................................... 75
Section 4.22 Franchise Agreements............................................. 75
</TABLE>
iii
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<TABLE>
<CAPTION>
ARTICLE V
AFFIRMATIVE COVENANTS
<S> <C> <C>
Section 5.01 Compliance with Laws, Etc........................................ 76
Section 5.02 Preservation of Corporate Existence; Corporate Separateness, Etc. 76
Section 5.03 Payment of Taxes, Etc............................................ 78
Section 5.04 Visitation Rights; Bank Meeting.................................. 78
Section 5.05 Reporting Requirements........................................... 78
Section 5.06 Maintenance of Property, Required Work and Approved
Preliminary Property Plan Work................................... 82
Section 5.07 CAPEX Reserve.................................................... 83
Section 5.08 Appraisals....................................................... 84
Section 5.09 Duplicate Louisiana Notes........................................ 85
Section 5.10 Insurance........................................................ 85
Section 5.11 Casualty; Condemnation........................................... 85
Section 5.12 Cash Management Systems.......................................... 87
Section 5.13 Initial Properties............................................... 89
Section 5.14 Supplemental Guaranties.......................................... 89
Section 5.15 Participating Leases............................................. 89
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
NEGATIVE COVENANTS
<S> <C> <C>
Section 6.01 Liens, Etc................................................ 90
Section 6.02 Indebtedness.............................................. 90
Section 6.03 Agreements Restricting Distributions From Subsidiaries.... 91
Section 6.04 Restricted Payments....................................... 91
Section 6.05 Fundamental Changes; Asset Sales.......................... 92
Section 6.06 Personal Property Leases.................................. 93
Section 6.07 Investments, Loans, Future Properties..................... 93
Section 6.08 Affiliate Transactions.................................... 94
Section 6.09 Sale and Leaseback........................................ 94
Section 6.10 Sale or Discount of Receivables........................... 94
Section 6.11 No Further Negative Pledges............................... 94
Section 6.12 Franchise Agreements...................................... 94
Section 6.13 Material Documents........................................ 95
Section 6.14 Other Businesses; Undeveloped Land........................ 95
</TABLE>
iv
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.15 Borrower Debt Service Ratio........................... 96
Section 6.16 Parent Debt Service Ratio............................. 96
Section 6.17 Net Worth............................................. 96
Section 6.18 Bank Accounts......................................... 96
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
<S> <C> <C>
Section 7.01 Events of Default........................................ 97
Section 7.02 Optional Acceleration of Maturity........................ 101
Section 7.03 Automatic Acceleration of Maturity....................... 102
Section 7.04 Cash Collateral Account.................................. 102
Section 7.05 Non-exclusivity of Remedies.............................. 103
Section 7.06 Right of Set-off......................................... 103
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VIII
AGENCY AND ISSUING BANK PROVISIONS
<S> <C> <C>
Section 8.01 Authorization and Action................................. 104
Section 8.02 Agents' Reliance, Etc.................................... 104
Section 8.03 Each Agent and Its Affiliates............................ 105
Section 8.04 Bank Credit Decision..................................... 105
Section 8.05 Indemnification.......................................... 105
Section 8.06 Successor Agent and Issuing Banks........................ 105
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IX
MISCELLANEOUS
<S> <C> <C>
Section 9.01 Amendments, Etc....................................... 106
Section 9.02 Notices, Etc.......................................... 108
Section 9.03 No Waiver; Remedies................................... 109
Section 9.04 Costs and Expenses.................................... 109
Section 9.05 Binding Effect........................................ 110
Section 9.06 Bank Assignments and Participations................... 110
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.07 Indemnification..................................... 112
Section 9.08 Execution in Counterparts........................... 113
Section 9.09 Survival of Representations, Indemnifications, etc.. 113
Section 9.10 Severability........................................ 113
Section 9.11 Business Loans...................................... 113
Section 9.12 Usury Not Intended.................................. 114
Section 9.13 Governing Law....................................... 114
Section 9.14 Consent to Jurisdiction............................. 114
Section 9.15 Knowledge of Borrower............................... 115
Section 9.16 Banks Not in Control................................ 115
Section 9.17 Headings Descriptive................................ 115
Section 9.18 Time is of the Essence.............................. 115
Section 9.19 WAIVERS OF JURY TRIAL............................... 115
Section 9.20 ENTIRE AGREEMENT.................................... 115
</TABLE>
vi
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<TABLE>
<CAPTION>
EXHIBITS:
<S> <C>
Exhibit A - Form of Note
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Assignment of Leases (Borrower)
Exhibit D - Form of Assignment of Leases (Participating Lessee)
Exhibit E - Form of Assignment of Management Agreement
Exhibit F - Form of Bank One Cash Management Agreement
Exhibit G - Form of Borrower Funding Certificate
Exhibit H - Form of Borrowing Base Certificate
Exhibit I - Form of Collateral Assignment and Security Agreement
Exhibit J - Form of Compliance Certificate
Exhibit K - Form of Credit Card Agreement
Exhibit L - Form of Depository Account Agreement
Exhibit M - Form of Environmental Indemnity
Exhibit N - Form of Franchisor Consent
Exhibit O - Form of General Assignment and Agreement
Exhibit P - Form of Ground Lessor Consent
Exhibit Q - Form of Guaranty
Exhibit R - Form of Irrevocable Direction to Pay
Exhibit S - Form of Liquor License Concession Agreement
Exhibit T - Form of Liquor License Company Consent
Exhibit U - Form of Liquor License Company Pledge Agreement
Exhibit V - Form of Manager Consent
Exhibit W - Form of Mortgages
Exhibit X - Form of Notice of Borrowing
Exhibit Y - Form of Notice of Conversion or Continuation
Exhibit Z - Form of Participating Lessee Estoppel
Exhibit AA - Form of Property Adjustment Report
Exhibit BB - Form of Property Certificate
Exhibit CC - Form of Security Agreement
Exhibit DD - Form of Battle Fowler L.L.P. Opinion
Exhibit EE - Form of Kane, Russell, Coleman and Logan Opinion
Exhibit FF - Form of Local Counsel Opinion
Exhibit GG - Form of Ballard, Spahr, Andrews & Ingersoll Opinion
Exhibit HH - Form of McDonald, Hopkins, Buske & Harber Co. Opinion
Exhibit II Form of Foley & Lardner Opinion
Exhibit JJ Form of McDonald, Carano, Wilson, McCune, Bergin,
Frankovich &Hicks LLP Opinion
</TABLE>
vii
<PAGE>
SCHEDULES:
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.01(a) - Commitments
Schedule 1.01(b) - Initial Properties, Allocated Debt Amount, Appraisal
Amounts and Cost Basis
Schedule 1.01(c) - Approved Preliminary Property Plan
Schedule 1.01(d) - Engineer Report Scope of Services
Schedule 1.01(e) - Approved Engineers
Schedule 1.01(f) - Environmental Report Scope of Services
Schedule 1.01(g) - Approved Environmental Consultants
Schedule 1.01(h) - Franchisors
Schedule 1.01(i) - Ground Leases
Schedule 1.01(j) - Guarantors
Schedule 1.01(k) - Hotel Capital and Operating Lease Limits
Schedule 1.01(l) - Liquor License Companies
Schedule 1.01(m) - Participating Leases
Schedule 4.01 - Subsidiaries
Schedule 4.08 - Litigation
Schedule 4.15 - Loan and Lease Disclosure
Schedule 4.17 - Legal Requirements; Zoning; Utilities; Access
Schedule 4.19 - Participating Lessee Personal Property
Schedule 4.21 - Cash Management Systems
Schedule 4.22 - Franchise Agreements
Schedule 4.23 - Management Agreements
Schedule 5.06 - Required Work for Initial Properties
Schedule 5.10 - Insurance
Schedule 9.02 - Notice Information
</TABLE>
viii
<PAGE>
CREDIT AGREEMENT
This Credit Agreement dated as of July 31, 1996 is among AMERICAN GENERAL
HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, as the
Borrower, SOCIETE GENERALE, SOUTHWEST AGENCY, as Structuring Agent, BANK ONE,
TEXAS, N.A., as Administrative Agent, and the Banks.
The parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (unless otherwise indicated,
such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Accession Agreement" means an Accession Agreement in the form attached
-------------------
respectively to the Guaranty and Environmental Indemnity as Annex 1 thereto,
which agreement causes the Person executing and delivering the same to the
Administrative Agent to become a party to the Guaranty and to the Environmental
Indemnity.
"Acquisition Agreements" means for any Hotel Property the agreements entered
----------------------
into in connection with the acquisition of such Hotel Property.
"Adjusted Prime Rate" means, for any day, the fluctuating rate per annum of
-------------------
interest equal to the greater of (a) the Prime Rate in effect on such day and
(b) the Federal Funds Rate in effect on such day plus 1/2%.
"Adjustment Event" has the meaning set forth in Section 2.14(b).
----------------
"Administrative Agent" means Bank One, Texas, N.A. in its capacity as
--------------------
Administrative Agent for the Banks pursuant to Article VIII and any successor
Administrative Agent appointed pursuant to Section 8.06.
"Advance" means an Advance by a Bank to the Borrower, any such Advance being
-------
either a Prime Rate Advance or a LIBOR Rate Advance.
"Affiliate" means, as to any Person, any other Person that, directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or
<PAGE>
any Subsidiary of such Person. The term "control" (including the terms
"controlled by" or "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of a Control Percentage, by
contract or otherwise.
"Agents" means the Administrative Agent and the Structuring Agent, and
------
"Agent" means either such agent.
-----
"Agents' Fee Letter" means the letter agreement dated as of June 12, 1996
------------------
among the Borrower, the Structuring Agent and the Administrative Agent.
"AGH LP" means AGH LP, Inc., a Nevada corporation.
------
"Agreement" means this Credit Agreement dated as of July 31, 1996 among the
---------
Borrower, the Structuring Agent, the Administrative Agent, and the Banks, as it
may be amended hereafter in accordance with its terms.
"Allocated Debt Amount" means for any Initial Property, the amount set forth
---------------------
for such Initial Property on Schedule 1.01(b) attached hereto, and for any other
Hotel Property, forty percent (40%) of the Real Estate Value of such Hotel
Property.
"Applicable Lending Office" means, with respect to each Bank, such Bank's
-------------------------
Domestic Lending Office in the case of a Prime Rate Advance and such Bank's
LIBOR Lending Office in the case of a LIBOR Rate Advance.
"Applicable Margin" means, at any time, (a) with respect to a LIBOR Rate
-----------------
Advance, one and 85/100 percent (1.85%), and (b) with respect to a Prime Rate
Advance, one-half of one percent (.50%).
"Appraisal" means an appraisal of the Hotel Property prepared by an M.A.I.
---------
appraiser approved by the Agents in writing which appraisal is acceptable to the
Agents and done in conformity with the following standards: Uniform Standards
of Professional Appraisal Practice, the requirements of the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the Appraisal
Institute, the appraisal guidelines set forth by the office of the Comptroller
of the Currency and the Federal Reserve Board.
"Approved Preliminary Property Plan" means (a) with respect to the Initial
----------------------------------
Properties, the preliminary plans and projections of the Capital Expenditures
and the expenditures for FF&E of each Initial Property and set forth on Schedule
1.01(c), as such plans and projections may be amended
-2-
<PAGE>
with the approval of the Agents (which approval shall not be unreasonably
withheld) and (b) with respect to any Future Property that the Borrower desires
be an Eligible Property, the preliminary plans and projections of the Capital
Expenditures and the expenditures for FF&E for such Future Property approved by
the Majority Banks within one hundred eighty (180) days of the date of
acquisition of such Future Property (which approval will not be unreasonably
withheld or delayed).
"Approved Preliminary Property Plan Work" means, for any Hotel Property, the
---------------------------------------
performance of the Capital Expenditures and the purchase of the FF&E
contemplated by the Approved Preliminary Property Plan for such Hotel Property.
"Asset Sale" means (a) any sale, financing lease (in which the Borrower or a
----------
Guarantor is lessor but exclusive of the Participating Leases), conveyance,
exchange, transfer, or assignment of any Property by the Borrower or a Guarantor
to a Person other than the Borrower or a Guarantor; and (b) any insured loss or
casualty of Hotel Property owned by the Borrower or any Guarantor if the
insurance proceeds in connection therewith are required by the provisions of
this Agreement to be used to repay Obligations.
"Assignment and Acceptance" means an assignment and acceptance entered into
-------------------------
by a Bank and an Eligible Assignee, and accepted by the Administrative Agent, in
substantially the form of the attached Exhibit B.
"Assignment of Leases (Borrower)" means an assignment of leases, rents and
-------------------------------
security deposits executed by the Borrower or any Guarantor to secure the
Obligations, each substantially in the form of Exhibit C with such modifications
as may be necessary and appropriate in the opinion of counsel to the Agents to
comply with the state law of the filing jurisdiction and as may be reasonably
satisfactory to the Agents (provided any such modification does not materially
and adversely affect the rights and benefits to be accorded to the
Administrative Agent for the benefit of the Banks), as the same may be amended
or terminated in accordance with their terms.
"Assignment of Leases (Participating Lessee)" means an assignment of leases,
-------------------------------------------
rents and security deposits executed by the Participating Lessee for the benefit
of the Borrower or Guarantor who is the particular Property Owner for a Hotel
Property to secure the Participating Lessee's obligations under the
Participating Lease for such Hotel Property, each substantially in the form of
Exhibit D with such modifications as may be necessary and appropriate in the
opinion of counsel to the Agents to comply with the state law of the filing
jurisdiction and as may be reasonably satisfactory to the Agents (provided any
such modification does not materially and adversely affect the rights and
benefits accorded thereunder), as the same may be amended or terminated in
accordance with their terms.
-3-
<PAGE>
"Assignment of Management Agreement" means an assignment of management
----------------------------------
agreement executed by the Participating Lessee for the benefit of the Borrower
or Guarantor who is the particular Property Owner for a Hotel Property to secure
the Participating Lessee's obligations under the Participating Lease for such
Hotel Property, each substantially in the form of Exhibit E with such
modifications as may be necessary and appropriate in the opinion of counsel to
the Agents to comply with the state law of the filing jurisdiction and as may be
reasonably satisfactory to the Agents (provided any such modification does not
materially and adversely affect the rights and benefits accorded thereunder), as
the same may be amended or terminated in accordance with their terms.
"Associates" means, for any individual, the Associates (as such term is
----------
defined in Rule 12b-2 promulgated under the Exchange Act) of such individual.
"Banks" means the lenders listed on the signature pages of this Agreement and
-----
each Eligible Assignee that shall become a party to this Agreement pursuant to
Section 9.06.
"Bank One Cash Management Agreement" means the depository account agreement
----------------------------------
substantially in the form of the attached Exhibit F by and among the Cash
Manager, the Administrative Agent and the Borrower covering the Borrower's Bank
Accounts.
"Borrower" means American General Hospitality Operating Partnership, L.P., a
--------
Delaware limited partnership.
"Borrower's Bank Accounts" means the CAPEX Reserve, the Concentration Bank
------------------------
Account and the Operating Accounts (Borrower).
"Borrower Capitalization Event" means (a) any sale or issuance by the
-----------------------------
Borrower or any of its Subsidiaries of equity securities for consideration other
than a direct or indirect ownership interest in a Person that owns a Hotel
Property, (b) an issuance or incurrence by the Borrower or any of its
Subsidiaries of Indebtedness except for Indebtedness permitted pursuant to the
provisions of Section 6.02.
"Borrower Controlled Group" means all members of a controlled group of
-------------------------
corporations and all trades (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Borrower Funding Certificate" means a certificate of the Borrower in
----------------------------
substantially the form of the attached Exhibit G.
-4-
<PAGE>
"Borrowing" means a borrowing consisting of simultaneous Advances of the same
---------
Type made by each Bank pursuant to Section 2.01(a) or Converted by each Bank to
Advances of a different Type pursuant to Section 2.02(b).
"Borrowing Base" means an amount equal to the lesser of (i) 40% of the
--------------
aggregate Real Estate Value of all Eligible Properties; and (ii) the product of
(A) the combined trailing twelve months Borrowing Base EBITDA generated by the
Eligible Properties multiplied by (B) 5.
"Borrowing Base Certificate" means a certificate of the Borrower in
--------------------------
substantially the form of the attached Exhibit H, certified by a Responsible
Officer of Borrower to be true, correct and accurate in all material respects.
"Borrowing Base Determination Date" means any date the Borrowing Base is
---------------------------------
determined in accordance with Section 2.14.
"Borrowing Base EBITDA" means for any period the aggregate Property EBITDA of
---------------------
all Eligible Property.
"Business Day" means a day of the year on which banks are not required or
------------
authorized to close in New York City or Dallas, Texas and, if the applicable
Business Day relates to any LIBOR Rate Advances, on which dealings are carried
on by banks in the London interbank market.
"CAPEX Bills Pending" means, for any calendar quarter, the amount of payables
-------------------
for Capital Expenditures and expenditures for FF&E (except for the Approved
Preliminary Property Plan Work and the Required Work for which the Borrower is
not entitled to withdraw funds from the CAPEX Reserve to pay for) for the
Eligible Properties as of the end of such calendar quarter (a) which the
Borrower is at such time processing for payment in the ordinary course of
business and (b) which are not past due, all as certified in writing to the
Administrative Agent by the Borrower.
"CAPEX Reserve" means a bank account complying with the requirements of
-------------
Section 5.07 established by the Borrower with the Administrative Agent.
"CAPEX Reserve Deposit Amount" means, for any calendar quarter, an amount
----------------------------
equal to (a) 4% of the gross revenues from each Eligible Property for such
calendar quarter minus (b) the amount paid in such calendar quarter for Capital
Expenditures or FF&E for Eligible Properties (except for the Approved
Preliminary Property Plan Work and the Required Work for which the Borrower is
not entitled to withdraw funds from the CAPEX Reserve to pay for) which were
made or purchased in accordance with this Agreement minus (c) the CAPEX Bills
Pending as of the end of such calendar quarter plus (d) the CAPEX Bills Pending
as of the end of the previous calendar quarter.
-5-
<PAGE>
"Capital Expenditure" means any payment made directly or indirectly for the
-------------------
purpose of acquiring or constructing fixed assets, Real Property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of such Person making such expenditure, including, without limitation,
amounts paid or payable for such purpose under any conditional sale or other
title retention agreement or under any Capital Lease, but excluding repairs of
Property in the normal and ordinary course of business in keeping with the past
practices of the Borrower.
"Capitalization Event" means either a Borrower Capitalization Event or a
--------------------
Parent Capitalization Event.
"Capital Lease" means, for any Person, any lease of any Property (whether
-------------
real, personal or mixed) by that Person as lessee which, in accordance with
GAAP, is or should be accounted for as a capital lease on the balance sheet of
that Person.
"Cash Collateral Account" means a special cash collateral account containing
-----------------------
cash deposited pursuant to the terms of this Agreement to be maintained at the
Administrative Agent's office in accordance with Section 7.04.
"Cash Manager" means Bank One, Texas, N.A. or any successor thereto approved
------------
by the Agents.
"Cash Management System (Borrower)" means the system of Deposit Accounts of
---------------------------------
the Borrower and the Borrower's Subsidiaries (excluding the Permitted Other
Subsidiaries) including the Borrower's Bank Accounts pursuant to which all cash,
cash equivalents and credit card receipts of the Borrower and the Borrower's
Subsidiaries (excluding that of the Permitted Other Subsidiaries), respectively,
are collected and distributed, all as described in Schedule 4.21 annexed hereto,
as it may be modified from time to time in accordance with the terms hereof.
"Cash Management System (Participating Lessee)" means the system of Deposit
---------------------------------------------
Accounts of the Participating Lessee including the Operating Account
(Participating Lessee) for each Hotel Property (excluding DFW South and
Meadowlands) pursuant to which all cash, cash equivalents and credit card
receipts of the Participating Lessee (excluding that received in connection with
DFW South and Meadowlands) are collected and distributed, all as described in
Schedule 4.21 annexed hereto, as it may be modified from time to time in
accordance with the terms hereof.
"Cash Management Systems" means collectively the Cash Management System
-----------------------
(Borrower) and the Cash Management System (Participating Lessee).
-6-
<PAGE>
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
------
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.
"Closing Date" means the date on which each of the conditions set forth in
------------
Section 3.01 are satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor
----
statute.
"Collateral Assignment and Security Agreement" means a collateral assignment
--------------------------------------------
and agreement executed by the Borrower or any Guarantor to secure the
Obligations, each substantially in the form of Exhibit I with such modifications
as may be necessary and appropriate in the opinion of counsel to the Agents to
comply with the state law of the filing jurisdiction and as may be reasonably
satisfactory to the Agents (provided any such modification does not materially
and adversely affect the rights and benefits to be accorded to the
Administrative Agent for the benefit of the Banks), as the same may be amended
or terminated in accordance with their terms.
"Commitment" means, with respect to any Bank, the amount set opposite such
----------
Bank's name on Schedule 1.01(a) as its Commitment, or if such Bank has entered
into any Assignment and Acceptance, the amount set forth for such Bank as its
Commitment in the Register maintained by the Administrative Agent pursuant to
Section 9.06(c), as such amount may be reduced pursuant to Section 2.04.
"Compliance Certificate" means a certificate of the Borrower in substantially
----------------------
the form of the attached Exhibit J.
"Concentration Bank Account" means the Deposit Account maintained with the
--------------------------
Cash Manager located in Dallas, Texas for the benefit of the Borrower which is a
part of the Cash Management System (Borrower), or any substitute account
maintained with the Cash Manager reasonably acceptable to the Administrative
Agent.
"Conditions to Collateral Release" shall for any Asset Sale (other than Asset
--------------------------------
Sales involving DFW South or Meadowlands) include all of the following
requirements: (a) no Default has occurred and is continuing or would occur upon
the consummation of such Asset Sale; (b) the Borrower, the Parent and their
respective Subsidiaries shall be in compliance with all covenants, terms and
conditions of the Credit Documents and the consummation of such Asset Sale shall
not cause or result in any of such Persons being in non-compliance; (c) the
Borrower shall have delivered to the Administrative Agent a Compliance
Certificate dated as of the date of the Asset Sale certifying that the
Conditions to Collateral Release are satisfied which Compliance Certificate
shall (i) certify that
-7-
<PAGE>
the financial covenants contained in this Agreement measured as of the date of
the Asset Sale (without inclusion in the calculation of such covenants the
operating results of the Hotel Property for such Asset Sale) are satisfied and
(ii) set forth the Borrower's calculations of such financial covenants; (d) at
least 10 days prior to such Asset Sale the Borrower shall have delivered to the
Administrative Agent a copy of the documents that have or will be executed in
connection with such Asset Sale and a draft of the Compliance Certificate that
the Borrower is obligated to deliver pursuant to the preceding clause (c); (e)
the Borrower shall have delivered to the Administrative Agent a Property
Adjustment Report in connection with such Asset Sale; (f) the Asset Sale is to a
Person other than the Borrower or a Subsidiary of Borrower and for fair market
value; (g) the written approval of the Administrative Agent has been obtained
which approval shall not be unreasonably withheld; (h) upon consummation of such
Asset Sale the Pool Requirements would be satisfied; and (i) contemporaneously
with such Asset Sale the Borrower makes a prepayment of the Advances as provided
in Section 2.07(c)(iii) in an amount of not less than the Release Amount for
such Hotel Property, provided that if the Asset Sale is a sale of a Permitted
Non-Eligible Property the Borrower shall not have to make a prepayment as long
as no Default has occurred and is continuing or would occur upon the
consummation of such Asset Sale.
"Consolidated" refers to the consolidation of the accounts of the Borrower
------------
with the Borrower's Subsidiaries and the Parent with the Parent's Subsidiaries,
as applicable, in accordance with GAAP, including, when used in reference to the
Borrower, principles of consolidation consistent with those applied in the
preparation of the Financial Statements.
"Control Percentage" means, with respect to any Person, the percentage of the
------------------
outstanding capital stock of such Person having ordinary voting power which
gives the direct or indirect holder of such stock the power to elect a majority
of the Board of Directors of such Person.
"Controlled Group" means each of the Borrower Controlled Group, the
----------------
Participating Lessee Controlled Group and the Manager Controlled Group, and
"Controlled Groups" means, collectively, all of such groups.
-----------------
"Convert", "Conversion", and "Converted" each refers to a conversion of
------- ---------- ---------
Advances of one Type into Advances of another Type pursuant to Section 2.02(b).
"Cost Basis" means for any Hotel Property the sum of (a) for any Initial
----------
Property, the amount set forth for such Initial Property on Schedule 1.01(b)
attached hereto, and for any other Hotel Property, the aggregate purchase price
paid by the Borrower or its Subsidiary for such other Hotel Property (giving
effect to any securities used to purchase a Hotel Property at the fair market
value of the securities at the time of purchase based upon the price at which
such securities could be exchanged into the Parent's common stock assuming such
exchange occurred on the date of
-8-
<PAGE>
acquiring the Hotel Property), and (b) the actual cost of any Capital
Expenditures for such Hotel Property made by the Borrower or its Subsidiaries
pursuant to an Approved Preliminary Property Plan as certified, at the
Borrower's expense, upon the completion of such Capital Expenditures by a
property condition consultant or engineer reasonably acceptable to the Agents
who shall have inspected the Hotel Property and delivered to the Administrative
Agent a certificate that such Capital Expenditures have been made or purchased
and delivered to such Hotel Property.
"Credit Card Agreements" means each credit card agreement among each of the
----------------------
Participating Lessee, the Borrower or the Borrower's Subsidiaries (as
applicable), the credit card companies for all major credit cards accepted by
the Hotel Properties and the Administrative Agent, in each case substantially in
the form of Exhibit K attached hereto with such changes as are acceptable to the
Administrative Agent, and all other agreements with or directions to credit card
companies satisfactory to the Administrative Agent, in either case pursuant to
which, in accordance with Section 5.12 such credit card companies are to direct
funds from credit card receipts of a Hotel Property to either the Deposit
Account or Operating Account (Participating Lessee) of the Participating Lessee
for such Hotel Property which is subject to a Depository Account Agreement.
"Credit Documents" means this Agreement, the Notes, the Guaranties, the
----------------
Environmental Indemnities, the Security Documents, the Agents' Fee Letter, and
each other agreement, instrument or document executed by the Borrower or any of
its Subsidiaries at any time in connection with this Agreement.
"Debt Service" means, for any Person for the period for which such amount is
------------
being determined, the amount (without duplication) of all mandatory principal
payments made and interest accrued with respect to any Indebtedness of such
Person and all payments made in respect of Capital Leases of such Person.
"Debt Service Rate" means, for any Indebtedness for the period for which such
-----------------
amount is being determined, the greatest of (a) the percentage (on an annualized
basis) obtained by dividing the actual Debt Service for such Indebtedness for
such period by the average outstanding amount of such Indebtedness for such
period, (b) the percentage (on an annualized basis) that would be obtained by
dividing (i) the estimated Debt Service that would have been paid for such
Indebtedness for such period based upon (Y) an interest rate for such
Indebtedness for such period equal to 2.25% plus the Treasury Rate (as defined
----
herein) and (Z) a 20 year principal amortization of such Indebtedness with
constant monthly payments of principal and interest by (ii) the amount of such
Indebtedness, and (c) 10%. As used herein, "Treasury Rate" means the rate of
interest on United States Treasury Securities with a ten-year maturity, most
recently published prior to the date of any calculation made hereunder, and
shown in the "Week Ending" column and in the ten-year listing under the heading
"Treasury Constant Maturities" of the Federal Reserve Statistical Release Form
H-15.
-9-
<PAGE>
"Deposit Account" means a demand, time, savings, passbook, checking or like
---------------
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Depository Account Agreements" means (i) the Bank One Cash Management
-----------------------------
Agreement, (ii) each depository account agreement among each of the
Participating Lessee, the Borrower or the Borrower's Subsidiaries (as
applicable), and the financial institutions at which Deposit Accounts are
located pursuant to the Cash Management System (Participating Lessee) with the
consent and acknowledgment of such Persons of the collateral assignment of such
agreement to the Administrative Agent, in each case substantially in the form of
Exhibit L attached hereto with such changes as are acceptable to the
Administrative Agent, and (iii) all other agreements with or directions to the
financial institutions at which Deposit Accounts are located satisfactory to the
Administrative Agent, in either case pursuant to which, in accordance with
Section 5.12 such financial institutions are upon the occurrence of certain
events to direct funds from such Deposit Accounts to the account designated by
the Administrative Agent.
"Default" means (a) an Event of Default or (b) any event or condition which
-------
with notice or lapse of time or both would, unless cured or waived, become an
Event of Default.
"DFW South" means the Holiday Inn Dallas DFW Airport South hotel.
---------
"DFW South LP" means DFW South I Limited Partnership, a Texas limited
------------
partnership.
"Dollar Equivalent" means the equivalent in another currency of an amount in
-----------------
U.S. Dollars to be determined by reference to the rate of exchange quoted by the
Administrative Agent, at 11:00 a.m. (Dallas, Texas time) on the date of
determination, for the spot purchase in the foreign exchange market of such
amount of Dollars with such other currency.
"Dollars" and "$" means lawful money of the United States of America.
------- -
"Domestic Lending Office" means, with respect to any Bank, the office of such
-----------------------
Bank specified as its "Domestic Lending Office" opposite its name on Schedule
9.02 or such other office of such Bank as such Bank may from time to time
specify to the Borrower and the Administrative Agent.
"EBITDA" means for any Person for any period for which such amount is being
------
determined, an amount equal to (a) Net Income for such period plus (b) to the
----
extent deducted in determining Net Income, Interest Expense, income taxes,
depreciation, amortization, and other non-cash items for such period minus (c)
-----
4% of the gross revenues for such Person for such period, as determined in
accordance with GAAP; provided that if any Property of such Person has been sold
--------
or conveyed by
-10-
<PAGE>
such Person in such period, the amounts referred to in clauses (a)-(c) above
arising from such Property shall be excluded from the calculation of EBITDA for
such period; and provided further that if such Person has acquired any Property
----------------
in such period, the amounts referred to in clauses (a)-(c) above arising from
such Property during such entire period shall be included in the calculation of
EBITDA for such period.
"Effective Date" means the date all of the conditions precedent set forth in
--------------
Section 3.01 have been satisfied.
"Eligible Assignee" means (a) a commercial bank organized under the laws of
-----------------
the United States, or any State thereof, and having primary capital of not less
than $250,000,000 and approved by the Agents and the Issuing Bank, which
approvals will not be unreasonably withheld, (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development and having primary capital (or its
equivalent) of not less than $250,000,000 (or its Dollar Equivalent) and
approved by the Agents and the Issuing Bank, which approvals will not be
unreasonably withheld, (c) a Bank, and (d) an Affiliate of the respective
assigning Bank, without approval of any Person but otherwise meeting the
eligibility requirements of (a) or (b) above.
"Eligible Property" means, as of any Borrowing Base Determination Date, any
-----------------
Hotel Property which is owned by the Borrower or any Guarantor on such date and
was so owned on the date of the most recent Borrowing Base Certificate delivered
to the Banks, and which satisfies the conditions to qualifying as an Eligible
Property set forth in Section 3.04 on such Borrowing Base Determination Date.
"Engineering Report" means with respect to any Hotel Property, an engineering
------------------
report in accordance with the scope of services attached hereto as Schedule 1.01
(d) reasonably satisfactory to the Agents prepared for the Banks by a Person set
forth on Schedule 1.01(d) or otherwise satisfactory to the Agents covering the
physical condition of the Hotel Property, including without limitation the
structural, electrical, plumbing, mechanical and other essential components of
the Hotel Property.
"Environment" or "Environmental" shall have the meanings set forth in 43
----------- -------------
U.S.C. (S) 9601(8) (1988).
"Environmental Claim" means any third party (including governmental agencies
-------------------
and employees) action, lawsuit, claim, demand, regulatory action or proceeding,
order, decree, consent agreement or notice of potential or actual responsibility
or violation (including claims or proceedings under the
-11-
<PAGE>
Occupational Safety and Health Acts or similar laws or requirements relating to
health or safety of employees) which seeks to impose liability under any
Environmental Law.
"Environmental Indemnity" means one or more environmental indemnity
-----------------------
agreements dated of even date herewith in substantially the form of the attached
Exhibit M executed or to be executed by the Borrower, the Parent and all
Subsidiaries of the Borrower (including each Permitted New Subsidiary but
excluding the Permitted Other Subsidiaries), and any future environmental
indemnities executed in connection with any Hotel Property, as any of such
environmental indemnities may be amended hereafter in accordance with the terms
of such agreements.
"Environmental Law" means all Legal Requirements arising from, relating to,
-----------------
or in connection with the Environment, health, or safety, including without
limitation CERCLA, relating to (a) pollution, contamination, injury,
destruction, loss, protection, cleanup, reclamation or restoration of the air,
surface water, groundwater, land surface or subsurface strata, or other natural
resources; (b) solid, gaseous or liquid waste generation, treatment, processing,
recycling, reclamation, cleanup, storage, disposal or transportation; (c)
exposure to pollutants, contaminants, hazardous, medical, infectious, or toxic
substances, materials or wastes; (d) the safety or health of employees; or (e)
the manufacture, processing, handling, transportation, distribution in commerce,
use, storage or disposal of hazardous, medical, infectious, or toxic substances,
materials or wastes.
"Environmental Permit" means any permit, license, order, approval or other
--------------------
authorization under Environmental Law.
"Environmental Report" means with respect to any Hotel Property, an
--------------------
environmental report in accordance with the scope of services attached hereto as
Schedule 1.01 (f) prepared for the Banks by a Person set forth on Schedule
1.01(f) or otherwise satisfactory to the Agents certifying to the Agents and the
Banks that the Hotel Property and the soil and the groundwater thereunder do not
contain Hazardous Substances except for Permitted Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"Escrow Breaking Deadline" means August 9, 1996.
------------------------
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time to time.
"Event of Default" has the meaning set forth in Section 7.01.
----------------
-12-
<PAGE>
"Expiration Date" means, with respect to any Letter of Credit, the date on
---------------
which such Letter of Credit will expire or terminate in accordance with its
terms.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
------------------
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for any such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
---------------------
System or any of its successors.
"FF&E" means furniture, fixtures and equipment.
----
"Financial Statements" means the financial statements described in Section
--------------------
4.06.
"Financing Statement (Borrower)" means any Uniform Commercial Code -
------------------------------
Financing Statement - Form UCC-1 to be executed and delivered by Borrower or any
of its Subsidiaries in connection with perfecting the security interest assigned
by any Security Document, and any extension, renewal, or amendment thereof.
"Financing Statement (Participating Lessee)" means any Uniform Commercial
------------------------------------------
Code - Financing Statement - Form UCC-1 to be executed and delivered by
Participating Lessee in connection with perfecting the security interest
assigned by any Participating Lessee Document, and any extension, renewal, or
amendment thereof.
"Franchise Agreements" means those certain Agreements listed on Schedule 4.22
--------------------
attached hereto and any future franchise or license agreement for an Eligible
Property with a reputable, nationally known, third party franchisor or licensor
approved by the Agents in writing.
"Franchisor" means those certain franchisors listed on Schedule 1.01(h )
----------
attached hereto, or any other franchisor or licensor of a Hotel Property
approved by the Agents in writing.
"Franchisor Consent" means a Franchisor's Consent and Agreement acceptable to
------------------
the Agents and in substantially the form of one of the forms attached as Exhibit
N or such other form as approved by the Agents in writing, executed by a
Franchisor for a Hotel Property.
-13-
<PAGE>
"Fund," "Trust Fund," or "Superfund" means the Hazardous Substance Response
---- ---------- ---------
Trust Fund, established pursuant to 42 U.S.C. (S) 9631 (1988) and the Post-
closure Liability Trust Fund, established pursuant to 42 U.S.C. (S) 9641 (1988),
which statutory provisions have been amended or repealed by the Superfund
Amendments and Reauthorization Act of 1986, and the "Fund," "Trust Fund," or
"Superfund" that are now maintained pursuant to 42 U.S.C. (S) 9507.
"Funds from Operations" means for any period an amount equal to the
---------------------
Consolidated Net Income of the Borrower and the Borrower's Subsidiaries for such
period excluding gains (losses) from debt restructuring and sales of property
(including furniture and equipment) plus real estate related depreciation and
amortization (excluding amortization of deferred financing costs) and after
adjustments for unconsolidated partnerships and joint ventures; provided,
however, if any extraordinary items are excluded for purposes of calculating Net
Income, such items shall not be further excluded for purposes of making the
calculation set forth in this definition.
"Future Property" means any Hotel Property except for the Initial Properties,
---------------
the DFW South or the Meadowlands which the Borrower or any Subsidiary of the
Borrower acquires.
"GAAP" means United States generally accepted accounting principles as in
----
effect from time to time, applied on a basis consistent with the requirements of
Section 1.03.
"General Assignment and Agreement" means a general assignment and agreement
--------------------------------
executed by the Participating Lessee for the benefit of the Borrower or
Guarantor who is the particular Property Owner for a Hotel Property to secure
the Participating Lessee's obligations under the Participating Lease for such
Hotel Property, each substantially in the form of Exhibit O with such
modifications as may be necessary and appropriate in the opinion of counsel to
the Agents to comply with the state law of the jurisdiction in which the Hotel
Property is located and as may be reasonably satisfactory to the Agents
(provided any such modification does not materially and adversely affect the
rights and benefits accorded thereunder), as the same may be amended or
terminated in accordance with their terms.
"General Partner" means AGH GP, Inc., a Nevada corporation.
---------------
"Governmental Authority" means any foreign governmental authority, the United
----------------------
States of America, any state of the United States of America and any subdivision
of any of the foregoing, and any agency, department, commission, board,
authority or instrumentality, bureau or court having jurisdiction over any Bank,
the Parent, the Borrower, any Subsidiaries of the Borrower or the Parent, the
Participating Lessee, the Manager or any of their respective Properties.
-14-
<PAGE>
"Governmental Proceedings" means any action or proceedings by or before any
------------------------
Governmental Authority, including, without limitation, the promulgation,
enactment or entry of any Legal Requirement.
"Ground Lease" means each of the ground leases or subground leases set forth
------------
on Schedule 1.01(i) hereto and any ground lease for a Future Property acceptable
to the Agents in their sole discretion, together with all right, title and
interest of Borrower or any Subsidiary of Borrower (except the Permitted Other
Subsidiaries), as the case may be, in and to the leasehold estate created
pursuant to each such ground lease as each such ground lease may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"Ground Lessor Consent" means a Ground Lessor Consent and Agreement
---------------------
acceptable to the Agents and in substantially the form of the attached Exhibit P
or other form approved by the Agents, executed by the then current lessor for
the Ground Lease.
"Guarantor" means Parent and each Subsidiary of the Borrower (except the
---------
Permitted Other Subsidiaries). The Guarantors on the Effective Date are
identified on Schedule 1.01(j).
"Guaranty" means one or more Guaranty and Contribution Agreements in
--------
substantially the form of the attached Exhibit Q executed by the Borrower and
all of the Subsidiaries of the Borrower (including any Permitted New Subsidiary
but excluding the Permitted Other Subsidiaries), evidencing the joint and
several guaranty by the signatories thereto of the obligations of Borrower in
respect of the Credit Documents and the obligations of landlords under
Participating Leases, and any future guaranty and contribution agreement
executed to secure Advances except for Supplemental Guaranties, as any of such
agreements may be amended hereafter in accordance with the terms of such
agreements.
"Hazardous Substance" means the substances identified as such pursuant to
-------------------
CERCLA and those regulated under any other Environmental Law, including without
limitation pollutants, contaminants, petroleum, petroleum products, radio
nuclides, radioactive materials, and medical and infectious waste.
"Hazardous Waste" means the substances regulated as such pursuant to any
---------------
Environmental Law.
"Hotel Capital Lease Limit" means for any Initial Property the amount of
-------------------------
Capital Leases set forth for such Initial Property on Schedule 1.01(k) attached
hereto, and for any Future Property an amount of Capital Leases approved by the
Agents in writing (which approval will not be unreasonably withheld).
-15-
<PAGE>
"Hotel Operating Lease Limit" means for any Initial Property the amount of
---------------------------
operating leases set forth for such Initial Property on Schedule 1.01(k)
attached hereto, and for any Future Property an amount of operating leases
approved by the Agents in writing (which approval will not be unreasonably
withheld).
"Hotel Property" for any hotel means the Real Property and the Personal
--------------
Property for such hotel.
"Improvements" for any hotel means all buildings, structures, fixtures,
------------
tenant improvements and other improvements of every kind and description now or
hereafter located in or on or attached to the Land for such hotel; and all
additions and betterments thereto and all renewals, substitutions and
replacements thereof.
"Indebtedness" means (without duplication), at any time and with respect to
------------
any Person, (i) indebtedness of such Person for borrowed money (whether by loan
or the issuance and sale of debt securities) or for the deferred purchase price
of property or services purchased (other than amounts constituting trade
payables or bank drafts payable within 120 days arising in the ordinary course);
(ii) indebtedness of others in the amount which such Person has directly or
indirectly assumed or guaranteed or otherwise provided credit support therefor;
(iii) indebtedness of others in the amount secured by a Lien on assets of such
Person, whether or not such Person shall have assumed such indebtedness; (iv)
obligations of such Person in respect of letters of credit, acceptance
facilities, or drafts or similar instruments issued or accepted by banks and
other financial institutions for the account of such Person (other than trade
payables or bank drafts payable within 120 days arising in the ordinary course);
and (v) obligations of such Person under Capital Leases.
"Initial Properties" means collectively the Hotel Properties listed on
------------------
Schedule 1.01(b), and "Initial Property" means any of such Hotel Properties.
----------------
"Initial Maturity Date" means the date which is the earlier of (i) the date
---------------------
three (3) years from the date hereof or (ii) July 31, 1999.
"Interest Expense" means, for any Person, for any period for which such
----------------
amount is being determined, total interest expense (including that properly
attributable to Capital Leases in accordance with GAAP) and all charges incurred
with respect to letters of credit.
"Interest Period" means, for each LIBOR Rate Advance comprising part of the
---------------
same Borrowing, the period commencing on the date of such Advance or the date of
the Conversion of any Prime Rate Advance into such an Advance and ending on the
last day of the period selected by the Borrower pursuant to the provisions below
and Section 2.02 and, thereafter, each subsequent period commencing on the last
day of the immediately preceding Interest Period and ending on the last day
-16-
<PAGE>
of the period selected by the Borrower pursuant to the provisions below and
Section 2.02. The duration of each such Interest Period shall be one, two, or
three months, in each case as the Borrower may select, upon notice received by
the Administrative Agent not later than 11:00 a.m. (Dallas, Texas time) on the
third Business Day prior to the first day of such Interest Period, provided,
--------
however, that:
- -------
(a) Interest Periods for Advances of the same Borrowing shall be of the same
duration;
(b) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided that if such
--------
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;
(c) any Interest Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
(d) each successive Interest Period shall commence on the day on which the
next preceding Interest Period expires; and
(e) no Interest Period with respect to any portion of any Advance shall
extend beyond the Maturity Date.
"Irrevocable Direction to Pay Rent" means one or more Irrevocable Direction
---------------------------------
to Pay Rent in substantially the form of the attached Exhibit R executed by the
Parent and all of the Subsidiaries of the Borrower (including any Permitted New
Subsidiary but excluding the Permitted Other Subsidiaries) and acknowledged by
the Participating Lessee, evidencing the direction by the landlords under the
Participating Leases to the Participating Lessee to make rental payments under
the Participating Leases into the Concentration Bank Account, and any future
direction, as any of such directions may be amended hereafter in accordance with
the terms of such directions.
"Issuing Bank" means Bank One, Texas, N.A., or any Bank acting as a successor
------------
issuing bank pursuant to Section 8.06, and "Issuing Banks" means, collectively,
-------------
all of such Banks.
"Land" for any hotel means the real property upon which the hotel is located,
----
together with all rights, title and interests appurtenant to such real property,
including without limitation all rights, title and interests to (a) all strips
and gores within or adjoining such property, (b) the streets, roads,
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<PAGE>
sidewalks, alleys, and ways adjacent thereto, (c) all of the tenements,
hereditaments, easements, reciprocal easement agreements, rights-of-way and
other rights, privileges and appurtenances thereunto belonging or in any way
pertaining thereto, (d) all reversions and remainders, (e) all air space rights,
and all water, sewer and wastewater rights, (e) all mineral, oil, gas,
hydrocarbon substances and other rights to produce or share in the production of
anything related to such property, and all other appurtenances appurtenant to
such property, including without limitation, any now or hereafter belonging or
in anywise appertaining thereto.
"Legal Requirement" means any law, statute, ordinance, decree, requirement,
-----------------
order, judgment, rule, regulation (or official interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority.
"Letter of Credit" means, individually, any letter of credit issued by the
----------------
Issuing Bank in accordance with the provisions of Section 2.13 of this
Agreement, and "Letters of Credit" means all such letters of credit
-----------------
collectively.
"Letter of Credit Documents" means, with respect to any Letter of Credit,
--------------------------
such Letter of Credit and any reimbursement or other agreements, documents, and
instruments entered into in connection with or relating to such Letter of
Credit.
"Letter of Credit Exposure" means, at any time, the sum of (a) the aggregate
-------------------------
undrawn maximum face amount of each Letter of Credit at such time and (b) the
aggregate unpaid amount of all Reimbursement Obligations at such time.
"Letter of Credit Obligations" means all obligations of the Borrower arising
----------------------------
in respect of this Agreement or the Letter of Credit Documents.
"LIBOR Lending Office" means, with respect to any Bank, the office of such
--------------------
Bank specified as its "LIBOR Lending Office" opposite its name on Schedule 9.02
(or, if no such office is specified, its Domestic Lending Office) or such other
office of such Bank as such Bank may from time to time specify to the Borrower
and the Administrative Agent.
"LIBOR Rate" means, for the Interest Period for each LIBOR Rate Advance
----------
comprising part of the same Borrowing, an interest rate per annum (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum) equal to (A) the
rate per annum at which deposits in Dollars are offered by the principal office
of the Administrative Agent in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) three Business Days before the
first day of such Interest Period in an amount substantially equal to the
Administrative Agent's LIBOR Rate Advance comprising part of such Borrowing and
for a period equal to such Interest Period divided
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<PAGE>
by (B) one minus the LIBOR Reserve Requirement. It is agreed that for purposes
of this definition, LIBOR Rate Advances made hereunder shall be deemed to
constitute Eurocurrency Liabilities as defined in Regulation D and to be subject
to the reserve requirements of Regulation D.
"LIBOR Rate Advance" means any Advance which bears interest as provided in
------------------
Section 2.06(b).
"LIBOR Reserve Requirement" shall mean, on any day, that percentage
-------------------------
(expressed as a decimal fraction) which is in effect on such date, as provided
by the Federal Reserve System for determining the maximum reserve requirements
generally applicable to financial institutions regulated by the Federal Reserve
Board comparable in size and type to the Administrative Agent (including,
without limitation, basic, supplemental, marginal and emergency reserves) under
Regulation D with respect to "Eurocurrency liabilities" as currently defined as
Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding (or other category of
liabilities which includes deposits by reference to which the interest rate on a
LIBOR Rate Advance is determined or any category or extensions of credit which
includes loans by a non-United States office of the Administrative Agent to
United States residents). Each determination by the Administrative Agent of the
LIBOR Reserve Requirement, shall, in the absence of manifest error, be
conclusive and binding upon the Borrower.
"Lien" means any mortgage, lien, pledge, charge, deed of trust, security
----
interest, encumbrance or other type of preferential arrangement to secure or
provide for the payment of any obligation of any Person, whether arising by
contract, operation of law or otherwise (including, without limitation, the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement).
"Liquid Investments" means:
------------------
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States;
(b) (i) negotiable or nonnegotiable certificates of deposit, time deposits,
or other similar banking arrangements maturing within 180 days from the date of
acquisition thereof ("bank debt securities"), issued by (A) any Bank or (B) any
other bank or trust company which has a combined capital surplus and undivided
profit of not less than $250,000,000 or the Dollar Equivalent thereof, if at the
time of deposit or purchase, such bank debt securities are rated not less than
"A" (or the then equivalent) by the rating service of S&P or of Moody's
Investors Service, and (ii) commercial paper issued by (A) any Bank or (B) any
other Person if at the time of purchase such commercial paper is rated not less
than "A-2" (or the then equivalent) by the rating service of S&P or not less
than "P-2"
-19-
<PAGE>
(or the then equivalent) by the rating service of Moody's Investors Service, or
upon the discontinuance of both of such services, such other nationally
recognized rating service or services, as the case may be, as shall be selected
by the Borrower with the consent of the Administrative Agent;
(c) repurchase agreements relating to investments described in clauses (a)
and (b) above with a market value at least equal to the consideration paid in
connection therewith, with any Person who regularly engages in the business of
entering into repurchase agreements and has a combined capital surplus and
undivided profit of not less than $250,000,000 or the Dollar Equivalent thereof,
if at the time of entering into such agreement the debt securities of such
Person are rated not less than "A" (or the then equivalent) by the rating
service of S&P or of Moody's Investors Service; and
(d) such other instruments (within the meaning of Article 9 of the Texas
Business and Commerce Code) as the Borrower may request and the Administrative
Agent may approve in writing, which approval will not be unreasonably withheld.
"Liquor License Concession Agreement" means a Lease/Concession Agreement
-----------------------------------
between the Participating Lessee and a Liquor License Company in the form of
Exhibit S attached hereto or such other form as approved by the Agents in
writing.
"Liquor License Companies" means those certain companies listed on Schedule
------------------------
1.01(l) attached hereto and any future company wholly-owned by Steve D. Jorns
having a concession to sell liquor for a Hotel Property approved by the Agents
in writing (which approval will not be unreasonably withheld).
"Liquor License Company Consent" for any Initial Property or Future Property
------------------------------
for which the liquor license(s) for such Hotel Property is held by a Person
(including a Liquor License Company) other than Borrower, a Guarantor owning
such Hotel Property, the Manager or the Participating Lessee, means, a consent
and agreement in the form of Exhibit T attached hereto or such other form as
reasonably approved by the Agents executed by the Liquor License Company.
"Liquor License Pledge Agreement" for any Initial Property or Future Property
-------------------------------
for which the liquor license(s) for such Hotel Property is held by a Person
(including a Liquor License Company) other than Borrower, a Guarantor owning
such Hotel Property, the Manager or the Participating Lessee, means a pledge of
the legal and beneficial ownership interest in such Person to the Participating
Lessee in the form of Exhibit U with such modifications as may be necessary and
appropriate in the opinion of counsel to the Agents to comply with the state law
of the Hotel Property's state and as may be reasonably satisfactory to the
Agents (provided any such modification does not materially and adversely affect
the rights and benefits to be accorded thereunder).
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<PAGE>
"Major Renovation" means, for any Hotel Property, renovation of such Hotel
----------------
Property for which the anticipated cost of the Capital Expenditures and FF&E
involved in such renovation equals or exceeds an amount equal to the product of
(a) $15,000 times (b) the number of guest rooms for such Hotel Property.
"Majority Banks" means, at any time, Banks holding at least 66 2/3% of the
--------------
then aggregate unpaid principal amount of the Notes and the Letter of Credit
Exposure of the Banks at such time, or, if no such principal amount of the Notes
and Letter of Credit Exposure is then outstanding, Banks having at least 66 2/3%
of the aggregate amount of the Commitments at such time.
"Management Agreements" means those certain Management Agreements listed on
---------------------
Schedule 4.23 attached hereto and any future management agreement for an
Eligible Property is substantially the same form or as otherwise approved by the
Agents in writing.
"Manager" means American General Hospitality, Inc., a Texas corporation, or
-------
any other manager of a Hotel Property approved by the Agents in writing.
"Manager Consent" means a Manager Consent and Agreement in substantially the
---------------
form of the attached Exhibit V, executed by the Manager for the Hotel Property.
"Manager Controlled Group" means all members of a controlled group of
------------------------
corporations and all trades (whether or not incorporated) under common control
which, together with the Manager, are treated as a single employer under Section
414 of the Code.
"Material Adverse Change" shall mean a material adverse change in the
-----------------------
business, financial condition, or results of operations of (i) the Borrower or
any Guarantor, in each case since the date of the Financial Statements, or (ii)
the Parent, since the date of the Registration Statement.
"Material Lease" means any lease, other than the Participating Lease, either
--------------
(i) demising in excess of 10,000 square feet of the Improvements with respect to
any Hotel Property or (ii) generating in excess of 10% of the gross revenues
with respect to any Hotel Property.
"Maturity Date" means the Initial Maturity Date, unless the Maturity Date is
-------------
extended pursuant to Section 2.01(b), in which event such extended date shall be
the Maturity Date.
"Maximum Rate" means the maximum nonusurious interest rate under applicable
------------
law.
"Meadowlands" means the Courtyard by Marriott-Meadowlands Hotel.
-----------
-21-
<PAGE>
"Meadowlands LP" means 455 Meadowland Associates, Ltd., a Texas limited
--------------
partnership.
"Mortgages" means, collectively, the deeds of trust and mortgages executed by
---------
the Borrower or any Guarantor to secure the Obligations, each substantially in
the form of Exhibit W with such modifications as may be necessary and
appropriate in the opinion of counsel to the Agents to comply with the state law
of the filing jurisdiction and as may be reasonably satisfactory to the Agents
(provided any such modification does not materially and adversely affect the
rights and benefits to be accorded to the Administrative Agent for the benefit
of the Banks), as the same may be amended or terminated in accordance with their
terms, and "Mortgage" means any of such instruments.
--------
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA to which the Borrower or any member of a Controlled Group is
making or accruing an obligation to make contributions.
"Net Cash Proceeds" means (a) the aggregate cash proceeds (including, without
-----------------
limitation, insurance proceeds) received by the Parent, the Borrower or any of
their respective Subsidiaries (as applicable) in connection with any Asset Sale
or Capitalization Event, minus (b) the reasonable expenses of such Person in
-----
connection with such Asset Sale or such Capitalization Event.
"Net Income" means, for any Person or Hotel Property for any period for which
----------
such amount is being determined, the net income of such Person or Hotel
Property, as applicable, after taxes, as determined in accordance with GAAP,
excluding, however, extraordinary items, including but not limited to (i) any
net gain or loss during such period arising from the sale, exchange, or other
disposition of capital assets (such term to include all fixed assets and all
securities) other than in the ordinary course of business and (ii) any write-up
or write-down of assets.
"Net Worth" means, for any Person, stockholders equity of such Person
---------
determined in accordance with GAAP.
"Note" means a promissory note of the Borrower payable to the order of any
----
Bank, in substantially the form of the attached Exhibit A, evidencing
indebtedness of the Borrower to such Bank resulting from Advances owing to such
Bank, and "Notes means all of such promissory notes.
-----
"Notice of Borrowing" means a notice of borrowing in the form of the attached
-------------------
Exhibit X signed by a Responsible Officer of the Borrower.
"Notice of Conversion or Continuation" means a notice of conversion or
------------------------------------
continuation in the form of the attached Exhibit Y signed by a Responsible
Officer of the Borrower.
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<PAGE>
"Obligations" means all Advances, Reimbursement Obligations, and other
-----------
amounts payable by the Borrower to the Structuring Agent, the Administrative
Agent, or the Banks under the Credit Documents.
"Operating Accounts (Borrower)" means (a) a Deposit Account of the Borrower
-----------------------------
to be established and maintained by the Borrower with the Cash Manager at its
offices at 1717 Main Street, Dallas, Texas, Account Name: " American General
Hospitality Operating Partnership, L.P. -Operating Account," and (b) a Deposit
Account of the Property Owner for each Hotel Property (except for DFW South and
Meadowlands) to be established and maintained by the Borrower with the Cash
Manager at its offices at 1717 Main Street, Dallas, Texas, in the name of the
Property Owner.
"Operating Account (Participating Lessee)" means the Deposit Account of the
----------------------------------------
Participating Lessee for each Hotel Property (except for DFW South and
Meadowlands) to be established and maintained by the Participating Lessee with
the Cash Manager at its offices at 1717 Main Street, Dallas, Texas, Account
Name: "AGH Leasing, L.P. - Operating Account [Hotel Property]."
"Parent" means American General Hospitality Corporation, a Maryland
------
corporation.
"Parent Capitalization Event" means any of the following which do not
---------------------------
constitute a Borrower Capitalization Event: (a) any sale or issuance by the
Parent or any of its Subsidiaries of equity securities, or (b) any issuance or
incurrence by the Parent of any Indebtedness.
"Parent Common Stock" means the common stock of Parent, par value $.01 per
-------------------
share.
"Parent's Other Subsidiaries" means all Subsidiaries of the Parent except for
---------------------------
the Borrower and the Subsidiaries of the Borrower.
"Participating Leases" means those certain Participating Leases listed on
--------------------
Schedule 1.01(m) attached hereto and any future participating lease for an
Eligible Property approved by the Agents in writing (which approval shall not
be unreasonably withheld as long as such Person is at least 65% owned by the
same individuals required of a Participating Lessee pursuant to the provisions
of Section 7.01(r).
"Participating Lessee" means AGH Leasing, L.P., a Delaware limited
--------------------
partnership and any future participating lessee for a Hotel Property approved
by the Agents in writing.
-23-
<PAGE>
"Participating Lessee Controlled Group" means all members of a controlled
-------------------------------------
group of corporations and all trades (whether or not incorporated) under common
control which, together with the Participating Lessee, are treated as a single
employer under Section 414 of the Code.
"Participating Lessee Estoppel" means a Lessee Estoppel, Acknowledgment and
-----------------------------
Subordination Agreement in substantially the form of the attached Exhibit Z,
executed by the Participating Lessee for the Hotel Property.
"Participating Lessee Documents" for any Initial Property or Future Property,
------------------------------
means collectively (a) an Assignment of Leases (Participating Lessee), (b) a
General Assignment, (c) Financing Statements (Participating Lessee), (d) an
Assignment of Management Agreements, (e), a Depository Account Agreement, (f)
the Credit Card Agreements for such Hotel Property, and (i) such other security
agreements, pledge agreements, assignments, mortgages, financing statements,
stock powers, and other collateral documentation as may be reasonably needed to
confirm or perfect the liens and security interests conveyed to such Hotel
Property's Property Owner pursuant to any of the documents listed in clauses in
(a)-(f) of this definition.
"Participating Lessee Pledged Property" means, for any Hotel Property, the
-------------------------------------
Property of the Participating Lessee assigned or pledged to the Property Owner
of such Hotel Property pursuant to the Participating Lessee Documents for such
Hotel Property.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means the Liens permitted to exist pursuant to
----------------------
Section 6.01.
"Permitted Hazardous Substances" means (a) Hazardous Substances, petroleum
------------------------------
and petroleum products which are (i) used in the ordinary course of business and
in typical quantities for a mid-market hotel and (ii) generated, used and
disposed of in accordance with all Legal Requirements and good hotel industry
practice and (b) non-friable asbestos to the extent (i) that no applicable Legal
Requirements require removal of such asbestos from the Hotel Property and (ii)
such asbestos is encapsulated in accordance with all applicable Legal
Requirements and such reasonable operations and maintenance program as may be
required by the Agents.
"Permitted Hotel Sale" means the Asset Sale of all, but not a portion, of a
--------------------
Hotel Property for which the Conditions to Collateral Release are satisfied.
"Permitted New Subsidiary" means a Subsidiary at least 99% of the interests
------------------------
therein are owned directly or indirectly by the Borrower which (a) owns a Hotel
Property and does not own and has
-24-
<PAGE>
never owned any Property except for such Hotel Property, (b) has delivered to
the Administrative Agent either (i) an original Guaranty and Environmental
Indemnity executed by such Subsidiary or (ii) an Accession Agreement executed by
such Subsidiary, and (c) is newly-formed and bankruptcy remote.
"Permitted Non-Eligible Property" means any Hotel Property (a) which either
-------------------------------
(i) does not satisfy the conditions to qualifying as an Eligible Property set
---
forth in Section 3.04 or (ii) has not been submitted to the Banks as a potential
Eligible Property by the Borrower; (b) which is owned by a Permitted New
Subsidiary; (c) which neither is subject to any Environmental Claim, nor
contains any Hazardous Substance which could reasonably be expected to cause a
Material Adverse Change as evidenced by an Environmental Report delivered to the
Administrative Agent at least 10 days prior to the acquisition of such Hotel
Property by Borrower or one of Borrower's Subsidiaries; (d) for which the
Borrower or the Property Owner (as applicable) shall have satisfied the
conditions precedent set forth in Sections 3.04(a)(i)-(iv), 3.04(a)(vi),
3.04(b)-(c), 3.04(h), 3.04(j), and 3.04(o) within 90 days of the acquisition
date of such Hotel Property, provided that if any of the requirements of this
clause (d) with respect to a Future Property (but not an Initial Property) shall
result in the payment of material mortgage or intangible taxes or in a Material
Adverse Change, the Borrower or the Property Owner (as applicable) shall not
have to satisfy the condition[s] precedent which would result in the payment of
material mortgage or intangible taxes or in a Material Adverse Change until the
occurrence of an Event of Default; (e) which is not subject to any Liens except
for those permitted pursuant to the provisions of Section 6.01; and (f) which
would if considered with the other Permitted Non-Eligible Properties, if any, as
an Eligible Property for the purpose of testing the Pool Requirements, not cause
the Borrower to violate the Pool Requirements.
"Permitted Other Subsidiaries" means (a) DFW South LP; (b) Meadowlands LP;
----------------------------
(c) AGH DFW South LLC, the sole general partner of DFW South LP; (d) AGH
Secaucaus LLC, the sole general partner of Meadowlands LP and (c) such other
Subsidiaries of the Borrower which will not be Guarantors and not own Eligible
Property, as may be approved by the Agents in their sole discretion.
"Permitted Other Subsidiary Indebtedness" means (a) any Indebtedness of DFW
---------------------------------------
South LP in an amount not to exceed $14,250,000; and (b) any Indebtedness of
Meadowlands LP in an amount not to exceed $6,000,000.
"Permitted Other Subsidiary Loan Documents" means the notes, the deeds of
-----------------------------------------
trust, mortgages and the other loan documents executed in connection with or
securing the Permitted Other Subsidiary Indebtedness.
"Permitted Personal Property Replacement" means the removal from any Hotel
---------------------------------------
Property of any items of tangible Personal Property for which the following
requirements are met: (a) no Default has
-25-
<PAGE>
occurred and is continuing or would occur upon the consummation of such
Permitted Personal Property Replacement; and (ii) Borrower promptly substitutes
and installs on the Hotel Property other Personal Property of equal or greater
value in the operation of the Hotel Property as a hotel of the class of the
Hotel Property prior to such removal, all of which items shall be free of Liens
and shall be subject to the Liens of the Mortgage encumbering such Hotel
Property, and executes and delivers to the Administrative Agent all documents
required by the Administrative Agent to create and perfect a valid and binding
first priority security interest and the attachment of such Lien to such
Personal Property in favor of the Administrative Agent for the benefit of the
Banks.
"Person" means an individual, partnership, corporation (including a business
------
trust), joint stock company, trust, unincorporated association, limited
liability company, joint venture or other entity, or a government or any
political subdivision or agency thereof or any trustee, receiver, custodian or
similar official.
"Personal Property" for any Hotel Property means all FF&E, inventory and
-----------------
other personal property of every kind, whether now existing or hereafter
acquired, tangible and intangible, now or hereafter located on or about the
Land, and used or to be used in the future in connection with the operation of
such Hotel Property, as more fully described in the Property Security Documents
and the Participating Lessee Documents for such Hotel Property.
"Plan" means an employee benefit plan (other than a Multiemployer Plan)
----
maintained for employees of the Borrower or any member of a Controlled Group and
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code.
"Pool Requirements" means collectively that (a) the Cost Basis for any
-----------------
individual Hotel Property shall not exceed 20% of the Cost Basis for all
Eligible Property; (b) the Cost Basis for all Eligible Property at all times
must exceed $150,000,000; (c) the Cost Basis for Hotel Properties which are
limited service hotels (for purposes of this definition Marriott Courtyards
shall not be deemed limited service hotels) shall not exceed 20% of the Cost
Basis for all Eligible Property; (d) the Cost Basis for Hotel Properties which
do not have Franchise Agreements shall not exceed 20% of the Cost Basis for all
Eligible Property; (e) the occupancy levels, operating revenues and geographic
diversity of the Eligible Property shall be generally comparable to that of the
Initial Properties taken as whole; (f) no Hotel Property or other Property shall
cause the Parent to forfeit the Parent's tax status as a real estate investment
trust under Sections 856-860 of the Code, and (g) any Future Property shall be
comparable in quality to the Initial Properties.
"Prime Rate" means a fluctuating interest rate per annum as shall be in
----------
effect from time to time equal to the rate of interest publicly announced by the
Administrative Agent as its prime commercial
-26-
<PAGE>
lending rate (which may not be the lowest rate offered to its customers),
whether or not the Borrower has notice thereof.
"Prime Rate Advance" means an Advance which bears interest as provided in
------------------
Section 2.06(a).
"Property" of any Person means any property or assets (whether real,
--------
personal, or mixed, tangible or intangible) of such Person.
"Property Adjustment Report" means a certificate of the Borrower in
--------------------------
substantially the form of the attached Exhibit AA.
"Property Certificate" for any Hotel Property means a Property Certificate
--------------------
dated of even date herewith executed by the Property Owner in substantially the
form of Exhibit BB, and any future Property Certificate executed by a Property
Owner of any Future Property.
"Property EBITDA" means for any Hotel Property for any period for which such
---------------
amount is being determined, the EBITDA of the Property Owner for such Hotel
Property from such Hotel Property. Property EBITDA shall expressly exclude the
Participating Lessee's Net Income for such Hotel Property.
"Property Information" for any Hotel Property means the information and
--------------------
documentation for such Hotel Property listed in Sections 3.04(a)(ii)-(xiv) and
3.04(f) and a commitment for a Title Policy for such Hotel Property, together
with a legible copy of all documents referred to in such commitment.
"Property Owner" for any Initial Property or Future Property, means the
--------------
Person who owns fee or leasehold title interest (as applicable) in, and to such
Property.
"Property Security Documents" for any Initial Property or Future Property,
---------------------------
means collectively (a) a Mortgage, (b) an Assignment of Leases (Borrower), (c)
Financing Statements (Borrower), (d) a Collateral Assignment and Security
Agreement, (e) the Liquor License Company Consent, (f) a Property Certificate
and (h) such other security agreements, pledge agreements, assignments,
mortgages, financing statements, stock powers, and other collateral
documentation as the Agents may reasonably request.
"Pro Rata Share" means, at any time with respect to any Bank, either (a) the
--------------
ratio (expressed as a percentage) of such Bank's Commitment at such time to the
aggregate Commitments at such time or (b) if the Commitments have been
terminated, the ratio (expressed as a percentage) of such Bank's aggregate
outstanding Advances and participation interest in the Letter of Credit Exposure
at such
-27-
<PAGE>
time to the aggregate outstanding Advances and Letter of Credit Exposure of all
the Banks at such time.
"Public Offering" means the initial public offering of approximately
---------------
7,500,000 shares of Parent Common Stock pursuant to the Registration Statement.
"Public Offering Documents" means the collective reference to the
-------------------------
Registration Statement and each certificate, opinion, agreement, instrument or
other document delivered by Parent or any underwriter pursuant thereto.
"Real Estate Value" means, with respect to any Hotel Property, the lesser of
-----------------
(a) the appraised value of such Hotel Property under the most recent Appraisal
for such Hotel Property (appraised value will initially be based upon the "As
Is" value of a Hotel Property and will be based upon the "As Improved" value of
a Hotel Property once the Capital Expenditures are completed in accordance with
the Approved Preliminary Property Plan for such Hotel Property which values for
the Initial Properties are set forth in Schedule 1.01(b)), and (b) the Cost
Basis of such Hotel Property as of the date of the most recent Borrowing Base
Certificate (or, if applicable, Property Adjustment Report) delivered to the
Banks.
"Real Property" for any hotel means the Land and the Improvements for such
-------------
hotel.
"Refund Amount" means for any calendar quarter prior to July 1, 1997 an
-------------
amount (but in no event less than zero) equal to (a) $62,500 minus (b) an amount
-----
equal to (i) one quarter of one percent (.25%) times (ii) the average daily
amount (based on a 360 day year) in such quarter by which the Banks' aggregate
Commitments exceed the sum of the Banks' outstanding Advances and the Letter of
Credit Exposure (as calculated by the Administrative Agent).
"Register" has the meaning set forth in paragraph (c) of Section 9.06.
--------
"Registration Statement" means Registration Statement (No. 333-4596) of
----------------------
Parent on Form S-11 and the prospectus included therein, as filed with the
Securities and Exchange Commission on May 3, 1996, as it may be amended or
supplemented from time to time.
"Reimbursement Obligations" means all of the obligations of the Borrower set
-------------------------
forth in Section 2.13(c) and the Letter of Credit Documents.
"Release" shall have the meaning set forth in CERCLA or under any other
-------
Environmental Law.
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"Release Amount" shall in connection with any Asset Sale mean the greater of
--------------
(a) one-hundred twenty percent (120%) of the Allocated Debt Amount for the Hotel
Property in such Asset Sale, (b) seventy-five percent (75%) of the Net Cash
Proceeds from such Asset Sale, (c) the amount of Advances that would need to be
repaid, if any, to cure a Borrowing Base deficiency under Section 2.07(c)(iii),
and (d) the amount of Advances that would need to be repaid, if any, to satisfy
the financial covenants contained in Sections 6.15 and 6.16 calculating such
tests without inclusion of the results of the Hotel Property in such Asset Sale.
Notwithstanding the foregoing, if an Asset Sale occurs during the Renewal Term
and in connection with such Asset Sale all of the Conditions to Collateral
Release are satisfied except for the payment of the Release Amount, then the
"Release Amount" for such Asset Sale shall not exceed the amount which would
cause the Parent to forfeit the Parent's tax status as a real estate investment
trust under Sections 856-860 of the Code, as evidenced by a written opinion of
the Parent's accountants or legal counsel acceptable to the Agents.
"Renewal Term" shall have the meaning set forth in Section 2.01(b).
------------
"Reportable Event" means any of the events set forth in Section 4043(b) of
----------------
ERISA.
"Required Work" means for any Initial Property, the Capital Expenditures and
-------------
expenditures for FF&E for such Initial Property described on Schedule 5.06
attached hereto as may be modified by agreement between the Borrower and the
Majority Banks, and for any Future Property which the Borrower requests be an
Eligible Property, the Capital Expenditures and expenditures for FF&E agreed
upon by the Borrower and the Majority Banks as the Required Work for such Future
Property, if any.
"Required Work Deadline" means for any Initial Property, the date for
----------------------
completion of the Required Work which is one year following the date of this
Agreement, and for any Future Property, the date for completion of the Required
Work which is the date which is one year following the date of acquisition of
such Future Property.
"Response" shall have the meaning set forth in CERCLA or under any other
--------
Environmental Law.
"Responsible Officer" means the Chief Executive Officer, President, Executive
-------------------
Vice President or Chief Financial Officer of any Person.
"Restricted Payment" means (a) any direct or indirect payment, prepayment,
------------------
redemption, purchase, or deposit of funds or Property for the payment (including
any sinking fund or defeasance), prepayment, redemption or purchase of
Indebtedness not permitted by this Agreement, and (b) the making by any Person
of any dividends or other distributions (in cash, property, or otherwise) on,
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or payment for the purchase, redemption or other acquisition of, any shares of
any capital stock of such Person, other than dividends payable in such Person's
stock.
"Rolling Period" means with respect to any calendar quarter of the Borrower,
--------------
such fiscal quarter and the three immediately preceding calendar quarters.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.,
---
or any successor thereof.
"Security Agreement" means the Security Agreement dated of even date herewith
------------------
executed by the Borrower and the Guarantors in substantially the form of Exhibit
CC, as it may be amended from time to time in accordance with its terms.
"Security Documents" means, collectively, the Security Agreement, all
------------------
Property Security Documents, the Bank One Cash Management Agreement, the
Irrevocable Direction to Pay Rent, all Financing Statements (Borrower) and any
other agreement executed in connection with the Liens in favor of the
Administrative Agent for the benefit of the Banks securing the Obligations; and
any "Security Document" means any one of the foregoing.
"Structuring Agent" means Societe Generale, Southwest Agency in its capacity
-----------------
as Structuring Agent for the Banks pursuant to Article VIII and any successor
Structuring Agent pursuant to Section 8.06.
"Subsidiary" of a Person means any corporation, association, partnership or
----------
other business entity of which more than 50% of the outstanding shares of
capital stock (or other equivalent interests) having by the terms thereof
ordinary voting power under ordinary circumstances to elect a majority of the
board of directors or Persons performing similar functions (or, if there are no
such directors or Persons, having general voting power) of such entity
(irrespective of whether at the time capital stock (or other equivalent
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person.
"Supplemental Guarantor" means any partner of the Borrower except for the
----------------------
Parent, the Guarantors, the General Partner or AGH LP that executes a
Supplemental Guaranty.
"Supplemental Guaranty" means any future assumption of liability in a form
---------------------
reasonably acceptable to the Agents executed by a Supplemental Guarantor to
secure Advances, as such future supplemental guaranties may be amended hereafter
in accordance with their terms.
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"Termination Event" means (a) the occurrence of a Reportable Event with
-----------------
respect to a Plan, as described in Section 4043 of ERISA and the regulations
issued thereunder (other than a Reportable Event not subject to the provision
for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the
Borrower or any of a Controlled Group from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
giving of a notice of intent to terminate a Plan under Section 4041(c) of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any
other event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Title Policy" means a Mortgagee Policy of Title Insurance which (a) is in
------------
the form of American Land Title Association Standard Loan Policy - 1970 (without
modification, revision or amendment) (or such other form as approved by the
Agents) with ALTA Endorsements Form 1, 3.1 (with parking), 6, 9, and
endorsements commonly known Doing Business, Usury, Utility Facility, contiguity,
survey, access, creditor's rights deletion, plat act, revolver, "tie-in" and
specific endorsements relating to encroachments, (b) is issued by underwriters
reasonably acceptable to the Agents, with such reinsurance as the Agents shall
reasonably request, (c) insures that the grantor of the Lien insured by such
policy owns the Real Property subject to such Lien in fee simple or pursuant to
a leasehold estate and that the Mortgage covering the Real Property is a valid
lien on the Real Property in favor of the Administrative Agent for the benefit
of the Banks (subject only to Permitted Encumbrances), (d) does not contain any
exceptions for rights of parties in possession, or unpaid delinquent
installments of taxes, special assessments or subsequent assessments due to
changes in ownership or usage, or any other exceptions to coverage other than
Permitted Encumbrances.
"Total Collateral EBITDA" means for any period the aggregate Property EBITDA
-----------------------
of all Eligible Properties and all Permitted Non-Eligible Properties.
"Type" has the meaning set forth in Section 1.04.
----
Section 1.02 Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
Section 1.03 Accounting Terms; Changes in GAAP.
---------------------------------
(a) All accounting terms not specifically defined in this Agreement shall be
construed in accordance with GAAP applied on a consistent basis with those
applied in the preparation of the Financial Statements.
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<PAGE>
(b) Unless otherwise indicated, all financial statements of the Borrower and
the Parent, all calculations for compliance with covenants in this Agreement,
and all calculations of any amounts to be calculated under the definitions in
Section 1.01 shall be based upon the Consolidated accounts of the Borrower, the
Parent and their respective Subsidiaries (as applicable) in accordance with
GAAP.
(c) If any changes in accounting principles after December 31, 1995 required
by GAAP or the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or similar agencies results in a change in the
method of calculation of, or affects the results of such calculation of, any of
the financial covenants, standards or terms found in this Agreement, then the
parties shall enter into and diligently pursue negotiations in order to amend
such financial covenants, standards or terms so as to equitably reflect such
change, with the desired result that the criteria for evaluating the financial
condition of Borrower and its Subsidiaries (determined on a Consolidated basis)
shall be the same after such change as if such change had not been made.
Section 1.04 Types of Advances. Advances are distinguished by "Type". The
-----------------
"Type" of an Advance refers to the determination whether such Advance is a LIBOR
Rate Advance or Prime Rate Advance, each of which constitutes a Type.
Section 1.05 Miscellaneous. Article, Section, Schedule and Exhibit
-------------
references are to Articles and Sections of and Schedules and Exhibits to this
Agreement, unless otherwise specified.
ARTICLE II
THE ADVANCES AND THE LETTERS OF CREDIT
Section 2.01 The Advances; Extension of Initial Maturity Date.
------------------------------------------------
(a) Advances. Each Bank severally agrees, on the terms and conditions set
--------
forth in this Agreement, to make Advances to the Borrower from time to time on
any Business Day up to 30 days prior to the Initial Maturity Date in an
aggregate amount not to exceed at any time outstanding an amount equal to such
Bank's Commitment less such Bank's Pro Rata Share of the Letter of Credit
----
Exposure at such time. The aggregate amount of all outstanding Advances and
Letter of Credit Exposure at any time may not exceed either the lesser of (i)
the aggregate Commitments at such time or (ii) the Borrowing Base at such time.
Within the limits of each Bank's Commitment and the Borrowing Base limitation
set forth above, the Borrower may from time to time prepay pursuant to Section
2.07 and reborrow under this Section 2.01(a).
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<PAGE>
(b) Extension of Initial Maturity Date. The Borrower shall have a one time
----------------------------------
option, exercisable as hereinafter provided, to extend the Initial Maturity Date
of the Notes for an additional one year period (the "Renewal Term") to the first
anniversary of the Initial Maturity Date upon the completion by the Borrower of
the following conditions prior to the Initial Maturity Date to the satisfaction
of the Agents.
(i) No Default which has not been cured or waived in writing by the
Administrative Agent as set forth in Section 9.01 shall have occurred.
(ii) The Agents shall have received no later than ninety (90) days prior
to the Initial Maturity Date written notice from the Borrower that it
intends to exercise its option to extend the Initial Maturity Date of the
Notes.
(iii) The Borrower shall have paid to the Administrative Agent for the
account of each Bank an extension fee equal to the product of (A) one
quarter of one percent (1/4%) times (B) the aggregate amount of such Bank's
outstanding Advances and Pro Rata Share of the Letter of Credit Exposure as
of the Initial Maturity Date.
(iv) The Borrower shall have delivered to the Administrative Agent (A)
Appraisals of the Eligible Property performed no later than 120 days prior
to the Initial Maturity Date and no earlier than 90 days prior to the
Initial Maturity Date and (B) a Borrowing Base Certificate dated as of the
Initial Maturity Date based upon the new Appraisals.
(v) If, based upon the Borrowing Base Certificate to be delivered to the
Administrative Agent pursuant to the preceding clause (iv) or as otherwise
required under this Agreement, the Borrower is obligated to repay any
Advances, the Borrower shall have repaid such Advances.
(vi) The representations and warranties of the Borrower in Sections
4.04, 4.06 and 4.09 of the Credit Agreement remain true and correct as of
the Initial Maturity Date. The other representations and warranties of the
Borrower, the Parent and the Guarantors in the Credit Documents remain true
and correct in all material respects as of the Initial Maturity Date.
If the Initial Maturity Date has been extended as provided in this Section
2.01(b), the aggregate Banks' Commitments shall be capped at the then
outstanding principal balance of all Advances and the Letter of Credit Exposure
and the Borrower shall have the right to extend the Expiration Date to the new
Maturity Date. After the Initial Maturity Date, the Borrower will no longer
have the right to request any more Advances, or any increase in the Letter of
Credit Exposure and shall repay the Advances in accordance with the provisions
of Section 2.05.
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<PAGE>
Section 2.02 Method of Borrowing.
-------------------
(a) Notice. Each Borrowing shall be made pursuant to a Notice of Borrowing,
------
given not later than 11:00 a.m. (Dallas, Texas time) on the third Business Day
before the date of the proposed Borrowing, by the Borrower to the Administrative
Agent, which shall give each Bank prompt notice on the day of receipt of such
timely Notice of Borrowing of such proposed Borrowing by telecopier. Each Notice
of Borrowing shall be in writing or by telecopier specifying the requested (i)
date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii)
aggregate amount of such Borrowing, and (iv) if such Borrowing is to be
comprised of LIBOR Rate Advances, the Interest Period for each such Advance. In
the case of a proposed Borrowing comprised of LIBOR Rate Advances, the
Administrative Agent shall promptly notify each Bank of the applicable interest
rate under Section 2.06(b). Each Bank shall, before 11:00 a.m. (Dallas, Texas
time) on the date of such Borrowing, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address referred
to in Section 9.02, or such other location as the Administrative Agent may
specify by notice to the Banks, in same day funds, such Bank's Pro Rata Share of
such Borrowing. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower at its
account with the Administrative Agent.
(b) Conversions and Continuations. In order to elect to Convert or continue
-----------------------------
Advances comprising part of the same Borrowing under this Section, the Borrower
shall deliver an irrevocable Notice of Conversion or Continuation to the
Administrative Agent at the Administrative Agent's office no later than 11:00
a.m. (Dallas, Texas time) at least three Business Days in advance of the
proposed Conversion or continuation date. Each such Notice of Conversion or
Continuation shall be in writing or by telecopier, specifying (i) the requested
Conversion or continuation date (which shall be a Business Day), (ii) the
Borrowing amount and Type of the Advances to be Converted or continued, (iii)
whether a Conversion or continuation is requested, and if a Conversion, into
what Type of Advances, and (iv) in the case of a Conversion to, or a
continuation of, LIBOR Rate Advances, the requested Interest Period. Promptly
after receipt of a Notice of Conversion or Continuation under this paragraph,
the Administrative Agent shall provide each Bank with a copy thereof and, in
the case of a Conversion to or a continuation of LIBOR Rate Advances, notify
each Bank of the applicable interest rate under Section 2.06(b). For purposes
other than the conditions set forth in Section 3.02, the portion of Advances
comprising part of the same Borrowing that are Converted to Advances of another
Type shall constitute a new Borrowing. If the Borrower shall fail to specify an
Interest Period for a LIBOR Rate Advance including the continuation of a LIBOR
Rate Advance, the Borrower shall be deemed to have selected a Prime Rate
Advance.
(c) Certain Limitations. Notwithstanding anything in paragraphs (a) and (b)
-------------------
above:
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<PAGE>
(i) in the case of LIBOR Rate Advances each Borrowing shall be in an
aggregate amount of not less than $2,000,000 or greater multiples of
$100,000;
(ii) except for Borrowings for the acquisition of Future Properties by
the Borrower or a Permitted New Subsidiary, (A) the Borrower may not
request Borrowings on more than two days in any calendar month, and (B) the
Borrower shall not request more than one Borrowing in any calendar month
for the payment of Capital Expenditures and FF&E in connection with a Major
Renovation and any such request in connection with a Major Renovation shall
be made contemporaneously with any request to withdraw funds from the CAPEX
Reserve as set forth in Section 5.07 in such month and shall be accompanied
by the same documentation as required for a withdraw from the CAPEX
Reserve.
(iii) at no time shall there be more than three Interest Periods
applicable to outstanding LIBOR Rate Advances;
(iv) the Borrower may not select LIBOR Rate Advances for any Borrowing
to be made, Converted or continued if a Default has occurred and is
continuing;
(v) if any Bank shall, at any time prior to the making of any requested
Borrowing comprised of LIBOR Rate Advances, notify the Administrative Agent
that the introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Bank or its
LIBOR Lending Office to perform its obligations under this Agreement to
make LIBOR Rate Advances or to fund or maintain LIBOR Rate Advances, then
such Bank's Pro Rata Share of such Borrowing shall be made as a Prime Rate
Advance, provided that such Prime Rate Advance shall be considered part of
the same Borrowing and interest on such Prime Rate Advance shall be due and
payable at the same time that interest on the LIBOR Rate Advances
comprising the remainder of such Borrowing shall be due and payable; and
such Bank agrees to use commercially reasonable efforts (consistent with
its internal policies and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such designation would
avoid the effect of this paragraph and would not, in the reasonable
judgment of such Bank, be otherwise materially disadvantageous to such
Bank;
(vi) if the Administrative Agent is unable to determine the LIBOR Rate
for LIBOR Rate Advances comprising any requested Borrowing, the right of
the Borrower to select LIBOR Rate Advances for such Borrowing or for any
subsequent Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing
shall be a Prime Rate Advance;
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<PAGE>
(vii) if the Majority Banks shall, at least one Business Day before the
date of any requested Borrowing, notify the Administrative Agent that the
LIBOR Rate for LIBOR Rate Advances comprising such Borrowing will not
adequately reflect the cost to such Banks of making or funding their
respective LIBOR Rate Advances, as the case may be, for such Borrowing, the
right of the Borrower to select LIBOR Rate Advances for such Borrowing or
for any subsequent Borrowing shall be suspended until the Administrative
Agent shall notify the Borrower and the Banks that the circumstances
causing such suspension no longer exist, and each Advance comprising such
Borrowing shall be a Prime Rate Advance; and
(viii) if the Borrower shall fail to select the duration or
continuation of any Interest Period for any LIBOR Rate Advances in
accordance with the provisions contained in the definition of "Interest
Period" in Section 1.01 and paragraph (a) or (b) above, the Administrative
Agent will forthwith so notify the Borrower and the Banks and such Advances
will be made available to the Borrower on the date of such Borrowing as
Prime Rate Advances or, if an existing Advance, Converted into Prime Rate
Advances.
(d) Notices Irrevocable. Each Notice of Borrowing and Notice of Conversion
-------------------
or Continuation shall be irrevocable and binding on the Borrower. In the case
of any Borrowing which the related Notice of Borrowing specifies is to be
comprised of LIBOR Rate Advances, the Borrower shall indemnify each Bank against
any loss, out-of-pocket cost or expense incurred by such Bank as a result of any
condition precedent for Borrowing set forth in Article III not being satisfied
for any reason, including, without limitation, any loss, cost or expense
actually incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund the Advance to be made by such Bank as
part of such Borrowing when such Advance, as a result of such failure, is not
made on such date.
(e) Administrative Agent Reliance. Unless the Administrative Agent shall
-----------------------------
have received notice from a Bank before the date of any Borrowing that such Bank
will not make available to the Administrative Agent such Bank's Pro Rata Share
of the Borrowing, the Administrative Agent may assume that such Bank has made
its Pro Rata Share of such Borrowing available to the Administrative Agent on
the date of such Borrowing in accordance with paragraph (a) of this Section 2.02
and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Bank shall not have so made its Pro Rata Share of such
Borrowing available to the Administrative Agent, such Bank and the Borrower
severally agree to immediately repay to the Administrative Agent on demand such
corresponding amount, together with interest on such amount, for each day from
the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable on each such day to Advances comprising
such Borrowing and (ii) in the case of such Bank, the Federal Funds Rate for
each such
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<PAGE>
day. If such Bank shall repay to the Administrative Agent such corresponding
amount and interest as provided above, such corresponding amount so repaid shall
constitute such Bank's Advance as part of such Borrowing for purposes of this
Agreement even though not made on the same day as the other Advances comprising
such Borrowing.
(f) Bank Obligations Several. The failure of any Bank to make the Advance
------------------------
to be made by it as part of any Borrowing shall not relieve any other Bank of
its obligation, if any, to make its Advance on the date of such Borrowing. No
Bank shall be responsible for the failure of any other Bank to make the Advance
to be made by such other Bank on the date of any Borrowing.
(g) Notes. The indebtedness of the Borrower to each Bank resulting from
-----
Advances owing to such Bank shall be evidenced by the Note of the Borrower
payable to the order of such Bank in substantially the form of Exhibit A.
Section 2.03 Fees.
----
(a) Initial Funding Fees; Bank Refund. If the Borrower delivers the
---------------------------------
Borrower Funding Certificate, the Banks make an Advance hereunder or any Issuing
Bank issues a Letter of Credit hereunder, the Borrower agrees to pay to the
Administrative Agent for the account of each Bank on the date of the earliest to
occur of such events an initial funding fee equal to $1,000,000. The
Administrative Agent shall hold $250,000 of such fee in escrow to be used to pay
the Refund Amount to the Borrower and certain sums to the Banks as hereinafter
provided. If the Borrower has paid such initial funding fee as provided herein
and no Default exists, within 30 days of the end of the calendar quarters ending
September 30, 1996, December 31, 1996, March 31, 1997 and June 30, 1997, the
Administrative Agent shall calculate the Refund Amount for such calendar
quarter. After calculation of the Refund Amount for any calendar quarter the
Administrative Agent will first pay to each Bank out of the escrowed $250,000
such Bank's Pro Rata Share of an amount equal to (i) $62,500 minus (ii) the
-----
Refund Amount for such calendar quarter and second pay to the Borrower on behalf
of the Banks out of such escrowed sums an amount equal to the Refund Amount.
Any sums remaining in such escrowed account after the aforementioned payments
for all four of the stated calendar quarters shall be refunded to the Borrower.
(b) Commitment Fees. For the period from July 1, 1997 until the Initial
---------------
Maturity Date the Borrower agrees to pay to the Administrative Agent for the
account of each Bank a commitment fee on the average daily amount by which such
Bank's Commitment exceeds the sum of such Bank's outstanding Advances and Pro
Rata Share of the Letter of Credit Exposure at a rate per annum equal to one
quarter of one percent (.25%). Such fees shall be due and payable quarterly in
arrears (i) on the date which is 30 days following the end of the last Business
Day of each March, June, September and December and (ii) on the Initial Maturity
Date.
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<PAGE>
(c) Letter of Credit Fees. The Borrower agrees to pay to the Administrative
---------------------
Agent for the account of the Banks, fees in respect of all Letters of Credit
outstanding at a rate per annum equal to one and 85/100 percent (1.85%)
calculated based upon a 360-day year and in respect of the maximum amount
available from time to time to be drawn under such outstanding Letters of
Credit, payable in arrears (i) on the last Business Day of each calendar month
and (ii) on the Maturity Date. In addition, the Borrower agrees to pay to the
Issuing Bank for its own account $500 for each Letter of Credit issued,
reissued, amended, increased, or extended by such Issuing Bank, such fees due
and payable at the time of such issuance, reissuance, amendment, increase or
extension.
(d) Agents Fees. The Borrower agrees to pay to the Agents for their benefit
-----------
the fees set forth in the Agents' Fee Letter as and when the same are due and
payable pursuant to the terms of the Agent's Fee Letter.
Section 2.04 Reduction of the Commitments.
----------------------------
(a) Change of Control. Upon the occurrence of any of the following:
-----------------
(i) a change in control is reported by the Borrower, the Parent, a
Participating Lessee or the Manager in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), or
(ii) any "person" (as such term is used in Section 13(d) and
Section 14(d)(2) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Borrower, the Parent, a Participating
Lessee or the Manager representing the Control Percentage or more of
the combined voting power of the Borrower's, the Parent's, a
Participating Lessee's or the Manager's, as applicable, then
outstanding securities; then, in such event the Majority Banks may,
at their sole option upon written notice to the Borrower (a
"Termination Notice"), declare the obligation of each Bank to make
Advances and the obligation of the Issuing Bank to issue, increase, or
extend Letters of Credit to be terminated, whereupon the same shall
forthwith terminate and the Commitments shall reduce to zero.
Notwithstanding the foregoing, a "change of control" shall not be deemed to
occur as a result of the acquisition of securities of the Borrower, the Parent,
the Participating Lessee or the Manager by any of Steven D. Jorns, Bruce G.
Wiles, Kenneth E. Barr, James E. Sowell, Louis W. Shaw, II, Kenneth W. Shaw or
their respective Associates (as such term is defined in Rule 12b-2 promulgated
under the Exchange Act) or controlled Affiliates.
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<PAGE>
(b) Borrower Capitalization Event. Upon the occurrence of any Borrower
-----------------------------
Capitalization Event, the aggregate Commitments shall reduce by an amount equal
to 100% of the Net Cash Proceeds of such Borrower Capitalization Event, with
each Bank's Commitment being reduced by such Bank's Pro Rata Share of the
aggregate reduction in Commitments.
Section 2.05 Repayment of Advances.
---------------------
Advances. The Borrower shall repay the outstanding principal amount of each
--------
Advance on the Initial Maturity Date; provided that if the Maturity Date is
extended as provided in Section 2.01(b), the total outstanding balance of all
Advances as of the Initial Maturity Date shall be payable thereafter in
quarterly installments on August 1, 1999, November 1, 1999, February 1, 2000 and
May 1, 2000 in an amount equal to the product of (i) one sixtieth (1/60) times
(ii) the sum of (A) the amount of the Advances on the Initial Maturity Date
following the conversion of the loan to a term loan and (B) the amount of the
Letter of Credit Exposure on the Initial Maturity Date. The Borrower shall on
the Maturity Date repay the outstanding principal amount of Advances.
Section 2.06 Interest, Late Payment Fee. The Borrower shall pay interest
--------------------------
on the unpaid principal amount of each Advance made by each Bank from the date
of such Advance until such principal amount shall be paid in full, at the
following rates per annum:
(a) Prime Rate Advances. If such Advance is a Prime Rate Advance, a rate
-------------------
per annum (computed on the actual number of days elapsed, including the first
day and excluding the last, based on a 365 day year) equal at all times to the
lesser of (i) the Adjusted Prime Rate in effect from time to time plus the
----
Applicable Margin and (ii) the Maximum Rate, payable in arrears on the last
Business Day of each calendar month and on the date such Prime Rate Advance
shall be paid in full, provided that during the continuance of an Event of
--------
Default, Prime Rate Advances shall bear interest at a rate per annum equal at
all times to the lesser of (i) the rate required to be paid on such Advance
immediately prior to the date on which such amount becomes due plus three
----
percent (3%) and (ii) the Maximum Rate.
(b) LIBOR Rate Advances. If such Advance is a LIBOR Rate Advance, a rate
per annum (computed on the actual number of days elapsed, including the first
day and excluding the last, based on a 360 day year) equal at all times during
the Interest Period for such Advance to the lesser of (i) the LIBOR Rate for
such Interest Period plus the Applicable Margin and (ii) the Maximum Rate,
----
payable in arrears on the last day of each calendar month and the last day of
such Interest Period, and on the date such LIBOR Rate Advance shall be paid in
full; provided that during the continuance of an Event of Default, LIBOR Rate
--------
Advances shall bear interest at a rate per annum equal at all times to the
lesser of the rate required to be paid on such Advance immediately prior to the
date on which such amount became due plus three percent (3%) and (ii) the
----
Maximum Rate.
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<PAGE>
(c) Usury Recapture. In the event the rate of interest chargeable under
---------------
this Agreement or the Notes at any time is greater than the Maximum Rate, the
unpaid principal amount of the Notes shall bear interest at the Maximum Rate
until the total amount of interest paid or accrued on the Notes equals the
amount of interest which would have been paid or accrued on the Notes if the
stated rates of interest set forth in this Agreement had at all times been in
effect. In the event, upon payment in full of the Notes, the total amount of
interest paid or accrued under the terms of this Agreement and the Notes is less
than the total amount of interest which would have been paid or accrued if the
rates of interest set forth in this Agreement had, at all times, been in effect,
then the Borrower shall, to the extent permitted by applicable law, pay the
Administrative Agent for the account of the Banks an amount equal to the
difference between (i) the lesser of (A) the amount of interest which would have
been charged on the Notes if the Maximum Rate had, at all times, been in effect
and (B) the amount of interest which would have accrued on the Notes if the
rates of interest set forth in this Agreement had at all times been in effect
and (ii) the amount of interest actually paid or accrued under this Agreement on
the Notes. In the event the Banks ever receive, collect or apply as interest
any sum in excess of the Maximum Rate, such excess amount shall, to the extent
permitted by law, be applied to the reduction of the principal balance of the
Notes, and if no such principal is then outstanding, such excess or part thereof
remaining shall be paid to the Borrower.
(d) Other Amounts Overdue. If any amount payable under this Agreement other
---------------------
than the Advances is not paid when due and payable, including without
limitation, accrued interest and fees, then such overdue amount shall accrue
interest hereon due and payable on demand at a rate per annum equal to the
Adjusted Prime Rate plus three percent (3%), from the date such amount became
----
due until the date such amount is paid in full.
(e) Late Payment Fee. Subject to the provisions of Section 9.12, if any
----------------
interest payable under this Agreement is not paid when due and payable (after
taking into account any applicable grace period), then the Borrower will pay to
the Banks contemporaneously with the payment of such past due interest a late
payment fee equal to an amount equal to the product of (i) such overdue interest
times (ii) four percent (4%).
- -----
Section 2.07 Prepayments.
-----------
(a) Right to Prepay. The Borrower shall have no right to prepay any
---------------
principal amount of any Advance except as provided in this Section 2.07.
(b) Optional Prepayments. The Borrower may elect to prepay any of the
--------------------
Advances, after giving by 11:00 a.m. (Dallas, Texas time) (i) in the case of
LIBOR Rate Advances, at least three Business Days' or (ii) in case of Prime Rate
Advances, at least one Business Day's prior written notice to the Administrative
Agent stating the proposed date and aggregate principal amount of such
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<PAGE>
prepayment, and if applicable, the relevant Interest Period for the Advances to
be prepaid. If any such notice is given, the Borrower shall prepay Advances
comprising part of the same Borrowing in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice, and
shall also pay accrued interest to the date of such prepayment on the principal
amount prepaid and amounts, if any, required to be paid pursuant to Section 2.08
as a result of such prepayment being made on such date; provided, however, that
-------- -------
each partial prepayment shall be in an aggregate principal amount not less than
$500,000 and in integral multiples of $100,000.
(c) Mandatory Prepayments.
---------------------
(i) Change of Control. On the fifth Business Day following the
-----------------
Borrower's receipt of a Termination Notice pursuant to Section 2.04 (a)
hereof, the Borrower shall be required to prepay all outstanding Advances
in full and to deposit with the Administrative Agent into the Cash
Collateral Account an amount equal to the Letter of Credit Exposure.
(ii) Borrowing Base Deficiency. On each Borrowing Base Determination
-------------------------
Date, the Borrower shall be required to prepay Advances in an aggregate
amount equal to the excess of (A) the aggregate amount of outstanding
Advances and Letter of Credit Exposure on such date over (B) the Borrowing
Base, as determined on such Borrowing Base Determination Date (or, upon
payment in full of all outstanding Advances, to deposit with the
Administrative Agent into the Cash Collateral Account an amount equal to
the amount of the Letter of Credit Exposure which exceeds the Borrowing
Base).
(iii) Asset Sale. Contemporaneously with the occurrence of any Asset
----------
Sale, the Borrower shall prepay Advances in an amount equal to the Release
Amount of each such Asset Sale (except as otherwise provided in the
definition of Conditions to Collateral Release for a sale of a Permitted
Non-Eligible Property).
(iv) Capitalization Event. Upon the occurrence of any Capitalization
--------------------
Event, the Borrower shall prepay Advances in an amount equal to 100% of the
Net Cash Proceeds of such Capitalization Event on the Business Day such Net
Cash Proceeds are received by the Borrower or the Parent, as applicable
(or, in connection with a Borrower Capitalization Event only, upon payment
in full of all outstanding Advances, to deposit with the Administrative
Agent into the Cash Collateral Account an amount equal to the lesser of the
amount of the Letter of Credit Exposure or the remaining Net Cash
Proceeds).
(v) Accrued Interest. Each prepayment pursuant to this Section 2.07(c)
----------------
shall be accompanied by accrued interest on the amount prepaid to the date
of such prepayment and
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<PAGE>
amounts, if any, required to be paid pursuant to Section 2.08 as a result
of such prepayment being made on such date.
(vi) Avoidance of Breakage Costs. In the event that the amount of any
---------------------------
mandatory prepayment of Advances under this Section 2.07(c) exceeds the
aggregate principal amount of Advances which consist of Prime Rate Advances
(the amount of such excess being the "Excess Amount"), the Borrower shall
-------------
have the right, in lieu of making such prepayment in full, to prepay such
outstanding Advances which are Prime Rate Advances and to deposit an amount
equal to the Excess Amount with the Administrative Agent in the Cash
Collateral Account maintained by and in the sole dominion and control of
the Administrative Agent for the ratable benefit of the Banks. Any amount
so deposited shall be held by the Administrative Agent as collateral for
the Obligations and applied to the prepayment of Advances which are LIBOR
Rate Advances at the end of the current Interest Period(s) applicable
thereto. On any day on which amounts collected in the Cash Collateral
Account remain on deposit in or to the credit of the Cash Collateral
Account after giving effect to the payment made on such day pursuant to
this Section 2.07(c), and the Borrower shall have delivered to the
Administrative Agent a written request or a telephonic request (which shall
be promptly confirmed in writing) prior to 11:00 am (Dallas, Texas time)
that such remaining collected amounts be invested in cash equivalents
specified in such request, the Administrative Agent shall invest such
funds, to the extent the Administrative Agent is reasonably able to do so,
in such cash equivalents as are acceptable to, and with no risk to, the
Administrative Agent on an overnight basis or with maturities such that
amounts will be available to pay the Obligations secured thereby as they
become due, whether at maturity, by acceleration or otherwise; provided,
--------
however, that any loss resulting from such investments shall be charged to
-------
and be immediately payable by the Borrower on demand by the Administrative
Agent.
(d) Ratable Payments. Each payment of any Advance pursuant to this Section
----------------
2.07 or any other provision of this Agreement shall be made in a manner such
that all Advances comprising part of the same Borrowing are paid in whole or
ratably in part.
(e) Effect of Notice. All notices given pursuant to this Section 2.07 shall
----------------
be irrevocable and binding upon the Borrower.
(f) Payments with respect to Hotel Property Limitations. Notwithstanding
---------------------------------------------------
anything in this Agreement or any other Credit Document to the contrary, each
payment of any Advance pursuant to this Section 2.07 or any other provision of
this Agreement shall be made in a manner such that all Advances secured by a
Hotel Property for which any of the Security Documents for such Hotel Property
state that the amount of the Obligations secured by such Hotel Property is
limited in some way shall be deemed the last Advances repaid and, to the extent
that the Advances are repaid to an
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<PAGE>
amount less than the amount of any such limitation, shall be deemed the first
Advances made to the Borrower if and when the Borrower requests any further
Advances.
Section 2.08 Breakage Costs. If (a) any payment of principal of any LIBOR
--------------
Rate Advance is made other than on the last day of the Interest Period for such
Advance as a result of any payment pursuant to Section 2.07 or the acceleration
of the maturity of the Notes pursuant to Article VIII or otherwise; (b) any
Conversion of a LIBOR Rate Advance is made other than on the last day of the
Interest Period for such Advance pursuant to Section 2.12 or otherwise; or (c)
the Borrower fails to make a principal or interest payment with respect to any
LIBOR Rate Advance on the date such payment is due and payable, the Borrower
shall, within 10 days of any written demand sent by any Bank to the Borrower
through the Administrative Agent, pay to the Administrative Agent for the
account of such Bank any amounts (without duplication of any other amounts
payable in respect of breakage costs) required to compensate such Bank for any
additional losses, out-of-pocket costs or expenses which it may reasonably incur
as a result of such payment or nonpayment, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Bank to fund or maintain such Advance.
Section 2.09 Increased Costs.
---------------
(a) LIBOR Rate Advances. If, due to either (i) the introduction of or any
-------------------
change (other than any change by way of imposition or increase of reserve
requirements included in the calculation of the LIBOR Rate) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Bank of agreeing to make or making, funding or maintaining LIBOR
Rate Advances, then the Borrower shall from time to time, upon demand by such
Bank (with a copy of such demand to the Administrative Agent), immediately pay
to the Administrative Agent for the account of such Bank additional amounts
(without duplication of any other amounts payable in respect of increased costs)
sufficient to compensate such Bank for such increased cost; provided, however,
-------- -------
that, before making any such demand, each Bank agrees to use commercially
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, such
increased cost and would not, in the reasonable judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate as to the amount of such
increased cost and detailing the calculation of such cost submitted to the
Borrower and the Administrative Agent by such Bank at the time such Bank demands
payment under this Section shall be conclusive and binding for all purposes,
absent manifest error.
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<PAGE>
(b) Capital Adequacy. If any Bank or the Issuing Bank determines in good
----------------
faith that compliance with any law or regulation or any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law) implemented or effective after the date of this Agreement affects
or would affect the amount of capital required or expected to be maintained by
such Bank or the Issuing Bank and that the amount of such capital is increased
by or based upon the existence of such Bank's commitment to lend or the Issuing
Bank's commitment to issue Letters of Credit or any Bank's commitment to risk
participate in Letters of Credit and other commitments of this type, then, upon
30 days prior written notice by such Bank or the Issuing Bank (with a copy of
any such demand to the Administrative Agent), the Borrower shall immediately pay
to the Administrative Agent for the account of such Bank or to the Issuing Bank,
as the case may be, from time to time as specified by such Bank or the Issuing
Bank, additional amounts (without duplication of any other amounts payable in
respect of increased costs) sufficient to compensate such Bank or the Issuing
Bank, in light of such circumstances, (i) with respect to such Bank, to the
extent that the Issuing Bank reasonably determines such increase in capital to
be allocable to the existence of such Bank's commitment to lend under this
Agreement or its commitment to risk participate in Letters of Credit and (ii)
with respect to the Issuing Bank, to the extent that such Issuing Bank
reasonably determines such increase in capital to be allocable to the issuance
or maintenance of the Letters of Credit. A certificate as to such amounts and
detailing the calculation of such amounts submitted to the Borrower and the
Administrative Agent by such Bank or the Issuing Bank shall be conclusive and
binding for all purposes, absent manifest error.
(c) Letters of Credit. If any change in any law or regulation or in the
-----------------
interpretation thereof by any court or administrative or Governmental Authority
charged with the administration thereof shall either (i) impose, modify, or deem
applicable any reserve, special deposit, or similar requirement against letters
of credit issued by, or assets held by, or deposits in or for the account of,
Issuing Bank or any Bank or (ii) impose on Issuing Bank or any Bank any other
condition regarding the provisions of this Agreement relating to the Letters of
Credit or any Letter of Credit Obligations, and the result of any event referred
to in the preceding clause (i) or (ii) shall be to increase the cost to Issuing
Bank of issuing or maintaining any Letter of Credit, or increase the cost to
such Bank of its risk participation in any Letter of Credit (which increase in
cost shall be determined by Issuing Bank's or such Bank's reasonable allocation
of the aggregate of such cost increases resulting from such event), then, upon
demand by Issuing Bank or such Bank (with a copy sent to the Administrative
Agent), as the case may be, the Borrower shall pay to the Administrative Agent
for the account of Issuing Bank or Bank, as the case may be, from time to time
as specified by Issuing Bank or such Bank, additional amounts which shall be
sufficient to compensate such Issuing Bank or such Bank for such increased cost.
Issuing Bank and each Bank agrees to use commercially reasonable efforts
(consistent with internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office for the booking of its Letters
of Credit or risk participations if the making of such designation would avoid
the effect of this paragraph and would not, in the
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<PAGE>
reasonable judgment of Issuing Bank or such Bank, be otherwise disadvantageous
to Issuing Bank or such Bank, as the case may be. A certificate as to such
increased cost incurred by Issuing Bank or such Bank, as the case may be, as a
result of any event mentioned in clause (i) or (ii) above, and detailing the
calculation of such increased costs submitted by Issuing Bank or such Bank to
the Borrower and the Administrative Agent, shall be conclusive and binding for
all purposes, absent manifest error.
Section 2.10 Payments and Computations.
-------------------------
(a) Payment Procedures. Except if otherwise set forth herein, the Borrower
------------------
shall make each payment under this Agreement and under the Notes not later than
11:00 a.m. (Dallas, Texas time) on the day when due in Dollars to the
Administrative Agent at the location referred to in the Notes (or such other
location as the Administrative Agent shall designate in writing to the Borrower)
in same day funds. The Administrative Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal, interest or fees
ratably (other than amounts payable solely to the Administrative Agent, the
Issuing Banks, or a specific Bank pursuant to Section 2.03(c), 2.03(d), 2.06(c),
2.08, 2.09, 2.11, 2.12, or 2.13(c) but after taking into account payments
effected pursuant to Section 9.04) to the Banks in accordance with each Bank's
Pro Rata Share for the account of their respective Applicable Lending Offices,
and like funds relating to the payment of any other amount payable to any Bank
or Issuing Bank for the account of its Applicable Lending Office, in each case
to be applied in accordance with the terms of this Agreement. The Borrower
hereby authorizes the Administrative Agent to instruct the Cash Manager
following and during the continuance of an Event of Default to withdraw from or
offset against the Borrower's and the Borrower's Subsidiaries accounts with the
Cash Manager (including the Borrower's Bank Accounts) in order to cause timely
payment to be made to the Administrative Agent of all principal, interest, fees
and expenses due hereunder or under the Notes or the other Credit Documents
(subject to sufficient funds being available in such accounts for that purpose).
(b) Computations. All computations of interest based on the Adjusted Prime
------------
Rate shall be made by the Administrative Agent on the basis of a year of 365
days and all computations of fees and interest based on the LIBOR Rate and the
Federal Funds Rate shall be made by the Administrative Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day, but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent of
an interest rate shall be conclusive and binding for all purposes, absent
manifest error.
(c) Non-Business Day Payments. Whenever any payment shall be stated to be
-------------------------
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or
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<PAGE>
fees, as the case may be; provided, however, that if such extension would cause
--------
payment of interest on or principal of LIBOR Rate Advances to be made in the
next following calendar month, such payment shall be made on the next preceding
Business Day.
(d) Administrative Agent Reliance. Unless the Administrative Agent shall
-----------------------------
have received written notice from the Borrower prior to the date on which any
payment is due to the Banks that the Borrower will not make such payment in
full, the Administrative Agent may assume that the Borrower has made such
payment in full to the Administrative Agent on such date and the Administrative
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such date an amount equal to the amount then due such Bank. If and to
the extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Bank, together with
interest, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Administrative Agent, at the
Federal Funds Rate for each such day.
(e) Application of Payments. Unless otherwise specified in Section 2.07
-----------------------
hereof, whenever any payment received by the Administrative Agent under this
Agreement is insufficient to pay in full all amounts then due and payable under
this Agreement and the Notes, such payment shall be distributed and applied by
the Administrative Agent and the Banks in the following order: first, to the
-----
payment of fees and expenses due and payable to the Administrative Agent under
and in connection with this Agreement or any other Credit Document; second, to
------
the payment of all expenses due and payable under Section 2.11(c), ratably among
the Banks in accordance with the aggregate amount of such payments owed to each
such Bank; third, to the payment of fees due and payable to the Issuing Bank
-----
pursuant to Section 2.03(c); fourth, to the payment of all other fees due and
------
payable under Section 2.03 ratably among the Banks in accordance with their
applicable Commitments; and fifth, to the payment of the interest accrued on and
-----
the principal amount of all of the Notes and the interest accrued on and all
Reimbursement Obligations, regardless of whether any such amount is then due and
payable, ratably among the Banks in accordance with the aggregate accrued
interest plus the aggregate principal amount owed to such Bank.
(f) Register. The Administrative Agent shall record in the Register the
--------
Commitment and the Advances from time to time of each Bank and each repayment or
prepayment in respect to the principal amount of such Advances of each Bank.
Any such recordation shall be conclusive and binding on the Borrower and each
Bank, absent manifest error; provided however, that failure to make any such
-------- -------
recordation, or any error in such recordation, shall not affect the Borrower's
obligations hereunder in respect of such Advances.
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<PAGE>
Section 2.11 Taxes.
-----
(a) No Deduction for Certain Taxes. Any and all payments by the Borrower
------------------------------
shall be made, in accordance with Section 2.10, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Bank, Issuing Bank, and the Administrative Agent, taxes imposed
on its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank, Issuing Bank, or the Administrative Agent (as the case
may be) is organized or any political subdivision of the jurisdiction (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes") and, in the case of each
Bank and Issuing Bank, Taxes by the jurisdiction of such Bank's Applicable
Lending Office or any political subdivision of such jurisdiction. If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable to any Bank, Issuing Bank, or the Administrative Agent, (i) the sum
payable shall be increased as may be necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.11), such Bank, Issuing Bank, or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made; provided, however, that if the Borrower's
--------
obligation to deduct or withhold Taxes is caused solely by such Bank's, Issuing
Bank's, or the Administrative Agent's failure to provide the forms described in
paragraph (e) of this Section 2.11 and such Bank, Issuing Bank, or the
Administrative Agent could have provided such forms, no such increase shall be
required; (ii) the Borrower shall make such deductions; and (iii) the Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Legal Requirements.
(b) Other Taxes. In addition, the Borrower agrees to pay any present or
-----------
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Notes, or the other Credit Documents (hereinafter referred to as "Other Taxes").
(c) Indemnification. The Borrower indemnifies each Bank, Issuing Bank, and
---------------
the Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any Governmental
Authority on amounts payable under this Section 2.11) paid by such Bank, Issuing
Bank, or the Administrative Agent (as the case may be) and any liability
(including interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Each payment required to be made by the Borrower in respect of this
indemnification shall be made to the Administrative Agent for the benefit of any
party claiming such indemnification within 30 days from the date the Borrower
receives written demand detailing the calculation of such amounts therefor from
the Administrative Agent on behalf of itself as Administrative Agent, Issuing
Bank, or any such Bank. If any Bank, the
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<PAGE>
Administrative Agent, or Issuing Bank receives a refund in respect of any Taxes
or Other Taxes paid by the Borrower under this paragraph (c), such Bank, the
Administrative Agent, or Issuing Bank, as the case may be, shall promptly pay to
the Borrower the Borrower's share of such refund.
(d) Evidence of Tax Payments. The Borrower will pay prior to delinquency all
------------------------
Taxes and other Taxes payable in respect of any payment. Within 30 days after
the date of any payment of Taxes, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.02, the original
or a certified copy of a receipt evidencing payment of such Taxes or Other
Taxes.
(e) Foreign Bank Withholding Exemption. Each Bank and each Issuing Bank that
----------------------------------
is not incorporated under the laws of the United States of America or a state
thereof agrees that it will deliver to the Borrower and the Administrative Agent
on the date of this Agreement or upon the effectiveness of any Assignment and
Acceptance (i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form, as the case may be,
certifying in each case that such Bank is entitled to receive payments under
this Agreement and the Notes payable to it, without deduction or withholding of
any United States federal income taxes, (ii) if applicable, an Internal Revenue
Service Form W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax, and (iii) any
other governmental forms which are necessary or required under an applicable tax
treaty or otherwise by law to reduce or eliminate any withholding tax, which
have been reasonably requested by the Borrower. Each Bank which delivers to the
Borrower and the Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the next preceding sentence further undertakes to deliver to the
Borrower and the Administrative Agent two further copies of Form 1001 or 4224
and Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower and
the Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Administrative Agent certifying
in the case of a Form 1001 or 4224 that such Bank is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes. If an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
delivery required by the preceding sentence would otherwise be required which
renders all such forms inapplicable or which would prevent any Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Borrower and the Administrative Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax, such Bank shall not be required to deliver
such forms. The Borrower shall withhold
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<PAGE>
tax at the rate and in the manner required by the laws of the United States with
respect to payments made to a Bank failing to timely provide the requisite
Internal Revenue Service forms.
Section 2.12 Illegality. If any Bank shall notify the Administrative Agent
----------
and the Borrower that the introduction of or any change in or in the
interpretation of any Legal Requirement makes it unlawful, or that any central
bank or other Governmental Authority asserts that it is unlawful for such Bank
or its LIBOR Lending Office to perform its obligations under this Agreement to
maintain any LIBOR Rate Advances of such Bank then outstanding hereunder, then,
notwithstanding anything herein to the contrary, the Borrower shall, if demanded
by such Bank by notice to the Borrower and the Administrative Agent no later
than 11:00 a.m. (Dallas, Texas time), (a) if not prohibited by Legal Requirement
to maintain such LIBOR Rate Advances for the duration of the Interest Period, on
the last day of the Interest Period for each outstanding LIBOR Rate Advance of
such Bank or (b) if prohibited by Legal Requirement to maintain such LIBOR Rate
Advances for the duration of the Interest Period, on the second Business Day
following its receipt of such notice from such Bank, Convert all LIBOR Rate
Advances of such Bank then outstanding to Prime Rate Advances, and pay accrued
interest on the principal amount Converted to the date of such Conversion and
amounts, if any, required to be paid pursuant to Section 2.08 as a result of
such Conversion being made on such date. Each Bank agrees to use commercially
reasonable efforts (consistent with its internal policies and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such designation would avoid the effect of this paragraph and
would not, in the reasonable judgment of such Bank, be otherwise disadvantageous
to such Bank.
Section 2.13 Letters of Credit.
-----------------
(a) Issuance. From time to time from the date of this Agreement until three
--------
months before the Maturity Date, at the request of the Borrower, each Issuing
Bank shall, on any Business Day and on the terms and conditions hereinafter set
forth, issue, increase, decrease, amend, or extend the expiration date of
Letters of Credit for the account of the Borrower (for its own benefit or for
the benefit of any of its Subsidiaries). No Letter of Credit will be issued,
increased, or extended (i) if such issuance, increase, or extension would cause
the Letter of Credit Exposure to exceed the lesser of (x) $10,000,000 or (y) an
amount equal to (A) the lesser of the Borrowing Base or the aggregate
Commitments less (B) the aggregate outstanding Advances and Letter of Credit
----
Exposure at such time; (ii) unless such Letter of Credit has an Expiration Date
not later than the earlier of (A) one year after the date of issuance thereof
and (B) the Maturity Date; (iii) unless such Letter of Credit is in form and
substance acceptable to the respective Issuing Bank; (iv) unless such Letter of
Credit is a standby letter of credit not supporting the repayment of
indebtedness for borrowed money of any Person; (v) unless the Borrower has
delivered to the respective Issuing Bank the completed and executed Letter of
Credit Documents (other than the Letter of Credit) on such Issuing Bank's
standard form, which shall contain terms no more restrictive than the terms of
this Agreement; and
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(vi) unless such Letter of Credit is governed by the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 ("UCP") or any successor to the UCP. After the
Initial Maturity Date, the Borrower will no longer have the right to any
increase in the Letter of Credit Exposure. If the terms of any of the Letter of
Credit Documents referred to in the foregoing clause (v) conflicts with the
terms of this Agreement, the terms of this Agreement shall control.
(b) Participations. On the date of the issuance or increase of any Letter of
--------------
Credit on or after the Effective Date, each Issuing Bank shall be deemed to have
sold to each other Bank and each other Bank shall have been deemed to have
purchased from such Issuing Bank a participation in the Letter of Credit
Exposure related to the Letters of Credit issued by such Issuing Bank equal to
such Bank's Pro Rata Share at such date and such sale and purchase shall
otherwise be in accordance with the terms of this Agreement. Each Issuing Bank
shall promptly notify each such participant Bank by telex, telephone, or
telecopy of each Letter of Credit of such Issuing Bank issued, increased or
decreased, and the actual dollar amount of such Bank's participation in such
Letter of Credit. Each Bank's obligation to purchase participating interests
pursuant to this Section and to reimburse the respective Issuing Bank for such
Bank's Pro Rata Share of any payment under a Letter of Credit by such Issuing
Bank not reimbursed in full by the Borrower shall be absolute and unconditional
and shall not be affected by any circumstance, including, without limitation,
(i) any of the circumstances described in paragraph (d) below, (ii) the
occurrence and continuance of a Default, (iii) an adverse change in the
financial condition of the Borrower or any Guarantor, or (iv) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing, except for any such circumstance, happening or event constituting
or arising from gross negligence or willful misconduct on the part of such
Issuing Bank.
(c) Reimbursement. The Borrower shall have the right (but not the
-------------
obligation) to pay promptly on demand to each Issuing Bank in respect of each
Letter of Credit issued by such Issuing Bank an amount equal to any amount paid
by such Issuing Bank under or in respect of such Letter of Credit. In the event
any Issuing Bank makes a payment pursuant to a request for draw presented under
a Letter of Credit and such payment is not promptly reimbursed by the Borrower
upon demand, such Issuing Bank shall give notice of such payment to the
Administrative Agent and the Banks, and each Bank shall promptly reimburse such
Issuing Bank for such Bank's Pro Rata Share of such payment, and such
reimbursement shall be deemed for all purposes of this Agreement to constitute a
Prime Rate Advance to the Borrower from such Bank. If such reimbursement is not
made by any Bank to any Issuing Bank on the same day on which such Issuing Bank
shall have made payment on any such draw, such Bank shall pay interest thereon
to such Issuing Bank for each such day from the date such payment should have
been made until the date repaid at a rate per annum equal to the Federal Funds
Rate for each such day. The Borrower hereby unconditionally and irrevocably
authorizes, empowers, and directs the Administrative Agent and the Banks to
record
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and otherwise treat each payment under a Letter of Credit not immediately
reimbursed by the Borrower as a Borrowing comprised of Prime Rate Advances to
the Borrower.
(d) Obligations Unconditional. The obligations of the Borrower under this
-------------------------
Agreement in respect of each Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, notwithstanding the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit
Documents;
(ii) any amendment or waiver of or any consent to departure from any
Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense or other right which
the Borrower or any Bank or any other Person may have at any time against
any beneficiary or transferee of such Letter of Credit (or any Persons for
whom any such beneficiary or any such transferee may be acting), the
respective Issuing Bank or any other Person or entity, whether in
connection with this Agreement, the transactions contemplated in this
Agreement or in any Letter of Credit Documents or any unrelated
transaction;
(iv) any statement or any other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
to the extent the respective Issuing Bank would not be liable therefor
pursuant to the following paragraph (e);
(v) payment by the respective Issuing Bank under such Letter of Credit
against presentation of a draft or certificate which does not comply with
the terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
(e) Liability of Issuing Banks. The Borrower assumes all risks of the acts
--------------------------
or omissions of any beneficiary or transferee of any Letter of Credit with
respect to its use of such Letter of Credit. No Issuing Bank nor any of its
officers or directors shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
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(ii) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or
all respects invalid, insufficient, fraudulent or forged;
(iii) payment by such Issuing Bank against presentation of documents
which do not comply with the terms of a Letter of Credit, including failure
of any documents to bear any reference or adequate reference to the
relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (including such Issuing Bank's own
negligence),
except that the Borrower shall have a claim against such Issuing Bank, and such
- ------
Issuing Bank shall be liable to, and shall promptly pay to, the Borrower, to the
extent of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by (A) such Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under a Letter of Credit comply with the terms of such Letter of
Credit or (B) such Issuing Bank's gross negligence in failing to make lawful
payment under any Letter of Credit after the presentation to it of a draft and
certificate strictly complying with the terms and conditions of such Letter of
Credit. In furtherance and not in limitation of the foregoing, any Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation.
Section 2.14 Determination of Borrowing Base. The Borrowing Base shall be
-------------------------------
determined by the Administrative Agent, as follows:
(a) Quarterly. On the 45th day following each calendar quarter the
---------
Administrative Agent shall determine the Borrowing Base upon receipt of a
Borrowing Base Certificate setting forth the components of the Borrowing Base
dated as of the last day of the immediately preceding calendar quarter.
(b) Property Adjustments. Following each addition or deletion of a Hotel
--------------------
Property as an Eligible Property (an "Adjustment Event"), and with respect to
----------------
the addition of an Eligible Property the Administrative Agent's receipt of a
Property Adjustment Report with respect thereto, the Administrative Agent shall
adjust the Borrowing Base accordingly.
(c) Notice of Borrowing Base Change. Promptly following any date the
-------------------------------
Borrowing Base is redetermined in accordance with the preceding paragraphs, the
Administrative Agent shall give notice to the Banks and the Borrower of the new
Borrowing Base.
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Section 2.15 Bank Replacement.
----------------
(a) Right to Replace. The Borrower shall have the right to replace each Bank
----------------
affected by a condition under Section 2.02(c)(v), 2.09, or 2.12 for more than 90
days (each such affected Bank, an "Affected Bank") in accordance with the
procedures in this Section 2.15 and provided that no reduction of the total
Commitments occurs as a result thereof.
(b) First Right of Refusal; Replacement.
-----------------------------------
(i) Upon the occurrence of any condition permitting the replacement of a
Bank, each Bank which is not an Affected Bank shall have the right, but not
the obligation, to elect to increase its respective Commitment by an amount
not to exceed the amount of the Commitments of the Affected Banks, which
election shall be made by written notice from each such Bank to the
Administrative Agent and the Borrower given within 30 days after the date
such condition occurs specifying the amount of such proposed increase in
such Bank's Commitment.
(ii) If the aggregate amount of the proposed increases in Commitments
of all such Banks making such an election is in excess of the Commitments
of the Affected Banks, (A) the Commitments of the Affected Banks shall be
allocated pro rata among such Banks based on the respective amounts of the
proposed increases to Commitments elected by each of such Banks, and (B)
the respective Commitments of such Banks shall be increased by the
respective amounts as so allocated so that after giving effect to such
termination and increases the aggregate amount of the Commitments of the
Banks will be the same as prior to such termination.
(iii) If the aggregate amount of the proposed increases to Commitments
of all Banks making such an election equals the Commitments of the Affected
Banks, the respective Commitments of such Banks shall be increased by the
respective amounts of their proposed increases, so that after giving effect
to such termination and increase the aggregate amount of the Commitments of
all of the Banks will be the same as prior to such termination.
(iv) If the aggregate amount of the proposed increases to Commitments of
all Banks making such an election is less than the Commitments of the
Affected Banks, (A) the respective Commitments of such Banks shall be
increased by the respective amounts of their proposed increases, and (B)
the Borrower shall have the right to add additional Banks which are
Eligible Assignees to this Agreement to replace such Affected Banks, which
additional Banks would have aggregate Commitments no greater than those of
the Affected Banks minus the amounts thereof assumed by the other Banks
-----
pursuant to such increases.
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(c) Procedure. Any assumptions of Commitments pursuant to this Section 2.15
---------
shall be (i) made by the purchasing Bank or Eligible Assignee and the selling
Bank entering into an Assignment and Assumption and by following the procedures
in Section 9.06 for adding a Bank. In connection with the increase of the
Commitments of any Bank pursuant to the foregoing paragraph (b), each Bank with
an increased Commitment shall purchase from the Affected Banks at par such
Bank's ratable share of the outstanding Advances of the Affected Banks and
assume such Bank's ratable share of the Affected Banks' Letter of Credit
Exposure.
Section 2.16 Sharing of Payments, Etc. If any Bank shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) on account of its Advances or its share of Letter of
Credit Obligations in excess of its Pro Rata Share of payments on account of the
Advances or Letter of Credit Obligations obtained by all the Banks, such Bank
shall notify the Administrative Agent and forthwith purchase from the other
Banks such participations in the Advances made by them or Letter of Credit
Obligations held by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably in accordance with the requirements of this
Agreement with each of them; provided, however, that if all or any portion of
--------
such excess payment is thereafter recovered from such purchasing Bank, such
purchase from each Bank shall be rescinded and such Bank shall repay to the
purchasing Bank the purchase price to the extent of such Bank's ratable share
(according to the proportion of (a) the amount of the participation sold by such
Bank to the purchasing Bank as a result of such excess payment to (b) the total
amount of such excess payment) of such recovery, together with an amount equal
to such Bank's ratable share (according to the proportion of (a) the amount of
such Bank's required repayment to the purchasing Bank to (b) the total amount of
all such required repayments to the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees that any Bank so purchasing a participation from
another Bank pursuant to this Section 2.16 may, to the fullest extent permitted
by Legal Requirement, unless and until rescinded as provided above, exercise all
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation.
Section 2.17 Collateral.
----------
(a) Creation and Perfection of Liens. Prior to the termination of the
--------------------------------
Commitments and the repayment in full of the Obligations, a valid, perfected
first priority lien or security interest, as applicable, in the Property of the
Borrower and its Subsidiaries (other than the Permitted Other Subsidiaries) and
in the Participating Lessee Pledged Property (through the Collateral Assignment
and Security Agreement) shall exist in favor of the Administrative Agent for the
benefit of the Banks to secure the Obligations in accordance with the terms of
the Security Documents.
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(b) Further Assurances. The Borrower agrees to promptly, on demand, execute
------------------
and deliver, and cause the Guarantors and the Participating Lessee to execute
and deliver, at the Borrower's expense, such security agreements, pledge
agreements, assignments, mortgages, Financing Statements, stock powers, and
other collateral documentation, and take such other actions deemed by the
Administrative Agent and its counsel to be necessary in order to effect the
foregoing.
(c) Appraisals. The Borrower agrees to obtain, at its own expense and as
----------
promptly as practicable, such other appraisals as any Governmental Authority may
require the Administrative Agent to obtain from time to time to satisfy any
applicable Legal Requirement.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01 Conditions Precedent to Effectiveness of this Agreement. This
-------------------------------------------------------
Agreement shall become effective on the date hereof if on or prior to the close
of business on such date the following conditions precedent have been satisfied:
(a) Documentation. The Administrative Agent shall have received counterparts
-------------
of this Agreement executed by the Borrower and the Banks, and the following duly
executed by all the parties thereto, in form and substance satisfactory to the
Agents, and in sufficient copies for each Bank (except with respect to the
Property Security Documents, the Participating Lessee Documents (except for the
Credit Card Agreements and the Depository Account Agreements with financial
institutions other than the Cash Manager), the Financing Statements (Borrower),
or the Financing Statements (Participating Lessee)):
(i) the Notes, all Guaranties, the Environmental Indemnity, the Security
Agreement, the Mortgages, the other Credit Documents and the Participating
Lessee Documents which have been prepared for execution on the Effective
Date and any related Financing Statements;
(ii) a certificate from the Chief Executive Officer, President or Chief
Financial Officer of the General Partner on behalf of the Borrower dated as
of the Effective Date stating that as of the Effective Date (A) all
representations and warranties of the Borrower set forth in this Agreement
and the Credit Documents are true and correct in all material respects; (B)
no Default has occurred and is continuing; (C) the conditions in this
Section 3.01 have been met or waived in writing; and (D) there are no
claims, defenses, counterclaims or offsets against the Banks under the
Credit Documents;
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(iii) a certificate of the Secretary or an Assistant Secretary of the
General Partner on behalf of the Borrower and each Guarantor dated as of
the date of this Agreement certifying as of the date of this Agreement (A)
the names and true signatures of officers or authorized representatives of
the general partner of the Borrower and such Guarantor authorized to sign
the Credit Documents to which such Person is a party as general partner of
such Person, (B) resolutions of the Board of Directors or the members of
the general partner of such Person with respect to the transactions herein
contemplated, (C) either (x) the copies of the organizational documents of
the general partner of such Person delivered to the Banks are still true
and correct and have not been amended or modified since such date or (y)
copies of any modification or amendment to the organizational documents of
the general partner of such Person made since such date, (D) a true and
correct copy of the partnership agreement for such Person, and (E) a true
and correct copy of all partnership authorizations necessary or desirable
in connection with the transactions herein contemplated;
(iv) a certificate of the Secretary or an Assistant Secretary of the
Parent dated as of the date of this Agreement certifying as of the date of
this Agreement (A) resolutions of the Board of Directors of such Person
with respect to the transactions herein contemplated, (B) the copies of the
charter and bylaws of the Parent and any modification or amendment to the
articles or certificate of incorporation or bylaws of the Parent made since
such date, (C) the issuance of the Parent Common Stock pursuant to the
Public Offering Documents;
(v) a certificate of the Secretary or an Assistant Secretary of the
general partner of the Participating Lessee on behalf of the Participating
Lessee dated as of the date of this Agreement certifying as of the date of
this Agreement (A) the partnership authorization of such Person with
respect to the transactions contemplated by the Participating Leases and
the Participating Lessee Documents, (B) the copies of the Partnership
Agreement and any modification or amendment to the Partnership Agreement of
the Participating Lessee made since such date;
(vi) (A) one or more favorable written opinions of Battle Fowler L.L.P.,
special counsel for the Borrower, the Parent, and the Participating Lessee
and the Manager and their Subsidiaries, substantially in the form of the
attached Exhibit DD, in each case dated as of the Closing Date and with
such changes as the Agents may approve, (B) one or more favorable written
opinions of Kane, Russell, Coleman & Logan, special Texas counsel for the
Borrower, the Parent, and the Participating Lessee and the Manager and
their Subsidiaries, substantially in the form of the attached Exhibit EE,
in each case dated as of the Closing Date and with such changes as the
Agents may approve, (C) a reliance letter from Battle Fowler L.L.P., as
counsel to the Parent, and each other counsel (other than underwriters'
counsel) delivering an opinion in connection with the Public Offering, in
each case addressed to the Agents and the Banks and
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satisfactory in form and substance to the Agents stating that the Agents
and the Banks may rely on such opinions as if they were original addressees
thereof, and in each case attaching an executed original thereof, (D) one
or more favorable written opinions of the local counsel for the Borrower,
the Parent, the Participating Lessee and the Manager and their Subsidiaries
for each state in which a Hotel Property is located, substantially in the
form of the attached Exhibit FF, in each case dated as of the Closing Date
and with such changes as the Agents may approve, (E) one or more favorable
written opinions of Ballard, Spahr, Andrews & Ingersoll, special Maryland
counsel for the Parent, substantially in the form of the attached Exhibit
GG, in each case dated as of the Closing Date and with such changes as the
Agents may approve, (F) one or more favorable written opinions of
McDonald, Hopkins, Buske & Harber Co., special Ohio counsel for 3100
Glendale Joint Venture, substantially in the form of the attached Exhibit
HH, in each case dated as of the Closing Date and with such changes as the
Agents may approve, (G) one or more favorable written opinions of Foley &
Lardner, special Wisconsin counsel for Madison Motel Associates,
substantially in the form of the attached Exhibit II, in each case dated as
of the Closing Date and with such changes as the Agents may approve, and
(H) one or more favorable written opinions of McDonald, Carano, Wilson,
McCune, Bergin, Frankovich &Hicks LLP, special Nevada counsel for the
General Partner, substantially in the form of the attached Exhibit JJ, in
each case dated as of the Closing Date and with such changes as the Agents
may approve;
(vii) a Borrowing Base Certificate dated as of July 31, 1996, each duly
completed and executed by the Chief Financial Officer or Treasurer of the
General Partner on behalf of the Borrower; and
(viii) such other documents, governmental certificates, agreements,
lien searches as either Agent may reasonably request.
(b) Representations and Warranties. The representations and warranties
------------------------------
contained in Article IV hereof, the Guaranties, the Environmental Indemnities
and in each Security Document and Participating Lessee Document shall be true
and correct in all material respects.
(c) Certain Payments. The Borrower shall have paid the fees required to be
----------------
paid as of the Effective Date pursuant to the Agents' Fee Letter.
Section 3.02 Conditions Precedent for each Borrowing or Letter of Credit.
-----------------------------------------------------------
The obligation of each Bank to fund an Advance on the occasion of each Borrowing
(other than the Conversion or continuation of any existing Borrowing) and of any
Issuing Bank to issue or increase or extend any Letter of Credit shall be
subject to the further conditions precedent that on the date of such Borrowing
or the issuance or increase or extension of such Letter of Credit:
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(a) the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing and the acceptance by the Borrower of the
proceeds of such Borrowing or the issuance or increase or extension of such
Letter of Credit shall constitute a representation and warranty by the Borrower
that on the date of such Borrowing or the issuance or increase or extension of
such Letter of Credit such statements are true):
(i) the representations and warranties contained in Article IV hereof,
the Guaranties, the Environmental Indemnities and in each Security Document
and Participating Lessee Document are correct in all material respects on
and as of the date of such Borrowing or the issuance or increase or
extension of such Letter of Credit, before and after giving effect to such
Borrowing or to the issuance or increase or extension of such Letter of
Credit and to the application of the proceeds from such Borrowing, as
though made on and as of such date; and
(ii) no Default has occurred and is continuing or would result from such
Borrowing or from the application of the proceeds therefrom;
(b) the Borrower shall have executed and delivered to the Administrative
Agent a Borrowing Base Certificate dated not earlier than the date 10 days prior
to the anticipated date of such Borrowing;
(c) if all or a portion of such Borrowing is intended to be used to make
Capital Expenditures or purchase FF&E for a Hotel Property in connection with a
Major Renovation, the Administrative Agent shall have received (i) an analysis
of the amount of such renovation performed to date and the actual costs incurred
therefore versus an Approved Preliminary Property Plan or another budget for
such renovation in sufficient detail as the Administrative Agent shall
reasonably request, and (ii) invoices, lien waivers and any additional
information as the Administrative Agent may reasonably request; and
(d) the Administrative Agent shall have received such other approvals,
opinions or documents deemed necessary or desirable by any Bank, the
Structuring Agent or the Administrative Agent as such party may reasonably
request.
Section 3.03 Conditions Precedent for Initial Borrowing or Letter of
-------------------------------------------------------
Credit. The obligation of each Bank to fund an Advance on the occasion of the
- ------
first Borrowing and of any Issuing Bank to issue the first Letter of Credit
shall be subject to the further conditions precedent that on or prior to the
Escrow Breaking Deadline:
(a) The Borrower shall have executed and delivered to the Administrative
Agent the Borrower Funding Certificate and a Notice of Borrowing;
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(b) The Borrower shall have paid the fees required under Section 2.03 and the
Agents' Fee Letter;
(c) The Agents shall have received evidence satisfactory to it that (i) the
Public Offering shall have been consummated pursuant to the Public Offering
Documents, (ii) the Administrative Agent shall have received executed or
conformed copies of each of the Public Offering Documents and all amendments
thereto, all in form and substance reasonably satisfactory to the Structuring
Agent, (iii) each of the Public Offering Documents shall be in full force and
effect, (iv) the Parent shall have received not less than $130,000,000 in
aggregate gross proceeds from the Public Offering (before deducting expenses and
underwriting discounts and commissions), (v) the Parent shall have contributed
such gross proceeds (net of such amount as may be required to pay underwriting
discounts and commissions and costs and expenses of the Public Offering and the
transactions contemplated hereby) to the Borrower as an equity contribution and
(vi) all other matters with respect to the Public Offering shall be reasonably
satisfactory to the Agents;
(d) The Agents shall have received an Officer's Certificate of the
Responsible Officer of the Parent certifying that, after giving effect to the
Public Offering, (i) the covenants set forth in Section 6.17 of this Agreement
are satisfied, (ii) the Parent owns 100% of the issued and outstanding shares of
the General Partner and AGH LP, (iv) the Parent has no first tier Subsidiaries
(other than the General Partner and AGH LP), (v) the General Partner owns a 1%
general partner interest and AGH LP owns at least 70% of the limited partnership
interests in the Borrower;
(e) The Pool Requirements are met; and
(f) the Agents shall have received such other approvals, opinions or
documents deemed necessary or desirable by any Bank, the Structuring Agent or
the Administrative Agent as such party may reasonably request.
If the conditions set forth in this Section 3.03 are not satisfied on or prior
to the Escrow Breaking Deadline, the obligation of each Bank to make Advances
and the obligation of each Issuing Bank to issue, increase, or extend Letters of
Credit shall immediately and automatically be terminated and the Notes, all
interest on the Notes, all Letter of Credit Obligations, and all other amounts
payable under this Agreement shall immediately and automatically become and be
due and payable in full, without presentment, demand, protest or any notice of
any kind (including, without limitation, any notice of intent to accelerate or
notice of acceleration), all of which are hereby expressly waived by the
Borrower. However, Borrower shall pay to the Agents all fees and expenses as
set forth in Agents' Fee Letter.
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Section 3.04 Conditions Precedent to a Hotel Property Qualifying as an
---------------------------------------------------------
Eligible Property. In order for an Initial Property or a Future Property to
- -----------------
qualify initially and thereafter to continue to qualify as an Eligible Property,
the following conditions precedent must be satisfied and remain satisfied for
that Property:
(a) Documents and Information. The Administrative Agent shall have received
-------------------------
each of the following executed by the Borrower, the Property Owner or other
appropriate person, in form and substance satisfactory to the Agents:
(i) the original executed Property Security Documents and the
Participating Lessee Documents (except for the Credit Card Agreements and
the Depository Account Agreements with financial institutions other than
the Cash Manager);
(ii) a copy of each of the following for such Hotel Property certified
as true and correct by the Borrower pursuant to a Property Certificate:
A. If the Hotel Property is subject to a Franchise Agreement, the
Franchise Agreement and any requirements or conditions imposed by the
Franchisor at such time in connection with the Franchise Agreement,
including without limitation any requirements with respect to Capital
Expenditures or expenditures for FF&E for the Hotel Property;
B. Management Agreement;
C. Participating Lease;
D. List of the Personal Property for such Hotel Property;
E. Acquisition Agreements;
F. A rent roll for the Hotel Property identifying all rentable
space within the Hotel Property, the tenant, concessionaire or licensee (or
if vacant, identified as vacant), the monthly rental payable (including any
adjustments to operating expenses), the date through which rent is paid,
the termination date of each such leases, concessions and licenses and a
delinquency report.
G. The occupancy permit;
H. If the Hotel Property is subject to a Ground Lease, the Ground
Lease;
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I. The liquor license for such Hotel Property;
J. Liquor License Concession Agreement and any other agreements
related to the liquor license(s); and
K. The Property Owner's articles of incorporation, by-laws,
partnership agreements, as applicable, and certificates of existence, good
standing and authority to do business from each appropriate state
authority, and partnership or corporate, as applicable, authorizations
authorizing the execution, delivery and performance of the Security
Documents all certified to be true and complete by a duly authorized
officer of such Property Owner;
L. The Participating Lessee's articles of incorporation, by-laws,
partnership agreements, as applicable, and certificates of existence, good
standing and authority to do business from each appropriate state
authority, and partnership or corporate, as applicable, authorizations
authorizing the execution, delivery and performance of the Tenant Documents
all certified to be true and complete by a duly authorized officer of such
Property Owner;
(iii) a ALTA/ASCM survey of the Real Property certified in a manner
reasonably satisfactory to the Agents by a registered surveyor and dated no
more than ninety (90) days prior to the date the Borrower desires that such
Hotel Property be an Eligible Property;
(iv) all financial statements related to the Hotel Property (i)
reasonably required by the Agents; or (ii) necessary to provide the Agents
with a true and complete knowledge of the financial condition of the Hotel
Property;
(v) an Environmental Report;
(vi) an Engineering Report;
(vii) if available, a set of as-built plans for the Hotel Property;
(viii) either (A) evidence from the applicable Governmental Authority
of compliance with zoning for the Hotel Property, (B) a zoning endorsement
to the Title Policy, (C) legal opinion of compliance with zoning for the
Hotel Property in form reasonably acceptable to the Administrative Agent,
or (D) other evidence of compliance with zoning for the Hotel Property
reasonably acceptable to the Administrative Agent;
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(ix) a summary list of the Capital Expenditures and FF&E expenditures
for the Hotel Property for the immediately preceding 12-month period and an
estimate of the Capital Expenditures and FF&E expenditures for the upcoming
12-month period, certified by Borrower;
(x) a tenant estoppel certificate and subordination, non-disturbance and
attornment agreement in forms reasonably acceptable to the Agents from each
tenant of the Hotel Property which has a Material Lease;
(xi) certificates and policies of insurance evidencing that the Hotel
Property is covered by the insurance required pursuant to Section 5.10
hereof, provided that for the required earthquake insurance for the Initial
Properties the policy or policies for such earthquake insurance need only
be delivered within 30 days of the date of this Agreement;
(xii) a written opinion of the Borrower's counsel or counsels covering
such matters relating to the Property Owner, the Participating Lessee, the
Hotel Property, the Security Documents, the Participating Lessee Documents
as the Agents reasonably require;
(xiii) a Manager Consent; and
(xiv) all other documents reasonably required by either Agent.
(b) Recordation and Filing. The Mortgage, the Assignment of Leases
----------------------
(Borrower), the Assignment of Leases (Participating Lessee) and the
Participating Lessee Estoppel, shall each have been recorded in the Official
Public Records of Real Property of the County in which the Hotel Property is
located with all filing fees and applicable mortgage or intangible taxes paid by
Borrower. All appropriate Financing Statements (Borrower) and Financing
Statements (Participating Lessee) shall have been (a) filed with the Secretary
of State of the state in which the Hotel Property is located and the state in
which the Property Owner and Participating Lessee, as applicable, was formed and
of its respective principal place of business, and the Administrative Agent
shall have received a certificate of each Secretary of State showing such
financing statements to be subject to no prior filings; and (b) recorded in the
official records of all appropriate counties.
(c) Perfection; Priority. The Administrative Agent, as agent for the Banks,
--------------------
will have a valid, perfected first priority lien or security interest, as
applicable, in the Hotel Property (including without limitation the
Participating Lessee Pledged Property through the Collateral Assignment and
Security Agreement), subject only to the Permitted Encumbrances.
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(d) Title Insurance. Borrower shall, at its sole expense, have delivered to
---------------
the Administrative Agent the paid Title Policy insuring the Mortgage securing
the Obligations to be a valid, perfected first priority lien on the Real
Property covered thereby, subject only to the Permitted Encumbrances.
(e) Adverse Property Situation. Neither all nor any material portion of the
--------------------------
Hotel Property shall be the subject of any proceeding by a governmental
authority for the condemnation, seizure or appropriation thereof, nor the
subject of any negotiations for sale in lieu of condemnation, seizure or
appropriation. The Hotel Property shall not have been materially damaged or
destroyed by fire or other casualty which cannot be substantially restored or
repaired within ninety (90) days of such occurrence from the proceeds of
insurance maintained by the Borrower, nor shall all or any material portion of
the Hotel Property cease to be in operation; provided, however, that if the
Property Owner is receiving insurance proceeds under any business interruption
(not property) insurance in connection with such event, then such Hotel Property
shall not become ineligible as an Eligible Property because of such event though
the Property EBITDA for such Hotel Property will be adjusted downward to the
extent such proceeds result in a lower Property EBITDA for such Hotel Property.
(f) Appraisal. The Agents shall have received a current Appraisal of the
---------
Hotel Property satisfactory to the Agents.
(g) Subsidiary. In addition, if the Property Owner for such Hotel Property
----------
is not Borrower, the Property Owner is at least a 99%-owned Subsidiary of the
Borrower listed on Schedule 4.01 (other than a Permitted Other Subsidiary) or
Permitted New Subsidiary.
(h) New Guarantor. In addition, if the Property Owner for such Hotel
-------------
Property is not the Borrower or a Guarantor, the following:
(i) The Administrative Agent shall have received financial statements of
the Property Owner (i) reasonably required by the Agents; or (ii) necessary
to provide the Agents with a true and complete knowledge of the financial
condition of the Property Owner, all certified as true and correct by the
Borrower;
(ii) The Property Owner shall be a Permitted New Subsidiary whose sole
asset is the Future Property, who complies with all of the covenants and
requirements of Guarantors under the Credit Documents and who has delivered
to the Administrative Agent either (A) an original Guaranty and
Environmental Indemnity executed by such Subsidiary or (B) an Accession
Agreement executed by such Subsidiary.
(i) Future Property. In addition, if the Hotel Property is a Future
---------------
Property, the following:
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(i) The addition of the Future Property to the Eligible Property shall
not (A) cause the Eligible Property to violate the Pool Requirements, (B)
cause a Default, or (C) cause or result in the Borrower failing to comply
with any of the financial covenants contained herein;
(ii) The Borrower shall have delivered to the Administrative Agent and
the Banks the Property Information for such Future Property 20 days prior
to the date the Borrower proposes such Future Property qualify as an
Eligible Property;
(iii) the Majority Banks shall have approved such Future Property as a
possible Eligible Property and reached agreement with the Borrower as to
the Required Work for such Future Property, if any; and
(iv) within one hundred eighty (180) days of the date such Future
Property initially qualifies as an Eligible Property the Majority Banks
shall have approved the Approved Preliminary Property Plan for such Future
Property.
(j) Ground Leases. In addition, if the Hotel Property is subject to a Ground
-------------
Lease, no default by the lessee under the Ground Lease exists, the Ground Lease
remains in full force and effect and the Administrative Agent shall have
received a Ground Lessor Consent.
(k) Franchise Agreement. In addition, if the Hotel Property is subject to a
-------------------
Franchise Agreement, no default by the franchisee under the Franchise Agreement
exists, the Franchise Agreement remains in full force and effect and the
Administrative Agent shall have received a Franchisor Consent.
(l) Management Agreement Fees and Participating Lessee Net Income. The sum
-------------------------------------------------------------
of (i) the management fees payable to the Manager under the Management Agreement
for a Hotel Property whether payable by the Participating Lessee or the Property
Owner of such Hotel Property and (ii) the actual or expected Net Income for the
Participating Lessee for such Hotel Property shall not in the aggregate exceed
6% of the gross revenues for such Hotel Property.
(m) Depository Account Agreements and Credit Card Agreements. Within 30
--------------------------------------------------------
days of the initial date any property is deemed an Eligible Property but for the
requirements of this subsection (m), the Borrower shall have delivered to the
Administrative Agent the Depository Account Agreements for each financial
institution at which a Deposit Account for such Hotel Property is located
pursuant to the Cash Management System (Participating Lessee) and the Credit
Card Agreements for each credit card company for all major credit cards accepted
by such Hotel Property, which Depository Account Agreements, Credit Card
Agreements and the Cash Management Systems shall be in form and substance
reasonably satisfactory to the Agents.
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(n) Hilton Hotel & Conference Center, Toledo, Ohio. If in connection with
----------------------------------------------
the Hotel Property commonly known as the Hilton Hotel & Conference Center,
Toledo, Ohio either (i) any utility service for such Hotel Property is
interrupted or materially decreased for more than 7 days because no easement or
other legal right exists across such Hotel Property's neighboring properties
permitting such service to the Hotel Property (a "Utility Interruption Event")
or (ii) the Borrower or the Property Owner for such Hotel Property receives
written notice that a Utility Interruption Event will occur and the Borrower and
the Property Owner fails to cure such anticipated Utility Interruption Event as
provided in clause (ii) of the following sentence on or prior to the date 90
days prior to the date such Utility Interruption Event is anticipated to occur,
then such Hotel Property will no longer be deemed an Eligible Property until
such situation is cured as provided in the following sentence. Such situation
will be deemed cured (i) with respect to a Utility Interruption Event, when such
service is restored to substantially the same level as prior to such
interruption or decrease and (ii) with respect to an anticipated Utility
Interruption Event, when the Property Owner shall have received such utility
easements of record and commenced construction and thereafter diligently
continued construction of any Capital Expenditures needed to receive such
affected service in substantially the same level as prior to such anticipated
Utility Interruption Event within a time frame that would prevent a Utility
Interruption Event, all as reasonably acceptable to the Administrative Agent.
(o) Participating Lease. In addition, if the Hotel Property is subject to a
-------------------
Participating Lease, no default by the Participating Lessee or the Property
Owner under the Participating Lease exists beyond any applicable cured period
(provided that for purposes of this subsection (o) such cure period will be
deemed to commence running when the Borrower, the Parent or a Guarantor has
knowledge of such default), the Participating Lease remains in full force and
effect and the Administrative Agent shall have received a Participating Lessee
Estoppel and the Participating Lessee Documents.
(p) Maison De Ville, New Orleans, Louisiana. For the Hotel Property commonly
---------------------------------------
known as the Maison De Ville, New Orleans, Louisiana, the Agents shall have
received a legal opinion or other evidence acceptable to the Agents that such
Hotel Property is exempt from or currently complies with the requirements of the
Americans with Disabilities Act, as amended.
(q) Other Actions. Borrower shall have executed and acknowledged (or caused
-------------
to be executed and acknowledged) and delivered to the Administrative Agent, on
behalf of the Banks, all documents, and taken all actions reasonably required by
Agents from time to time to confirm the rights created or now or hereafter
intended to be created under the Credit Documents, to protect and further the
validity, priority and enforceability of the Security Documents including
without limitation with respect to the Participating Lessee Documents and the
Participating Lessee Pledged
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Property, to subject to the Security Documents and Participating Lessee Pledged
Property any Property intended by the terms of any such document to be covered
by the Security Documents or Participating Lessee Documents, as applicable, or
otherwise to carry out the purposes of the Credit Documents or Participating
Lessee Documents, as applicable, and the transactions contemplated thereunder.
The Agents shall have received all other evidence and information that they may
reasonably require.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 4.01 Existence; Qualification; Partners; Subsidiaries.
------------------------------------------------
(a) The Borrower is a limited partnership duly organized, validly existing,
and in good standing under the laws of Delaware and in good standing and
qualified to do business in each jurisdiction where its ownership or lease of
property or conduct of its business requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
Borrower.
(b) The Parent is a corporation duly organized, validly existing, and in good
standing under the laws of Maryland and in good standing and qualified to do
business in each jurisdiction where its ownership or lease of property or
conduct of its business requires such qualification, except where the failure to
so qualify would not have a material adverse effect on the Parent. The Parent
owns 100% of the issued and outstanding shares of the General Partner and AGH
LP. The Parent has no first tier Subsidiaries (other than the General Partner
and AGH LP).
(c) The General Partner is the Borrower's sole general partner with full
power and authority to bind the Borrower. The General Partner is a corporation
duly organized, validly existing, and in good standing under the laws of Nevada
and in good standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the General Partner.
(d) AGH LP is a limited partnership duly organized, validly existing, and in
good standing under the laws of Nevada and in good standing and qualified to do
business in each jurisdiction where its ownership or lease of property or
conduct of its business requires such qualification, except where the failure to
so qualify would not have a material adverse effect on AGH LP.
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(e) As of the date of this Agreement, the General Partner owns a 1% general
partner interest in and AGH LP owns an approximately 79.2% limited partnership
interest in the Borrower.
(f) Each Subsidiary of the Borrower is a limited partnership, general
partnership or limited liability company duly organized, validly existing, and
in good standing under the laws of its jurisdiction of formation and in good
standing and qualified to do business in each jurisdiction where its ownership
or lease of property or conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on such Subsidiary. The Borrower has no Subsidiaries on the date of this
Agreement other than the Subsidiaries listed on the attached Schedule 4.01, and
Schedule 4.01 lists the jurisdiction of formation and the address of the
principal office of each such Subsidiary existing on the date of this Agreement.
Schedule 4.01 hereto correctly sets forth the ownership interests in each
Subsidiary as of the date of this Agreement. As of the date of this Agreement,
the Borrower owns, directly or indirectly, at least 99% of the interests in each
such Subsidiary.
(g) To the knowledge of the Borrower, the Participating Lessee is a limited
partnership duly organized, validly existing, and in good standing under the
laws of Delaware and in good standing and qualified to do business in each
jurisdiction where its ownership or lease of property or conduct of its business
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the Participating Lessee. To the knowledge of
the Borrower, the sole general partner of the Participating Lessee is AGHL GP,
Inc. As of the date of this Agreement, to the knowledge of Borrower, James
Sowell, Louis Shaw and Kenneth Shaw legally and beneficially own, directly or
indirectly, approximately 77% of the partnership interests in the Participating
Lessee. As of the date of this Agreement, to the knowledge of Borrower, Steve
D. Jorns, Bruce G. Wiles, and Kenneth E. Barr legally and beneficially own
approximately 23% of the partnership interests in the Participating Lessee.
(h) To the knowledge of Borrower, the Manager is a corporation duly
organized, validly existing, and in good standing under the laws of Texas and in
good standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the Manager. To the knowledge of the Borrower, as of the date
of this Agreement, James Sowell, Louis Shaw and Kenneth Shaw legally and
beneficially own, directly or indirectly, approximately 79% of the outstanding
shares of the Manager common stock. To the knowledge of the Borrower, as of the
date of this Agreement, Steve D. Jorns and Bruce G. Wiles legally and
beneficially own approximately 21% of the outstanding shares of the Manager
common stock.
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(i) The principal place of business of the Borrower, the Parent, the
Participating Lessee and the Manager and their Subsidiaries is in the Dallas,
Texas metropolitan area. The principal place of business of the General Partner
and AGH LP is Las Vegas, Nevada.
Section 4.02 Partnership and Corporate Power. The execution, delivery, and
-------------------------------
performance by the Borrower, the Parent, and each Guarantor of the Credit
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby (a) are within such Persons' partnership,
limited liability company and corporate powers, as applicable, (b) have been
duly authorized by all necessary corporate, limited liability company and
partnership action, as applicable, (c) do not contravene (i) such Person's
certificate or articles, as the case may be, of incorporation or by-laws,
operating agreement or partnership agreement, as applicable, or (ii) any law or
any contractual restriction binding on or affecting any such Person, the
contravention of which could reasonably be expected to cause a Material Adverse
Change, and (d) will not result in or require the creation or imposition of any
Lien prohibited by this Agreement. At the time of each Borrowing, such
Borrowing and the use of the proceeds of such Borrowing will be within the
Borrower's partnership powers, will have been duly authorized by all necessary
partnership action, (a) will not contravene (i) the Borrower's partnership
agreement or (ii) any law or any contractual restriction binding on or affecting
the Borrower, the contravention of which could reasonably be expected to cause a
Material Adverse Change, and (b) will not result in or require the creation or
imposition of any Lien prohibited by this Agreement.
Section 4.03 Authorization and Approvals.
---------------------------
(a) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Borrower, the Parent, or any Guarantor of the
Credit Documents to which it is a party or the consummation of the transactions
contemplated thereby. At the time of each Borrowing, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required for such Borrowing or the use of the proceeds of such
Borrowing.
(b) The Parent Common Stock is duly and validly issued, fully paid and
nonassessable. The issuance and sale of such Parent Common Stock, upon issuance
and sale, will either (i) have been registered under applicable federal and
state securities laws or (ii) be exempt therefrom. The Parent Common Stock shall
at all times be duly listed on the New York Stock Exchange, Inc. and the Parent
shall use commercially reasonable efforts to timely file all reports required to
be filed by it with the New York Stock Exchange, Inc. and the Securities and
Exchange Commission.
Section 4.04 Enforceable Obligations. This Agreement, the Notes, and the
-----------------------
other Credit Documents to which the Borrower is a party have been duly executed
and delivered by the Borrower;
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each Guaranty and the other Credit Documents to which each Guarantor and the
Parent is a party have been duly executed and delivered by such Guarantor and
the Environmental Indemnity has been duly executed and delivered by the parties
thereto. Each Credit Document is the legal, valid, and binding obligation of
the Borrower, the Parent, and each Guarantor which is a party to it enforceable
against the Borrower, the Parent, and each such Guarantor in accordance with its
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar law affecting
creditors' rights generally and by general principles of equity (whether
considered in proceeding at law or in equity). The Participating Lessee
Documents have been duly executed and delivered by the Participating Lessee.
Each Participating Lessee Document is the legal, valid, and binding obligation
of the Participating Lessee enforceable against the Participating Lessee in
accordance with its terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium, or similar law
affecting creditors' rights generally and by general principles of equity
(whether considered in proceeding at law or in equity).
Section 4.05 Public Offering. Upon consummation of the Public Offering,
---------------
(i) each of the Public Offering Documents shall be in full force and effect,
(ii) the Parent shall have received not less than $130,000,000 in aggregate
gross proceeds from the Public Offering, (iii) the Parent shall have contributed
such gross proceeds (net of such amount as may be required to pay costs and
expenses of the Public Offering and the transactions contemplated hereby) to the
Borrower as an equity contribution, and (iv) the Parent shall qualify as a real
estate investment trust under Sections 856-860 of the Code, as amended.
Section 4.06 Financial Statements.
--------------------
The Consolidated balance sheet of the Borrower and its Subsidiaries, and
the related Consolidated statements of operations, shareholders' equity and cash
flows, of the Borrower and its Subsidiaries contained in the Registration
Statement, fairly present the estimated financial condition in all material
respects and reflects the Indebtedness of the Borrower and its Subsidiaries as
of the dates indicated in the Registration Statement and the results of the
operations of the Borrower and its Subsidiaries for the periods indicated, and
such balance sheet and statements were prepared in accordance with GAAP. Since
the date of such statements, no Material Adverse Change has occurred.
Section 4.07 True and Complete Disclosure. No representation, warranty, or
----------------------------
other statement made by the Borrower (or on behalf of the Borrower) in this
Agreement or any other Credit Document or any representation, warranty, or other
statement made in the Registration Statement contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were
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made as of the date of this Agreement. There is no fact known to any
Responsible Officer of the Borrower or the Parent on the date of this Agreement
that has not been disclosed to the Agents which could reasonably be expected to
cause a Material Adverse Change. All projections, estimates, and pro forma
financial information furnished by the Borrower and the Parent or on behalf of
the Borrower or the Parent were prepared on the basis of assumptions, data,
information, tests, or conditions believed to be reasonable at the time such
projections, estimates, and pro forma financial information were furnished.
Section 4.08 Litigation. Except as set forth in the attached Schedule
----------
4.08, there is no pending or, to the best knowledge of the Borrower, threatened
action or proceeding affecting the Borrower, the Parent, the Manager, the
Participating Lessee or any of their respective Subsidiaries before any court,
Governmental Authority or arbitrator (provided that with respect to the giving
of this representation after the date of this Agreement, the representation
shall only be deemed to apply to those matters for which Administrative Agent
would have been entitled to notice under Section 5.05(n)).
Section 4.09 Use of Proceeds.
---------------
(a) Advances. The proceeds of the Advances have been, and will be used by
--------
the Borrower (i) to refinance the existing indebtedness of each Initial Property
which qualifies as an Eligible Property, (ii) to finance the acquisition of any
Future Property which either qualifies as an Eligible Property or a Permitted
Non-Eligible Property, (iii) to finance the renovation of, Capital Expenditures
for and FF&E for any Eligible Property or a Permitted Non-Eligible Property in
accordance with the provisions of Section 5.06, (iv) for general corporate
purposes of the Borrower and its Subsidiaries, including without limitation
expenses related to the Public Offering.
(b) Regulations. No proceeds of Advances will be used to purchase or carry
-----------
any margin stock in violation of Regulations G, T, U or X of the Federal Reserve
Board, as the same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Federal Reserve Board).
Section 4.10 Investment Company Act. Neither the Borrower, the Parent nor
----------------------
any of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.11 Taxes. All federal, state, local and foreign tax returns,
-----
reports and statements required to be filed (after giving effect to any
extension granted in the time for filing) by the Borrower, its Subsidiaries, or
any member of a Controlled Group have been filed with the
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appropriate governmental agencies in all jurisdictions in which such returns,
reports and statements are required to be filed, and where the failure to file
could reasonably be expected to cause a Material Adverse Change, except where
contested in good faith and by appropriate proceedings; and all taxes (which are
material in amount) and other impositions due and payable have been timely paid
prior to the date on which any fine, penalty, interest, late charge or loss may
be added thereto for non-payment thereof except where contested in good faith
and by appropriate proceedings. As of the date of this Agreement, neither the
Borrower nor any member of a Controlled Group has given, or been requested to
give, a waiver of the statute of limitations relating to the payment of any
federal, state, local or foreign taxes or other impositions. None of the
Property owned by the Borrower or any other member of a Controlled Group is
Property which the Borrower or any member of a Controlled Group is required to
treat as being owned by any other Person pursuant to the provisions of Section
168(f)(8) of the Code. Proper and accurate amounts have been withheld by the
Borrower and all members of each Controlled Group from their employees for all
periods to comply in all material respects with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law. Timely payment of all material sales and use taxes required by
applicable law have been made by the Borrower and all other members of each
Controlled Group, the failure to timely pay of which could reasonably be
expected to cause a Material Adverse Change. The amounts shown on all tax
returns to be due and payable have been paid in full or adequate provision
therefor is included on the books of the appropriate member of the applicable
Controlled Group.
Section 4.12 Pension Plans. All Plans are in compliance in all material
-------------
respects with all applicable provisions of ERISA. No Termination Event has
occurred with respect to any Plan, and each Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. No "accumulated funding deficiency" (as defined in
Section 302 of ERISA) has occurred and there has been no excise tax imposed
under Section 4971 of the Code. To the knowledge of any Responsible Officer of
the Borrower, no Reportable Event has occurred with respect to any Multiemployer
Plan, and each Multiemployer Plan has complied with and been administered in all
material respects with applicable provisions of ERISA and the Code. To the
knowledge of any Responsible Officer of the Borrower, neither the Borrower nor
any member of a Controlled Group has had a complete or partial withdrawal from
any Multiemployer Plan for which there is any material withdrawal liability. As
of the most recent valuation date applicable thereto, neither the Borrower nor
any member of a Controlled Group has received notice that any Multiemployer Plan
is insolvent or in reorganization.
Section 4.13 Condition of Hotel Property; Casualties; Condemnation. Except
-----------------------------------------------------
as disclosed in an Engineering Report, each Initial Property and any Future
Property (a) is and will continue to be in good repair, working order and
condition, normal wear and tear excepted, (b) is free of structural defects, (c)
is not subject to material deferred maintenance and (d) has and will have all
building
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systems contained therein and all other FF&E in good repair, working order and
condition, normal wear and tear excepted. None of the Properties of the
Borrower or of any of its Subsidiaries has been materially and adversely
affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of property or cancellation of contracts, permits or concessions by a
Governmental Authority, riot, activities of armed forces or acts of God or of
any public enemy. No condemnation or other like proceedings that has had, or
could reasonably be expected to result in, a Material Adverse Effect, are
pending and served nor, to the knowledge of the Borrower, threatened against any
Property in any manner whatsoever. No casualty has occurred to any Property that
could reasonably be expected to have a Material Adverse Effect.
Section 4.14 Insurance. The Borrower and each of its Subsidiaries carry
---------
the insurance required pursuant to the provisions of Section 5.10.
Section 4.15 No Burdensome Restrictions; No Defaults.
---------------------------------------
(a) Except as set forth on Schedule 4.15, neither the Borrower nor any of its
Subsidiaries is a party to any indenture, loan or credit agreement or any lease
except for the Participating Leases. Neither the Borrower, the Parent nor any of
their respective Subsidiaries is a party to any agreement or instrument or
subject to any charter or corporate restriction or provision of applicable law
or governmental regulation which could reasonably be expected to cause a
Material Adverse Change. Neither the Borrower, the Parent nor any of their
Subsidiaries is in default under or with respect to (i) any contract, agreement,
lease or other instrument which could reasonably be expected to cause a Material
Adverse Change or (ii) any Ground Lease, Participating Lease, Franchise
Agreement or Management Agreement except as disclosed to the Administrative
Agent in writing prior to the date such representation is deemed given. Neither
the Borrower, the Parent nor any of their Subsidiaries has received any notice
of default under any material contract, agreement, lease or other instrument
which is continuing and which, if not cured, could reasonably be expected to
cause a Material Adverse Change.
(b) No Default has occurred and is continuing (or with respect to the giving
of this representation after the date of this Agreement, as otherwise disclosed
to the Administrative Agent in writing after the date of this Agreement and
prior to the date such representation is deemed given).
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Section 4.16 Environmental Condition.
-----------------------
(a) Except as disclosed in the Environmental Reports (or with respect to the
giving of this representation after the date of this Agreement, as otherwise
disclosed to the Administrative Agent in writing after the date of this
Agreement and prior to the date such representation is deemed given), to the
knowledge of the Borrower, the Borrower and its Subsidiaries (i) have obtained
all Environmental Permits necessary for the ownership and operation of their
respective Properties and the conduct of their respective businesses; (ii) have
been and are in material compliance with all terms and conditions of such
Environmental Permits and with all other requirements of applicable
Environmental Laws; (iii) have not received notice of any violation or alleged
violation of any Environmental Law or Environmental Permit; and (iv) are not
subject to any actual or contingent Environmental Claim.
(b) Except as set forth in the Environmental Reports or the surveys for the
Hotel Properties, to the knowledge of Borrower, none of the present or
previously owned or operated Property of the Borrower or of any of its present
or former Subsidiaries, wherever located, (i) has been placed on or proposed to
be placed on the National Priorities List, the Comprehensive Environmental
Response Compensation Liability Information System list, or their state or local
analogs, or have been otherwise investigated, designated, listed, or identified
as a potential site for removal, remediation, cleanup, closure, restoration,
reclamation, or other response activity under any Environmental Laws which could
reasonably be expected to cause a Material Adverse Change; (ii) is subject to a
Lien, arising under or in connection with any Environmental Laws, that attaches
to any revenues or to any Property owned or operated by the Borrower or any of
its Subsidiaries, wherever located; (iii) has been the site of any Release, use
or storage of Hazardous Substances or Hazardous Wastes from present or past
operations except for Permitted Hazardous Substances, which Permitted Hazardous
Substances have not caused at the site or at any third-party site any condition
that has resulted in or could reasonably be expected to result in the need for
Response or (iv) none of the Improvements are constructed on land designated by
any Governmental Authority having land use jurisdiction as wetlands.
Section 4.17 Legal Requirements, Zoning, Utilities, Access. Except as set
---------------------------------------------
forth on Schedule 4.17 attached hereto, the use and operation of each Hotel
Property as a commercial hotel with related uses constitutes a legal use under
applicable zoning regulations (as the same may be modified by special use
permits or the granting of variances) and complies in all material respects with
all Legal Requirements, and does not violate in any material respect any
material approvals, material restrictions of record or any material agreement
affecting any Hotel Property (or any portion thereof). The Borrower and its
Subsidiaries possess all certificates of public convenience, authorizations,
permits, licenses, patents, patent rights or licenses, trademarks, trademark
rights, trade names rights and copyrights (collectively "Permits") required by
Governmental Authority to
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own and operate the Hotel Properties, except for those Permits if not obtained
would not cause a Material Adverse Change. The Borrower and its Subsidiaries
own and operate their business in material compliance with all applicable Legal
Requirements. To the extent necessary for the full utilization of each Hotel
Property in accordance with its current use, telephone services, gas, steam,
electric power, storm sewers, sanitary sewers and water facilities and all other
utility services are available to each Hotel Property, are adequate to serve
each such Hotel Property, exist at the boundaries of the Land and are not
subject to any conditions, other than normal charges to the utility supplier,
which would limit the use of such utilities. All streets and easements necessary
for the occupancy and operation of each Hotel Property are available to the
boundaries of the Land.
Section 4.18 Existing Mortgage Debt. Except for the Obligations, the only
----------------------
Indebtedness secured by a Lien on Real Property of the Borrower, the Parent or
any of their respective Subsidiaries existing as of the Effective Date is the
Permitted Other Subsidiary Indebtedness, and the respective amounts of such
Indebtedness is approximately the amounts set forth in the definition of
Permitted Other Subsidiary Indebtedness as of the Effective Date. No "default"
or "event of default", however defined, has occurred and is continuing under any
Permitted Other Subsidiary Loan Document or the Lien securing such Permitted
Other Subsidiary Indebtedness (or with respect to the giving of this
representation after the date of this Agreement, as otherwise disclosed to the
Administrative Agent in writing after the date of this Agreement and prior to
the date such representation is deemed given).
Section 4.19 Title; Encumbrances. On the date any Mortgage is filed
-------------------
covering an Eligible Property, the Borrower or any Guarantor, as the case may
be, will have (i) good and marketable fee simple title to the Real Property
(other than for Real Property subject to a Ground Lease, as to which it has a
valid leasehold or subleasehold interest) and (ii) good and marketable title to
the Personal Property (other than Personal Property for any Hotel Property (A)
which has been leased which does not in the aggregate exceed the Hotel Operating
Lease Limit or the Hotel Capital Lease Limit, as applicable, for such Hotel
Property and (B) for which the Property Owner has a valid leasehold interest)
free and clear of all Liens, and there will exist no Liens or other charges
against such Property or leasehold interest or any of the real or personal,
tangible or intangible, Property of the Borrower or any Guarantor (including
without limitation statutory and other Liens of mechanics, workers, contractors,
subcontractors, suppliers, taxing authorities and others), except (A) those
matters expressly set forth as permitted encumbrances in the respective
Mortgages covering such Property, (B) inchoate tax Liens and (C) the Personal
Property listed on Schedule 4.19 and the other Participating Lessee Pledged
Property (plus any replacements thereof) to which the Participating Lessee will
have good and marketable title to free and clear of all Liens. Upon the
recording of the Mortgages and the recording or filing of the other Security
Documents and Participating Lessee Documents, as applicable, the Administrative
Agent, as agent for the Banks, will have a valid, perfected first priority lien
or security interest, as applicable, in the Property of the Borrower and its
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Subsidiaries (other than the Permitted Other Subsidiaries) and the
Participating Lessee Pledged Property.
Section 4.20 Leasing Arrangements. The only leases of Real Property for
--------------------
which either the Borrower or a Guarantor is a lessee are the Ground Leases. The
Borrower or Guarantor which executes the Mortgage for a Real Property subject to
a Ground Lease is the lessee under such Ground Lease and no consent is necessary
to such Person being the lessee under such Ground Lease which has not already
been obtained. The Ground Leases are in full force and effect and no defaults
exist thereunder. The only participating leases burdening the Hotel Properties
are the Participating Leases. The Participating Leases are in full force and
effect and no defaults by the Borrower or any Subsidiary exist thereunder.
Section 4.21 Cash Management Systems. The summary of the Cash Management
-----------------------
Systems attached hereto as Schedule 4.21 is accurate and complete in all
material respects as of the Effective Date and does not omit to state any
material fact necessary to make the statements set forth therein not misleading.
Neither the Participating Lessee, the Borrower nor any of the Borrower's
Subsidiaries owns any Deposit Account which is not described in Schedule 4.21.
Schedule 4.21 lists all major credit cards accepted by the Hotel Properties.
There has been no change to the Cash Management Systems since the date of this
Agreement. The revenues from the DFW South and the Meadowlands are not
commingled with (a) the Deposit Accounts of the Participating Lessee, the
Borrower or any of the Permitted Other Subsidiaries for either the Eligible
Properties or the Permitted Non-Eligible Properties or (b) the Borrower's Bank
Accounts.
Section 4.22 Franchise Agreements. The only franchise or license
--------------------
agreements burdening the Hotel Properties are the Franchise Agreements. The
Participating Lessee which executes the Assignment of Management Agreement for a
Hotel Property subject to a Franchise Agreement is the licensee under such
Franchise Agreement and no consent is necessary to such Person being the
licensee under such Franchise Agreement which has not already been obtained.
The Franchise Agreements are in full force and effect and no defaults by the
Borrower or any Subsidiary exist thereunder (or with respect to the giving of
this representation after the date of this Agreement, as otherwise disclosed to
the Administrative Agent in writing after the date of this Agreement and prior
to the date such representation is deemed given). Schedule 4.22 sets forth, as
of the date of this Agreement, (a) which Franchise Agreements the Borrower
expects to terminate, (b) the expected date of such termination, (c) the
expected fees, if any, which will be owed to the Franchisor being terminated in
connection with such termination and (d) the expected replacement Franchisor and
the material terms of the expected replacement Franchise Agreement.
Section 4.23 Management Agreements. The only management agreements
---------------------
burdening the Hotel Properties are the Management Agreements. To the knowledge
of the Borrower, the
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Participating Lessee which executes the Assignment of Management Agreement for a
Hotel Property subject to a Management Agreement is the owner under such
Management Agreement and no consent is necessary to such Person being the owner
under such Management Agreement which has not already been obtained. To the
knowledge of the Borrower, the Management Agreements are in full force and
effect and no defaults by the Participating Lessee exist thereunder (or with
respect to the giving of this representation after the date of this Agreement,
as otherwise disclosed to the Administrative Agent in writing after the date of
this Agreement and prior to the date such representation is deemed given).
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Bank shall have
any Commitment hereunder, unless the Administrative Agent shall otherwise
consent in writing, the Borrower agrees to comply with the following covenants.
Section 5.01 Compliance with Laws, Etc. The Borrower will comply, and
-------------------------
cause each of its Subsidiaries to comply, in all material respects with all
Legal Requirements.
Section 5.02 Preservation of Corporate Existence; Corporate Separateness,
------------------------------------------------------------
Etc.
- ---
(a) The Borrower will preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its partnership, limited liability
company or corporate (as applicable) existence, rights, franchises and
privileges in the jurisdiction of its formation, and qualify and remain
qualified, and cause each such Subsidiary to qualify and remain qualified, as a
foreign partnership or corporation as applicable in each jurisdiction in which
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, and, in each case, where failure to qualify
or preserve and maintain its rights and franchises could reasonably be expected
to cause a Material Adverse Change.
(b) The Borrower shall, and shall cause the Borrower's Subsidiaries, the
Parent and the Parent's Other Subsidiaries to, (i) maintain financial
statements, payroll records, accounting records and other corporate records and
other documents separate from each other and any other Person, (ii) maintain its
own bank accounts in its own name, separate from each other and any other
Person, (iii) pay its own expenses and other liabilities from its own assets and
incur (or endeavor to incur) obligations to other Persons based solely upon its
own assets and creditworthiness and not upon the creditworthiness of each other
or any other Person, and (iv) file its own tax returns or, if part of a
consolidated group, join in the consolidated tax return of such group as a
separate member thereof.
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The Borrower shall, and shall cause the Parent to, use reasonable efforts to
correct any known misunderstanding or misrepresentation regarding the
independence of the Parent and the Parent's Other Subsidiaries from the Borrower
and the Borrower's Subsidiaries.
(c) The Borrower shall, and shall cause the Permitted Other Subsidiaries to,
take all actions necessary to keep the Permitted Other Subsidiaries, separate
from the Borrower and the Borrower's other Subsidiaries, including, without
limitation, (i) the taking of action under the direction of the Board of
Directors, members or partners, as applicable, of the Permitted Other
Subsidiaries and, if so required by the Certificate of Incorporation or the
Bylaws, operating agreement or partnership agreement, as applicable, of the
Permitted Other Subsidiaries or by any Legal Requirement, the approval or
consent of the stockholders, members or partners, as applicable, of the
Permitted Other Subsidiaries, (ii) the preparation of corporate, partnership or
limited liability company minutes for or other appropriate evidence of each
significant transaction engaged in by the Permitted Other Subsidiaries, (iii)
the observance of separate approval procedures for the adoption of resolutions
by the Board of Directors or consents by the partners, as applicable, of the
Permitted Other Subsidiaries, on the one hand, and of the Borrower and the
Borrower's other Subsidiaries, on the other hand, and (iv) the holding of the
annual stockholders meeting, if applicable, of the Permitted Other Subsidiaries,
which are corporations on a date other than the date of the annual stockholders'
meeting of the General Partner or AGH LP.
(d) The Borrower shall, and shall cause the Permitted Other Subsidiaries to,
manage the business of and conduct the administrative activities of the
Permitted Other Subsidiaries independently from the business of the Borrower,
any of the Borrower's other Subsidiaries and any other Person. Any moneys
earned by the Permitted Other Subsidiaries on their assets or proceeds of the
sale of any of their assets shall be deposited in bank accounts separate from
any of the assets of the Borrower, any of the Borrower's other Subsidiaries and
any other Person, and no assets of the Permitted Other Subsidiaries shall become
commingled with assets of such Persons.
(e) The Borrower shall hold itself out, and shall continue to hold itself
out, to the public and to its creditors as a legal entity, separate and distinct
from all other entities, and shall continue to take all steps reasonably
necessary to avoid (i) misleading any other Person as to the identity of the
entity with which such Person is transacting business or (ii) implying that the
Borrower is, directly or indirectly, absolutely or contingently, responsible for
the Indebtedness or other obligations the Permitted Other Subsidiaries or any
other Person.
(f) The Borrower shall, and shall cause the Borrower's Subsidiaries, the
Parent, the Participating Lessee and the Manager and their Subsidiaries to
maintain their principal place of business in Dallas, Texas.
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Section 5.03 Payment of Taxes, Etc. The Borrower will pay and discharge,
---------------------
and cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or Property that are material in
amount, prior to the date on which penalties attach thereto and (b) all lawful
claims that are material in amount which, if unpaid, might by Legal Requirement
become a Lien upon its Property; provided, however, that neither the Borrower
-------- -------
nor any such Subsidiary shall be required to pay or discharge any such tax,
assessment, charge, levy, or claim (a) which is being contested in good faith
and by appropriate proceedings, (b) with respect to which reserves in conformity
with GAAP have been provided, (c) such charge or claim does not constitute and
is not secured by any cohate Lien on any portion of any Hotel Property and no
portion of any Hotel Property is in jeopardy of being sold, forfeited or lost
during or as a result of such contest, (d) neither the Agents nor any Bank could
become subject to any civil fine or penalty or criminal fine or penalty, in each
case as a result of non-payment of such charge or claim and (e) such contest
does not, and could not reasonably be expected to, result in a Material Adverse
Change.
Section 5.04 Visitation Rights; Bank Meeting. At any reasonable time and
-------------------------------
from time to time and so long as any visit or inspection will not unreasonably
interfere with the Borrower's or any of its Subsidiaries' operations, upon
reasonable notice, the Borrower will, and will cause its Subsidiaries to, permit
the Agents and any Bank or any of its agents or representatives thereof, to
examine and make copies of and abstracts from the records and books of account
of, and visit and inspect at its reasonable discretion the properties of, the
Borrower and any such Subsidiary, to discuss the affairs, finances and accounts
of the Borrower and any such Subsidiary with any of their respective officers or
directors. Without in any way limiting the foregoing, the Borrower will, upon
the request of either Agent, participate in a meeting with the Agents and the
Banks once during each calendar year to be held at the Borrower's office in
Dallas, Texas (or such other location as may be agreed to by the Borrower and
the Agents) at such time as may be agreed to by the Borrower and the Agents.
Section 5.05 Reporting Requirements. The Borrower will furnish to the
----------------------
Administrative Agent and each Bank:
(a) Monthly Financials. As soon as available and in any event not later than
------------------
45 days after the end of each calendar month, statements of the Capital
Expenditures and expenditures for FF&E and the operating income of each Hotel
Property owned by the Borrower, the Parent or any of their respective
Subsidiaries and for all such Hotel Properties in the aggregate (separately
aggregated for (i) the Borrower and the Borrower's Subsidiaries [including the
Permitted Other Subsidiaries], and (ii) the Parent and the Parent's
Subsidiaries) for such month, together with comparisons versus the budgeted
amounts for such Capital Expenditures and expenditures for FF&E and the
operating income of each Hotel Property and for all such Hotel Properties in the
aggregate as aforesaid for
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such month, duly certified by a Responsible Officer of the Borrower as having
been prepared in accordance with GAAP, together with a Compliance Certificate
duly executed by a Responsible Officer of the Borrower.
(b) Quarterly Financials. As soon as available and in any event not later
--------------------
than 45 days after the end of each quarter of each fiscal year of the Borrower
and the Parent, as applicable, the unaudited Consolidated balance sheets of
Borrower, the Parent and their respective Subsidiaries (separately aggregated
for (i) the Borrower and the Borrower's Subsidiaries [including the Permitted
Other Subsidiaries], and (ii) the Parent and the Parent's Subsidiaries) as of
the end of such quarter and the related unaudited statements of income,
shareholders' equity and cash flows of the Borrower, the Parent and their
respective Subsidiaries (separately aggregated for (i) the Borrower and the
Borrower's Subsidiaries [including the Permitted Other Subsidiaries], and (ii)
the Parent and the Parent's Subsidiaries) for the period commencing at the end
of the previous year and ending with the end of such quarter, and the
corresponding figures as at the end of, and for, the corresponding period in the
preceding fiscal year, all in reasonable detail by Hotel Property and duly
certified with respect to such statements (subject to year-end audit
adjustments) by a Responsible Officer of the Borrower and the Parent, as
applicable, as having been prepared in accordance with GAAP, together with (i) a
Compliance Certificate duly executed by a Responsible Officer of the Borrower
and (ii) a completed Borrowing Base Certificate duly executed by a Responsible
Officer of the Borrower setting forth the components of the Borrowing Base as of
the last day of the immediately preceding calendar quarter.
(c) Annual Financials. As soon as available and in any event not later than
-----------------
90 days after the end of each fiscal year of the Borrower and the Parent, as
applicable, (i) a copy of the annual audit report for such year for the
Borrower, the Parent and their respective Subsidiaries (separately aggregated
for (i) the Borrower and the Borrower's Subsidiaries [including the Permitted
Other Subsidiaries], and (ii) the Parent and the Parent's Subsidiaries) as of
the end of such fiscal year and the related Consolidated statements of income,
shareholders' equity and cash flows of the Borrower, the Parent and their
respective Subsidiaries (separately aggregated for (i) the Borrower and the
Borrower's Subsidiaries [including the Permitted Other Subsidiaries], and (ii)
the Parent and the Parent's Subsidiaries) for such fiscal year, and the
corresponding figures as at the end of, and for, the preceding fiscal year, in
each case certified by Coopers & Lybrand L.L.P. or other independent certified
public accountants of nationally recognized standing reasonably acceptable to
the Agents and including, if requested by either Agent, any management letters
delivered by such accountants to the Borrower or the Parent in connection with
such audit together with a certificate of such accounting firm to the Banks
stating that, in the course of the regular audit of the business of the
Borrower, the Parent and their respective Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge that a Default has
occurred and is continuing, or if, in the opinion of such
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accounting firm, a Default has occurred and is continuing, a statement as to the
nature thereof, together with (A) a Compliance Certificate duly executed by a
Responsible Officer and (B) a completed Borrowing Base Certificate duly executed
by a Responsible Officer setting forth the components of the Borrowing Base as
of the last day of the immediately preceding calendar year and (ii) statements
of the Capital Expenditures, expenditures for FF&E and operating income of each
Hotel Property owned by the Borrower, the Parent or any of their respective
Subsidiaries and for all such Hotel Properties in the aggregate (separately
aggregated for (i) the Borrower and the Borrower's Subsidiaries [including the
Permitted Other Subsidiaries], and (ii) the Parent and the Parent's
Subsidiaries). During the occurrence of an Event of Default, either Agent can
require that the audited financial statements required under this Section
5.06(c) be provided for each of such Hotel Properties on a Consolidated and
consolidating basis.
(d) Manager Financials. As soon as available and in any event not later than
------------------
120 days after the end of each fiscal year of the Manager, as applicable, (i) a
copy of the annual audit report for such year for the Manager and its
Subsidiaries, if any, including therein audited Consolidated balance sheets of
the Manager and its Consolidated Subsidiaries as of the end of such fiscal year
and the related Consolidated statements of income, shareholders' equity and cash
flows of the Manager and its Subsidiaries for such fiscal year, and the
corresponding figures as at the end of, and for, the preceding fiscal year, in
each case certified by an independent certified public reasonably accountants
acceptable to the Agents and including, if requested by either Agent, any
management letters delivered by such accountants to the Manager in connection
with such audit. On or prior to the date 120 days following the date of this
Agreement, Borrower will cause the Manager to deliver the financial statements
required under this Section 5.05(d) for the fiscal year ending December 31,
1995.
(e) Annual Budgets. As soon as available and in any event not later than the
--------------
date 30 days prior to the start of each fiscal year, (i) the Consolidated annual
budgets of the Parent and its Subsidiaries for such upcoming fiscal year in
reasonable detail and duly certified by a Responsible Officer of the Parent as
the budgets presented or to be presented to the Parent's Board of Directors for
their review and (ii) annual budgets of the Capital Expenditures and
expenditures for FF&E and the operating income of each Hotel Property owned by
the Borrower, the Parent or any of their respective Subsidiaries and for all
such Hotel Properties in the aggregate (separately aggregated for (i) the
Borrower and the Borrower's Subsidiaries [including the Permitted Other
Subsidiaries], and (ii) the Parent and the Parent's Subsidiaries).
(f) Securities Law Filings. Promptly and in any event within 15 days after
----------------------
the sending or filing thereof, copies of all proxy material, reports and other
information which the Borrower, the Parent or any of their respective
Subsidiaries sends to or files with the United States Securities and Exchange
Commission or sends to all shareholders of the Parent or of any of its
Subsidiaries.
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(g) Defaults. As soon as possible and in any event within five days after
--------
the occurrence of each Default known to a Responsible Officer of the Borrower,
the Parent or any of their respective Subsidiaries, a statement of an authorized
financial officer or Responsible Officer of the Borrower setting forth the
details of such Default and the actions which the Borrower has taken and
proposes to take with respect thereto.
(h) ERISA Notices. As soon as possible and in any event (i) within 30 days
-------------
after the Borrower or any of a Controlled Group knows to know that any
Termination Event described in clause (a) of the definition of Termination Event
with respect to any Plan has occurred, (ii) within 10 days after the Borrower or
any of a Controlled Group knows to know that any other Termination Event with
respect to any Plan has occurred, a statement of the Chief Financial Officer of
the Borrower describing such Termination Event and the action, if any, which the
Borrower or such member of such Controlled Group proposes to take with respect
thereto; (iii) within 10 days after receipt thereof by the Borrower or any of a
Controlled Group from the PBGC, copies of each notice received by the Borrower
or any such member of such Controlled Group of the PBGC's intention to terminate
any Plan or to have a trustee appointed to administer any Plan; and (iv) within
10 days after receipt thereof by the Borrower or any member of a Controlled
Group from a Multiemployer Plan sponsor, a copy of each notice received by the
Borrower or any member of such Controlled Group concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of ERISA.
(i) Environmental Notices. Promptly upon the knowledge of any Responsible
---------------------
Officer of the Borrower of receipt thereof by the Borrower or any of its
Subsidiaries, a copy of any form of notice, summons or citation received from
the United States Environmental Protection Agency, or any other Governmental
Authority concerning (i) violations or alleged violations of Environmental Laws,
which seeks to impose liability therefor, (ii) any action or omission on the
part of the Parent or Borrower or any of their present or former Subsidiaries in
connection with Hazardous Waste or Hazardous Substances which, based upon
information reasonably available to the Borrower, could reasonably be expected
to cause a Material Adverse Change or an Environmental Claim in excess of
$1,000,000, (iii) any notice of potential responsibility under CERCLA, or (iv)
concerning the filing of a Lien upon, against or in connection with the Parent,
Borrower, their present or former Subsidiaries, or any of their leased or owned
Property, wherever located.
(j) Other Governmental Notices or Actions. Promptly and in any event within
-------------------------------------
five Business Days after receipt thereof by the Borrower, the Parent or any of
their respective Subsidiaries, (i) a copy of any notice, summons, citation, or
proceeding seeking to adversely modify in any material respect, revoke, or
suspend any license, permit, or other authorization from any Governmental
Authority, which action could reasonably be expected to cause a Material Adverse
Change, and (ii) any revocation or involuntary termination of any license,
permit or other authorization from any
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Governmental Authority, which revocation or termination could reasonably be
expected to cause a Material Adverse Change.
(k) Reports Affecting the Borrowing Base. On or prior to the 2nd day
------------------------------------
following any Adjustment Event, a Property Adjustment Report with respect to
such Adjustment Event.
(l) Press Releases. Promptly and in any event within 5 days after the
--------------
sending or releasing thereof, copies of all press releases or other releases of
information to the public by the Borrower, the Parent or any of their respective
Subsidiaries.
(m) Other Notices.
-------------
(i) Upon the request of either Agent, a certified rent roll listing all
of the Real Property of the Borrower and the Guarantors that are subject to
leases and containing such other information regarding such leases that
such Agent may reasonably request,
(ii) As soon as received, a copy of any notice of default or any other
material notice (including without limitation property condition reviews)
received by the Borrower or any Guarantor from any Franchisor, Manager, or
any ground lessor under a Ground Lease,
(iii) Promptly following any merger or dissolution of any Subsidiary of
the Borrower which is permitted hereunder or event which would make any of
the representations in Section 4.01-4.04 untrue, notice thereof, and
(iv) Promptly upon the occurrence of a Utility Interruption Event or
receipt of a notice of an anticipated Utility Interruption Event, notice of
such Utility Interruption Event or a copy of any such notice, as
applicable.
(n) Material Litigation. As soon as possible and in any event within five
-------------------
days of any Responsible Officer of the Borrower, the Parent or any of their
respective Subsidiaries having knowledge thereof, notice of any litigation,
claim or any other event which could reasonably be expected to cause a Material
Adverse Change.
(o) Other Information. Such other information respecting the business or
-----------------
Properties, or the condition or operations, financial or otherwise, of the
Borrower, the Parent or any of their respective Subsidiaries, as any Bank
through the Administrative Agent may from time to time reasonably request.
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Section 5.06 Maintenance of Property, Required Work and Approved
---------------------------------------------------
Preliminary Property Plan Work. The Borrower will, and will cause each of its
- ------------------------------
Subsidiaries to, (a) maintain their owned, leased, or operated Property in a
manner consistent for hotel properties and related property of the same quality
and character and shall keep or cause to be kept every part thereof and its
other properties in good condition and repair, reasonable wear and tear
excepted, and make all reasonably necessary repairs, renewals or replacements
thereto as may be reasonably necessary to conduct the business of the Borrower
and its Subsidiaries, (b) not remove, demolish or structurally alter, or permit
or suffer the removal, demolition or structural alteration of, any of the
Improvements except as expressly permitted hereunder or pursuant to an Approved
Preliminary Property Plan or with the prior written consent of the
Administrative Agent, (c) not knowingly or willfully permit the commission of
waste or other injury, or the occurrence of pollution, contamination or any
other condition in, on or about any Hotel Property, (d) maintain and repair each
Hotel Property as required by any Franchise Agreement, Management Agreement or
Ground Lease for such Hotel Property, and (e) commence the Required Work and
Approved Preliminary Property Plan Work for any Hotel Property by a date which
would allow a reasonable period of time to complete such work on or prior to the
Required Work Deadline for such Hotel Property, (f) after any commencement of
any of the work described in clause (e) of this Section 5.06 diligently perform
such Required Work or Approved Preliminary Property Plan Work, as applicable,
provide status reports in reasonable of the progress of the Required Work or
Approved Preliminary Property Plan Work, as applicable, to the Administrative
Agent within 45 days of the end of each calendar quarter and complete such
Required Work or Approved Preliminary Property Plan Work, as applicable, prior
to the Required Work Deadline (i) for the Required Work, as described in the
Engineering Reports and/or the Environmental Reports referred to in Schedule
5.06 or as otherwise described for any Future Property, (ii) in a good and
workmanlike manner and (iii) in compliance in all material respects with all
Legal Requirements. Upon the completion of the Required Work or any Major
Renovation for any Hotel Property, at the Borrower's expense, a property
condition consultant or engineer acceptable to the Agents shall inspect the
Hotel Property and deliver to the Administrative Agent a certificate that the
Required Work or the Major Renovation, as applicable, has been made or purchased
and delivered to such Hotel Property. Except as may be required to maintain the
Parent's status as a real estate investment trust under the Code, any Capital
Expenditures or expenditures or leases for FF&E made for any Hotel Property
shall be in the name of the Property Owner for such Hotel Property.
Section 5.07 CAPEX Reserve. On or prior to the date sixty days after the
-------------
date of each calendar quarter the Borrower will (i) deposit into the CAPEX
Reserve the CAPEX Reserve Deposit Amount for such calendar quarter and (ii)
deliver to the Administrative Agent a statement certified by a Responsible
Officer of the Borrower to be true and correct in all material respects, which
statement shall specify the calculation of such gross revenues and the amount of
such Capital Expenditures or FF&E and such other information reasonably
requested by the Administrative
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Agent. The CAPEX Reserve will be used to make or purchase Capital Expenditures
or FF&E (except for those made or purchased under an Approved Preliminary
Property Plan or Required Work performed for any Hotel Property after the date
which is 365 days following the date such Hotel Property initially qualified as
an Eligible Property) for Eligible Properties in accordance with this Agreement.
In addition to the Bank One Cash Management Agreement, Borrower shall execute
such Financing Statements and other documents and execute such other documents
as either Agent shall reasonably require in order for the Administrative Agent
to have a perfected first lien security interest in such CAPEX Reserve. Within
10 days after presentation to the Administration Agent of documentation
reasonably required the Administrative Agent (including without limitation
copies of invoices and a summary of Capital Expenditures) evidencing that in
accordance with this Agreement either (a) Capital Expenditures to an Eligible
Property have been performed or (b) FF&E has been purchased by the Borrower and
delivered to an Eligible Property, the Administrative Agent shall permit the
withdrawal from the CAPEX Reserve of the amounts for such Capital Expenditures
or FF&E (except for those made or purchased under an Approved Preliminary
Property Plan or Required Work performed for any Hotel Property after the date
which is 365 days following the date such Hotel Property initially qualified as
an Eligible Property), including payment to an escrow agent or title company to
disburse such amounts. Any requests for disbursements from the CAPEX Reserve
(a) shall not be made more often than once in any calendar month or for less
than $50,000, (b) shall be made contemporaneously with any request for a
Borrowing in such month pertaining to a Major Renovation, (c) shall be made
contemporaneously with a request for a Borrowing if in the month requested the
Borrower requests Borrowings on 2 days in such month, (d) shall not be made for
Capital Expenditures or FF&E made or purchased under an Approved Preliminary
Property Plan or Required Work performed for any Hotel Property after the date
which is 365 days following the date such Hotel Property initially qualified as
an Eligible Property, (e) shall also include the information and materials
required in the preceding sentence for all Capital Expenditures and FF&E
purchased with funds drawn out of the Concentration Bank Account and a
reconciliation of such amounts with the draws from the CAPEX Reserve and
Borrowings for such expenditures.
Section 5.08 Appraisals. The Borrower agrees that the Administrative Agent
----------
or the Majority Banks may from time to time obtain an Appraisal of any Hotel
Property and the Borrower shall, and shall cause each of its Subsidiaries to,
cooperate fully with the appraiser selected by the Administrative Agent or the
Majority Banks, as applicable, to conduct such Appraisals; it being understood
and agreed that the Borrower shall be required to pay the costs of such
Appraisal if either (a) the Person(s) requesting the Appraisal believe in their
reasonable discretion that Real Estate Value of the Hotel Property has
materially decreased or (b) an Event of Default has occurred. In the event that
the Borrower or any of its Subsidiaries obtains an Appraisal of any Hotel
Property other than pursuant to this subsection, the Borrower shall deliver a
copy of such appraisal to the Administrative Agent promptly upon the completion
thereof and the Administrative Agent may elect, in its sole discretion and
subject to Legal Requirements, to treat such appraisal as an
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"Appraisal." In the event that the Administrative Agent or the Majority Banks
obtains an Appraisal of any Hotel Property pursuant to the provisions of this
Section 5.08, such Person(s) shall deliver a copy of such Appraisal to the
Borrower upon the completion thereof.
Section 5.09 Duplicate Louisiana Notes. For each Hotel Property located
-------------------------
within the State of Louisiana, the Borrower agrees to execute an additional
promissory note for each Bank identical to the Note for such Bank which
additional promissory note (a) shall be held by the Administrative Agent to be
used in connection with the exercise of remedies against such Hotel Property in
accordance with Louisiana law and (b) shall not evidence any additional
Obligations. If any Note is exchanged or issued pursuant to the provisions of
Section 9.06(d), (a) the Borrower shall again execute additional promissory
notes identical to any new Notes issued by the Borrower and (b) the
Administrative Agent shall be authorized to exchange the promissory notes held
pursuant to the provisions of this Section 5.09 for the duplicates of the new
Notes.
Section 5.10 Insurance. The Borrower will maintain, and cause each of its
---------
Subsidiaries to maintain, the insurance required pursuant to Schedule 5.10.
Section 5.11 Casualty; Condemnation.
----------------------
(a) Any proceeds collected (the "Proceeds") under any fire or other physical
damage insurance policy described in this Agreement shall be disbursed as
provided in this Section 5.11. If (i) both (A) the Proceeds for any casualty are
in excess of twenty five percent (25%) of the Real Estate Value of the Hotel
Property affected by such casualty and (B) such casualty would result in a
decrease to the Borrowing Base which would require a prepayment of the
Obligations pursuant to the provisions of this Agreement, (ii) the casualty
shall have occurred within ninety (90) days of the Maturity Date or (iii) in the
Administrative Agent's discretion the casualty cannot be restored by a date
thirty (30) days prior to the Maturity Date, then at the Administrative Agent's
option and in its sole discretion, any Proceeds received by the Administrative
Agent shall be (A) disbursed to the Borrower for repairs and reconstruction;
and/or (B) applied against the outstanding principal balance of and/or unpaid
accrued interest on, the Notes in such order as the Administrative Agent chooses
in its sole discretion . If the Proceeds are not applied against the Notes as
provided in the preceding sentence, any Proceeds received by the Administrative
Agent shall be disbursed to the Borrower for repairs and reconstruction as
provided in Section 5.11(b) but only upon fulfillment of each of the following
conditions within 90 days following the occurrence of the damage for which the
Proceeds are collected:
(i) The Borrower shall demonstrate to the Administrative Agent's
reasonable satisfaction that the Proceeds, together with amounts deposited
by the Borrower pursuant to subparagraph (ii) will be adequate to
accomplish the repair and reconstruction of the
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Improvements and to restore the fair market value of the Hotel Property to
at least the value it had immediately prior to sustaining the damage. Such
demonstration shall include delivery to the Administrative Agent of (i)
plans and specifications satisfactory to the Administrative Agent; and (ii)
a construction contract in form and content, and with a contractor,
satisfactory to the Administrative Agent.
(ii) To the extent that the Proceeds are insufficient in the reasonable
determination of the Administrative Agent to accomplish the repairs and
reconstruction required above, the Borrower shall deliver to the
Administrative Agent funds (the "Shortfall Funds") in the amount of such
shortfall, which funds shall be, at the Administrative Agent's option,
assigned to the Administrative Agent as security for the Borrower's
obligations hereunder and shall be maintained with the Administrative Agent
and disbursed in the same manner as the Proceeds.
(iii) The Borrower shall execute such documents, in form and content
satisfactory to the Administrative Agent, as the Administrative Agent
requires to evidence and secure the Borrower's obligation to use all
amounts disbursed for the prompt repair and reconstruction of the Hotel
Property in accordance with the plans and specifications approved by the
Administrative Agent.
(iv) There shall have occurred no Default which is continuing or has not
otherwise been cured or waived, and the Administrative Agent shall have
received a certificate to that effect signed by a Responsible Officer of
the Borrower.
(b) Any Proceeds and Shortfall Funds to be disbursed to the Borrower shall be
held by the Administrative Agent and disbursed at such times and in such amounts
as the Administrative Agent shall reasonably deem necessary to fund the ongoing
repairs, provided the Administrative Agent is satisfied with such repairs. The
Administrative Agent shall have no obligation to disburse proceeds more than
once per month. Any amounts remaining undisbursed following completion of (and
full payment for) such repairs and reconstruction shall be returned to the
Borrower up to the amount of any Shortfall Funds deposited by Borrower, and any
other amounts remaining shall be applied against the outstanding principal
balance of and/or unpaid accrued interest on, the Notes, in such order as the
Administrative Agent chooses in its sole discretion.
(c) In the event the Borrower fails to fulfill the conditions set forth in
Sections 5.11(a)(i)-(iv) within 90 days following the date on which the damage
occurs, the Proceeds shall be applied by the Administrative Agent against the
outstanding principal balance of and/or unpaid accrued interest on, the Notes in
such order as the Administrative Agent chooses in its sole discretion.
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(d) The Borrower hereby assigns to the Administrative Agent, as security for
the Borrower's obligations under the Credit Documents, all compensation, awards
and other amounts payable to the Borrower in connection with any taking of any
portion of a Hotel Property for public use, and any proceeds of any related
settlement regardless of whether eminent domain proceedings are instituted in
connection therewith (collectively, "Compensation"). The Borrower shall deliver
all Compen sation to the Administrative Agent immediately upon receipt. If
such condemnation or taking would result in a decrease to the Borrowing Base
which would require a prepayment of the Obligations pursuant to the provisions
of this Agreement at the Administrative Agent's option and in its sole
discretion, any Compensation received by the Administrative Agent shall be (i)
disbursed to Borrower for repairs and reconstruction; and/or (ii) paid to
Borrower; and/or (iii) applied against the outstanding principal balance of
and/or unpaid accrued interest on, the Notes in such order as the Administrative
Agent chooses in its sole discretion; all in accordance with the rights,
procedures and other provisions set forth in Sections 5.11(a)-(c) for the
application of casualty insurance proceeds. Otherwise, the Compensation shall be
disbursed by the Administrative Agent to Borrower for repairs and
reconstruction.
Section 5.12 Cash Management Systems. The Borrower shall, and shall cause
-----------------------
each of its Subsidiaries and the Participating Lessee to, maintain the Cash
Management Systems. The Participating Lessee shall establish separate Deposit
Accounts for each Hotel Property with financial institutions having offices in
the same locale as the applicable Hotel Property. The Deposit Accounts for the
Eligible Properties shall be subject to a Depository Account Agreement in form
satisfactory to the Agents. The Participating Lessee also shall establish with
the Cash Manager a separate Operating Account (Participating Lessee) for each
Hotel Property. The Borrower also shall establish with the Cash Manager the
Borrower's Bank Accounts. As of the Effective Date, collections of cash and
cash equivalents for each Hotel Property (except for DFW South and Meadowlands
and any Permitted Non-Eligible Property) shall be deposited on a daily basis by
the Participating Lessee into the Deposit Account established for such Hotel
Property as part of the Cash Management System (Participating Lessee). The
Deposit Account for each Hotel Property (except for DFW South and Meadowlands
and any Permitted Non-Eligible Property) shall be swept at the end of each
Business Day into the respective Operating Account (Participating Lessee) for
such Hotel Property to reduce the net daily balance of good funds in such
Deposit Account to an amount, sufficient in the reasonable opinion of the
Agents, to cover usual and customary account fees and chargebacks applicable to
such Deposit Account. As provided in the Irrevocable Direction to Pay Rent, the
rental payments and other sums owed by the Participating Lessee to the Borrower
and the Borrower's Subsidiaries under the Participating Leases (except for DFW
South and Meadowlands) shall be paid into the Concentration Bank Account
established as part of the Cash Management System (Borrower) for the purpose of
holding and investing such rental payments. Except as provided in subsection (b)
below, the Parent, the Borrower, and their Subsidiaries shall have no right to
withdraw funds from, or otherwise transfer, pledge or assign any funds in the
Borrower's Bank
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Accounts except the pledge to the Administrative Agent pursuant to the Security
Agreement and the Bank One Cash Management Agreement. In addition, the Borrower
shall and shall cause each of its Subsidiaries and the Participating Lessee to,
perform and comply with the following covenants and agreements:
(a) Cash, cash equivalents and other revenues shall be received and held
by the Participating Lessee and any of its officers, employees, agents, managers
or other Persons acting for or in concert with the Participating Lessee to make
collections for or on behalf of the Participating Lessee ("Collecting Agents"),
in trust for the Borrower and the Borrower's Subsidiaries as collateral for the
Participating Lessee's obligations under the Participating Lease.
Notwithstanding any other provision of this Agreement or any other Credit
Document, all such cash, cash equivalents and other revenues from the Eligible
Properties shall be paid by the Collecting Agents into Deposit Accounts subject
to a Depository Account Agreement and the Cash Management Systems. Funds
received from credit card companies pursuant to the Credit Card Agreements for
any Hotel Property (except for DFW South and Meadowlands and any Permitted Non-
Eligible Property) shall be deposited either directly into the Operating Account
( Participating Lessee) for such Hotel Property or Deposit Account for such
Hotel Property subject to a Depository Account Agreement and the Cash Management
System (Participating Lessee).
(b) As long as no Default shall have occurred and be continuing or would
result therefrom, the Borrower may request, but not more often than once in any
calendar week, in written certificate from a Responsible Officer that the
Administrative Agent instruct the Cash Manager to either (i) apply Dollars on
deposit in the Concentration Bank Account to pay the Obligations, (ii) transfer
such Dollars to the CAPEX Reserve, (iii) transfer such Dollars as directed by
the Borrower or its Subsidiaries to make an investment permitted by the
provisions of Section 6.07 or (iv) transfer such Dollars to any of the Operating
Accounts (Borrower) as required by the Borrower to pay for Capital Expenditures,
FF&E, insurance premiums, taxes and general operating expenses incurred in the
ordinary course of business for the Hotel Properties (except for DFW South and
Meadowlands) and to make distributions to the Borrower's or its Subsidiaries
partners as permitted by the provisions of Section 6.04, in each case by
delivering such a request to the Administrative Agent in accordance with the
provisions of the Bank One Cash Management Agreement. Upon receipt by the
Administrative Agent of such a request, the Administrative Agent shall, as
applicable, instruct the Cash Manager to apply or transfer Dollars on deposit in
the Concentration Bank Account as so requested, in each case subject to the
availability of funds on deposit in the Concentration Bank Account. Funds
transferred into any of the Operating Accounts (Borrower) shall be withdrawn by
the Borrower or its Subsidiaries, as applicable, and used to pay for those
matters for which the Borrower had made request.
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(c) The Borrower or all Subsidiaries of Borrower (except for the
Permitted Other Subsidiaries) irrevocably makes, constitutes and appoints the
Administrative Agent, and all Persons designated by Administrative Agent for
that purpose (including the Cash Manager), at any time, as such Person's true
and lawful attorney-in-fact to, during the continuance of an Event of Default,
endorse such Person's name on any checks, notes, drafts or any other form of
payment relating to Hotel Property that come into the Administrative Agent's or
the Cash Manager's possession or under the Cash Managers or the Administrative
Agent's control; provided, however, that such appointment by such Person of the
-------- -------
Administrative Agent as such Person's attorney-in-fact shall in no case impose
upon the Administrative Agent or any such Person any obligation or duty to take
any actions on behalf of such Person or any fiduciary obligations with respect
to such Person.
(d) Within 30 days following the date of acquisition of an Initial
Property and within 30 days following the date of that the Borrower desires that
a Future Property qualify as an Eligible Property, the Borrower shall have
delivered to the Administrative Agent the Depository Account Agreements and the
Credit Card Agreements necessary to qualify such Hotel Property as an Eligible
Property, which documents shall be in form and substance reasonably satisfactory
to the Administrative Agent
(e) No cash, cash equivalents, credit card receipts or other revenues of
the Hotel Properties owned by the Permitted Other Subsidiaries or any other
assets of the Permitted Other Subsidiaries shall be commingled with cash, cash
equivalents, credit card receipts or other revenues collected or applied
pursuant to the Cash Management Systems or collected from the Permitted Non-
Eligible Properties.
Section 5.13 Initial Properties. Except for DFW South or Meadowlands, the
------------------
Borrower will use its best efforts to cause the Initial Properties to qualify as
Eligible Properties within thirty (30) days of the Effective Date, except for
the Maison De Ville, New Orleans, Louisiana for which the Borrower will use
reasonable efforts to qualify as an Eligible Property. If an Initial Property
does not qualify as an Eligible Property within thirty (30) days of the
Effective Date or later no longer qualifies as an Eligible Property, the
Borrower will cause any such Initial Property to qualify as a Permitted Non-
Eligible Property as provided in the definition of Permitted Non-Eligible
Property.
Section 5.14 Supplemental Guaranties. The Borrower has requested and the
-----------------------
Agents have agreed that any partner of the Borrower except the General Partner,
AGH LP or any Guarantor may execute a Supplemental Guaranty. However, the
execution of or release of any Supplemental Guaranty shall not be construed as a
release or modification of any obligation of a Guarantor under a Guaranty or
Environmental Indemnity.
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Section 5.15 Participating Leases. Upon knowledge of a default by a
--------------------
Participating Lessee under a Participating Lease or a Participating Lessee
Document, the Borrower will send, or will cause the Guarantor who is a party to
such Participating Lease or Participating Lessee Document to send, a notice of
such default to such Participating Lessee as provided in the document under
which such default has occurred.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Credit Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Bank shall have
any Commitment, the Borrower agrees, unless the Administrative Agent shall
otherwise consent in writing, to comply with the following covenants.
Section 6.01 Liens, Etc. The Borrower will not create, assume, incur or
----------
suffer to exist, or permit any of its Subsidiaries (except for Permitted Other
Subsidiaries) to create, assume, incur, or suffer to exist, any Lien on or in
respect of any of its Property whether now owned or hereafter acquired, or
assign any right to receive income, except that the Borrower and its
Subsidiaries may create, incur, assume or suffer to exist Liens:
(a) securing the Obligations;
(b) for taxes, assessments or governmental charges or levies on Property of
the Borrower or any Guarantor to the extent not required to be paid pursuant to
Sections 5.03;
(c) Liens imposed by law (such as landlords', carriers', warehousemen's and
mechanics' liens or otherwise arising from litigation) (a) which are being
contested in good faith and by appropriate proceedings, (b) with respect to
which reserves in conformity with GAAP have been provided, (c) such Liens are
subordinate to the Liens of the Security Documents and no portion of any Hotel
Property is in jeopardy of being sold, forfeited or lost during or as a result
of such contest, (d) neither the Agents nor any Bank could become subject to any
civil fine or penalty or criminal fine or penalty, in each case as a result of
non-payment of such charge or claim and (e) such contest does not, and could not
reasonably be expected to, result in a Material Adverse Change; and
(d) on leased personal property to secure solely the lease obligations
associated with such property.
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Section 6.02 Indebtedness. The Borrower will not incur or permit to exist,
------------
or permit any of its Subsidiaries to incur or permit to exist, any Indebtedness
other than the Obligations and the following:
(a) Permitted Other Subsidiary Indebtedness;
(b) Indebtedness in the form of Capital Leases for any particular Hotel
Property which have over the term of such Capital Leases payments in the
aggregate for all such Capital Leases for such Hotel Property for an amount
which does not exceed the Hotel Capital Lease Limit for such Hotel Property;
(c) Debt in the form of accounts payable to trade creditors for goods or
services for which not more than $50,000.00 for any two Hotel Properties is aged
more than 60 days from the billing date, incurred in the ordinary course of
business, as presently conducted, and paid within the specified time, unless
contested in good faith and by appropriate proceedings; and
(d) extensions, renewals and refinancing of any of the Indebtedness specified
in paragraphs (a) - (b) above so long as the principal amount of such
Indebtedness is not thereby increased.
The Borrower will cause the Parent and the Parent's Other Subsidiaries not to
incur or permit to exist any Indebtedness (except for Indebtedness of the type
listed in clauses (b) and (c) above) without the Majority Bank's written
consent; provided that such consent shall not be withheld if such Indebtedness
will not cause the Borrower or the Parent to breach another covenant of this
Credit Agreement and such Indebtedness will not cause a Material Adverse Change.
The Banks hereby consent to the Parent (a) guaranteeing to the lender under the
Indebtedness secured by the Meadowlands (i) the payment of rent under the ground
lease relating to the Meadowlands, (ii) real estate taxes relating to the
Meadowlands, (iii) capital reserves required under such Indebtedness, and (iv)
after a default under such Indebtedness, the base rent under the applicable
participating lease will be applied to such Indebtedness and (b) an indemnity
for certain acts of malfeasance, misappropriation and misconduct and an
environmental indemnity for the lender under the Indebtedness secured by the DFW
South.
Section 6.03 Agreements Restricting Distributions From Subsidiaries. The
------------------------------------------------------
Borrower will not, nor will it permit any of its Subsidiaries to, enter into any
agreement (other than a Credit Document) which limits distributions to or any
advance by any of the Borrower's Subsidiaries to the Borrower.
Section 6.04 Restricted Payments. The Borrower will not, and will not
-------------------
permit any of its Subsidiaries to, make any Restricted Payment, except that:
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(a) a Subsidiary of the Borrower may make a Restricted Payment to the
Borrower,
(b) provided no Default has occurred and is continuing or would result
therefrom, the Borrower may in any calendar quarter, based on the Rolling Period
for such calendar quarter, make cash distributions to its partners (including in
connection with the repurchase of partnership interests in the Borrower) which
with the previous cash distributions (including in connection with the
repurchase of partnership interests in the Borrower) in such Rolling Period are
not in excess of 90% of Funds from Operations during such Rolling Period,
including without limitation the Rolling Period ending June 30, 1997; provided,
however, that for the calendar quarters ended September 30, 1996, December 31,
1996 and March 31, 1997, the Borrower will be entitled to make additional
distributions to its partners (including in connection with the repurchase of
partnership interests in the Borrower) in an amount which when aggregated with
the other permitted distributions (including in connection with the repurchase
of partnership interests in the Borrower) would allow the Parent to pay a $.4075
per share dividend for such quarter;
(c) the Borrower shall be entitled to distribute to its partners a sufficient
amount received from an Asset Sale in excess of that which would be required to
be used to repay Obligations pursuant to the terms of this Agreement which would
be necessary to permit the Parent to maintain the Parent's status as a real
estate investment trust under the Code;
(d) the Borrower shall be entitled to and covenants to repay the existing
Indebtedness (other than the Obligations) secured by the Hotel Property commonly
known as the Holiday Inn - New Orleans Intercontinental Airport within 2 days of
the initial Borrowing;
(e) the limited partners of the Borrower shall be entitled to exchange
limited partnership interests in the Borrower for the Parent's stock in
accordance with the Registration Statement; and
(f) the Borrower shall be entitled to issue limited partnership interests in
the Borrower in exchange of ownership interests in Permitted New Subsidiaries
which own a Future Property.
Section 6.05 Fundamental Changes; Asset Sales. The Borrower will not, and
--------------------------------
will not permit any of its Subsidiaries (other than the Permitted Other
Subsidiaries) to, (a) merge or consolidate with or into any other Person, unless
(i) a Guarantor is merged into the Borrower and the Borrower is the surviving
Person, and (ii) immediately after giving effect to any such proposed
transaction no Default would exist; (b) sell, transfer, or otherwise dispose of
all or any of the Borrower's or any of the Borrower's Subsidiary's Property
except for a Permitted Hotel Sale, a Permitted Personal Property Replacement or
Hotel Properties which are not Eligible Properties; (c) enter into a Material
Lease (other than a Participating Lease) of all or any portion of any Eligible
Property with any Person without the consent of the Administrative Agent; (d)
sell or otherwise dispose of any shares
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of capital stock, membership interests or partnership interests of any
Subsidiary (except for a Permitted Other Subsidiary); (e) except for sales of
ownership interests permitted under this Agreement and the issuance or limited
partnership interests in the Borrower in exchange for ownership interests in a
Permitted New Subsidiary, alter the corporate, capital or legal structure of the
Borrower or any of its Subsidiaries (except for a Permitted Other Subsidiary);
(f) incorporate or otherwise organize any Subsidiaries except a Permitted New
Subsidiary; (g) liquidate, wind-up or dissolve itself (or suffer any liquidation
or dissolution) provided that nothing herein shall prohibit the Borrower from
dissolving any Subsidiary which has no assets on the date of dissolution.
Section 6.06 Personal Property Leases. For any Eligible Property, the
------------------------
Borrower will not, and will not permit any of its Subsidiaries to (a) enter into
leases of Personal Property which constitute Capital Leases in excess of the
Hotel Capital Lease Limit or (b) enter into leases of Personal Property which do
not constitute Capital Leases in excess of the Hotel Operating Lease Limit.
Section 6.07 Investments, Loans, Future Properties. The Borrower will not,
-------------------------------------
and will not permit any of its Subsidiaries to, acquire by purchase or otherwise
all or substantially all the business, property or fixed assets of any Person or
any Hotel Property, make or permit to exist any loans, advances or capital
contributions to, or make any investment in, or purchase or commit to purchase
any evidences of indebtedness of, stock or other securities, partnership
interests, member interests or other interests in any Person, except the
following (provided that after giving effect thereto there shall exist no
Default):
(a) the purchase of Liquid Investments with the Administration Agent;
(b) trade and customer accounts receivable (including in connection with the
sale of used FF&E) which are for goods furnished or services rendered in the
ordinary course of business and are payable in accordance with customary trade
terms;
(c) wholly-owned Subsidiaries which own an Initial Property;
(d) Permitted Other Subsidiaries;
(e) a Future Property which qualifies as an Eligible Property or a Permitted
Non-Eligible Property;
(f) contributions to, or capital investments in a Person which, prior to such
contribution or investment, is not a Subsidiary but which becomes a Permitted
New Subsidiary as a result of such contribution or investment and which
Permitted New Subsidiary uses such contributions or capital investments to make
an acquisition of a Future Property permitted under the preceding clause (e);
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(g) a loan to the Participating Lessee in amount sufficient to allow the
Participating Lessee to purchase Personal Property from the Property Owners of
the Hotel Properties which qualify as either an Eligible Property or a Permitted
Non-Eligible Property so that the ownership of Personal Property by such
Property Owners does not cause the Parent to forfeit the Parent's status as a
real estate investment trust under the Code;
(h) receivables purchased in connection with the acquisition of a Hotel
Property; and
(i) other assets owned in the ordinary course of owning the Borrower's and
the Borrower's Subsidiaries' Hotel Properties.
Section 6.08 Affiliate Transactions. Except for the Management Agreements,
----------------------
the Participating Lease Agreements, the Liquor License Concession Agreements,
the transactions described in Section 6.07(g), and as expressly permitted
elsewhere in this Agreement, the Borrower will not, and will not permit any of
its Subsidiaries to, make, directly or indirectly: (a) any transfer, sale,
lease, assignment or other disposal of any assets to any Affiliate of the
Borrower or any purchase or acquisition of assets from any such Affiliate except
for sales of new Personal Property (i) which in any calendar year do not exceed
$1,000,000 in the aggregate and (ii) for which the sales price is the actual
cost to the party selling; or (b) any arrangement or other transaction directly
or indirectly with or for the benefit of any such Affiliate (including without
limitation, guaranties and assumptions of obligations of an Affiliate), other
than in the ordinary course of business and at market rates.
Section 6.09 Sale and Leaseback. The Borrower will not, and will not
------------------
permit any of its Subsidiaries to, enter into any arrangement with any Person,
whereby in contemporaneous transactions the Borrower or such Subsidiary sells
essentially all of its right, title and interest in a material asset and the
Borrower or such Subsidiary acquires or leases back the right to use such
property.
Section 6.10 Sale or Discount of Receivables. The Borrower will not, and
-------------------------------
will not permit any of its Subsidiaries to, directly or indirectly, sell with
recourse, or discount or otherwise sell for less than the face value thereof,
any of its notes or accounts receivable.
Section 6.11 No Further Negative Pledges. The Borrower will not, and will
---------------------------
not permit any of its Subsidiaries to, enter into or suffer to exist any
agreement (other than this Agreement and the Credit Documents) (a) prohibiting
the creation or assumption of any Lien upon the Properties of the Borrower or
any of its Subsidiaries (except for the Permitted Other Subsidiaries), whether
now owned or hereafter acquired, or (b) requiring an obligation to be secured if
some other obligation is or becomes secured.
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Section 6.12 Franchise Agreements. The Borrower will not, nor will it
--------------------
permit any of its Subsidiaries (other than Permitted Other Subsidiaries) or any
Participating Lessee to (i) enter into a new Franchise Agreement or (ii) enter
into any termination, or material modification or amendment of any Franchise
Agreement.
Section 6.13 Material Documents. The Borrower will not, nor will it permit
------------------
any of its Subsidiaries (other than Permitted Other Subsidiaries) or any
Participating Lessee to, enter into any termination, modification or amendment
of any:
(a) Management Agreement;
(b) Participating Lease;
(c) Ground Lease; and
(d) Participating Lessee Document.
The Borrower will not, nor will it permit any of its Subsidiaries (other than
Permitted Other Subsidiaries) or any Participating Lessee to, enter into any
termination or material modification or material amendment of any:
(a) Acquisition Agreement;
(b) Material Lease;
(c) Liquor License Concession Agreement and any agreements related to the
liquor license(s); and
(d) Any other material agreement.
Any termination, modification or amendment prohibited under this Section 6.13
without the Administrative Agent's written consent shall, to the extent
permitted by applicable law, be void and of no force and effect. The Borrower
will not, nor will it permit any of its Subsidiaries (other than Permitted Other
Subsidiaries) or any Participating Lessee to, enter into a Participating Lease
which does not provide for (i) base rent to be paid on a weekly basis starting
in the second month of the commencement of the Participating Lease or (ii) the
participating rent to be paid on monthly estimates with a quarterly
reconciliation which payments shall be made on the 10th day of the first and
third month of every calendar quarter and on the last day of the first month of
every calendar quarter.
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Section 6.14 Other Businesses; Undeveloped Land. The Borrower will not,
----------------------------------
and will not permit the Parent or any of their respective Subsidiaries to, (a)
substantially alter the character of their respective businesses from that
conducted as of the date of this Agreement or (b) acquire or develop any real
property except for the expansion of the DFW South or the Meadowlands or for the
acquisition of Land in connection with the expansion of an existing Hotel
Property which expansion will not cost in excess of the lesser of (i) $1,000,000
or (ii) five percent (5%) of the Cost Basis of such Hotel Property.
Section 6.15 Borrower Debt Service Ratio. The Borrower will not permit the
---------------------------
ratio, determined as of the last day of each calendar quarter (commencing with
the quarter ending September 30, 1996), of (a) Borrowing Base EBITDA for the
Rolling Period ending on such date to (b) the product of (i) the Consolidated
Indebtedness of the Borrower and the Borrower's Subsidiaries (other than the
Permitted Other Subsidiaries) as of such date times (ii) the Debt Service Rate
-----
for such Indebtedness for such Rolling Period, to be less than 1.75 to 1.0.
Section 6.16 Parent Debt Service Ratio. The Borrower will not permit the
-------------------------
ratio, determined as of the last day of each calendar quarter (commencing with
the quarter ending September 30, 1996), of (a) the Property EBITDA of all Hotel
Properties owned by the Parent and the Parent's Subsidiaries (including without
limitation the Borrower, the Borrower's Subsidiaries and the Permitted Other
Subsidiaries) for the Rolling Period ending on such date to (b) the product of
(i) the Consolidated Indebtedness of the Parent and the Parent's Subsidiaries as
of such date times (ii) the Debt Service Rate for such Indebtedness for such
-----
Rolling Period, to be less than 1.75 to 1.0.
Section 6.17 Net Worth. The Borrower will not permit the Parent's
---------
Consolidated Net Worth at any time, tested quarterly, to be less than the sum of
(a) $100,000,000 plus ( b) 75% of the Net Cash Proceeds from a Parent
----
Capitalization Event after the Effective Date involving any sale or issuance by
the Parent or any of its Subsidiaries of equity securities.
Section 6.18 Bank Accounts.
-------------
(a) Location of Borrower's Bank Accounts. Neither the Borrower nor any of
------------------------------------
its Subsidiaries (except the Permitted Other Subsidiaries) shall maintain
accounts with any bank or financial institution except those accounts in the
Cash Management System (Borrower).
(b) Concentration Bank Accounts. Neither the Borrower nor any Guarantor
---------------------------
shall move or cancel any of the Borrower's Bank Accounts or make any changes to
the Cash Management System (Borrower) without the prior written consent of the
Administrative Agent.
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(c) Location of Participating Lessee Bank Accounts. The Participating Lessee
----------------------------------------------
shall not maintain accounts with any bank or financial institution except those
accounts in the Cash Management System (Participating Lessee) and those accounts
maintained in connection with DFW South or the Meadowlands.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.01 Events of Default. The occurrence of any of the following
-----------------
events shall constitute an "Event of Default" under any Credit Document:
(a) Principal or Reimbursement Obligation Payment. The Borrower shall fail
---------------------------------------------
to pay any principal of any Note or any Reimbursement Obligation when the same
becomes due and payable as set forth in this Agreement;
(b) Interest or Other Obligation Payment. The Borrower shall fail to pay any
------------------------------------
interest on any Note or any fee or other amount payable hereunder or under any
other Credit Document when the same becomes due and payable as set forth in this
Agreement, provided however that the Borrower will have a grace period of five
days after the payments covered by this Section 7.01(b) becomes due and payable
for the first two defaults under this Section 7.01(b) in every calendar year;
(c) Representation and Warranties. Any representation or warranty made or
-----------------------------
deemed to be made (i) by the Borrower in this Agreement or in any other Credit
Document, (ii) by the Borrower (or any of its officers) in connection with this
Agreement or any other Credit Document, or (iii) by any Subsidiary in any Credit
Document shall prove to have been incorrect in any material respect when made or
deemed to be made;
(d) Covenant Breaches. (i) The Borrower shall fail to perform or observe any
-----------------
covenant contained in Sections 5.02, 5.03, Section 5.11, Section 5.05 (f), (g),
(h), (i), (l) or (n) or Article VI of this Agreement or the Borrower shall fail
to perform or observe, or shall fail to cause any Guarantor to perform or
observe any covenant in any Security Document beyond any notice and/or cure
period for such default expressly provided in such Security Document or (ii) the
Borrower or any Guarantor shall fail to perform or observe any term or covenant
set forth in any Credit Document which is not covered by clause (i) above or any
other provision of this Section 7.01, in each case if such failure shall remain
unremedied for 30 days after the earlier of the date written notice of such
default shall have been given to the Borrower or such Guarantor by the
Administrative Agent or any Bank or the date a Responsible Officer of the
Borrower or any Guarantor has actual knowledge of such default, unless such
default in this clause (ii) cannot be cured in such 30 day period and the
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Borrower is diligently proceeding to cure such default, in which event the cure
period shall be extended to 90 days;
(e) Cross-Defaults. (i) The Borrower, the Parent or any of their respective
--------------
Subsidiaries shall fail to pay any principal of or premium or interest on its
Indebtedness which is outstanding in a principal amount of at least $5,000,000
individually or when aggregated with all such Indebtedness of the Borrower, the
Parent or any of their respective Subsidiaries so in default (but excluding
Indebtedness evidenced by the Notes) when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Indebtedness;
(ii) any other event shall occur or condition shall exist under any agreement or
instrument relating to Indebtedness which is outstanding in a principal amount
of at least $5,000,000 individually or when aggregated with all such
Indebtedness of the Borrower, the Parent or any of their respective Subsidiaries
so in default, and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate the maturity of such Indebtedness; or (iii) any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(f) Insolvency. The Borrower, the Parent, any of their respective
----------
Subsidiaries, or the Participating Lessee shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower, the Parent, any
of their respective Subsidiaries, or the Participating Lessee seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against the Borrower, the Parent, any of their respective
Subsidiaries, or the Participating Lessee, either such proceeding shall remain
undismissed for a period of 60 days or any of the actions sought in such
proceeding shall occur; or the Borrower, the Parent, any of their respective
Subsidiaries, or the Participating Lessee shall take any corporate action to
authorize any of the actions set forth above in this paragraph (f);
(g) Judgments. Any judgment or order for the payment of money in excess of
---------
$5,000,000 (reduced for purposes of this paragraph for the amount in respect of
such judgment or order that a reputable insurer has acknowledged being payable
under any valid and enforceable insurance policy) shall be rendered against the
Borrower, the Parent or any of their respective Subsidiaries which,
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within 30 days from the date such judgment is entered, shall not have been
discharged or execution thereof stayed pending appeal;
(h) ERISA. (i) Any Person shall engage in any "prohibited transaction" (as
-----
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is likely to result in the termination of such Plan for
purposes of Title IV of ERISA, unless such Reportable Event, proceedings or
appointment are being contested by the Borrower in good faith and by appropriate
proceedings, (iv) any Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any member of a Controlled Group shall incur any liability
in connection with a withdrawal from a Multiemployer Plan or the insolvency
(within the meaning of Section 4245 of ERISA) or reorganization (within the
meaning of Section 4241 of ERISA) of a Multiemployer Plan, unless such liability
is being contested by the Borrower in good faith and by appropriate proceedings,
or (vi) any other event or condition shall occur or exist, with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any Guarantor to any tax, penalty or other liabilities
in the aggregate exceeding $10,000,000;
(i) Guaranty. Any provision of any Guaranty except a Supplemental Guaranty
--------
shall for any reason cease to be valid and binding on any Guarantor or any
Guarantor shall so state in writing;
(j) Environmental Indemnity. Any provision of any Environmental Indemnity
-----------------------
shall for any reason cease to be valid and binding on any Person party thereto
or any such Person shall so state in writing;
(k) Invalidity of Subordination Provisions. The subordination provisions in
--------------------------------------
the Mortgages which provide for the subordination of the Participating Leases to
the liens and security interests securing the Obligations shall be invalidated
or otherwise cease to be in full force and effect;
(l) Franchise Agreement. Any Franchise Agreement has been terminated and not
-------------------
replaced within 60 days of such termination with a temporary Franchise Agreement
with a nationally recognized Franchisor acceptable to the Majority Banks, any
temporary Franchise Agreement has been terminated and not replaced with a long-
term Franchise Agreement with a nationally recognized Franchisor acceptable to
the Majority Banks, or any three (3) Franchise Agreements shall be in default at
the same time;
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(m) Default Under Ground Lease. The occurrence of a default under any Ground
--------------------------
Lease which has not been cured or waived (i) 10 days prior to the date the
ground lessor under such Ground Lease would have the right to terminate such
Ground Lease and (ii) in any event within 30 days of the occurrence of such
default;
(n) Manager. The Participating Lessee shall not have replaced the Manager
-------
with a reputable, nationally known, third party manager acceptable to the
Majority Banks within 120 days of the occurrence of any of the following: Any
Management Agreement shall have been terminated except in connection with an
Asset Sale, or the Manager shall have a Consolidated Net Worth of less than
negative $300,000, or shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Manager or any of its Subsidiaries seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding
instituted against the Manager or any of its Subsidiaries, either such
proceeding shall remain undismissed for a period of 60 days or any of the
actions sought in such proceeding shall occur; or the Manager or any of its
Subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this paragraph (n); or
(o) Parent's REIT Status. There shall be a determination from the
--------------------
applicable Governmental Authority from which no appeal can be taken that the
Parent's tax status as a real estate investment trust under Sections 856-860 of
the Code has been lost.
(p) Parent's Indebtedness; Other Tests. Either of the following events
----------------------------------
continues to exist 5 days following the initial occurrence thereof: (i) the
aggregate Indebtedness of the Parent and the Parent's Subsidiaries (including
without limitation the Borrower, the Borrower's Subsidiaries and the Permitted
Other Subsidiaries) exceeds the lesser of (A) 45% of the Real Estate Value of
all Hotel Properties owned by the Parent and the Parent's Subsidiaries
(including without limitation the Borrower, the Borrower's Subsidiaries and the
Permitted Other Subsidiaries); and (B) the product of (A) the aggregate trailing
12 months Property EBITDA for all Hotel Properties owned by the Parent and the
Parent's Subsidiaries (including without limitation the Borrower, the Borrower's
Subsidiaries and the Permitted Other Subsidiaries) multiplied by (B) 5.5 or (ii)
the Parent and the Parent's Subsidiaries fail to comply with the covenants set
forth in Section 6.16 and 6.17.
(q) Parent Common Stock; Parent Capitalization Event The Parent at any time
------------------------------------------------
hereafter fails to (a) cause the Parent Common Stock to be duly listed on the
New York Stock Exchange, Inc. and (b) file timely all reports required to be
filed by the Parent with the New York Stock Exchange,
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Inc. and the Securities and Exchange Commission and, with respect to a failure
under clause (b), such failure remains uncured on the date which is the earlier
of (i) the date 30 days following the initial occurrence of such failure and
(ii) the date specified by the New York Stock Exchange, Inc. or the Securities
and Exchange Commission as the date such failure needs to be cured by. Upon the
receipt by the Parent of any Net Cash Proceeds from a Parent Capitalization
Event, (a) the Parent fails to immediately make a capital contribution to the
Borrower in the aggregate amount of such Net Cash Proceeds or (b) the Borrower
fails to apply such Net Cash Proceeds to repay any outstanding principal of the
Notes, and accrued and unpaid interest thereon and other amounts payable by the
Borrower in respect thereof.
(r) Changes in Ownership. Any of the following occur without the written
--------------------
consent of the Agents: (a) the Parent owns less than 100% of the stock and
beneficial ownership interest in the General Partner and AGH LP; (b) the General
Partner and AGH LP (i) amend the Borrower's partnership agreement in any
material respect, (ii) admit a new general partner to the Borrower, or (iii) own
less than 51% of the partnership interests in and beneficial ownership of the
Borrower; (c) the General Partner resigns as general partner of the Borrower;
(d) James Sowell, Louis Shaw, Kenneth Shaw, Steve D. Jorns, Bruce G. Wiles and
their respective Associates legally and beneficially own less than 65% of the
outstanding shares of the Manager common stock; (e) Steve D. Jorns, Bruce G.
Wiles or any of their respective Associates sells or assigns either the legal or
beneficial interest in any outstanding shares of the Manager common stock except
to Steve D. Jorns, Bruce G. Wiles or any of their respective Associates; (f)
James Sowell, Louis Shaw, Kenneth Shaw, Steve D. Jorns, Bruce G. Wiles and their
respective Associates legally and beneficially owns less than 65% of the
partnership interests in the Participating Lessee; and (g) Steve D. Jorns, Bruce
G. Wiles, Kenneth E. Barr or any of their respective Associates sells or
assigns either the legal or beneficial interest in any partnership interests in
the Participating Lessee except to Steve D. Jorns, Bruce G. Wiles, Kenneth E.
Barr or any of their respective Associates.
(s) Participating Lessee. Either (i) a default by the Participating Lessee
--------------------
shall occur under any Participating Lease or Participating Lessee Document or
Participating Lessee Estoppel related to 3 or more Eligible Properties which
shall remain uncured following any notice and cure period under such document,
(ii) the Participating Lessee suffers to exist (for a period in excess of 30
days), creates, assumes or incurs, any Lien on or in respect of any of the
Participating Lessee Pledged Property whether now owned or hereafter acquired,
or assigns any right to receive income except for those Liens created pursuant
to the Participating Lessee Documents, (iii) with respect to 3 or more Eligible
Properties, (A) the Participating Lease or Participating Lessee Document for any
Hotel Property is terminated and the Administrative Agent on behalf of the Banks
no longer has a perfected first lien and security interest in the Participating
Lessee Pledged Property for such Hotel Property or (B) any Participating Lessee
Estoppel is terminated, or (iv) the Participating Lessee
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enters into a Participating Lease or other material agreement except those
directly related to a Hotel Property owned by the Borrower or any of the
Borrower's Subsidiaries.
Section 7.02 Optional Acceleration of Maturity. If any Event of Default
---------------------------------
(other than an Event of Default pursuant to paragraph (f) of Section 7.01) shall
have occurred and be continuing, then, and in any such event,
(a) the Administrative Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare the
obligation of each Bank to make Advances and the obligation of each Issuing Bank
to issue, increase, or extend Letters of Credit to be terminated, whereupon the
same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare the Notes,
all interest thereon, the Letter of Credit Obligations, and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest, all such Letter of Credit Obligations and all such
amounts shall become and be forthwith due and payable in full, without
presentment, demand, protest or further notice of any kind (including, without
limitation, any notice of intent to accelerate or notice of acceleration), all
of which are hereby expressly waived by the Borrower, and
(b) the Borrower shall, on demand of the Administrative Agent at the request
or with the consent of the Majority Banks, deposit with the Administrative Agent
into the Cash Collateral Account an amount of cash equal to the Letter of Credit
Exposure as security for the Obligations to the extent the Letter of Credit
Obligations are not otherwise paid at such time.
Section 7.03 Automatic Acceleration of Maturity. If any Event of Default
----------------------------------
pursuant to paragraph (f) of Section 7.01 shall occur,
(a) the obligation of each Bank to make Advances and the obligation of each
Issuing Bank to issue, increase, or extend Letters of Credit shall immediately
and automatically be terminated and the Notes, all interest on the Notes, all
Letter of Credit Obligations, and all other amounts payable under this Agreement
shall immediately and automatically become and be due and payable in full,
without presentment, demand, protest or any notice of any kind (including,
without limitation, any notice of intent to accelerate or notice of
acceleration), all of which are hereby expressly waived by the Borrower and
(b) to the extent permitted by law or court order, the Borrower shall deposit
with the Administrative Agent into the Cash Collateral Account an amount of cash
equal to the outstanding Letter of Credit Exposure as security for the
Obligations to the extent the Letter of Credit Obligations are not otherwise
paid at such time.
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Section 7.04 Cash Collateral Account.
-----------------------
(a) Pledge. The Borrower hereby pledges, and grants to the Administrative
------
Agent for the benefit of the Banks, a security interest in all funds held in the
Cash Collateral Account from time to time and all proceeds thereof, as security
for the payment of the Obligations, including without limitation all Letter of
Credit Obligations owing to any Issuing Bank or any other Bank due and to become
due from the Borrower to any Issuing Bank or any other Bank under this Agreement
in connection with the Letters of Credit.
(b) Application against Letter of Credit Obligations. The Administrative
------------------------------------------------
Agent may, at any time or from time to time apply funds then held in the Cash
Collateral Account to the payment of any Letter of Credit Obligations owing to
any Issuing Bank, in such order as the Administrative Agent may elect, as shall
have become or shall become due and payable by the Borrower to any Issuing Bank
under this Agreement in connection with the Letters of Credit.
(c) Duty of Care. The Administrative Agent shall exercise reasonable care in
------------
the custody and preservation of any funds held in the Cash Collateral Account
and shall be deemed to have exercised such care if such funds are accorded
treatment substantially equivalent to that which the Administrative Agent
accords its own property, it being understood that the Administrative Agent
shall not have any responsibility for taking any necessary steps to preserve
rights against any parties with respect to any such funds.
Section 7.05 Non-exclusivity of Remedies. No remedy conferred upon the
---------------------------
Administrative Agent or the Banks is intended to be exclusive of any other
remedy, and each remedy shall be cumulative of all other remedies existing by
contract, at law, in equity, by statute or otherwise.
Section 7.06 Right of Set-off. Upon (a) the occurrence and during the
----------------
continuance of any Event of Default and (b) the making of the request or the
granting of the consent, if any, specified by Section 7.02 to authorize the
Administrative Agent to declare the Notes and any other amount payable hereunder
due and payable pursuant to the provisions of Section 7.02 or the automatic
acceleration of the Notes and all amounts payable under this Agreement pursuant
to Section 7.03, each Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the credit
or the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement, the Note held by such
Bank, and the other Credit Documents, irrespective of whether or not such Bank
shall have made any demand under this Agreement, such Note, or such other Credit
Documents, and although such obligations may be unmatured. Each Bank agrees to
promptly notify the Borrower after any such set-off and application
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made by such Bank, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Bank
under this Section are in addition to any other rights and remedies (including,
without limitation, other rights of set-off) which such Bank may have.
ARTICLE VIII
AGENCY AND ISSUING BANK PROVISIONS
Section 8.01 Authorization and Action. Each Bank hereby appoints and
------------------------
authorizes the Agents to take such action as Agent on its behalf and to exercise
such powers under this Agreement and the other Credit Documents as are delegated
to the Agents by the terms hereof and of the other Credit Documents, together
with such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement or any other Credit Document
(including, without limitation, enforcement or collection of the Notes), the
Agents shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Majority
Banks, and such instructions shall be binding upon all Banks and all holders of
Notes; provided, however, that neither Agent shall be required to take any
--------
action which exposes such Agent to personal liability or which is contrary to
this Agreement, any other Credit Document, or applicable law. The functions of
the Agents are administerial in nature and in no event shall the Agents have a
fiduciary or trustee relation in respect of any Bank by reason of this Agreement
or any other Credit Document.
Section 8.02 Agents' Reliance, Etc. Neither the Agents nor any of their
---------------------
respective directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken (including such Person's own negligence) by
it or them under or in connection with this Agreement or the other Credit
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, each Agent: (a) may
treat the payee of any Note as the holder thereof until such Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to the Administrative Agent; (b) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Bank and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or the other Credit
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any other Credit Document on the part of the Borrower or its
Subsidiaries or to inspect the property (including the books and records) of the
Borrower or its Subsidiaries; (e) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Credit
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Document; and (f) shall incur no liability under or in respect of this Agreement
or any other Credit Document by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
Section 8.03 Each Agent and Its Affiliates. With respect to its
-----------------------------
Commitment, the Advances made by it and the Notes issued to it, each Agent shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not an Agent. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include each Agent in its
individual capacity. Each Agent and its Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Borrower or any of its Subsidiaries, and any Person
who may do business with or own securities of the Borrower or any such
Subsidiary, all as if such Agent were not an Agent hereunder and without any
duty to account therefor to the Banks.
Section 8.04 Bank Credit Decision. Each Bank acknowledges that it has,
--------------------
independently and without reliance upon either Agent or any other Bank and based
on the financial statements referred to in Section 4.06 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon either Agent or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
Section 8.05 Indemnification. The Banks severally agree to indemnify each
---------------
Agent and each Issuing Bank (to the extent not reimbursed by the Borrower),
according to their respective Pro Rata Shares from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against such Agent or such Issuing Bank in
any way relating to or arising out of this Agreement or any action taken or
omitted by such Agent or such Issuing Bank under this Agreement or any other
Credit Document (including such Agent's or such Issuing Bank's own negligence),
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's or such Issuing Bank's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Bank agrees to reimburse each Agent promptly upon demand for its Pro Rata
Share of any out-of-pocket expenses (including counsel fees) incurred by such
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any other Credit Document, to the
extent that such Agent is not reimbursed for such expenses by the Borrower.
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Section 8.06 Successor Agent and Issuing Banks. Either Agent or any
---------------------------------
Issuing Bank may resign at any time by giving written notice thereof to the
Banks and the Borrower and may be removed at any time with or without cause by
the Majority Banks upon receipt of written notice from the Majority Banks to
such effect. Upon receipt of notice of any such resignation or removal, the
Majority Banks shall have the right to appoint a successor Agent or Issuing
Bank. If no successor Agent or Issuing Bank shall have been so appointed, and
shall have accepted such appointment, within 30 days after the retiring Agent's
or Issuing Bank's giving of notice of resignation or the Majority Banks' removal
of the retiring Agent or Issuing Bank, then the retiring Agent or Issuing Bank
may, on behalf of the Banks and the Borrower, appoint a successor Agent or
Issuing Bank, which shall be a commercial bank meeting the financial
requirements of an Eligible Assignee and, in the case of an Issuing Bank, a
Bank. Upon the acceptance of any appointment as Agent or Issuing Bank by a
successor Agent or Issuing Bank, such successor Agent or Issuing Bank shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent or Issuing Bank, and the retiring Agent or
Issuing Bank shall be discharged from its duties and obligations under this
Agreement and the other Credit Documents, except that the retiring Issuing Bank
shall remain an Issuing Bank with respect to any Letters of Credit issued by
such Issuing Bank and outstanding on the effective date of its resignation or
removal and the provisions affecting such Issuing Bank with respect to such
Letters of Credit shall inure to the benefit of the retiring Issuing Bank until
the termination of all such Letters of Credit. After any retiring Agent's or
Issuing Bank's resignation or removal hereunder as Structuring Agent,
Administrative Agent or Issuing Bank, the provisions of this Article VIII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was such Agent or Issuing Bank under this Agreement and the other Credit
Documents.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement, the Notes, or any other Credit Document, nor consent to any
departure by the Borrower or any Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Structuring
Agent, the Administrative Agent or the Agents, as specified in the particular
provisions of the Credit Documents, and the Borrower, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment shall increase the
--------
Commitment of any Bank without the written consent of such Bank, and no
amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) increase the aggregate Commitments of the
Banks, (b) reduce the principal of, or interest on, the Notes or any fees or
other amounts payable hereunder
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or under any other Credit Document, (c) postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) change the number of Banks which shall be required for the Banks
or any of them to take any action hereunder or under any other Credit Document,
(e) amend this Section 9.01, (f) release any Guarantor from its obligations
under any of the Guaranties (provided that the Administrative Agent can release
any Supplemental Guarantor from its obligations under any of the Supplemental
Guaranties), (g) release any Person from its obligations under any or the
Environmental Indemnities, (h) release any Lien in favor of the Administrative
Agent for the benefit of the Banks on Property of the Borrower or Guarantors or
the Participating Lessee, except as contemplated by the Security Documents or
this Agreement, (i) amend the definition of "Majority Banks", (j) increases the
maximum duration of Interest Periods permitted under this Agreement, (k) waives
any covenant prohibiting a second Lien on any Property, (l) amends the
definition of "Borrowing Base or any component of "Borrowing Base"; and
provided, further, that (A) no amendment, waiver or consent shall, unless in
- --------
writing and signed by the Structuring Agent, the Administrative Agent, or any
Issuing Bank in addition to the Banks required above to take such action, affect
the rights or duties of the Structuring Agent, the Administrative Agent, or such
Issuing Bank, as the case may be, under this Agreement or any other Credit
Document, and (B) no waiver or consent to departure from any of the conditions
specified in Section 3.01 or 3.02 or 3.03 or 3.04 shall be effective unless in
writing and signed by the Majority Banks and the Agents. In addition, no
Majority Bank Decision (as hereinafter defined) shall be made without the
written consent of the Majority Banks. "Majority Bank Decision" shall mean:
(a) any waiver for more than 30 days of, or any material amendment to,
of the reporting requirements set forth in clauses (a)-(e) or (g) of
Section 5.05 of this Agreement;
(b) any material waiver of, or any material amendment to, the provisions
related to the Cash Management Systems contained in Section 5.12 of this
Agreement;
(c) any determination to make a Borrowing after the occurrence and
during the continuance of an Event of Default;
(d) any waiver of the provisions of the Manager Consent that require
Management Agreements to be subordinate to the Lien of the Mortgages and
terminable upon the conditions specified in the Manager Consent;
(e) any consent pursuant to Section 6.02 of this Agreement to any
additional Indebtedness of the Borrower or any Subsidiary of the Borrower;
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(f) any waiver for a period of more than 60 days of, or any material
amendment to, the financial covenants contained in Sections 6.15, 6.16 or
6.17 of this Agreement;
(g) any material waiver of, or any material amendment to, Section 6.05
of this Agreement to permit a fundamental change of the Borrower or any
Subsidiary of the Borrower;
(h) any approval pursuant to subsection 3.04(i) of this Agreement of a
Future Property as a possible Eligible Property;
(i) any material waiver of the conditions to a Hotel Property qualifying
as either an Eligible Property or a Permitted Non-Eligible Property;
(j) any amendment, supplement or modification to, or waiver of, the
provisions of Section 7.01 of this Agreement;
(k) any determination to send notice to the Borrower of, or otherwise
declare, an Event of Default pursuant to Section 7.01 of this Agreement;
(l) any determination to accelerate the Obligations pursuant to Section
7.02 of this Agreement;
(m) any determination to foreclose on, or exercise remedies in order to
realize upon, any Property after an Event of Default pursuant to any Credit
Document, provided, however, that if an Event of Default has occurred and
is continuing and the Majority Banks cannot agree on a course of action
within 60 days following the occurrence of such Event of Default, the
Administrative Agent shall commence exercising remedies against the
Property securing the Obligations;
(n) any material decision regarding the operation, maintenance, sale or
other disposition of any Property after the foreclosure upon such Property,
provided that Administrative Agent shall be able to take any action it
determines necessary to preserve or maintain any such Property and provided
further that if the Majority Banks cannot agree on the sale or disposition
of such Property, the Administrative Agent shall not sell or dispose of
such Property, but shall continue to hold such Property for the benefit of
the Banks;
(o) any decision regarding a new or substitute Manager or Franchisor or
new or substitute Management Agreement, Franchise Agreement, Ground Lease
or Participating Lease, or any other material decision regarding a
Management Agreement, Franchise Agreement, Ground Lease or Participating
Lease; and
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(p) any modification of any of the following definitions of this
Agreement: "Debt Service Rate", "Pool Requirements" or "Refund Amount".
Section 9.02 Notices, Etc. All notices and other communications shall be
------------
in writing (including telecopy or telex) and mailed, telecopied, telexed, hand
delivered or delivered by a nationally recognized overnight courier, if to the
Borrower, at its address at 3860 West Northwest Highway, Suite 300, Dallas,
Texas 75220, Attention: Steven D. Jorns; if to any Bank at its Domestic Lending
Office specified opposite its name on Schedule 9.02; if to the Structuring
Agent, at its address at 4900 Trammell Crow Center, 2001 Ross Avenue, Dallas,
Texas 75201, Attention: Thomas K. Day, Vice President (telecopy: (214) 979-
2727; telephone: (214) 979-2774); if to Bank One, Texas, N.A., in its capacity
as Administrative Agent or an Issuing Bank, at its office at 1717 Main Street,
4th Floor, Dallas, Texas 75201, Attention: Commercial Real Estate Department -
Jeff S. Lindsey, Vice President (telecopy: (214) 290-2275; telephone: (214) 290-
2385); or, as to each party, at such other address or teletransmission number as
shall be designated by such party in a written notice to the other parties. All
such notices and communications shall, when mailed, telecopied, telexed or hand
delivered or delivered by overnight courier, be effective three days after
deposited in the mails, when telecopy transmission is completed, when confirmed
by telex answer-back or when delivered, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II or Article
VIII shall not be effective until received by the Administrative Agent.
Section 9.03 No Waiver; Remedies. No failure on the part of any Bank, any
-------------------
Agent, or any Issuing Bank to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
this Agreement and the other Credit Documents are cumulative and not exclusive
of any remedies provided by law.
Section 9.04 Costs and Expenses. The Borrower agrees to pay on demand all
------------------
out-of-pocket costs and expenses of the Agents in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other Credit Documents and syndication
(syndication costs shall not exceed $5,000 per Eligible Assignee) of the
Obligations including, without limitation, (a) the reasonable fees and out-of-
pocket expenses of Bracewell & Patterson, L.L.P., counsel for the Structuring
Agent, and, with respect to advising either Agent as to its rights and
responsibilities under this Agreement, the Agents (such counsel's fees shall no
longer be capped as initially provided in the Agents' Fee Letter), (b) the
reasonable fees and out-of-pocket expenses of Donohoe, Jameson & Carroll, P.C.,
counsel for the Administrative Agent, and (c) all reasonable out-of-pocket costs
and expenses, if any, of each Agent, each Issuing Bank, and each Bank
(including, without limitation, reasonable counsel fees and expenses of each
Agent,
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such Issuing Bank, and each Bank) in connection with the enforcement (whether
through negotiations, legal proceedings or otherwise) of this Agreement and the
other Credit Documents, and (d) to the extent not included in the foregoing, the
costs of any local counsel, travel expenses, Appraisals, Engineering Reports,
Environmental Reports, Title Policies, mortgage and intangible taxes, costs of
recordation or filing of any Mortgage or Financing Statement or continuation
statement, and any related title or Uniform Commercial Code search conducted
subsequent to such recordation, any flood plain search costs, insurance
consultant costs and other costs usual and customary in connection with the
taking of a Lien on any of the Property.
Section 9.05 Binding Effect. This Agreement shall become effective when it
--------------
shall have been executed by the Borrower and the Agents, and when the
Structuring Agent shall have, as to each Bank, either received a counterpart
hereof executed by such Bank or been notified by such Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, each Agent, each Issuing Bank, and each Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights or delegate its duties under this Agreement or any interest in
this Agreement without the prior written consent of each Bank.
Section 9.06 Bank Assignments and Participations.
-----------------------------------
(a) Assignments. Any Bank may assign to one or more banks or other entities
-----------
all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it, the Notes held by it, and the participation interest in the Letter
of Credit Obligations held by it); provided, however, that (i) each such
-------- -------
assignment shall be of a constant, and not a varying, percentage of all of such
Bank's rights and obligations under this Agreement and shall involve a ratable
assignment of such Bank's Commitment and such Bank's Advances, (ii) the amount
of the resulting Commitment and Advances of the assigning Bank (unless it is
assigning all its Commitment) and the assignee Bank pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 and shall
be an integral multiple of $1,000,000, (iii) each such assignment shall be to an
Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with the Notes subject to such
assignment, and (v) each Eligible Assignee (other than the Eligible Assignee of
either Agent or an Eligible Assignee which is an Affiliate of the assigning
Bank) shall pay to the Administrative Agent a $2,500 administrative fee. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least three Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto for all purposes and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
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Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (B) such Bank thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of such Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto). Notwithstanding anything herein to the
contrary, any Bank may assign, as collateral or otherwise, any of its rights
under the Credit Documents to any Federal Reserve Bank.
(b) Term of Assignments. By executing and delivering an Assignment and
-------------------
Acceptance, the Bank thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
Guarantors or the performance or observance by the Borrower or the Guarantors of
any of their obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.05 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon either Agent, such Bank or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee appoints and authorizes each
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to such Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Bank.
(c) The Register. The Administrative Agent shall maintain at its address
------------
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Banks and the Commitments of, and principal amount of the
Advances owing to, each Bank from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, each Agent, the Issuing Banks, and the Banks may treat
each Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
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(d) Procedures. Upon its receipt of an Assignment and Acceptance executed by
----------
a Bank and an Eligible Assignee, together with the Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of the attached Exhibit B,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Administrative Agent in exchange
for the surrendered Note, a new Note payable to the order of such Eligible
Assignee in amount equal to, respectively, the Commitment and the outstanding
Advances assumed by it pursuant to such Assignment and Acceptance, and if the
assigning Bank has retained any Commitment hereunder, a new Note payable to the
order of such Bank in an amount equal to, respectively, the Commitment and the
outstanding Advances retained by it hereunder. Such new Note shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the attached Exhibit A.
(e) Participations. Each Bank may sell participations to one or more banks
--------------
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it, its participation interest in the Letter
of Credit Obligations, and the Notes held by it); provided, however, that (i)
-------- -------
such Bank's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of any such Note
for all purposes of this Agreement, (iv) the Borrower, each Agent, and the
Issuing Banks and the other Banks shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations under this
Agreement, (v) such Bank shall not require the participant's consent to any
matter under this Agreement, except for change in the principal amount of any
Note in which the participant has an interest, reductions in fees or interest,
or extending the Maturity Date except as permitted in this Agreement, and (vi)
such Bank shall give prompt notice to the Borrower of each such participation
sold by such Bank. The Borrower hereby agrees that participants shall have the
same rights under Sections 2.08, 2.09, 2.11(c), and 9.07 hereof as the Bank to
the extent of their respective participations.
(f) Confidentiality. Each Bank may furnish any information concerning the
---------------
Borrower and its Subsidiaries in the possession of such Bank from time to time
to assignees and participants (including prospective assignees and
participants); provided that, prior to any such disclosure, the assignee or
--------
participant or proposed assignee or participant shall agree in writing to
preserve the confidentiality of any confidential information relating to the
Borrower and its Subsidiaries received by it from such Bank. Such Bank shall
promptly deliver a signed copy of any such confidentiality agreement to the
Borrower.
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Section 9.07 Indemnification. The Borrower shall indemnify each Agent, the
---------------
Banks (including any lender which was a Bank hereunder prior to any full
assignment of its Commitment), the Issuing Banks, and each affiliate thereof and
their respective directors, officers, employees and agents from, and discharge,
release, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from (i)
any actual or proposed use by the Borrower or any Affiliate of the Borrower of
the proceeds of any Advance, (ii) any breach by the Borrower or any Guarantor of
any provision of this Agreement or any other Credit Document, (iii) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, or (iv) any
Environmental Claim or requirement of Environmental Laws concerning or relating
to the present or previously-owned or operated properties, or the operations or
business, of the Borrower or any of its Subsidiaries, and the Borrower shall
reimburse each Agent, each Issuing Bank, and each Bank, and each affiliate
thereof and their respective directors, officers, employees and agents, upon
demand for any reasonable out-of-pocket expenses (including legal fees) incurred
in connection with any such investigation, litigation or other proceeding; and
expressly including any such losses, liabilities, claims, damages, or expense
incurred by reason of the Person being indemnified's own negligence, but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified.
THE BORROWER ACKNOWLEDGES AND AGREES THAT CERTAIN OF ITS OBLIGATIONS AND
INDEMNITIES UNDER THIS AGREEMENT INCLUDE ANY CLAIMS RESULTING FROM THE
NEGLIGENCE OR ALLEGED NEGLIGENCE OF THE STRUCTURING AGENT, THE ADMINISTRATIVE
AGENT, THE BANKS, OR ANY OTHER PERSON BEING INDEMNIFIED.
Section 9.08 Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different 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.
Section 9.09 Survival of Representations, Indemnifications, etc. All
--------------------------------------------------
representations, warranties contained in this Agreement or made in writing by or
on behalf of the Borrower in connection herewith shall survive the execution and
delivery of this Agreement and the Credit Documents, the making of the Advances
and any investigation made by or on behalf of the Banks, none of which
investigations shall diminish any Bank's right to rely on such representations
and warranties. All obligations of the Borrower provided for in Sections 2.08,
2.09, 2.11(c), 8.05 and 9.07 shall survive any termination of this Agreement and
repayment in full of the Obligations.
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Section 9.10 Severability. In case one or more provisions of this
------------
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not be affected or impaired thereby.
Section 9.11 Business Loans. The Borrower warrants and represents that the
--------------
Advances evidenced by the Notes are and shall be for business, commercial,
investment or other similar purposes and not primarily for personal, family,
household or agricultural use, as such terms are used in Chapter One ("Chapter
One") of the Texas Credit Code. At all such times, if any, as Chapter One shall
establish a Maximum Rate, the Maximum Rate shall be the "indicated rate ceiling"
(as such term is defined in Chapter One) from time to time in effect.
Section 9.12 Usury Not Intended. It is the intent of the Borrower and each
------------------
Bank in the execution and performance of this Agreement and the other Credit
Documents to contract in strict compliance with applicable usury laws, including
conflicts of law concepts, governing the Advances of each Bank including such
applicable laws of the State of Texas and the United States of America from time
to time in effect. In furtherance thereof, the Banks and the Borrower stipulate
and agree that none of the terms and provisions contained in this Agreement or
the other Credit Documents shall ever be construed to create a contract to pay,
as consideration for the use, forbearance or detention of money, interest at a
rate in excess of the Maximum Rate and that for purposes hereof "interest" shall
include the aggregate of all charges which constitute interest under such laws
that are contracted for, charged or received under this Agreement; and in the
event that, notwithstanding the foregoing, under any circumstances the aggregate
amounts taken, reserved, charged, received or paid on the Advances, include
amounts which by applicable law are deemed interest which would exceed the
Maximum Rate, then such excess shall be deemed to be a mistake and each Bank
receiving same shall credit the same on the principal of its Notes (or if such
Notes shall have been paid in full, refund said excess to the Borrower). In the
event that the maturity of the Notes is accelerated by reason of any election of
the holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the Maximum
Rate and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the applicable Notes
(or, if the applicable Notes shall have been paid in full, refunded to the
Borrower). The provisions of this Section shall control over all other
provisions of this Agreement or the other Credit Documents which may be in
apparent conflict herewith.
Section 9.13 Governing Law. This Agreement, the Notes and the other Credit
-------------
Documents shall be governed by, and construed and enforced in accordance with,
the laws of the State of Texas.
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Section 9.14 Consent to Jurisdiction. The Borrower hereby irrevocably
-----------------------
submits to the jurisdiction of any Texas state or federal court sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, the Notes and the other Credit Documents, and the Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such court. The Borrower hereby irrevocably waives,
to the fullest extent it may effectively do so, any right it may have to the
defense of an inconvenient forum to the maintenance of such action or
proceeding. The Borrower hereby agrees that service of copies of the summons
and complaint and any other process which may be served in any such action or
proceeding may be made by mailing or delivering a copy of such process to the
Borrower at its address specified in Section 9.02. The Borrower agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section shall affect the rights of any Bank,
the Structuring Agent, or the Administrative Agent to serve legal process in any
other manner permitted by the law or affect the right of any Bank, the
Structuring Agent or the Administrative Agent to bring any action or proceeding
against the Borrower or its Property in the courts of any other jurisdiction.
Section 9.15 Knowledge of Borrower. For purposes of this Agreement,
---------------------
"knowledge of the Borrower" means the actual knowledge of any of the executive
officers and all other Responsible Officers of the Parent or the general manager
of each Hotel Property.
Section 9.16 Banks Not in Control. None of the covenants or other
--------------------
provisions contained in the Credit Documents shall or shall be deemed to, give
the Banks the rights or power to exercise control over the affairs and/or
management of the Borrower, any of its Subsidiaries or any Guarantor, the power
of the Banks being limited to the right to exercise the remedies provided in the
Credit Documents; provided, however, that if any Bank becomes the owner of any
stock, or other equity interest in, any Person whether through foreclosure or
otherwise, such Bank shall be entitled (subject to requirements of law) to
exercise such legal rights as it may have by being owner of such stock, or other
equity interest in, such Person.
Section 9.17 Headings Descriptive. The headings of the several Sections
--------------------
and paragraphs of the Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
Section 9.18 Time is of the Essence. Time is of the essence under the
----------------------
Credit Documents.
SECTION 9.19 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE BANKS
---------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
PROCEEDING RELATING TO THIS AGREEMENT OR THE
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NOTES OR ANY OTHER CREDIT DOCUMENT OR TO ANY COUNTERCLAIM THEREIN.
SECTION 9.20 ENTIRE AGREEMENT. PURSUANT TO SECTION 26.02 OF THE TEXAS
----------------
BUSINESS AND COMMERCE CODE, A LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE
LOAN AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN
AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S
AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN AGREEMENT,
AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED
INTO THE LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS
DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THE BORROWER ACKNOWLEDGES AND AGREES THAT CERTAIN OF ITS OBLIGATIONS AND
INDEMNITIES UNDER THIS AGREEMENT INCLUDE ANY CLAIMS RESULTING FROM THE
NEGLIGENCE OR ALLEGED NEGLIGENCE OF THE STRUCTURING AGENT, THE ADMINISTRATIVE
AGENT, THE BANKS, OR ANY OTHER PERSON BEING INDEMNIFIED.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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EXECUTED as of the date first referenced above.
BORROWER:
--------
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:______________________________
Name:____________________________
Title:___________________________
ADMINISTRATIVE AGENT:
--------------------
BANK ONE, TEXAS, N.A.
______________________________________
By:___________________________________
Title:________________________________
STRUCTURING AGENT:
-----------------
SOCIETE GENERALE,
SOUTHWEST AGENCY
______________________________________
By:___________________________________
Title:________________________________
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BANKS:
-----
SOCIETE GENERALE,
SOUTHWEST AGENCY
______________________________________
By:___________________________________
Title:________________________________
BANK ONE, TEXAS, N.A.
______________________________________
By:___________________________________
Title:________________________________
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<PAGE>
SCHEDULE 5.10
INSURANCE
A. INSURANCE.
---------
1. POLICIES REQUIRED. While any obligation of the Borrower or any
-----------------
Guarantor under any Credit Document remains outstanding, the Borrower shall
procure and maintain or shall cause to be procured and maintained continuously
in effect policies of insurance in form and amounts and issued by companies,
associations or organizations licensed to do business in the states the Hotel
Properties are located, with a Best's Rating of no less than A, XI and otherwise
satisfactory to the Agents covering such casualties, risks, perils, liabilities
and other hazards required by Agents. All original policies, or certificates
thereof, and endorsements and renewals thereof shall be delivered to and
retained by the Administrative Agent unless the Administrative Agent waives this
requirement in writing. All policies shall expressly protect or recognize
Administrative Agent's interest as required by the Administrative Agent.
Without limiting the generality of the foregoing, the Borrower shall provide or
cause to be provided the following types of insurance coverage:
(a) until repayment of the Notes and satisfaction of all
obligations under the Credit Documents: (i) property insurance on an "all
risks" full replacement cost basis without deduction for depreciation (or
fire, extended coverage and difference in conditions basis), including
flood, earthquake and sinkhole coverages in an amount equal to the
replacement cost of the Improvements (except for earthquake insurance which
for each Eligible Property and Permitted Non-Eligible Property shall be in
an amount which is equal to or greater than the greater of (A) 50% of the
Real Estate Value of such Hotel Property or (b) the Allocated Debt Amount
for such Hotel Property), naming the Administrative Agent in its capacity
as administrative agent, as mortgagee under a standard form mortgagee
clause; (ii) Comprehensive General Liability Insurance (including
contractual liability, owners and contractors protective coverages,
products & completed operations, personal & advertising injury liability,
fire damage legal liability and alienated premises coverage) and
Comprehensive Auto Liability Insurance in a minimum amount of $50,000,000
each occurrence; (iii) Statutory Workers' Compensation and Employer's
Liability Insurance in the minimum amounts of $1,000,000 each accident,
$1,000,000 each employee - disease, $1,000,000 policy limit - disease; and
(iv) Rent loss insurance against loss of income by reason of any hazard
covered under the insurance required under this subparagraph (a) in an
amount sufficient to avoid any co-insurance penalty, but in any event for
not less than two (2) years gross receipts from all sources of income from
the Hotel Property. Each such policy of property insurance shall contain a
replacement cost endorsement and such other endorsements as are sufficient
to prevent the Borrower, the Agents
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<PAGE>
and/or the Borrower's Subsidiaries from becoming a co-insurer with respect
to such buildings and improvements.
(b) During the renovation of any Hotel Property the Borrower will
additionally provide: (i) Builder's Risk Insurance on an "all risks" basis
including flood, earthquake (in the amount stated in clause (a)) and
sinkhole coverages, and also including Stored Materials and materials while
in transit, naming the Administrative Agent as mortgagee under a standard
form mortgagee clause, and (ii) Statutory Workers' Compensation and
Employer's Liability Insurance in the minimum amounts of $1,000,000 each
accident, $1,000,000 each employee - disease, $1,000,000 policy limit -
disease, covering each contractor and all other contractors or
subcontractors who may have occasion to be at the job site.
(c) Such additional insurance as may be reasonably required by the
Administrative Agent from time to time in the event that any Hotel Property
is exposed to hazards and risks with respect to which the Administrative
Agent deems the existing insurance inadequate to properly protect its
interests.
All policies of insurance shall either have attached thereto a lender's
loss payable endorsement for the benefit of the Administrative Agent as loss
payee, in form satisfactory to the Agents or shall name the Agents, the Banks
and their respective directors, officers, representatives, agents and employees
(the "Banks' Parties") as additional insureds, as applicable. The Borrower
shall furnish the Administrative Agent with a certified copy of an original or a
certificate of insurance of all policies of insurance required. All policies or
certificates, as the case may be, of insurance shall set forth the coverage, the
limits of liability, the name of the carrier, the policy number, the Best's
Rating of the carrier and the period of coverage. In addition, all policies of
insurance required under the terms hereof shall contain an endorsement or
agreement by the insurer that any loss shall be payable in accordance with the
terms of such policy notwithstanding any act or negligence of the Borrower, the
Participating Lessee, the Manager or any party holding under any such Person
which might otherwise result in a forfeiture of said insurance and the further
agreement of the insurer waiving all rights of setoff, counterclaim or
deductions against the Borrower. At least 15 days prior to the expiration of
each required policy, the Borrower shall deliver to the Administrative Agent
evidence of the renewal or replacement of such policy, continuing such insurance
in the form as required by this Agreement. All such policies shall contain a
provision that notwithstanding any contrary agreement between the Borrower and
the applicable insurance company, such policies will not be canceled, allowed to
lapse without renewal, surrendered or amended (which provision shall include any
reduction in the scope or limits of coverage) without at least 15 days' prior
written notice to the Administrative Agent.
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<PAGE>
EXHIBIT A
FORM OF NOTE
$ __________ __________ 19__
For value received, the undersigned American General Hospitality
Operating Partnership L.P., a Delaware limited partnership ("Borrower"), hereby
promises to pay to the order of _____________________ ("Bank") the principal
amount of ____________________ and ____/100 Dollars ($_____) or, if less, the
aggregate outstanding principal amount of each Advance (as defined in the Credit
Agreement referred to below) made by the Bank to the Borrower, together with
interest on the unpaid principal amount of each such Advance from the date of
such Advance until such principal amount is paid in full, at such interest
rates, and at such times, as are specified in the Credit Agreement.
The Note is one of the Notes referred to in, and is entitled to the
benefits of, and is subject to the terms of, the Credit Agreement dated as of
July 31, 1996 (as the same may be amended or modified from time to time, the
"Credit Agreement"), among the Borrower, the Banks, Societe Generale, Southwest
Agency, as Structuring Agent, and Bank One, Texas, N.A., as Administrative
Agent. Capitalized terms used in this Note that are defined in the Credit
Agreement and not otherwise defined in this Note have the meanings assigned to
such terms in the Credit Agreement. The Credit Agreement, among other things,
(a) provides for the making of Advances by the Bank to the Borrower from time to
time in an aggregate amount not to exceed at any time outstanding the Dollar
amount first above mentioned, the indebtedness of the Borrower resulting form
each such Advance being evidenced by this Note and (b) contains provisions for
acceleration of the maturity of this Note upon the happening of certain events
stated in the Credit Agreement and for prepayments of principal prior to the
maturity of this Note upon the terms and conditions specified in the Credit
Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Administrative Agent at 1717 Main Street, 4th Floor,
Commerical Real Estate Lending, Dallas, Texas 75201 (or at such other location
or address as may be specified by the Administrative Agent to the Borrower) in
same day funds. The Bank shall record all Advances and payments of principal
made under this Note, but no failure of the Bank to make such recordings shall
affect the Borrower's repayment obligations under this Note.
Except as specifically provided in the Credit Agreement, the Borrower
hereby waives presentment, demand, protest, notice of intent to accelerate,
notice of acceleration, and any other notice of any kind. No failure to
exercise, and no delay in exercising, any rights hereunder on the part of the
holder of this Note shall operate as a waiver of such rights
<PAGE>
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the state of Texas (except that Tex. Rev. Civ. Stat. Ann. Art.
5069, Ch. 15, which regulates certain revolving credit loan accounts shall not
apply to this Note).
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:_______________________________
Name:_______________________
Title:______________________
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<PAGE>
EXHIBIT _
ASSIGNMENT AND ACCEPTANCE
Dated ______________, 19__
Reference is made to the Credit Agreement dated as of _________, 1996 (as
the same may be amended or modified from time to time, the "Credit Agreement")
among American General Hospitality Operating Partnership, L.P., a Delaware
limited partnership (the "Borrower"), the Banks, Societe Generale, Southwest
Agency, as Structuring Agent, and Bank One, Texas, N.A., as Administrative
Agent. Capitalized terms not otherwise defined in this Assignment and Acceptance
shall have the meanings assigned to them in the Credit Agreement.
Pursuant to the terms of the Credit Agreement, _________________ wishes to
assign and delegate ___%/1/ of its rights and obligations under the Credit
Agreement. Therefore, ____________________ ("Assignor"), ________________
("Assignee"), and the Administrative Agent agree as follows:
1. As of the Effective Date (as defined below), the Assignor hereby sells
and assigns and delegates to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, without recourse to the Assignor and without
representation or warranty except for the representations and warranties
specifically set forth in clauses (i), (ii), and (iii) of Section 2, a ___%
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement in connection with its Commitment, including, without limitation, such
percentage interest in the Assignor's Commitment and the Advances owing to the
Assignor, the participation interest in the Letter of Credit Obligations held by
the Assignor, the Note held by the Assignor, and the obligation to pay to the
Borrower the Refund Amount.
2. The Assignor (i) represents and warrants that, prior to executing this
Assignment and Acceptance, its Commitment is $__________, the aggregate
outstanding principal amount of Advances owed to it by the Borrower is
$________, its Pro Rata Share of the Letter of Credit Exposure is
$___________, and its Pro Rata Share of the Refund Amount is
$__________________; (ii) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (iii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with the Credit
Agreement or any other Credit Document or the execution,
________________________
/1/ Specify percentage in no more than 5 decimal points.
<PAGE>
legality, validity, enforceability, genuineness, sufficiency, or value of the
Credit Agreement or any other Credit Document or any other instrument or
document furnished pursuant thereto; (iv) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any Guarantor or the performance or observance by the Borrower or
any Guarantor of any of its obligations under the Credit Agreement or any other
Credit Document or any other instrument or document furnished pursuant thereto;
and (v) attaches the Note referred to in paragraph 1 above and requests that the
Administrative Agent exchange such Note for a new Note dated __________, 19__ in
the principal amount of $_________________, payable to the order of the Assignee
[, and a new Note dated ______________, 19__ in the principal amount of
$___________, payable to the order of Assignor].
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.06 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Structuring Agent, the Administrative Agent, the Assignor, or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement or any other Credit Document; (iii)
appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers under the Credit
Agreement and any other Credit Document as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) appoints and authorizes the Structuring Agent to take
such action as structuring agent on its behalf and to exercise such powers under
the Credit Agreement and any other Credit Document as are delegated to the
Structuring Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement or any other Credit Document are required to be performed by it as a
Bank; (vi) specifies as its Domestic Lending Office (and address for notices)
and LIBOR Lending Office the offices set forth beneath its name on the signature
pages hereof; (vii) attaches the forms prescribed by the Internal Revenue
Service of the United States certifying as to the Assignee's status for purposes
of determining exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Credit Agreement and its Note
or such other documents as are necessary
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<PAGE>
to indicate that all such payments are subject to such rates at a rate reduced
by an applicable tax treaty/2/, and (viii) represents that it is an Eligible
Assignee.
4. The effective date for this Assignment and Acceptance shall be
______________ (the "Effective Date")/3/ and following the execution of this
Assignment and Acceptance, the Administrative Agent will record it.
5. Upon such recording, and as of the Effective Date, (i) the Assignee
shall be a party to the Credit Agreement for all purposes, and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights (other than rights against the
Borrower pursuant to Sections 2.09, 2.11(c) and 9.07 of the Credit Agreement,
which shall survive this assignment) and be released from its obligations under
the Credit Agreement.
6. Upon such recording, from and after the Effective Date, the
Administrative Agent shall make all payments under the Credit Agreement and the
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest, and commitment fees) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas.
______________________
/2/ If the Assignee is organized under the laws of a jurisdiction outside the
United States.
/3/ See Section 9.06. Such date shall be at least three Business Days after
the execution of this Assignment and Acceptance.
-3-
<PAGE>
The parties hereto have caused this Assignment and Acceptance to be duly
executed as of the date first above written.
[ASSIGNOR]
By:________________________________________
Name:____________________________________
Title:___________________________________
Address: _________________________________
_________________________________
_________________________________
Attention:_________________________________
Telecopy:__________________________________
Telephone:_________________________________
[ASSIGNEE]
By:________________________________________
Name:____________________________________
Title:___________________________________
Domestic Lending Office:
Address: _________________________________
______________________________________
Attention:_________________________________
Telecopy:__________________________________
Telephone:_________________________________
LIBOR Lending Office:
Address: _________________________________
______________________________________
Attention:_________________________________
Telecopy:__________________________________
Telephone:_________________________________
Bank One, Texas, N.A.,
as Administrative Agent
By:________________________________________
Name:______________________________
Title:_____________________________
Address: 1717 Main Street, 4th Floor
P.O. Box 655415
Commercial Real Estate Department
Dallas, Texas 75201
Attention:___________________________
Telecopy:____________________________
Telephone:___________________________
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<PAGE>
THIS INSTRUMENT PREPARED BY,
AND WHEN RECORDED, RETURN TO:
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Attn: Mr. David W. Locascio
ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
---------------------------
THIS ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS ("Assignment") dated
___________, 1996, is made by AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "Assignor") in favor of
BANK ONE, TEXAS, N.A., a national banking association, as administrative agent
(such administrative agent and any successor administrative agent shall be
referred to hereinafter as "Assignee"), and is executed concurrently with that
certain Credit Agreement of even date herewith (the "Credit Agreement") by and
among Assignor, Assignee, as the administrative agent, Societe Generale,
Southwest Agency, as the structuring agent and those other banks and lenders a
party thereto (collectively the "Banks") pursuant to which the Banks have agreed
to make a loan (the "Loan") to Assignor in the amount of $100,000,000.00,
subject to the terms and conditions set forth therein, and is one of the
Assignments of Leases described therein. All words and phrases used in this
Assignment with their initial letters capitalized shall have the meaning
assigned to them in the Credit Agreement, unless such words and phrases are
otherwise specifically defined herein.
1. ASSIGNMENT. For good and valuable consideration, the receipt and
----------
sufficiency of which is acknowledged, Assignor presently, absolutely,
irrevocably and unconditionally grants, sells, conveys, transfers, assigns and
delivers unto Assignee all the right, title and interest of Assignor in and to
the rents, issues, profits, revenues, royalties, rights and benefits
(hereinafter referred to as the "Rents") from all or any portion of the property
more fully described on Exhibit "A" attached hereto and made a part hereof for
all purposes and the improvements located or to be located thereon (hereinafter
referred to as the "Property"); and to that end Assignor presently, absolutely,
irrevocably
<PAGE>
and unconditionally assigns and sets over to Assignee all of Assignor's right,
title and interest as "Landlord" or "Lessor" under all leases covering any
portion of said Property or the improvements located or to be located thereon,
whether now or hereafter made, executed or delivered, and whether written or
verbal, including without limitation that certain Participating Lease by and
between Assignor and AGH Leasing, L.P. dated as of __________, 1996 (which,
together with any and all leases of the Property or the improvements located or
to be located thereon which are entered into following the date hereof, shall be
referred to herein as the "Leases"), including all guaranties thereof and all
security deposits thereunder.
2. AUTHORIZATION TO COLLECT. Assignor authorizes and empowers Assignee to
------------------------
collect the Rents, including, without limitation, security deposits, as they
shall become due, and by this Assignment authorizes and directs each and all of
the tenants under any of the Leases to pay the Rents including, without
limitation, security deposits, as may now be due and shall hereafter become due,
to Assignee. It is understood and agreed, however, that except during the
existence of an Event of Default, Assignor shall have the revocable license to
collect the Rents and take all actions with respect to all Leases, present and
future, and Assignee shall refrain from exercising its rights hereunder subject
to the terms of this Assignment; but that such license to collect or continue
collecting as aforesaid by Assignor shall not operate to permit a collection by
Assignor of any installment of Rent more than one month in advance thereof
without the written consent of Assignee. For so long as Assignor's license to
collect such Rents remains in effect, Assignor shall apply all such Rents first
to the Notes and other indebtedness secured by that certain
[LEASEHOLD/SUBLEASEHOLD] Deed of Trust, Security Agreement, Assignment of Rents,
Fixture Filing and Financing Statement dated as of even date herewith executed
by Assignor (the "Deed of Trust") and Assignor's satisfaction and discharge of
all of their respective obligations pertaining to the Property under the Leases
and Loan Documents. Thereafter, Assignor may apply the balance of the Rents
collected by Assignor in any manner not inconsistent with the Loan Documents.
For purposes of this Assignment and the Deed of Trust, Rents shall be deemed
earned over the entire period to which they relate, and if Assignor has received
any Rents which are properly allocable to any period following a foreclosure of
the Property under the Loan Documents or transfer in lieu thereof, Assignor
shall pay the amount so allocable to the then owner of the Property immediately
upon demand. Upon or at any time after an Event of Default, the license granted
herein may be revoked by Assignee, and Assignee or a receiver may enter upon the
Property, and collect, retain and apply the Rents toward payment of the Notes
and other indebtedness secured by the Deed of Trust in such priority and
proportions as Assignee in its discretion shall elect. Assignor hereby consents
to the appointment of a receiver after the occurrence of an Event of Default if
Assignee believes it is necessary or desirable to enforce Assignee's rights
under this Assignment, the Credit Agreement or any other Loan Document and
Assignor waives notice of any application therefor.
3. NOTES: DEED OF TRUST. The term of this Assignment shall be until the
--------------------
Notes, together with all interest thereon, and all other indebtedness secured by
the Deed of Trust, shall have been
-2-
<PAGE>
fully paid and satisfied. At the end of such term this Assignment is to be
canceled, released and reassigned to Assignor and any release of the Deed of
Trust in full shall automatically cancel, release, and reassign to Assignor all
interests conveyed herein.
4. NO PAYMENT OF RENT. Assignor covenants that at the time of the
------------------
execution and delivery of this Assignment there has been no prepayment of any
Rents by any tenant under any Lease for more than one month in advance.
5. LEASES. Assignor hereby represents and warrants that all of the
------
Leases existing as of the date hereof (the "Existing Leases") are in full force
and effect and that there are no defaults by any tenant under any of the
Existing Leases nor, to the knowledge of Assignor, by Assignor. Except as
otherwise expressly permitted in the Credit Agreement, Assignor hereby covenants
and agrees that Assignor will comply with all of the obligations of the
"Landlord" or "Lessor" under all of the Leases without relying on any grace
period provided therein; that Assignor will immediately furnish to Assignee
copies of all notices of default received from any tenant under any Lease; that
Assignee shall have the right, at Assignor's expense (but shall not be
obligated) to cure any default by Assignor under any Lease; that Assignor will
not, except as a result of a default thereunder, terminate any Lease; and that
Assignor will not decrease the rental rate, shorten the lease term or make any
material modification to any Lease.
6. MORTGAGEE IN POSSESSION. Nothing herein contained shall be construed
-----------------------
as making Assignee a mortgagee in possession or shall Assignee be liable for
laches, or failure to collect any Rents and it is understood that Assignee is
obligated to account to Assignor only for such sums as are actually collected by
Assignee.
7. NO WAIVER. It is understood and agreed that neither the existence of
---------
this Assignment nor the exercise of the privilege to collect Rents hereunder
including, without limitation, security deposits, shall be construed as a waiver
by the Assignee of the right to enforce payment of the Loan in strict accordance
with the terms and provisions of the Credit Agreement and by any means provided
in the Credit Agreement, and the rights hereby given are in addition to and
cumulative of all rights given by the Credit Agreement or any other Loan
Document.
8. SUCCESSORS AND ASSIGNS. The covenants and obligations herein
----------------------
undertaken by Assignor shall be binding upon the successors and assigns of
Assignor and the rights and benefits herein conferred upon Assignee shall inure
to the benefit of its successors and assigns.
9. NOTICES. Unless expressly provided otherwise in this Assignment, all
-------
notices, demands, approvals and other communications provided for in this
Assignment shall be in writing and shall be delivered to the addresses set forth
in, and in accordance with, the Deed of Trust.
-3-
<PAGE>
10. FURTHER ASSURANCES. Until the indebtedness evidenced by the Notes and
------------------
secured by the Deed of Trust is paid in full, Assignor covenants and agrees upon
demand to confirm to Assignee the assignment contained herein of any and all
Leases entered into following the date hereof and the Rents relating thereto,
and to make, execute and deliver to Assignee upon demand any and all instruments
that may be necessary or desirable therefor, but the terms and provisions of
this Assignment shall apply to any such subsequent Lease, whether or not such
assignment is so confirmed.
11. CHOICE OF LAW. To the extent, and only to the extent, that an
-------------
election of the laws of a forum other than California would be ineffective under
California law, the validity, construction, and enforcement of this instrument
shall be governed by the laws of the State of California applicable to contracts
executed and performed entirely within that state with respect to real estate
remedies, perfection and other matters so inherently local that an election of
the laws of a forum other than California would be ineffective under California
law. In all other respects, including, but not limited to, matters of usury law
and general contract law applicable to agreements between lenders and borrowers,
the validity, construction and enforcement hereof shall be determined according
to the substantive laws (but not the conflicts laws) of the State of Texas, in
which state the Assignee and the Banks originated the Said Indebtedness and in
which state the Notes are payable.
IN WITNESS WHEREOF, Assignor has executed this assignment as of the date
first set forth above.
ASSIGNOR:
AMERICAN GENERAL
HOSPITALITY OPERATING
PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., a Nevada corporation
By:___________________________________
Name:_________________________________
Title:________________________________
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
================================================================================
STATE OF _______________
COUNTY OF ______________
On ____________________ before me, ____________________________________________,
Date NAME, TITLE OF OFFICER-E.G. "JANE DOE,
NOTARY PUBLIC"
personally appeared ____________________________________________________________
_______ personally known to me - OR - _______ proved to me on the basis of
satisfactory evidence to be person(s) whose
name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she
/they executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of
which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
________________________________________
SIGNATURE OF NOTARY
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
____ INDIVIDUAL
____ CORPORATE OFFICER
___________________________________ ___________________________________
TITLE(S) TITLE OR TYPE OF DOCUMENT
____ PARTNER(S) ____ LIMITED
____ GENERAL
___________________________________
____ ATTORNEY-IN-FACT NUMBER OF PAGES
____ TRUSTEE(S)
____ GUARDIAN/CONSERVATOR
____ OTHER:________________________ ___________________________________
_____________________________ DATE OF DOCUMENT
_____________________________
SIGNER IS REPRESENTING:
================================================================================
-5-
<PAGE>
EXHIBIT "A"
PROPERTY DESCRIPTION
<PAGE>
(DUPLICATE ONLY)
FORM OF ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
---------------------------
THE STATE OF _______ (S)
(S)
COUNTY OF _________ (S)
THIS ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS ("Assignment") dated
______________, 1996 is made by AGH LEASING, L.P., a Delaware limited
partnership (the "Assignor") in favor of [________________________, a
_____________________] [AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., A DELAWARE LIMITED PARTNERSHIP] (the "Assignee"), its landlord pursuant to
that certain Lease Agreement dated as of even date herewith (the "Lease
Agreement"). Assignor is making this Assignment as a condition precedent to and
security for its obligations under the Lease Agreement.
1. ASSIGNMENT. For good and valuable consideration, the receipt and
----------
sufficiency of which is acknowledged, Assignor presently, absolutely,
irrevocably and unconditionally conveys, transfers, assigns and delivers unto
Assignee all the right, title and interest of Assignor in and to the rents,
issues, profits, revenues, royalties, rights and benefits (hereinafter referred
to as the "Rents") from all or any portion of the property more fully described
on Exhibit "A" attached hereto and made a part hereof for all purposes and the
improvements located or to be located thereon (hereinafter referred to as the
"Property"); and to that end Assignor presently, absolutely, irrevocably and
unconditionally assigns and sets over to Assignee all of Assignor's right, title
and interest as "Landlord", "Lessor" or "Sublessor" under all leases covering
any portion of said Property or the improvements located or to be located
thereon, whether now or hereafter made, executed or delivered, and whether
written or verbal (which, together with any and all leases of the Property or
the improvements located or to be located thereon which are entered into
following the date hereof, shall be referred to herein as the "Leases"),
including all guaranties thereof and all security deposits thereunder.
2. AUTHORIZATION TO COLLECT. Assignor authorizes and empowers Assignee to
------------------------
collect the Rents, including, without limitation, security deposits, as they
shall become due, and by this Assignment authorizes and directs each and all of
the tenants under any of the Leases to pay the Rents including, without
limitation, security deposits, as may now be due and shall hereafter become due,
to Assignee. It is understood and agreed, however, that except during the
existence of a default beyond applicable notice and cure period by Assignor
under the Lease Agreement (an "Event of Default"), Assignor shall have the
revocable license to collect the Rents and take all actions with respect to all
Leases, present and future, and Assignee shall refrain from exercising its
rights hereunder subject to the terms of this Assignment; but that such license
to collect or continue collecting as aforesaid by Assignor shall not operate to
permit a collection by Assignor of any
<PAGE>
installment of Rent more than one month in advance thereof without the written
consent of Assignee. For so long as Assignor's license to collect such Rents
remains in effect, Assignor shall apply all such Rents first to its obligations
under the Lease Agreement. Thereafter, Assignor may apply the balance of the
Rents collected by Assignor in any manner not inconsistent with the Lease
Agreement. For purposes of this Assignment and the Lease Agreement, Rents shall
be deemed carried over the entire period to which they relate, and if Assignor
has received any Rents which are properly allocable to any period following
termination of the Lease Agreement, Assignor shall pay the amount so allocable
to the Assignee immediately upon demand. Upon or at any time after an Event of
Default, the license granted herein may be revoked by Assignee, and Assignee may
enter upon the Property, and collect, retain and apply the Rents toward payment
of the Assignor's obligations under the Lease Agreement.
3. SURVIVAL. The provisions of this Assignment shall survive any
--------
termination of the Lease Agreement.
4. NO PAYMENT OF RENT. Assignor covenants that at the time of the
------------------
execution and delivery of this Assignment there has been no prepayment of any
Rents by any tenant under any Lease for more than one month in advance.
5. LEASES. Assignor hereby represents and warrants that all of the Leases
------
existing as of the date hereof (the "Existing Leases") are in full force and
effect and that to the best of its knowledge there are no defaults by any tenant
under any of the Existing Leases nor, to the knowledge of Assignor, by Assignor.
Assignor hereby represents, warrants and covenants that no prior assignment of
the property assigned by Assignor under this Assignment has occurred and that
except for this Assignment no such assignment will occur prior to the expiration
of the Lease Agreement. Assignor hereby covenants and agrees that Assignor will
comply with all of the obligations of the "Landlord", "Lessor" or "Sublessor"
under all of the Leases without relying on any grace period provided therein;
that Assignor will immediately furnish to Assignee copies of all notices of
default received from any tenant under any Lease; that Assignee shall have the
right, at Assignor's expense (but shall not be obligated) after sending Assignor
notice thereof and ten days to perform same to cure any default by Assignor
under any Lease; that Assignor will not, except as a result of a default
thereunder, terminate any Lease; and that Assignor will not decrease the rental
rate, shorten the lease term or make any material modification to any Lease.
6. MORTGAGEE IN POSSESSION. Nothing herein contained shall be construed
-----------------------
as making Assignee a mortgagee in possession nor shall Assignee be liable for
laches, or failure to collect any Rents and it is understood that Assignee is
obligated to account to Assignor only for such sums as are actually collected by
Assignee.
7. NO WAIVER. It is understood and agreed that neither the existence of
---------
this Assignment nor the exercise of the privilege to collect Rents hereunder
including, without limitation, security
-2-
<PAGE>
deposits, shall be construed as a waiver by the Assignee of the right to
enforce payments of the sums due any payable pursuant to the Lease Agreement in
strict accordance with the terms and provisions thereof and by any means
provided therein.
8. SUCCESSORS AND ASSIGNS. The covenants and obligations herein
----------------------
undertaken by Assignor shall be binding upon the successors and assigns of
Assignor and the rights and benefits herein conferred upon Assignee shall inure
to the benefit of its successors and assigns. Assignee may collaterally assign
this Assignment and its rights, in whole or in part, under this Assignment as
collateral for any credit facility secured in whole or in part, under this
Assignment as collateral for any credit facility secured in whole or in part by
the Property, and Assignor hereby irrevocably consents and agrees to the same.
Upon such collateral assignment: (i) this Assignment shall inure to the benefit
of the lender or lenders providing such credit facility, and upon Assignor's
receipt of the address(es) of such lender or lenders, Assignor shall send lender
or lenders a copy of any notices sent by Assignor to Assignee under this
Assignment, and such lender or lenders shall have the right, but not the
obligation, to take any action of Assignee under this Assignment, and (ii) no
consent on behalf of Assignee or amendment, modification or termination of this
Assignment shall be effective or binding without the written consent of such
lender or lenders and all such actions taken without such lender or lenders
consent shall be void.
9. NOTICES. Unless expressly provided otherwise in this Assignment, all
-------
notices, demands, approvals and other communications provided for in this
Assignment shall be in writing and shall be delivered to the addresses set forth
in, and in accordance with, the Lease Agreement.
10. FURTHER ASSURANCES. Assignor covenants and agrees upon demand to
------------------
confirm to Assignee the assignment contained herein of any and all Leases
entered into following the date hereof and the Rents relating thereto, and to
make, execute and deliver to Assignee upon demand any and all instruments that
may be necessary or desirable therefor, but the terms and provisions of this
Assignment shall apply to any such subsequent Lease, whether or not such
assignment is so confirmed.
-3-
<PAGE>
IN WITNESS WHEREOF, Assignor has executed this assignment as of the date
first set forth above.
ASSIGNOR:
AGH LEASING, L.P., a Delaware limited partnership
By: AGHL GP, INC., a Delaware corporation.
its sole general partner
By:_________________________________________
Name:_______________________________________
Title:______________________________________
[ADD APPROPRIATE FORM OF ACKNOWLEDGMENT]
-4-
<PAGE>
EXHIBIT "A"
PROPERTY DESCRIPTION
<PAGE>
BANK ONE, TEXAS, N.A.
1717 Main Street
Dallas, Texas 75201
July 31, 1996
Bank One, Texas, N.A.
1717 Main Street
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey
Commercial Real Estate Lending
Re: Concentration Bank Account No. 1892347897
Operating Account (Borrower) No. 1822924542
CapEx Reserve Account No. 1892347905
Certain accounts described on Schedule A (Other Accounts)
---------------------------------------------------------
Ladies and Gentlemen:
This letter agreement (this "Agreement") will confirm our arrangements
---------
regarding (i) Account No. 1892347897 (the "Concentration Bank Account"), which
--------------------------
Bank One, Texas N.A. (the "Bank") maintains in the name of Bank One, Texas,
----
N.A., as Administrative Agent for the Banks (in such capacity, the "Secured
-------
Party") under that certain Credit Agreement dated July 30, 1996, as amended from
- -----
time to time, by and among American General Hospitality Operating Partnership,
L.P. ("Borrower"), Societe Generale, as structuring agent, the lenders named
--------
therein and the Secured Party (the "Credit Agreement") for the account of and at
----------------
the request of Borrower, (ii) Account No. 1892347905 (the "CapEx Reserve
-------------
Account"), an interest bearing account which the Bank maintains in the name of
- -------
the Secured Party for the account of and at the request of the Borrower, (iii)
Account No. 1822924542 (the "Operating Account") which the Bank maintains in the
-----------------
name "American General Hospitality Operating Partnership, L.P. - Operating
Account", and (iv) the accounts set forth on Schedule A attached hereto (the
----------
"Other Accounts") which the Bank maintains for the account of and at the request
--------------
of the Borrower and/or the Guarantors (except for the Parent) (herein, the
"Subsidiary Guarantors"). All interest accruing in respect of funds on deposit
---------------------
in the CapEx Reserve Account shall be applied to the balance on deposit in said
account. The Concentration Bank Account, the CapEx Reserve Account, the
Operating Account and the Other Accounts are referred to herein, collectively,
as the "Accounts"). Capitalized terms
--------
CASH MANAGEMENT AGREEMENT - Page 1 of 14
- -------------------------
<PAGE>
used herein without definition shall have the meaning ascribed to such terms in
the Credit Agreement.
Pursuant to that certain Security Agreement (as amended, restated,
supplemented or otherwise modified from time to time, the "Security Agreement"),
------------------
dated as of July 31, 1996, by and among the Borrower, the Subsidiary Guarantors,
and the Secured Party, the Secured Party has been assigned and granted a
security interest in all of Borrower's and Subsidiary Guarantor's right, title
and interest in and to all funds, and any investments of and earnings of said
funds, now or hereafter held by the Bank in the Accounts.
The Secured Party, the Borrower and the Subsidiary Guarantors hereby direct
the Bank as follows:
(i) the Bank will not permit the withdrawal of any funds from the
Concentration Bank Account and the CapEx Reserve Account by the
Borrower; and
(ii) upon the written request of the Secured Party following the
occurrence of an Event of Default under the Credit Agreement, the
Bank will transfer funds on deposit in the Concentration Bank
Account (subject to the availability of funds then on deposit in the
Concentration Bank Account) to the Secured Party for application to
any amounts then outstanding under the Credit Agreement; or
(iii) so long as the Bank has not received prior written notice from the
Secured Party of the occurrence of either an Event of Default or a
Bankruptcy Event (as hereinafter defined), upon receipt by the Bank
of a request from the Secured Party (which shall specify the
Accounts to which funds shall be transferred), the Bank will
transfer funds on deposit in the Concentration Bank Account (in the
amount specified in such request, subject to the availability of
funds then on deposit in the Concentration Bank Account) to the
Operating Account or to any of the Other Accounts;
(iv) upon receipt by the Bank of written or tested telex request from the
Borrower (1) the Bank will invest in the Secured Party's name funds
held in the Concentration Bank Account as Liquid Investments (as
defined in the Credit Agreement) as may be specified in said
instructions, and/or (2) the Bank will sell any such Liquid
Investments whether at maturity or prior thereto as may be specified
in the Borrower's request;
CASH MANAGEMENT AGREEMENT - Page 2 of 14
- -------------------------
<PAGE>
(v) upon receipt by the Bank of a written request from the Secured Party
to transfer funds on deposit in the CapEx Reserve Account to the
Operating Account, the Bank will transfer funds (in the amount
specified in such request, subject to the availability of funds then
on deposit in the CapEx Reserve Account) to the Operating Account or
such other Account, subject to the terms of the Credit Agreement;
and
(vi) so long as the Bank has not received prior written notice from the
Secured Party of the occurrence of an Event of Default or a
Bankruptcy Event, the Borrower and the Subsidiary Guarantors shall
have the right, subject to their respective interests in such
Accounts, to withdraw funds from the Operating Account and the Other
Accounts, provided, however, that after receipt of such notice by
-------- -------
the Bank, the Bank will not permit the Borrower or the Subsidiary
Guarantors to withdraw funds from the Operating Account or the Other
Accounts and any funds on deposit in, or payable with respect to,
the Operating Account or the Other Accounts shall thereafter be due
and payable to the Secured Party.
As used herein, the term "Bankruptcy Event" shall mean and refer to the
----------------
occurrence of one or more of the following events: any one of the Borrower or
the Subsidiary Guarantors (A) executes an assignment for the benefit of
creditors, or takes any action in furtherance thereof; (B) admits in writing its
inability to pay, or fails to pay, its debts generally as they become due; (C)
as a debtor, files a petition, case, proceeding or other action pursuant to, or
voluntarily seeks the benefit of any applicable laws pertaining to liquidation,
bankruptcy, insolvency, reorganization, receivership, or similar laws, domestic
or foreign, affecting the rights or remedies of creditors generally, in effect
from time to time (collectively, "Debtor Relief Law"), or takes any action in
-----------------
furtherance thereof; (D) seeks the appointment of a receiver, trustee, custodian
or liquidator of any part of the Eligible Property or of any significant portion
of its other property; or (E) suffers the filing of a petition, case, proceeding
or other action against it as a debtor under any Debtor Relief Law or seeking
appointment of a receiver, trustee, custodian or liquidator of any part of the
Eligible Property or of any significant portion of its other property.
The directions set forth above may not be rescinded, amended or modified
without the written consent of the Secured Party.
By its execution below, the Borrower and the Subsidiary Guarantors hereby
(i) irrevocably direct the Bank to follow any instructions (including, without
limitation, any requests for withdrawals, transfers, investments, sale of
investments or requests for information) with respect to the Accounts and any
funds from time to time held therein, that the Bank may receive from the
CASH MANAGEMENT AGREEMENT _ Page 3 of 14
- -------------------------
<PAGE>
Secured Party in accordance with this Agreement, (ii) agree that any funds that
are received by the Borrower or the Subsidiary Guarantors from the Operating
Account and the Other Accounts on or after the occurrence of an Event of Default
or a Bankruptcy Event shall be held IN TRUST for the benefit of the Secured
Party and immediately delivered to the Secured Party or immediately paid into
the Operating Account, and (iii) acknowledge and agree that neither the Borrower
nor any of the Subsidiary Guarantors shall have the right to withdraw funds from
or close the CapEx Reserve Account or the Concentration Bank Account or give any
instructions with respect thereto (other than the rights of Borrower in respect
of investment instructions and directions to the Secured Party) and, following
the occurrence of an Event of Default or a Bankruptcy Event, neither Borrower
nor any of the Subsidiary Guarantors shall have the right to withdraw funds from
the Operating Account or the Other Accounts, all such rights being expressly
reserved for the Secured Party, and for purposes of following any instructions
of the Secured Party, the Bank shall treat the Secured Party as if it were sole
owner of such Accounts and the funds from time to time held therein, without
regard to any interests the Borrower or the Subsidiary Guarantors may have
therein. Without limiting any of the foregoing, the Borrower and the Subsidiary
Guarantors hereby acknowledge and agree that all fees, expenses and other costs
in connection with the Accounts shall be for the sole account of the Borrower
and/or the Subsidiary Guarantors or as may otherwise be agreed to by the Bank,
the Borrower and the Subsidiary Guarantors.
Notwithstanding any instructions to the contrary from the Secured Party to
the Bank, the Bank may charge back the Accounts for any customary and usual
service charges and any credit given for any items which are returned unpaid for
any reason and for related account adjustments, and if the funds in the Accounts
have been charged and are insufficient to compensate the Bank, then the Bank
shall be entitled to offset the aggregate amounts owed to the Bank against any
funds subsequently deposited in the Accounts.
The Bank may rely upon any instructions given to it in writing by any
person purporting to be a vice president of the Secured Party or by any other
officer of the Secured Party designated by a person purporting to be a vice
president of the Secured Party in a writing delivered to the Bank.
At the end of each month the Bank shall furnish its regular statements
covering the deposits to and withdrawals from the Concentration Bank Account and
the CapEx Reserve Account to the Secured Party, 1717 Main Street, 4th Floor,
Dallas, Texas 75201, Attention: Jeff Lindsey, Commercial Real Estate Lending.
The Borrower and the Subsidiary Guarantors hereby agree that they will,
jointly and severally, indemnify and hold harmless the Bank from and against any
and all liabilities,
CASH MANAGEMENT AGREEMENT - Page 4 of 14
- -------------------------
<PAGE>
obligations, claims, suits, judgments, actions, losses, costs and expenses
(including reasonable attorneys' fees) arising out of or relating to this
Agreement or the Accounts (except those arising from the gross negligence or
willful misconduct of the Bank).
The Bank may terminate this letter only upon 30 days' prior written notice
to that effect to the Borrower, the Subsidiary Guarantors and the Secured Party:
To Borrower and the Subsidiary Guarantors at:
American General Hospitality
Operating Partnership, L.P.
3860 West Northwest Highway
Dallas, Texas 75220
Attention: Mr. Ken Barr
Telecopier: (214) 351-0568
To the Secured Party at:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Jeff S. Lindsey
Commercial Real Estate Lending
Telecopier: (214) 290-2275
This Agreement may be terminated upon 30 days' prior written notice to the Bank
by the Secured Party stating that the security interest of the Secured Party in
the Accounts has been released.
This Agreement shall become effective upon its execution by all parties
hereto and shall then be binding upon the parties hereto and their respective
successors and assigns. This Agreement may be executed by one or more of the
parties hereto in any number of counterparts, each of which when so executed
shall be an original, but all such counterparts together shall constitute but
one and the same instrument. This Agreement may not be amended except in writing
and signed by each of the Secured Party, the Borrower, the Subsidiary
Guarantors and the Bank. To the extent that any other agreement between the
Bank, the Borrower and the Subsidiary Guarantors contradicts the terms of this
Agreement, the terms of this Agreement shall govern. This Agreement supersedes
all previous agreements between the Borrower, the Subsidiary
CASH MANAGEMENT AGREEMENT - Page 5 of 14
- -------------------------
<PAGE>
Guarantors and the Bank, whether written or oral, and contains the entire
understanding between the Borrower, the Subsidiary Guarantors and the Bank with
respect to the subject matter hereof.
Notwithstanding that the Bank may have knowledge of, or be a party to, any
other agreement between the Secured Party and the Borrower and the Subsidiary
Guarantors, including the Credit Agreement, the Secured Party hereby agrees that
the Bank shall have no duty independently to determine whether or not any
request or instruction made hereunder by the Borrower or the Subsidiary
Guarantors is valid or permissible under the Credit Documents, or otherwise.
The Secured Party further acknowledges and agrees that the Bank, in the
performance of its obligations hereunder, shall only be obligated to exercise
reasonable diligence, and shall be liable only for losses, or other costs or
expenses to the Secured Party or others (including attorneys' fees), if (i) such
losses, cost or expenses arise out of or relate to the requests and instructions
of the Secured Party hereunder and (ii) are caused by the willful misconduct or
gross negligence of the Bank.
This Agreement shall be governed and construed in accordance with the
substantive laws of the State of Texas.
BANK ONE, TEXAS, N.A.
as the Secured Party
By: ______________________________
Jeff S. Lindsey
Vice President
ACKNOWLEDGED AND AGREED
this 31st day of July, 1996
BANK ONE, TEXAS, N.A.
as Cash Manager
By: ______________________________
Jeff S. Lindsey
Vice President
CASH MANAGEMENT AGREEMENT - Page 6 of 14
- -------------------------
<PAGE>
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., a Nevada corporation,
its general partner
By:____________________
Name:__________________
Title:_________________
CASH MANAGEMENT AGREEMENT - Page 7 of 14
- -------------------------
<PAGE>
3100 GLENDALE JOINT VENTURE,
an Ohio general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:_______________________
Name:_____________________
Title:____________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:_______________________
Name:_____________________
Title:____________________
By: American General Hospitality Operating
Partnership, L.P., its partner
By: AGH GP, Inc., general partner
By:_______________________
Name:_____________________
Title:____________________
CASH MANAGEMENT AGREEMENT - Page 8 of 14
- -------------------------
<PAGE>
MDV LIMITED PARTNERSHIP,
a Texas limited partnership
By: AGH UPREIT LLC, its general
partner
By: American General Hospitality
Corporation, member
By:_________________________
Name:_______________________
Title:______________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:_________________________
Name:_______________________
Title:______________________
CASH MANAGEMENT AGREEMENT - Page 9 of 14
- -------------------------
<PAGE>
MADISON MOTEL ASSOCIATES,
a Wisconsin general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:_________________________
Name:_______________________
Title:______________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its
general partner
By:_________________________
Name:_______________________
Title:______________________
By: American General Hospitality Operating
Partnership, L.P., its partner
By: AGH GP, Inc., general partner
By:____________________
Name:__________________
Title:_________________
CASH MANAGEMENT AGREEMENT - Page 10 of 14
- -------------------------
<PAGE>
183 HOTEL ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general
partner
By: American General Hospitality
Corporation, member
By:_________________________
Name:_______________________
Title:______________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:_________________________
Name:_______________________
Title:______________________
CASH MANAGEMENT AGREEMENT - Page 11 of 14
- -------------------------
<PAGE>
RICHMOND WILLIAMSBURG
ASSOCIATES, LTD., a Texas limited
partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:___________________________
Name:_________________________
Title:________________________
By: American General Hospitality
Operating Partnership, L.P.,
member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
CASH MANAGEMENT AGREEMENT - Page 12 of 14
- -------------------------
<PAGE>
2929 WILLIAMS LIMITED LIABILITY
COMPANY, a Delaware limited liability
company
By: AGH UPREIT, LLC, its member
By: American General Hospitality
Corporation, member
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality
Operating Partnership, L.P.,
member
By: AGH GP, Inc., general
partner
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality Operating
Partnership, L.P., its member
By: AGH GP, Inc., general partner
By:_______________________________
Name:_____________________________
Title:____________________________
CASH MANAGEMENT AGREEMENT - Page 13 of 14
- -------------------------
<PAGE>
AGH UPREIT, LLC, a Delaware limited liability
company
By: American General Hospitality Corporation,
member
By:_________________________
Name:_______________________
Title:______________________
CASH MANAGEMENT AGREEMENT - Page 14 of 14
- -------------------------
<PAGE>
Schedule A
----------
LIST OF OTHER ACCOUNTS
----------------------
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH UPREIT LLC 1822924625
- --------------------------------------------------------------------------------
3100 Glendale Joint Venture 1822924641
Hilton Hotel and Conference Center, Toledo, OH
- --------------------------------------------------------------------------------
MDV Limited Partnership 1822924658
Hotel Maison de Ville, New Orleans, LA
- --------------------------------------------------------------------------------
Madison Motel Associates 1822924666
Holiday Inn Select, Madison, WI
- --------------------------------------------------------------------------------
183 Hotel Associates, Ltd. 1822924674
Holiday Inn DFW Airport West
- --------------------------------------------------------------------------------
Richmond Williamsburg Associates, Ltd. 1822924682
Hampton Inn Richmond Airport, Richmond VA
- --------------------------------------------------------------------------------
2929 Williams Limited Liability Company 1822924732
Holiday Inn New Orleans Airport, LA
================================================================================
CASH MANAGEMENT AGREEMENT -- Schedule A
- -------------------------
<PAGE>
EXHIBIT __
BORROWER FUNDING CERTIFICATE
JULY 31, 1996
Bank One, Texas, N.A.,
as Administrative Agent under the Credit Agreement herein described
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey, Vice President
Ladies and Gentlemen:
The undersigned, American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership (the "Borrower"), refers to the Credit Agreement
dated as of July 13, 1996 (as the same may be amended or modified from time to
time, the "Credit Agreement," the defined terms of which are used in this
Borrower Funding Certificate unless otherwise defined in this Borrower Funding
Certificate) among the Borrower, the Banks, the Agent, the Structuring Agent and
the Administrative Agent, and hereby gives you irrevocable notice pursuant to
Section 3.03(a) of the Credit Agreement that the undersigned hereby requests the
initial Borrowing, and in connection with that request acknowledges and agrees
that all Credit Documents, if any, held in escrow are hereby released from such
escrow.
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the initial Borrowing;
(a) the representations and warranties contained in the Credit Agreement
and the other Security Documents are correct in all material respects,
before and after giving effect to the Proposed Borrowing and the
application of the proceeds therefrom, as though made on the date of the
Proposed Borrowing; and
<PAGE>
Bank One, Texas, N.A.
[Date]
Page 2
(b) no Default has occurred and remains uncured, or would result from such
Proposed Borrowing or from the application of the proceeds therefrom.
Very truly yours,
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT ___
BORROWING BASE CERTIFICATE
This Borrowing Base Certificate is executed this ___ day of _____________,
1996 and is prepared pursuant to Section 2.14 of that certain Credit Agreement
(the "Agreement") between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "Borrower"), SOCIETE GENERALE,
SOUTHWEST AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as Administrative
Agent, and the Banks parties to the Credit Agreement. Capitalized terms used
herein but not otherwise defined herein shall have the meanings specified by the
Agreement:
1. Aggregate Real Estate Value of all Eligible Properties $________
2. Line 1 above multiplied by 40% $________
3. The combined trailing twelve months Borrowing Base EBITDA
generated by the Eligible Properties $________
4. Line 3 above multiplied by five (5) $________
5. BORROWING BASE
(Lesser of Lines 2 and 4) $________
The Borrower has caused this Borrowing Base Certificate to be executed this
____ day of ______________, 199_.
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general
partner
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Real Estate Value
Hotel Propertis Owned by the Parent Appraised (Lesser of Cost Basis Trailing 12-Month
or Parent's Subsidiaries Cost Basis Value or Appraised Value) Property EBITDA
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELIGIBLE PROPERTIES
- --------------------------------------------------------------------------------------------------------------------
1. Holiday Inn, DFW West,
Bedford, TX
- --------------------------------------------------------------------------------------------------------------------
2. Hampton Inn, Richmond
Airport, Sandston, VA
- --------------------------------------------------------------------------------------------------------------------
3. Hilton Hotel, Toledo, OH
- --------------------------------------------------------------------------------------------------------------------
4. Holiday Inn-N.O. Airport,
(Holiday Inn Select
Conversion), Kenner, LA
- --------------------------------------------------------------------------------------------------------------------
5. Holiday Inn Select,
(Crowne Plaza Conversion),
Madison, WI
- --------------------------------------------------------------------------------------------------------------------
6. Holiday Inn (Crowne Plaza
Conversion), San Jose, CA
- --------------------------------------------------------------------------------------------------------------------
7. Best Western,
Albuquerque, NM
- --------------------------------------------------------------------------------------------------------------------
8. Hotel Maison de Ville,
New Orleans, LA
- --------------------------------------------------------------------------------------------------------------------
9. Days Inn, Ocean City, MD
- --------------------------------------------------------------------------------------------------------------------
10. Holiday Inn, Mission
Valley, San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
11. Le Baron Airport Hotel,
San Jose, CA
- --------------------------------------------------------------------------------------------------------------------
(Combined 12-Month
(Eligible Properties Borrowing Base
Aggregate Real Estate EBITDA for Eligible
Value) Properties)
$________(1) X 40%=(2) $________(3) X 5=(4)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
FORM OF
Recording Requested By And
When Recorded Mail to:
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Attention: David W. Locascio
THE STATE OF __________ (S)
(S)
COUNTY OF _____________ (S)
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
This Collateral Assignment and Security Agreement dated as of July _____,
1996 (as may be hereafter amended or otherwise modified from time to time, this
"Assignment") is between ______________________, a [Delaware] limited
partnership ("Debtor") having an office and mailing address at 3860 West
Northwest Highway, Suite 300, Dallas, Texas 75220, Attention: Ken Barr in favor
of BANK ONE, TEXAS, N.A., a national banking association, as administrative
agent ("Secured Party") for the Banks (as hereinafter defined), having an office
and mailing address at 1717 Main Street, 4th Floor, Commercial Real Estate
Department, Dallas, Texas 75201, Attention: Mr. Jeff S. Lindsey, Vice
President.
WITNESSETH:
WHEREAS, [AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., A
DELAWARE LIMITED PARTNERSHIP ("BORROWER"), WHICH IS THE DIRECT OR INDIRECT OWNER
OF DEBTOR] [DEBTOR], Secured Party, as Administrative Agent, Societe Generale,
Southwest Agency, as Structuring Agent, and the banks and other lenders party
thereto (collectively the "Banks") have entered into a Credit Agreement dated as
of _________, 1996 (as amended or otherwise modified from time to time, the
"Credit Agreement"); and
WHEREAS, the [BORROWER/DEBTOR] has executed promissory notes of even date
with the Credit Agreement in favor of the Banks in the original aggregate
principal amount of $100,000,000.00 (the "Notes", which term includes any
modification, renewal, extension or alteration thereof); and
WHEREAS, the Notes were executed and delivered to Secured Party and the
Banks, and shall be due and payable in accordance with the Credit Agreement; and
<PAGE>
WHEREAS, Debtor is leasing or subleasing the land described on Exhibit "A"
attached hereto and the improvements, equipment, fixtures, furniture and other
personal property located on such land (collectively, the "Hotel Property") to
AGH Leasing, L.P. (the "Lessee") under that certain lease executed between
Debtor and Lessee (the "Hotel Lease"); and
WHEREAS, the terms and provisions of the Notes and Credit Agreement are
incorporated herein by reference and made a part of this Assignment to the same
extent as though set forth in full herein; and
WHEREAS, as a condition to the acceptance of the Notes and the making of
the credit facility evidenced by the Credit Agreement (the "Credit Facility"),
Debtor agreed to execute and deliver this Assignment to secure the payment of
the indebtedness from time to time evidenced by the Notes, the payment of all
other sums now or hereafter owing by [BORROWER AND] Debtor and the other
Guarantors (all such Persons being collectively referred to herein as the
"Obligors") hereunder, under the Credit Agreement or under any other document or
instrument now or hereafter evidencing or securing the aforesaid indebtedness or
otherwise executed in connection herewith or therewith (this Assignment, the
Notes, the Credit Agreement and all other documents and instruments now or
hereafter evidencing or securing the aforesaid indebtedness or otherwise
executed in connection herewith or therewith, being hereinafter referred to
collectively as the "Credit Documents"), and the performance and observance of
all covenants, agreements, conditions and other provisions set forth herein, in
the Notes and in the Other Credit Documents;
NOW THEREFORE, and for in consideration of the sum of Ten and No/100
Dollars ($10.00) paid by Secured Party to Debtor and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Debtor and Secured Party hereby agree as follows:
1. Definitions. Unless otherwise defined in this Assignment, each
-----------
capitalized term shall have the meaning given to such term in the Note.
2. Assignment. To secure the payment of the indebtedness from time to
----------
time evidenced by the Notes, the payment of all other sums now or hereafter
owing by the Obligors hereunder, under the Credit Agreement or any other Credit
Document and the performance and observance of all covenants, agreements,
conditions and other provisions set forth herein, in the Notes, the Credit
Agreement or any other Credit Document (collectively the "Obligations"), and to
charge the properties, interests and rights hereinafter described with such
payment, performance and observance, Debtor hereby assigns as security to
Secured Party, and hereby grants to Secured Party, a continuing security
interest in the following and Debtor's right, title and interest in, to and
under the following, including without limitation all of Debtor's right, title
and interest, if any, in and to the real and
-2-
<PAGE>
personal property serving as collateral under any of the following
(collectively, the "Collateral"):
a. the Assignment of Management Agreements executed by Lessee
to Lessor in connection with the Hotel Property;
b. the Assignment of Leases, Rents and Security Deposits
executed by Lessee to Lessor in connection with the Hotel Property;
c. the General Assignment and Agreement executed by Lessee to
Lessor in connection with the Hotel Property;
d. those instruction letters or agreements executed in
connection with Hotel Property pursuant to which upon the occurrence of
certain events certain depository institutions have agreed wire transfer
funds in various bank accounts of Lessee to a bank account at Secured Party
held in the name of the [BORROWER/DEBTOR];
e. those instruction letters or agreements executed in
connection with the Hotel Property pursuant to which certain credit card
companies have agreed to wire transfer funds owed Lessee into certain bank
accounts of Lessee;
f. any other agreements, pledges assignments or mortgages
pursuant to which Lessee's obligations to Lessor under the Hotel Lease are
secured; and
g. all amendments, modifications, replacements, products and
proceeds of the foregoing.
3. Power and Authority. Debtor has full power and authority to make
-------------------
this agreement.
4. Obligations and This Agreement. Debtor shall perform promptly all
------------------------------
agreements herein, in the Note, and in the other Credit Documents to which
Debtor is a party. Debtor agrees that any amounts paid to Secured Party pursuant
to this Agreement shall be applied in accordance with the provisions of the
Credit Agreement.
5. Ownership of Collateral. At the time Debtor assigns and grants to
-----------------------
Secured Party a security interest in any Collateral, Debtor shall be the
absolute owner thereof and shall have the right to assign and grant such
security interest. Debtor shall defend the Collateral against all claims and
demands of all persons at any time claiming any interest therein adverse to
Secured Party. Debtor shall keep the Collateral free from all liens and security
interests except those for taxes not yet due and the security interest hereby
created.
-3-
<PAGE>
6. Delivery of Collateral. Debtor represents and warrants that Debtor has
----------------------
provided to Secured Party, a current, true and complete original of the
Collateral and shall continue to provide Secured Party a current, true and
complete original of any additional Collateral until Debtor satisfies the
Obligations in full, including without limitation any securities, cash, cash
equivalents or other personal property constituting Collateral delivered to
Debtor.
7. Events of Default. An "Event of Default" under the Credit Agreement
-----------------
shall be deemed an Event of Default hereunder ("Event of Default").
8. Remedies of Secured Party. When an Event of Default occurs, at any
-------------------------
time thereafter during the continuance of the Event of Default, Secured Party,
without notice, may take all actions permitted under the Credit Documents and
exercise any rights under the Uniform Commercial Code of the State of Texas (the
"Uniform Commercial Code"), rights and remedies of Secured Party under this
Agreement, or otherwise. Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place which is reasonably
convenient to both parties. Unless the Collateral threatens to decline quickly
in value or is of a type customarily sold on a recognized market, Secured Party
will give Debtor reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or other intended
disposition thereof is to be made. Expenses of retaking, holding, preparing for
sale, selling, leasing or the like shall include Secured Party's reasonable
attorney's fees and legal expenses. Secured Party shall have the authority to
enter upon any premises upon which any of the same, or any Collateral, may be
situated and remove the same therefrom without liability. Debtor shall be
entitled to any surplus and shall be liable to Secured Party for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligations shall be applied to the Obligations in such order and in such manner
as Secured Party in its discretion shall decide. In addition, Debtor
acknowledges that during the continuance of a monetary Event of Default or
following a foreclosure or deed in lieu of foreclosure, pursuant to the
Manager's Consent Secured Party or any subsequent owner of any Hotel Property
shall have the continuing right to terminate the Management Agreement for the
Hotel Property upon no less than thirty (30) days prior written notice to
Manager without any obligation to pay a termination or cancellation fee or
penalty to Manger.
9. Attorney-in-Fact. Debtor hereby irrevocably appoints Secured Party,
----------------
and any officer or agent of Secured Party as Secured Party may select in its
sole discretion, as Debtor's true and lawful attorney-in-fact, with full power
of substitution (a) from and after the occurrence and during the continuance of
an Event of Default, to (i) endorse Debtor's name on all applications,
documents, paper and instruments necessary or desirable for Secured Party in the
use of the Collateral or (ii) take any other actions with respect to the
Collateral as Secured Party deems in the best interest of Secured Party, and (b)
from and after the occurrence and during the continuance of an Event of Default,
to assign, pledge, convey
-4-
<PAGE>
or otherwise transfer title in or dispose of the Collateral to anyone. Debtor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable until the Obligations shall have been paid in full and discharged or
the security interests granted to Debtor by this Security Agreement have been
released.
10. License Back; Consents. Unless and until there shall have occurred an
----------------------
Event of Default which is not cured within the appropriate cure period and is
continuing or waived in writing by Secured Party, Secured Party hereby grants to
Debtor the exclusive, nontransferable right and license, for Debtor's own
benefit and account and none other, to use the Collateral in connection with the
Hotel Property; provided that Secured Party shall retain possession of all
securities constituting Collateral. If any Event of Default shall have occurred
and be continuing, Debtor's license shall terminate (unless Secured Party
consents to an extension in writing), and Secured Party shall have all of the
rights and remedies described herein. Debtor agrees that until the Obligations
shall have been satisfied in full and the security interest granted hereby has
been released, Debtor will not, without Secured Party's prior written consent,
enter into any agreement which is inconsistent with Debtor's obligations under
this Assignment or amends, modifies or terminates any of the Collateral. Debtor
further agrees that it will not take any action, or permit any action to be
taken by other subject to its control, including licensees, or fail to take any
action, which would affect the validity or enforcement of the rights transferred
to Secured Party under this Assignment. Notwithstanding the foregoing, however,
Debtor shall not grant any consent or approval under any of the Collateral
without the written consent of Secured Party. Debtor acknowledges that certain
ground lessors, managers, franchisors, licensors and liquor license companies
have executed or will execute consents and agreements for the benefit of Secured
Party, and Debtor hereby consents to all existing or hereinafter executed
consents and agreements.
11. Rights Cumulative. All of Secured Party's rights and remedies with
-----------------
respect to the Collateral, whether established by this Assignment, by the Notes,
by any other Credit Documents, or by law shall be cumulative and may be
exercised singularly or concurrently. Debtor acknowledges and agrees that this
Assignment is not intended to limit or restrict in any way the rights and
remedies of Secured Party under the Notes or any other Credit Document, but
rather is intended to facilitate the exercise of such rights and remedies
Secured Party shall have, in addition to all other rights and remedies given to
it by the terms of this Assignment, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Collateral or Debtor may be located.
12. Additional Documents. Debtor shall sign any papers furnished by
--------------------
Secured Party which are necessary or desirable in the judgment of Secured Party
to obtain, maintain and perfect the security interest hereunder and to enable
Secured Party to comply with any
-5-
<PAGE>
federal or state law in order to obtain or perfect Secured Party's interest in
the Collateral or to obtain proceeds of the Collateral.
13. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Assignment nor consent to any departure by Debtor from this Assignment, shall be
effective unless the same is in writing and signed by Secured Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
14. Governing Law. This Assignment shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Texas and the relevant laws
of the United States of America.
15. Recordation and Filing. Secured Party shall have the continuing right
----------------------
to record or file a copy of this Assignment in any public records that Secured
Party desires.
16. Subordination. Debtor has subordinated and does hereby subordinate
-------------
all of its rights, liens and security interests in and to the Collateral and in,
to and under the Lease to the following: (i) the Credit Documents; (ii) all
renewals, substitutions, extensions, modifications, replacements or amendments
of the Credit Documents; and (iii) the Obligations and all other indebtedness
secured by the Credit Documents and all advances thereunder.
17. Credit Agreement. To the extent that any of the terms or provisions
----------------
of this Assignments are inconsistent with the terms or provisions of the Credit
Agreement, the terms and provisions of the Credit Agreement shall control.
18. Complete Agreement. THIS WRITTEN ASSIGNMENT, THE NOTES AND ALL OTHER
------------------
CREDIT DOCUMENTS ENTERED INTO BETWEEN THE PARTIES REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Debtor has caused this Assignment to be duly executed
as of the date first set forth above.
DEBTOR:
___________________________
By:____________________
Name:__________________
Title:_________________
-6-
<PAGE>
SECURED PARTY:
BANK ONE, TEXAS, N.A.
By:_____________________
Name:___________________
Title:__________________
-7-
<PAGE>
[ADD APPROPRIATE FORM OF ACKNOWLEDGMENTS]
-8-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-9-
<PAGE>
Exhibit "J"
-
COMPLIANCE CERTIFICATE
This Compliance Certificate is executed this ___ day of _____________, 1996
and is prepared pursuant to Section 5.05 of that certain Credit Agreement (the
"Agreement") between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership (the "Borrower"), SOCIETE GENERALE, SOUTHWEST
AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as Administrative Agent,
and the Banks parties to the Credit Agreement. Capitalized terms used herein but
not otherwise defined herein shall have the meanings specified by the Agreement.
1. REPRESENTATIONS, COVENANTS, DEFAULTS. Borrower hereby certifies to
------------------------------------
the Agents and the Banks, effective as of the date of execution of this
Compliance Certificate, as follows:
1.1 Covenants. All covenants of Borrower set forth in Articles V and
---------
VI of the Agreement required to be performed as of the date hereof have been
performed and maintained in all material respects, and such covenants continue
to be performed and maintained as of the execution date of this certificate,
except as follows:
___________________________________________________
___________________________________________________
1.2. Event of Default. There exists no Event of Default except as
----------------
follows:
___________________________________________________
___________________________________________________
___________________________________________________
2. OPERATING COVENANTS. Borrower hereby certifies to the Agents and the
-------------------
Banks, effective as of the calendar quarter ending ___________, 199__, that the
following amounts and calculations made pursuant to Sections 6.15, 6.16 and 6.17
of the Agreement are true and correct:
2.1 Borrower Debt Service Test
--------------------------
(a) Borrowing Base EBITDA for the Rolling
Period ending on _________ equals: __________
<PAGE>
(b) Consolidated Indebtedness of the Borrower
and the Borrower's Subsidiaries (other than
the Permitted Other Subsidiaries) as of
______________ equals $__________________
times ______ (the Debt Service Rate) equals: __________
-----
Ratio of 2.1(a) to 2.1(b): __________
2.2 Parent Debt Service Test
------------------------
(a) Property EBITDA of all Hotel Properties
owned by the Parent and the Parent's
Subsidiaries (including without limitation
the Borrower, the Borrower's Subsidiaries
and the Permitted Other Subsidiaries)
for the Rolling Period equals: __________
(b) The Consolidated Indebtedness of the
Parent and the Parent's Subsidiaries as
of ___________ equal $_______________
times ___________ (the Debt Service Rate)
-----
equals: __________
Ratio of 2.2(a) to 2.2(b) __________
2.3 Parent's Net Worth Test
-----------------------
Parent's Consolidated Net Worth:
$100,000,000 plus 75% of the Net Cash
----
Proceeds from the Parent Capitalization
Event dated _____________ involving any
sale or issuance by the Parent or any of its
Subsidiaries of equity securities equals: __________
-2-
<PAGE>
EXECUTED as of the date first referenced above.
BORROWER:
--------
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:________________________________
Name:______________________________
Title:_____________________________
-3-
<PAGE>
AGREEMENT AND DIRECTION TO PAY
------------------------------
[CREDIT CARD COMPANY AND CLEARINGHOUSE]
_______________________________________
_______________________________________
_______________________________________
Attention:_______________________________
This Agreement and Direction to Pay (this "Agreement") is made and entered
---------
into effective for all purposes as of the 31st day of July, 1996, by the parties
signatory hereto.
AGH Leasing L.P. ("Pledgor") and _______________________ ("Property Owner")
------- --------------
have entered into that certain Lease Agreement dated of even date herewith (the
"Lease Agreement") regarding certain real property and the improvements located
---------------
thereon (the "Property").
--------
Pledgor also has executed and delivered to Property Owner that certain
General Assignment and Agreement (as amended, restated, supplemented, or
otherwise modified from time to time, the "Assignment Agreement"), dated as of
--------------------
July 31, 1996, to and for the benefit of Property Owner, pursuant to which
Pledgor granted, assigned and pledged to Property Owner, among other things, all
credit card receipts and other income and receivables now or hereafter payable
to Pledgor in respect of certain hotel properties (the "Pledged Proceeds").
----------------
Pledgor and Property Owner desire to execute this Agreement to evidence
their agreement in respect of all the Pledged Proceeds which may now or
hereafter be due and payable by ______________________ (the "Company") to
-------
Pledgor and to direct the Company to pay such Pledged Proceeds as herein
provided.
Pledgor is executing this Agreement in consideration for and in connection
with the Lease Agreement.
In consideration of the foregoing, Pledgor and Property Owner hereby agree
and direct the Company as follows:
1. Commencing on the date hereof, and continuing until such time as the
Assignment Agreement has been terminated or the obligations secured thereby have
been fully performed or satisfied, the Company shall make all payments of the
Pledged Proceeds by wire transfer into the
AGREEMENT AND DIRECTION TO PAY - Page 1 of 8
- ------------------------------
<PAGE>
following account (the "Account") maintained at Bank One, Texas, N.A., Dallas,
-------
Texas, or any successor bank appointed pursuant to the Credit Agreement
described herein (the "Cash Manager") and neither Pledgor nor the Company shall
------------
transfer, or permit the transfer of, any payment of the Pledged Proceeds to any
other account, without the prior written consent of Property Owner.
Account No. Account Name Name and Address
---------- ------------ ----------------
of the Depository Bank
----------------------
___________ ____________ Bank One, Texas, N.A.
1717 Main Street
4th Floor
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey
2. The directions herein are irrevocable and shall remain in full force
and effect until the Assignment Agreement has been terminated or the obligations
secured thereby have been fully performed or satisfied.
3. This Agreement shall be governed and construed in accordance with the
substantive laws of the State of Texas (without regard to conflict of laws
principles) and applicable United States federal law.
4. This Agreement may be executed in a number of identical counterparts,
each of which shall be deemed an original. In making proof of this Agreement, it
shall not be necessary for any party hereto to account for all counterparts, and
it shall be sufficient for such party to produce a counterpart signed by the
party to be bound hereby. It is not necessary that all parties execute the same
counterpart hereof, so long as each party executes an identical counterpart
hereof.
5. Property Owner may collaterally assign this Agreement and its rights,
in whole or in part, under this Agreement as collateral for any credit facility
secured in whole or in part by the Property, and Pledgor hereby irrevocably
consents and agrees to the same. In accordance therewith, the parties hereto
acknowledge and agree that all of the rights and interests of Property Owner
hereunder and under the Assignment Agreement in respect of the Pledged Proceeds
have been assigned to Bank One, Texas, N.A.("BOT"), as administrative agent
---
(BOT, or any successor to BOT as administrative agent, herein, the
"Administrative Agent") pursuant to that certain Credit Agreement dated July 31,
--------------------
1996, as amended from time to time, executed by and among American General
Hospitality Operating Partnership, L.P., Societe Generale, as structuring agent,
the lenders now or hereafter made a party thereto, and the Administrative Agent
(the "Credit Agreement"), as evidenced, in part, by that certain Joinder and
----------------
Agreement dated of even date herewith attached hereto
AGREEMENT AND DIRECTORY TO PAY - Page 2 of 8
- ------------------------------
<PAGE>
and made a part of this Agreement for all purposes. Pledgor hereby consents to
such assignment by Property Owner to Administrative Agent. Pledgor acknowledges
that, until such time as Pledgor receives written notice from the Administrative
Agent that the Administrative Agent no longer has any interest in the Pledged
Proceeds, Property Owner shall have no rights in respect of the Pledged Proceeds
and Pledgor shall treat the Administrative Agent, for all purposes herein, as
the sole holder of the security interests created hereby or by the Assignment
Agreement.
EXECUTED effective as of the date first set forth above
PLEDGOR:
-------
AGH LEASING, L.P.,
a Delaware limited partnership
By: AGHL GP, Inc., a Delaware
corporation, its sole general
partner
By:_______________________
Name:_____________________
Title:____________________
PROPERTY OWNER:
--------------
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership.
By: AGH GP, Inc., its general
partner
By:____________________
Name:__________________
Title:_________________
AGREEMENT AND DIRECTION TO PAY - page 3 of 8
- ------------------------------
<PAGE>
OR
_________________________
By: ________________ its
general partner
By:______________________
Name:____________________
Title:___________________
AGREEMENT AND DIRECTION TO PAY - Page 4 of 8
- ------------------------------
<PAGE>
ACKNOWLEDGMENT AND CONSENT TO AGREEMENT AND DIRECTION TO PAY
------------------------------------------------------------
The undersigned hereby acknowledges the foregoing Agreement and Direction
to Pay and agrees for the benefit of Property Owner and the Administrative Agent
to pay all of the Pledged Proceeds into the Account as directed above.
The undersigned further agrees to continue to make such payments until the
earlier of (i) the date on which the agreement between Pledgor and the Company
in respect of the collection and payment of the Pledged Proceeds terminates, or
(ii) the date on which the undersigned is notified by a writing signed by
Property Owner and Administrative Agent that all obligations secured by the
Assignment Agreement have been fully performed or satisfied and the Assignment
Agreement has been terminated.
COMPANY:
-------
______________________________
By:___________________________
Name:_________________________
Title_________________________
AGREEMENT AND DIRECTION TO PAY - Page 5 or 8
- ------------------------------
<PAGE>
JOINDER AND CONSENT
-------------------
This Joinder and Consent is attached to and forms a material part of that
Agreement and Direction to Pay (the "Agreement") dated as of July 31, 1996,
---------
executed by and between [CREDIT CARD COMPANY] (the "Company"), AGH Leasing, L.P.
-------
("Pledgor"), and American General Hospitality Operating Partnership, L.P. or___
-------
__________ ("Property Owner").
--------------
Pursuant to that certain Collateral Assignment and Security Agreement
("Security Agreement") dated as of July 31, 1996, executed by Property Owner to
------------------
and for the benefit of Bank One, Texas, N.A., as administrative agent (in such
capacity, "Administrative Agent") under that certain Credit Agreement dated as
--------------------
of July 31, 1996, as amended from time to time, executed by and among [PROPERTY
OWNER OR AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.],
Administrative Agent, Societe Generale, as structuring agent, and the other
lenders now or hereafter made a party thereto ("Credit Agreement"), Property
----------------
Owner assigned, pledged and granted to Administrative Agent a continuing lien
and security interest in and to certain collateral including all of its rights
under the Assignment Agreement and all of its rights, title and interest in and
to the Pledged Proceeds granted to it under the Assignment Agreement.
Property Owner hereby (i) irrevocably directs Pledgor and the Company to
follow any instructions (including, without limitation, any requests for
withdrawals or information or any instructions in respect of the Pledged
Proceeds) with respect to the Pledged Proceeds that Pledgor or the Company may
receive from Administrative Agent in accordance with this Agreement; (ii)
acknowledges and agrees that Property Owner will have no rights in respect of
the Pledged Proceeds, including any rights to give any instructions with respect
thereto, all such rights hereafter being expressly reserved for Administrative
Agent, and for purposes of following any instructions of Administrative Agent,
Pledgor and the Company shall treat Administrative Agent as if it were sole
holder of all liens and security interests encumbering the Pledged Proceeds and
the funds from time to time held therein, without regard to any interest
Property Owner may have therein by virtue of the Assignment Agreement or
otherwise, and (iii) any funds from the Pledged Proceeds that are received by
Property Owner on or after the occurrence of an Event of Default under the
Credit Document shall be held IN TRUST for the benefit of Administrative Agent
and immediately delivered to Administrative Agent. Property Owner further
acknowledges and agrees that, during the term of the Agreement, Property Owner
will not take any action to exercise any of its rights and interest in respect
of the Assignment Agreement or the Pledged Proceeds without the prior written
consent of Administrative Agent, all such rights being assigned to and expressly
reserved for Administrative Agent.
Notwithstanding anything to the contrary in the Agreement, the Agreement
may not be amended or terminated by Property Owner without the prior written
consent of Administrative Agent. Any notice in respect of the Pledged Proceeds
or the Agreement shall be sent, simultaneously with the delivery of such notice
to Property Owner, to Administrative Agent at the
AGREEMENT AND DIRECTION TO PAY - Page 6 of 8
- ------------------------------
<PAGE>
following address: Bank One, Texas, N.A., 1717 Main Street, 4th Floor, Dallas,
Texas 75201
Attention: Mr. Jeff S. Lindsey, Commercial Real Estate Lending (Telecopier:
(214)290-2275).
Dated as of 31st day of July, 1996.
BANK ONE TEXAS, N.A.
By:______________________________
Name:____________________________
Title:___________________________
The undersigned hereby acknowledge that the foregoing Joinder and Consent
is attached to and forms a material part of the Agreement and Direction to Pay
and agree for the benefit of Administrative Agent to comply with the directions
set forth above.
COMPANY:
-------
______________________________
By:___________________________
Name:_________________________
Title:________________________
PROPERTY OWNER:
--------------
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its general partner
By:_______________________
Name:_____________________
Title:____________________
AGREEMENT AND DIRECTION TO PAY - Page 7 of 8
- ------------------------------
<PAGE>
OR,
_____________________________
By: ______________, its general partner
By:______________________
Name:____________________
Title:___________________
AGREEMENT AND DIRECTION TO PAY - Page 8 of 8
- ------------------------------
<PAGE>
Property: ________________________________
Deposit Account No. ______________________
General Manager Account No. ______________
DEPOSIT ACCOUNT AGREEMENT
-------------------------
THIS DEPOSIT ACCOUNT AGREEMENT (this "Agreement") is executed effective as
---------
of the 31st day of July, 1996, by and among ____________________ [DEPOSITORY
BANK] (the "Bank"), AGH LEASING, L.P., a Delaware limited partnership
----
("Pledgor") and [AMERICAN GENERAL HOSPITALITY OPERATING LIMITED PARTNERSHIP,
-------
L.P., A DELAWARE LIMITED PARTNERSHIP OR ______________________] ("Property
--------
Owner").
- -----
RECITALS:
A. Pledgor and Property Owner entered into that certain Lease Agreement
dated of even date herewith (the "Lease Agreement") regarding certain real
---------------
property and the improvements thereon more particularly described therein (the
"Property").
--------
B. Pledgor also executed and delivered to Property Owner that certain
General Assignment and Agreement (as amended, restated, supplemented, or
otherwise modified from time to time, the "Assignment Agreement"), dated as of
--------------------
July 31, 1996, pursuant to which Pledgor granted, assigned and pledged to
Property Owner a continuing lien and security interest in and to, among other
things, all right, title and interest in and to Account No. ___________ and
Account No. ____________________ each maintained with the Bank for and at the
request of Pledgor (together, the "Deposit Accounts"), together with all funds,
----------------
including any investments of and earnings on said funds, now or hereafter on
deposit in the Deposit Accounts, among other accounts (the "Pledged
-------
Collateral").
- ----------
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. All monies received by the Bank for the account of Pledgor shall be
credited to the Deposit Accounts. All charges incurred in connection with the
operation of the Deposit Accounts will be charged to the Deposit Accounts.
2. The Bank agrees that, on or before the close of each business day (on
which both the Bank and Bank One, Texas, N.A. are open for the transaction of
business), the Bank will wire transfer all funds in the Deposit Accounts to the
following account (the "Operating Account")
-----------------
DEPOSIT ACCOUNT AGREEMENT - Page 1 of 10
- -------------------------
<PAGE>
maintained at Bank One, Texas, N.A., Dallas, Texas, or any successor bank
appointed pursuant to the Credit Agreement described herein (the "Cash
----
Manager"), and the Bank shall not transfer, or permit the transfer of, any funds
- -------
from the Deposit Accounts to any other account, without the prior written
consent of Property Owner:
Account No. Account Name Name and Address of the
----------- ------------ -----------------------
Depository Bank
---------------
___________ ____________ Bank One, Texas, N.A.
1717 Main Street
4th Floor
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey
3. Pledgor hereby authorizes Property Owner, from and after the
occurrence of a Bankruptcy Event (as hereinafter defined) or a default (which
has not been remedied by the end of the applicable cure period) by Pledgor in
the payment or performance of any obligation secured by the Assignment Agreement
(a "Pledgor Default"), (i) to withdraw, collect and receipt for any and all
---------------
funds on deposit in or payable on the Deposit Accounts; (ii) on behalf of
Pledgor to endorse the name of Pledgor upon any checks, drafts or other
instruments payable to Pledgor evidencing payment on the Deposit Accounts; and
(iii) to surrender or present for notation of withdrawal the passbook,
certificate or other documents issued to Pledgor in connection with the Deposit
Accounts. Property Owner shall not be liable for any loss of interest on or any
penalty or charge assessed by the Bank against funds in, payable on, or
credited to the Deposit Accounts as a result of Property Owner exercising any of
its rights or remedies under this Agreement.
As used herein, the term "Bankruptcy Event" shall mean and refer to the
----------------
occurrence of one or more of the following events: Pledgor (A) executes an
assignment for the benefit of creditors, or takes any action in furtherance
thereof; (B) admits in writing its inability to pay, or fails to pay, its debts
generally as they become due; (C) as a debtor, files a petition, case,
proceeding or other action pursuant to, or voluntarily seeks the benefit of any
applicable laws pertaining to liquidation, bankruptcy, insolvency,
reorganization, receivership, or similar laws, domestic or foreign, affecting
the rights or remedies of creditors generally, in effect from time to time
(collectively, "Debtor Relief Law"), or takes an action in furtherance thereof;
-----------------
(D) seeks the appointment of a receiver, trustee, custodian or liquidator of any
part of the Eligible Property or of any significant portion of its other
property; or (E) suffers the filing of a petition, case, proceeding or other
action against it as a debtor under any Debtor Relief Law or seeking appointment
of a receiver, trustee, custodian or liquidator of any part of the Eligible
Property or of any significant portion of its other property.
4. The Bank agrees that, upon written demand from Property Owner
following the occurrence of a Bankruptcy Event or any Pledgor Default, the Bank
will promptly place a hold on
DEPOSIT ACCOUNT AGREEMENT - Page 2 of 10
- -------------------------
<PAGE>
the withdrawal of funds on deposit in the Deposit Accounts, except the daily
transfers by the Bank to the Operating Account. The Bank shall be fully
protected in relying upon the written statement of Property Owner that the
Deposit Accounts are at the time of such demand assigned hereunder and that
Property Owner is entitled to enforce its rights hereunder. Property Owner's
receipt for sums paid to it or withdrawn from the Deposit Accounts pursuant to
such demand shall be a full and complete release, discharge and acquittance to
the Bank to the extent of the amount so paid or withdrawn.
5. Pledgor hereby (i) irrevocably directs the Bank to follow any
instructions (including, without limitation, any requests for withdrawals or
information or any instructions to close the Deposit Accounts) with request to
the Deposit Accounts and any funds from time to time held therein, that the Bank
may receive from Property Owner in accordance with this Agreement, (ii)
acknowledges and agrees that, from and after the date that the Bank receives
written notice from Property Owner of the occurrence of a Bankruptcy Event or a
Pledgor Default, the Bank will place a hold on the withdrawal of funds on
deposit in the Deposit Account and prohibit withdrawals of funds from the
Deposit Accounts except by Property Owner, and Pledgor agrees that Pledgor will
have no right thereafter to withdraw funds from or close the Deposit Accounts or
give any instructions with respect thereto, all such rights thereafter being
expressly reserved for Property Owner, and for purposes of following any
instructions of Property Owner, the Bank shall treat Property Owner as if it
were sole owner of such Deposit Accounts and the funds from time to time held
therein, without regard to any interest Pledgor may have therein, and (iii) any
funds from the Deposit Accounts that are received by Pledgor on or after the
occurrence of a Pledgor Default or a Bankruptcy Event shall be held IN TRUST for
the benefit of Property Owner and immediately delivered to Property Owner or
immediately paid into the Deposit Accounts. Without limiting any of the
foregoing, Pledgor hereby acknowledges and agrees that all fees, expenses and
other costs in connection with the Deposit Accounts shall continue to be for the
sole account of Pledgor or as may otherwise be agreed to by Pledgor.
6. The directions set forth above may not be rescinded, amended or
modified without the prior written consent of Property Owner.
7. The Bank may charge back the Deposit Accounts for any customary and
usual service charges any credit given for any items which are returned
unpaid for any reason and for related account adjustments (such service charges,
returns and adjustments, and if the funds in the Deposit Accounts have been
charged and are insufficient to compensate the Bank, then the Bank shall be
entitled to offset the aggregate amounts owned to the Bank against any funds
subsequently deposited in the Deposit Accounts.
8. The Bank may rely upon any instructions given to it in writing by any
person purporting to be a representative of Property Owner in a writing
delivered to the Bank.
DEPOSIT ACCOUNT AGREEMENT - Page 3 of 10
- -------------------------
<PAGE>
9. Pledgor hereby agrees that it will indemnify and hold harmless the
Bank from and against any and all liabilities, obligations, claims, suits,
judgments, actions, losses, costs and expenses (including reasonable attorneys'
fees) arising out of or relating to this Agreement or the Pledged Collateral
(except those arising from the gross negligence or willful misconduct of the
Bank).
10. The Bank may terminate this Agreement only upon 30 days' prior written
notice to Pledgor and Property Owner. All notices sent hereunder shall be
addressed as follows:
To Pledgor at:
AGH Leasing, L.P.
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Mr. Ken Barr
Telecopier: (214) 351-0568
To Property Owner at:
[__________________________________________OR
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.]
3860 West Northwest Highway, Suite 300
Dallas, Texas 75220
Attention: Mr. Ken Barr
Telecopier: (214) 351-0568
To the Bank at:
_________________________________
_________________________________
_________________________________
Telecopier:______________________
This Agreement may be terminated upon 30 days' prior notice to the Bank (i) by a
writing signed by Pledgor and acknowledged by Property Owner, stating Pledgor's
desire to terminate this Agreement and close the Deposit Accounts, or (ii) by
Property Owner stating that the security interest of Property Owner in the
Deposit Accounts has been released.
DEPOSIT ACCOUNT AGREEMENT - Page 4 of 10
- -------------------------
<PAGE>
11. This Agreement shall become effective upon its execution by all
parties hereto and shall then be binding upon the parties hereto and their
respective successors and assigns. This Agreement may be executed by one or more
of the parties hereto in any number of counterparts, each of which when so
executed by one or more of the parties hereto in any number of counterparts,
each of which when so executed shall be an original, but all such counterparts
together shall constitute but one and the same instrument. This Agreement may
not be amended except in writing and signed by each of Property Owner, Pledgor
and the Bank. To the extent that any other agreement between the Bank and
Pledgor contradicts the terms of this Agreement, the terms of this Agreement
shall govern. This Agreement supersedes any previous agreements between the
parties hereto, whether written or oral, and contains the entire understanding
between the parties hereto with respect to the subject matter hereof.
12. This Agreement shall be governed and construed in accordance with the
substantive laws of the State of Texas (without regard to conflict of laws
principles) and applicable United States federal law.
13. This Agreement may be executed in a number of identical counterparts,
each of which shall be deemed an original. In making proof of this Agreement, it
shall not be necessary for any party hereto to account for all counterparts, and
it shall be sufficient for such party to produce a counterpart signed by the
party to be bound hereby. It is not necessary that all parties execute the same
counterpart hereof, so long as each party executes an identical counterpart
hereof.
14. Property Owner may collaterally assign this Agreement and its rights,
in whole or in part, under this Agreement as collateral for any credit facility
(including the credit facility evidenced by the Credit Agreement) secured in
whole or in part by the Property, and Pledgor hereby irrevocably consents and
agrees to the same. In connection therewith, the parties hereto acknowledge and
agree that all of the rights and interests of Property Owner hereunder and under
the Assignment Agreement in respect of the Pledged Collateral have been assigned
to Bank One, Texas, N.A. ("BOT"), as Administrative Agent (BOT, or any successor
---
to BOT as administrative agent, herein the "Administrative Agent") under that
--------------------
Credit Agreement dated July 31, 1996, as amended from time to time, executed by
and among American General Hospitality Operating Partnership, L.P., Societe
Generale, as structuring agent, the lenders now or hereafter made a party
thereto and the Administrative Agent (the "Credit Agreement"), as evidenced, in
----------------
part, by that certain Joinder and Agreement dated of even date herewith attached
hereto and made a part of this Agreement for all purposes. The Bank acknowledges
that, until such time as the Bank receives written notice from the
Administrative Agent that the Administrative Agent no longer has any interest in
the Pledged Collateral, Property Owner shall have no rights in respect of the
Deposit Accounts and the Bank shall treat the Administrative Agent, for all
purposes herein, as the sole holder of the security interests created hereby or
by the Assignment Agreement.
DEPOSIT ACCOUNT AGREEMENT - Page 5 of 10
- ----------------------------------------
<PAGE>
EXECUTED as of the effective date set forth above.
BANK:
----
__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
PLEDGOR:
-------
AGH LEASING, L.P.,
a Delaware limited partnership
By: _____________________, a __________
corporation
its general partner
By:________________________________
Name:______________________________
Title:_____________________________
PROPERTY OWNER:
--------------
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its general
partner
By:________________________________
Name:______________________________
Title:_____________________________
DEPOSIT ACCOUNT AGREEMENT - Page 6 of 10
- -------------------------
<PAGE>
OR,
________________________________________
By: _________________, its general
partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
DEPOSIT ACCOUNT AGREEMENT - Page 7 of 10
- -------------------------
<PAGE>
JOINDER AND CONSENT
-------------------
This Joinder and Consent is attached to and forms a material part of that
Deposit Account Agreement (the "Deposit Account Agreement") dated as of July 31,
-------------------------
1996, executed by and between AGH Leasing, L.P. ("Pledgor"), [AMERICAN GENERAL
-------
HOSPITALITY OPERATING PARTNERSHIP, L.P. OR ____________________] ("Property
--------
Owner") and ___________________________ ("Bank").
- ----- ----
Pursuant to that certain Collateral Assignment and Security Agreement
("Security Agreement") dated as of July 31, 1996, executed by Property Owner to
------------------
and for the benefit of Bank One, Texas, N.A., as administrative agent (in such
capacity, "Secured Party") under that certain Credit Agreement dated as of July
-------------
31, 1996, as amended from time to time, executed by and among [PROPERTY OWNER OR
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.], Secured Party,
Societe Generale, as Structuring Agent, and the other lenders now or hereafter
made a party thereto ("Credit Agreement"), Property Owner assigned, pledged and
----------------
granted to Secured Party a continuing lien and security interest in and to
certain collateral including all of its rights under the Deposit Account
Agreement and all of its rights, title and interest in and to the Deposit
Accounts granted to it under the Deposit Account Agreement (the "Pledged
-------
Collateral").
- ----------
Property Owner hereby (i) irrevocably directs the Bank to follow any
instructions (including, without limitation, any requests for withdrawals or
information or any instructions to close the Deposit Accounts) with respect to
the Deposit Accounts and any funds from time to time held therein, that the Bank
may receive from Secured Party in accordance with this Joinder and Consent and
the foregoing Deposit Account Agreement, (ii) acknowledges and agrees that
Property Owner will have no rights in respect of the Deposit Accounts, including
any rights to give any instructions with respect thereto, all such rights
hereafter being expressly reserved for Secured Party, and for purposes of
following any instructions of Secured Party, the Bank shall treat Secured Party
as if it were sole holder of all liens and security interests encumbering the
Deposit Accounts and the funds from time to time held therein, without regard to
any interest Property Owner may have therein by virtue of the Assignment
Agreement or otherwise, and (iii) any funds from the Deposit Accounts that are
received by Property Owner on or after the occurrence of a Pledgor Default or a
Bankruptcy Event (as those terms are defined in the Deposit Account Agreement)
shall be held IN TRUST for the benefit of Secured Party and immediately
delivered to Secured Party. Property Owner further acknowledges and agrees that,
during the term of this Agreement, Property Owner will not take any action to
exercise any of its rights and interests in respect of the Assignment Agreement
or the Pledged Collateral without the prior written consent of Secured Party,
all such rights being assigned to and expressly reserved for Secured Party.
The Bank shall furnish copies of its regular statements covering the
deposits to and withdrawals from the Deposit Accounts to Pledgor and, upon the
request of Secured Party, to Secured Party at 1717 Main Street, Dallas, Texas
75201 Attention: Mr. Jeff S. Lindsey, Commercial Real Estate Lending.
DEPOSIT ACCOUNT AGREEMENT - Page 8 of 10
- -------------------------
<PAGE>
Notwithstanding anything to the contrary in the Deposit Account Agreement,
the Deposit Account Agreement may not be amended or terminated by Property Owner
without the prior written consent of Secured Party. Any notice in respect of the
Pledged Collateral, the Deposit Accounts or the Deposit Account Agreement
delivered or sent by the Bank to the Property Owner shall be sent to Secured
Party simultaneously with the delivery of such notice to Property Owner at the
following address: Bank One, Texas, N.A., 1717 Main Street, 4th Floor, Dallas,
Texas 75201 Attention: Mr. Jeff S. Lindsey, Commercial Real Estate Lending
(Telecopier: (214) 290-2275).
BANK ONE, TEXAS, N.A.
By:_____________________________________
Name:___________________________________
Title:__________________________________
ACKNOWLEDGED
AND AGREED:
BANK:
- ----
_________________________________
By:______________________________
Name:____________________________
Title:___________________________
PROPERTY OWNER:
- --------------
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its general partner
By:______________________________
Name:____________________________
Title:___________________________
DEPOSIT ACCOUNT AGREEMENT - Page 9 0f 10
- -------------------------
<PAGE>
OR,
_______________________________
By: _______________, its general partner
By:_______________________
Name:_____________________
Title:____________________
DEPOSIT ACCOUNT AGREEMENT - Page 10 of 10
- -------------------------
<PAGE>
EXHIBIT "M"
-
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
---------------------------------------
This Environmental Indemnification Agreement (this "Agreement") is made and
entered into effective for all purposes as of the _____ day of _____________,
1996, by the parties signatory hereto or to an Accession Agreement
(collectively, the "Indemnitor" whether one or more), to and for the benefit of
SOCIETE GENERALE, SOUTHWEST AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A.,
as Administrative Agent, and their respective successors, assigns and
participants (collectively referred to herein as the "Banks").
RECITALS
--------
A. On the date of this Agreement the Banks have extended a loan (the
"Loan") to American General Hospitality Operating Partnership, L.P. a Delaware
limited partnership (the "Borrower") in the original stated principal amount of
One Hundred Million and No/100 Dollars ($100,000,000) in accordance with the
terms of a Credit Agreement (the "Credit Agreement") of even date herewith
between Borrower and the Banks. The Borrower and Subsidiaries of the Borrower
now or hereafter will own certain Hotel Properties which include without
limitation the Initial Properties, the Future Properties, the Permitted
Non-Eligible Properties and the properties owned by the Permitted Other
Subsidiaries (said properties together with all property owned by the
Participating Lessees in connection with such Hotel Properties, all rights and
appurtenances to such Hotel Properties and all improvements presently located or
hereafter constructed on such Hotel Properties are hereinafter collectively call
the "Properties").
B. The Borrower is the principal financing equity for capital
requirements of its Subsidiaries, and from time to time the Borrower has made
and will continue to make capital contributions and advances to its
Subsidiaries, including the Subsidiaries which are parties hereto. Other than
the Parent, each Indemnitor is a direct or indirect subsidiary of the Borrower.
Each Indemnitor will derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement.
C. The Banks have required the execution and delivery of this Agreement
as a condition precedent to the extension of the Loan. The Banks would not be
willing to extend the Loan in the absence of the execution and delivery by
Indemnitor of this Agreement.
D. All terms used in this Agreement but not defined in this Agreement
shall have the meaning ascribed to such terms in the Credit Agreement.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, Indemnitor, as an inducement to the Banks to make the Loan,
hereby covenants and agrees to and for the benefit of the Banks as follows:
1. HAZARDOUS MATERIAL. As used in this Agreement, the term "Hazardous
------------------
Materials" shall mean any flammable explosives, radioactive materials, hazardous
wastes, hazardous materials; hazardous or toxic substances, or related materials
as defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. (S) 9601 et. seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. (S) 1801 et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C. (S) 6901 et seq.),
and in the regulations adopted and publications promulgated pursuant thereto,
and all friable asbestos, petroleum derivatives, polychlorinated biphenyls, and
materials defined as hazardous materials under any federal, state or local laws,
ordinances, codes, rules, orders, regulations or policies governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production or disposal thereof (collectively, "Environmental Laws").
2. REPRESENTATION. Except as set forth in the Environmental Reports,
--------------
Indemnitor warrants and represents to the Banks that it has no knowledge of (a)
the presence of any Hazardous Materials on any of the Properties except for
Permitted Hazardous Substances; or (b) any material spills, releases, discharges
or disposal of Hazardous Materials that have occurred or are presently occurring
off any of the Properties as a result of any construction on or operation and
use of any of the Properties. In connection with the operation and use of any of
the Properties, Indemnitor warrants and represents that, as of the date of this
Agreement, it has no knowledge of any failure to comply in all material respects
with all applicable law, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials other than as set forth in the Environmental Reports.
3. COVENANT. Indemnitor covenants and agrees not to cause or permit the
--------
presence, use, generation, release, discharge, storage, disposal or
transportation of any Hazardous Materials on, under, in, about, to or from any
of the Properties except for Permitted Hazardous Substances.
4. INDEMNIFICATION. Indemnitor shall exonerate, indemnify, pay and
---------------
protect, defend (with counsel approved pursuant to the Credit Agreement) and
save the Structuring Agent, the Administrative Agent, the Banks, and their
respective directors, trustees, beneficiaries, officers, shareholders, employees
and agents of the Banks (collectively,the "Indemnified Parties"), harmless from
and against any claims (including, without limitation, third party claims for
personal injury or real or personal Properties damage), actions, administrative
proceedings (including informal
-2-
<PAGE>
proceedings), judgments, damages, punitive damages, penalties, fines, costs,
taxes, assessments, liabilities (including, without limitation, sums paid in
settlements of claims), interest or losses, including reasonable attorneys' fees
and expenses (including, without limitation, any such reasonable fees and
expenses incurred in enforcing this Agreement or collecting any sums due
hereunder), consultant fees, and expert fees, together with all other reasonable
costs and expenses of any kind or nature (collectively, the "Costs") that arise
directly or indirectly in connection with the presence, suspected presence,
release or suspected release of any Hazardous Materials in or into the air,
soil, ground water, surface water or improvements at, on, about, under or within
any of the Properties, or any portion thereof, or elsewhere in connection with
the transportation of Hazardous Materials to or from any of the Properties (any
such release being referred to herein as a "Release"; provided however that
Indemnitor shall not be so liable for any Costs arising because of the gross
negligence or wilful misconduct of an Indemnified Party or Costs arising because
of a Release for a Property after the Administrative Agent or the Administrative
Agent's nominee acquires title to such Property. INDEMNITOR'S OBLIGATION TO SO
INDEMNIFY THE INDEMNIFIED PARTIES SHALL INCLUDE INDEMNIFICATION FOR ANY OF SUCH
MATTERS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED
PARTIES. The indemnification provided in this paragraph shall specifically apply
to and include claims or actions brought by or on behalf of tenants or employees
of Indemnitor; Indemnitor hereby expressly waives (with respect to any claims of
the Indemnified Parties arising under this Agreement) any immunity to which
Indemnitor may otherwise be entitled under any industrial or worker's
compensation laws. In the event any of the Indemnified Parties shall suffer or
incur any such Costs, Indemnitor shall pay to the Administrative Agent for the
benefit of the Indemnified Party the total of all such Costs suffered or
incurred by such Indemnified Party within ten (10) days after demand therefor,
such payment to be disbursed by Administrative Agent in accordance with the
Credit Agreement. Without limiting the generality of the foregoing, the
indemnification provided by this paragraph 4 shall specifically cover Costs,
including, without limitation, capital, operating and maintenance costs,
incurred in connection with any investigation or monitoring of site conditions,
any clean-up, containment, remedial, removal or restoration work required or
performed by any federal, state or local governmental agency or political
subdivision ("Governmental Agency") or performed by any non-governmental entity
or person as required or requested, by any Governmental Agency because of the
presence, suspected presence, release or suspected release of any Hazardous
Materials in or into the air, soil, groundwater, surface water or improvements
at, on, under or within any of the Properties (or any portion thereof), or
elsewhere in connection with the transportation of Hazardous Materials to or
from any of the Properties, and any claims of third parties for loss or damage
due to such Hazardous Materials.
5. REMEDIAL WORK. In the event any investigation or monitoring of site
-------------
conditions or any clean-up, containment, restoration, removal or other remedial
work ("Remedial Work") is required (a) under any Environmental Law, (b) by any
judicial, arbitral or administrative order, (c)
-3-
<PAGE>
in order to comply with any agreements affecting any of the Properties, or (d)
to maintain any of the Properties in a standard of environmental condition which
prevents the release or generation of any Hazardous Materials except for
Permitted Hazardous Substances, Indemnitor shall perform or cause to be
performed such Remedial Work; provided, that Indemnitor may withhold
commencement of such Remedial Work pending resolution of any good faith contest
regarding the application, interpretation or validity of any law, regulation,
order or agreement, subject to the requirements of Paragraph 6 below. All
Remedial Work shall be conducted (i) in a diligent and timely fashion by a
licensed environmental engineer, (ii) pursuant to a detailed written plan for
the Remedial Work approved by any Governmental Agency with a legal or
contractual right to such approval, (iii) with such insurance coverage
pertaining to liabilities arising out of the Remedial Work as is then
customarily maintained with respect to such activities and (iv) only following
receipt of all required permits, licenses or approvals. In addition, Indemnitor
shall submit to the Banks promptly upon receipt or preparation, copies of any
and all reports, studies, analyses, correspondence, governmental comments or
approvals, proposed removal or other Remedial Work contracts and similar
information prepared or received by Indemnitor in connection with any Remedial
Work or Hazardous Materials relating to any of the Properties. All costs and
expenses of such Remedial Work shall be paid by Indemnitor, including, without
limitation, the charges of the Remedial Work contractors and the consulting
environmental engineer, any taxes or penalties assessed in connection with the
Remedial Work and the Banks' reasonable fees and costs incurred in connection
with monitoring or review of such Remedial Work. In the event Indemnitor should
fail to commence or cause to be commenced such Remedial Work, in a timely
fashion, or fail diligently to prosecute to completion, such Remedial Work, the
Administrative Agent following consent of the Majority Banks (following thirty
(30) days written notice to Indemnitor) may, but shall not be required to, cause
such Remedial Work to be performed, and all costs and expenses thereof, or
incurred in connection therewith shall be Costs within the meaning of paragraph
4 above. All such Costs shall be due and payable to the Administrative Agent by
Indemnitor upon (30) days after demand therefor, such payments to be disbursed
by the Administrative Agent in accordance with the Credit Agreement.
6. PERMITTED CONTESTS. Notwithstanding any provision of this Agreement
------------------
to the contrary, Indemnitor may contest by appropriate action any Remedial Work
requirement imposed by any Governmental Agency provided that (a) if the Loan
then remains outstanding, no "Event of Default" has occurred and is continuing
under the Credit Agreement or any Credit Documents, (b) Indemnitor has given the
Banks written notice that Indemnitor is contesting or shall contest and
Indemnitor does in fact contest the application, interpretation or validity of
the law, regulation, order or agreement pertaining to the Remedial Work by
appropriate legal or administrative proceedings conducted in good faith and with
due diligence and dispatch, (c) such contest shall not subject any of the
Indemnified Parties nor any assignee of all or any portion of the Banks'
interest in the Loan nor any of the Properties to civil or criminal liability
and does not jeopardize any such party's lien upon or interest in any of the
Properties and (d) if the estimated cost of the Remedial Work is greater
-4-
<PAGE>
than $2,500,000, Indemnitor shall give such security or assurances as may be
reasonably required by the Banks as determined pursuant to the Credit Agreement
to ensure ultimate compliance with all legal or contractual requirements
pertaining to the Remedial Work (and payment of all costs, expenses, interest
and penalties in connection therewith) and to prevent any sale, forfeiture or
loss by reason of nonpayment or noncompliance.
7. REPORTS AND CLAIMS. Indemnitor shall deliver to the Banks copies of
------------------
any reports, analyses, correspondence, notices, licenses, approvals, orders or
other written materials relating to the environmental condition of any of the
Properties promptly upon receipt, completion or delivery thereof. Indemnitor
shall give notice to the Banks of any claim, action, administrative proceeding
(including, without limitation, informal proceedings) or other demand by any
governmental agency or other third party involving Costs or Remedial Action at
the time such claim or other demand first becomes known to Indemnitor. Receipt
of any such notice shall not be deemed to create any obligation on the Banks to
defend or otherwise respond to any claim or demand. All notices, approvals,
consents, requests and demands upon the respective parties hereto shall be in
writing, including telegraphic communication and delivered or teletransmitted to
the Administrative Agent, as set forth in the Credit Agreement and to each
Indemnitor, at the address set forth beneath such Indemnitor's signature or in
the Accession Agreement executed by such Indemnitor, or to such other address as
shall be designated by any Indemnitor or the Administrative Agent in written
notice to the other parties. All such notices and other communications shall be
effective when delivered or teletransmitted to the above addresses.
8. BANKS AS OWNER. If for any reason, including foreclosure of the
--------------
Mortgages, the Administrative Agent or any of the Banks (or any successor or
assign of such parties) becomes the fee owner of any of the Properties and any
claim, action, notice, administrative proceeding (including, without limitation,
informal proceedings) or other demand is made by any governmental agency or
other third party which implicate Costs or Remedial Work, Indemnitor shall
cooperate with such party in any defense or other appropriate response to any
such claim or other demand; provided however that Indemnitor shall not be
so liable for any Costs arising because of the gross negligence or wilful
misconduct of an Indemnified Party. Indemnitor's duty to cooperate and right to
participate in the defense or response to any such claim or demand shall not be
deemed to limit or otherwise modify Indemnitor's obligations under this
Agreement. Any Party subject to a claim or other proceeding referenced in the
first sentence of this paragraph 8 shall give notice to Indemnitor of any claim
or demand governed by this paragraph 8 at the time such claim or other demand
first becomes known to such party.
9. SUBROGATION OF INDEMNITY RIGHTS. If Indemnitor fails to fully perform
-------------------------------
its obligations under paragraphs 4 and 5 above, the Indemnified Parties shall be
subrogated to any rights or claims Indemnitor may have against any present,
future or former owners, tenants or other
-5-
<PAGE>
occupants or users of any of the Properties, any portion thereof or any adjacent
or proximate properties, relating to the recovery of Costs or the performance of
Remedial Work.
10. ASSIGNMENT BY AGENTS AND BANKS. No consent by Indemnitor shall be
------------------------------
required for any assignment or reassignment of the rights of the Structuring
Agent, the Administrative Agent or the Banks under this Agreement to any
successor of such party or a purchaser of the Loan or any interest in or portion
of the Loan including participation interests.
11. MERGER, CONSOLIDATION, OR SALE OF ASSETS. In the event Indemnitor is
----------------------------------------
dissolved, liquidated or terminated or all or substantially all the assets of
Indemnitor are sold or otherwise transferred to one or more persons or other
entities, the surviving entity or transferee or assets, as the case may be, (i)
shall be formed and existing under the laws of a state, (ii) shall deliver to
the Banks an acknowledged instrument in recordable form assuming all
obligations, covenants and responsibilities of Indemnitor under this Agreement.
12. INDEPENDENT OBLIGATIONS: SURVIVAL. The obligations of Indemnitor
---------------------------------
under this Agreement shall survive the consummation of the Loan transaction
described above and the repayment of the Loan and reconveyance or foreclosure of
the Mortgages. The obligations of Indemnitor under this Agreement are separate
and distinct from the obligations of Indemnitor under the Credit Documents, and
are not secured by the Mortgages or by any of the other Credit Documents
encumbering any of the Properties. This Agreement may be enforced by the Banks
without regard to or affecting any rights and remedies the Administrative Agent
and/or the Banks may have against Indemnitor under the Credit Documents and
without regard to any limitations on the Administrative Agent's or Banks'
recourse for recovery of the Loan as may be provided in the Credit Documents.
Enforcement of this Agreement is not and shall not be deemed to constitute an
action for recovery of the indebtedness of the Loan or for recovery of a
deficiency judgment against Indemnitor following foreclosure of the Mortgages or
any other Credit Documents encumbering any of the Properties.
13. DEFAULT INTEREST. In addition to all other rights and remedies of the
----------------
Banks against Indemnitor as provided herein, or under applicable law, Indemnitor
shall pay to the Administrative Agent, immediately upon demand therefor, Default
Interest (as defined below) on any Costs and other payments required to be paid
by Indemnitor to the Banks under this Agreement which are not paid within ten
(10) days after demand therefor, such payments to be disbursed by the
Administrative Agent in accordance with the Credit Agreement. Default Interest
shall be paid by Indemnitor from the date such payment becomes delinquent
through and including the date of payment of such delinquent sums. "Default
Interest" shall mean a per annum interest rate equal to three points above the
Adjusted Prime Rate or reference rate for the then current calendar month, as
-6-
<PAGE>
of the first day of such calendar month, which is publicly announced from time
to time by the Administrative Agent.
14. CONTRIBUTION. As a result of the transactions contemplated by the
------------
Credit Agreement, each of the Indemnitors will benefit, directly and indirectly,
from the Obligations and in consideration thereof desire to enter into a
contribution agreement among themselves as set forth in this Section 14 to
allocate such benefits among themselves and to provide a fair and equitable
arrangement to make contributions in the event any payment is made by any
Indemnitor hereunder to the Structuring Agent, the Administrative Agent or the
Banks (such payment being referred to herein as a "Contribution," and for
purposes of this Agreement, includes any exercise of recourse by the
Administrative Agent against any Property of a Contributor designated as
collateral under any Security Document and application of proceeds of such
collateral in satisfaction of such Indemnitor's obligations under this
Agreement). The Indemnitors hereby agree as follows:
14.01 Calculation of Contribution. In order to provide for just and
---------------------------
equitable contribution among the Indemnitors in the event any Contribution
is made by a Indemnitor (a "Funding Indemnitor"), such Funding Indemnitor
shall be entitled to a contribution from certain other Indemnitors for all
payments, damages and expenses incurred by that Funding Indemnitor in
discharging any of the obligations under this Agreement (the
"Obligations"), in the manner and to the extent set forth in this Section.
The amount of any Contribution under this Agreement shall be equal to the
payment made by the Funding Indemnitor to the Administrative Agent or any
other beneficiary pursuant to this Agreement and shall be determined as of
the date on which such payment is made.
14.02 Benefit Amount Defined. For purposes of this Agreement, the
----------------------
"Benefit Amount" of any Indemnitor as of any date of determination shall be
the net value of the benefits to such Indemnitor and all of its
Subsidiaries (including any Subsidiaries which may be Indemnitors) from
extensions of credit made by the Banks to the Borrower under the Credit
Agreement; provided, that in determining the contribution liability of any
Indemnitor which is a Subsidiary to its direct or indirect parent
corporation or of any Indemnitor to its direct or indirect Subsidiary, the
Benefit Amount of such Subsidiary and its Subsidiaries, if any, shall be
subtracted in determining the Benefit Amount of the parent corporation.
Such benefits shall include benefits of funds constituting proceeds of
Advances made to the Borrower by the Banks which are in turn advanced or
contributed by the Borrower to such Indemnitor or its Subsidiaries and
benefits of Letters of Credit issued pursuant to the Credit Agreement on
behalf of, or the proceeds of which are advanced or contributed or
otherwise benefit, directly or indirectly, such Indemnitor and its
Subsidiaries (collectively, the "Benefits"). In the case of any proceeds of
Advances or Benefits advanced or contributed to a Person (an "Owned
Entity") any of the equity interests of which are owned directly or
-7-
<PAGE>
indirectly by a Indemnitor, the Benefit Amount of a Indemnitor with respect
thereto shall be that portion of the net value of the benefits attributable
to Advances or Benefits equal to the direct or indirect percentage
ownership of such Indemnitor in its Owned Entity.
14.03. Contribution Obligation. Each Indemnitor shall be liable to a
-----------------------
Funding Indemnitor in an amount equal to the greater of (A) the (i) ratio
of the Benefit Amount of such Indemnitor to the total amount of
Obligations, multiplied by (ii) the amount of Obligations paid by such
Funding Indemnitor and (B) 95% of the excess of the fair saleable value of
the property of such Indemnitor over the total liabilities of such
Indemnitor (including the maximum amount reasonably expected to become due
in respect of contingent liabilities) determined as of the date on which
the payment made by a Funding Indemnitor is deemed made for purposes of
this Agreement (giving effect to all payments made by other Funding
Indemnitors as of such date in a manner to maximize the amount of such
contributions).
14.04 Allocation. In the event that at any time there exists more
----------
than one Funding Indemnitor with respect to any Contribution (in any such
case, the "Applicable Contribution"), then payment from other Indemnitors
pursuant to this Agreement shall be allocated among such Funding
Indemnitors in proportion to the total amount of the Contribution made for
or on account of the Borrower by each such Funding Indemnitor pursuant to
the Applicable Contribution. In the event that at any time any Indemnitor
pays an amount under this Agreement in excess of the amount calculated
pursuant to clause (A) of Subsection 14.03 above, that Indemnitor shall be
deemed to be a Funding Indemnitor to the extent of such excess and shall be
entitled to contribution from the other Indemnitors in accordance with the
provisions of this Section.
14.05 Subsidiary Payment. The amount of contribution payable under
------------------
this Section by any Indemnitor shall be reduced by the amount of any
contribution paid hereunder by a Subsidiary of such Indemnitor.
14.06 Equitable Allocation. If as a result of any reorganization,
--------------------
recapitalization, or other corporate change in the Borrower or any of its
Subsidiaries, or as a result of any amendment, waiver or modification of
the terms and conditions of other Sections of this Agreement or the
Obligations, or for any other reason, the contributions under this Section
become inequitable as among the Indemnitors, the Indemnitors shall promptly
modify and amend this Section to provide for an equitable allocation of
contributions. Any of the foregoing modifications and amendments shall be
in writing and signed by all Indemnitors.
-8-
<PAGE>
14.07. Asset of Party to Which Contribution is Owing. The
---------------------------------------------
Indemnitors acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the Indemnitor to which such contribution
is owing.
14.08. Subordination. No payments payable by a Indemnitor pursuant
-------------
to the terms of this Section 14 shall be paid until all amounts then due
and payable by the Borrower to the Administrative Agent, the Structuring
Agent or any Bank, pursuant to the terms of the Credit Documents, are paid
in full in cash. Nothing contained in this Section 14 shall affect the
obligations of any Indemnitor to the Administrative Agent, the Structuring
Agent or any Bank under the Credit Agreement or any other Credit Documents.
15. MISCELLANEOUS. If there shall be more than one Indemnitor hereunder,
-------------
or pursuant to any other indemnification of Banks relating to Hazardous
Materials arising out of or in connection with the Loan ("Other Indemnitor"),
each Indemnitor and Other Indemnitor agrees that (a) the obligations of the
Indemnitor hereunder, and each Other Indemnitor, are joint and several, (b) a
release of any one or more Indemnitors or Other Indemnitors or any limitation of
this Agreement in favor of or for the benefit of one or more Indemnitors or
Other Indemnitors shall not in any way be deemed a release of or limitation in
favor of or for the benefit of any other Indemnitor or Other Indemnitor and (c)
a separate action hereunder may be brought and prosecuted against any or all
Indemnitors or Other Indemnitors. If any term of this Agreement or any
application thereof shall be invalid, illegal or unenforceable, the remainder of
this Agreement and any other application of such term shall not be affected
thereby. No delay or omission in exercising any right hereunder shall operate as
a waiver of such right or any other right. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Indemnitor and the Banks, and
their respective successors and assigns, including (without limitation) any
assignee or purchaser of all or any portion of the Banks' interest in (i) the
Loan, (ii) the Credit Documents, or (iii) any of the Properties.
16. GOVERNING LAW. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Texas. Each Indemnitor
hereby irrevocably submits to the jurisdiction of any Texas state or federal
court sitting in Dallas, Texas in any action or proceeding arising out of or
relating to this Agreement and the other Credit Documents, and such Indemnitor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court. Each Indemnitor hereby
irrevocably waives, to the fullest extent it may effectively do so, any right it
may have to the defense of an inconvenient forum to the maintenance of such
action or proceeding. Each Indemnitor hereby agrees that service of copies of
the summons and complaint and any other process which may be served in any such
action or proceeding may be made by mailing or delivering a copy of such process
to such Indemnitor at its address specified below. Each Indemnitor agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment
-9-
<PAGE>
or in any other manner provided by law. Nothing in this Section shall affect the
rights of any of the Banks to serve legal process in any other manner permitted
by the law or affect the right of any of the Banks to bring any action or
proceeding against any Indemnitor or its Property in the courts of any other
jurisdiction.
17. WAIVERS OF JURY TRIALS. EACH INDEMNITOR HEREBY IRREVOCABLY AND
----------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OTHER CREDIT DOCUMENT OR TO ANY COUNTERCLAIM
THEREIN.
18. AMENDMENTS/ACCESSION AGREEMENT. No waiver of any provision of this
------------------------------
Agreement nor consent to any departure by any Indemnitor therefrom shall be
effective unless the same shall be in writing and signed by the Administrative
Agent and the Majority Banks, and no amendment of this Agreement shall be
effective unless the same shall be in writing and signed by the Administrative
Agent, with the consent of the Majority Banks; provided that any amendment or
--------
waiver releasing any Indemnitor from any liability hereunder shall be signed by
all the Banks; and provided further that any waiver or consent shall be
----------------
effective only in the specific instance and for the specific purpose for which
given. Notwithstanding the foregoing, in the event that any Subsidiary or
Affiliate of the Borrower hereafter is required in accordance with the terms of
the Credit Agreement or otherwise agrees to become a Indemnitor under this
Agreement, then such Subsidiary or Affiliate may become a party to this
Agreement by executing an Accession Agreement ("Accession Agreement") in the
form attached hereto as Annex 1, and each Indemnitor and the Administrative
-------
Agent hereby agrees that upon such Subsidiary's or Affiliate's execution of such
Accession Agreement, this Agreement shall be deemed to have been amended to make
such Person an Indemnitor hereunder for all purposes and a party hereto and no
signature is required on behalf of the other Indemnitors or the Administrative
Agent to make such an amendment to this Agreement effective.
-10-
<PAGE>
IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be executed as
of the day and year first written above.
INDEMNITORS:
AMERICAN GENERAL HOSPITALITY
CORPORATION, a Maryland corporation
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
Address: 3860 W.Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone:(214)904-2004
Telecopy: (214)351-0568
AGH UPREIT, LLC, a Delaware limited liability company
By: American General Hospitality Corporation, member
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Address: 3860 W.Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone:(214)904-2004
Telecopy: (214)351-0568
-11-
<PAGE>
3100 GLENDALE JOINT VENTURE,
an Ohio general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:___________________________________
Name:_________________________________
Title:________________________________
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc., its general partner
By:______________________________
Name:____________________________
Title:___________________________
By: American General Hospitality Operating
Partnership, L.P., its partner
By: AGH GP, INC., general partner
By:___________________________________
Name:_________________________________
Title:________________________________
Address: 3860 W. Northwest Highway
Dallas Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
-12-
<PAGE>
MDV LIMITED PARTNERSHIP,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:___________________________________
Name:_________________________________
Title:________________________________
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:______________________________
Name:____________________________
Title:___________________________
Address: 3860 W. Northwest Highway
Dallas Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
-13-
<PAGE>
MADISON MOTEL ASSOCIATES,
a Wisconsin general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., its
partner
By: AGH GP, Inc., general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 315-0568
-14-
<PAGE>
183 HOTEL ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general manager
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
-15-
<PAGE>
RICHMOND WILLIAMSBURG ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
-16-
<PAGE>
2929 WILLIAMS LIMITED LIABILITY COMPANY, a
Delaware limited liability company
By: AGH UPREIT, LLC
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., general partner
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., its
member
By: AGH GP, Inc., general partner
By:________________________________
Name:______________________________
Title:_____________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
-17-
<PAGE>
ANNEX 1
to Environmental Indemnification Agreement
ACCESSION AGREEMENT
_______________________[NAME OF ENTITY], a __________________ [limited
partnership/corporation] (the "Company"), hereby agrees with (i) BANK ONE,
TEXAS, N.A., as Administrative Agent (the "Agent") under the Credit Agreement
dated as of ________ __, 1996 among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership, as the Borrower, SOCIETE
GENERALE, SOUTHWEST AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as
Administrative Agent, and the Banks (as such agreement is amended from time to
time in accordance with its terms, the "Credit Agreement"; capitalized terms
used herein and not otherwise defined having the meanings set forth therein),
(ii) the parties to the Environmental Indemnity Agreement (the "Environmental
Indemnity Agreement") dated as of __________ __, 1996 executed in connection
with the Credit Agreement, and (iii) the parties to the Guaranty and
Contribution Agreement (the "Guaranty") dated as of _________ __, 1996 executed
in connection with the Credit Agreement as follows:
The Company hereby agrees and confirms that, as of the date hereof, it (a)
intends to be a party to the Environmental Indemnity Agreement and the Guaranty
and undertakes to perform all the obligations expressed therein, respectively,
of an Indemnitor and a Guarantor (as defined in the Environmental Indemnity
Agreement and the Guaranty, respectively), (b) agrees to be bound by all of the
provisions of the Environmental Indemnity Agreement and the Guaranty as if it
had been an original party to such agreements, and (c) confirms that the
representations and warranties set forth in the Environmental Indemnity
Agreement and the Guaranty, respectively, with respect to the Company, a party
thereto, are true and correct in all material respects as of the date of this
Accession Agreement.
For purposes of notices under the Environmental Indemnity Agreement and the
Guaranty the address for the Company is as follows:
________________________________________
________________________________________
Attention:______________________________
Telephone:______________________________
Telecopy:_______________________________
This Accession Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF this Accession Agreement was executed and delivered as
of the ___ day of ________________, 19__.
[NAME OF ENTITY]
________________________________________
By:_____________________________________
Title:__________________________________
<PAGE>
EXHIBIT "N"
FORM OF
FRANCHISOR'S CONSENT AND AGREEMENT
----------------------------------
THIS FRANCHISOR'S CONSENT AND AGREEMENT ("Agreement"), dated as of
___________, 1996, is executed by ________________________________________, a
______________________________ ("Franchisor"), having its address at
_______________________________________, in connection with that certain Credit
Agreement (the "Credit Agreement") dated as of ______________, 1996, by and
between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("Borrower"); SOCIETE GENERALE, a French banking corporation
acting through its Southwest Agency, as Structuring Agent (the bank in such
capacity and its successors and assigns are referred to herein as "Structuring
Agent"); BANK ONE, TEXAS, N.A., a national banking association, having its
address at 1717 Main Street, 4th Floor, P.O. Box 655415, Commerical Real Estate
Department - Mr. Jeff S. Lindsey, Dallas, Texas 75201, as Administrative Agent
(the bank in such capacity and its successors and assigns are referred to herein
as "Administrative Agent"; the Structuring Agent and the Administrative Agent
are collectively referred to herein as the "Agents"); and the banks and other
financial institutions a party thereto (the "Banks").
WHEREAS, pursuant to the Credit Agreement the Banks have agreed to make a
loan (the "Loan") in the amount of $100,000,000.00 to Borrower to be secured by,
among other things, certain real property situated on the land more particularly
described in Exhibit "A" attached hereto and incorporated herein by this
reference (the "Property");
WHEREAS, either Borrower or an affiliate of Borrower ("Owner") has or will
become the owner of the Property;
WHEREAS, Owner will lease the Property to AGH Leasing, L.P., a Delaware
limited partnership ("Lessee");
NOW, THEREFORE, in consideration of the foregoing recitals and ten dollars
($10.00) in hand paid to Franchisor by Borrower, Franchisor warrants, represents
and agrees with the Agents and the Banks as follows:
<PAGE>
1. FRANCHISOR'S REPRESENTATIONS: Franchisor warrants and represents to
----------------------------
the Agents and the Banks that the following are true and correct:
(a) That Franchisor has granted a license or franchise to Lessee in
connection with the Property and the improvements on the Property (the
"Improvements").
(b) That the entire agreement between Franchisor and Lessee for such
license or franchise is evidenced by an agreement (hereinafter referred to as
the "Franchise Agreement"), a true and correct copy of which is attached hereto
as Exhibit "B" and made a part hereof for all purposes.
(c) That the Franchise Agreement constitutes the valid and binding
agreement of Franchisor, enforceable in accordance with its terms, and
Franchisor has full authority under all state or local laws and regulations to
perform all of its obligations under said Franchise Agreement.
(d) That the licensee or franchisee under the Franchise Agreement is not
in default in the performance of any of its obligations under the Franchise
Agreement.
2. FRANCHISOR'S AGREEMENTS: Lease has advised Franchisor that Lessee
-----------------------
intends to pledge the Franchise Agreement as additional collateral for the Loan.
Franchisor hereby consents to the assignment of the Franchise Agreement to
Administrative Agent for the benefit of the Banks to secure the Loan. Further,
Franchisor hereby agrees to each and every one of the following for the benefit
of the Banks and as an inducement to the Banks to extend credit to Borrower
pursuant to the terms of the Credit Agreement:
(a) In the event of a default by Lessee or Borrower under any term,
covenant or provision of the Franchise Agreement, Franchisor will give
Administrative Agent thirty (30) days prior written notice of such default prior
to Franchisor's exercise of any of its rights or remedies under such Franchise
Agreement or at law, and Administrative Agent and the other Banks shall have the
right, but not the obligation, during said thirty (30) day period to cure such
default; provided, however, that if such default cannot be reasonably cured
during such thirty (30) day period, Administrative Agent and the Banks shall
have such longer period as is reasonably necessary to cure such default as long
as Administrative Agent or any Bank commences such cure within such thirty (30)
day period. Only in the event Administrative Agent and the Banks fail to timely
cure or cause to be cured any such default as provided in the foregoing sentence
shall Franchisor have the right to terminate the Franchise
-2-
<PAGE>
Agreement. Franchisor will deliver to Administrative Agent a copy of all
notices of termination given by Franchisor to Lessee under the Franchise
Agreement simultaneously with the delivery of any such notice of termination to
Lessee.
(b) the Franchise Agreement and any and all liens, rights and interests
(whether choate or inchoate and including, without limitation, all mechanic's
and materialman's liens under applicable law) owned, claimed or held, or to be
owned, claimed or held by the Franchisor in and to the Property and the
Improvements now or hereafter constructed thereon, are and shall be in all
things subordinate and inferior to the full repayment of the Loan and the liens
and security interests created or to be created for the benefit of the Banks,
its successors and assigns, and securing the repayment of the Loan and
including, without limitation, those created under and by virtue of that certain
[Deed of Trust/Mortgage], Security Agreement, Assignment of Rents and Financing
Statement dated as of the date of the Credit Agreement (the "Mortgage"),
executed by Owner in favor of the Administrative Agent, as agent for the Banks,
covering the Property and filed or to be filed of record in the public records
maintained for the recording of mortgages and/or deeds of trust in the county
and state in which the Property is located, and all renewals and extensions
thereof.
(c) Upon the occurrence of an Event of Default (as defined in the Credit
Agreement), Franchisor shall, at the request of Administrative Agent, its
successors or assigns, continue performance on Administrative Agent's, its
successors' or assigns', behalf in accordance with the terms of the Franchise
Agreement, provided that Franchisor shall be paid all sums due or to become due
it in accordance with said Franchise Agreement following the date Administrative
Agent makes such request.
(d) Franchisor will not amend or modify the Franchise Agreement without
the prior written consent of Administrative Agent. In the event Franchisor
fails to secure such approval, the Franchise Agreement shall, for the purposes
of Franchisor's obligation aforesaid to continue performance thereunder for
Administrative Agent's and the Banks' benefit, be deemed not to have been
modified by such amendment.
(e) Neither the Agents, nor the Banks have an obligation to Franchisor
with respect to the Loan, and Agents and the Banks' obligations to Borrower and
Owner with respect thereto are set forth in the Credit Agreement and certain
other Credit Documents by and between Bank, Borrower and Owner ("Credit
Documents"), with respect to which the Franchisor is not a third party
beneficiary. The relationship of Bank to Borrower
-3-
<PAGE>
and to Owner is one of a creditor to a debtor, and Bank is not a joint
venturer or partner of Owner.
(f) Franchisor further agrees that nothing herein shall impose upon the
Agents or the Banks any obligation for payment or performance in favor of
Franchisor unless Administrative Agent notifies Franchisor in writing after an
Event of Default, that (i) Administrative Agent has elected to assert the
Lessee's rights under the Franchise Agreement and (ii) Administrative Agent
agrees to pay Franchisor the sums due Franchisor under the terms of the
Franchise Agreement.
(g) Franchisor covenants and agrees that, upon Administrative Agent or any
Bank or any other party (a "Subsequent Owner") acquiring title to the Property
and Improvements either through foreclosure or by acceptance of a deed,
assignment or other conveyance in lieu thereof (collectively, "Foreclosure") or
after Foreclosure, any Subsequent Owner shall have the continuing right to
terminate the Franchise Agreement upon no less than thirty (30) days prior
written notice to Franchisor without any obligation to pay a termination or
cancellation fee or penalty to Franchisor. A Subsequent Owner shall only incur
liability to Franchisor under the Franchise Agreement during such Subsequent
Owner's ownership of the Property and Improvements. Upon a sale, conveyance,
transfer or other assignment of the Property and Improvements or a termination
of the Franchise Agreement, a Subsequent Owner shall have no further liability
to Franchisor under the Franchise Agreement from the date of such sale,
conveyance, transfer, assignment or termination.
(h) Franchisor hereby represents and warrants that no prior assignment of
Franchisor's interest in the Agreements has been made, and Franchisor agrees and
covenants not to assign, sell, pledge, transfer or otherwise encumber
Franchisor's interest in the Agreements so long as any portion of the Loan
remains outstanding.
(i) Franchisor has executed this Agreement for the purpose of inducing
the Banks to advance sums to Borrower under the Credit Agreement and with full
knowledge and intent that the Banks shall rely upon the representations,
warranties and agreements herein contained when making advances to Borrower, and
that but for this instrument and the representations, warranties and agreements
herein contained, the Banks would not take such actions.
3. NOTICES: All notices hereunder shall be hand-delivered or sent by
-------
United States registered or certified mail, with return receipt requested,
postage prepaid to the parties hereto at their respective addresses set forth
above
-4-
<PAGE>
(or at such other address as shall be given in writing in the manner set forth
above) and shall be deemed given upon receipt.
4. LESSEE'S CONSENT: Lessee has joined herein to evidence its consent to
----------------
all the agreements of Franchisor contained in this Agreement.
EXECUTED this the ______ day of ____________, 199__.
FRANCHISOR:
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
[ADD ACKNOWLEDGMENT IN THE FORM OF THE STATE IN WHICH THE PROPERTY IS LOCATED]
-5-
<PAGE>
LESSEE:
AGH LEASING, L.P., a
Delaware limited partnership
By:_________________________,
its general partner
BY:__________________________
NAME:________________________
TITLE:_______________________
[ADD ACKNOWLEDGEMENT IN THE FORM OF THE STATE IN WHICH THE PROPERTY IS LOCATED]
-6-
<PAGE>
EXHIBITS
--------
Exhibit "A" - Legal Description
Exhibit "B" - Franchise Agreement
<PAGE>
[LETTERHEAD OF HOLIDAY INN]
July 11, 1996 VIA OVERNIGHT COURIER
---------------------
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Attn: Jeff Lindsey
Dallas, TX 75201
RE: LICENSE AGREEMENT BETWEEN HOLIDAY INNS FRANCHISING, INC. ("HIFI") AND
AGH LEASING, L.P. ("LICENSEE") DATED JULY 18, 1996, (THE "LICENSE")
FOR THE HOLIDAY INN HOTEL LOCATED AT DALLAS-FT. WORTH-ARPT-WEST,
TX/#1814 ("HOTEL")
Ladies and Gentlemen:
HIFI has entered into a License pertaining to the operation of the Hotel as
a Holiday Inn hotel. Attached hereto on Exhibit "A" is a list of lenders
("Lenders") that are entitled to have the benefits of this Letter Agreement. The
initial Lender to have the benefits of this Letter Agreement is Bank One, Texas,
N.A., 1717 Main Street, 4th Floor, Dallas, Texas 75201 ("Servicing Lender").
Bank One, Texas, N.A. may in the future designate in writing to HIFI any other
Lender identified on Exhibit "A" to have the benefits of this Letter Agreement
in its place and such Lender shall thereafter be the Servicing Lender.
1. HIFI shall use its reasonable efforts to give Servicing Lender 30
days' prior written notice of any voluntary surrender by Licensee of the
License (to the extent that HIFI is aware in advance of any such voluntary
surrender); and HIFI shall also give Servicing Lender 30 days' prior written
notice of any action it intends to take under the License as a result of any
default(s) by Licensee under the License, provided (a) that the first mortgage
of which Servicing Lender is involved and the License are in full force and
effect at the time of the event(s) set out above; (b) that Servicing Lender is
not in receivership or conservatorship; (c) that Servicing Lender has not been
taken over by any state or federal regulatory agency; and (d) that neither
Servicing Lender nor any of its respective directors or officers have entered
into any cease and desist order or any other formal or informal written
agreement with a federal or state regulatory agency. The notice given to
Servicing Lender concerning Licensee's default(s) will allow Servicing Lender 30
days from the date thereof to cure or cause to be cured the default(s). HIFI may
at its option, upon Servicing Lender's written request to it, deliver to
Servicing Lender copies of any of its product quality reports and/or notices of
non-payment of fees pertaining to the Hotel.
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -2-
2. (A) In the event Servicing Lender acquires possession and control of
the Hotel by foreclosure or deed in lieu of foreclosure or otherwise, either:
(1) while the License is in full force and effect; or (2) within 60 days
following the date of HIFI's termination of the License; Servicing Lender shall
have 30 days from such acquisition to elect, by written notice to HIFI
accompanied by a non-refundable processing charge of $5,000.00, to obtain a new
License in the form and specifying the royalty and other fees then being used or
charged by HIFI and for a term equal to the balance of the original term under
the License, except that Servicing Lender shall not be charged the initial fee
(as same as described in HIFI's then current Franchise Offering Circular for
Prospective Franchisees), provided: (a) that Servicing Lender is not in
receivership or conservatorship; (b) that Servicing Lender has not been taken
over by any state or federal regulatory agency; and (c) that neither Servicing
Lender, nor any of its respective directors or officers have entered into any
cease and desist order or any other formal or informal written agreement with a
federal or state regulatory agency.
(B) All defaults and breaches under the License must be cured by
Servicing Lender within 30 days from the date of Servicing Lender's election to
obtain a new License including, but not limited to any monies due with respect
to the Hotel, to HIFI, or its parent, subsidiaries, divisions or affiliates.
With respect to any defaults or breaches of a non-monetary nature which are not
reasonably capable of being cured within said 30-day period, HIFI may extend,
for such time as it in its sole discretion may reasonably determine, the period
of time in which such defaults(s) may be cured. A new License will not be
issued to Servicing Lender until all defaults are cured. Servicing Lender shall
further comply with HIFI's then-current procedures concerning the issuance of a
License.
(C) In the event that Servicing Lender acquires the Hotel as set out
in paragraph 2 above, Servicing Lender shall furnish HIFI with reasonably
satisfactory evidence of such acquisition.
(D) If you have a receiver appointed with respect to the Hotel during
a foreclosure proceeding against Licensee, HIFI shall enter into its standard
form short term receivership license with such receiver, which will not exceed a
term of 12 months, provided: (a) you are entitled to make and have made your
election to exercise your rights hereunder; (b) HIFI and you have reached
agreement concerning any cure under paragraph 2 (B) hereof and any financial
defaults, including any defaults under any agreements with HIFI's subsidiaries
or affiliates, have been cured; (c) you guaranty such receiver's obligation
under its license in HIFI's standard form of guaranty; and (d) such receiver
meets HIFI's licensing criteria.
3. Neither Servicing Lender nor any of the Lenders shall have the right
to assign, transfer, sell or otherwise convey the License, and any License that
may be issued to Servicing Lender pursuant to the terms of this letter shall not
be assignable. Neither Servicing Lender nor
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page-3-
any of the Lenders' rights under this letter are assignable. A new owner of the
Hotel may apply for a Holiday Inn hotel License Agreement, and such application
will be processed in accordance with HIFI's then-current requirements and
procedures.
4. By its signature below, Licensee acknowledges that this letter was
provided to Servicing Lender at Licensee's request in order to induce Servicing
Lender to provide financing for the Hotel, and in consideration thereof,
Licensee hereby releases Servicing Lender and the Lenders, and HIFI, as well as
each of our respective subsidiaries, parents, divisions, successors, assigns,
heirs and representatives, including but not limited to our respective
employees, agents, officers, directors and stockholders of and from any and all
actions, causes of action, suits, claims, demands, contingencies, debts,
accounts and judgments whatsoever, at law or in equity, whether known or
unknown, arising from the exercise by Servicing Lender or any Lender of any of
the rights granted hereunder and the recognition and compliance with such
exercise by HIFI. It is further acknowledged and agreed that HIFI shall be
entitled to rely upon any written notice or request by Servicing Lender made
pursuant to the provisions hereof without requirement of necessitating the
accuracy or authenticity of such written notice or any fact or allegations
contained therein.
5. (A) Servicing Lender and the Lenders agree to notify HIFI, by mail,
10 days in advance of any action to: (a) commence foreclosure proceedings
regarding the Hotel; or (b) petition for appointment of a receiver, obtain the
entry of an order for relief or take any action under federal or state
bankruptcy laws or similar laws with regard to the Hotel; or (c) accept a deed
for the Hotel in lieu of foreclosure; or (d) take ownership or possession of the
Hotel in any manner.
(B) Servicing Lender agrees to notify HIFI promptly upon: (a) any
change in your address; or (b) the satisfaction, cancellation, sale or
assignment of Servicing Lenders or any Lenders' mortgage on the Hotel.
6. Notwithstanding anything else herein to the contrary, Servicing Lender
may, upon written notice to HIFI, designate any of the Lenders as a substitute
Servicing Lender ("Sub-Servicing lender") under the terms of this Comfort
Letter. At such time, the Sub-Servicing Lender shall obtain all of present
Servicing Lender's rights under the Comfort Letter, provided that, it enters
into a new Comfort Letter agreement with HIFI under the same terms and
conditions hereof.
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -4-
7. The provisions of this letter are not intended to and do not in any
way alter, modify or amend the License or assign any rights thereunder.
8. Notices shall be addressed to HIFI as follows:
Holiday Inns Franchising, Inc.
Three Ravinia Drive, Suite 2000
Atlanta, Georgia 30346
Attn: Vice President, Franchise Administration
Notices shall be addressed to you as follows:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Attn: Jeff Lindsey
Dallas, TX 75201
Notices shall be given by certified mail, return receipt requested, or
by Federal Express or other express delivery service.
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -5-
9. This letter constitutes an offer which shall be deemed revoked and
null and void unless the duplicate originals hereof are signed by both Servicing
Lender and Licensee and received by HIFI on or before August 12, 1996. An
executed copy will be returned to Servicing Lender and Licensee.
Sincerely,
Jim Darby
Vice President
Franchise Administration
Agreed and Accepted:
AGH Leasing, L.P. Bank One, Texas, N.A.
By: AGHL GP, Inc., General Partner
By: xxx By:__________________________
-----------------------------
Title: Executive Vice President Title:_______________________
--------------------------
Attest: xxx Attest:______________________
-------------------------
Senior Vice President Secretary
Date: 7/12/96 Date:________________________
--------------------------
Loan No._____________________
<PAGE>
EXHIBIT "A"
List of Lenders
First National Bank of Commerce
P.O. Box 60279
New Orleans, LA 70160
Bank of Nova Scotia
New York Agency
One Liberty Plaza
New York, NY 10006
Sociate Generale
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, TX 75201
<PAGE>
[LETTERHEAD OF CROWNE PLAZA APPEARS HERE]
July 11, 1996 VIA OVERNIGHT COURIER
---------------------
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Attn: Jeff Lindsey
Dallas, TX 75201
RE: LICENSE AGREEMENT BETWEEN HOLIDAY INNS FRANCHISING, INC.("HIFI")
AND AGH LEASING, L.P. ("LICENSEE") DATED JULY 31, 1996
(THE "LICENSE") FOR THE CROWNE PLAZA HOTEL LOCATED AT SAN
JOSE-PARK, CENTER PLAZA, CA /#4367 ("HOTEL")
Ladies and Gentlemen:
HIFI has entered into a License pertaining to the operation of the Hotel as
a Holiday Inn hotel. Attached hereto on Exhibit "A" is a list of lenders
("Lenders") that are entitled to have the benefits of this Letter Agreement. The
initial Lender to have the benefits of this Letter Agreement is Bank One, Texas,
N.A., 1717 Main Street, 4th Floor, Dallas, Texas 75201 ("Servicing Lender").
Bank One, Texas, N.A. may in the future designate in writing to HIFI any other
Lender identified on Exhibit "A" to have the benefits of this Letter Agreement
in its place and such Lender shall thereafter be the Servicing Lender.
1. HIFI shall use its reasonable efforts to give Servicing Lender 30
days' prior written notice of any voluntary surrender by Licensee of the License
(to the extent that HIFI is aware in advance of any such voluntary surrender);
and HIFI shall also give Servicing Lender 30 days' prior written notice of any
action it intends to take under the License as a result of any default(s) by
Licensee under the License, provided (a) that the first mortgage of which
Servicing Lender is involved and the License are in full force and effect at the
time of the event(s) set out above; (b) that Servicing Lender is not in
receivership or conservatorship; (c) that Servicing Lender has not been taken
over by any state or federal regulatory agency; and (d) that neither Servicing
Lender nor any of its respective directors or officers have entered into any
cease and desist order or any other formal or informal written agreement with a
federal or state regulatory agency. The notice given to Servicing Lender
concerning Licensee's default(s) will allow Servicing Lender 30 days from the
date thereof to cure or cause to be cured the default(s). HIFI may at its
option, upon Servicing Lender's written request to it, deliver to Servicing
Lender copies of any of its product quality reports and/or notices of
non-payment of fees pertaining to the Hotel.
HOLIDAY INN/F/ WORLDWIDE HOTELS
HOLIDAY INNS, INC., A BASS COMPANY
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -2-
2. (A) In the event Servicing Lender acquires possession and control of
the Hotel by foreclosure or deed in lieu of foreclosure or otherwise, either:
(1) while the License is in full force and effect; or (2) within 60 days
following the date of HIFI's termination of the License; Servicing lender shall
have 30 days from such acquisition to elect, by written notice to HIFI
accompanied by a non-refundable processing charge of $5,000.00, to obtain a new
License in the form and specifying the royalty and other fees then being used
or charged by HIFI and for a term equal to the balance of the original term
under the License, except that Servicing Lender shall not be charged the
initial fee (as same as described in HIFI's then current Franchise Offering
Circular for Prospective Franchisees), provided: (a) that Servicing Lender is
not in receivership or conservatorship; (b) that Servicing Lender has not been
taken over by any state or federal regulatory agency; and (c) that neither
Servicing Lender, nor any of its respective directors or officers have entered
into any cease and desist order or any other formal or informal written
agreement with a federal or state regulatory agency.
(B) All defaults and breaches under the License must be cured by
Servicing Lender within 30 days from the date of Servicing Lender's election to
obtain a new License including, but not limited to any monies due with respect
to the Hotel, to HIFI, or its parent, subsidiaries, divisions or affiliates.
With respect to any defaults or breaches of a non-monetary nature which are not
reasonably capable of being cured within said 30-day period, HIFI may extend,
for such time as it in its sole discretion may reasonably determine, the period
of time in which such default(s) may be cured. A new License will not be issued
to Servicing Lender until all defaults are cured. Servicing Lender shall further
comply with HIFI's then-current procedures concerning the issuance of a License.
(C) In the event that Servicing Lender acquires the Hotel as set out
in paragraph 2 above, Servicing Lender shall furnish HIFI with reasonably
satisfactory evidence of such acquisition.
(D) If you have a receiver appointed with respect to the Hotel during
a foreclosure proceeding against Licensee, HIFI shall enter into its standard
form short term receivership license with such receiver, which will not exceed a
term of 12 months, provided: (a) you are entitled to make and have made your
election to exercise your rights hereunder; (b) HIFI and you have reached
agreement concerning any cure under paragraph 2(B) hereof and any financial
defaults, including any defaults under any agreements with HIFI's subsidiaries
or affiliates, have been cured; (c) you guaranty such receiver's obligation
under its license in HIFI's standard form of guaranty; and (d) such receiver
meets HIFI's licensing criteria.
3. Neither Serving Lender nor any of the Lenders shall have the right to
assign, transfer, sell or otherwise convey the License, and any License that may
be issued to Servicing Lender pursuant to the terms of this letter shall not be
assignable. Neither Servicing Lender nor
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -3-
any of the Lenders' rights under this letter are assignable. A new owner of the
Hotel may apply for a Holiday Inn hotel License Agreement, and such application
will be processed in accordance with HIFI's then-current requirements and
procedures.
4. By its signature below, Licensee acknowledges that this letter was
provided to Servicing Lender at Licensee's request in order to induce Servicing
Lender to provide financing for the Hotel, and in consideration thereof,
Licensee hereby releases Servicing Lender and the Lenders, and HIFI, as well as
each of our respective subsidiaries, parents, divisions, successors, assigns,
heirs and representatives, including but not limited to our respective
employees, agents, officers, directors and stockholders of and from any and all
actions, causes of action, suits, claims, demands, contingencies, debts,
accounts and judgments whatsoever, at law or in equity, whether known or
unknown, arising from the exercise by Servicing Lender or any Lender or any
Lender of any of the rights granted hereunder and the recognition and compliance
with such exercise by HIFI. It is further acknowledged and agreed that HIFI
shall be entitled to rely upon any written notice or request by Servicing Lender
made pursuant to the provisions hereof without requirement of necessitating the
accuracy or authenticity of such written notice or any facts or allegations
contained therein.
5. (A) Servicing Lender and the Lenders agree to notify HIFI, by mail,
10 days in advance of any action to: (a) commence foreclosure proceedings
regarding the Hotel; or (b) petition for appointment of a receiver, obtain the
entry of an order for relief or take any action under federal or state
bankruptcy laws or similar laws with regard to the Hotel; or (c) accept a deed
for the Hotel in lieu of foreclosure; or (d) take ownership or possession of the
Hotel in any manner.
(B) Servicing Lender agrees to notify HIFI promptly upon: (a) any
change in your address; or (b) the satisfaction, cancellation, sale or
assignment of Servicing Lenders or any Lenders' mortgage on the Hotel.
6. Notwithstanding anything else herein to the contrary, Servicing Lender
may, upon written notice to HIFI, designate any of the Lenders as a substitute
Servicing Lender ("Sub-Servicing Lender") under the terms of this Comfort
Letter. At such time, the Sub-Servicing Lender shall obtain all of present
Servicing Lender's rights under the Comfort Letter, provided that, it enters
into a new Comfort Letter agreement with HIFI under the same terms and
conditions hereof.
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -4-
7. The provisions of this letter are not intended to and do not in any
way alter, modify or amend the License or assign any rights thereunder.
8. Notices shall be addressed to HIFI as follows:
Holiday Inns Franchising, Inc
Three Ravinia Drive, Suite 2000
Atlanta, Georgia 30346
Attn: Vice President, Franchise Administration
Notices shall be addressed to you as follows:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Attn: Jeff Lindsey
Dallas, TX 75201
Notices shall be given by certified mail, return receipt requested, or
by Federal Express or other express delivery service.
<PAGE>
Bank One, Texas, N.A.
July 11, 1996
Page -5-
9. This letter constitutes an offer which shall be deemed revoked and
null and void unless the duplicate originals hereof are signed by both Servicing
Lender and Licensee and received by HIFI on or before August 12, 1996. An
executed copy will be returned to Servicing Lender and Licensee.
Sincerely,
/s/ Jim Darby Jr.
Jim Darby
Vice President
Franchise Administration
Agreed and Accepted:
AGH Leasing, L.P. Bank One, Texas, N.A.
By: AGHL GP, Inc., General Partner
By: xxx By:__________________________
-----------------------------
Title: Executive Vice President Title:_______________________
--------------------------
Attest: xxx Attest:______________________
-------------------------
Senior Vice President Secretary
Date: 7/12/96 Date:________________________
--------------------------
Loan No._____________________
<PAGE>
EXHIBIT "A"
List of Lenders
First National Bank of Commerce
P.O. Box 60279
New Orleans, LA 70160
Bank of Nova Scotia
New York Agency
One Liberty Plaza
New York, NY 10006
Sociate Generale
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, TX 75201
<PAGE>
[LETTERHEAD OF PROMUS HOTEL CORPORATION]
July 30, 1996
Bank One, Texas, N.A.,
as Administrative Agent
Commercial Real Estate Department
Mr. Jeff S. Lindsey
4th Floor, 1717 Main Street
P.O. Box 655415
Dallas, TX 75201
RE: Comfort Letter for Hampton Inn hotel located at located at 5300
Airport Square Lane, Sandston, (Richmond-Airport), Virginia (the
"Hotel")
Dear Mr. Lindsey:
As requested by Ms. Nicola Wolpmann, please find enclosed three execution
originals of our standard comfort letter regarding the referenced property,
which have been executed by Promus Hotels, Inc. ("Promus").
While we do not allow the transfer or assignment of comfort letters, Promus
will, as an accommodation to you, allow the appointment of Societe Generale to
replace you as Administrative Agent, provided your request is received by Promus
in writing prior to the appointment. If you wish to appoint an entity other than
Societe Generale as Administrative agent, your written request must be received
prior to the appointment, such entity must be accepted and approved by Promus,
and be fully guaranteed by Bank One Texas, N.A. and/or Societe Generale. This
assignment condition is for the benefit of Bank One, Texas, N.A. and will not be
extended to any substituted or appointed entity.
Please have each of the three originals signed (as indicated) by the Lender
and Licensee with each retaining one original for their respective files. The
third fully executed original must be returned to my attention within thirty
(30) days from the date of the letter, or the letter becomes null and void. A
self-addressed return envelope is enclosed for your convenience.
Should you have any questions, please let me know.
Very truly yours,
Carol Conley
Carol P. Conley
Franchise Administrator
Development Administration
/cpc
Enclosure(s)
<PAGE>
[LETTERHEAD OF PROMUS HOTEL CORPORATION]
July 30,1996
Bank One, Texas, N.A.,
as Administrative Agent
Commercial Real Estate Department
Mr. Jeff S. Lindsey
4th Floor, 1717 Main Street
P.O. Box 655415
Dallas, TX 75201
Re: Hampton Inn License Agreement ("License") with AGH Leasing, L.P.
("Licensee") for the Hampton Inn hotel located at 5300 Airport Square
Lane, Sandston (Richmond-Airport), Virginia (the "Hotel")
Gentlemen:
Promus Hotels, Inc. ("Promus") is about to enter into the License with the
Licensee regarding the development and operation of the Hotel. It is my
understanding that you, have entered or are about to enter into a loan with
American General Hospitality Group, Inc. ("Borrower") and the loan will be
secured by a first mortgage on the Hotel which Borrower has leased to Licensee.
The Licensee has requested that Promus issue this letter relative to the
License.
1. Promus will use its best efforts to send you copies of any default
notices that it issues under the License so long as your first
mortgage on the Hotel is still in effect. You will have the right but
not the responsibility to cure or cause to be cured any default(s)
within thirty (30) days from the date of the notice. For a non-
monetary default that is not capable of being cured within the 30-day
period, Promus may, at its reasonable discretion, grant an extension
of the cure period provided you have commenced and are diligently
proceeding in good faith with the curing of such default(s). Failure
to cure such default(s) within such period or the termination of the
License shall not prevent you from entering into a new Hampton Inn
license agreement as hereafter provided.
2. You agree to notify Promus in advance of any action that will result
in your taking possession and/or ownership of the Hotel. Such actions
may include, but are not limited to, foreclosure, deed in lieu of
foreclosure, or appointment of a receiver.
3. Within thirty (30) days after the occurrence of any of the following
events: (a) Licensee loses possession of the Hotel, (b) a court-
appointed receiver takes possession of the Hotel, (c) you commence
foreclosure proceedings or you agree to accept a deed in lieu of
foreclosure on the Hotel, or (d) Licensee seeks relief under or action
is taken voluntarily or involuntarily under bankruptcy laws and such
actions affect the Hotel, you will notify Promus in writing (the
"Acquisition
<PAGE>
Bank One, Texas, N.A., as Administrative Agent
Commercial Real Estate Department
Mr. Jeff S. Lindsey
July 30, 1996; Page 2
Notice"), as permitted by applicable law, if you elect to obtain a new
Hampton Inn license agreement. Failure to send the Acquisition Notice
means that you have waived your right to obtain a new Hampton Inn
license agreement.
4. If you (a) comply with the terms of this letter, (b) acquire legal
title and possession to the Hotel within 180 days from the date of the
Acquisition Notice, and (c) cure any default(s) capable of being cured
by you within thirty (30) days after you obtain possession of the
Hotel, Promus will issue its then current Hampton Inn license
agreement to you for a term equal to the balance of the term of
Licensee's License, without payment of the standard Hampton Inn
application fee. If the default(s) are not capable of being cured
within the 30-day period, Promus may, in its reasonable discretion,
extend such time period, provided you have commenced and are
diligently proceeding in good faith to cure such default(s). If you
send the Acquisition Notice but fail to sign the current Hampton Inn
license agreement within thirty (30) days after you obtain possession
of the Hotel (or such longer period as may be specified pursuant to
the previous sentence), you shall promptly pay Promus liquidated
damages of $50,000.
5. Neither this letter nor any Hampton Inn license agreement issued to
you pursuant to this letter is assignable. A third party that buys the
Hotel from you may apply for a Hampton Inn license. The application
will be processed according to Promus' then current requirements and
procedures.
6. While you are in possession of the Hotel, you will (a) maintain
insurance on the Hotel as specified in the then current Hampton Inn
license agreement, (b) promptly pay to Promus (or its parent or
affiliates) all fees and royalties that are specified in the then
current Hampton Inn license agreement (and reservation system
contract, etc.), and (c) comply with Promus' current policies and
procedures.
7. Licensee acknowledges that this letter was provided to you at
Licensee's request. Licensee releases Promus (its parent,
subsidiaries, affiliates and their officers and employees) and you
from any and all actions, claims, demands, costs, debts, causes and
judgments, whether in law or equity, known or unknown, arising from
the exercise of any of the rights granted hereunder by Promus and/or
you. Licensee also agrees that Promus may rely on any notice from you
pursuant to the terms of this letter without having to investigate or
ascertain the accuracy of any fact or allegation in the notice.
8. Notices to you will be given by certified mail or overnight delivery
to you at the address on page one of this letter. Notice to Promus
will be sent in the same manner and addressed as follows: Promus
Hotels, Inc., ATTN: Development Administration, 755 Crossover Lane,
Memphis, TN 38117.
<PAGE>
Bank One, Texas, N.A., as Administrative Agent
Commercial Real Estate Department
Mr. Jeff S. Lindsey
July 30, 1996; Page 3
Please sign the three duplicate originals and return one fully executed
original to Promus in the enclosed self-addressed envelope. You and Licensee
should each retain one original. THIS LETTER WILL AUTOMATICALLY BECOME VOID
IF ONE FULLY SIGNED ORIGINAL IS NOT RECEIVED BY PROMUS WITHIN THIRTY (30)DAYS
FROM THE DATE OF THIS LETTER.
Sincerely,
/s/ Thomas P. Powell
Thomas P. Powell
Vice President
Development - Eastern Region
AGREED AND ACCEPTED:
AGH LEASING, L.P. BANK ONE, TEXAS, N.A.
BY: AGHL BP, INC., General Partner By:____________________________
By:______________________________ Title:_________________________
Title:___________________________ Date:__________________________
Date:____________________________ Loan #:________________________
<PAGE>
[LETTERHEAD OF HILTON INNS. Inc.]
July ___, 1996
Bank One, Texas, N.A.,
as Administrative Agent
1717 Main Street, 4th Floor
commercial Real Estate Lending
Dallas, Texas 75201
Attention: Jeff S. Lindsey
RE: TOLEDO HILTON, TOLEDO, OHIO
Ladies and Gentlemen:
Reference is made to that certain amended and restated Hilton Inns, Inc.
License Agreement (the "License Agreement") dated June 14, 1996, as assigned, by
and between Hilton Inns, Inc. ("Hilton Inns") and AGH Leasing, L.P.
("Licensee"), with respect to the Toledo Hilton ("Hotel"), located or to be
located at 3100 Glendale Avenue, Toledo, Ohio, and to the closing of a mortgage
loan ("Loan") in the aggregate principal amount of $100,000,000, dated July ___,
1996, from Bank One, Texas, N.A., as administrative agent (the bank in such
capacity and its successors and assigns are referred to herein as "Agent") under
that certain Credit Agreement (the "Credit Agreement") by and between American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership,
and the banks and other financial institutions a party thereto (the "Banks"); in
regard to the Hotel and certain other hotel properties. The term "Agent" as used
herein shall also include (i) any special-purpose entity formed by the Agent and
the Banks to hold title to the Hotel, (ii) any successor administrative agent as
provided for in the Credit Agreement and (iii) any Affiliate of Agent. The term
"Affiliate" with respect to any entity means any natural person or firm,
corporation, partnership, association, trust or other entity which, directly or
indirectly, controls, is controlled by, or is under common control with, the
subject entity; a natural person or entity which has an entity as an Affiliate
under the foregoing shall also be deemed to be an Affiliate of such entity. For
purposes hereof, the term "control" shall mean the possession, directly, or
indirectly, of the power to direct or cause the direction of the management and
policies of any such entity, or the power to veto major policy decisions of any
such entity, whether through the ownership of voting securities, by contract or
otherwise.
In connection with such closing, this will set forth the agreement of the
parties in regard to the following matters:
1. Cure Period.
-----------
(a) Hilton Inns shall notify Agent in writing of any default of
Licensee under the License Agreement and Agent shall have a cure period of
thirty (30) days from the date of receipt
<PAGE>
of such notice to cure any such default (or if such default is not curable
within said 30-day period, such additional time as is required provided Agent
commences to cure said default within such 30-day period and thereafter
diligently proceeds to cure such default) prior to any termination of the
License Agreement becoming effective pursuant to notice by Hilton Inns given in
accordance with the License Agreement. With respect to physical standards
default, diligent cure as used herein shall mean actual physical renovation work
on the property. Commencement of proceedings designed to allow Agent to assume
title to the property, without commencement of actual physical renovation work,
shall not satisfy the cure requirements set forth herein. The notice
requirements hereunder shall be satisfied by sending to Agent a copy of the
default notice sent to Licensee. Agent's 30-day cure period shall begin upon
Agent's receipt of said copy and shall run concurrently with any cure period of
Licensee. Any such notice by Hilton Inns to Agent shall be sent to the above
address for Agent, or to such other address of which Agent may notify Hilton
Inns in writing from time to time; provided, however, that only one address may
be used by Agent for such notice purposes at any one time. Any change in Agent's
address shall be submitted to Hilton Inns by hand delivery; certified mail,
return receipt requested; or overnight courier at the address for Hilton Inns
set forth in Paragraph 7 below.
(b) Notwithstanding anything to the contrary set forth above in
Paragraph 1(a), in the event of a physical standards default or any other
non-monetary default which requires possession by Agent in order to effect a
cure, Hilton Inns will not terminate the License Agreement for such additional
period of time as is reasonably required for Agent to obtain possession of the
Hotel through foreclosure or other appropriate proceedings in the nature
thereof, including any proceedings required due to any prohibition by any
process or injunction issued by any court or by reason of any action by any
court having jurisdiction of any bankruptcy or insolvency proceeding
involving Licensee, but in no event to exceed one hundred twenty (120) days,
provided that Agent (i) commences such proceedings within forty five (45) days
from the date of Agent's receipt of notice of default pursuant to Paragraph 1(a)
and diligently prosecutes such proceeding to completion, (ii) diligently cures
said default within the periods of time set forth in Paragraph 1(a) above
following Agent's possession of the Hotel and thereafter performs all
obligations of Licensee arising under the License Agreement, (iii) pays all
monetary obligations of Licensee arising under the License Agreement, and (iv)
in all other respects complies with the requirements of Paragraph 1(a) above
with respect to any other obligation of Licensee under the License Agreement. If
any such default or any subsequent default occurring during the period
contemplated by this Paragraph is of a nature that, in the sole opinion of
Hilton Inns, damages the image or reputation of Hilton Inns or the "Hilton"
name, or if Hilton Inns is required to terminate the License Agreement by court
order or action of any trustee in bankruptcy or debtor in possession of the
Hotel, which
2
<PAGE>
shall include but not be limited to a rejection of the License Agreement by a
trustee or debtor-in-possession, or if the one hundred twenty (120) day period
set forth in Paragraph 1(b) above expires, then notwithstanding the above,
Hilton Inns may terminate the License Agreement. Provided, however, anything to
the contrary in this Paragraph 1(b) notwithstanding, should Licensee reject the
License Agreement in bankruptcy prior to the end of Agent's one hundred twenty
day-period to obtain possession of the Hotel, and should Agent subsequently
acquire possession of the Hotel and cure any non-monetary defaults within the
time periods set forth in this Paragraph 1(b), Agent shall have thirty (30) days
from the date of such acquisition to elect, by written notice to Hilton Inns, to
enter into a new license agreement for a term equal to the then remaining term
under the License Agreement under Hilton Inns' then current form, subject to any
renovation or other operational requirements which Hilton Inns may reasonably
require. Should Agent elect to enter into such new license agreement, Agent
shall execute such new license agreement within fifteen (15) business days of
its election.
2. Assumption.
----------
(a) In the event Agent becomes the owner of the Hotel, Agent shall
have the right to elect, at its sole option, at any time within thirty (30) days
after Agent becomes the owner of the Hotel, to terminate the License Agreement
effective upon thirty (30) days prior written notice to Hilton Inns. During this
election and notice period Agent shall pay all fees due Hilton Inns and its
affiliates from and after the time Agent becomes owner of the Hotel. Should
Agent elect to terminate the License Agreement in accordance with the terms of
this paragraph 2(a), Agent shall not be liable to Hilton Inns for any
cancellation or termination fees, or for any other fees incurred under the
License Agreement prior to the time Agent became owner of the Hotel.
(b) If Agent, upon becoming owner, does not elect by thirty (30) days
prior written notice to Hilton Inns, to terminate the License Agreement, then
the License Agreement shall not be cancelled or terminated and shall continue in
full force and effect. In such event it is hereby agreed that Agent and Hilton
Inns shall fully and completely recognize each other as "Licensee" and
"Licensor" respectively under the License Agreement for the balance of the term
thereof, upon all terms and conditions therein provided, so as to establish
direct privity of contract between Agent and Hilton Inns. The provisions of this
paragraph 2(b) shall be effective and self-operative without the execution of
any further instrument.
(c) If Agent shall have acquired the Hotel and failed to exercise its
right to terminate and cancel the License Agreement in accordance with paragraph
2(a), then within ten (10) business days after written request by Hilton Inns,
Agent shall execute and deliver to Hilton Inns a written instrument, in form
3
<PAGE>
reasonably satisfactory to Hilton Inns, confirming its assumption of the License
Agreement and its agreement hereunder to perform all of the obligations of
Licensee under the License Agreement. Failure to execute and deliver to Hilton
Inns a written instrument in accordance with the provisions of this paragraph
2(c) shall be a default under the License Agreement.
3. Licensee's Obligations. Notwithstanding any assignment and assumption
----------------------
of the License Agreement, the Licensee shall not be released from any of its
obligations under the License Agreement.
4. Subsequent Sale. In the event Agent acquires the fee simple title to
---------------
the Hotel through foreclosure or deed in lieu thereof, become assignee of the
License Agreement under Paragraph 2 above, and subsequently sells, assigns or
transfers said Hotel to a third party, Hilton Inns shall not unreasonably
withhold its consent to the transfer of the License Agreement to such third
party, and upon such transfer consented to by Hilton Inns, Agent shall be
released from any liability or obligations under the License Agreement arising
subsequent to the date of such transfer.
5. Subordination. Hilton Inns hereby acknowledges and agrees that the
-------------
License Agreement, to the extent that it creates any interest in the Hotel, is
and shall be subordinate to the mortgage of Agent placed or to be placed on the
Hotel in accordance with the terms of the Loan. Hilton Inns further acknowledges
and agrees that a conveyance to Agent by foreclosure or deed in lieu of
foreclosure shall not be deemed a sale or lease of the Hotel under Paragraph
9(b) of the License Agreement.
6. Management. In the event Agent becomes owner of the Hotel, (i)
----------
notwithstanding the provisions of Paragraph 5(j) of the License Agreement, Agent
shall have the right to employ a reputable and qualified firm or person to
manage the Hotel, and (ii) Agent shall not be bound by the provisions of
Paragraph 8 of the License Agreement.
7. Execution. This Agreement shall not be binding upon Hilton Inns and
---------
shall be deemed null and void unless a fully executed counterpart original
hereof is received by Hilton Inns at the following address within ten (10)
business days of the date of the Loan closing:
Hilton Inns, Inc.
9336 Civic Center Drive
Beverly Hills, CA 90210
Attn: General Counsel
4
<PAGE>
8. Assignment. This Agreement may not be assigned by Agent without the
----------
written consent of Hilton Inns.
Very truly yours,
HILTON INNS, INC.
BY: /s/ J. Michael Curran
----------------------------
J. MICHAEL CURRAN
SR. VICE PRESIDENT MARKETING
----------------------------
(Print Name and Title)
Accepted and agreed to this ___________ day of _________________, 1996.
BANK ONE, TEXAS, N.A.,
in its capacity as administrative
agent under the Credit Agreement
By: ______________________________
______________________________
(Print Name and Title)
In consideration of the closing of the above-referenced Loan, Licensee
consents to each of the terms of the above Letter Agreement.
AGH LEASING, L.P. Dated: _______________, 1996
By: ___________________________
___________________________
(Print Name and Title)
d3979.daw
5
<PAGE>
[LETTERHEAD OF DOUBLETREE APPEARS HERE]
July 12, 1996
Bank One, Texas, N.A., as Administrative Agent
1717 Main Street
4th Floor
Commercial Real Estate Department
Dallas, TX 75201
Attention: Mr. Jeff Lindsey
RE: License Agreement (the "LICENSE AGREEMENT") between Doubletree Hotel
Systems, Inc., ("DOUBLETREE") and AGH Leasing, L.P. ("LICENSEE") dated
_______________, in connection with the Doubletree Hotel located at 1350 N.
First Street, San Jose, CA 95112 (the "HOTEL).
Gentlemen:
Doubletree and Licensee have entered into the License Agreement under which
Licensee has been granted a license to operate the Hotel under the tradename
DOUBLETREE HOTEL (the "TRADENAME"). Licensee and you have advised us that you
and certain other lenders (the "Lenders") have entered, or are about to enter,
into a loan arrangement (the "LOAN") whereby your loan will be secured by a
mortgage/deed of trust on the premises on which the Hotel is situated. Licensee
and you have requested that we enter into this Letter Agreement with respect to
the parties' rights in connection with the Hotel, the License Agreement and the
Loan. This letter shall only remain in effect if you are one of the Lenders.
1. Doubletree shall give you 30 days' prior written notice of any voluntary
surrender by Licensee of the License Agreement (to the extent that Doubletree is
aware in advance of any such voluntary surrender), and Doubletree shall also
give you 30 days' prior written notice of a default and any action Doubletree
intends to take under the License Agreement as a result of any default(s) by
Licensee thereunder, provided in each instance that (a) your mortgage/deed of
trust and the License Agreement are in full force and effect at the time of the
event(s) set out above; (b) you are not in receivership or conservatorship; (c)
you have not been taken over by any state or federal regulatory agency; and (d)
neither you nor any of your institution's directors or officers have entered
into any cease and desist order or any other formal or informal written
agreement with a federal or state regulatory agency. The notice given to you
concerning Licensee's default(s) will allow you 30 days from the date thereof to
cure or cause to be cured the default(s) or such longer period as provided in
Section 2B. Doubletree may, at its option upon your written request, deliver to
you copies of any of its product quality reports and/or notices of non-payment
of fees pertaining to the Hotel.
2. A. In the event you or your nominee acquire the Hotel (including the
right to possession thereof) by foreclosure, deed in lieu of foreclosure or
otherwise, either: (a) while the License Agreement is in full force and effect,
or (b) within 60 days following the date of Doubletree's termination of the
License Agreement, then you shall have 30 days from such acquisition to elect,
by written notice to Doubletree, accompanied by a non-refundable
<PAGE>
processing charge of $5,000.00, to obtain a new license agreement in the form
then being used (and specifying the royalty and other fees then being charged)
by Doubletree and for a term equal to the balance of the original term under
the License Agreement, except that you shall not be charged the initial fee (as
the same is described in Doubletree's then current Uniform Franchise Offering
Circular for Prospective Franchisees), provided that (i) you are not in
receivership or conservatorship; (ii) you have not been taken over by any state
or federal regulatory agency; and (iii) neither you nor any of your
institution's directors or officers have entered into any cease and desist order
or any other formal or informal written agreement with a federal or state
regulatory agency.
B. All monetary defaults under the License Agreement must be cured by you
within 30 days from the date of your election to obtain a new license agreement,
including, without limitation, payment of any monies due to Doubletree or its
affiliates. With respect to any defaults of a non-monetary nature which are not
reasonably capable of being cured within said 30-day period, you will have a
reasonable period of time in which such default(s) may be cured, including the
period of time reasonably necessary to take possession of the Hotel. A new
license agreement will not be issued to you until all defaults are cured which
are capable of being cured by you; provided that you will be able to operate the
Hotel under the terms hereof. You shall further comply with Doubletree's
then-current procedures concerning the issuance of a new license agreement.
C. In the event you acquire the Hotel as set out in paragraph 2A above,
you shall furnish Doubletree with reasonably satisfactory evidence of such
acquisition.
3. In executing this document, you acknowledge that neither Licensee nor you
have any right to assign, transfer, sell or otherwise convey the License
Agreement except if, and to the extent, expressly provided therein, and any new
license agreement that may be issued to you pursuant to the terms of this letter
shall be assignable only to the extent, if any, expressly provided therein. Your
rights under this letter are not assignable, provided the Lenders may appoint
another administrative agent. A new owner of the Hotel may apply for a new
license agreement, and such application will be processed in accordance with
Doubletree's then-current requirements and procedures.
4. By its signature below, Licensee acknowledges that this letter was provided
to you at its request in order to induce you to make the Loan, and in
consideration thereof, Licensee hereby releases Doubletree, its subsidiaries,
parents, divisions, successors, assigns, heirs and representatives, and their
respective employees, agents, officers, directors and stockholders, of and from
any and all actions, causes of action, suits, claims, demands, contingencies,
debts, accounts and judgments whatsoever, at law or in equity, whether known or
unknown, arising from the exercise by you of any of the rights granted hereunder
and the recognition and compliance with such exercise by Doubletree. It is
further acknowledged and agreed that Doubletree shall be entitled to rely upon
any written notice or request by you made pursuant to the provisions hereof
without any requirement of investigating the accuracy or authenticity of such
notice or any facts or allegations contained therein.
<PAGE>
5. A. You agree to notify Doubletree by mail 10 days in advance of any
action to (a) commence foreclosure proceedings regarding the Hotel; and/or (b)
petition for appointment of a receiver obtain the entry of an order for
relief or take any action under federal or state bankruptcy laws or similar laws
with regard to the Hotel; and/or (c) accept a deed for the Hotel in lieu of
foreclosure; and/or (d) take ownership or possession of the Hotel in any manner.
B. You agree to notify Doubletree promptly upon: (a) any change in your
address; and/or (b) the satisfaction, cancellation, sale or assignment of your
mortgage/deed of trust.
6. It is understood and agreed that (a) the provisions of this letter are not
intended to and do not in any way alter, modify or amend, or effect Doubletree's
rights under the License Agreement with respect to the Licensee or assign any
rights thereunder, (b) Doubletree shall in no event be liable or be deemed
liable directly or indirectly, for any obligations under the Loan, (c) during
any period of time that the License Agreement is in effect or the Hotel is
otherwise being operated under the Tradename, Doubletree shall be entitled to be
paid from the revenues of the Hotel all amounts due it in connection therewith
(including, without limitation, royalty fees and marketing contributions) in a
timely manner, but in no event less frequently than monthly, (d) Doubletree's
liability to Licensee, you and/or any other party for breach of or default under
any duty, covenant, agreement, representation and/or warranty under the License
Agreement, shall not, in the aggregate, exceed that for which Doubletree would
have been liable to Licensee for breach of or default under such duty, covenant,
agreement, representation and/or warranty in the absence of this letter, (e)
subject to the rights to cure as set forth in the License Agreement and herein,
Doubletree's obligations to perform its duties under the License Agreement (and
any party's rights to use the Tradename at the Hotel) shall be conditioned upon
the performance of all material duties of the "Licensee" thereunder, (f) any
acquisition of the Hotel under paragraph 2A above shall be deemed, as between
Doubletree and Licensee only, a termination of the License Agreement by
Doubletree as a result of Licensee's default, and Doubletree may pursue all
available rights and remedies against Licensee upon such termination, but any
termination fees shall be subordinate to the Loan to the extent the payment of
such fees was subordinate to the Loan prior to the date of your acquisition of
the Hotel, (g) Doubletree shall be entitled to rely on, and to comply with any
demand or request contained in, any notice provided to it by you, and Doubletree
shall have no liability to Licensee or you arising out of any action taken by
you or Doubletree pursuant to any such notice or the terms and conditions
hereof, and (h) Doubletree's agreements contained herein are for the benefit of
you, and Licensee shall acquire no rights therefrom.
7. Doubletree hereby consents to the assignment of the License Agreement by
Licensee to American General Hospitality Operating Partnership, L.P., a Delaware
limited partnership ("Lessor") and the collateral assignment of, and granting of
a security interest in, the License Agreement by Lessor to you as security for
the loan; provided, however, that in connection with the assignment of the
-------- -------
License Agreement by Licensee to Lessor the provisions of paragraphs 6(a), (b),
(c), (d), (f), (g) and (h) shall be deemed to be incorporated by reference into
the documentation evidencing such assignment as if fully sets forth therein,
with all references to "you" contained in such sections deemed to refer to
Lessor.
<PAGE>
8. Notices shall be addressed to Doubletree as follows:
Doubletree Hotel Systems, Inc.
410 N. 44th Street, Suite 700
Phoenix, Arizona 85008
Attention: Sr. Vice President, Franchising
Notices shall be given by certified mail, return receipt requested, or by
FedEx or other express delivery service.
9. This letter constitutes an offer which shall be deemed revoked and null and
void unless the duplicate originals hereof are signed by both you and Licensee
and received by Doubletree on or before August 12, 1996. An executed copy will
be returned to you and Licensee.
10. As of the date of this letter, the License Agreement is in full force and
effect, and Doubletree has no knowledge of any defaults by Licensee thereunder.
Sincerely,
Doubletree Hotel Systems, Inc.
By: xxx
-------------------------------
Its: xxx
----------------------------
Agreed and Accepted:
AGH Leasing, LP
Licensee Lender
By: AGHL GP, Inc., General Partner
By: xxx By:___________________________
-------------------------------
Title: Executive Vice President Title:________________________
----------------------------
Date: 7/15/96 Date:_________________________
-----------------------------
Loan No.______________________
Agreed and Accepted as to Paragraph 7 only:
American General Hospitality Operating Partnership, LP
Lessor
By: AGH GP, Inc., General Partner
By: xxx
------------------------------
Title: Executive Vice President
---------------------------
Date: 7/15/96
----------------------------
<PAGE>
EXHIBIT "O"
NOTE: NEED PARTICIPATING LESSEE BANK ACCOUNTS AND LIQUOR LICENSE COMPANY
REFERENCE FOR DOCUMENT
FORM OF
GENERAL ASSIGNMENT AND AGREEMENT
THIS GENERAL ASSIGNMENT AND AGREEMENT ("Agreement") is made as of the ____
day of JULY, 1996, by AGH LEASING, L.P., a Delaware limited partnership
("Lessee"), having an office and mailing address at 3860 West Northwest
Highway, Suite 300, Dallas, Texas 75220, Attention: Ken Barr, in favor of
[BORROWER/GUARANTOR], a [Delaware] limited partnership ("Lessor") having an
office and mailing address at 3860 West Northwest Highway, Suite 300, Dallas,
Texas 75220, Attention: Ken Barr.
WHEREAS, Lessor is the owner of that certain real property more
particularly described on Exhibit "A" attached hereto and incorporated herein by
reference (the "Land"), and the improvements and personal property located
thereon, consisting generally of a hotel together with a restaurant, bars,
conference rooms and related facilities (the "Hotel"). The Land and the Hotel
shall sometimes be collectively referred to herein as the "Property;"
WHEREAS, pursuant to that certain Lease Agreement (the "Lease") between
Lessor, as Lessor, and Lessee, as Lessee, dated as of even date herewith, with
respect to the Property, Lessor leased to Lessee and Lessee leased from Lessor
the Property;
WHEREAS, as a condition precedent to executing the Lease, Lessor has
required that Lessee execute this Agreement;
NOW, THEREFORE, IN CONSIDERATION of the sum of TEN AND NO/100 DOLLARS
($10.00) in hand paid by Lessor to Lessee, Lessee hereby makes certain
assignments, covenants and agreements in favour of Lessor as set forth herein.
1. Bank Accounts. Lessee represents and warrants to Lessor that all
-------------
rents, royalties, issues, profits, revenues, income, money, accounts and all
funds (collectively, "Funds") generated by or in connection with the Property,
including without limitation those generated through credit card sales and
receipts, are deposited and held in the bank accounts described on Exhibit "B"
attached hereto (the "Bank Accounts") and that Lessee has no other checking;
savings, custodian and other accounts in connection with the Property. Except as
expressly consented to in writing by Lessor (which consent Lessor can withhold
in its sole and absolute discretion), Lessee agrees not to deposit any Funds
into any checking; savings, custodian and other accounts except for the Bank
Accounts.
2. Grant of Security Interest. To secure the prompt and complete
--------------------------
performance by Lessee of its covenants and obligations set forth in the Lease,
Lessee hereby assigns, conveys, mortgages,
<PAGE>
pledges, hypothecates, transfers, and hereby grants to Lessor a continuing lien
on and security interest in, and a right of setoff and compensation against, all
of Lessee's right, title, and interest in, to, and under, or right to acquire,
the following, whether now owned or existing or hereafter acquired or arising
out of or relating to the Property (collectively, "Collateral"):
a. All Funds on deposit in checking; savings, custodian and other
accounts, including the "Bank Accounts," related to the Property or the Hotel;
all accounts receivable; all income and revenues, including revenues from the
rental and/or leasing of suites, rooms, banquet facilities, conference and
meeting rooms and related facilities; all occupancy fees and user fees; all
revenues from the sales of food, beverages, alcoholic beverages and concessions;
all parking revenues; and all other revenues, profits, proceeds, benefits and
income of the Property from any source whatsoever generated by the Property or
arising from the use or enjoyment of all or any portion thereof;
b. All intangible property and rights relating to the Property or
the operation or development thereof, or used in connection therewith,
including, without limitation, all governmental permits and licenses (including,
without limitation, liquor licenses), grants or approval of any kind relating to
the operation, occupancy or development of the Properties, and including all of
Lessee's right, title and interest in and to (i) all leases, service contracts,
operating agreements or other agreements for the operation and/or maintenance of
the Property except for those agreements or leases described in either that
certain Assignment of Management Agreements or that certain Assignment of
Leases, Rents and Security Deposits both executed by Lessee to Lessor
contemporaneously with the execution of this Agreement, (ii) all leases of
furniture, fixtures and equipment used on or in connection with the Property and
the aforesaid property (including, but not limited to, computing, communications
and electronic equipment), all indemnities and other agreements delivered in
connection with such agreements, (iii) other than the trade names of third party
franchisors, all names under or by which the Property or the Hotel thereon may
at any time be operated or known, all rights to carry on business under such
names or any variant thereof, and all good will, trade names and trademarks
relating in any way to the Property or the Hotel and (iv) the rights, title and
interests of Lessee under that certain Pledge Agreement (the "Pledge Agreement")
with the shareholders of [INSERT LIQUOR LICENSE COMPANY NAME] (the "Liquor
License Company") and the stock powers executed in connection with the Pledge
Agreement.
c. All goods, personal property, furniture, fixtures and equipment
owned by Lessee and now or hereafter located in or on the Property and/or used
in the operation and occupancy thereof, including, without limitation, all
furniture and furnishings; and
d. All accessions to, substitutions and replacements for, and all
proceeds and claims arising on account of any damage to or taking of, the
aforesaid property or any improvements
-2-
<PAGE>
thereon or any part thereof, including, without limitation, proceeds of
insurance policies, and all causes of action and recoveries for any loss or
diminution in the value thereof of any improvements.
Lessee agrees that Lessee shall have all of the rights and remedies of
a first priority secured party under the Uniform Commercial Code as enacted in
the State of Texas, including the right of set-off against any funds on deposit
with Lessor. All of the rights and remedies available to the Lessor under the
Uniform Commercial Code, as enacted in the State of Texas, are in addition to
any other rights of Lessor set forth in this Agreement, and the security
interest pledged, assigned and granted to the Lessor by this Agreement is not
intended in any way to limit the aforesaid rights and remedies of the Lessor.
Lessee agrees to execute all other reasonable documentation (including UCC
financing statements) necessary to effectuate the foregoing.
3. Bankruptcy of Lessee. Lessee hereby acknowledges and agrees that to
--------------------
the extent permitted by applicable law, the accounts comprising a portion of the
Collateral, including without limitation the Bank Accounts, and all Funds
(collectively, "Accounts") shall not constitute the property of Lessee or any
estate of Lessee, and, in the event of the filing of a voluntary of involuntary
bankruptcy petition with respect to Lessee, the Accounts shall not be subject to
Lessee's use during the pendency of any such proceeding and shall not constitute
cash collateral within the meaning of the federal bankruptcy laws. Lessee
further agrees that immediately upon the filing of a petition in bankruptcy with
respect to Lessee, Lessee shall consent to the entry of an order by the
appropriate court granting the Lessor such relief as may be necessary to allow
Agent, on behalf of Lessor, to possess and use freely all funds in the Accounts.
4. Disclaimer of Responsibility. This Agreement shall not operate to
----------------------------
place any responsibility, liability or obligation whatsoever upon Lessor, except
as expressly set forth herein.
5. No Waiver. Any forbearance or failure or delay by Lessor in
---------
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Lessor shall continue in full force
and effect until such right, power or remedy is specifically waived in a writing
executed by Lessor.
6. Expenses. If Lessee fails to comply with the terms of this Agreement,
--------
Lessee shall pay all reasonable attorneys' fees and expenses actually incurred
by the Lessor in connection with the enforcement of this Agreement.
7. Representations and Warranties. Lessee represents and warrants to
------------------------------
Lessor as follows:
-3-
<PAGE>
a. Lessee is duly organized and validly existing under the laws of
the State of its organization and is duly qualified to do business in all
jurisdictions in which the Hotels are located.
b. The execution, delivery and performance by Lessee of this
Agreement (i) are within the power of Lessee, (ii) have been duly authorized by
all requisite action of Lessee, (iii) have received all necessary governmental
approvals which are applicable to Lessee, and (iv) will not violate (a) any
provision of law which is applicable to Lessee, (b) any order of any court or
agency of government which is applicable to Lessee, (c) the organizational
documents of Lessee, or (d) any indenture, agreement or any other instrument to
which Lessee is a party or by which Lessee or its property is bound, or result
in a breach of or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of Lessee's property or assets.
c. With respect to the Lease, all restaurant leases between Lessee
and third party operators of the restaurants located at the Property, and the
Pledge Agreement, as of the date hereof:
(1) each such agreement or instrument is in full force and
effect;
(2) to best of Lessee's knowledge no default exists on the part
of Lessee under any such agreement or instrument, and to the best of
Lessee's knowledge, any other party to any such agreement or instrument;
(3) no rent or other consideration has been collected by Lessee
more than one month in advance under any such agreement or instrument;
(4) no such agreement or instrument or any interest of Lessee
has been assigned or pledged except in connection with this Agreement;
(5) to the best of Lessee' knowledge, no party to any such
agreement has any defense, set off or counterclaim against Lessee under its
respective agreement or instrument; and
(6) all rent and other consideration due to date under each such
agreement or instrument has been collected and no concession has been
granted to any party thereto in the form of a waiver, release, reduction,
discount, or other alteration of rent or other consideration due or to
become due other than as set forth in such agreements or instruments.
-4-
<PAGE>
8. Collateral Assignment; Binding Effect. Lessor may collaterally assign
-------------------------------------
this Agreement and its rights, in whole or in part, under this Agreement as
collateral for any credit facility secured in whole or in part by the Property,
and Lessee hereby irrevocably consents and agrees to the same. Upon such
collateral assignment, this Agreement shall inure to the benefit of the lender
or lenders providing such credit facility, and upon Lessee receiving the address
of such lender or lenders, (a) Lessee shall send such lender or lenders a copy
of any notice sent by Lessee to Lessor under this Agreement, (b) such lender or
lenders shall have the right, but not the obligation, to take any action of
Lessor under this Agreement and (c) no consent on behalf of Lessor or
amendment, modification or termination of this Agreement shall be effective or
binding without the written consent of such lender or lenders and all such
actions taken without such lender or lenders consent shall be void. This
Agreement shall benefit the successors and assigns of the Lessor and shall inure
to the benefit of and bind the successors and assigns of Lessee.
9. Governing Law. THIS AGREEMENT AND ANY DEALINGS BETWEEN THE PARTIES
-------------
TO THIS AGREEMENT RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR THE
RELATIONSHIPS THAT ARE BEING ESTABLISHED HEREBY AND THEREBY SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. WHERE
APPLICABLE AND EXCEPT AS OTHERWISE DEFINED HEREIN, THE TERMS HEREOF SHALL HAVE
THE MEANINGS GIVEN THEM IN THE UNIFORM COMMERCIAL CODE, AS ENACTED IN THE STATE
OF TEXAS.
10. Consent to Jurisdiction and Services of Process. Lessee hereby
-----------------------------------------------
irrevocably submits generally and unconditionally for itself and in respect of
its property to the jurisdiction of any state court, or any United States court,
sitting in the State of Texas, over any suit, action or proceeding arising out
of or relating to this Agreement or the other assignments executed by Lessee for
the benefit of Lessor. Lessee hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of venue in any such court and any claim that any such court is an inconvenient
forum. Any such proceeding against Lessee brought in the State of Texas may be
removed to a federal court of competent jurisdiction in the State of Texas.
Lessee hereby agrees and consents that, in addition to any methods of service of
process provided for under the laws of the State of Texas, all service of
process in any such suit, action or proceeding in any state court, or any United
States federal court, sitting in the State of Texas, may be made by certified or
registered mail, return receipt requested, directed to Lessee at its address for
notice stated herein or at a subsequent address of which Lessor received actual
written notice from Lessee in accordance with this Agreement, and service so
made shall be complete within five (5) days after the same shall have been so
mailed. Nothing herein shall affect the right of Lessor to serve process
-5-
<PAGE>
in any manner permitted by law or limit the right of Lessor to bring proceedings
against Lessee in any other court or jurisdiction.
11. Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS
AGREEMENT OR THE OTHER ASSIGNMENTS EXECUTED BY LESSEE FOR THE BENEFIT OF LESSOR
OR TO ANY COUNTERCLAIM INVOLVING ANY OF THE FOREGOING.
12. Notices. All notices and demand given under this Agreement shall be
-------
in writing and shall be served by personal delivery courier service or
registered or certified mail. Any such notice shall be fully prepaid and
addressed to the party served at its address as set forth in the introduction to
this Agreement. Service of any such notice or demand so made shall be deemed
effective as of the date of actual delivery if sent by personal courier service,
or if sent by registered or certified mail, three (3) days after the date of
actual delivery as shown by the addressee's return receipt, except that service
of any notice of default provided or required by law shall, if mailed, be deemed
effective on the date of mailing.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives under seal as of
the day and year first above written.
LESSEE:
Signed, sealed and AGH LEASING, L.P.,
delivered in the presence of: a Delaware limited partnership
______________________________ By: ____________________,
Unofficial Witness its general partner
By:_________________________
______________________________ Name:_______________________
Notary Public Title:______________________
My Commission Expires:
[AFFIX NOTARIAL SEAL]
LESSOR:
Signed, sealed and _____________________________
delivered in the presence of:
______________________________ By:______________________________
Unofficial Witness Name:____________________________
______________________________ Title:___________________________
Notary Public
My Commission Expires:
[AFFIX NOTARIAL SEAL]
-7-
<PAGE>
Exhibit "A" - Legal Description
Exhibit "B" - Bank Accounts
-8-
<PAGE>
EXHIBIT "B"
1. Bank One, Texas, N.A. account number:______________________
2. _______________________ account number:________________________
-9-
<PAGE>
EXHIBIT "P"
FORM OF
GROUND LESSOR'S ESTOPPEL CERTIFICATE AND AGREEMENT
The undersigned ______________________________ ("Landlord") hereby executes
this estoppel certificate and agreement (this "Certificate") in connection with
that certain Credit Agreement (the "Credit Agreement") dated as of ________,
1996, by and between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership ("Borrower"); SOCIETE GENERALE, a French banking
corporation acting through its Southwest Agency, as Structuring Agent (the bank
in such capacity and its successors and assigns are referred to herein as
"Structuring Agent"); BANK ONE, TEXAS, N.A., a national banking association,
having its address at 1717 Main Street, 4th Floor Real Estate Department,
Dallas, Texas 75201, as Administrative Agent (the bank in such capacity and its
successors and assigns are referred to herein as "Administrative Agent"; the
Structuring Agent and the Administrative Agent are collectively referred to
herein as the "Agents"); and the banks and other financial institutions a party
thereto (the "Banks"). Pursuant to the Credit Agreement the Banks have agreed to
make a loan (the "Loan") in the amount of $100,000,000.00 to Borrower to be
secured by a number of hotels, including among other things, the tenant's
interest in that certain lease agreement (as amended, the "Lease") stated on
Exhibit "B" attached hereto covering real property situated in ___________
County, _________, more particularly described in Exhibit "A" attached hereto
(the "Property"). __________________ ("Tenant") [, an affiliate of Borrower,] is
or will become the tenant under the Lease.
Landlord understands and acknowledges that the Banks are considering making
the Loan to Borrower which will be secured by certain security instruments
(collectively the "Security Documents"), including without limitation, a [Deed
of Trust/Mortgage], Security Agreement, Assignment of Rents and Financing
Statement covering the tenant's interest in the Lease, and as a condition to
making the Loan, the Banks have required Landlord to make the certifications,
warranties and representations to and agreements with the Banks set forth
hereinbelow; and
Landlord is willing to make such certifications, warranties,
representations and agreements set forth below; and
In consideration of the foregoing and the sum of Ten Dollars ($10.00) paid
by Tenant to Landlord, the receipt and sufficiency of which is hereby
acknowledged, Landlord hereby certifies, warrants, and represents to and agrees
with the Agents and Banks as follows:
1. Landlord is the landlord under the Lease [and Tenant is the tenant
under the Lease]. The Lease is in full force and effect, and except as set forth
on Exhibit "B", the Lease has not been amended, modified, supplemented or
assigned in any manner. The Lease is the entire agreement between Tenant and
Landlord related to the Property. The rent and all other sums due and payable to
Landlord under the Lease have been paid through the date
<PAGE>
of this Certificate. To the best knowledge of Landlord, the tenant under the
Lease is not in default of its obligations under the Lease and no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time, or both, will constitute a default by the tenant under the Lease.
2. The undersigned hereby acknowledges (a) the Banks' recording the
Security Documents against the tenant's interest under the Lease and the
tenant's interest in the Property, (b) that any liens or security interests of
Landlord against the tenant's interest in Lease or Property are subordinate to
those granted in the Security Documents and (c) that the Banks' exercising the
Banks' rights and remedies under the Security Documents shall not constitute a
default by the tenant under the Lease.
3. Landlord agrees that no surrender (except a surrender upon the
expiration of the term of the Lease) of the Lease to Landlord, or of the
Property, or any part thereof, or any interest herein, and no termination,
amendment or modification of the Lease by Tenant shall be valid or effective,
without the prior written consent of the Agents so long as the Loan remains
outstanding.
4. The Administrative Agent shall be entitled to and shall receive from
Landlord under the Lease prompt written notice of defaults by tenant under the
Lease. The Administrative Agent shall have thirty (30) days to cure monetary
defaults and as long as the Administrative Agent reasonably requires to cure
non-monetary defaults so long as the Administrative Agent is proceeding
diligently to cure non-monetary defaults and so long as all rentals and other
sums to be paid by the tenant under the Lease are timely paid. In the event of a
default by the tenant under the Lease, other than a default in the payment of
money under the Lease (whether of rents, taxes or other sums payable), Landlord
shall not terminate the Lease without first giving to the Administrative Agent
reasonable time within which either (a) to obtain possession of the Property (by
appointment of a receiver, foreclosure or otherwise) and cure such default with
reasonable diligence, in the case of a default which is susceptible of being
cured after the Administrative Agent obtains possession of the Premises, or (b)
to institute foreclosure proceedings and complete such foreclosure with
reasonable diligence or otherwise acquire the tenant's interest under the Lease
with reasonable diligence, in the case of default which is not susceptible of
being cured by the Administrative Agent (any such noncurable default shall be
deemed to have been cured upon the completion of such foreclosure or acquisition
of the Tenant's interest in the Lease); provided, however, that the
-------- -------
Administrative Agent shall pay all rent and other sums payable under the Lease
(including, without limitation, taxes) within thirty (30) days after any such
sums become due and payable, together with interest on any past due sums from
the due date at the rate specified in the Lease (or, if no rate is specified, at
two percent (2%) per annum above the "prime rate" announced from time to time by
the Administrative Agent).
-2-
<PAGE>
5. The Administrative Agent may, at any time before the termination of
the Lease, pay any amount or do any act or thing required of the tenant by the
terms of the Lease, and all payments so made and all acts or things so done by
the Administrative Agent shall be as effective to prevent a forfeiture of the
rights of the tenant under the Lease as if same had been done or performed by
the tenant under the Lease rather than the Administrative Agent.
6. If the Lease is terminated prior to its expiration date, by reason of
the tenant's default or rejection of the Lease by the tenant in a bankruptcy
case or for any other reason. Landlord will enter into a new lease of the
Property with the nominee of the Administrative Agent for the remainder of the
term of the Lease, at the rent and additional rent and upon all of the
covenants, agreements, terms, provisions and limitations contained in the Lease
if the Administrative Agent requests such a new lease within sixty (60) days
after the date of termination of the Lease and if all sums then due to the
Landlord under the Lease, including interest at the rate specified in the Lease
(or as otherwise specified herein), are paid to Landlord.
7. Any notices sent to Landlord under the Lease shall, until further
notice, be sent by registered mail and addressed as follows:
_____________________________________
_____________________________________
_____________________________________
Any notices sent to the Administrative Agent shall, until further
notice, be sent by registered mail and addressed as follows:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
P.O. Box 655415
Dallas, Texas 75201
Attn: Commercial Real Estate Department - Mr. Jeff S. Lindsey
Notices shall be effective upon deposit in the mails as aforesaid; however, the
period in which a response thereto must be given or taken shall run from the
date of receipt by the addressee. Rejection, refusal to accept delivery or
inability to deliver due to changed addresses of which no notice has been given
shall be deemed receipt.
-3-
<PAGE>
8. This Certificate may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.
9. This Certificate may not be modified except by an agreement in writing
signed by Landlord and the Administrative Agent or their respective successors
in interest. This Agreement shall inure to the benefit of the parties hereto,
the Agents, the Banks, and their successors and assigns. The rights and
obligations under this Agreement shall be appurtenant to and run with the
Property. Landlord will deliver to the Administrative Agent an estoppel
certificate in form reasonably acceptable to the Administrative Agent and
Landlord pertaining to the Lease within twenty (20) days after the
Administration Agent's request, so long as the Administrative Agent agrees to
pay Landlord's reasonable costs and expenses (including attorneys' fees)
associated therewith. Either Agent shall have the continuing right to record the
original or a copy of this Certificate in the real property records in which the
Property is located.
[10. Landlord consents to Tenant becoming the tenant under the Lease,
provided that Tenant assumes the obligations of the tenant under the Lease
arising from and after the date of the assignment.]
-4-
<PAGE>
IN WITNESS WHEREOF, Landlord has executed this document this ______ day of
_____________, 1996.
LANDLORD:
______________________________
By:___________________________
Name:_________________________
Title:________________________
[INSERT ACKNOWLEDGMENT FORM FOR STATE IN WHICH PROPERTY IS LOCATED]
-5-
<PAGE>
CONSENT OF LENDER
The undersigned lender ("Lender") hereby acknowledges that it is the
current holder of a mortgage lien and other liens and security interests
affecting the Property described in the attached Certificate pursuant to that
certain Deed of Trust or Mortgage dated ____________, 199_, recorded in the Real
Property Records of______________ County, ____________, under Volume ______,
Page ________ (collectively, the "Liens"), and hereby joins in the execution of
the attached Certificate for the purpose of subordinating the Liens to the terms
of the Certificate and agreeing that in the event of a foreclosure by Lender (or
its successors and assigns) on the Property, Lender (or its successors and
assigns) will take title thereto subject to the terms of the Certificate.
EXECUTED as of the ________ day of _______________, 1996.
LENDER:
_______________________________
By:____________________________
Name:__________________________
Title:_________________________
[INSERT ACKNOWLEDGMENT FORM FOR STATE IN WHICH PROPERTY IS LOCATED]
-6-
<PAGE>
EXHIBIT "Q"
GUARANTY AND CONTRIBUTION AGREEMENT
-----------------------------------
This Guaranty and Contribution Agreement (this "Agreement") is made and
entered into effective for all purposes as of the date of the Credit Agreement
herein described, by the parties signatory hereto or to an Accession Agreement
(collectively, the "Guarantor" whether one or more), to and for the benefit of
SOCIETE GENERALE, SOUTHWEST AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A.,
as Administrative Agent, and the Banks parties to the Credit Agreement herein
described.
INTRODUCTION
A. This Agreement is given in connection with the Credit Agreement (the
"Credit Agreement") dated as of July __, 1996 among AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, as the Borrower,
Structuring Agent, Administrative Agent and the Banks.
B. The Borrower is the principal financing entity for capital
requirements of its Subsidiaries, and from time to time the Borrower has made
and will continue to make capital contributions and advances to its
Subsidiaries, including the Subsidiaries which are parties hereto. Other than
the Parent, each Guarantor is a direct or indirect subsidiary of the Borrower.
Each Guarantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement.
C. Under the Credit Agreement, it is a condition to the making of the
Advances by the Banks and the issuance of the Letters of Credit by the Issuing
Bank that each Guarantor shall have executed and delivered this Agreement.
Therefore, in order to induce the Banks to make the Advances and the
Issuing Bank to issue its Letters of Credit, each Guarantor hereby agrees as
follows:
Section 1. Definitions. All capitalized terms not otherwise defined in this
-----------
Agreement that are defined in the Credit Agreement shall have the meaning
assigned to such terms by the Credit Agreement.
Section 2. Guaranty. Each Guarantor hereby unconditionally guarantees (a)
--------
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Borrower now or hereafter existing under
the Credit Agreement, the Notes and any other Credit Document, whether for
principal, Reimbursement Obligations, interest, fees, expenses, or otherwise and
(b) the payment and performance of the lessor's obligations under the
Participating Leases (such obligations being the "Guaranteed Obligations") and
any and all expenses (including reasonable
<PAGE>
counsel fees and expenses) incurred by the Structuring Agent, the Administrative
Agent or any Bank in enforcing any rights under this Agreement. Each Guarantor
agrees that its guaranty obligation under this Agreement is a guarantee of
payment, not of collection and that such Guarantor is primarily liable for the
payment of the Guaranteed Obligations.
Section 3. Limit of Liability. Each Guarantor that is a Subsidiary of the
------------------
Borrower shall be liable under this Agreement with respect to the Guaranteed
Obligations only for amounts aggregating up to the largest amount that would not
render its guaranty obligation hereunder subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provisions of any state
law.
Section 4. Guaranty Absolute. Each Guarantor guarantees that the
-----------------
Guaranteed Obligations will be paid and performed strictly in accordance with
the terms of the Credit Agreement, the other Credit Documents and the
Participating Leases, as applicable, regardless of any law, regulation, or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Structuring Agent, the Administrative Agent, the Banks or the
Participating Lessees with respect thereto. The liability of each Guarantor
under this Agreement shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement, any
other Credit Document, any Participating Lease or any other agreement or
instrument relating thereto;
(b) any change in the time, manner, or place of payment of, or in any
other term of, any of the Guaranteed Obligations, or any other amendment or
waiver of or any consent to departure from the Credit Agreement, any Credit
Document or any Participating Lease;
(c) any exchange, release, or nonperfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
agreement or guaranty, for any of the Guaranteed Obligations; or
(d) any other circumstances which might otherwise constitute a defense
available to, or a discharge of the Borrower or a Guarantor.
Section 5. Continuation and Reinstatement, Etc. Each Guarantor agrees
-----------------------------------
that, to the extent that the Borrower makes payments to the Structuring Agent,
the Administrative Agents or any Bank or the Structuring Agent, the
Administrative Agent or any Bank receives any proceeds of collateral and such
payments or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside, or otherwise required to be repaid,
then to the extent of such
-2-
<PAGE>
repayment the Guaranteed Obligations shall be reinstated and continued in full
force and effect as of the date such initial payment or collection of proceeds
occurred. The Guarantor shall defend and indemnify the Structuring Agent, the
Administrative Agent and each Bank from and against any claim or loss under this
Section 5 (including reasonable attorneys' fees and expenses) in the defense of
any such action or suit.
Section 6. Certain Waivers.
---------------
6.01. Notice. Each Guarantor hereby waives promptness, diligence, notice
------
of acceptance, notice of acceleration, notice of intent to accelerate and any
other notice with respect to any of the Guaranteed Obligations and this
Agreement.
6.02. Other Remedies. Each Guarantor hereby waives any requirement that
--------------
the Structuring Agent, the Administrative Agent or any Bank protect, secure,
perfect, or insure any Lien or any Property subject thereto or exhaust any right
or take any action against the Borrower or any other Person or any
collateral, including any action required by Chapter 34 of the Texas Business
and Commerce Code.
6.03. Waiver of Subrogation. (a) Each Guarantor hereby irrevocably waives,
---------------------
until payment in full of all Guaranteed Obligations and termination of all
Commitments, any claim or other rights which it may acquire against the Borrower
that arise from such Guarantor's obligations under this Agreement or any other
Credit Document, including, without limitation, any right of subrogation
(including, without limitation, any statutory rights of subrogation under
Section 509 of the Bankruptcy Code, 11 U.S.C. (S) 509, or otherwise),
reimbursement, exoneration, contribution, indemnification, or any right to
participate in any claim or remedy of the Structuring Agent, the Administrative
Agent or any Bank against the Borrower or any collateral which the Structuring
Agent, the Administrative Agent or any Bank now has or acquires. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Guaranteed Obligations shall not have been paid in full and all of the
Commitments terminated, such amount shall be held in trust for the benefit of
the Structuring Agent, the Administrative Agent or any Bank and shall promptly
be paid to the Administrative Agent for the benefit of Structuring Agent, the
Administrative Agent and the Banks to be applied to the Guaranteed Obligations,
whether matured or unmatured, as the Administrative Agent may elect. Each
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Credit Agreement and that the
waiver set forth in this Section 6.03(a) is knowingly made in contemplation of
such benefits.
(b) Each Guarantor further agrees that it will not enter into any
agreement providing, directly or indirectly, for any contribution,
reimbursement, repayment, or indemnity by the Borrower
-3-
<PAGE>
or any other Person on account of any payment by such Guarantor to the
Structuring Agent, the Administrative Agent or the Banks under this Agreement.
6.04. California Waivers.
------------------
(a) Guarantor understands and agrees that the waivers contained in this
Section 6.04 are waivers of substantive rights and defenses to which Guarantor
might otherwise be entitled under state and federal law. The rights and defenses
waived include, without limitation, those provided by California laws of
suretyship and guaranty, antideficiency laws, and the Uniform Commercial Code.
Guarantor acknowledges that Guarantor has provided these waivers of rights and
defenses with the intention that they be fully relied upon by the Banks and/or
Agents.
(b) Guarantor waives Guarantor's rights of subrogation, reimbursement,
indemnity and contribution, and any other rights and defenses available to
Guarantor by reason of Section 2787 to 2855, inclusive, of the California Civil
Code, as amended or recodified from time to time, including without limitation
(i) any defenses Guarantor may have to the Guaranteed Obligations by reason of
an election of remedies by the Banks and/or Agents, and (ii) any rights or
defenses Guarantor may have by reason of protection afforded to Borrower with
respect to the Guaranteed Obligations pursuant to the antideficiency or other
laws of the State of California limiting or discharging Borrower's indebtedness,
including, without limitation, Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure, as amended or recodified from time to time.
(c) If and to the extent such waivers of Guarantor's rights of
subrogation, reimbursement, indemnity and contribution, and any other rights and
defenses waived by Guarantor hereunder are unenforceable, Guarantor hereby
agrees that all such rights shall be junior and subordinate to the rights of the
Banks and/or Agents to obtain payment and performance of the Guaranteed
Obligations and to all rights of the Banks and/or Agents in and to any property,
including the Property, which now or hereafter serves as collateral security for
the Guaranteed Obligations.
(d) The above waivers include, but are not limited to, the waiver by
Guarantor of:
(i) all rights and defenses arising out of an election of remedies
by the Banks and/or Agents, even though that election of remedies, such as
a nonjudicial foreclosure with respect to security for the Guaranteed
Obligations, has destroyed Guarantor's rights or subrogation and/or
reimbursement against Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise;
-4-
<PAGE>
(ii) all rights and protections of any kind which Guarantor may
have for any reason which would affect or limit the amount of any recovery
by the Banks and/or Agents from Guarantor following a nonjudicial or
judicial foreclosure of any security for the Guaranteed Obligations,
including, without limitation, the right to any fair market value hearing
pursuant to Section 580a of the California Code of Civil Procedure.
(iii) any and all benefits available to sureties and creditors which
might otherwise be available to Guarantor under California Civil Code
Sections 2809 (reduction of surety's obligation where larger than
principal's), 2810 (liability of surety when principal is not liable), 2815
(revocation of continuing guaranty), 2819 (exoneration of surety), 2839
(performance of principal obligation or offer of performance), 2845
(requiring creditor to proceed against principal), 2849 (security for
performance of principal obligation), 2850 (hypothecation of surety's
property), 2899 (order of resort to property), and 3433 (creditor's
entitlement to satisfy claim from several funds), as amended or recodified
from time to time.
(iv) all rights which Guarantor may have under any law which may
prohibit the Banks and/or Agents from enforcing its rights and remedies
against Guarantor by both a private trustee's sale and an action in court
or any law which requires that a court action to enforce the Bank's and/or
Agents' rights be an action to foreclose the Deed of Trust, including
without limitation, waivers of the benefit of California Code of Civil
Procedure Sections 564 (cases in which appointment of receiver is
authorized) and 726.5 (right of election by secured lender where security
is environmentally impaired), and California Civil Code Section 2929.5 (the
lender's inspection of real property security), as amended or recodified
from time to time; and
(e) Guarantor shall not be discharged, released or exonerated, in any
way, from its absolute, unconditional and independent liabilities hereunder,
even though any rights or defenses which Guarantor may have against Borrower,
the Banks, the Agents or others may be destroyed, diminished or otherwise
affected, by:
(i) Any declaration by the Banks and/or Agents of a default in
respect of any of the Guaranteed Obligations;
(ii) The exercise by the Banks and/or Agents of any rights or
remedies against Borrower or any other person;
(iii) The failure of the Banks and/or Agents to exercise any rights
or remedies against Borrower or any other person; or
-5-
<PAGE>
(iv) The sale or enforcement of, or realization upon (through
judicial foreclosure, power of sale or any other means) any security for
any of the Guaranteed Obligations, even though (A) recourse may not
thereafter be had against Borrower for any deficiency or (B) the Banks
and/or Agents fail to pursue any such recourse which might otherwise be
available, whether by way of deficiency judgment following judicial
foreclosure, or otherwise.
Section 7. Representations and Warranties. Each Guarantor hereby
------------------------------
represents and warrants as follows:
7.01. Corporate Authority. Such Guarantor is either a corporation, limited
-------------------
liability company or limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. The
execution, delivery and performance by such Guarantor of this Agreement are
within such Guarantor's organizational powers, have been duly authorized by all
necessary organizational action and do not contravene (a) such Guarantor's
organizational authority or (b) any law or material contractual restriction
affecting such Guarantor or its Property.
7.02. Government Approval. No authorization or approval or other action by
-------------------
and no notice to or filing with, any Governmental Authority is required for the
due execution, delivery and performance by such Guarantor of this Agreement.
7.03. Binding Obligations. This Agreement is the legal, valid and binding
-------------------
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, or similar law affecting creditors' rights (whether
considered in a proceeding at law or in equity).
Section 8. Covenants. Each Guarantor will comply with all covenant
---------
provisions of Article V and Article VI of the Credit Agreement to the extent
such provisions are applicable.
8.01. Additional Covenant. As soon as possible and in any event within
-------------------
five days after the incurrence of any Indebtedness by the Parent or any
Subsidiary of the Parent other than the Obligations or the Permitted Other
Subsidiary Indebtedness, the Parent shall notify the Administrative Agent in
writing of such incurrence.
Section 9. Contribution. As a result of the transactions contemplated by
------------
the Credit Agreement, each of the Guarantors will benefit, directly and
indirectly, from the Guaranteed Obligations and in consideration thereof desire
to enter into a contribution agreement among themselves as set forth in this
Section 9 to allocate such benefits among themselves and to provide
-6-
<PAGE>
a fair and equitable arrangement to make contributions in the event any payment
is made by any Guarantor hereunder to the Structuring Agent, the Administrative
Agent or the Banks (such payment being referred to herein as a "Contribution,"
and for purposes of this Agreement, includes any exercise of recourse by the
Administrative Agent against any Property of a Contributor designated as
collateral under any Security Document and application of proceeds of such
collateral in satisfaction of such Guarantor's obligations under this
Agreement). The Guarantors hereby agree as follows:
9.01. Calculation of Contribution. In order to provide for just and
---------------------------
equitable contribution among the Guarantors in the event any Contribution is
made by a Guarantor (a "Funding Guarantor"), such Funding Guarantor shall be
entitled to a contribution from certain other Guarantors for all payments,
damages and expenses incurred by that Funding Guarantor in discharging any of
the Guaranteed Obligations, in the manner and to the extent set forth in this
Section. The amount of any Contribution under this Agreement shall be equal to
the payment made by the Funding Guarantor to the Administrative Agent or any
other beneficiary pursuant to this Agreement and shall be determined as of the
date on which such payment is made.
9.02. Benefit Amount Defined. For purposes of this Agreement, the "Benefit
----------------------
Amount" of any Guarantor as of any date of determination shall be the net value
of the benefits to such Guarantor and all of its Subsidiaries (including any
Subsidiaries which may be Guarantors) from extensions of credit made by the
Banks to the Borrower under the Credit Agreement and the benefit of entering
into the Participating Leases; provided, that in determining the contribution
liability of any Guarantor which is a Subsidiary to its direct or indirect
parent corporation or of any Guarantor to its direct or indirect Subsidiary, the
Benefit Amount of such Subsidiary and its Subsidiaries, if any, shall be
subtracted in determining the Benefit Amount of the parent corporation. Such
benefits shall include benefits of funds constituting proceeds of Advances made
to the Borrower by the Banks which are in turn advanced or contributed by the
Borrower to such Guarantor or its Subsidiaries and benefits of Letters of Credit
issued pursuant to the Credit Agreement on behalf of, or the proceeds of which
are advanced or contributed or otherwise benefit, directly or indirectly, such
Guarantor and its Subsidiaries (collectively, the "Benefits"). In the case of
any proceeds of Advances or Benefits advanced or contributed to a Person (an
"Owned Entity") any of the equity interests of which are owned directly or
indirectly by a Guarantor, the Benefit Amount of a Guarantor with respect
thereto shall be that portion of the net value of the benefits attributable to
Advances or Benefits equal to the direct or indirect percentage ownership of
such Guarantor in its Owned Entity.
9.03. Contribution Obligation. Each Guarantor shall be liable to a Funding
-----------------------
Guarantor in an amount equal to the greater of (A) the (i) ratio of the Benefit
Amount of such Guarantor to the total amount of Guaranteed Obligations,
multiplied by (ii) the amount of Guaranteed Obligations paid by
-7-
<PAGE>
such Funding Guarantor and (B) 95% of the excess of the fair saleable value of
the property of such Guarantor over the total liabilities of such Guarantor
(including the maximum amount reasonably expected to become due in respect of
contingent liabilities) determined as of the date on which the payment made by a
Funding Guarantor is deemed made for purposes of this Agreement (giving effect
to all payments made by other Funding Guarantors as of such date in a manner to
maximize the amount of such contributions).
9.04. Allocation. In the event that at any time there exists more than one
----------
Funding Guarantor with respect to any Contribution (in any such case, the
"Applicable Contribution"), then payment from other Guarantors pursuant to this
Agreement shall be allocated among such Funding Guarantors in proportion to the
total amount of the Contribution made for or on account of the Borrower by each
such Funding Guarantor pursuant to the Applicable Contribution. In the event
that at any time any Guarantor pays an amount under this Agreement in excess of
the amount calculated pursuant to clause (A) of Subsection 9.03 above, that
Guarantor shall be deemed to be a Funding Guarantor to the extent of such excess
and shall be entitled to contribution from the other Guarantors in accordance
with the provisions of this Section.
9.05. Subsidiary Payment. The amount of contribution payable under this
------------------
Section by any Guarantor shall be reduced by the amount of any contribution paid
hereunder by a Subsidiary of such Guarantor.
9.06. Equitable Allocation. If as a result of any reorganization,
--------------------
recapitalization, or other corporate change in the Borrower or any of its
Subsidiaries, or as a result of any amendment, waiver or modification of the
terms and conditions of other Sections of this Agreement or the Guaranteed
Obligations, or for any other reason, the contributions under this Section
become inequitable as among the Guarantors, the Guarantors shall promptly modify
and amend this Section to provide for an equitable allocation of contributions.
Any of the foregoing modifications and amendments shall be in writing and signed
by all Guarantors.
9.07. Asset of Party to Which Contribution is Owing. The Guarantors
---------------------------------------------
acknowledge that the right to contribution hereunder shall constitute an asset
in favor of the Guarantor to which such contribution is owing.
9.08. Subordination. No payments payable by a Guarantor pursuant to the
-------------
terms of this Section 9 shall be paid until all amounts then due and payable by
the Borrower to any Bank, pursuant to the terms of the Credit Documents, are
paid in full in cash. Nothing contained in this Section 9 shall affect the
obligations of any Guarantor to any Bank under the Credit Agreement or any other
Credit Documents.
-8-
<PAGE>
Section 10 Miscellaneous.
-------------
10.01. Addresses for Notices. All notices and other communications provided
---------------------
for hereunder shall be in writing, including telegraphic communication and
delivered or teletransmitted to the Administrative Agent, as set forth in the
Credit Agreement and to each Guarantor, at the address set forth beside such
Guarantor's signature hereto or in the Accession Agreement executed by such
Guarantor, or to such other address as shall be designated by any Guarantor or
the Administrative Agent in written notice to the other parties. All such
notices and other communications shall be effective when delivered or
teletransmitted to the above addresses.
10.02. Amendments, Etc. No waiver of any provision of this Agreement nor
----------------
consent to any departure by any Guarantor therefrom shall be effective unless
the same shall be in writing and signed by the Administrative Agent, the
Majority Banks and the Borrower and no amendment of this Agreement shall be
effective unless the same shall be in writing and signed by each Guarantor and
the Administrative Agent, with the consent of the Majority Banks; provided that
--------
any amendment or waiver releasing any Guarantor from any liability hereunder
shall be signed by all the Banks; and provided further that any waiver or
----------------
consent shall be effective only in the specific instance and for the specific
purpose for which given. Notwithstanding the foregoing, in the event that any
Subsidiary or Affiliate of the Borrower hereafter is required in a accordance
with the terms of the Credit Agreement or otherwise agrees to become a guarantor
of the Borrower's obligations under the Credit Documents, then such Subsidiary
or Affiliate may become a party to this Agreement by executing an Accession
Agreement ("Accession Agreement") in the form attached hereto as Annex 1 and
-------
each Guarantor and the Administrative Agent hereby agrees that upon such
Subsidiary's or Affiliate's execution of such Accession Agreement, this
Agreement shall be deemed to have been amended to make such Person a Guarantor
hereunder for all purposes and a party hereto and no signature is required on
behalf of the other Guarantors or the Administrative Agent to make such an
amendment to this Agreement effective.
10.03. No Waiver; Remedies. No failure on the part of Structuring Agent,
-------------------
the Administrative Agent or any Bank to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
10.04 Right of Set-Off. Upon the occurrence and during the continuance of
----------------
any Event of Default, the Structuring Agent, the Administrative Agent and the
Banks are hereby authorized at any time, to the fullest extent permitted by law,
to set off and apply any deposits (general or special, time or demand,
provisional or final) and other indebtedness owing by the Structuring Agent, the
-9-
<PAGE>
Administrative Agent or the Banks to the account of any Guarantor against any
and all of the obligations of such Guarantor under this Agreement, irrespective
of whether or not the Structuring Agent, the Administrative Agent or the Banks
shall have made any demand under this Agreement and although such obligations
may be contingent and unmatured. The Structuring Agent, the Administrative Agent
and the Banks agree promptly to notify each Guarantor affected by any such set-
off after any such set-off and application made by the Structuring Agent, the
Administrative Agent or the Banks provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Structuring Agent, the Administrative Agent and the Banks under this Section
10.04 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Structuring Agent, the
Administrative Agent and the Banks may have.
10.05. Continuing Guaranty: Transfer of Interest. This Agreement shall
-----------------------------------------
create a continuing guaranty and shall (a) remain in full force and effect until
payment in full and termination of the Guaranteed Obligations, (b) be binding
upon each Guarantor, its successors and assigns, and (c) inure, together with
the rights and remedies of the Administrative Agent hereunder, to the benefit of
the Structuring Agent, the Administrative Agent, the Banks and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause, when any Bank assigns or otherwise transfers any interest held
by it under the Credit Agreement or other Credit Document to any other Person
pursuant to the terms of the Credit Agreement or other Credit Document, that
other Person shall thereupon become vested with all the benefits held by such
Bank under this Agreement. Upon the payment in full and termination of the
Guaranteed Obligations, the guaranties granted hereby shall terminate and all
rights hereunder shall revert to each Guarantor to the extent such rights have
not been applied pursuant to the terms hereof. Upon any such termination, the
Administrative Agent will, at each Guarantor's expense, execute and deliver to
such Guarantor such documents as such Guarantor shall reasonably request and
take any other actions reasonably requested to evidence or effect such
termination.
10.06. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with, the laws of the State of Texas. Each Guarantor
hereby irrevocably submits to the jurisdiction of any Texas state or federal
court sitting in Dallas, Texas in any action or proceeding arising out of or
relating to this Agreement and the other Credit Documents and such Guarantor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court. Each Guarantor hereby
irrevocably waives, to the fullest extent it may effectively do so, any right it
may have to the defense of an inconvenient forum to the maintenance of such
action or proceeding. Each Guarantor hereby agrees that service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding may be made by mailing or delivering a copy of such process
to such Guarantor at its
-10-
<PAGE>
address specified below. Each Guarantor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section shall affect the rights of any Bank, the Structuring
Agent or the Administrative Agent to serve legal process in any other manner
permitted by the law or affect the right of any Bank, the Structuring Agent or
the Administrative Agent to bring any action or proceeding against any Guarantor
or its Property in the courts of any other jurisdiction.
SECTION 10.07. WAIVERS OF JURY TRIAL. THE GUARANTORS HEREBY IRREVOCABLY
---------------------
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OTHER CREDIT DOCUMENT OR TO ANY COUNTERCLAIM
THEREIN.
SECTION 10.08. ENTIRE AGREEMENT. PURSUANT TO SECTION 26.02 OF THE TEXAS
----------------
BUSINESS AND COMMERCE CODE, A LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE
LOAN AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN
AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S
AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN AGREEMENT
AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED
INTO THE LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS
DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE>
Each Guarantor has caused this Agreement to be duly executed as of the date
first above written.
GUARANTORS:
AMERICAN GENERAL HOSPITALITY
CORPORATION, a Maryland corporation
By:__________________________________________
Name:________________________________________
Title:_______________________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
AGH UPREIT, LLC, a Delaware limited liability
company
By: American General Hospitality
Corporation, member
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
3100 GLENDALE JOINT VENTURE,
an Ohio general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:___________________________
Name:_________________________
Title:________________________
By: American General Hospitality
Operating Partnership, L.P., its
partner
By: AGH GP, Inc., general partner
By:________________________________
Name:______________________________
Title:_____________________________
Address: 3860 W. Northwest Highway
Dallas, Texas, 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
MDV LIMITED PARTNERSHIP,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
MADISON MOTEL ASSOCIATES,
a Wisconsin general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., its
partner
By: AGH GP, Inc., general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
183 HOTEL ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
RICHMOND WILLIAMSBURG ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:________________________________
Name:______________________________
Title:_____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:___________________________
Name:_________________________
Title:________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
2929 WILLIAMS LIMITED LIABILITY COMPANY, a
Delaware limited liability company
By: AGH UPREIT, LLC
By: American General Hospitality
Corporation, member
By:___________________________________
Name:_________________________________
Title:________________________________
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc., general partner
By:___________________________________
Name:_________________________________
Title:________________________________
By: American General Hospitality Operating
Partnership, L.P., its member
By: AGH GP, Inc., general partner
By:______________________________
Name:____________________________
Title:___________________________
Address: 3860 W. Northwest Highway
Dallas, Texas 75220
Attn: Mr. Kenneth E. Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
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<PAGE>
ANNEX 1
to Guaranty and Contribution Agreement
ACCESSION AGREEMENT
____________________ [NAME OF ENTITY], a ______________ [limited
partnership/corporation] (the "Company"), hereby agrees with (i) BANK ONE,
TEXAS, N.A., as Administrative Agent (the "Agent") under the Credit Agreement
dated as of _______ __, 1996 among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership, as the Borrower, SOCIETE
GENERALE, SOUTHWEST AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as
Administrative Agent, and the Banks (as such agreement is amended from time to
time in accordance with its terms, the "Credit Agreement", capitalized terms
used herein and not otherwise defined having the meanings set forth therein),
(ii) the parties to the Environmental Indemnity Agreement (the "Environmental
Indemnity Agreement") dated as of ___________ __, 1996 executed in connection
with the Credit Agreement, and (iii) the parties to the Guaranty and
Contribution Agreement (the "Guaranty") dated as of __________ __, 1996 executed
in connection with the Credit Agreement, as follows:
The Company hereby agrees and confirms that, as of the date hereof, it (a)
intends to be a party to the Environmental Indemnity Agreement and the Guaranty
and undertakes to perform all the obligations expressed therein, respectively,
of an Indemnitor and a Guarantor (as defined in the Environmental Indemnity
Agreement and the Guaranty, respectively), (b) agrees to be bound by all of the
provisions of the Environmental Indemnity Agreement and the Guaranty as if it
had been an original party to such agreements, and (c) confirms that the
representations and warranties set forth in the Environmental Indemnity
Agreement and the Guaranty, respectively, with respect to the Company, a party
thereto, are true and correct in all material respects as of the date of this
Accession Agreement.
For purposes of notices under the Environmental Indemnity Agreement and the
Guaranty the address for the Company is as follows:
____________________________
____________________________
Attention:________________________
Telephone:________________________
Telecopy:_________________________
This Accession Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF this Accession Agreement was executed and delivered as
of the ____ day of ______________, 19__.
[NAME OF ENTITY]
________________________________________
By:_____________________________________
Title:__________________________________
<PAGE>
EXHIBIT "R"
IRREVOCABLE DIRECTION TO PAY RENT
TO:
AGH Leasing, L.P.
3860 West Northwest Highway
Suite 300
Dallas, Texas 75220
Attention: Ken Barr
This Irrevocable Direction to Pay Rent (this "Direction") is made and
entered into effective for all purposes as of the 31st day of July, 1996, by the
parties signatory hereto or to an Accession Agreement (collectively, the
"Lessor" whether one or more).
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("Borrower"); SOCIETE GENERALE, a French banking corporation
acting through its Southwest Agency, as Structuring Agent (the bank in such
capacity and its successors and assigns are referred to herein as "Structuring
Agent"); BANK ONE, TEXAS, N.A., a national banking association, having its
address at 1717 Main Street, 4th Floor, Real Estate Department, Dallas, Texas
75201, as Administrative Agent (the bank in such capacity and its successors and
assigns are referred to herein as "Administrative Agent"; the Structuring Agent
and the Administrative Agent are collectively referred to herein as the
"Agents"); and the banks and other financial institutions a party thereto (the
"Banks") have entered into a Credit Agreement dated as of July 31, 1996 (as
amended or otherwise modified from time to time, the "Credit Agreement")
pursuant to which the Banks have agreed to provide a credit facility ("Credit
Facility") in an amount of up to $100,000,000.00 to Borrower.
Pursuant to those certain Lease Agreements between Lessor, as lessor, and
AGH Leasing, L.P., a Delaware limited partnership ("Lessee"), as lessee, dated
as of even date herewith and more particularly described on Exhibit "A" attached
hereto and incorporated herein by reference (the "Leases"), Lessor leased to
Lessee and Lessee leased from Lessor the property described in such Leases.
Lessor is executing this Direction in consideration for and as a condition
precedent to the Bank's making the Credit Facility to Borrower. Lessee is
executing the Acknowledgment to this Direction in consideration for and in
connection with the Leases.
All capitalized terms not otherwise defined in this instrument shall have
the meaning assigned to such terms by the Credit Agreement.
<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 2
In consideration of the foregoing, you are hereby authorized and directed
to pay all lease rentals due under the Leases ("Rental Payments"), as follows:
1. Commencing on the date hereof, and until such time as the Obligations
due and owing under the Credit Agreement and all of the Credit
Documents have been fully performed or satisfied pay Rental Payments
to BANK ONE, TEXAS, N.A., Account No. 1892347897 (in the name of
Borrower).
2. This Direction is irrevocable and shall remain in full force and
effect until the Obligations due and owing under the Credit Agreement
and all of the Credit Documents have been fully performed or
satisfied.
3. Payment of the Rental Payments as provided in Paragraph 1 hereof to
the foregoing account shall be deemed payment to Lessor, as lessor
under the Leases, and to the extent so paid shall satisfy your
obligation to pay rent under the Leases. All payments of Rental
Payments into the account described in Paragraph 1 under Leases in
which the lessor is a Lessor other than Borrower shall be deemed for
the account of the applicable Lessor notwithstanding that the account
may be in the name of Borrower, and Borrower shall be deemed to be
acting as such Lessor's agent with respect to such payments.
LESSORS:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:___________________________________
Name:____________________________
Title:___________________________
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<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 3
3100 GLENDALE JOINT VENTURE,
an Ohio general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:__________________________
Name:________________________
Title:_______________________
By: American General Hospitality Operating
Partnership, L.P., its partner
By: AGH GP, Inc., general partner
By:_______________________________
Name:_____________________________
Title:____________________________
-3-
<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 4
MDV LIMITED PARTNERSHIP,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:__________________________
Name:________________________
Title:_______________________
-4-
<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 5
MADISON MOTEL ASSOCIATES,
a Wisconsin general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:____________________________________
Name:__________________________________
Title:_________________________________
By: American General Hospitality
Operating Partnership, L.P., its
Partner
By: AGH GP, Inc., general partner
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc., its general partner
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-5-
<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 6
183 HOTEL ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:__________________________________
Name:________________________________
Title:_______________________________
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By:_____________________________
Name:___________________________
Title:__________________________
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<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 7
RICHMOND WILLIAMSBURG ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality Corporation,
member
By:_____________________________________
Name:___________________________________
Title:__________________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc.,
general partner
By;________________________________
Name:______________________________
Title:_____________________________
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<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 8
2929 WILLIAMS LIMITED LIABILITY COMPANY, a
Delaware limited liability company
By: AGH UPREIT, LLC
By: American General Hospitality
Corporation, member
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality
Operating Partnership, L.P., member
By: AGH GP, Inc., general partner
By:_______________________________
Name:_____________________________
Title:____________________________
By: American General Hospitality Operating
Partnership, L.P., its member
By: AGH GP, Inc., general partner
By:_________________________________
Name:_______________________________
Title:______________________________
-8-
<PAGE>
AGH Leasing, L.P.
July 30, 1996
Page 9
Acknowledgment and Consent to the Irrevocable Direction to Pay Rent
-------------------------------------------------------------------
The undersigned hereby acknowledges the foregoing Direction, and agrees for
the benefit of the Agents and the Banks, to pay Rental Payments in the amounts
and to the account as directed above.
The undersigned further agrees to continue to make such payments until the
earlier of (i) the date on which the Leases are terminated in accordance with
their terms or (ii) the date on which the undersigned is notified by Bank One,
Texas, N.A. in its capacity as Administrative Agent for the Banks pursuant to
Credit Agreement or any successor Administrative Agent appointed pursuant to the
Credit Agreement that all Obligations due and owing under the Credit Agreement
and all of the Credit Documents have been fully performed or satisfied.
AGH LEASING, L.P.
a Delaware limited partnership
By: AGHL GP, INC.,
a Delaware corporation,
its sole general partner
By:________________________________
Name:______________________________
Title:_____________________________
WITNESS:
___________________________
___________________________
-9-
<PAGE>
ANNEX 1
to Irrevocable Direction to Pay Rent
ACCESSION AGREEMENT
_______________ [NAME OF ENTITY], a _______________ [limited
partnership/corporation] (the "Company"), hereby agrees with the parties to the
Irrevocable Direction to Pay Rent (the "Direction") dated as of _____ ___, 1996,
as follows:
The Company hereby agrees and confirms that, as of the date hereof, it (a)
intends to be a party to the Direction, (b) agrees to be bound by all of the
provisions of the Direction as if it had been an original party to such
agreement, and (c) acknowledges that it has received and reviewed a copy of the
Direction and the Acknowledgment and Consent to the Irrevocable Direction to Pay
Rent.
For purposes of notices under the Direction the address for the Company is
as follows:
_____________________________
_____________________________
Attention:___________________
Telephone:___________________
Telecopy:____________________
This Accession Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. IN WITNESS WHEREOF this
Accession Agreement was executed and delivered as of the ____ day of ________,
19__.
[NAME OF ENTITY]
_____________________________________
By:__________________________________
Title:_______________________________
<PAGE>
Agreed to and Accepted By:
AGH LEASING L.P.,
a Delaware limited partnership
By: AGHL GP, INC.,
a Delaware corporation,
its sole general partner
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
EXHIBIT "S"
LEASE/CONCESSION AGREEMENT
THIS AGREEMENT is made on the _______ day of _____________, 1996, between
AGH Leasing, L.P., a Delaware limited partnership ("Lessee"), and SDBMI, a
California corporation ("Licensee").
Whereas, Lessee has leased the hotel facility known as the Holiday Inn
Mission Valley, 595 Hotel Circle South at San Diego, California 92108-3496
("Hotel"), from American General Hospitality Operating Partnership, L.P.
("Owner"), pursuant to that certain Lease Agreement (herein so called) dated the
same date as the date hereof; and
Whereas, Lessee has retained American General Hospitality, Inc. ("Manager")
to manage the Hotel pursuant to that certain Management Agreement (herein so
called) of today's date between Lessee and Manager; and
Whereas, in connection with the operation of the Hotel and the services to
be provided by Manager, Lessee desires that Licensee operate a concession for
the sale of alcoholic beverages at the Hotel and Manager has agreed to provide
the personnel and management necessary for the operation of the alcoholic
beverage sales which are attendant to the management and operation of the Hotel
by Manager.
Now therefore, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration as set forth herein, the parties
agree as follows:
1. Lessee grants to Licensee the right to dispense alcoholic beverages on
the premises of the Hotel under general guidelines and rules established from
time to time by Manager, on condition that all such sales shall be legally made
under valid licenses or permits therefor, and further conditioned that Licensee
shall conform to and comply with all applicable laws, ordinances, rules and
regulations of the applicable governmental or quasi-governmental authorities
having jurisdiction over the sale, service and/or dispensing of alcoholic
beverages at the Hotel ("Applicable Laws"). The rights of Licensee granted in
this section shall be subject to the terms and provisions of the Management
Agreement relating to the use and operation of the Hotel, and Licensee
acknowledges that it has received and reviewed a copy of the Management
Agreement.
2. Lessee will furnish, or will cause Manager to furnish, insurance,
including, as necessary, a waiver of liquor liability exclusion or specific
liquor liability coverage, so as to protect Licensee, Manager and Lessee in
regard to the concession granted herein and will as well furnish utilities,
furniture, fixtures, advertising, related bar supplies (other than alcoholic
beverages) and personnel necessary to conduct the business of dispensing
alcoholic beverages upon the premises. Licensee agrees to pay to Lessee the
following: (i) thirty percent (30%) of the gross receipts ("gross receipts"
being net however of beverage purchases, sales taxes, including penalties and
assessments, and Licensee's State and local taxes and fees, for all of
<PAGE>
which Licensee shall be solely responsible) from the dispensing and sale of
alcoholic beverages by Licensee hereunder, payable monthly, and (ii)
reimbursement of the actual cost of supplies and services furnished by Lessee,
or by Manager as the agent of Lessee, based on a prorata formula of the costs
where joint use of the same is made, provided that, at the request of Lessee,
such payments to Lessee shall be made periodically and adjusted on a monthly
basis or upon final audit. The formula to be used in determining shared expenses
shall be the ratio between total sales of Licensee to total revenues of the
Hotel.
3. Licensee agrees to furnish such management, training and supervision
of Manager's employees as necessary to enable such personnel to transact the
actual sale of alcoholic beverages on behalf of Licensee so as to comply with
Applicable Laws. Manager agrees that, in the use of such employees by Licensee,
Licensee shall have the exclusive right and obligation to make all decisions
relating to all activities of such employees affecting the permits of Licensee
under Applicable Laws. Licensee shall have the right to terminate the
application of this Agreement to the employees of Manager upon reasonable notice
to Manager, or without notice in regard to any particular employee when such
employee violates any part of the Applicable Laws. Any activity relating to the
beverage permit of Licensee by any such employee shall remain under the
exclusive control of Licensee.
4. Licensee agrees that in the event of termination of this Agreement,
the physical assets on and about the Hotel shall remain the property of Lessee
or the Owner of the Hotel, as the case may be. The physical assets furnished by
Licensee (in particular, the alcoholic beverages) shall remain the property of
Licensee.
5. Each party is solely responsible for its own acts and activities, and
neither Lessee nor Manager shall be held liable for any acts or omissions of
Licensee in the preparation and serving of beverages. Licensee shall retain the
exclusive right to select and purchase all alcoholic beverages dispensed upon
the premises covered by the beverage permit and to establish the price of each
such item served on the licensed premises.
6. This Agreement is entered into for the mutual benefit of both parties
and for the purpose of providing a complete beverage service to the public at
the Hotel. Both parties agree to take all actions reasonably necessary to
achieve such result.
7. The term of this Agreement shall be indefinite but is subject to
termination at will by either party upon 30 days notice, provided that this
Agreement shall immediately terminate upon termination of the Lease Agreement,
or in the event that any of the stock of Licensee is transferred to or owned by
anyone other than Steven D. Jorns (Licensee's sole shareholder). In the event of
termination hereof, the business operated hereunder by Licensee shall be
terminated in an orderly fashion, and, if required by law, all alcoholic
beverage permits and licenses issued to Licensee with respect to the Hotel shall
be surrendered to the appropriate authority for cancellation or voluntary
suspension.
-2-
<PAGE>
8. The terms of this Agreement are subject and subordinate in all
respects to the terms of the Lease Agreement and any mortgage or deed of trust
encumbering the Hotel.
Dated the day and year first above written.
AGH LEASING. L.P.
By: AGHL GP., Inc., its
General Partner
By: /s/ Steven D. Jorns
-------------------------------
Steven D. Jorns, President
SDBMI
By: /s/ Steven D. Jorns
----------------------------------
Steven D. Jorns, President
AGREED TO:
AMERICAN GENERAL HOSPITALITY, INC.
By: /s/ Steven D. Jorns
----------------------------------
Steven D. Jorns, President
-3-
<PAGE>
EXHIBIT "T"
FORM OF
LIQUOR LICENSE COMPANY CONSENT AND AGREEMENT
--------------------------------------------
THIS LIQUOR LICENSE COMPANY CONSENT AND AGREEMENT ("Agreement"), dated as
of ___________, 1996, is executed by ___________________________, a ____________
corporation (the "Company") and AGH LEASING, L.P., a Delaware limited
partnership (the "Tenant") in connection with that certain Credit Agreement (the
"Credit Agreement") dated as of ___________, 1996, by and between AMERICAN
GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
("Borrower"), BANK ONE, TEXAS, N.A., a national banking association, as
administrative agent, (Bank One, Texas, N.A. and any subsequent Administrative
Agent under the Credit Agreement, are referred to hereinafter as the
"Administrative Agent"), SOCIETE GENERALE, a French banking corporation acting
through its Southwest Agency, as structuring agent (the "Structuring Agent")
(the Structuring Agent and Administrative Agent are collectively referred to
hereinafter as the "Agents"), and the banks and other lenders a party thereto
(collectively the "Banks"), pursuant to which the Banks have agreed to provide a
credit facility (the "Credit Facility") in an amount of up to $100,000,000.00 to
Borrower. All terms used, but not defined, in this Agreement shall have the
meaning given such terms in the Credit Agreement. The Credit Facility is or will
be secured by, among other things, the Initial Properties and Future Properties
(collectively, the "Properties").
Company is executing this Agreement in consideration for and in connection
with the Lease/Concession Agreement dated as of even date herewith executed with
Tenant (the "Lease/Concession Agreement"). Tenant is consenting to this
Agreement in consideration for and in connection with the Lease Agreement
between Tenant and Borrower or an affiliate of Borrower (the "Landlord") for the
use of the Improvements on the Property (as hereinafter defined). Execution and
delivery of this Agreement is a condition precedent to the Bank's making the
Credit Facility to Borrower.
1. COMPANY'S REPRESENTATIONS: Company warrants and represents to the
-------------------------
Agents and the Banks that the following are true and correct:
(a) That Company has agreed to act as liquor concessionaire for the hotel
located on the property more particularly described on Exhibit "A" attached
hereto (the "Property").
(b) That the only agreement between Tenant and Company, for the concession
of liquor is the Lease/Concession Agreement.
(c) That the Lease/Concession Agreement constitutes the valid and binding
agreement of Company, enforceable in accordance with its terms, and Company has
full authority under all state or local laws and regulations to perform all of
its obligations under said Lease/Concession Agreement.
(d) That to the best of Company's knowledge Tenant is not in default in
the performance of any of its obligations under the Lease/Concession Agreement.
<PAGE>
2. COMPANY'S AGREEMENTS: Landlord and Tenant have advised Company that
--------------------
Borrower intends to obtain the Credit Facility from the Banks. The Credit
Facility is evidenced by, among other things, those certain Promissory Notes
dated as of the date of the Credit Agreement, executed by Borrower and payable
to the order of Banks in the aggregate original principal sum equal to the
amount of the Credit Facility (the "Notes"). Company hereby agrees to each and
every one of the following for the benefit of Agents and the Banks and as an
inducement to Banks to extend credit to Borrower pursuant to the terms of the
Credit Agreement:
(a) In the event of a default by Tenant under any term, covenant or
provision of the Lease/Concession Agreement, Company will give Administrative
Agent thirty (30) days prior written notice of such default prior to Company's
exercise of any of its rights or remedies under the Lease/Concession Agreement
or at law, and Administrative Agent shall have the right, but not the
obligation, during said thirty (30) day period to cure such default; provided,
however, that if such default cannot be reasonably cured during such thirty (30)
day period, Administrative Agent shall have such longer period as is reasonably
necessary to cure such default as long as Administrative Agent commences such
cure within thirty (30) day period. Only in the event Administrative Agent fails
to timely cure or cause to be cured any such default as provided in the
foregoing sentence shall Company have the right to terminate the
Lease/Concession Agreement. Company will deliver to Administrative Agent a copy
of all notices of termination given by Company to Tenant under the
Lease/Concession Agreement simultaneously with the delivery of any such notices
of termination to Tenant.
(b) Without the written consent of the Administrative Agent, Company will
not terminate or amend any arrangement or agreement with respect to the liquor
license for or the sale of alcoholic beverages in connection with the Property.
(c) The Lease/Concession Agreement and any and all liens, rights and
interests (whether choate or inchoate and including, without limitation, all
mechanic's and materialman's liens under applicable law) owned, claimed or held,
or to be owned, claimed or held by the Company in and to the Property and
Improvements now or hereafter constructed thereon, are and shall be in all
things subordinate and inferior to the full repayment of the Credit Facility and
the liens and security interests created or to be created for the benefit of the
Agents and the Banks, their respective successors and assigns, and securing the
repayment of the above described Notes including, without limitation, those
created under and by virtue of the Mortgage covering the Property and filed or
to be filed of record in the public records maintained for the recording of
mortgages and/or deeds of trust in the state and county in which the Property is
located (the "Records"), and all renewals and extensions hereof.
(d) Upon the occurrence of an Event of Default (as defined in the Credit
Agreement), Company shall, at the request of Administrative Agent, its
successors or assigns, continue performance on Administrative Agent's, its
successors' or assigns', behalf in accordance with the terms of the
Lease/Concession Agreement, provided that Company shall be paid all sums due or
to become due it in accordance with said Lease/Concession Agreement following
the date the Administrative Agent makes such request. Company further agrees
that upon the occurrence of
-2-
<PAGE>
such an Event of Default, the Administrative Agent shall have the continuing
right to reject the Lease/Concession Agreement.
(e) Company will not voluntarily terminate, nor materially amend or modify
the Lease/Concession Agreement without the prior written consent of
Administrative Agent. In the event Company fails to secure such approval, the
Lease/Concession Agreement shall, for the purposes of Company's obligation
aforesaid to continue performance thereunder for Administrative Agent's benefit,
be deemed not to have been modified by such amendment.
(f) Company further agrees to (i) execute such affidavits and certificates
as Administrative Agent shall reasonably require to further evidence the
agreements herein contained, (ii) on request from Administrative Agent, furnish
Administrative Agent with copies of such information as Tenant is entitled to
receive under the Lease/Concession Agreement, and (iii) cooperate with
Administrative Agent's representatives in any inspection of the Improvements on
the Property.
(g) Administrative Agent has no obligation to Company with respect to the
Credit Facility, and Administrative Agent's obligations to Borrower and its
affiliates with respect thereto are set forth in the Credit Agreement and
certain other credit documents by and between Banks, Agents, Borrower and
Borrower's affiliates ("Credit Documents"), with respect to which the Company is
not a third party beneficiary. The relationship of Agents and Banks to Borrower
and Borrower's affiliates is one of a creditor to a debtor, and Agents and Banks
are not joint venturers or partners of Borrower or Borrower's affiliates.
(h) Company further agrees that nothing herein shall impose upon
Administrative Agent any obligation for payment or performance in favor of
Company unless Administrative Agent notifies Company in writing after an Event
of Default, that (i) Administrative Agent has elected to assert Tenant's rights
under of the Lease/Concession Agreement and (ii) Administrative Agent agrees to
pay Company the sums due Company under the terms of such Lease/Concession
Agreement.
(i) Company covenants and agrees that, upon Administrative Agent or any
other party (a "Subsequent Owner") acquiring title to the Property and
Improvements thereon either through foreclosure or by acceptance of a deed,
assignment or other conveyance in lieu thereof (collectively, "Foreclosure") or
after Foreclosure, (1) Company shall immediately deliver to a Subsequent Owner
originals of: (A) all authorizations, approvals, permits held by it in
connection with the Property and Improvements; and (B) all licenses and
agreements including, without limitation, to the extent permitted by law, all
liquor licenses obtained by Company in connection with the Property and
Improvements thereon (the items described in (A) and (B) being hereinafter
collectively referred to as the "Agreements") and Company shall, to the maximum
extent permitted by law, upon request of any Subsequent Owner, promptly transfer
to such Subsequent Owner all of such Agreements, and will cooperate with such
Subsequent Owner to effectuate a full assignment, conveyance and transfer of
such Agreements so that the smooth and continual operation of the Property and
Improvements thereon is not impaired or hindered, (2) Company shall execute such
further instruments or documents as a Subsequent Owner may reasonably require to
further effect the purposes hereof, including, without limitation, upon the
occurrence of a Foreclosure, such documents as may be necessary to vest title in
such Subsequent Owner to any liquor licenses then held by Company in
-3-
<PAGE>
connection with the Property and Improvements thereon and (3) any Subsequent
Owner shall have the continuing right to terminate the Lease/Concession
Agreement, in whole or in part, upon no less than thirty (30) days prior written
notice to Company without any obligation to pay a termination or cancellation
fee or penalty to Company. Notwithstanding any provision contained herein to the
contrary, the obligations of Company pursuant to this Agreement shall survive
any termination of the Lease/Concession Agreement. A Subsequent Owner shall only
incur liability to Company under the Lease/Concession during such Subsequent
Owner's ownership of the Property and Improvements. Upon a sale, conveyance,
transfer or other assignment of the Property and Improvements thereon or a
termination of the Lease/Concession Agreement, a Subsequent Owner shall have no
further liability to Company under such terminated Lease/Concession Agreement
from the date of such sale, conveyance, transfer, assignment or termination. In
addition, no Subsequent Owner shall have personal liability under the
Lease/Concession Agreement or this Agreement, and Company agrees to look solely
to such Subsequent Owner's interest in the Property and Improvements thereon for
satisfaction of any sums or other obligations owed Company under the
Lease/Concession Agreement.
(j) Company hereby represents and warrants that no prior assignment of
Company's interest in the Lease/Concession Agreement has been made, and Company
agrees and covenants not to assign, sell, pledge, transfer or otherwise encumber
Company's interest in the Lease/Concession Agreement.
(k) Company has executed this Agreement for the purpose of inducing Banks
to advance sums to Borrower under the above described Notes and with full
knowledge and intent that Banks shall rely upon the representations, warranties
and agreements herein contained when making advances to Borrower, and that but
for this instrument and the representations, warranties and agreements herein
contained, Banks would not take such actions.
(l) The Administrative Agent shall have the continuing right to file a
copy of this Agreement in any of the Records without the need for further
consent of Company, Tenant or any of their respective affiliates.
3. TENANT'S CONSENT: Tenant has joined herein to evidence its consent to
----------------
all the agreements of Company contained in this Agreement.
-4-
<PAGE>
EXECUTED this the ____ day of ____________, 1996.
TENANT:
AGH LEASING, L.P., A DELAWARE LIMITED PARTNERSHIP
By: AGHL GP, INC., a Delaware corporation, its
sole general partner
By: _________________________________________
Name:________________________________________
Title:_______________________________________
COMPANY:
_____________________________________________
By:__________________________________________
Steven D. Jorns
Title:_______________________________________
-5-
<PAGE>
THE STATE OF _________ (S)
(S)
COUNTY OF ____________ (S)
This instrument was acknowledged before me on the ____ day of ______, 1996
by _____________, _______________ of AGHL GP, Inc., a Delaware corporation the
sole general partner of AGH Leasing, L.P., a Delaware limited partnership on
behalf of such partnership.
_____________________________________________
Notary Public in and for the
State of ____________________________________
Name: _______________________________________
My Commission Expires: ______________________
THE STATE OF _________ (S)
(S)
COUNTY OF ____________ (S)
This instrument was acknowledged before me on the ____ day of ______, 1996,
by Steven D. Jorns, _____________ of _______________, a ________________________
corporation on behalf of said corporation.
_____________________________________________
Notary Public in and for the
State of ____________________________________
Name: _______________________________________
My Commission Expires: ______________________
-6-
<PAGE>
EXHIBITS
--------
Exhibit "A" - Property Description
-7-
<PAGE>
EXHIBIT "U"
FORM OF
PLEDGE AGREEMENT
This Pledge Agreement dated as of _________, 1996 ("Pledge Agreement") is
executed by STEVEN D. JORNS, an individual living in the State of Texas [CRAIG
STARK FOR MADISON, WISCONSIN] (the "Pledgor") and AGH LEASING, L.P., a Delaware
limited partnership (the "Secured Party").
INTRODUCTION
A. AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("Borrower"), BANK ONE, TEXAS, N.A., a national banking
association, as administrative agent, SOCIETE GENERALE, a French banking
corporation, acting through its Southwest agency, as structuring agent, and the
banks and the other lenders a party thereto (collectively, the "Lenders"), have
entered into a Credit Agreement dated as of even date herewith (as amended,
restated or otherwise modified from time-to-time, the "Credit Agreement").
B. Pledgor is the sole shareholder of ______________________________ (the
"Liquor Company"). The Liquor Company has entered into that certain
Lease/Concession Agreement ("Concession Agreement") with the Secured Party. The
Pledgor is executing this Pledge Agreement in order to secure its obligations to
Secured Party pursuant to the Concession Agreement.
C. Pledgor understands and acknowledges that the Secured Party will be
collaterally assigning its rights under this Pledge Agreement to Borrower or an
affiliate of Borrower (the "Landlord") as security for its obligations to
Landlord pursuant to that certain Lease Agreement (the "Lease") dated as of even
date herewith by and between Secured Party and Landlord and that such rights are
being further collaterally assigned by Landlord to the Lenders as security for
Borrower's, and its affiliates', obligations under the Credit Agreement and the
other Credit Documents. The Pledgor will derive substantial benefit (both direct
and indirect) from the transactions contemplated by the Credit Agreement.
Therefore, the Pledgor hereby agrees with the Secured Party as follows:
Section 1. Definitions. All capitalized terms not otherwise defined in this
-----------
Pledge Agreement that are defined in the Credit Agreement shall have the meaning
assigned to such terms by the Credit Agreement. Any terms used in this Pledge
Agreement that are defined in the Uniform Commercial Code as adopted in the
State of Texas ("UCC") shall have the meaning assigned to those terms by the
UCC, whether specified elsewhere in this Pledge Agreement or not.
<PAGE>
Section 2. Pledge.
------
2.1. Grant of Pledge. The Pledgor hereby pledges as security for the
---------------
obligations described in Section 3 the Pledged Collateral, as defined in Section
2.2 below to the Secured Party.
2.2. Pledged Collateral. "Pledged Collateral" shall mean all of Pledgor's
------------------
right, title, and interest in the following, whether now owned or hereafter
acquired:
(a) the shares of stock listed in the attached Schedule 2.2(a) and
all additional shares of stock of any issuer of such shares of stock issued to
Pledgor (the "Pledged Shares"), the certificates representing the Pledged
Shares, and all dividends, cash, instruments, and other property from
time-to-time received or otherwise distributed in respect of any of the Pledged
Shares (exclusive of, at the time of distribution, payments distributed on
account of taxes and allocated corporate expenses in accordance with past
practice); and
(b) all proceeds from the Pledged Collateral described in paragraph
(a) of this Section 2.2.
2.3. Delivery of Pledged Collateral. All certificates or instruments
------------------------------
representing the Pledged Collateral shall be delivered to the Secured Party and
shall be accompanied by duly executed instruments of assignment in blank in the
form attached hereto as Exhibit "A". After the occurrence and during the
continuance of a default under the Concession Agreement beyond applicable notice
and cure periods (an "Event of Default"), the Secured Party shall have the
right, upon prior written notice to the Pledgor, to transfer to or to register
in the name of the Secured Party or any of its nominees any of the Pledged
Collateral, subject to the rights specified in Section 2.4. In addition, after
the occurrence and during the continuance of an Event of Default, the Secured
Party shall have the right at any time to exchange the certificates or
instruments representing the Pledged Collateral for certificates or instruments
of smaller or larger denominations.
2.4. Rights Retained by Pledgor. Notwithstanding the pledge in Section
--------------------------
2.1, so long as no Event of Default shall have occurred and remain uncured:
(a) the Pledgor shall be entitled to receive and retain any
dividends and other distributions paid on or in respect of the Pledged
Collateral and the proceeds of any sale of the Pledged Shares and all payments
of principal and interest on loans and advances made by Pledgor to the issuer of
the Pledged Collateral;
(b) and, if an Event of Default shall have occurred and remain
uncured, until such time thereafter as such voting and other consensual rights
have been terminated pursuant to Section 6 hereof, the Pledgor shall be entitled
to exercise any voting and other consensual rights pertaining to
-2-
<PAGE>
the Pledged Collateral for any purpose not inconsistent with the terms of this
Pledge Agreement or the Concession Agreement; provided, however, that the
-------- -------
Pledgor shall not exercise or shall refrain from exercising any such right if
such action would have a materially adverse effect on the value of the Pledged
Collateral; and
(c) at and after such time as voting and other consensual rights have been
terminated pursuant to Section 6 hereof, the Pledgor shall execute and deliver
(or cause to be executed and delivered) to the Secured Party all proxies and
other instruments as the Secured Party may reasonably request to (i) enable the
Secured Party to exercise the voting and other rights which the Pledgor is
entitled to exercise pursuant to paragraph (b) of this Section 2.4, and (ii) to
receive the dividends or other distributions and proceeds of sale of the Pledged
Shares and payments of principal and interest which the Pledgor is authorized to
receive and retain pursuant to paragraph (a) of this Section 2.4.
Section 3. Obligations Secured by Pledge. The pledge made in Section 2 above
-----------------------------
shall secure (a) all obligations of the Liquor Company now or hereafter existing
under the Concession Agreement, including any extensions, modifications,
substitutions, amendments and renewals thereof, whether for principal, interest,
fees, expenses, indemnification, or otherwise; and (b) all obligations of the
Pledgor now or hereafter existing under this Pledge Agreement. All such
obligations of the Liquor Company and the Pledgor secured hereby are referred to
as the "Secured Obligations."
Section 4. Pledgor's Representations and Warranties. The Pledgor represents and
----------------------------------------
warrants as follows:
4.1. The Pledged Shares listed on the attached Schedule 2.2(a) have been
duly authorized and validly issued and are fully paid and nonassessable.
4.2. The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien or option, except for the security
interest created by this Pledge Agreement.
4.3. No authorization, approval, or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body, that has not
occurred, is required either (i) for the pledge by the Pledgor of the
Pledged Collateral pursuant to this Pledge Agreement or for the execution,
delivery, or performance of this Pledge Agreement by the Pledgor (except to the
extent that financing statements are required under the UCC to be filed in order
to maintain a perfected security interest in that portion of the Pledged
Collateral not constituting Pledged Shares) or (ii) for the exercise by the
Secured Party of the voting or other rights provided for in this Pledge
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Pledge Agreement (except as may be required in connection with such disposition
by laws affecting the offering and sale of
-3-
<PAGE>
securities generally or affecting the transfer of rights in and to liquor
licenses and the qualification of persons to maintain such licenses).
4.4. The Pledged Shares listed on the attached Schedule 2.2(a) constitute
all of the issued and outstanding shares of capital stock of the issuer thereof.
Section 5. Pledgor's Covenants.
-------------------
5.1. Further Assurances. The Pledgor agrees that, at the expense of the
------------------
Pledgor, the Pledgeor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be reasonably necessary and
that the Secured Party may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
5.2. Transfer, Other liens, and Additional Shares. The Pledgor agrees that
--------------------------------------------
he will not (a) sell or otherwise dispose of, or grant any option with respect
to, any of the Pledged Shares or (b) create or permit to exist any lien upon or
with respect to any of the Pledged Collateral, except for the security
interest under this Pledge Agreement. The Pledgor agrees that he will (a) cause
each issuer of the Pledged Shares not to issue any capital stock or other equity
securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to the Pledgor and (b) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any additional shares of
capital stock or other equity securities of an issuer of the Pledged Shares.
Section 6. Remedies upon Default. If any Event of Default shall have occurred
---------------------
and remain uncured:
6.1. UCC Remedies. To the extent permitted by law, the Secured Party may
------------
exercise in respect of the Pledged Collateral, in addition to other rights and
remedies provided for in this Pledge Agreement or otherwise available to it, all
the rights and remedies of a secured party under the UCC (whether or not the UCC
applies to the affected Pledged Collateral).
6.2. Dividends and Other Rights.
--------------------------
(a) All rights of the Pledgor to exercise the voting and other
consensual rights which they would otherwise be entitled to exercise pursuant to
Section 2.4(b) may be exercised by the Secured Party if Secured Party so elects
and gives written notice of such election to the Pledgor and all rights of the
Pledgor to receive the dividends and other distributions on or in respect of the
Pledged Shares and the proceeds of sale of the Pledged Shares and interest and
principal payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.4(a) shall cease.
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<PAGE>
(b) All dividends and other distributions on or in respect of the
Pledged Shares and the proceeds of sale of the Pledged Shares and interest and
principal payments which are received by the Pledgor shall be received in trust
for the benefit of the Secured Party, shall be segregated from other funds of
the Pledgor, and shall be promptly paid over to the Secured Party as Pledged
Collateral in the same form as so received (with any necessary indorsement).
6.3. Sale of Pledged Collateral. The Secured Party may upon five days prior
--------------------------
written notice to the Pledgor sell all or part of the Pledged Collateral at
public or private sale, at any of the Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery, and upon such other terms as are
commercially reasonable. The Secured Party shall not be obligated to make any
sale of the Pledged Collateral regardless of notice of sale having been given.
The Secured Party may adjourn any public or private sale from time-to-time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
6.4. Exempt Sale. If, in the opinion of the Secured Party there is any
-----------
question that a public or semi-public sale or distribution of any Pledged
Collateral will violate any state or federal securities law, Secured Party in
its discretion (a) may offer and sell securities privately to purchasers who
will agree to take them for investment purposes and not with a view to
distribution and who will agree to imposition of restrictive legends on the
certificates representing the security, or (b) may sell such securities in an
intrastate offering under Section 3(a)(11) of the Securities Act of 1933, as
amended, and no sale so made in good faith by Secured Party shall be deemed to
be not "commercially reasonable" solely because so made. Pledgor shall cooperate
fully with Secured Party in all reasonable respects in selling or realizing upon
all or any part of the Pledged Collateral.
6.5. Application of Collateral. Any cash held by the Secured Party as
-------------------------
Pledged Collateral and all cash proceeds received by the Secured Party from the
sale of, collection of, or other realization of any part of the Pledged
Collateral may, in the discretion of the Secured Party, be held by the Secured
Party as Pledged Collateral or applied by the Secured Party against part of the
Secured Obligations in the following order:
first, to payment of the reasonable expenses of such sale or other
-----
realization, including reasonable compensation to the Secured Party and its
agents and counsel, and all reasonable expenses, liabilities and advances
incurred or made by the Secured Party in connection therewith, and to the
ratable payment of any other unreimbursed reasonable expenses for which the
Secured Party is to be reimbursed pursuant to the Concession Agreement;
second, to the ratable payment of the Secured Obligations; and
------
-5-
<PAGE>
third, to the ratable payment of all other amounts payable by the
-----
Liquor Company under the Concession Agreement and this Pledge Agreement.
Any surplus of such cash or cash proceeds held by the Secured Party and
remaining after payment in full of all the Secured Obligations shall be promptly
paid over to the Pledgor or to whoever may be lawfully entitled to receive such
surplus.
Section 7. Secured Party as Agent for Pledgor.
----------------------------------
7.1. Secured Party Appointed Attorney-in-Fact. The Pledgor hereby
----------------------------------------
irrevocably appoints the Secured Party the Pledgor's attorney-in-fact, with full
authority after the occurrence and during the continuance of an Event of Default
to act for the Pledgor and in the name of the Pledgor, and, in the Secured
Party's discretion, subject to the Pledgor's revocable rights specified in
Section 2.4, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this Pledge
Agreement, including, without limitation, to receive, indorse, and collect all
instruments made payable to the Pledgor representing any dividend, or the
proceeds of the sale of the Pledged Shares, or other distribution in respect of
the Pledged Shares and to give full discharge for the same.
7.2. Secured Party May Perform. If the Pledgor fails to perform any
-------------------------
covenant contained herein, the Secured Party may, after sending written notice
thereof to Pledgor and 10 days to perform same, itself perform, or cause
performance of, such covenant. Pledgor shall pay for the reasonable expenses of
the Secured Party incurred in connection therewith.
7.3. Reasonable Care. The Secured Party shall be deemed to have exercised
---------------
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Secured Party accords its own property, it being understood
that the Secured Party shall have no responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relative to any Pledged Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or (b) taking
any necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
Section 8. Miscellaneous.
-------------
8.1 Amendments, Etc. No amendment or waiver of any provision of this Pledge
---------------
Agreement nor consent to any departure by the Pledgor herefrom shall be
effective unless made in writing and signed by the Secured Party and the
Pledgor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
-6-
<PAGE>
8.2. Addresses for Notices. All notices and other communications to be
---------------------
given under this Pledge Agreement by any party to another shall be in writing
and shall be delivered by telephonic facsimile, overnight air courier, personal
delivery or registered or certified U.S. Mail with return receipt requested,
postage paid, to the appropriate party at its address as follows:
To the Pledgor:
Steven D. Jorns
3860 West Northwest Highway
Suite 300
Dallas, Texas 75220
Telephone: (214) 904-2001
Telecopy: (214) 351-0568
To the Secured Party:
AGH Leasing, L.P.
3860 West Northwest Highway
Suite 300
Dallas, Texas 75220
Attn: Ken Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
Addresses for notice may be changed from time to time by written notice to all
other parties. Any communication given by mail will be effective upon the
earlier of (a) three Banking Days following deposit in a post office or other
official depository under the care and custody of the United States Postal
Service; or (b) actual receipt, as indicated by the return receipt; if given by
telephonic facsimile or telex, when sent; and if given by personal delivery or
by overnight air courier, when delivered to the appropriate address set forth
above.
8.3. Continuing Security Interest; Transfer of Interest. This Pledge
--------------------------------------------------
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until payment in full and
termination of the Secured Obligations, (b) be binding upon the Pledgor, his
successors and assigns, and (c) inure, together with the rights and remedies of
the Secured Party hereunder, to the benefit of and be binding upon, the Secured
Party and its respective successors, transferees, and assigns. Secured Party,
and its successors and assigns, may collaterally assign this Pledge Agreement
and its rights, in whole or in part, under this Pledge Agreement to Landlord as
collateral for Secured Party's obligations under the Lease, and Landlord can in
turn collaterally assign the same as collateral for any credit facility secured
in whole or in part by any of the
-7-
<PAGE>
Properties, and Pledgor hereby irrevocably consents and agrees to the same. Upon
such collateral assignment: (i) this Pledge Agreement shall inure to the benefit
of the Landlord and the lender or lenders providing such credit facility, and
Pledgor shall send Landlord and such lender or lenders a copy of any notice sent
by Pledgor to Secured Party under this Pledge Agreement, and Landlord and such
lender or lenders shall have the right, but not the obligation to take any
action of Secured Party under this Pledge Agreement and (ii) no material
amendment, material modification or termination of this Pledge Agreement shall
be effective or binding without the written consent of Landlord and such lender
or lenders and all such actions taken without such consents shall be void. Upon
the payment in full and termination of the Secured Obligations, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgor to the extent such Pledged Collateral shall not have
been sold or otherwise applied pursuant to the terms hereof. Upon any such
termination, the Secured Party will, at the Pledgor's expense, deliver all
Pledged Collateral to the Pledgor, execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request and take any other actions
reasonably requested to evidence or effect such termination.
8.4. Choice of Law. This Pledge Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the state of Texas, except
to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of Texas.
-8-
<PAGE>
The parties hereto have caused this Pledge Agreement to be duly executed as
of the date first above written.
PLEDGOR:
STEVEN D. JORNS
________________________________________________
SECURED PARTY:
AGH LEASING, L.P., a Delaware limited partnership
By: AGHL GP, INC., a Delaware corporation, its
sole general partner
By:________________________________________
Name:______________________________________
Title:_____________________________________
-9-
<PAGE>
SCHEDULE 2.2(a)
Attached to and forming a part of that certain Pledge Agreement dated
__________, by Steven D. Jorns, as Pledgor, to the Secured Party.
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
- ------------ -------------- ----------------- --------- ---------
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED, ____________________("Assignor"), hereby sells, assigns
and transfers ________________ shares of the common stock of _________________,
a _____________ corporation (the "Corporation"), to __________________________,
all of such shares of common stock as registered in Assignor's name on the
books of the Corporation, as represented by Certificate No. ___________
herewith, and does hereby irrevocably constitute and appoint
_____________________________ as its attorney-in-fact to take any and all
actions Assignor could take if acting on its own behalf to effectuate a transfer
of such stock to the indicated assignees on the books of the Corporation with
full power of substitution in the premises, and does hereby ratify and confirm
all that such attorney-in-fact shall lawfully do by virtue hereof.
Date:___________________
[Assignor]
By:__________________________________________
Name:________________________________________
Title:_______________________________________
IN THE PRESENCE OF:
_________________________________
<PAGE>
FORM OF
PLEDGE AGREEMENT
This Pledge Agreement dated as of _____________, 1996 ("Pledge Agreement")
is executed by [STEVEN D. JORNS], an individual living in the [State of Texas]
(the "Pledgor") and AGH LEASING, L.P., a Delaware limited partnership (the
"Secured Party").
INTRODUCTION
A. AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("Borrower"), BANK ONE, TEXAS, N.A., a national banking
association, as administrative agent, SOCIETE GENERALE, a French banking
corporation, acting through its Southwest agency, as structuring agent, and the
banks and the other lenders a party thereto (collectively, the "Lenders"), have
entered into a Credit Agreement dated as of even date herewith (as amended,
restated or otherwise modified from time-to-time, the "Credit Agreement").
B. Pledgor is the sole shareholder of ______________________________ (the
"Liquor Company"). The Liquor Company has entered into that certain
Lease/Concession Agreement ("Concession Agreement") with the Secured Party. The
Pledgor is executing this Pledge Agreement in order to secure its obligations to
Secured Party pursuant to the Concession Agreement.
C. Pledgor understands and acknowledges that the Secured Party will be
collaterally assigning its rights under this Pledge Agreement to Borrower or an
affiliate of Borrower (the "Landlord") as security for its obligations to
Landlord pursuant to that certain Lease Agreement (the "Lease") dated as of even
date herewith by and between Secured Party and Landlord and that such rights are
being further collaterally assigned by Landlord to the Lenders as security for
Borrower's, and its affiliates', obligations under the Credit Agreement and the
other Credit Documents. The Pledgor will derive substantial benefit (both direct
and indirect) from the transactions contemplated by the Credit Agreement.
Therefore, the Pledgor hereby agrees with the Secured Party as follows:
Section 1. Definitions. All capitalized terms not otherwise defined in this
-----------
Pledge Agreement that are defined in the Credit Agreement shall have the meaning
assigned to such terms by the Credit Agreement. Any terms used in this Pledge
Agreement that are defined in the Uniform Commercial Code as adopted in the
State of Texas ("UCC") shall have the meaning assigned to those terms by the
UCC, whether specified elsewhere in this Pledge Agreement or not.
<PAGE>
Section 2. Pledge.
------
2.1. Grant of Pledge. The Pledgor hereby pledges as security for the
---------------
obligations described in Section 3 the Pledged Collateral, as defined in Section
2.2 below to the Secured Party.
2.2. Pledged Collateral. "Pledged Collateral" shall mean all of Pledgor's
------------------
right, title, and interest in the following, whether now owned or hereafter
acquired:
(a) the shares of stock listed in the attached Schedule 2.2(a)
and all additional shares of stock of any issuer of such shares of stock issued
to Pledgor (the "Pledged Shares"), the certificates representing the Pledged
Shares, and all dividends, cash, instruments, and other property from
time-to-time received or otherwise distributed in respect of any of the Pledged
Shares (exclusive of, at the time of distribution, payments distributed on
account of taxes and allocated corporate expenses in accordance with past
practice); and
(b) all proceeds from the Pledged Collateral described in
paragraph (a) of this Section 2.2.
2.3. Delivery of Pledged Collateral. All certificates or instruments
------------------------------
representing the Pledged Collateral shall be delivered to the Secured Party and
shall be accompanied by duly executed instruments of assignment in blank in the
form attached hereto as Exhibit "A". After the occurrence and during the
continuance of a default under the Concession Agreement beyond applicable notice
and cure periods (an "Event of Default"), the Secured Party shall have the
right, upon prior written notice to the Pledgor, to transfer to or to register
in the name of the Secured Party or any of its nominees any of the Pledged
Collateral, subject to the rights specified in Section 2.4. In addition, after
the occurrence and during the continuance of an Event of Default, the Secured
Party shall have the right at any time to exchange the certificates or
instruments representing the Pledged Collateral for certificates or instruments
of smaller or larger denominations.
2.4. Rights Retained by Pledgor. Notwithstanding the pledge in Section
--------------------------
2.1, so long as no Event of Default shall have occurred and remain uncured:
(a) the Pledgor shall be entitled to receive and retain any
dividends and other distributions paid on or in respect of the Pledged
Collateral and the proceeds of any sale of the Pledged Shares and all payments
of principal and interest on loans and advances made by Pledgor to the issuer of
the Pledged Collateral;
(b) and, if an Event of Default shall have occurred and remain
uncured, until such time thereafter as such voting and other consensual rights
have been terminated pursuant to Section 6 hereof, the Pledgor shall be entitled
to exercise any voting and other consensual rights pertaining to
-2-
<PAGE>
the Pledged Collateral for any purpose not inconsistent with the terms of this
Pledge Agreement or the Concession Agreement; provided, however, that the
-------- -------
Pledgor shall not exercise or shall refrain from exercising any such right if
such action would have a materially adverse effect on the value of the Pledged
Collateral; and
(c) at and after such time as voting and other consensual rights
have been terminated pursuant to Section 6 hereof, the Pledgor shall execute and
deliver (or cause to be executed and delivered) to the Secured Party all proxies
and other instruments as the Secured Party may reasonably request to (i) enable
the Secured Party to exercise the voting and other rights which the Pledgor is
entitled to exercise pursuant to paragraph (b) of this Section 2.4, and (ii) to
receive the dividends or other distributions and proceeds of sale of the Pledged
Shares and payments of principal and interest which the Pledgor is authorized to
receive and retain pursuant to paragraph (a) of this Section 2.4.
Section 3. Obligations Secured by Pledge. The pledge made in Section 2 above
-----------------------------
shall secure (a) all obligations of the Liquor Company now or hereafter existing
under the Concession Agreement, including any extensions, modifications,
substitutions, amendments and renewals thereof, whether for principal, interest,
fees, expenses, indemnification, or otherwise; and (b) all obligations of the
Pledgor now or hereafter existing under this Pledge Agreement. All such
obligations of the Liquor Company and the Pledgor secured hereby are referred to
as the "Secured Obligations."
Section 4. Pledgor's Representations and Warranties. The Pledgor represents and
----------------------------------------
warrants as follows:
4.1 The Pledged Shares listed on the attached Schedule 2.2(a) have been
duly authorized and validly issued and are fully paid and nonassessable.
4.2 The Pledgor is the legal and beneficial owner of the Pledged Collateral
free and clear of any lien or option, except for the security interest created
by this Pledge Agreement.
4.3 No authorization, approval, or other action by, and no notice to or
filing with, any Governmental Authority or regulatory body, that has not
occurred, is required either (i) for the pledge by the Pledgor of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution, delivery, or
performance of this Pledge Agreement by the Pledgor (except to the extent that
financing statements are required under the UCC to be filed in order to maintain
a perfected security interest in that portion of the Pledged Collateral not
constituting Pledged Shares) or (ii) for the exercise by the Secured Party of
the voting or other rights provided for in this Pledge Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Pledge Agreement (except
as may be required in connection with such disposition by laws affecting the
offering and sale of
-3-
<PAGE>
securities generally or affecting the transfer of rights in and to liquor
licenses and the qualification of persons to maintain such licenses).
4.4. The Pledged Shares listed on the attached Schedule 2.2(a) constitute
all of the issued and outstanding shares of capital stock of the issuer thereof.
Section 5. Pledgor's Covenants.
-------------------
5.1. Further Assurances. The Pledgor agrees that, at the expense of the
------------------
Pledgor, the Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be reasonably necessary and
that the Secured Party may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
5.2. Transfer, Other liens, and Additional Shares. The Pledgor agrees that
--------------------------------------------
he will not (a) sell or otherwise dispose of, or grant any option with respect
to, any of the Pledged Shares or (b) create or permit to exist any lien upon or
with respect to any of the Pledged Collateral, except for the security interest
under this Pledge Agreement. The Pledgor agrees that he will (a) cause each
issuer of the Pledged Shares not to issue any capital stock or other equity
securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to the Pledgor and (b) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any additional shares of
capital stock or other equity securities of an issuer of the Pledged Shares.
Section 6. Remedies upon Default. If any Event of Default shall have occurred
---------------------
and remain uncured:
6.1. UCC Remedies. To the extent permitted by law, the Secured Party may
------------
exercise in respect of the Pledged Collateral, in addition to other rights and
remedies provided for in this Pledge Agreement or otherwise available to it, all
the rights and remedies of a secured party under the UCC (whether or not the UCC
applies to the affected Pledged Collateral).
6.2. Dividends and Other Rights.
--------------------------
(a) All rights of the Pledgor to exercise the voting and other
consensual rights which they would otherwise be entitled to exercise pursuant to
Section 2.4(b) may be exercised by the Secured Party if Secured Party so elects
and gives written notice of such election to the Pledgor and all rights of the
Pledgor to receive the dividends and other distributions on or in respect of the
Pledged Shares and the proceeds of sale of the Pledged Shares and interest and
principal payments which it would otherwise be authorized to received and retain
pursuant to Section 2.4(a) shall cease.
-4-
<PAGE>
(b) All dividends and other distributions on or in respect of the
Pledged Shares and the proceeds of sale of the Pledged Shares and interest and
principal payments which are received by the Pledgor shall be received in trust
for the benefit of the Secured Party, shall be segregated from other funds of
the Pledgor, and shall be promptly paid over to the Secured Party as Pledged
Collateral in the same form as so received (with any necessary indorsement).
6.3. Sale of Pledged Collateral. The Secured Party may upon five days prior
--------------------------
written notice to Pledgor sell all or part of the Pledged Collateral at public
or private sale, at any of the Secured Party's offices or elsewhere, for cash,
on credit, or for future delivery, and upon such other terms as are commercially
reasonable. The Secured Party shall not be obligated to make any sale of the
Pledged Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time-to-time by announcement
at the time and place fixed therefor, any such sale may, without further notice,
be made at the time and place to which it was so adjourned.
6.4. Exempt Sale. If, in the opinion of the Secured Party there is any
-----------
question that a public or semi-public sale or distribution of any Pledged
Collateral will violate any state or federal securities law, Secured Party in
its discretion (a) may offer and sell securities privately to purchasers who
will agree to take them for investment purposes and not with a view to
distribution and who will agree to imposition of restrictive legends on the
certificates representing the security, or (b) may sell such securities in an
intrastate offering under Section 3(a)(11) of the Securities Act of 1933, as
amended, and no sale so made in good faith by Secured Party shall be deemed to
be not "commercially reasonable" solely because so made. Pledgor shall cooperate
fully with Secured Party in all reasonable respects in selling upon all or any
part of the Pledged Collateral.
6.5. Application of Collateral. Any cash held by the Secured Party as
-------------------------
Pledged Collateral and all cash proceeds received by the Secured Party from the
sale of, collection of, or other realization of any part of the Pledged
Collateral may, in the discretion of the Secured Party, be held by the Secured
Party as Pledged Collateral or applied by the Secured Party against part of the
Secured Obligations in the following order:
first, to payment of the reasonable expenses of such sale or other
-----
realization, including reasonable compensation to the Secured Party and its
agents and counsel, and all reasonable expenses, liabilities and advances
incurred or made by the Secured Party in connection therewith, and to the
ratable payment of any other unreimbursed reasonable expenses for which the
Secured Party is to be reimbursed pursuant to the Concession Agreement;
second, to the ratable payment of the Secured Obligations; and
------
-5-
<PAGE>
third, to the ratable payment of all other amounts payable by the
-----
Liquor Company under the Concession Agreement and this Pledge Agreement.
Any surplus of such cash or cash proceeds held by the Secured Party and
remaining after payment in full of all the Secured Obligations shall be promptly
paid over to the Pledgor or to whoever may be lawfully entitled to receive such
surplus.
Section 7. Secured Party as Agent for Pledgor
----------------------------------
7.1. Secured Party Appointed Attorney-in-Fact. The Pledgor hereby
----------------------------------------
irrevocably appoints the Secured Party the Pledgor's attorney-in-fact, with full
authority after the occurrence and during the continuance of an Event of Default
to act for the Pledgor and in the name of the Pledgor, and, in the Secured
Party's discretion, subject to the Pledgor's revocable rights specified in
Section 2.4, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this Pledge
Agreement, including, without limitation, to receive, indorse, and collect
all instruments made payable to the Pledgor representing any dividend, or the
proceeds of the sale of the Pledged Shares, or other distribution in respect of
the Pledged Shares and to give full discharge for the same.
7.2. Secured Party May Perform. If the Pledgor fails to perform any
-------------------------
covenant contained herein, the Secured Party may, after sending written notice
thereof to Pledgor and 10 days to perform same, itself perform, or cause
performance of, such covenant. Pledgor shall pay for the reasonable expenses of
the Secured Party incurred in connection therewith.
7.3. Reasonable Care. The Secured Party shall be deemed to have exercised
---------------
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Secured Party accords its own property, it being understood
that the Secured Party shall have no responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relative to any Pledged Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or (b) taking
any necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
Section 8. Miscellaneous.
-------------
8.1. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Pledge Agreement nor consent to any departure by the Pledgor herefrom shall be
effective unless made in writing and signed by the Secured Party and the
Pledgor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
-6-
<PAGE>
8.2. Addresses for Notices. All notices and other communications to be
---------------------
given under this Pledge Agreement by any party to another shall be in writing
and shall be delivered by telephonic facsimile, overnight air courier, personal
delivery or registered or certified U.S. Mail with return receipt requested,
postage paid, to the appropriate party at its address as follows:
To the Pledgor:
Steven D. Jorns
3860 West Northwest Highway
Suite 300
Dallas, Texas 75220
Telephone: (214) 904-2001
Telecopy: (214) 351-0568
To the Secured Party:
AGH Leasing, L.P.
3860 West Northwest Highway
Suite 300
Dallas, Texas 75220
Attn. Ken Barr
Telephone: (214) 904-2004
Telecopy: (214) 351-0568
Addresses for notice may be changed from time to time by written notice to all
other parties. Any communication given by mail will be effective upon the
earlier of (a) three Banking Days following deposit in a post office or other
official depository under the care and custody of the United States Postal
Service; or (b) actual receipt, as indicated by the return receipt; if given by
telephonic facsimile or telex, when sent; and if given by personal delivery or
by overnight air courier, when delivered to the appropriate address set forth
above.
8.3. Continuing Security Interest. Transfer of Interest. This Pledge
--------------------------------------------------
Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until payment in full
and termination of the Secured Obligations, (b) be binding upon the Pledgor, his
successors and assigns, and (c) inure, together with the rights and remedies of
the Secured Party hereunder, to the benefit of and be binding upon, the Secured
Party and its respective successors, transferees, and assigns. Secured Party,
and its successors and assigns, may collaterally assign this Pledge Agreement
and its rights, in whole or in part, under this Pledge Agreement to Landlord as
collateral for Secured Party's obligations under the Lease, and Landlord can in
turn collaterally assign the same as collateral for any credit facility secured
in whole or in part by any of the
-7-
<PAGE>
Properties, and Pledgor hereby irrevocably consents and agrees to the same. Upon
such collateral assignment: (i) this Pledge Agreement shall inure to the benefit
of the Landlord and the lender or lenders providing such credit facility, and
Pledgor shall sent Landlord and such lender or lenders a copy of any notice sent
by Pledgor to Secured Party under this Pledge Agreement, and Landlord and such
lender or lenders shall have the right, but not the obligation to take any
action of Secured Party under this Pledge Agreement and (ii) no material
amendment, material modification or termination of this Pledge Agreement shall
be effective or binding without the written consent of Landlord and such lender
or lenders and all such actions taken without such consents shall be void. Upon
the payment in full and termination of the Secured Obligations, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgor to the extent such Pledged Collateral shall not have
been sold or otherwise applied pursuant to the terms hereof. Upon any such
termination, the Secured Party will, at the Pledgor's expense, deliver all
Pledged Collateral to the Pledgor, execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request and take any other actions
reasonably requested to evidence or effect such termination.
8.4 Choice of Law. This Pledge Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the state of Texas, except
to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of Texas.
-8-
<PAGE>
The parties hereto have caused this Pledge Agreement to be duly executed as
of the date first above written.
PLEDGOR:
STEVEN D. JORNS
_____________________________________________
SECURED PARTY:
AGH LEASING, L.P., a Delaware limited
partnership
By: AGHL GP, INC., a Delaware corporation,
its sole general partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
-9-
<PAGE>
SCHEDULE 2.2(a)
Attached to and forming a part of that certain Pledge Agreement dated
__________, by Steven D. Jorns, as Pledgor, to the Secured Party.
<TABLE>
<CAPTION>
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
- ------------ -------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED, __________________________ ("Assignor"), hereby sells,
assigns and transfers _____________ shares of the common stock of ______________
________, a _________ corporation (the "Corporation"), to
______________________________, all of such shares of common stock as registered
in Assignor's name on the books of the Corporation, as represented by
Certificate No. ____________ herewith, and does hereby irrevocably constitute
and appoint __________________________________ as its attorney-in-fact to take
any and all actions Assignor could take if acting on its own behalf to
effectuate a transfer of such stock to the indicated assignees on the books of
the Corporation with full power of substitution in the premises, and does hereby
ratify and confirm all that such attorney-in-fact shall lawfully do by virtue
hereof.
Date:____________________
[Assignor]
By:__________________________________________
Name:________________________________________
Title:_______________________________________
IN THE PRESENCE OF:
_________________________________
<PAGE>
EXHIBIT "V"
MANAGER'S CONSENT AND AGREEMENT
-------------------------------
THIS MANAGER'S CONSENT AND AGREEMENT ("Agreement"), dated as of ________,
1996, is executed by AMERICAN GENERAL HOSPITALITY, INC., a Texas corporation
(the "Manager"), and AGH LEASING, L.P., a Delaware limited partnership ("AGH"),
in connection with that certain Credit Agreement (the "Credit Agreement") dated
_________, 1996, by and between AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership ("Borrower"), BANK ONE, TEXAS,
N.A., a national banking association, as administrative agent, (Bank One, Texas,
N.A. and any subsequent Administrative Agent under the Credit Agreement, are
referred to hereinafter as the "Administrative Agent"), SOCIETE GENERALE, a
French banking corporation acting through its Southwest Agency, as structuring
agent (the "Structuring Agent") (the Structuring Agent and Administrative Agent
are collectively referred to hereinafter as the "Agents"), and the banks and
other lenders a party thereto (collectively the "Banks"), pursuant to which the
Banks have agreed to provide a credit facility (the "Credit Facility") in an
amount of up to $100,000,000.00 to Borrower. All terms used, but not defined, in
this Agreement shall have the meaning given such terms in the Credit Agreement.
The Credit Facility is or will be secured by, among other things, the Initial
Properties and Future Properties (collectively, the "Properties").
Manager is executing this Agreement in consideration for and in connection
with all of the agreements now or hereafter executed with AGH, the tenant in
possession of each of the Properties, for the management of the Improvements
thereon (hereinafter referred to as the "Management Agreements") and as a
condition precedent to the Banks' providing the Credit Facility to Borrower, AGH
is consenting to this Agreement in consideration of and as a condition precedent
to the Bank's making the Credit Facility to Borrower.
1. MANAGER'S REPRESENTATIONS: Manager warrants and represents to the
-------------------------
Agents and the Banks that the following are true and correct:
(a) That Manager has agreed to act as manager of the Improvements on the
Properties.
(b) That all of the Management Agreements as of the date hereof are listed
on Exhibit "A" attached hereto and made a part hereof for all purposes.
(c) That the Management Agreements constitute the valid and binding
agreements of Manager, enforceable in accordance with their terms, and Manager
has full authority under all state or local laws and regulations to perform all
of its obligations under said Management Agreements.
(d) That to the best of Manager's knowledge AGH is not in default in the
performance of any of its obligations under any of the Management Agreements.
<PAGE>
2. MANAGER'S AGREEMENTS: AGH has advised Manager that Borrower intends
--------------------
to obtain the Credit Facility from the Banks. The Credit Facility is evidenced
by, among other things, those certain Promissory Notes dated as of the date of
the Credit Agreement, executed by Borrower and payable to the order of Banks in
the aggregate original principal sum equal to the amount of the Credit Facility
(the "Notes"). Manager hereby consents to and agrees to be bound by all the
terms of those certain Assignments of Management Agreements by AGH for the
benefit of Borrower and its affiliates (the "Assignments"), the provisions of
which are hereby incorporated fully by reference. Manager also understands and
acknowledges that the rights conveyed pursuant to such Assignments have been or
will be collaterally assigned by Borrower and its affiliates to Agents and the
Banks as additional security for the Credit Facility. In connection therewith,
Manager further agrees to each and every one of the following for the benefit of
Agents and the Banks and as an inducement to Banks to extend credit to Borrower
pursuant to the terms of the Credit Agreement:
(a) In the event of a default by AGH under any term, covenant or provision
of any of the Management Agreements, Manager will give Administrative Agent
thirty (30) days prior written notice of such default prior to Manager's
exercise of any of its rights or remedies under any of the Management Agreements
or at law, and Administrative Agent shall have the right, but not the
obligation, during said thirty (30) day period to cure such default; provided,
however, that if such default cannot be reasonably cured during such thirty (30)
day period, Administrative Agent shall have such longer period as is reasonably
necessary to cure such default as long as Administrative Agent commences such
cure within such thirty (30) day period. Only in the event Administrative Agent
fails to timely cure or cause to be cured any such default as provided in the
foregoing sentence shall Manager have the right to terminate the Management
Agreement(s) under which such default has occurred. Manager will deliver to
Administrative Agent a copy of all notices of termination given by Manager to
AGH under the Management Agreements simultaneously with the delivery of any such
notices of termination to AGH.
(b) Without the written consent of the Administrative Agent, Manager will
not terminate or amend any arrangement or agreement with respect to the liquor
license for or the sale of alcoholic beverages in connection with any of the
Properties.
(c) The Management Agreements and any and all liens, rights and interests
(whether choate or inchoate and including, without limitation, all mechanic's
and materialman's liens under applicable law) owned, claimed or held, or to be
owned, claimed or held by the Manager in and to the Properties and the
Improvements now or hereafter constructed thereon, are and shall be in all
things subordinate and inferior to the full repayment of the Credit Facility and
the liens and security interests created or to be created for the benefit of the
Agents and the Banks, their respective successors and assigns, and securing the
repayment of the above described Notes including, without limitation, those
created under and by virtue of the Mortgages covering the Properties and filed
or to be filed of record in the public records maintained for the recording of
mortgages and/or deeds of trust in the counties and states in which the
Properties are located (the "Records"), and all renewals and extensions hereof.
(d) Upon the occurrence and during the continuance of an Event of Default
(as defined in the Credit Agreement), Manager shall, at the request of
Administrative Agent, its successors or
-2-
<PAGE>
assigns, continue performance on Administrative Agent's, its successors' or
assigns', behalf in accordance with the terms of the Management Agreements,
provided that Manager shall be paid all sums due or to become due it in
accordance with said Management Agreements following the date the Administrative
Agent makes such request. Manager further agrees that, upon the occurrence of
such an Event of Default, the Administrative Agent shall be entitled to accept
or reject each of the Management Agreements on a property by property basis.
Once the Administrative Agent has selected the Properties at which Manager is to
continue performance under the Management Agreements, the remaining Management
Agreements for the Properties not so selected shall terminate and no sums shall
be due and payable by Administrative Agent thereunder. Upon the occurrence and
during the continuance of a monetary Event of Default, Administrative Agent
shall have the continuing right to terminate any or all of the Management
Agreements on a property by property basis, in whole or in part as to certain
Properties, upon no less than thirty (30) days prior written notice to Manager
without any obligation to pay a termination or cancellation fee or penalty to
Manager.
(e) Manager will not voluntarily terminate, or materially amend or modify
any of the Management Agreements without the prior written consent of
Administrative Agent. In the event Manager fails to secure such approval, the
Management Agreements shall, for the purposes of Manager's obligation aforesaid
to continue performance thereunder for Administrative Agent's benefit, be deemed
not to have been modified by such amendment.
(f) Manager further agrees to (i) execute such affidavits and certificates
as Administrative Agent shall reasonably require to further evidence the
agreements herein contained, (ii) on request from Administrative Agent, furnish
Administrative Agent with copies of such information as AGH is entitled to
receive under the Management Agreements, and (iii) cooperate with Administrative
Agent's representatives in any inspection of the Improvements on the Properties.
(g) Manager acknowledges that, in connection with the Credit Facility, AGH
has executed and delivered to Borrower and its affiliates, Assignments of
Leases, Rents and Security Deposits ("Assignments of Leases"), assigning to such
entities all of the right, title and interest in and to any lease of the
Improvements on the Properties, including any security deposits thereunder, and
all revenues, accounts and proceeds from the Properties and Improvements.
Manager also acknowledges that the rights conveyed pursuant to the Assignments
of Leases have been or will be collaterally assigned to Agents and the Banks as
additional security for the Credit Facility. Manager hereby agrees that upon
receipt of written notice from Administrative Agent that an Event of Default has
occurred under the Credit Facility, Manager shall henceforth deliver to
Administrative Agent, for application in accordance with the terms and
conditions of the Credit Agreement, all rents and other proceeds received from
and after the date thereof from any and all tenants, concessionaires, or other
parties occupying or using any portion of the Improvements, and all revenues,
accounts and proceeds from the Properties and Improvements received from and
after the date thereof. Manager acknowledges that, in connection with the Credit
Facility, Cash Management Systems (as defined in the Credit Agreement) have been
set up with respect to the Properties which Cash Management Systems Manager is
familiar with and agrees to abide by in connection with any cash, cash
equivalents or credit card receipts received by Manager with respect to such
Properties.
-3-
<PAGE>
(h) Administrative Agent has no obligation to Manager with respect to the
Credit Facility, and Administrative Agent's obligations to Borrower with respect
thereto are set forth in the Credit Agreement and certain other credit documents
by and between Banks, Agents, Borrower and Borrower's affiliates ("Credit
Documents"), with respect to which the Manager is not a third party beneficiary.
The relationship of Agents and Banks to Borrower and Borrower's affiliates is
one of a creditor to a debtor, and Agents and Banks are not joint venturers or
partners of Borrower or Borrower's affiliates.
(i) Manager further agrees that nothing herein shall impose upon
Administrative Agent any obligation for payment or performance in favor of
Manager unless Administrative Agent notifies Manager in writing after an Event
of Default under the Notes or Credit Documents, that (i) Administrative Agent
has elected to assert AGH's rights under all or certain of the Management
Agreements and (ii) Administrative Agent agrees to pay Manager the sums due
Manager under the terms of such Management Agreements.
(j) Manager covenants and agrees that, upon Administrative Agent or any
other party (a "Subsequent Owner") acquiring title to any of the Properties and
Improvements either through foreclosure or by acceptance of a deed, assignment
or other conveyance in lieu thereof (collectively, "Foreclosure") or after
Foreclosure, (1) Manager shall deliver to a Subsequent Owner originals or copies
if originals are not available of: (A) all authorizations, approvals, permits,
variances and land use entitlement required for the development and maintenance
of the Properties and Improvements; (B) all permits, licenses and agreements
required for the use, occupancy or operation of the Properties and Improvements,
including, without limitation, to the extent permitted by law, all liquor
licenses obtained by Manager in connection with the Properties and Improvements
and (C) all leases of personal property now or hereafter entered into by Manager
in connection with the development, use, occupancy or operation of the
Properties or Improvements, whether such leases are owned by or issued in the
name of Manager or some other party (the items described in (A), (B) and (C)
being hereinafter collectively referred to as the "Agreements"). Manager shall,
to the maximum extent permitted by law, upon request of any Subsequent Owner,
immediately transfer to such Subsequent Owner all of such Agreements, and will
cooperate with such Subsequent Owner to effectuate a full assignment, conveyance
and transfer of such Agreements so that the smooth and continual operation of
the Properties and Improvements is not impaired or hindered, (2) Manager shall
execute such further instruments or documents as a Subsequent Owner may
reasonably require to further effect the purposes hereof, including, without
limitation, upon the occurrence of a Foreclosure, such documents as may be
necessary to vest title in such Subsequent Owner to any liquor licenses then
held by Manager in connection with the Properties and Improvements and (3) any
Subsequent Owner shall have the continuing right to terminate any or all of the
Management Agreements on a property by property basis, in whole or in part as to
certain Properties, upon no less than thirty (30) days prior written notice to
Manager without any obligation to pay a termination or cancellation fee or
penalty to Manager. Notwithstanding any provision contained herein to the
contrary, the obligations of Manager pursuant to this Agreement shall survive
any termination of the Management Agreements. A Subsequent Owner shall only
incur liability to Manager under all or certain of the Management Agreements
during such Subsequent Owner's ownership of the corresponding Properties and
Improvements. Upon a sale, conveyance, transfer or other assignment of any of
the Properties and Improvements or a termination of the corresponding Management
Agreement(s), a
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<PAGE>
Subsequent Owner shall have no further liability to Manager under such
terminated Management Agreement(s) from the date of such sale, conveyance,
transfer, assignment or termination. In addition, no Subsequent Owners shall
have personal liability under the Management Agreement(s) or this Agreement, and
Manager agrees to look solely to such Subsequent Owner's interest in the
Properties and Improvements for satisfaction of any sums or other obligations
owed Manager under the Management Agreement(s).
(k) Manager hereby represents and warrants that no prior assignment of
Manager's interest in the Management Agreements has been made, and Manager
agrees and covenants not to assign, sell, pledge, transfer or otherwise encumber
Manager's interest in the Management Agreements so long as any portion of the
Credit Facility remains outstanding.
(l) Manager has executed this Agreement for the purpose of inducing Banks
to advance sums to Borrower under the above described Notes and with full
knowledge and intent that Banks shall rely upon the representations, warranties
and agreements herein contained when making advances to Borrower, and that but
for this instrument and the representations, warranties and agreements herein
contained, Banks would not take such actions.
(m) The Administrative Agent shall have the continuing right to file a
copy of this Agreement in any of the Records without the need for further
consent of Manager, AGH or any of their respective affiliates.
3. AGH's CONSENT: AGH has joined herein to evidence its consent to all
-------------
the agreements of Manager contained in this Agreement.
EXECUTED this the _____ day of ______________, 1996.
MANAGER:
AMERICAN GENERAL HOSPITALITY, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
AGH:
AGH LEASING, L.P., A DELAWARE LIMITED
PARTNERSHIP,
By: AGHL GP, Inc., a Delaware corporation,
its sole general partner
-5-
<PAGE>
By:____________________________________
Name:__________________________________
Title:_________________________________
-6-
<PAGE>
THE STATE OF ___________ (S)
(S)
COUNTY OF _____________ (S)
This instrument was acknowledged before me on the ___ day of ______, 1996
by _______________, ________________ of American General Hospitality, Inc., a
__________ corporation on behalf of said corporation.
_____________________________
Notary Public in and for the
State of _____________
Name:_________________________
My Commission Expires: _______
THE STATE OF __________ (S)
(S)
COUNTY OF ___________ (S)
This instrument was acknowledged before me on the ______ day of ________,
1996, by _____________________,_______________ of AGHL GP, Inc., the sole
general partner of AGH Leasing, L.P., a Delaware limited partnership, on behalf
of said partnership.
__________________________________
Notary Public in and for the
State of _________________
Name:______________________________
My Commission Expires:_________
-7-
<PAGE>
EXHIBITS
--------
Exhibit "A" - Management Agreements
-8-
<PAGE>
EXHIBIT "W"
FORM OF DEED OF TRUST, SECURITY AGREEMENT ASSIGNMENT
OF RENTS AND FINANCING STATEMENT
THE STATE OF______ (S)
(S) KNOWN ALL MEN BY THESE PRESENTS:
COUNTY OF_________ (S)
THAT the undersigned,________________________("Grantor"), a
_______________, having an office and mailing address at 3860 West Northwest
Highway, Suite 300, Dallas, Texas 75220, Attention ___________ and whose address
is set forth opposite its signature, in consideration of TEN AND NO/100 DOLLARS
($10.00) in hand paid, and of the debt and trust hereinafter mentioned, has
GRANTED, BARGAINED, SOLD, CONVEYED, TRANSFERRED, ASSIGNED and SET OVER, and by
these presents does GRANT, BARGAINED, SELL, CONVEY, TRANSFER, ASSIGN and SET
OVER unto DAVID W. LOCASCIO, TRUSTEE [INSERT OTHER TRUSTEE WHERE STATE REQUIRES
THAT THE TRUSTEE BE A RESIDENT], having an address at 711 Louisiana Street,
Suite 2900, Houston, Harris County, Texas 77002 (hereafter called the "Trustee")
and to his substitutes or successors in trust, the following described land and
property situated in the County of __________, State of _________.
and being more particularly described by metes and bounds on Exhibit "A"
attached hereto and incorporated herein for all purposes (the "Land");
together with all buildings, fixtures and other improvements on the Land or
hereafter placed on the Land; all rights, titles and interests now owned or
hereinafter acquired by Grantor in and to all easements, streets and rights of
way of every kind and nature adjoining the Land, and all public or private
utility connections thereto and all leasehold interests, appurtenances,
servitudes, rights, privileges, prescriptions and advantages thereunto belonging
or in anywise appertaining; all materials, goods (including without limitation
consumables and inventories), equipment, appliances, apparatus, furniture,
furnishings, inventory and other property, real or personal, now owned or
hereafter acquired by Grantor and now or hereafter installed, used or located on
the above described property or the improvements thereon, whether or not the
same have or would become a part of the Land by attachment thereto, including,
but not limited to, all heating, lighting, refrigeration, plumbing, ventilating,
laundry, incinerating, water-heating, cooking, dishwashing, radio,
communication, electrical and air conditioning equipment, appliances, fixtures
and appurtenances, together with all disposals, dishwashers, machinery,
elevators, pumps, generators, sprinklers, wiring, pipe, doors, motors,
compressors, boilers, condensing units, range hoods, windows, window screens,
window shades, venetian blinds, awnings, drapes, shelving, mantels, cabinets,
paneling, rugs and other floor coverings, and shrubbery and other chattels and
personal property as are ever used, usable or furnished in connection with any
present or future operation, use or enjoyment of the Land and the improvements
on the Land, and all renewals,
<PAGE>
replacements and substitutions thereof and additions thereto and Grantor's
current and future rights as lessee under leases of any of the foregoing; all
rights, titles and interests of Grantor in and to all crops located on and
timber to be cut from the Land and all minerals in, under and upon, produced or
to be produced from the Land; all rights to the present or future use of
wastewater, drainage water or other utility facilities to the extent such use
benefits the Land or the improvements now or hereafter located thereon; and
without limitation of the foregoing, any and all permits, licenses, approvals,
rights, rents, revenues, benefits, leases, concessions, licenses, contracts,
accounts (including without limitation all rights to payment from any consumer
credit/charge card organization or entity), general intangibles, trade names,
monies, instruments, documents, tenements, hereditaments and appurtenances now
or hereafter owned by Grantor and appertaining to, generated from, arising out
of or belonging to the above described properties or any part thereof (including
without limitation the Grantor's Concentration Bank Account); and Grantor's
interest in all 1-800 and other telephone numbers (all of the aforesaid being
hereinafter sometimes called the "Mortgaged Premises"). The Mortgaged Premises
shall also include the Grantor's interest, if any, in all current and future
management, franchise and license agreements related to the Land or improvements
thereon and the Hotel Lease (as hereinafter defined). Some of the said items are
or are to become "fixtures" (as that term is defined in the Uniform Commercial
Code, as adopted in the state in which the Mortgaged Premises are located (the
"Code")) on the Land and as provided under the Code, this Deed of Trust,
Security Agreement, Assignment of Rents and Financing Statement upon being filed
for record in the real property records of the state and county where the
Mortgaged Premises are located, shall operate also as a "fixture filing" and
financing statement upon such of the items as are or may become fixtures.
TO HAVE AND TO HOLD the Mortgaged Premises unto the Trustee and his
substitutes or successors forever. And Grantor does hereby bind itself, its
heirs, executors, administrators, successors and assigns to warrant and forever
defend the title to the Mortgaged Premises, or any part thereof, unto the
Trustee, his substitutes or successors forever against all persons whomsoever
claiming or to claim the same or any part thereof.
1. CREDIT AGREEMENTS AND NOTES.
(a) [AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., A
DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), WHICH IS THE DIRECT OR INDIRECT
OWNER OF THE GRANTOR] [GRANTOR], Bank One, Texas, N.A., as Administrative Agent
(the "Administrative Agent"), and Societe Generale, Southwest Agency, as
Structuring Agent, and the banks and other lenders party thereto (collectively
the "Banks") have entered into a Credit Agreement dated as of __________, 1996
(as amended or otherwise modified from time to time, the "Credit Agreement").
-2-
<PAGE>
(b) [BORROWER/GRANTOR] has executed promissory notes of even date
with the Credit Agreement in favor of the Banks in the original aggregate
principal amount of $100,000,000.00, the final payments of which are due on or
before June 30, 2000 (the "Notes", which term includes any modification,
renewal, extension or alteration thereof).
(c) The Notes were executed and delivered to Administrative Agent and
the Banks, and shall be due and payable in accordance with the Credit Agreement.
(d) All capitalized terms not otherwise defined in this
instrument shall have the meaning assigned to such terms by the Credit
Agreement.
(e) Grantor is [LEASING/SUBLEASING] a portion of the Mortgaged
Premises to AGH Leasing, L.P. ("the Tenant") under that certain lease executed
between Grantor and Tenant (the "Hotel Lease").
(f) The terms and provisions of the Notes and Credit Agreement are
incorporated herein by reference and made a part of this Deed of Trust to the
same extent as though set forth in full herein.
(g) As a condition to the acceptance of the Notes and the making of
the loan evidenced by the Credit Agreement (the "Loan), Grantor agreed to
execute and deliver this Deed of Trust to secure the payment of the indebtedness
from time to time evidenced by the Notes, the payment of all other sums now or
hereafter owing by [BORROWER AND] Grantor and the Guarantors (all such Persons
being collectively referred to herein as the "Obligors") hereunder, under the
Credit Agreement or under any other document or instrument now or hereafter
evidencing or securing the aforesaid indebtedness or otherwise executed in
connection herewith or therewith (this Deed of Trust, the Notes, the Credit
Agreement and all other documents and instruments now or hereafter evidencing or
securing the aforesaid indebtedness or otherwise executed in connection herewith
or therewith, being hereinafter referred to collectively as the "Loan
Documents"), and the performance and observance of all covenants, agreements,
conditions and other provisions set forth herein, in the Notes and in the other
Loan Documents.
This conveyance is made in trust on the terms and conditions herein set forth to
secure the payment of the indebtedness from time to time evidenced by the Notes,
the payment of all other sums now or hereafter owing by the Obligors hereunder,
under the Credit Agreement or any other Loan Document and the performance and
observance of all covenants, agreements, conditions and other provisions set
forth herein, in the Notes, the Credit Agreement or any other Loan Document.
-3-
<PAGE>
2. FUTURE ADVANCES AND ADDITIONAL INDEBTEDNESS. In addition, this
conveyance is made in trust (i) to secure the performance and discharge of each
and every promise, obligation, covenant and agreement contained in the Notes,
this Deed of Trust, the Credit Agreement and any other instrument pertaining to
the herein described Said Indebtedness or the security therefor and (ii) to
secure the following (all of the following, including the hereinabove described
Notes and the foregoing, herein sometimes called "Said Indebtedness"):
(a) The payment of all other amounts with interest thereon becoming due
and payable to the Administrative Agent and the Banks under the terms
of the Notes, this Deed of Trust, or any instrument securing or
executed in connection with the Notes, including (but not limited to)
any moneys advanced thereunder by Administrative Agent or the Banks on
behalf of Obligors;
(b) Any extension, modification, renewal or reamortization of said Notes,
and any increase or addition thereto; and
(c) The payment of all other indebtedness, of whatever kind or character,
now owing or which may hereafter become owing by the Obligors to
Administrative Agent and the Banks, pursuant to the terms and
conditions of the Credit Agreement or any other Loan Document, whether
such indebtedness is direct or indirect, primary or secondary, fixed
or contingent or arises out of or is evidenced by note, deed of trust,
open account, overdraft, endorsement, surety agreement, guaranty or
otherwise, it being contemplated that the Obligors may hereafter
become indebted to Administrative Agent and the Banks for further sum
or sums.
3. ADDITIONAL SECURITY. As additional security for the payment of the
Said Indebtedness, Grantor hereby transfers, assigns and conveys unto the
Administrative Agent, for its benefit and the ratable benefit of the Banks, and
hereby grants Administrative Agent a security interest in the following and all
products and proceeds of the same (hereinafter collectively referred to as the
"Income"), but the mention of products and proceeds herein shall not be
construed as an authorization for the transfer or surrender by Grantor of the
Income:
(a) All judgments, awards of damages, insurance proceeds and settlements
hereafter made resulting from condemnation proceedings or the taking
of all or any part of the Mortgaged Premises under the power of
eminent domain, or for any damage (whether caused by a taking, a
casualty or otherwise) to
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<PAGE>
the Mortgaged Premises or any part thereof, or to any rights
appurtenant thereto, including, but not limited to, any award for
change of grade of streets. The Administrative Agent is hereby
authorized, but shall not be required, on behalf and in the name of
Grantor, to execute and deliver valid acquittances for, and to appeal
from, any such judgments or awards. Subject to the terms and
conditions of the Credit Agreement, the Administrative Agent may apply
all such sums or any part thereof so received, after the payment of
all expenses, including costs and attorney's fees, as a payment on
Said Indebtedness in such manner as the Administrative Agent elects.
(b) All bonuses, rents and royalties accrued or to accrue under all oil,
gas or mineral leases affecting the Mortgaged Premises, now existing
or which may hereafter come into existence. Grantor directs payment of
the same to the Administrative Agent, for the benefit of the Banks at
the option of the Administrative Agent upon written demand of the
Administrative Agent therefor, to be applied to Said Indebtedness
until paid, whether due or not, and either before or after any default
under the terms of this Deed of Trust or Said Indebtedness.
(c) All rents, income and profits issuing or to hereafter issue from the
Mortgaged Premises, and in the event of a Default hereunder,
Administrative Agent, for the benefit of the Banks shall have the
right, at its option, and with or without taking possession of the
Mortgaged Premises, to collect said rents, income and profits, or if
the Mortgaged Premises are vacant to rent the same and collect the
rents, and apply the same to the payment of Said Indebtedness after
deducting all costs of collection and administration. The collection
of said rents, income and profits by the Administrative Agent shall
not constitute a waiver of its right to accelerate the maturity of the
Notes nor of its right to proceed with the enforcement of this Deed of
Trust. Grantor shall not assign the whole or any part of the rents,
income or profits arising from the Mortgaged Premises without the
prior written consent of Administrative Agent and any assignment
thereof without such consent will be null and void; and upon notice
and demand, Grantor shall transfer and assign to Administrative Agent,
in form satisfactory to Administrative Agent, the lessor's interest in
any lease now or hereafter affecting the whole or any part of the
Mortgaged Premises. Grantor agrees that it shall duly and timely
perform all of its obligations as provided for in any leases or other
rental contracts covering or relating to any of the Mortgaged
Premises.
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<PAGE>
The liens, security interests and rights granted by this Deed of Trust shall not
affect or be affected by any other security taken for the Said Indebtedness or
any part thereof. The taking of additional security, or the extension or
renewal of Said Indebtedness or any part thereof, shall at no time release or
impair the liens, security interests and rights granted hereby, or affect the
liability of any endorser, guarantor, or surety, or improve the right of any
junior lienholder; and this Deed of Trust, as well as any instrument given to
secure any renewal or extension of Said Indebtedness, or any part thereof, shall
be and remain the first and prior lien and security interest on all of the
Mortgaged Premises not expressly released, until the Said Indebtedness is
completely paid.
4. SUBROGATION TO EXISTING LIENS. It is agreed that the lien hereby
created shall take precedence over and be a prior lien to any other lien of any
character whether vendor's materialman's or mechanic's lien hereafter created on
the Mortgaged Premises, and in the event the proceeds of the Notes are used to
acquire or to pay off and satisfy any indebtedness and liens heretofore existing
on the Mortgaged Premises, then the Administrative Agent is, and shall be for
the benefit of the Banks, subrogated to all of the rights, liens and remedies of
the holders of the indebtedness and liens so acquired or paid off, regardless of
whether said indebtedness and liens are acquired by the Administrative Agent by
assignment or are released by the holders thereof upon payment.
5. COVENANTS, REPRESENTATIONS AND AGREEMENTS OF GRANTOR. Grantor
covenants, represents and agrees:
(a) That Grantor will timely perform all of its obligations under the
Notes, the Credit Agreement and every other Loan Document (as defined
in the Credit Agreement), in accordance with their respective terms
and conditions.
(b) That Grantor shall pay, prior to delinquency, all taxes and
assessments levied or assessed against the Mortgaged Premises,
including, without limitation, all taxes in lieu of ad valorem taxes,
as the same become due and payable. In the event of the passage after
date of this Deed of Trust of any law or regulation deducting from the
Mortgaged Premises for the purposes of taxation any lien thereon, or
changing in any way the laws now in force for the taxation of
mortgages, deeds of trust, or indebtedness secured thereby, for state
or local purposes, or the manner of the operation of any such taxes so
as to affect the interest of Administrative Agent or the Banks, then
and in such event, Grantor shall bear and pay the full amount of such
taxes. If Grantor fails to pay any such taxes and assessments
including, without limitation, taxes in lieu of ad valorem taxes and
taxes against this Deed of Trust or Said Indebtedness secured hereby,
Administrative Agent may pay the same,
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together with all costs and penalties thereon, at Grantor's expense;
provided, however, that if for any reason payment by Grantor of any
such new or additional taxes would be unlawful or if the payment
thereof would constitute usury or render Said Indebtedness wholly or
partially usurious under any of the terms or provisions of the Notes
or this Deed of Trust, or otherwise, Administrative Agent may, at its
option and for benefit of the Banks, declare Said Indebtedness with
all accrued interest thereon to be immediately due and payable, or
Administrative Agent may, at its option, pay the amount or portion of
such taxes as renders Said Indebtedness unlawful or usurious, in which
event Grantor shall concurrently therewith pay the remaining lawful
and nonusurious portion or balance of said taxes.
(c) That Grantor shall keep every part of the Mortgaged Premises in good
condition and presenting an appearance customary for like-situated
properties and in compliance with all requirements of any franchisor
with respect to the business operated on the Mortgaged Premises, make
promptly all repairs, renewals and replacements necessary to such end,
prevent waste to any part of the Mortgaged Premises, and do promptly
all else necessary to such end; and Grantor shall discharge all claims
for labor performed and material furnished therefor, and shall not
suffer any lien of mechanics or materialmen therefor to attach to any
part of the Mortgaged Premises. Grantor shall guard every part of the
Mortgaged Premises from removal, destruction and damage, and shall not
do or suffer to be done any act whereby the value of any part of the
MOrtgaged Premises may be lessened. No building or other property now
or hereafter covered by the lien of this Deed of Trust shall be
removed, demolished or materially altered or enlarged, nor shall any
new building be constructed, without the prior written consent of
Administrative Agent, which consent shall not be unreasonably withheld
or delayed. Administrative Agent and the Banks and their respective
agents or representatives shall have access to the Mortgaged Premises
at all reasonable times in order to inspect same and verify Grantor's
compliance with its duties and obligations under this document.
(d) That in the event Grantor shall fail to keep the improvements on the
Mortgaged Premises in the condition required hereby, or to pay
promptly when due all taxes and assessments, as aforesaid, or to
preserve the prior lien of this Deed of Trust on the Mortgaged
Premises, or to keep the buildings and improvements insured, as
provided in the Credit Agreement, or to deliver the policy, or
policies, of insurance or the renewal thereof to the Administrative
Agent, as provided in the Credit Agreement, then the Administrative
Agent
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may, at its option, but without being required to do so, make such
repairs, pay such taxes and assessments, purchase any tax title
thereon, remove any prior liens, and prosecute or defend any suits in
relation to the preservation of the prior lien of this Deed of Trust
on the Mortgaged Premises, or insure and keep the improvements thereon
insured in an amount not to exceed that stipulated in the Credit
Agreement; that any suns which may be so paid out by the
Administrative Agent and all sums paid for insurance premiums, as
aforesaid, including, but not limited to, the costs, expenses and
reasonable attorney's fees paid in any proceeding, transaction or suit
affecting the Mortgaged Premises when necessary to protect the lien
hereof shall bear interest from the dates of such payments as the
Default Rate (as defined in the Credit Agreement), and shall be paid
by Obligors and Grantor to the Administrative Agent and the Banks in
accordance with the Credit Agreement, as the same place at which the
Notes are payable, and shall be deemed a part of the debt hereby
secured and recoverable as such in all respects.
(e) That Grantor shall comply with all restrictive covenants and all laws,
ordinances, regulations and rules, whether state, federal or
municipal, applicable to the Mortgaged Premises and its ownership, use
and occupancy, and that Grantor has obtained all approvals, licenses
and permits necessary for the ownership, use and occupancy of the
Mortgaged Premises.
(f) That in the six (6) months prior to the recordation of this Deed of
Trust in the real property records of the county or counties in which
the Mortgaged Premises or any part thereof is situated, (i) no
construction of any proposed above or below ground improvements,
structures, additions or alterations has commenced, (ii) no materials
or supplies have been delivered to or labor performed on the Mortgaged
Premises, and (iii) Grantor has not entered into any contracts or
agreements for the construction of any improvements, structures,
additions or alterations, or the delivery of any materials or supplies
or the performance of said labor.
6. RELEASE. If Grantor shall well and truly pay, or cause to be paid, the
Said Indebtedness, and any other indebtedness that may be owing thereunder or
hereunder, and does keep and perform each and every covenant, condition, and
stipulation contained in the Notes and this Deed of Trust, then this conveyance
shall become null and void and shall be released by Administrative Agent upon
request and at the expense of Grantor.
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7. DEFAULT. The term "Default", as used herein, shall mean the
occurrence of any one of the following events:
(a) The occurrence of an "Event of Default" as defined in the Credit
Agreement; or
(b) Grantor abandons all or a portion of the Mortgaged Premises; or
(c) The holder of any lien or security interest on the Mortgaged Premises
institutes foreclosure or other proceedings for the enforcement of its
remedies thereunder; or
(d) Except as expressly provided otherwise in the Credit Agreement, if
Grantor, or any partner thereof, dissolves, liquidates, terminates, or
conveys, transfers, assigns, or pledges any interest in the Mortgaged
Premises or Grantor or any other Transfer shall occur which has not
been approved in writing by Administrative Agent.
Grantor's failure to perform or observe any covenant contained in this Deed of
Trust, other than those contained in Section 21 below and except as provided to
the contrary herein, shall not constitute a Default: (1) until such failure
shall remain unremedied for thirty (30) days after the date written notice of
such default shall have been given to the Grantor by the Administrative Agent or
any of the Banks or (2) if such performance is incapable of being completed
within thirty (30) days, unless Grantor fails to commence the performance of
such covenant, agreement or other obligation within said thirty (30) day period
and thereafter diligently pursue such performance until completion.
Upon the occurrence of a Default, Administrative Agent, at its option, and
without notice of intent to accelerate, notice of acceleration, or any notice,
demand, or presentment, which are hereby expressly waived by Grantor and the
other Obligors, may declare the entire unpaid balance of principal of, and all
accrued interest on, the Said Indebtedness immediately due and payable, in
addition to exercising any and all remedies provided for under this Deed of
Trust, the instruments evidencing Said Indebtedness and all other instruments
securing Said Indebtedness, or any part thereof. Upon the occurrence of a
Default, Administrative Agent shall also have the right to proceed with
foreclosure either through the courts or by directing the Trustee to proceed
with foreclosure as set forth in Paragraph 8 below. The filing of a suit to
foreclose this Deed of Trust, either on any matured portion of Said
Indebtedness or for the entire Said Indebtedness, shall never be considered an
election so as to preclude foreclosure by the Trustee under the provisions of
Paragraph 8 after dismissal of the suit; nor shall the filing of the necessary
notices of foreclosure, as provided in
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Paragraph 8 below preclude the prosecution of a later suit thereon. Upon the
occurrence of a Default, Administrative Agent shall also have the right to
exercise any and all other rights, remedies and recourse now or hereafter
existing in equity, at law, by virtue of statute or otherwise.
8. FORECLOSURE. Upon the occurrence of a Default, Administrative Agent
may, at its option, and in addition to any and every other remedy, request
Trustee to proceed with foreclosure (which request shall be presumed), and in
such event Trustee is hereby authorized and empowered and it shall be his
special duty, upon such request of Administrative Agent, to: [ADD APPROPRIATE
STATE FORECLOSURE PROVISION.]
9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale held by the
Trustee or any receiver or public officer in foreclosure of the liens evidenced
hereby shall be applied:
FIRST, to the payment of all necessary costs and expenses incident to
such foreclosure sale, including, but not limited to, all court costs and
charges of every character in the event foreclosed by suit, and a reasonable fee
to the Trustee acting under the provisions of Paragraph 8 above, if foreclosed
by power of sale as provided in said paragraph;
SECOND, to the payment in full of the Said Indebtedness (including
specifically without limitation the principal, interest and attorneys' fees due
and unpaid on the Notes and the amounts due and unpaid and owed to the
Administrative Agent under this Deed of Trust) in such order as the
Administrative Agent may elect; and
THIRD, the remainder, if any there shall be, shall be paid to Grantor
or to Grantor's heirs, personal representatives, successors or assigns.
10. ADMINISTRATIVE AGENT MAY PURCHASE. The Administrative Agent and the
Banks shall have the right to become the purchaser at any sale held by any
Trustee or substitute or successor or by any receiver or public officer, and
shall have the right to credit upon the amount of the bid made therefor, to the
extent necessary to satisfy such bid, the Said Indebtedness (or a part thereof)
owing to such party, or if such party holds less than all of Said Indebtedness
the pro rata part thereof owing to such party, accounting to all other parties
secured hereby not joining in such bid in cash for the portion of such bid or
bids apportionable to them.
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<PAGE>
11. FORECLOSURE WITHOUT MATURING ENTIRE NOTES. Upon the occurrence of a
Default, the Administrative Agent shall have the option to proceed with
foreclosure of the liens and security interests evidenced hereby in satisfaction
of such item either through the courts or by proceeding or by directing the
Trustee to proceed as if under a full foreclosure, conducting the sale as herein
provided, all without declaring the entire Said Indebtedness due, and provided
that if sale of the Mortgaged Premises are made because of default in the
payment of a part of the Said Indebtedness, such sale may be made subject to the
unmatured part of the Said Indebtedness; and such sale, if so made, shall not in
any manner affect the unmatured part of the Said Indebtedness, but as to such
unmatured part this Deed of Trust shall remain in full force and effect just as
though no sale had been made. The proceeds of any sale shall be applied as
provided in Paragraph 9 above except that the amount paid under subparagraph
SECOND thereof shall be only the matured portion of the Said Indebtedness and
any proceeds of such sale in excess of those provided for in subparagraphs FIRST
and SECOND (modified as provided above) shall be applied to installments of
principal and interest on the Said Indebtedness in proportion to the unpaid
principal balances thereof in the inverse order of maturity. Several sales may
be made hereunder without exhausting the right of sale for any unmatured part of
the Said Indebtedness. It is the purpose hereof to provide for a foreclosure and
sale of the Mortgaged Premises for any matured portion of the Said Indebtedness
without exhausting the power to foreclosure and to sell the Mortgaged Premises
for any other part of the Said Indebtedness whether matured at the time or
subsequently maturing.
12. OCCUPANCY AFTER FORECLOSURE. In the event there is a foreclosure sale
hereunder and at the time of such sale Grantor or Grantor's representatives,
successors or assigns or any other persons claiming any interest in the
Mortgaged Premises by, through or under Grantor are occupying or using the
Mortgaged Premises or any part thereof, each and all shall, at the option of the
Administrative Agent or the purchaser at such sale, as the case may be,
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day-to-day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the Mortgaged
Premises occupied, such rental to be due daily to purchaser. In the event the
tenant fails to surrender possession of said property upon the exercise of such
option, the purchaser shall be entitled to institute and maintain an eviction
proceeding before the appropriate court of the County and State in which the
Mortgaged Premises, or any part thereof, is situated.
13. SUBSTITUTE OR SUCCESSOR TRUSTEE. The Trustee may resign by an
instrument in writing addressed to the Administrative Agent, or the Trustee may
be removed at any time with or without cause by the Administrative Agent. In
case of the death, resignation, removal or disqualification of the Trustee or if
for any reason the Administrative Agent shall deem it desirable to appoint a
substitute or successor trustee to act instead of the
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<PAGE>
herein named trustee or any substitute or successor trustee, then the
Administrative Agent shall have the right and is hereby authorized and empowered
to appoint a successor trustee, or a substitute trustee, without other formality
than appointment and designation in writing executed by the Administrative
Agent, and the authority hereby conferred shall extend to the appointment of
other successor and substitutes trustees successively until the indebtedness
secured hereby has been paid in full or until the Mortgaged Premises are sold
hereunder. In the event the indebtedness secured hereby is held by more than one
person or entity, the holder or holders of not less than a majority in the
amount of such indebtedness shall have the right and authority to make the
appointment of a successor or substitute trustee provided for in the preceding
sentence. Such appointment and designation by the Administrative Agent or by the
holder or holders of not less than a majority of the indebtedness secured hereby
shall be full evidence of the right and authority to make the same and of all
facts therein recited. If the Administrative Agent is a corporation and such
appointment is executed in its behalf by an officer of such corporation, such
appointment shall be conclusively presumed to be executed with authority and
shall be valid and sufficient without proof of any action by the board of
directors or any superior officer of the corporation. Upon the making of any
such appointment and designation, all of the estate and title of the Trustee in
the Mortgage Premises shall vest in the named successor or substitute trustee
and he shall thereupon succeed to and shall hold, possess and execute all the
rights, powers, privileges, immunities and duties herein conferred upon the
Trustee; but nevertheless, upon the written request of the Administrative Agent
or of the successor of substitute trustee, the Trustee ceasing to act shall
execute and deliver an instrument transferring to such successor or substitute
trustee all of the estate and title in the Mortgaged Premises of the Trustee so
ceasing to act, together with all rights, powers, privileges, immunities and
duties herein conferred upon the Trustee, and shall duly assign, transfer and
deliver any of the properties and moneys held by said Trustee hereunder to said
successor or substitute trustee. All references herein to the Trustee shall be
deemed to refer to the Trustee (including any successor or substitute appointed
and designated as herein provided) from time to time acting hereunder. Grantor
hereby ratifies and confirms any and all acts which the herein named Trustee or
his successor or successors, substitute or substitutes, in this trust, shall do
lawfully by virtue hereof.
14. LIABILITY OF TRUSTEE. The Trustee shall not be liable for any error
of judgment or act done by the Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for the
Trustee's gross negligence or willful misconduct. The Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder, believed by him in
good faith to be genuine. All moneys received by the Trustee shall, until used
or applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated in any manner from any other moneys
(except
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to the extent required by law), and the Trustee shall be under no liability for
interest on any moneys received by him hereunder. Grantor will reimburse the
Trustee for, and indemnify and save him harmless against, any and all liability
and expenses which may be incurred by him in the performance of his duties
hereunder.
15. JUDICIAL FORECLOSURE. This instrument shall be effective as a mortgage
as well as a deed of trust and upon the occurrence of a Default may be
foreclosed as to any of the Mortgaged Premises in any manner permitted by the
laws of the State of Texas or of any other state in which any part of the
Mortgaged Premises are situated, and any foreclosure suit may be brought by the
Trustee or by the Administrative Agent. In the event a foreclosure hereunder
shall be commenced by the Trustee, or his substitute or successor, the
Administrative Agent may at any time before the sale of the Mortgaged Premises
direct the said Trustee to abandon the sale, and may then institute suit for the
collection of Said Indebtedness and the other secured indebtedness, and for the
foreclosure of this Deed of Trust. It is agreed that if the Administrative Agent
should institute a suit for the collection of the Said Indebtedness or any other
secured indebtedness, and for the foreclosure of this Deed of Trust, the
Administrative Agent may at any time before the entry of a final judgment in
said suit dismiss the same, and require the Trustee, his substitute or successor
to sell the Mortgaged Premises in accordance with the provisions of this Deed of
Trust.
16. APPOINTMENT OF A RECEIVER. In addition to all other remedies herein
provided for, Grantor agrees that upon the occurrence of a Default, or any event
or circumstance which, with the lapse of time or the giving of notice, or both,
would constitute a Default hereunder, the Administrative Agent shall as a matter
of right be entitled to the appointment of a receiver or receivers for all or
any part of the Mortgaged Premises, whether such receivership be incident to a
proposed sale of such property or otherwise, and without regard to the value of
the Mortgaged Premises or the solvency of any person or persons liable for the
payment of the indebtedness secured hereby, and Grantor does hereby consent to
the appointment of such receiver or receivers, waives any and all defenses to
such appointment and agrees not to oppose any application therefor by the
Administrative Agent, but nothing herein is to be construed to deprive the
Administrative Agent or any of the Banks of any other right, remedy or privilege
it may now have under the law to have a receiver appointed; provided, however,
that the appointment of such receiver, trustee or other appointee by virtue of
any court order, statute or regulation shall not impair or in any manner
prejudice the rights of the Administrative Agent and the Banks to receive
payment of the rents and income pursuant to this Deed of Trust. Any money
advanced by the Administrative Agent in connection with any such receivership
shall be a demand obligation owing by Grantor to the Administrative Agent and
shall bear interest from the date of making such advancement by the
Administrative Agent until paid at the highest rate of interest for which
Grantor may legally contract under applicable law and shall be a part of the
Said Indebtedness and shall
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be secured by this Deed of Trust and by any other instrument securing the
secured indebtedness.
17. POSSESSION BY ADMINISTRATIVE AGENT. Upon the occurrence of a Default
the Administrative Agent is authorized prior or subsequent to the institution of
any foreclosure proceedings to enter upon the Mortgaged Premises, or any part
thereof, and to take possession of the Mortgaged Premises and of all books,
records and accounts relating thereto and to exercise without interference from
Grantor any and all rights which Grantor has with respect to the management,
possession, operation, protection or preservation of the Mortgaged Premises,
including the right to rent the same for the account of Grantor and to deduct
from such rents all costs, expenses and liabilities of every character incurred
by the Administrative Agent in collecting such rents and in managing, operating,
maintaining, protecting or preserving the Mortgaged Premises, and to apply the
remainder of such rents on the indebtedness secured hereby in such manner as the
Administrative Agent may elect. All such reasonable costs, expenses and
liabilities incurred by the Administrative Agent in collecting such rents and in
managing, operating, maintaining, protecting or preserving the Mortgaged
Premises, if not paid out of rents as hereinabove provided, shall constitute a
demand obligation owing by Grantor and the Obligors and shall draw interest from
the date of expenditure until paid at the highest rate for which Grantor and
Obligors may legally contract under applicable law, all of which shall
constitute a portion of the Said Indebtedness. If necessary to obtain the
possession provided for above, the Administrative Agent may invoke any and all
legal remedies to dispossess Grantor, including specifically one or more actions
for forcible entry and detainer, trespass to try title and restitution. In
connection with any action taken by the Administrative Agent pursuant to this
Paragraph 17, the Administrative Agent shall not be liable for any loss
sustained by Grantor, resulting from any failure to let the Mortgaged Premises,
or any part thereof, or from any other act or omission of the Administrative
Agent in managing the Mortgaged Premises unless such loss is caused by the
willful misconduct and bad faith of the Administrative Agent, nor shall the
Administrative Agent be obligated to perform or discharge any obligation, duty
or liability under any lease agreement covering the Mortgaged Premises or any
part thereof or under or by reason of this instrument or the exercise of rights
or remedies hereunder. Grantor and the Obligors shall and do hereby agree to
indemnify the Administrative Agent for, and to hold the Administrative Agent
harmless from, any and all liability, loss or damage which may or might be
incurred by the Administrative Agent under any such lease agreement or under or
by reason of this Deed of Trust or the exercise of rights or remedies hereunder
and from any and all claims and demands whatsoever which may be asserted against
the Administrative Agent by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants or agreements
contained in any such lease agreement. GRANTOR'S AND THE OBLIGORS' OBLIGATION TO
SO INDEMNIFY THE ADMINISTRATIVE AGENT SHALL INCLUDE INDEMNIFICATION FOR ANY
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OF SUCH MATTERS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF THE
ADMINISTRATIVE AGENT. Should the Administrative Agent incur any such liability,
the amount thereof, including costs, expenses and reasonable attorney's fees,
shall be secured hereby and Grantor and the Obligors shall reimburse the
Administrative Agent therefor immediately upon demand. Nothing in this Paragraph
17 shall impose any duty, obligation or responsibility upon the Administrative
Agent for the control, care, management or repair of the Mortgaged Premises, or
for the carrying out of any of the terms and conditions of any such lease
agreement; nor shall it operate to make the Administrative Agent responsible or
liable for any waste committed on the Mortgaged Premises by the tenants or by
any other parties or for any dangerous or defective condition of the Mortgaged
Premises, or for any negligence in the management, upkeep, repair or control of
the Mortgaged Premises resulting in loss or injury or death to any tenant,
licensee, employee or stranger. Grantor hereby assents to, ratifies and confirms
any and all actions of the Administrative Agent with respect to the Mortgaged
Premises taken under Paragraph 17.
18. NON-WAIVER. It is expressly agreed that (i) no waiver of any Default
on the part of Grantor or any of the Obligors or breach of any of the provisions
of this Deed of Trust shall be considered a waiver of any other or subsequent
Default or breach, and no delay or omission in exercising or enforcing the
rights and powers herein granted shall be construed as a waiver of such rights
and powers, and likewise no exercise or enforcement of any rights or powers
hereunder shall be held to exhaust such rights and powers, and every such right
and power may be exercised from time to time; (ii) any failure by Administrative
Agent to insist upon the strict performance by Grantor of any of the terms and
provisions hereof shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Administrative Agent, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust; (iii) neither
Grantor nor any of the Obligors nor any other person now or hereafter obligated
for the payment of the whole or any part of Said Indebtedness shall be relieved
of such obligation by reason of the failure of Administrative Agent or Trustee
to comply with any request of Grantor, or any of the Obligors, or of any other
person so obligated, to take action to foreclose this Deed of Trust or otherwise
enforce any of the provisions of this Deed of Trust or of any obligations
secured by this Deed of Trust, or by reason of the release, regardless of
consideration, of the whole or any party of the security held for Said
Indebtedness, or by reason of the subordination in whole or in part by
Administrative Agent of the lien, security interest or rights evidenced hereby,
or by reason of any agreement or stipulation with any subsequent owner or owners
of the Mortgaged premises extending the time of payment or modifying the terms
of Said Indebtedness or this Deed of Trust without first having obtained the
consent of Grantor or the Obligors or such other person, and in the latter
event, Grantor, the Obligors and all such other persons shall continue to be
liable to make such payments according to the terms of any such agreement
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of extension or modification unless expressly released and discharged in writing
by Administrative Agent; (iv) regardless of consideration and without the
necessity for any notice to or consent by the holder of any subordinate lien or
security interest on the Mortgaged Premises, Administrative Agent may release
the obligation of anyone at any time liable for any of Said Indebtedness or any
part of the security held for Said Indebtedness and may extend the time of
payment or otherwise modify the terms of Said Indebtedness and/or this Deed of
Trust without, as to the security or the remainder thereof, in anywise impairing
or affecting the lien or security interest of this Deed of Trust or the priority
of such lien or security interest, as security for the payment of Said
Indebtedness as it may be so extended or modified, over any subordinate lien or
security interest; (v) the holder of any subordinate lien or security interest
shall have no right to terminate any lease affecting the Mortgaged Premises
whether or not such lease be subordinate to this Deed of Trust; and (vi)
Administrative Agent may resort or the payment of Said Indebtedness to any
security therefor held by Administrative Agent in such order and manner as
Administrative Agent may elect.
19. APPRAISEMENT AND REDEMPTION LAWS. To the full extent Grantor may do
so, Grantor agrees that Grantor will not at any time insist upon, plead, claim
or take the benefit or advantage of any law now or hereafter in force providing
for any appraisement, valuation, stay, extension or redemption, and Grantor, for
Grantor and Grantor's representatives, successors and assigns, and for any and
all persons ever claiming any interest in the Mortgaged Premises, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of intention to mature or
declare due the whole or any part of the Said Indebtedness, notice of election
to mature or declare due the whole or any part of the Said Indebtedness and all
rights to a marshaling of the assets of Grantor, including the Mortgaged
Premises, or to a sale in inverse order of alienation in the event of
foreclosure of the liens and security interests hereby created. Grantor shall
not have or assert any right under any statute or rule of law pertaining to the
marshaling of assets, sale in inverse order of alienation, the exemption of
homestead, the administration of estates of decedents or other matters whatever
to defeat, reduce or affect the right of the Administrative Agent and the Banks
under the terms of this Deed of Trust to a sale of the Mortgaged Premises for
the collection of the Said Indebtedness without any prior or different resort
for collection, or the right of the Administrative Agent and the Banks under the
terms of this Deed of Trust to the payment of such indebtedness out of the
proceeds of sale of the Mortgaged Premises in preference to every other claimant
whatever. If any law referred to in this paragraph and now in force, of which
Grantor or Grantor's representatives, successors and assigns and such other
persons claiming any interest in the Mortgaged Premises might take advantage
despite this paragraph, shall hereafter be repealed or cease to be in force,
such law shall not thereafter be deemed to preclude the application of this
paragraph.
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20. RENEWAL AND EXTENSION. The Administrative Agent, without notice, may
release any part of the Mortgaged Premises, or any person liable on the Said
Indebtedness, without in any way affecting the lien hereof upon any portion of
the Mortgaged Premises not expressly released, and may agree with any party
obligated on Said Indebtedness, or having any interest in the Mortgaged
Premises, to renew and extend the time or manner of payment of all or any part
of Said Indebtedness. Such agreement shall not in any way release or impair the
lien hereof, but shall renew and extend the lien hereof against the Mortgaged
Premises without altering or affecting the priority of the lien created by this
Deed of Trust in favor of any junior encumbrancer, mortgagee or purchaser, or
any person acquiring an interest in the Mortgaged Premises, and this Deed of
Trust shall remain first and superior to any liens that may be placed thereon,
or that may be fixed, given or imposed by law thereon after the execution of
this instrument notwithstanding any such extension of the time of payment, or
the release of a portion of said property from this lien.
21. SALE AND ADDITIONAL ENCUMBRANCES. Grantor hereby expressly agrees
that in the event the following occurs (hereinafter referred to as a "Transfer")
without the prior written consent of Administrative Agent, except as expressly
provided otherwise in the Credit Agreement, whether by a direct or indirect
method, then, in any such event, the Administrative Agent shall have the right,
for the benefit of the Banks, at its option, to declare the entire amount of
Said Indebtedness to be immediately due and payable, and the liens and security
interests evidenced hereby shall be subject to foreclosure in any manner
provided for herein or provided for by law as the Administrative Agent may
elect:
(a) Grantor shall cease to own the entire actual and beneficial title
and interest to all of the Mortgaged Premises, free and clear from all
liens, security interests and encumbrances except (i) the lien and
security interest evidenced by this Deed of Trust and (ii) such other
matters as are expressly permitted hereunder or in the Credit
Agreement;
(b) If any entity who has acquired title to the Mortgaged Premises (a
"Transferee") as a result of a transfer that has been approved by
Administrative Agent (a "Permitted Transfer") shall cease to own the
entire actual and beneficial title and interest to all of the
Mortgaged Premises, free and clear from all liens, security interests
and encumbrances except (i) the lien and security interest evidenced
by this Deed of Trust, and (ii) such other matters as are expressly
permitted hereunder or in the Credit Agreement;
(c) Except as provided otherwise in the Credit Agreement, if any one of
the following shall occur with respect to Grantor or any Transferee
during the period of time preceding the date on which Grantor or any
such Transferee,
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as the case may be, transfers title to the Mortgaged Premises as a
result of a Permitted Transfer:
(i) If Grantor or any Transferee is a general partnership, limited
partnership, or joint venture and Grantor or said Transferee
dissolves, terminates, liquidates or ceases to be a general
partnership, limited partnership or joint venture, as the case
may be, duly organized and validly existing under the laws of
the state of its creation pursuant to a partnership or joint
venture agreement that has been approved in writing by
Administrative Agent or if the general partners or joint
venturers of said partnership or joint venture change from
individuals or entities that have been approved in writing by
Administrative Agent;
(ii) If Grantor or any Transferee is a corporation and said
corporation shall dissolve, merge, liquidate or cease to be a
corporation duly organized and validly existing under the laws
of the state of its incorporation;
(iii) If Grantor or any Transferee is a general partnership, limited
partnership or joint venture and there shall be a transfer of
any of the general partnership interest or joint venture
interest in Grantor or said Transferee;
(iv) If Grantor or any Transferee is a corporation and there is a
transfer of any of the stock of said corporation or the
issuance of new stock of said corporation; or
(d) Except as provided otherwise in the Credit Agreement, if Grantor or
any Transferee shall enter into any contractual arrangement to sell,
transfer, convey or mortgage all or any part of the actual or
beneficial title and interest to the Mortgaged Premises that is not
expressly conditioned upon the consent of Administrative Agent to the
transaction contemplated thereby.
Administrative Agent, for the benefit of the Banks, shall have such right and
option to declare the entire amount of Said Indebtedness to be immediately due
and payable, irrespective of whether or not any such Transfer would or might (i)
diminish the value of any security for the Said Indebtedness, (ii) increase the
risk of default under this instrument, (iii) increase the likelihood of
Administrative Agent's having to resort to any security for the Said
Indebtedness after default, or (iv) add or remove the liability of any person or
entity for
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payment or performance of the Said Indebtedness or any covenant or obligation
under this Deed of Trust. Except where Administrative Agent's consent is not
required pursuant to the Credit Agreement, if Administrative Agent's consent to
a proposed Transfer is requested, Administrative Agent shall have the right (in
addition to its absolute right to refuse to consent to any such Transfer) to
condition its consent upon satisfaction of any one or more of the following
requirements:
(a) That the interest rate on the Notes be increased to a rate acceptable
to Administrative Agent and the Banks, but not in access of the
Default Rate; or
(b) That a reasonable transfer fee, in an amount determined by
Administrative Agent be paid; or
(c) That a principal amount deemed appropriate by Administrative Agent be
paid against said Notes; or
(d) That Grantor and each proposed transferee execute such Assumption
Agreement and other instruments as Administrative Agent shall require.
22. GRANTOR NOT RELEASED. In the event the Administrative Agent approves a
future conveyance of the Mortgaged Premises, or any part thereof, and title
becomes vested in a person other than Grantor, the Administrative Agent may,
without notice to Grantor, deal with such successor or successors in interest
with reference to this Deed of Trust and to the Notes in the same manner as with
Grantor without in any way vitiating or discharging Grantor's and the Obligors'
liability hereunder or upon Said Indebtedness. No sale of the Mortgaged Premises
and no forbearance on the part of the Administrative Agent and no extension of
the time for the payment of the Notes, given by the Administrative Agent and the
Obligors, shall operate to release, modify, change or affect the original
liability of Grantor, either in whole or in part.
23. ACCEPTANCE ON ACCOUNT. Acceptance by the Administrative Agent or any
of the Banks of any payment in an amount less than the amount then due on Said
Indebtedness shall be deemed an acceptance on account only, and the failure to
pay the entire amount then due shall be and continue to be a Default; at any
time thereafter, and until the entire amount then due on the Said Indebtedness
has been paid, the Administrative Agent shall be entitled to exercise all rights
conferred upon it in this Deed of Trust.
24. SECURITY INTEREST. To further secure Said Indebtedness, Grantor hereby
grants a security interest to Administrative Agent, for its benefit and the
ratable
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benefit of the Banks, in and to the Income and all personal property and
fixtures hereinabove described and all of Grantor's bank accounts including
without limitation the Grantor's Concentration Bank Account (all of such Income,
personal property, fixtures and the proceeds thereof and bank accounts being
herein called the "collateral," but the mention of proceeds of collateral herein
shall not be construed as an authorization for the sale or surrender by Grantor
of collateral and collateral as used in this Deed of Trust shall be included in
the term "Mortgaged Premises" when used herein). This document shall constitute
a security agreement as well as a mortgage and deed of trust. The following
applies with respect to collateral:
(a) In addition to and cumulative of any other remedies granted in this
Deed of Trust to Administrative Agent, Administrative Agent may, upon
Default hereunder, proceed under the Code as to all or any part of the
collateral and shall have and may exercise with respect to all or any
part of the collateral all of the rights, remedies and powers of a
secured party under the Code, including, without limitation, the right
and power to repossess, retain and sell, at public or private sale or
sales, or otherwise dispose of, lease or utilize the collateral or any
part thereof and to dispose of the proceeds in any manner authorized
or permitted under the applicable provisions of the Code, and to apply
the proceeds thereof toward payment of Administrative Agent's
reasonable attorney's fees and other expenses and costs of pursuing,
searching for, receiving, taking, keeping, storing, advertising, and
selling the collateral thereby incurred by Administrative Agent, and
toward payment of Said Indebtedness in such order and manner as
Administrative Agent may elect consistent with the provisions of the
Code. Nothing in this Paragraph 24 shall be construed to impair or
limit any other right or power to which Administrative Agent may be
entitled at law or in equity.
(b) Among the rights of Administrative Agent upon Default, and without
limitation, Administrative Agent shall have the right (but not the
obligation), without being deemed guilty of trespass and without
liability for damages thereby occasioned, (i) to enter upon any
premises where said collateral may be situated and take possession of
the collateral, or render it unusable, or dispose of the collateral on
Grantor's premises, and Grantor agrees not to resist or to interfere
and (ii) to take any action deemed necessary or appropriate or
desirable by Administrative Agent and at Administrative Agent's
option, and in its discretion, to repair, refurbish or otherwise
prepare the collateral for sale, lease or other use or disposition as
herein authorized. Administrative Agent may at Administrative Agent's
discretion require Grantor to assemble the collateral and make it
available to Administrative
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Agent at a place designated by Administrative Agent that is reasonably
convenient to both parties.
(c) Administrative Agent shall give Grantor notice, by certified mail,
postage prepaid, of the time and place of any public sale of any of
the collateral or of the time after which any private sale or other
intended disposition thereof is to be made by sending notice to
Grantor at the address of Grantor set out below opposite its signature
at least five (5) days before the time of the sale or other
disposition, which provisions for notice Grantor and Administrative
Agent agree are reasonable; provided, however, that nothing herein
shall preclude Administrative Agent from proceeding as to both real
and personal property in accordance with Administrative Agent's rights
and remedies in respect to real property as provided in the Code, and
without any notice to Grantor except for the notice provided for in
Paragraph 8 hereof.
(d) To the extent such may now or hereafter be permitted under the laws of
the state in which the Mortgaged Premises are located, Administrative
Agent is authorized to execute and file financing statements and
continuation statements under the Code with respect to the collateral
without joinder of Grantor in such execution or filing. Grantor shall
execute and deliver to Administrative Agent such financing statements,
continuation statements and other documents relating to the collateral
as Administrative Agent may reasonably request from time to time to
preserve and maintain the priority of the security interest created by
this Deed of Trust and shall pay to Administrative Agent on demand any
expenses and attorneys' fees incurred by Administrative Agent in
connection with the preparation, execution and filing of this Deed of
Trust and of any financing statements, continuation statements,
partial releases, termination statements or other documents necessary
or desirable to continue or confirm Administrative Agent's security
interest or any modification thereof. This document, and any carbon,
photographic or other reproduction of this document may be filed by
Administrative Agent and shall be sufficient as a financing statement.
All or part of the collateral is or is to become fixtures, crops,
timber or minerals on the real estate constituting a portion of the
Mortgaged Premises, but this statement shall not impair or limit the
effectiveness of this document as a security agreement or financing
statement, for other purposes, and this Deed of Trust shall constitute
a fixture, crops, timber and mineral financing statement and, as such,
shall be filed for record in the real estate records of the county in
which the land covered hereby is located. Grantor shall not change its
name without the prior express written consent of Administrative
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Agent which shall not be unreasonably withheld. The name of the record
owner of the land covered hereby is the party defined as Grantor.
(e) Unless otherwise disclosed to Administrative Agent as herein provided,
Grantor agrees that, except for the security interest granted hereby
in the collateral, Grantor is the owner of the collateral free of any
adverse claim, security interest or encumbrance, and Grantor shall
defend the collateral against all claims and demands of any person at
any time claiming the same or any interest therein. Grantor has not
heretofore signed any financing statement and no financing statement
signed by Grantor is now on file in any public office except those
statements, true and correct copies of which have been delivered to
Administrative Agent. So long as any amount remains unpaid on Said
Indebtedness, Grantor shall not except in connection with those Liens
expressly permitted by the Credit Agreement execute and there shall
not be filed in any public office any such financing statement or
statements affecting the collateral other than financing statements in
favor of Administrative Agent hereunder.
(f) The security interest granted herein shall not be construed or deemed
to constitute Administrative Agent or Trustee as a trustee or
mortgagee in possession of the Mortgaged Premises so as to obligate
Administrative Agent or Trustee to lease the Mortgaged Premises or
attempt to do the same, or to take any action, incur any expenses or
perform or discharge any obligation, duty or liability with respect to
the Mortgaged Premises or any part thereof or otherwise.
(g) Grantor's and Administrative Agent's addresses are as hereinbelow set
forth.
Without limitation, the "collateral" also includes all right, title and interest
now owned or hereafter acquired by Grantor in and to the following described
property and all replacements or substitutions thereof and all products and
proceeds thereof:
(a) All contracts now or hereafter entered into by and between Grantor and
any contractor or supplier as well as all right, title and interest of
Grantor under any subcontracts, providing for the construction
(original, restorative or otherwise) of any improvements to or on any
of the Mortgaged Premises or the furnishing of any materials,
supplies, equipment or labor in connection with such construction;
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(b) All of the plans, specifications and drawings (including, but not
limited to plot plans, foundations plans, floor plans, elevations,
framing plans, cross-sections of walls, mechanical plans, electrical
plans and architectural and engineering plans, and architectural and
engineering studies and analyses) heretofore or hereafter prepared by
any architect or engineer, in respect of any of the Mortgaged
Premises;
(c) All agreements now or hereafter entered into with any party in respect
of architectural, engineering, management or consulting services
rendered or to be rendered in respect of planning, design, inspection
or supervision of the construction or management of any of the
Mortgaged Premises;
(d) Any commitment issued by any lender or investor other than
Administrative Agent to finance or invest in any of the Mortgaged
Premises.
(e) Any completion bond, performance bond or labor and material payment
bond and any other bond relating to the Mortgaged Premises or to any
contract providing for construction of improvements to any of the
Mortgaged Premises.
To the extent that any of the collateral is not subject to the Uniform
Commercial Code of the state or states where it is situated, Grantor hereby
assigns to Administrative Agent all of Grantor's right, title and interest in
the collateral to secure the Said Indebtedness. Release of the lien of this Deed
of Trust shall automatically terminate this assignment.
25. EXCESS INTEREST. The invalidity, or unenforceability in particular
circumstances, of any provision of this Deed of Trust shall not extend beyond
such provision or such circumstances and no other provision of this instrument
shall be affected thereby. As used herein, the term "Maximum Legal Rate of
Interest" shall mean and refer to the maximum rate of nonusurious interest, if
any, that Administrative Agent may from time to time charge Grantor and the
Obligors and in regard to which Grantor and the Obligors would be prevented
successfully from raising the claim or defense of usury under applicable law as
now, or to the extent permitted by law, as may hereafter be, in effect (said law
permitting the highest rate being herein referred to as the "Interest Law").
Unless changed in accordance with law, the applicable rate ceiling under Texas
law shall be indicated (weekly) rate ceiling, from time to time in effect, as
provided in Article 5069-1.04 of the Texas Revised Civil Statues, as amended. It
is the intention of Grantor, the Obligors and Administrative Agent to conform
strictly to the Interest Law applicable to this loan transaction. Accordingly,
it is agreed that notwithstanding any provision to the contrary in this Deed of
Trust, the Notes or in any of the documents securing payment of Said
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Indebtedness or otherwise relating thereto, the aggregate of all interest and
any other charges or consideration constituting interest under applicable
Interest Law that is taken, reserved, contracted for, charged or received under
this Deed of Trust, or under any of the other aforesaid agreements or otherwise
in connection with this loan transaction shall under no circumstances exceed the
maximum amount of interest allowed by the Interest Law applicable to this loan
transaction. If any excess of interest in such respect is provided for, or shall
be adjudicated to be so provided for, in this Deed of Trust, in the Notes or in
any of the documents securing payment of Said Indebtedness or otherwise relating
thereto, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Grantor, the Obligors nor their respective heirs, legal
representatives, successors or assigns or any other party liable for the payment
of Said Indebtedness shall be obligated to pay the amount of such interest to
the extent that it is excess of the maximum amount of interest allowed by the
Interest Law applicable to this loan transaction, (c) any excess shall be deemed
a mistake and canceled automatically and, if theretofore paid, shall be credited
on Said Indebtedness by Administrative Agent (or if Said Indebtedness shall have
paid in full, refunded to Grantor or the Obligors, as applicable) and (d) the
effective rate of interest shall be automatically subject to reduction to the
Maximum Legal Rate of Interest allowed under such Interest Law as now or
hereafter construed by courts of appropriate jurisdiction. All sums paid or
agreed to be paid the Administrative Agent for the use, forbearance or detention
of the indebtedness secured hereby shall, to the extent permitted by the
Interest Law applicable to this loan transaction, be amortized, prorated,
allocated and spread throughout the full term of the Note.
26. PARTIAL INVALIDITY. If the lien of this Deed of Trust is invalid or
unenforceable as to any part of the Notes or indebtedness secured hereby, or if
the lien is invalid or unenforceable as to any part of the Mortgaged Premises,
the unsecured or partially unsecured portion of the Notes or indebtedness shall
be completely paid prior to the payment of the remaining and secured or
partially secured portion of the Notes or indebtedness, and payments made on the
Notes or indebtedness, whether voluntary or under foreclosure or other
enforcement action or procedure, shall be considered to have been first paid on
and applied to the full payment of that portion of the Notes or indebtedness
which is not secured or fully secured by the lien of this Deed of Trust.
27. REINSTATEMENT. In the event Administrative Agent shall elect to
invoke any of the rights or remedies provided for herein, but shall thereafter
determine to withdraw or discontinue same for any reason, it shall have the
unqualified right to do so, whereupon all parties shall be automatically
restored and returned to their respective positions regarding the Said
Indebtedness and this document as shall have existed prior to the invocation of
Administrative Agent's rights hereunder and the rights, powers and remedies of
Administrative Agent hereunder shall be and remain in full force and effect.
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28. FURTHER DOCUMENTS. Grantor agrees that it shall execute and deliver
such other and further documents and do and perform such other acts as may be
reasonably necessary and proper to carry out the intention of the parties as
herein expressed and to effect the purposes of this document and the loan
transaction referred to herein. Without limitation of the foregoing, Grantor
agrees to execute and deliver such documents as may be necessary to cause the
liens and security interests granted hereby to cover and apply to any property
placed in, on or about the Mortgaged Premises in addition to, or replacement or
substitution of any of the Mortgaged Premises.
29. SUCCESSORS AND ASSIGNS. The covenants herein contained shall inure to
the benefit of Administrative Agent, the Banks and Trustee, their respective
heirs, legal representatives, successors and assigns, and shall be binding upon
the respective heirs, legal representatives, successors and assigns of Grantor
[AND BORROWER], but nothing in this paragraph shall constitute an authorization
for Grantor to sell or in any way dispose of the Mortgaged Premises or any part
thereof.
30. TERMINOLOGY. Whenever used in this document, unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, the words "Deed of Trust" shall mean this Deed of Trust and Security
Agreement and any supplement or supplements hereto, the word "Grantor" shall
mean "Grantor, its heirs, legal representatives, successors and assigns, and/or
any subsequent owner or owners of the Mortgaged Premises," the word
"Administrative Agent" shall mean "Administrative Agent or any subsequent
Administrative Agent under the Credit Agreement," the word "Notes" shall mean
"Notes secured by this Deed of Trust and any renewals, extensions and
rearrangements thereof," the word "Person" shall mean "an individual,
corporation, trust, partnership or unincorporated association," the word
"Obligors" shall mean "Obligors, their respective heirs, legal representatives,
successors and assigns," and the pronouns of any gender shall include the other
genders, and either the singular or plural shall include the other.
31. HEADINGS. The paragraph entitlements hereof are inserted for
convenience of reference only and shall in no way alter, modify or define, or be
used in construing, the text of such paragraphs.
32. WARRANTIES OF TITLE. Notwithstanding anything to the contrary herein
set forth, the warranties of title herein contained are subject to those matters
set forth on Exhibit "B" attached hereto and made a part hereof for all
-----------
purposes, to the extent, but only to the extent, the same are valid and
subsisting and affect the Mortgaged Premises.
33. CREDIT AGREEMENT. It is expressly agreed that the Notes evidence a
loan from Administrative Agent and the Banks to [GRANTOR/BORROWER] pursuant to
----------------
the terms
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of the Credit Agreement, which Credit Agreement is hereby incorporated herein
for all purposes as if set forth herein in its entirety. To the extent the
specific terms and provisions of this Deed of Trust expressly conflict with the
specific terms and provisions of said Credit Agreement, the specific terms and
provisions of said Credit Agreement shall control.
34. TIME IS OF THE ESSENCE. Time is of the essence in this Deed of Trust.
35. CHOICE OF LAW. To the extent, and only to the extent, that an
election of the laws of a forum other than ___________ would be ineffective
under _____________ law, the validity, construction, and enforcement of this
instrument shall be governed by the laws of the State of _____________
applicable to contracts executed and performed entirely within that state with
respect to real estate remedies, perfection and other matters so inherently
local that an election of the laws of a forum other than _______________ would
be ineffective under _____________ law. In all other respects, including, but
not limited to, matters of usury law and general contract law applicable to
agreements between lenders and borrowers, the validity, construction and
enforcement hereof shall be determined according to the substantive laws (but
not the conflicts laws) of the State of Texas, in which state the Administrative
Agent and the Banks originated the Said Indebtedness and in which state the
Notes are payable.
[36. COVENANTS, REPRESENTATIONS AND AGREEMENTS OF GRANTOR WITH RESPECT TO
THE GROUND LEASE.
(A) THE GRANTOR REPRESENTS AND WARRANTS THAT (I) THE GROUND LEASE IS IN
FULL FORCE AND EFFECT, (II) THE GROUND LEASE HAS NOT BEEN MODIFIED IN
ANY RESPECT AND (III) TO ITS KNOWLEDGE THERE ARE NO DEFAULTS BY EITHER
PARTY TO THE GROUND LEASE.
(B) THE GRANTOR SHALL PERFORM AND/OR OBSERVE ALL COVENANTS AND CONDITIONS
TO BE PERFORMED AND/OR OBSERVED BY THE GRANTOR UNDER THE GROUND LEASE
AND SHALL DELIVER TO ADMINISTRATIVE AGENT PHOTOCOPIES OF ALL NOTICES
RECEIVED BY THE GRANTOR FROM THE LESSOR UNDER THE GROUND LEASE WITHIN
FIVE (5) DAYS AFTER RECEIPT THEREOF.
(C) SIMULTANEOUSLY WITH THE MAKING OF EACH PAYMENT TO THE LESSOR UNDER THE
GROUND LEASE, THE GRANTOR SHALL DELIVER TO THE ADMINISTRATIVE AGENT A
COPY OF THE CHECK IN THE AMOUNT OF SUCH PAYMENT DELIVERED TO THE
LESSOR UNDER THE GROUND LEASE.
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(D) IF THERE SHALL BE FILED BY OR AGAINST THE GRANTOR A PETITION UNDER THE
REVISED BANKRUPTCY ACT OF 1978, ET. SEQ., AS AMENDED AND ANY SUCCESSOR
--- -----
ACT THERETO (THE "BANKRUPTCY CODE") AND THE GRANTOR, SHALL DETERMINE
TO REJECT THE GROUND LEASE, THE GRANTOR SHALL GIVE THE ADMINISTRATIVE
AGENT NOT LESS THAN FIFTEEN (15) DAYS' PRIOR WRITTEN NOTICE OF THE
DATE ON WHICH THE GRANTOR SHALL APPLY TO ANY COURT OR OTHER
GOVERNMENTAL AUTHORITY FOR AUTHORITY AND PERMISSION TO REJECT THE
GROUND LEASE. THE ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT, BUT NOT
THE OBLIGATION, TO SERVE UPON THE GRANTOR WITHIN SUCH FIFTEEN (15) DAY
PERIOD A NOTICE STATING THAT (I) THE ADMINISTRATIVE AGENT DEMANDS THAT
THE GRANTOR ASSUME AND ASSIGN THE GROUND LEASE TO THE ADMINISTRATIVE
AGENT PURSUANT TO THE BANKRUPTCY CODE, AND (II) THE ADMINISTRATIVE
AGENT COVENANTS TO CURE AND/OR PROVIDE ADEQUATE ASSURANCE OF PROMPT
CURE OF ALL DEFAULTS REASONABLY SUSCEPTIBLE OF BEING CURED BY THE
ADMINISTRATIVE AGENT AND OF FUTURE PERFORMANCE UNDER THE GROUND LEASE.
IF THE ADMINISTRATIVE AGENT SERVES UPON THE GRANTOR THE NOTICE
DESCRIBED ABOVE, THE GRANTOR SHALL NOT SEEK TO REJECT THE GROUND LEASE
AND SHALL COMPLY WITH THE DEMAND PROVIDED FOR IN CLAUSE (I) ABOVE
WITHIN FIFTEEN (15) DAYS AFTER THE NOTICE SHALL HAVE BEEN GIVEN BY THE
ADMINISTRATIVE AGENT.
(E) THE GRANTOR HEREBY IRREVOCABLY APPOINTS THE ADMINISTRATIVE AGENT ITS
AGENT AND ATTORNEY-IN-FACT (WHICH APPOINTMENT IS COUPLED WITH AN
INTEREST) TO PERFORM OR OBSERVE ON BEHALF OF THE GRANTOR, THE
GRANTOR'S OPTION TO PURCHASE THE MORTGAGED PREMISES (IF ANY), PURSUANT
TO THE GROUND LEASE, AND ANY COVENANT OR CONDITION WHICH THE GRANTOR
FAILS TO PERFORM OR OBSERVE UNDER THE GROUND LEASE WITHIN ANY
APPLICABLE GRACE PERIOD SPECIFIED IN THE GROUND LEASE, AND ANY
ADVANCES MADE BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH SUCH
PERFORMANCE OR OBSERVANCE SHALL BE REPAID BY THE GRANTOR [AND
BORROWER] WITHIN TEN (10) DAYS OF DEMAND WITH INTEREST AT THE INTEREST
RATE TO BE PAID UNDER THE CREDIT AGREEMENT DURING AN EVENT OF DEFAULT
(THE "DEFAULT RATE") AND THE AMOUNT SO ADVANCED, AND SHALL BE A LIEN
UPON THE MORTGAGED PREMISES, OR ANY PART THEREOF, AND SHALL BE SECURED
BY THIS DEED OF TRUST. SUCH PERFORMANCE OR OBSERVANCE BY THE
ADMINISTRATIVE AGENT SHALL NOT PREVENT THE GRANTOR'S FAILURE SO TO
PERFORM OR OBSERVE FROM CONSTITUTING A DEFAULT UNDER THIS DEED OF
TRUST. IN PERFORMING OR OBSERVING ANY SUCH COVENANT OR CONDITION, THE
ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO ENTER UPON THE MORTGAGED
PREMISES OR ANY PART THEREOF. UPON RECEIPT BY THE ADMINISTRATIVE AGENT
FROM THE LESSOR UNDER THE GROUND LEASE OF ANY
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NOTICE OF DEFAULT UNDER THE GROUND LEASE, THE ADMINISTRATIVE AGENT MAY
RELY THEREON AND TAKE ANY ACTION PERMITTED BY THIS SECTION TO REMEDY
SUCH DEFAULT NOTWITHSTANDING THAT THE EXISTENCE OF SUCH DEFAULT OR THE
NATURE THEREOF MAY BE QUESTIONED OR DENIED BY THE GRANTOR.
(F) IF THE GRANTOR EXERCISES THE OPTION TO PURCHASE THE MORTGAGED PREMISES
(IF ANY), PURSUANT TO THE GROUND LEASE, SUCH PURCHASE OF THE MORTGAGED
PREMISES SHALL IMMEDIATELY BECOME SUBJECT TO THE LIEN HEREOF, AND
SECURED BY THIS DEED OF TRUST AS FULLY AND COMPLETELY, AND WITH THE
SAME EFFECT, AS THOUGH NOW OWNED BY THE GRANTOR AND SPECIFICALLY
DESCRIBED IN THE GRANTING CLAUSE HEREOF. NOTWITHSTANDING THE
FOREGOING, AT ANY AND ALL TIMES, THE GRANTOR SHALL EXECUTE, DELIVER
AND ACKNOWLEDGE SUCH FURTHER ASSURANCES, DEED OF TRUSTS AND/OR
SECURITY INSTRUMENTS THE ADMINISTRATIVE AGENT MAY REQUIRE TO CONFIRM
THE MORTGAGED PREMISES SO PURCHASED ARE SECURED BY THE LIEN OF THIS
DEED OF TRUST.
(G) THE GRANTOR EXPRESSLY AGREES THAT IF THERE SHALL BE FILED BY OR
AGAINST THE LESSOR UNDER THE GROUND LEASE ANY PETITION, ACTION AND/OR
PROCEEDING UNDER THE BANKRUPTCY CODE OR ANY OTHER SIMILAR FEDERAL AND
OR STATE LAW NOW OR HEREAFTER IN EFFECT (COLLECTIVELY HEREINAFTER
REFERRED TO AS THE "GRANTOR'S BANKRUPTCY"), THE GRANTOR SHALL NOT
ELECT TO TREAT THE GROUND LEASE AS TERMINATED, CANCELED AND/OR
SURRENDERED PURSUANT TO APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE
INCLUDING, BUT NOT LIMITED TO, SECTION 365(H)(1), WITHOUT THE
ADMINISTRATIVE AGENT'S PRIOR WRITTEN CONSENT. IN THE EVENT OF THE
GRANTOR'S BANKRUPTCY, THE GRANTOR EXPRESSLY COVENANTS AND AGREES,
INTENDING THAT THE ADMINISTRATIVE AGENT RELY THEREON, THAT IT SHALL
REAFFIRM AND RATIFY THE LEGALITY, VALIDITY, BINDING EFFECT AND
ENFORCEABILITY OF THE GROUND LEASE TO THE ADMINISTRATIVE AGENT AND THE
GRANTOR ALSO COVENANTS AND AGREES THAT IT SHALL REMAIN IN POSSESSION
OF THE MORTGAGED PREMISES AND THE LEASEHOLD ESTATE CREATED BY THE
GROUND LEASE, NOTWITHSTANDING ANY REJECTION THEREOF BY THE LESSOR
UNDER THE GROUND LEASE AND/OR ANY TRUSTEE, CUSTODIAN, RECEIVER OR
OTHER SIMILAR OFFICIAL.
(H) THE LIEN OF THIS DEED OF TRUST ATTACHES TO ALL OF THE GRANTOR'S RIGHTS
AND REMEDIES NOW AND HEREAFTER ARISING UNDER OR PURSUANT TO THE
BANKRUPTCY CODE, INCLUDING, BUT NOT LIMITED TO, THE GRANTOR'S RIGHT TO
ELECT TO REMAIN IN POSSESSION OF THE MORTGAGED PREMISES AND THE
LEASEHOLD ESTATE CREATED BY THE GROUND LEASE IN THE EVENT OF THE
GRANTOR'S BANKRUPTCY PURSUANT TO SECTION 365(H)(1). ANY SUCH ELECTION
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TO TERMINATE, CANCEL AND/OR SURRENDER THE GROUND LEASE IN THE EVENT OF
THE GRANTOR'S BANKRUPTCY WITHOUT THE ADMINISTRATIVE AGENT'S PRIOR
WRITTEN CONSENT SHALL BE NULL AND VOID.
(I) THE GRANTOR HEREBY UNCONDITIONALLY ASSIGNS, TRANSFERS, AND SETS OVER
TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE BANKS (I) ALL OF
THE GRANTOR'S CLAIMS AND RIGHTS TO DAMAGES, AND ANY OTHER REMEDIES IN
CONNECTION THEREWITH ARISING FROM ANY REJECTION OF THE GROUND LEASE BY
THE LESSOR THEREUNDER PURSUANT TO THE BANKRUPTCY CODE IN THE EVENT OF
THE GRANTOR'S BANKRUPTCY, AND/OR BY ANY TRUSTEE, CUSTODIAN, RECEIVER
OR OTHER SIMILAR OFFICIAL. THE ADMINISTRATIVE AGENT SHALL HERE THE
RIGHT, BUT NOT THE OBLIGATION, TO PROCEED IN ITS OWN NAME AND/OR IN
THE NAMES OF THE GRANTOR IN RESPECT OF ANY CLAIM, SUIT, ACTION AND/OR
PROCEEDING RELATING TO SUCH REJECTION OF THE GROUND LEASE, INCLUDING,
BUT NOT LIMITED TO, THE RIGHT TO FILE AND PROSECUTE, TO THE EXCLUSION
OF THE GRANTOR, ANY AND ALL PROOFS OF CLAIMS, COMPLAINTS, NOTICES AND
OTHER DOCUMENTS IN ANY CASE IN RESPECT OF THE LESSOR OF THE GROUND
LEASE UNDER AND PURSUANT TO THE BANKRUPTCY CODE, AND (II) THE
GRANTOR'S RIGHT OF ELECTION TO REMAIN IN POSSESSION OF THE MORTGAGED
PREMISES IN THE EVENT OF THE GRANTOR'S BANKRUPTCY UNDER AND PURSUANT
TO SECTION 365(H)(L) OF THE BANKRUPTCY CODE. THIS ASSIGNMENT
CONSTITUTES A PRESENT, ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL
ASSIGNMENT OF THE FOREGOING CLAIMS, ELECTIONS, RIGHTS AND REMEDIES,
AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL THE NOTES AND THE
SAID INDEBTEDNESS HAVE BEEN PAID IN FULL AND THIS DEED OF TRUST HAS
BEEN SATISFIED AND DISCHARGED. ANY AMOUNTS RECEIVED BY THE
ADMINISTRATIVE AGENT AND THE BANKS AS DAMAGES ARISING OUT OF THE
REJECTION OF THE GROUND LEASE BY THE LESSOR THEREUNDER SHALL BE
APPLIED IN THE MANNER SET FORTH IN PARAGRAPH 9 OF THIS DEED OF TRUST.
(J) IF, PURSUANT TO ANY APPLICABLE SECTION OF THE BANKRUPTCY CODE, THE
GRANTOR SEEKS TO OFFSET, COUNTERCLAIM, DEDUCT, AND/OR ASSERTS A
DEFENSE AGAINST THE RENT, ADDITIONAL RENT OR OTHER SUMS DUE UNDER THE
GROUND LEASE, THE AMOUNT OF ANY DAMAGES CAUSED BY THE NON-OBSERVANCE
AND/OR NON-PERFORMANCE OF THE LESSOR UNDER THE GROUND LEASE, THE
GRANTOR SHALL, PRIOR TO SUCH OFFSET, COUNTERCLAIM, DEFENSE AND/OR
DEDUCTION NOTIFY THE ADMINISTRATIVE AGENT OF ITS INTENT TO DO SO,
SETTING FORTH WITH SPECIFICITY THE AMOUNTS PROPOSED TO BE OFFSET,
COUNTERCLAIMED, DEDUCTED, AND/OR DEFENDED AGAINST AND FOR WHAT
PURPOSES. THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE BANKS SHALL
THEREUPON HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO OBJECT TO ALL OR
ANY PART OF SUCH OFFSET, COUNTERCLAIM
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AND/OR DEDUCTION AND, IN THE EVENT OF SUCH OBJECTION, THE GRANTOR
SHALL NOT EFFECT ANY SUCH OFFSET COUNTERCLAIM AND/OR DEDUCTION.
NEITHER THE ADMINISTRATIVE AGENT'S FAILURE TO OBJECT TO ANY SUCH
OFFSET, COUNTERCLAIM AND/OR DEDUCTION NOR ANY OBJECTION OR OTHER
COMMUNICATION BETWEEN THE ADMINISTRATIVE AGENT AND THE GRANTOR SHALL
CONSTITUTE AN APPROVAL OF ANY SUCH OFFSET, COUNTERCLAIM, DEDUCTION
AND/OR DEFENSE BY THE ADMINISTRATIVE AGENT. THE GRANTOR [AND BORROWER]
EXPRESSLY AGREE[S] TO PAY, PROTECT, INDEMNIFY AND SAVE HARMLESS THE
ADMINISTRATIVE AGENT FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS,
ACTIONS, SUIT, PROCEEDINGS, DAMAGES, LOSSES, LIABILITIES, JUDGMENTS,
COSTS AND EXPENSES OF EVERY KIND AND NATURE (INCLUDING REASONABLE
ATTORNEYS' FEES) ARISING FROM OR RELATING TO ANY OFFSET, COUNTERCLAIM
DEDUCTION AND/OR ASSERTION OF A DEFENSE BY THE GRANTOR AS HEREIN
DESCRIBED.
(K) IF ANY ACTION, PROCEEDING, MOTION AND/OR NOTICE SHALL BE COMMENCED OR
FILED WITH RESPECT TO THE GRANTOR OR THE MORTGAGED PREMISES, OR ANY
PART THEREOF, IN CONNECTION WITH THE BANKRUPTCY CODE, THE
ADMINISTRATIVE AGENT SHALL BE ENTITLED TO APPROVE OF GRANTOR'S
SELECTION OF ANY COUNSEL RETAINED IN CONNECTION THEREWITH AND SHALL
ALSO HAVE APPROVAL RIGHTS OVER ALL ASPECTS OF ANY ENSUING LITIGATION.
ALTERNATIVELY, THE ADMINISTRATIVE AGENT MAY PROCEED IN ITS OWN NAME IN
CONNECTION WITH ANY SUCH LITIGATION, AND THE GRANTOR EXPRESSLY AGREES
TO EXECUTE AND DELIVER ALL AND EVERY POWER, CONSENT, AUTHORIZATION AND
OTHER DOCUMENTS REQUIRED BY THE ADMINISTRATIVE AGENT IN CONNECTION
THEREWITH. THE GRANTOR [AND BORROWER] SHALL PAY TO THE ADMINISTRATIVE
AGENT ON DEMAND ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) PAID OR INCURRED AND PAYABLE BY THE ADMINISTRATIVE
AGENT IN CONNECTION WITH SUCH LITIGATION AND THE COSTS AND EXPENSES
SHALL BE SECURED BY THE LIEN OF THIS DEED OF TRUST. THE GRANTOR ALSO
AGREES NOT TO COMMENCE ANY ACTION, SUIT, PROCEEDING AND/OR CASE OR
FILE ANY APPLICATION OR MAKE ANY MOTION IN RESPECT OF THE GROUND LEASE
IN THE EVENT OF THE GRANTOR'S BANKRUPTCY WITHOUT THE PRIOR WRITTEN
CONSENT OF THE ADMINISTRATIVE AGENT.
(L) THE GRANTOR HEREBY IRREVOCABLY APPOINTS THE ADMINISTRATIVE AGENT ITS
AGENT AND ATTORNEY-IN-FACT (WHICH APPOINTMENT IS COUPLED WITH AN
INTEREST) TO OBSERVE AND PERFORM ON BEHALF OF THE GRANTOR THE
COVENANTS AND AGREEMENTS CONTAINED IN THIS SECTION AND ANY ADVANCES
MADE BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH SUCH PERFORMANCE
OR OBSERVANCE SHALL BE REPAID BY THE GRANTOR [AND BORROWER] WITHIN TEN
(10) DAYS OF DEMAND WITH INTEREST AT THE DEFAULT RATE AND THE AMOUNT
SO
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ADVANCED, AND INTEREST THEREON, SHALL BE A LIEN UPON THE MORTGAGED
PREMISES AND SHALL BE SECURED BY THIS DEED OF TRUST. SUCH PERFORMANCE
OR OBSERVANCE BY THE ADMINISTRATIVE AGENT SHALL NOT PREVENT THE
GRANTOR'S FAILURE TO PERFORM OR OBSERVE FROM CONSTITUTING A DEFAULT
UNDER THIS DEED OF TRUST.
(M) IF THE GRANTOR SHALL DEFAULT UNDER ANY OF ITS OBLIGATIONS WITH RESPECT
TO THE GROUND LEASE, AND SUCH DEFAULT IS NOT CURED WITHIN ANY
APPLICABLE GRACE PERIOD PROVIDED FOR IN THE GROUND LEASE, OR IF THE
ESTATE CREATED BY THE GROUND LEASE SHALL BE SURRENDERED, OR IF THE
GROUND LEASE SHALL BE ASSIGNED, CANCELED, TERMINATED, SUPPLEMENTED,
EXTENDED, MODIFIED AND/OR AMENDED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE ADMINISTRATIVE AGENT, THEN SUCH SHALL AUTOMATICALLY AND WITHOUT
ANY NOTICE TO THE GRANTOR BY THE ADMINISTRATIVE AGENT, BE A DEFAULT
UNDER THIS DEED OF TRUST.]
EXECUTED this the ________ day of __________, 1996.
Grantor's Address: GRANTOR:
3860 West Northwest Highway __________________________
Suite 300
Dallas, Texas 75220
Attention: _____________
By: ___________________________
Name:__________________________
Title:_________________________
Administrative Agent's Address:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
P.O. Box 655415
Commerical Real Estate Department
Dallas, Texas 75201
Attn: Mr. Jeff S. Lindsey
Vice President
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<PAGE>
[ADD APPROPRIATE FORM OF ACKNOWLEDGMENT]
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<PAGE>
EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - Permitted Exceptions
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<PAGE>
THIS INSTRUMENT WAS PREPARED BY
AND THE RECORDED ORIGINAL SHOULD
BE RETURNED TO THE FOLLOWING:
DAVID W. LOCASCIO
BRACEWELL & PATTERSON, L.L.P.
711 LOUISIANA STREET, SUITE 2900
HOUSTON, TEXAS 77002-2781
FORM OF
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FINANCING STATEMENT
________________________________________________________________________________
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY AND FUTURE ADVANCE PROVISIONS.
THIS INSTRUMENT COVERS THE INTEREST OF DEBTOR IN MINERALS OR THE LIKE (INCLUDING
OIL AND GAS) BEFORE EXTRACTION AND THE SECURITY INTEREST CREATED BY THIS
INSTRUMENT ATTACHES TO SUCH MINERALS AS EXTRACTED AND TO THE ACCOUNTS RESULTING
FROM THE SALE THEREOF AT THE WELLHEAD.
THIS INSTRUMENT COVERS THE INTEREST OF DEBTOR IN FIXTURES.
THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE
REAL ESTATE RECORDS.
PRODUCTS OF THE COLLATERAL ARE ALSO COVERED.
________________________________________________________________________________
<PAGE>
THE STATE OF __________ (S)
(S) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _____________ (S)
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FINANCING
STATEMENT (as amended from time to time, the "Mortgage") is made this _____ day
of _________, 1996 by _______________________________ ("Mortgagor"), a
______________________________________, having an office and mailing address at
3860 West Northwest Highway, Suite 300, Dallas, Texas 75220, Attention _________
in favor of BANK ONE, TEXAS, N.A., a national banking association, as
administrative agent ("Mortgagee") for the Banks (as hereinafter defined),
having an office and mailing address at 1717 Main Street, 4th Floor, P.O. Box
655415, Commercial Real Estate Department, Dallas, Texas 75201, Attention: Mr.
Jeff S. Lindsey, Vice President.
W I T N E S S E T H
WHEREAS, [AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., A
DELAWARE LIMITED PARTNERSHIP (THE "BORROWER"), WHICH IS THE DIRECT OR INDIRECT
OWNER OF THE MORTGAGOR] [MORTGAGOR], Bank One, Texas, N.A., as Administrative
Agent, and Societe Generale, Southwest Agency, as Structuring Agent, and the
banks and other lenders party thereto (collectively the "Banks") have entered
into a Credit Agreement dated as of ____________, 1996 (as amended or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, [BORROWER/MORTGAGOR] has executed promissory notes of even date
with the Credit Agreement in favor of the Banks in the original aggregate
principal amount of $100,000,000.00, the final payments of which are due on or
before June 30, 2000 (the "Notes", which term includes any modification,
renewal, extension or alteration thereof); and
WHEREAS, the Notes were executed and delivered to Mortgagee and the Banks,
and shall be due and payable in accordance with the Credit Agreement; and
WHEREAS, all capitalized terms not otherwise defined in this instrument
shall have the meaning assigned to such terms by the Credit Agreement; and
WHEREAS, Mortgagor is [LEASING/SUBLEASING] a portion of the Mortgaged
Premises (as hereinafter defined) to AGH Leasing, L.P. (the "Tenant") under that
certain lease executed between Mortgagor and Tenant (the "Hotel Lease"); and
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<PAGE>
WHEREAS, the terms and provisions of the Notes and Credit Agreement are
incorporated herein by reference and made a part of this Mortgage to the same
extent as though set forth in full herein; and
WHEREAS, as a condition to the acceptance of the Notes and the making of
the loan evidenced by the Credit Agreement (the "Loan"), Mortgagor agreed to
execute and deliver this Mortgage to secure the payment of the indebtedness from
time to time evidenced by the Notes, the payment of all sums now or hereafter
owing by [BORROWER AND] Mortgagor and the Guarantors (all such Persons being
collectively referred to herein as the "Obligors") hereunder, under the Credit
Agreement or under any other document or instrument now or hereafter evidencing
or securing the aforesaid indebtedness or otherwise executed in connection
herewith or therewith (this Mortgage, the Notes, the Credit Agreement and all
other documents and instruments now or hereafter evidencing or securing the
aforesaid indebtedness or otherwise executed in connection herewith or
therewith, being hereinafter referred to collectively as the "Loan Documents"),
and the performance and observance of all covenants, agreements, conditions and
other provisions set forth herein, in the Notes and in the other Loan Documents;
NOW THEREFORE, to secure the payment of the indebtedness from time to time
evidenced by the Notes, the payment of all other sums now or hereafter owing by
the Obligors hereunder, under the Credit Agreement or any other Loan Document
and the performance and observance of all covenants, agreements, conditions and
other provisions set forth herein, in the Notes, the Credit Agreement or
any other Loan Document, and to charge the properties, interests and rights
hereinafter described with such payment, performance and observance, and for and
in consideration of the sum of Ten and No/100 Dollars ($10.00) paid by Mortgagee
to Mortgagor and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor does hereby grant,
bargain, sell, alienate, devise, release, convey, assign, transfer, mortgage,
hypothecate, pledge, deliver, set over, warrant and confirm unto Mortgagee, its
successors and assigns forever, and, if applicable, grants a security interest
to Mortgagee, its successors and assigns, in the [FOLLOWING DESCRIBED LEASE
WHICH COVERS THE] land or property described on Exhibit "A" attached hereto and
------- ---
made a part hereof for all purposes (the "Land"):
[DESCRIBE GROUND LEASE, IF ANY (THE "GROUND LEASE")],
together with all buildings, fixtures and other improvements located on the Land
or hereafter placed on the Land; all rights, titles and interests now owned or
hereinafter acquired by Mortgagor in and to all easements, streets and rights of
way of every kind and nature adjoining the above the Land and all public or
private utility connections thereto and all leasehold interests, appurtenances,
servitudes, rights, privileges, prescriptions and advantages thereunto
belonging or in anywise appertaining; all materials, goods (including without
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<PAGE>
limitation consumables and inventories), equipment, appliances, apparatus,
furniture, furnishings, inventory, and other property, real or personal, now
owned or hereafter acquired by Mortgagor and now or hereafter installed, used or
located on the above described property or the improvements thereon, whether or
not the same have or would become a part of the Land by attachment thereto,
including, but not limited to, all heating, lighting, refrigeration, plumbing,
ventilating, laundry, incinerating, water-heating, cooking, dishwashing, radio,
communication, electrical and air conditioning equipment, appliances, fixtures
and appurtenances, together with all disposals, dishwashers, machinery,
elevators, pumps, generators, sprinklers, wiring, pipe, doors, motors,
compressors, boilers, condensing units, range hoods, windows, window screens,
window shades, venetian blinds, awnings, drapes, shelving, mantels, cabinets,
paneling, rugs and other floor coverings, and shrubbery and other chattels and
personal property as are ever used, usable or furnished in connection with any
present or future operation, use or enjoyment of the Land and the improvements
on the Land, and all renewals, replacements and substitutions thereof and
additions thereto and Mortgagor's current and future rights as lessee under
leases of any of the foregoing; all rights, titles and interests of Mortgagor in
and to all crops located on and timber to be cut from the Land and all minerals
in, under and upon, produced or to be produced from the Land; all rights to the
present or future use of wastewater, drainage water or other utility facilities
to the extent such use benefits the Land or the improvements now or hereafter
located thereon; and without limitation of the foregoing, any and all permits,
licenses, approvals, rights, rents, revenues, benefits, leases, concessions,
licenses, contracts, accounts (including without limitation all rights to
payment from any consumer credit/charge card organization or entity), general
intangibles, trade names, moneys, instruments, documents, tenements,
hereditaments and appurtenances now or hereafter owned by Mortgagor and
pertaining to, generated from, arising out of or belonging to the above
described properties or any part thereof (including without limitation the
Mortgagor's Concentration Bank Account); and Mortgagor's interest in all 1-800
and other telephone numbers (all of the aforesaid being hereinafter sometimes
called the "Mortgaged Premises"). The Mortgaged Premises shall also include the
Mortgagor's interest, if any, in all current and future management, franchise
and license agreements related to the Land or the improvements thereon and the
Hotel Lease. Some of the said items are or are to become "fixtures" (as that
term is defined in the Uniform Commercial Code, as adopted in the state in which
the Mortgaged Premises are located (the "Code")) on the above described land and
as provided under the Code, this Mortgage, upon being filed for record in the
real property records of the state and county where the Mortgaged Premises are
located, shall operate also as a "fixture filing" and financing statement upon
such of the items which as are or may become fixtures.
TO HAVE AND TO HOLD the Mortgaged Premises and all parts thereof unto the
Mortgagee, its successors and assigns, to its own proper use and benefit
forever, subject, however, to those matters set forth on Exhibit "B" hereto and
the terms and conditions herein and Mortgagor hereby binds itself, its
respective successors and assigns to forever warrant
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<PAGE>
and defend the Mortgaged Premises and every part thereof unto Mortgagee and its
successors and assigns against the claims and demands of every person whomsoever
lawfully claiming or to claim the same or any part thereof except for those
matters set forth on Exhibit "B" hereto.
PROVIDED ALWAYS, that if the Obligors pay to the Mortgagee and the Banks
the Notes at the times, in the amounts and in the manner stipulated therein,
together with any and all sums payable pursuant to any other Loan Document, and
faithfully perform all the covenants and agreements in the Notes, the Credit
Agreement and every other Loan Document, to be kept, performed or observed by
the Obligors, then this Mortgage shall cease and be void, but shall otherwise
remain in full force and effect.
1. FUTURE ADVANCES AND ADDITIONAL INDEBTEDNESS. In addition, this
Mortgage is made (i) to secure the performance and discharge of each and every
promise, obligation, covenant and agreement contained in the Notes, this
Mortgage, the Credit Agreement and any other Loan Document and (ii) to secure
the following (all of the following, including the hereinabove described Notes
and the foregoing, herein sometimes called "Said Indebtedness"):
(a) The payment of all other amounts with interest thereon becoming due
and payable to the Mortgagee and the Banks under the terms of the
Notes, this Mortgage, or any other Loan Document, including (but not
limited to) any moneys advanced thereunder by Mortgagee and the Banks
on behalf of the Obligors;
(b) Any extension, modification, renewal or reamortization of the Notes,
and any increase or addition thereto; and
(c) The payment of all other indebtedness, of whatever kind or character,
now owing or which may hereafter become owing by the Obligors to
Mortgagee and the Banks, pursuant to the terms of the Credit Agreement
or any other Loan Document, whether such indebtedness is direct or
indirect, primary or secondary, fixed or contingent or arises out of
or is evidenced by note, deed of trust, open account, overdraft,
endorsement, surety agreement, guaranty or otherwise, it being
contemplated that the Obligors may hereafter become indebted to
Mortgagee and the Banks for further sum or sums.
2. ADDITIONAL SECURITY. As additional security for the payment of the
Said Indebtedness, Mortgagor hereby transfers, assigns and conveys unto the
Mortgagee, for its benefit and the ratable benefit of the Banks, the following
and all products and
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<PAGE>
proceeds of the same (hereinafter collectively referred to as the "Income"), but
the mention of products and proceeds herein shall not be construed as an
authorization for the transfer or surrender by Mortgagor of the Income:
(a) All judgments, awards of damages, insurance proceeds and settlements
hereafter made resulting from condemnation proceedings or the taking
of all or any part of the Mortgaged Premises under the power of
eminent domain, or for any damage (whether caused by a taking, a
casualty or otherwise) to the Mortgaged Premises or any part thereof,
or to any rights appurtenant thereto, including, but not limited to,
any award for change of grade of streets. The Mortgagee is hereby
authorized, but shall not be required, on behalf and in the name of
Mortgagor, to execute and deliver valid acquittances for, and to
appeal from, any such judgments or awards. Subject to the terms and
conditions of the Credit Agreement, the Mortgagee may apply all such
sums or any part thereof so received, after the payment of all
expenses, including costs and attorney's fees, as a payment on Said
Indebtedness in such manner as the Mortgagee elects.
(b) All bonuses, rents and royalties accrued or to accrue under all oil,
gas or mineral leases affecting the Mortgaged Premises, now existing
or which may hereafter come into existence. Mortgagor directs payment
of the same to the Mortgagee, for the benefit of the Banks, at the
option of the Mortgagee and upon written demand of the Mortgagee
therefor, to be applied to Said Indebtedness until paid, whether due
or not, and either before or after any Default under the terms of this
Mortgage.
(c) All rents, income and profits issuing or to hereafter issue from the
Mortgaged Premises, and in the event of a Default hereunder,
Mortgagee, for the benefit of the Banks, shall have the right, at its
option, and with or without taking possession of the Mortgaged
Premises, to collect said rents, income and profits, or if the
Mortgaged Premises are vacant to rent the same and collect the rents,
and apply the same to the payment of Said Indebtedness after deducting
all costs of collection and administration. The collection of said
rents, income and profits by the Mortgagee shall not constitute a
waiver of its right to accelerate the maturity of the Notes nor of its
right to proceed with the enforcement of this Mortgage. Mortgagor
shall not assign the whole or any part of the rents, income or profits
arising from the Mortgaged Premises without the prior written consent
of Mortgagee and any assignment thereof without such consent will be
null and void; and upon notice and demand, Mortgagor shall transfer
and assign to Mortgagee, in form satisfactory to Mortgagee, the
lessor's interest in any lease now or hereafter affecting the
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<PAGE>
whole or any part of the Mortgaged Premises. Mortgagor agrees that it
shall duly and timely perform all of its obligations as provided for
in any leases or other rental contracts covering or relating to any of
the Mortgaged Premises.
The liens, security interests, and rights granted by this Mortgage shall not
affect or be affected by any other security taken for the Said Indebtedness or
any part thereof. The taking of additional security, or the extension or renewal
of Said Indebtedness or any part thereof, shall at no time release or impair the
liens, security interests and rights granted hereby, or affect the liability of
any endorser, guarantor, or surety, or improve the right of any junior
lienholder; and this Mortgage, as well as any instrument given to secure any
renewal or extension of Said Indebtedness, or any part thereof, shall be and
remain the first and prior lien and security interest on all of the Mortgaged
Premises not expressly released, until the Said Indebtedness is completely paid.
3. SUBROGATION TO EXISTING LIENS. It is agreed that the lien hereby
created shall take precedence over and be a prior lien to any other lien of any
character whether vendor's, materialman's or mechanic's lien hereafter created
on the Mortgaged Premises, and in the event the proceeds of the Notes are used
to acquire or to pay off and satisfy any indebtedness and liens heretofore
existing on the Mortgaged Premises, then the Mortgagee is, and shall be for the
benefit of the Banks, subrogated to all of the rights, liens and remedies of the
holders of the indebtedness and liens so acquired or paid off, regardless of
whether said indebtedness and liens are acquired by the Mortgagee by assignment
or are released by the holders thereof upon payment.
4. COVENANTS, REPRESENTATIONS AND AGREEMENTS OF MORTGAGOR. Mortgagor
covenants, represents and agrees:
(a) That Mortgagor will timely perform all of its obligations under the
Notes, the Credit Agreement and every other Loan Document in
accordance with their respective terms and conditions.
(b) That Mortgagor shall pay, prior to delinquency, all taxes and
assessments levied or assessed against the Mortgaged Premises,
including, without limitation, all taxes in lieu of ad valorem taxes,
as the same become due and payable; provided that, Mortgagor may
contest the amount of such taxes and assessments so long as Mortgagor
does so in good faith and by appropriate proceedings, and furnishes
Mortgagee with a bond or other security in form, substance and amount
satisfactory to Mortgagee. In the event of the passage after date of
this Mortgage of any law or regulation deducting from the Mortgaged
Premises for the purposes of taxation any lien thereon, or changing in
any way the laws now in force for the taxation of mortgages,
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<PAGE>
deeds of trust, or indebtedness secured thereby, for state or local
purposes, or the manner of the operation of any such taxes so as to
affect the interest of Mortgagee or the Banks, then and in such event,
Mortgagor shall bear and pay the full amount of such taxes. If
Mortgagor fails to pay any such taxes and assessments including,
without limitation, taxes in lieu of ad valorem taxes and taxes
against this Mortgage or Said Indebtedness secured hereby, Mortgagee
may pay the same, together with all costs and penalties thereon, at
Mortgagor's expense; provided, however, that if for any reason payment
by Mortgagor of any such new or additional taxes would be unlawful or
if the payment thereof would constitute usury or render Said
Indebtedness wholly or partially usurious under any of the terms or
provisions of the Notes or this Mortgage, or otherwise, Mortgagee may,
at its option and for the benefit of the Banks, declare Said
Indebtedness with all accrued interest thereon to be immediately due
and payable, or Mortgagee may, at its option, pay the amount or
portion of such taxes as renders Said Indebtedness unlawful or
usurious, in which event Mortgagor shall concurrently therewith pay
the remaining lawful and nonusurious portion or balance of said taxes.
(c) That Mortgagor shall keep every part of the Mortgaged Premises in good
condition and presenting an appearance customary for like-situated
properties and in compliance with all requirements of any franchisor
with respect to the business operated on the Mortgaged Premises, make
promptly all repairs, renewals and replacements necessary to such end,
prevent waste to any part of the Mortgaged Premises, and do promptly
all else necessary to such end; and Mortgagor shall discharge all
claims for labor performed and material furnished therefor, and shall
not suffer any lien of mechanics or materialmen therefor to attach to
any part of the Mortgaged Premises. Mortgagor shall guard every part
of the Mortgaged Premises from removal, destruction and damage, and
shall not do or suffer to be done any act whereby the value of any
part of the Mortgaged Premises may be lessened. No building or other
property now or hereafter covered by the lien of this Mortgage shall
be removed, demolished or materially altered or enlarged, nor shall
any new building be constructed, without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld or
delayed. Mortgagee and the Banks and their respective agents or
representatives shall have access to the Mortgaged Premises at all
reasonable times in order to inspect same and verify Mortgagor's
compliance with its duties and obligations under this document.
(d) That in the event Mortgagor shall fail to keep the improvements on the
Mortgaged Premises in the condition required hereby,or to pay promptly
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<PAGE>
when due all taxes and assessments, as aforesaid, or to preserve the
prior lien of this Mortgage on the Mortgaged Premises, or to keep the
buildings and improvements insured, as provided in the Credit
Agreement, or to deliver the policy, or policies, of insurance or the
renewal therof to the Mortgagee, as provided in the Credit Agreement,
then the Mortgagee may, at its option but without being required to do
so, make such repairs, pay such taxes and assessments, purchase any
tax title thereon, remove any prior liens, and prosecute or defend any
suits in relation to the preservation of the prior lien of this
Mortgage on the Mortgaged Premises, or insure and keep the
improvements thereon insured in an amount not to exceed that
stipulated in the Credit Agreement; that any sums which may be so paid
out by the Mortgagee and all sums paid for insurance premiums, as
aforesaid, including, but not limited to, the costs, expenses and
attorney's fees paid in any proceeding, transaction or suit affecting
the Mortgaged Premises when necessary to protect the lien hereof shall
bear interest from the dates of such payments at the Default Rate (as
defined in the Credit Agreement), and shall be paid by Obligors and
Mortgagor to the Mortgagee and the Banks in accordance with the Credit
Agreement, at the same place at which the Notes are payable, and shall
be deemed a part of the debt hereby secured and recoverable as such in
all respects.
(e) That Mortgagor shall comply with all restrictive covenants and all
laws, ordinances, regulations and rules, whether state, federal or
municipal, applicable to the Mortgaged Premises and its ownership, use
and occupancy, and that Mortgagor has obtained all approvals, licenses
and permits necessary for the ownership, use and occupancy of the
Mortgaged Premises.
(f) That in the six (6) months prior to the recordation of this Mortgage
in the real property records of the county or counties in which the
Mortgaged Premises or any part thereof is situated, (i) no
construction of any proposed above or below ground improvements,
structures, additions or alterations has commenced, (ii) no materials
or supplies have been delivered to or labor performed on the
Mortgaged Premises, and (iii) Mortgagor has not entered into any
contracts or agreements for the construction of any improvements,
structures, additions or alterations, or the delivery of any materials
or supplies or the performance of said labor.
5. DEFAULT. The term "Default," as used herein, shall mean the occurrence
of any one of the following events:
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(a) The occurrence of an "Event of Default" as defined in the Credit
Agreement; or
(b) Mortgagor abandons all or a portion of the Mortgaged Premises; or
(c) The holder of any lien or security interest on the Mortgaged Premises
institutes foreclosure or other proceedings for the enforcement of its
remedies thereunder; or
(d) Except as expressly provided otherwise in the Credit Agreement, if
Mortgagor or any partner thereof dissolves, liquidates, terminates, or
conveys, transfers, assigns or pledges any interest in the Mortgaged
Premises or Mortgagor or any other Transfer shall occur which has not
been approved in writing by Mortgagee.
Mortgagor's failure to perform or observe any covenant contained in this
Mortgage, other than those contained in Section 16 below and except as provided
to the contrary herein, shall not constitute a Default: (1) until such failure
shall remain unremedied for thirty (30) days after the date written notice of
such default shall have been given to the Mortgagor by the Mortgagee or any of
the Banks or (2) if such performance is incapable of being completed within
thirty (30) days, unless Mortgagor fails to commence the performance of such
covenant, agreement or other obligation within said thirty (30) day period and
thereafter diligently pursue such performance until completion.
Upon the occurrence of a Default, Mortgagee, at its option, and without notice
of intent to accelerate, notice of acceleration, or any other notice, demand, or
presentment, which are hereby expressly waived by Mortgagor and the other
Obligors, may declare the entire unpaid balance of principal of, and all accrued
interest on, the Said Indebtedness immediately due and payable, in addition to
exercising any and all remedies provided for under this Mortgage, the
instruments evidencing Said Indebtedness and all other instruments securing Said
Indebtedness, or any part thereof. Upon the occurrence of a Default, the
Mortgagee may, either with or without entry or taking possession as hereinabove
provided or otherwise, proceed by suit or suits at law or in equity or by any
other appropriate proceeding or remedy: (a) to enforce payment of the Notes or
the performance of any term hereof, of any other Loan Document, or of any other
right; (b) to foreclose this Mortgage and to sell, as an entirety or in separate
lots or parcels, the Mortgage and to sell, as an entirety or in separate lots or
parcels, the Mortgaged Premises, under the judgment or decree of a court or
courts of competent jurisdiction, or in such manner or manners as allowed under
applicable law; and (c) to pursue any other remedy available to it. The
Mortgagee shall take action either by such proceedings or by the exercise of its
powers with respect to entry or taking possession, or both, as the Mortgagee may
determine. Upon the occurrence of a Default, Mortgagee shall also have the
right, for the benefit of the Banks, to exercise any and
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all other rights, remedies and recourse now or hereafter existing in equity, at
law, by virtue of statute or otherwise.
6. MORTGAGEE'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND APPLY
INCOME.
(a) Upon the occurrence of a Default, the Mortgagor, upon demand of the
Mortgagee, shall forthwith surrender to the Mortgagee the actual
possession, and if and to the extent permitted by law, the Mortgagee
itself, or by the officers or agents as it may appoint, may enter and
take possession of all or any portion of the Mortgaged Premises, and
may exclude the Mortgagor and its agents and employees wholly
therefrom, and may have joint access with the Mortgagor to the books,
papers and accounts of the Mortgagor;
(b) If the Mortgagor shall for any reason fail to surrender or deliver the
Mortgaged Premises or any part thereof after the Mortgagee's demand,
the Mortgagee may obtain a judgment or decree conferring on the
Mortgagee the right to immediate possession or requiring the Mortgagor
to deliver immediate possession of all or part of the Mortgaged
Premises to the Mortgagee, to the entry of which judgment or decree
the Mortgagor hereby specifically consents;
(c) The Mortgagor shall pay to the Mortgagee, upon demand, all costs and
expenses of obtaining such judgment or decree and reasonable
compensation to the Mortgagee, its attorneys and agents, and all such
costs, expenses and compensation shall, until paid, be secured by the
lien of this Mortgage; and
(d) Upon every entering upon or taking of possession, the Mortgagee may
hold, store, use, operate, manage and control the Mortgaged Premises
and conduct the business thereof, and, from time to time:
(i) make all necessary and proper maintenance, repairs, renewals,
replacements, additions, betterments and improvements thereto
and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property;
(ii) insure or keep the Mortgaged Premises insured;
(iii) manage and operate the Mortgaged Premises and exercise all the
rights and powers of the Mortgagor in its name or otherwise,
with respect to the same; and
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(iv) enter into agreements with others to exercise the powers
herein granted the Mortgagee;
all as the Mortgagee from time to time may determine; and the Mortgagee,
for the benefit of the Banks, may collect and receive all the income,
revenues, rents, issues and profits of the same, including those past due
as well as those accruing thereafter; and shall apply the monies so
received by the Mortgagee in the priority as the Mortgagee may determine to
(1) the payment of accrued interest on the Notes; (2) any deposits for
taxes and assessments and insurance premiums due; (3) the payment of
overdue installments of principal (whether by acceleration or otherwise);
(4) the cost of insurance, taxes, assessments and other proper charges upon
the Mortgaged Premises or any part thereof; (5) the reasonable
compensation, expenses and disbursements of the agents, attorneys and other
representatives of the Mortgagee; and (6) any and all other charges or fees
payable by any of the Obligors to Mortgagee and the Banks pursuant to the
Credit Agreement or any other Loan Document. Mortgagor hereby assents to,
ratifies and confirms any and all actions of Mortgagee with respect to the
Mortgaged Premises, taken under this Paragraph 6.
The Mortgagee shall surrender possession of the Mortgaged Premises to the
Mortgagor only when (i) all that is due upon such interest, tax and insurance
deposits (if any) and principal installments, and under any of the terms of this
Mortgage or any other Loan Document, shall have been paid and all defaults made
good or (ii) should Said Indebtedness have been accelerated, payment in full
thereof shall have been made together with all other amounts due thereunder or
under any other Loan Document. The same right of taking possession, however,
shall exist if any subsequent Default shall occur and be continuing.
7. LEASES. The Mortgagee, at its option, is authorized to foreclose this
Mortgage subject to the rights of any tenants of the Mortgaged Premises, and the
failure to make any such tenants parties to any such foreclosure proceedings and
to foreclose their rights will not be, nor be asserted by the Mortgagor to be,
a defense to any proceedings instituted by the Mortgagee to collect the sums
secured hereby or to collect any deficiency remaining unpaid after the
foreclosure sale of the Mortgaged Premises.
8. PURCHASE BY MORTGAGEE. Upon any foreclosure sale, the Mortgagee may
bid for and purchase the Mortgaged Premises and, upon compliance with terms of
sale, may hold, retain and possess and dispose of such property in its own
absolute right without further accountability.
9. APPLICATION OF INDEBTEDNESS TOWARD PURCHASE PRICE. Upon any
foreclosure sale, the Mortgagee may, if permitted by law, after allowing for the
portion of the total purchase price required to be paid in cash and for the
costs and expenses
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of the sale, compensation and other charges, in paying the purchase price, apply
any portion of or all sums due to Mortgagee and the Banks under the Notes, this
Mortgage or any other Loan Document, in lieu of cash, to the amount which shall,
upon distribution of the net proceeds of the sale, be payable thereon.
10. FORECLOSURE WITHOUT MATURING ENTIRE NOTES. Upon the occurrence of a
Default, the Mortgagee shall have the option to proceed with foreclosure of the
liens and security interests evidenced hereby in satisfaction of such item
either through the courts or by proceeding, all without declaring the entire
Said Indebtedness due, and provided that if sale of the Mortgaged Premises is
made because of default in the payment of a part of the Said Indebtedness, such
sale may be made subject to the unmatured part of the Said Indebtedness; and
such sale, if so made, shall not in any manner affect the unmatured part of the
Said Indebtedness, but as to such unmatured part this Mortgage shall remain in
full force and effect just as though no sale had been made. The proceeds of any
sale shall be applied as provided in Paragraph 9 above. Several sales may be
made hereunder without exhausting the right of sale for any unmatured part of
the Said Indebtedness. It is the purpose hereof to provide for a foreclosure and
sale of the Mortgaged Premises for any matured portion of the Said Indebtedness
without exhausting the power to foreclose and to sell the Mortgaged Premises for
any other part of the Said Indebtedness whether matured at the time or
subsequently maturing.
11. OCCUPANCY AFTER FORECLOSURE. In the event there is a foreclosure sale
hereunder and at the time of such sale Mortgagor or Mortgagor's representatives,
successors or assigns or any other persons claiming any interest in the
Mortgaged Premises by, through or under Mortgagor are occupying or using the
Mortgaged Premises or any part thereof, each and all shall, at the option of the
Mortgagee or the purchaser at such sale, as the case may be, immediately become
the tenant of the purchaser at such sale, which tenancy shall be a tenancy from
day-to-day, terminable at the will of either landlord or tenant, at a reasonable
rental per day based upon the value of the Mortgaged Premises occupied, such
rental to be due daily to purchaser. In the event the tenant fails to surrender
possession of said property upon the exercise of such option, the purchaser
shall be entitled to institute and maintain an eviction proceeding before the
appropriate court of the County and State in which the Mortgaged Premises, or
any part thereof, are located.
12. APPOINTMENT OF A RECEIVER. In addition to all other remedies herein
provided for, Mortgagor agrees that upon the occurrence of a Default, or any
event or circumstance which, with the lapse of time or the giving of notice, or
both, would constitute a Default hereunder, the Mortgagee shall as a matter of
right be entitled to the appointment of a receiver or receivers for all or any
part of the Mortgaged Premises, whether such receivership be incident to a
proposed sale of such property or otherwise, and without regard to the value of
the Mortgaged Premises or the solvency of any person or persons liable for
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the payment of the indebtedness secured hereby, and Mortgagor does hereby
consent to the appointment of such receiver or receivers, waive any and all
defenses to such appointment and agrees not to oppose any application therefor
by the Mortgagee, but nothing herein is to be construed to deprive the Mortgagee
or any of the Banks of any other right, remedy or privilege they may now have
under the law to have a receiver appointed; provided, however, that the
appointment of such receiver, trustee or other appointee by virtue of any court
order, statute or regulation shall not impair or in any manner prejudice the
rights of the Mortgagee and the Banks to receive payment of the rents and income
pursuant to this Mortgage. Any money advanced by the Mortgagee in connection
with any such receivership shall be a demand obligation owing by Mortgagor to
the Mortgagee and shall bear interest from the date of making such advancement
by the Mortgagee until paid at the Default Rate and shall be a part of the Said
Indebtedness and shall be secured by this Mortgage and by any other instrument
securing the secured indebtedness.
13. NON-WAIVER. It is expressly agreed that (i) no waiver of any Default
on the part of Mortgagor or any of the Obligors or breach of any of the
provisions of this Mortgage shall be considered a waiver of any other or
subsequent Default or breach, and no delay or omission in exercising or
enforcing the rights and powers herein granted shall be construed as a waiver of
such rights and powers, and likewise no exercise or enforcement of any rights or
powers hereunder shall be held to exhaust such rights and powers, and every such
right and power may be exercised from time to time; (ii) any failure by
Mortgagee to insist upon the strict performance by Mortgagor of any of the terms
and provisions hereof shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Mortgagee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Mortgagor of any
and all of the terms and provisions of this Mortgage; (iii) neither Mortgagor
nor any of the Obligors nor any other person now or hereafter obligated for the
payment of the whole or any part of Said Indebtedness shall be relieved of such
obligation by reason of the failure of Mortgagee to comply with any request of
Mortgagor or any of the Obligors or of any other person so obligated, to take
action to foreclose this Mortgage or otherwise enforce any of the provisions of
this Mortgage or of any obligations secured by this Mortgage, or by reason of
the release, regardless of consideration, of the whole or any part of the
security held for Said Indebtedness, or by reason of the subordination in whole
or in part by Mortgagee of the lien, security interest or rights evidenced
hereby, or by reason of any agreement or stipulation with any subsequent owner
or owners of the Mortgaged Premises extending the time of payment or modifying
the terms of Said Indebtedness or this Mortgage without first having obtained
the consent of Mortgagor or the Obligors or such other person, and in the latter
event, Mortgagor, the Obligors and all such other persons shall continue to be
liable to make such payments according to the terms of any such agreement of
extension or modification unless expressly released and discharged in writing by
Mortgagee; (iv) regardless of consideration and without the necessity for any
notice to or consent by the holder of any subordinate lien or
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security interest on the Mortgaged Premises, Mortgagee may release the
obligation of anyone at any time liable for any of Said Indebtedness or any part
of the security held for Said Indebtedness and may extend the time of payment or
otherwise modify the terms of Said Indebtedness and/or this Mortgage without, as
to the security or the remainder thereof, in anywise impairing or affecting the
lien or security interest of this Mortgage or the priority of such lien or
security interest, as security for the payment of Said Indebtedness as it may be
so extended or modified, over any subordinate lien or security interest; (v) the
holder of any subordinate lien or security interest shall have no right to
terminate any lease affecting the Mortgaged Premises whether or not such lease
be subordinate to this Mortgage; and (vi) Mortgagee may resort for the payment
of Said Indebtedness to any security therefor held by Mortgagee in such order
and manner as Mortgagee may elect.
14. APPRAISEMENT AND REDEMPTION LAWS. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, extension or redemption, and
Mortgagor, for Mortgagor and Mortgagor's representatives, successors and
assigns, and for any and all persons ever claiming any interest in the Mortgaged
Premises, to the extent permitted by law, hereby waives and releases all rights
of redemption, valuation, appraisement, stay of execution, notice of intention
to mature or declare due the whole or any part of the Said Indebtedness, notice
of election to mature or declare due the whole or any part of the Said
Indebtedness and all rights to a marshalling of the assets of Mortgagor,
including the Mortgaged Premises, or to a sale in inverse order of alienation in
the event of foreclosure of the liens and security interests hereby created.
Mortgagor shall not have or assert any right under any statute or rule of law
pertaining to the marshalling of assets, sale in inverse order of alienation,
the exemption of homestead, the administration of estates of decedents or other
matters whatever to defeat, reduce or affect the right of the Mortgagee and the
Banks under the terms of this Mortgage to a sale of the Mortgaged Premises for
the collection of the Said Indebtedness without any prior or different resort
for collection, or the right of the Mortgagee and the Banks under the terms of
this Mortgage to the payment of such indebtedness out of the proceeds of sale of
the Mortgaged Premises in preference to every other claimant whatever. If any
law referred to in this paragraph and now in force, of which Mortgagor or
Mortgagor's representatives, successors and assigns and such other persons
claiming any interest in the Mortgaged Premises might take advantage despite
this paragraph, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to preclude the application of this paragraph.
15. RENEWAL AND EXTENSION. The Mortgagee, without notice, may release any
part of the Mortgaged Premises, or any person liable on the Said Indebtedness,
without in any way affecting the lien hereof upon any portion of the Mortgaged
Premises not expressly released, and may agree with any party obligated on Said
Indebtedness, or having
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any interest in the Mortgaged Premises, to renew and extend the time or manner
of payment of all or any part of Said Indebtedness. Such agreement shall not
in any way release or impair the lien hereof, but shall renew and extend the
lien hereof against the Mortgaged Premises without altering or affecting the
priority of the lien created by this Mortgage in favor of any junior
encumbrancer, mortgagee or purchaser, or any person acquiring an interest in the
Mortgaged Premises, and this Mortgage shall remain first and superior to any
liens that may be placed thereon, or that may be fixed, given or imposed by law
thereon after the execution of this instrument notwithstanding any such
extension of the time of payment, or the release of a portion of said property
from this lien.
16. SALE AND ADDITIONAL ENCUMBRANCES. Mortgagor hereby expressly agrees
that in the event the following occurs (hereinafter referred to as a "Transfer")
without the prior written consent of Mortgagee, except as expressly provided
otherwise in the Credit Agreement, whether by a direct or indirect method, then,
in any such event, the Mortgagee shall have the right, for the benefit of the
Banks, at its option, to declare the entire amount of Said Indebtedness to be
immediately due and payable, and the liens and security interests evidenced
hereby shall be subject to foreclosure in any manner provided for herein or
provided for by law or in equity as the Mortgagee may elect:
(a) Mortgagor shall cease to own the entire actual and beneficial title
and interest to all of the Mortgaged Premises, free and clear from all
liens, security interests and encumbrances except (i) the lien and
security interest evidenced by this Mortgage and (ii) such other
matters as are expressly permitted hereunder or in the Credit
Agreement;
(b) If anyone who has acquired title to the Mortgaged Premises (a
"Transferee") as a result of a transfer that has been approved by
Mortgagee (a "Permitted Transfer") shall cease to own the entire
actual and beneficial title and interest to all of the Mortgaged
Premises, free and clear from all liens, security interests and
encumbrances except (i) the lien and security interest evidenced by
this Mortgage, and (ii) such other matters as are expressly permitted
hereunder or in the Credit Agreement;
(c) Except as provided otherwise in the Credit Agreement, if any one of
the following shall occur with respect to Mortgagor or any Transferee
during the period of time preceding the date on which Mortgagor or any
such Transferee, as the case may be, transfers title to the Mortgaged
Premises as a result of a Permitted Transfer:
(i) If Mortgagor or any Transferee is a general partnership, limited
partnership or joint venture and Mortgagor or the Transferee
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dissolves, terminates, liquidates or ceases to be general
partnership, limited partnership or joint venture, as the case
may be, duly organized and validly existing under the laws of
the state of its creation pursuant to a partnership or joint
venture agreement that has been approved in writing by
Mortgagee, or if the general partners or joint ventures of said
partnership or joint venture change from individuals or
entities that have been approved in writing by Mortgagee;
(ii) If Mortgagor or any Transferee is a corporation and said
corporation shall dissolve, merge, liquidate or cease to be a
corporation duly organized and validly existing under the laws
of the state of its incorporation;
(iii) If Mortgagor or any Transferee is a general partnership,
limited partnership or joint venture and there shall be a
transfer of any of the general partnership interest or joint
venture interest in Mortgagor or said Transferee;
(iv) If Mortgagor or any Transferee is a corporation and there is a
transfer of any of the stock of said corporation or the
issuance of new stock of said corporation; or
(d) Except as provided otherwise in the Credit Agreement, if Mortgagor or
any Transferee shall enter into any contractual arrangement to sell,
transfer, convey or mortgage all or any part of the actual or
beneficial title and interest to the Mortgaged Premises that is not
expressly conditioned upon the consent of Mortgagee to the transaction
contemplated thereby.
Mortgagee, for the benefit of the Banks, shall have such right and option to
declare the entire amount of Said Indebtedness to be immediately due and
payable, irrespective of whether or not any such Transfer would or might (i)
diminish the value of any security for the Said Indebtedness, (ii) increase the
risk of default under this instrument, (iii) increase the likelihood of
Mortgagee's having to resort to any security for the Said Indebtedness after
default, or (iv) add or remove the liability of any person or entity for payment
or performance of Said Indebtedness or any covenant or obligation under this
Mortgage. Except where Mortgagee's consent is not required pursuant to the
Credit Agreement, if Mortgagee's consent to a proposed Transfer is requested,
Mortgagee shall have the right (in addition to its absolute right to refuse to
consent to any such Transfer) to condition its consent upon satisfaction of any
one or more of the following requirements:
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(a) That the interest rate on the Notes be increased to a rate acceptable
to Mortgagee and the Banks, but not in excess of the Default Rate; or
(b) That a reasonable transfer fee, in an amount determined by Mortgagee
be paid; or
(c) That a principal amount deemed appropriate by Mortgagee be paid
against said Notes; or
(d) That Mortgagor and each proposed transferee execute such Assumption
Agreement and other instruments as Mortgagee shall require.
17. MORTGAGOR NOT RELEASED. In the event the Mortgagee approves a future
conveyance of the Mortgaged Premises, or any part thereof, and title becomes
vested in persons other than Mortgagor, the Mortgagee may, without notice to
Mortgagor, deal with such successor or successors in interest with reference to
this Mortgage and to the Notes in the same manner as with Mortgagor without in
any way vitiating or discharging Mortgagor's and the Obligors' liability
hereunder or upon Said Indebtedness. No sale of the Mortgaged Premises and no
forbearance on the part of the Mortgagee and no extension of the time for the
payment of the Notes, given by the Mortgagee, shall operate to release, modify,
change or affect the original liability of Mortgagor and the Obligors either in
whole or in part.
18. ACCEPTANCE ON ACCOUNT. Acceptance by the Mortgagee or any of the Banks
of any payment in an amount less than the amount then due on Said Indebtedness
shall be deemed an acceptance on account only, and the failure to pay the entire
amount then due shall be and continue to be a Default; at any time thereafter,
and until the entire amount then due on the Said Indebtedness has been paid, the
Mortgagee shall be entitled to exercise all rights conferred upon it in this
Mortgage.
19. SECURITY INTEREST. To further secure Said Indebtedness, Mortgagor
hereby grants a security interest to Mortgagee, for its benefit and the ratable
benefit of the Banks, in and to the Income and all personal property and
fixtures hereinabove described and all of Mortgagor's bank accounts, including
without limitation the Mortgagor's Concentration Bank Account, (all of such
Income, personal property, fixtures and the proceeds thereof and the bank
accounts being herein called the "collateral," but the mention of proceeds of
collateral herein shall not be construed as an authorization for the sale or
surrender by Mortgagor of collateral and collateral as used in this Mortgage
shall be included in the term "Mortgaged Premises " when used herein). This
document shall constitute a security agreement as well as a mortgage. The
following applies with respect to collateral:
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(a) In addition to and cumulative of any other remedies granted in this
Mortgage to Mortgagee, Mortgagee may, upon Default hereunder, proceed
under the Code as now adopted and existing and as it may hereafter be
amended or succeeded, as to all or any part of the collateral and
shall have and may exercise with respect to all or any part of the
collateral all of the rights, remedies and powers of a secured party
under the Code, including, without limitation, the right and power to
repossess, retain and sell, at public or private sale or sales, or
otherwise dispose of, lease or utilize the collateral or any part
thereof and to dispose of the proceeds in any manner authorized or
permitted under the applicable provisions of the Code, and to apply
the proceeds thereof toward payment of Mortgagee's reasonable
attorneys' fees and other expenses and costs of pursuing, searching
for, receiving, taking, keeping, storing, advertising, and selling the
collateral thereby incurred by Mortgagee, and toward payment of Said
Indebtedness in such order and manner as Mortgagee may elect
consistent with the provisions of the Code. Nothing in this Paragraph
19 shall be construed to impair or limit any other right or power to
which Mortgagee may be entitled at law or in equity.
(b) Among the rights of Mortgagee upon Default, and without limitation.
Mortgagee shall have the right (but not the obligation), without being
deemed guilty of trespass and without liability for damages thereby
occasioned, (i) to enter upon any premises where said collateral may
be situated and take possession of the collateral, or render it
unusable, or dispose of the collateral on Mortgagor's premises, and
Mortgagor agrees not to resist or to interfere and (ii) to take any
action deemed necessary or appropriate or desirable by Mortgagee and
at Mortgagee's option, and in its discretion, to repair, refurbish or
otherwise prepare the collateral for sale, lease or other use or
disposition as herein authorized. Mortgagee may at Mortgagee's
discretion require Mortgagor to assemble the collateral and make it
available to Mortgagee at a place designated by Mortgagee that is
reasonably convenient to both parties.
(c) Mortgagee shall give Mortgagor notice, by certified mail, postage
prepaid, of the time and place of any public sale of any of the
collateral or of the time after which any private sale or other
intended disposition thereof is to be made by sending notice to
Mortgagor at the address of Mortgagor set out below opposite its
signature at least five (5) days before the time of the sale or other
disposition, which provisions for notice Mortgagor and Mortgagee agree
are reasonable; provided, however, that nothing herein shall preclude
Mortgagee from proceeding as to both real and personal property in
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accordance with Mortgagee's rights and remedies in respect to real
property as provided in the Code.
(d) To the extent such may now or hereafter be permitted under laws of the
state in which the Mortgaged Premises are located, Mortgagee is
authorized to execute and file financing statements and continuation
statements under the Code with respect to the collateral without
joinder of Mortgagor in such execution or filing. Mortgagor shall
execute and deliver to Mortgagee such financing statements,
continuation statements and other documents relating to the collateral
as Mortgagee may reasonably request from time to time to preserve and
maintain the priority of the security interest created by this
Mortgage and shall pay to Mortgagee on demand any expenses and
attorneys' fees incurred by Mortgagee in connection with the
preparation, execution and filing of this Mortgage and of any
financing statements, continuation statements, partial releases,
termination statements or other documents necessary or desirable to
continue or confirm Mortgagee's security interest or any modification
thereof. This document, and any carbon, photographic or other
reproduction of this document may be filed by Mortgagee and shall be
sufficient as a financing statement. All or part of the collateral is
or is to become fixtures, crops, timber or minerals on the real estate
constituting a portion of the Mortgaged Premises, but this statement
shall not impair or limit the effectiveness of this document as a
security agreement or financing statement, for other purposes, and
this Mortgage shall constitute a fixture, crops, timber and mineral
financing statement and, as such, shall be filed for record in the
real estate records of the county in which the land covered hereby is
located. Mortgagor shall not change its name without the prior express
written consent of Mortgagee which shall not be unreasonably withheld.
The name of the record owner of the land covered hereby the party
defined herein as Mortgagor.
(e) Unless otherwise disclosed to Mortgagee as herein provided, Mortgagor
agrees that, except for the security interest granted hereby in the
collateral, Mortgagor is the owner of the collateral free of any
adverse claim, security interest or encumbrance, and Mortgagor shall
defend the collateral against all claims and demands of any person at
any time claiming the same or any interest therein. Mortgagor has not
heretofore signed any financing statement and no financing statement
signed by Mortgagor now on file in any public office except those
statements, true and correct copies of which have been delivered to
Mortgagee. So long as any amount remains unpaid on Said Indebtedness,
Mortgagor shall not, except in connection with those Liens expressly
permitted by the Credit Agreement, execute and there shall not be
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filed in any public office any such financing statement or statements
affecting the collateral other than financing statements in favor of
Mortgagee hereunder.
(f) The security interest granted herein shall not be construed or deemed
to constitute Mortgagee as a trustee or mortgagee in possession of the
Mortgaged Premises so as to obligate Mortgagee to lease the Mortgaged
Premises or attempt to do the same, or to take any action, incur any
expenses or perform or discharge any obligation, duty or liability
with respect to the Mortgaged Premises or any part thereof or
otherwise.
(g) Mortgagor's and Mortgagee's addresses are as herein below set forth.
Without limitation, the "collateral" also includes all right, title and interest
now owned or hereafter acquired by Mortgagor in and to the following described
property and all replacements or substitutions therefor and all products and
proceeds thereof:
(a) All contracts now or hereafter entered into by and between Mortgagor
and any contractor or supplier as well as all right, title and
interest of Mortgagor under any subcontracts, providing for the
construction (original, restorative or otherwise) of any improvements
to or on any of the Mortgaged Premises or the furnishing of any
materials, supplies, equipment or labor in connection with any such
construction;
(b) All of the plans, specifications and drawings (including, but not
limited to plot plans, foundations plans, floor plans, elevations,
framing plans, cross-sections of walls, mechanical plans, electrical
plans and architectural and engineering plans, and architectural and
engineering studies and analyses) heretofore or hereafter prepared by
any architect or engineer, in respect of any of the Mortgaged
Premises;
(c) All agreements now or hereafter entered into with any party in respect
of architectural, engineering, management or consulting services
rendered or to be rendered in respect of planning, design, inspection
or supervision of the construction or management of any of the
Mortgaged Premises;
(d) Any commitment issued by any lender or investor other than Mortgagee
to finance or invest in any of the Mortgaged Premises; and
(e) Any completion bond, performance bond or labor and material payment
bond and other bond relating to the Mortgaged Premises or to any
contract
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providing for construction of improvements to any of the Mortgaged
Premises
To the extent that any of the collateral is not subject to the Uniform
Commercial Code of the state or states where it is situated, Mortgagor hereby
assigns to Mortgagee all of Mortgagor's right, title and interest in the
collateral to secure the Said Indebtedness. Release of the lien of this Mortgage
shall automatically terminate this assignment.
20. EXCESS INTEREST. The invalidity, or unenforceability in particular
circumstances, of any provision of this Mortgage shall not extend beyond such
provision or such circumstances and no other provision of this instrument shall
be affected thereby. As used herein, the term "Maximum Legal Rate of Interest"
shall mean and refer to the maximum rate of nonusurious interest, if any, that
Mortgagee may from time to time charge Mortgagor and the Obligors and in regard
to which Mortgagor and the Obligors would be prevented successfully from raising
the claim or defense of usury under applicable law as now, or to the extent
permitted by law, as may hereafter be, in effect (said law permitting the
highest rate being herein referred to as the "Interest Law"). Unless changed in
accordance with law, the applicable rate ceiling under Texas law shall be the
indicated (weekly) rate ceiling, from time to time in effect, as provided in
Article 5069-1.04 of the Texas Revised Civil Statues, as amended. It is the
intention of Mortgagor and the Obligors and Mortgagee to conform strictly to the
Interest Law applicable to this loan transaction. Accordingly, it is agreed that
notwithstanding any provision to the contrary in this Mortgage, the Notes or
in any other Loan Document, the aggregate of all interest and any other charges
or consideration constituting interest under applicable Interest Law that is
taken, reserved, contracted for, charged or received under this Mortgage, or
under any of the other aforesaid agreements or otherwise in connection with this
loan transaction shall under no circumstances exceed the maximum amount of
interest allowed by the Interest Law applicable to this loan transaction. If any
excess of interest in such respect is provided for, or shall be adjudicated to
be so provided for, in this Mortgage, in the Notes or in any other Loan
Document, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Mortgagor, the Obligors nor their respective heirs,
legal representatives, successors or assigns or any other party liable for the
payment of Said Indebtedness shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of interest
allowed by the Interest Law applicable to this loan transaction, (c) any excess
shall be deemed a mistake and canceled automatically and, if thereto paid, shall
be credited on Said Indebtedness by Mortgagee (or if Said Indebtedness shall
have been paid in full, refunded to Mortgagor or the Obligors, as applicable),
and (d) the effective rate of interest shall be automatically subject to
reduction to the Maximum Legal Rate of Interest allowed under such Interest Law
as now or hereafter construed by courts of appropriate jurisdiction. All sums
paid or agreed to be paid the Mortgagee for the use, forbearance or detention of
the indebtedness secured hereby shall, to the extent permitted by the Interest
Law applicable to
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this loan transaction, be amortized, prorated, allocated and spread throughout
the full term of the Notes.
21. PARTIAL INVALIDITY. If the lien of this Mortgage is invalid or
unenforceable as to any part of the Notes or indebtedness secured hereby, or if
the lien is invalid or unenforceable as to any part of the Mortgaged Premises,
the unsecured or partially unsecured portion of the Notes or indebtedness shall
be completely paid prior to the payment of the remaining and secured or
partially secured portion of the Notes in indebtedness, and payments made on the
Notes or indebtedness, whether voluntary or under foreclosure or other
enforcement action or procedure, shall be considered to have been first paid on
and applied to the full payment of that portion of the Notes or indebtedness
which is not secured or fully secured by the lien of this Mortgage.
22. REINSTATEMENT. In the event Mortgagee shall elect to invoke any of the
rights or remedies provided for herein, but shall thereafter determine to
withdraw or discontinue same for any reason, it shall have the unqualified right
to do so, whereupon all parties shall be automatically restored and returned to
their respective positions regarding the Said Indebtedness and this document as
shall have existed prior to the invocation of Mortgagee's rights hereunder and
the rights, powers and remedies of Mortgagee hereunder shall be and remain in
full force and effect.
23. FURTHER DOCUMENTS. Mortgagor agrees that it shall execute and deliver
such other and further documents and do and perform such other acts as may be
reasonably necessary and proper to carry out the intention of the parties as
herein expressed and to effect the purposes of this document and the loan
transaction referred to herein. Without limitation of the foregoing, Mortgagor
agrees to execute and deliver such documents as may be necessary to cause the
liens and security interests granted hereby to cover and apply to any property
placed in, on or about the Mortgaged Premises in addition to, or replacement or
substitution of any of the Mortgaged Premises.
24. SUCCESSORS AND ASSIGNS. The covenants herein contained shall inure to
the benefit of Mortgagee, the Banks, their respective legal representatives,
successors and assigns, and shall be binding upon the respective heirs, legal
representatives, successors and assigns of Mortgagor [AND BORROWER] but nothing
in this paragraph shall constitute an authorization for Mortgagor to sell or in
any way dispose of the Mortgaged Premises or any part thereof.
25. TERMINOLOGY. Wherever used in this document, unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, the words "Mortgage" shall mean this Mortgage, Security Agreement,
Assignment of Rents and Financing Statement, and any supplement or supplements
hereto, the word "Mortgagor" shall
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mean "Mortgagor, its respective heirs, legal representatives, successors and
assigns, and/or any subsequent owner or owners of the Mortgaged Premises, "the
word "Mortgagee" shall mean "Mortgagee or any subsequent Administrative Agent
under the Credit Agreement," the word "Notes" shall mean "Notes secured by this
Mortgage and any renewals, extensions and rearrangements thereof," the word
"Person" shall mean "an individual, corporation, trust, partnership or
unincorporated association," the word "Obligors" shall mean "Obligors, their
respective heirs, legal representatives, successors and assigns," and the
pronouns of any gender shall include the other genders, and either the singular
or plural shall include the other.
26. HEADINGS. The paragraph entitlements hereof are inserted for
convenience of reference only and shall in no way alter, modify or define, or be
used in construing, the text of such paragraphs.
27. WARRANTIES OF TITLE. Notwithstanding anything to the contrary herein
set forth, the warranties of title herein contained are subject to those matters
set forth on Exhibit"B" attached hereto and made a part hereof for all purposes,
----------
to the extent, but only to the extent, the same are valid and subsisting and
effect the Mortgaged Premises.
28. CREDIT AGREEMENT. It is expressly agreed that the Notes evidence a
loan from Mortgagee and the Banks to the [MORTGAGOR/BORROWER] pursuant to the
terms of the Credit Agreement, which Credit Agreement is hereby incorporated
herein for all purposes as if set forth herein in its entirety. To the extent
the specific terms and provisions of this Mortgage expressly conflict with the
specific terms and provisions of the Credit Agreement, the specific terms and
provisions of the Credit Agreement shall control.
29. TIME IS OF THE ESSENCE. Time is of the essence in this Mortgage.
30. CHOICE OF LAW. To the extent, and only to the extent, that an election
of the laws of a forum other than ___________ would be ineffective under________
law, the validity, construction, and enforcement of this instrument shall be
governed by the laws of the State of ___________ applicable to contracts
executed and performed entirely within that state with respect to real estate
remedies, perfection and other matters so inherently local that an election of
the laws of a forum other than ____________ would be ineffective under _________
law. In all other respects, including, but not limited to, matters of usury law
and general contract law applicable to agreements between lenders and borrowers,
the validity, construction and enforcement hereof shall be determined according
to the substantive laws (but not the conflicts laws) of the State of Texas, in
which state the Mortgagee and the Banks originated the Said Indebtedness and in
which state the Notes are payable.
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<PAGE>
[31. COVENANTS, REPRESENTATIONS AND AGREEMENTS OF MORTGAGOR WITH RESPECT TO
THE GROUND LEASE.
(A) THE MORTGAGOR REPRESENTS AND WARRANTS THAT (I) THE GROUND LEASE IS IN
FULL FORCE AND EFFECT, (II) THE GROUND LEASE HAS NOT BEEN MODIFIED IN
ANY RESPECT AND (III) TO ITS KNOWLEDGE THERE ARE NO DEFAULTS BY EITHER
PARTY TO THE GROUND LEASE.
(B) THE MORTGAGOR SHALL PERFORM AND/OR OBSERVE ALL COVENANTS AND
CONDITIONS TO BE PERFORMED AND/OR OBSERVED BY THE MORTGAGOR UNDER THE
GROUND LEASE AND SHALL DELIVER TO MORTGAGEE PHOTOCOPIES OF ALL NOTICES
RECEIVED BY THE MORTGAGOR FROM THE LESSOR UNDER THE GROUND LEASE
WITHIN FIVE (5) DAYS AFTER RECEIPT THEREOF.
(C) SIMULTANEOUSLY WITH THE MAKING OF EACH PAYMENT TO THE LESSOR UNDER THE
GROUND LEASE, THE MORTGAGOR SHALL DELIVER TO THE MORTGAGEE A COPY OF
THE CHECK IN THE AMOUNT OF SUCH PAYMENT DELIVERED TO THE LESSOR UNDER
THE GROUND LEASE.
(D) IF THERE SHALL BE FILED BY OR AGAINST THE MORTGAGOR A PETITION UNDER
THE REVISED BANKRUPTCY ACT OF 1978, ET. SEQ., AS AMENDED AND ANY
-- ---
SUCCESSOR ACT THERETO (THE "BANKRUPTCY CODE") AND THE MORTGAGOR, SHALL
DETERMINE TO REJECT THE GROUND LEASE, THE MORTGAGOR SHALL GIVE THE
MORTGAGEE NOT LESS THAN FIFTEEN (15) DAYS' PRIOR WRITTEN NOTICE OF THE
DATE ON WHICH THE MORTGAGOR SHALL APPLY TO ANY COURT OR OTHER
GOVERNMENTAL AUTHORITY FOR AUTHORITY AND PERMISSION TO REJECT THE
GROUND LEASE. THE MORTGAGEE SHALL HAVE THE RIGHT, BUT NOT THE
OBLIGATION, TO SERVE UPON THE MORTGAGOR WITHIN SUCH FIFTEEN (15) DAY
PERIOD A NOTICE STATING THAT (I) THE MORTGAGEE DEMANDS THAT THE
MORTGAGOR ASSUME AND ASSIGN THE GROUND LEASE TO THE MORTGAGEE PURSUANT
TO THE BANKRUPTCY CODE, AND (II) THE MORTGAGEE COVENANTS TO CURE
AND/OR PROVIDE ADEQUATE ASSURANCE OF PROMPT CURE OF ALL DEFAULTS
REASONABLY SUSCEPTIBLE OF BEING CURED BY THE MORTGAGEE AND OF FUTURE
PERFORMANCE UNDER THE GROUND LEASE. IF THE MORTGAGEE SERVES UPON THE
MORTGAGOR THE NOTICE DESCRIBED ABOVE, THE MORTGAGOR SHALL NOT SEEK TO
REJECT THE GROUND LEASE AND SHALL COMPLY WITH THE DEMAND PROVIDED FOR
IN CLAUSE (I) ABOVE WITHIN FIFTEEN (15) DAYS AFTER THE NOTICE SHALL
HAVE BEEN GIVEN BY THE MORTGAGEE.
(E) THE MORTGAGOR HEREBY IRREVOCABLY APPOINTS THE MORTGAGEE ITS AGENT AND
ATTORNEY-IN-FACT (WHICH APPOINTMENT IS COUPLED WITH AN INTEREST) TO
PERFORM OR OBSERVE ON BEHALF OF THE MORTGAGOR, THE MORTGAGOR'S OPTION
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TO PURCHASE THE MORTGAGED PREMISES (IF ANY), PURSUANT TO THE GROUND LEASE,
AND ANY COVENANT OR CONDITION WHICH THE MORTGAGOR FAILS TO PERFORM OR
OBSERVE UNDER THE GROUND LEASE WITHIN ANY APPLICABLE GRACE PERIOD SPECIFIED
IN THE GROUND LEASE, AND ANY ADVANCES MADE BY THE MORTGAGEE IN CONNECTION
WITH SUCH PERFORMANCE OR OBSERVANCE SHALL BE REPAID BY THE MORTGAGOR [AND
BORROWER] WITHIN TEN (10) DAYS OF DEMAND WITH INTEREST [AT THE INTEREST
RATE TO BE PAID UNDER THE CREDIT AGREEMENT DURING AN EVENT OF DEFAULT (THE
"DEFAULT RATE") AND THE AMOUNT SO ADVANCED, AND SHALL BE A LIEN UPON THE
MORTGAGED PREMISES, OR ANY PART THEREOF, AND SHALL BE SECURED BY THIS
MORTGAGE. SUCH PERFORMANCE OR OBSERVANCE BY THE MORTGAGEE SHALL NOT PREVENT
THE MORTGAGOR'S FAILURE SO TO PERFORM OR OBSERVE FROM CONSTITUTING A
DEFAULT UNDER THIS MORTGAGE. IN PERFORMING OR OBSERVING ANY SUCH COVENANT
OR CONDITION, THE MORTGAGEE SHALL HAVE THE RIGHT TO ENTER UPON THE
MORTGAGED PREMISES OR ANY PART THEREOF. UPON RECEIPT BY THE MORTGAGEE FROM
THE LESSOR UNDER THE GROUND LEASE OF ANY NOTICE OF DEFAULT UNDER THE GROUND
LEASE, THE MORTGAGEE MAY RELY THEREON AND TAKE ANY ACTION PERMITTED BY
THIS SECTION TO REMEDY SUCH DEFAULT NOTWITHSTANDING THAT THE EXISTENCE OF
SUCH DEFAULT OR THE NATURE THEREOF MAY BE QUESTIONED OR DENIED BY THE
MORTGAGOR.
(F) IF THE MORTGAGOR EXERCISES THE OPTION TO PURCHASE THE MORTGAGED PREMISES
(IF ANY), PURSUANT TO THE GROUND LEASE, SUCH PURCHASE OF THE MORTGAGED
PREMISES SHALL IMMEDIATELY BECOME SUBJECT TO THE LIEN HEREOF, AND SECURED
BY THIS MORTGAGE AS FULLY AND COMPLETELY, AND WITH THE SAME EFFECT, AS
THOUGH NOW OWNED BY THE MORTGAGOR AND SPECIFICALLY DESCRIBED IN THE
GRANTING CLAUSE HEREOF. NOTWITHSTANDING THE FOREGOING, AT ANY AND ALL
TIMES, THE MORTGAGOR SHALL EXECUTE, DELIVER AND ACKNOWLEDGE SUCH FURTHER
ASSURANCES, MORTGAGES AND/OR SECURITY INSTRUMENTS THE MORTGAGEE MAY REQUIRE
TO CONFIRM THE MORTGAGED PREMISES SO PURCHASED ARE SECURED BY THE LIEN OF
THIS MORTGAGE.
(G) THE MORTGAGOR EXPRESSLY AGREES THAT IF THERE SHALL BE FILED BY OR AGAINST
THE LESSOR UNDER THE GROUND LEASE ANY PETITION, ACTION AND/OR PROCEEDING
UNDER THE BANKRUPTCY CODE OR ANY OTHER SIMILAR FEDERAL AND OR STATE LAW NOW
OR HEREAFTER IN EFFECT (COLLECTIVELY HEREINAFTER REFERRED TO AS THE
"MORTGAGOR'S BANKRUPTCY"), THE MORTGAGOR SHALL NOT ELECT TO TREAT THE
GROUND LEASE AS TERMINATED, CANCELED AND/OR SURRENDERED PURSUANT TO
APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE INCLUDING, BUT NOT LIMITED TO,
SECTION 365 (H)(1), WITHOUT THE MORTGAGEE'S PRIOR WRITTEN CONSENT. IN THE
EVENT OF THE MORTGAGOR'S BANKRUPTCY, THE MORTGAGOR
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EXPRESSLY COVENANTS AND AGREES, INTENDING THAT THE MORTGAGEE RELY THEREON,
THAT IT SHALL REAFFIRM AND RATIFY THE LEGALITY, VALIDITY, BINDING EFFECT
AND ENFORCEABILITY OF THE GROUND LEASE TO THE MORTGAGEE AND THE MORTGAGOR
ALSO COVENANTS AND AGREES THAT IT SHALL REMAIN IN POSSESSION OF THE
MORTGAGED PREMISES AND THE LEASEHOLD ESTATE CREATED BY THE GROUND LEASE,
NOTWITHSTANDING ANY REJECTION THEREOF BY THE LESSOR UNDER THE GROUND
LEASE AND/OR ANY TRUSTEE, CUSTODIAN, RECEIVER OR OTHER SIMILAR OFFICIAL.
(H) THE LIEN OF THIS MORTGAGE ATTACHES TO ALL OF THE MORTGAGOR'S RIGHTS AND
REMEDIES NOW AND HEREAFTER ARISING UNDER OR PURSUANT TO THE BANKRUPTCY
CODE, INCLUDING, BUT NOT LIMITED TO, THE MORTGAGOR'S RIGHT TO ELECT TO
REMAIN IN POSSESSION OF THE MORTGAGED PREMISES AND THE LEASEHOLD ESTATE
CREATED BY THE GROUND LEASE IN THE EVENT OF THE MORTGAGOR'S BANKRUPTCY
PURSUANT TO SECTION 365(H)(1). ANY SUCH ELECTION TO TERMINATE, CANCEL
AND/OR SURRENDER THE GROUND LEASE IN THE EVENT OF THE MORTGAGOR'S
BANKRUPTCY WITHOUT THE MORTGAGEE'S PRIOR WRITTEN CONSENT SHALL BE NULL AND
VOID.
(I) THE MORTGAGOR HEREBY UNCONDITIONALLY ASSIGNS, TRANSFERS, AND SETS OVER TO
THE MORTGAGEE FOR THE BENEFIT OF THE BANKS (I) ALL OF THE MORTGAGOR'S
CLAIMS AND RIGHTS TO DAMAGES, AND ANY OTHER REMEDIES IN CONNECTION
THEREWITH ARISING FROM ANY REJECTION OF THE GROUND LEASE BY THE LESSOR
THEREUNDER PURSUANT TO THE BANKRUPTCY CODE IN THE EVENT OF THE MORTGAGOR'S
BANKRUPTCY, AND/OR BY ANY TRUSTEE, CUSTODIAN, RECEIVER OR OTHER SIMILAR
OFFICIAL. THE MORTGAGEE SHALL HERE THE RIGHT, BUT NOT THE OBLIGATION, TO
PROCEED IN ITS OWN NAME AND/OR IN THE NAMES OF THE MORTGAGOR IN RESPECT OF
ANY CLAIM, SUIT, ACTION AND/OR PROCEEDING RELATING TO SUCH REJECTION OF THE
GROUND LEASE, INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO FILE AND
PROSECUTE, TO THE EXCLUSION OF THE MORTGAGOR, ANY AND ALL PROOFS OF CLAIMS,
COMPLAINTS, NOTICES AND OTHER DOCUMENTS IN ANY CASE IN RESPECT OF THE
LESSOR OF THE GROUND LEASE UNDER AND PURSUANT TO THE BANKRUPTCY CODE, AND
(II) THE MORTGAGOR'S RIGHT OF ELECTION TO REMAIN IN POSSESSION OF THE
MORTGAGED PREMISES IN THE EVENT OF THE MORTGAGOR'S BANKRUPTCY UNDER AND
PURSUANT TO SECTION 365(H)(L) OF THE BANKRUPTCY CODE. THIS ASSIGNMENT
CONSTITUTES A PRESENT, ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL ASSIGNMENT
OF THE FOREGOING CLAIMS, ELECTIONS, RIGHTS AND REMEDIES, AND SHALL CONTINUE
IN FULL FORCE AND EFFECT UNTIL THE NOTES AND THE SAID INDEBTEDNESS HAVE
BEEN PAID IN FULL AND THIS MORTGAGE HAS BEEN SATISFIED AND DISCHARGED. ANY
AMOUNTS RECEIVED BY THE MORTGAGEE AND THE BANKS AS DAMAGES ARISING OUT OF
THE REJECTION OF
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<PAGE>
THE GROUND LEASE BY THE LESSOR THEREUNDER SHALL BE APPLIED IN THE MANNER
SET FORTH IN PARAGRAPH 9 OF THIS MORTGAGE.
(J) IF, PURSUANT TO ANY APPLICABLE SECTION OF THE BANKRUPTCY CODE, THE
MORTGAGOR SEEKS TO OFFSET, COUNTERCLAIM, DEDUCT, AND/OR ASSERTS A DEFENSE
AGAINST THE RENT, ADDITIONAL RENT OR OTHER SUMS DUE UNDER THE GROUND LEASE,
THE AMOUNT OF ANY DAMAGES CAUSED BY THE NON-OBSERVANCE AND/OR NON-
PERFORMANCE OF THE LESSOR UNDER THE GROUND LEASE, THE MORTGAGOR SHALL,
PRIOR TO SUCH OFFSET, COUNTERCLAIM, DEFENSE AND/OR DEDUCTION NOTIFY THE
MORTGAGEE OF ITS INTENT TO DO SO, SETTING FORTH WITH SPECIFICITY THE
AMOUNTS PROPOSED TO BE OFFSET, COUNTERCLAIMED, DEDUCTED, AND/OR DEFENDED
AGAINST AND FOR WHAT PURPOSES. THE MORTGAGEE FOR THE BENEFIT OF THE BANKS
SHALL THEREUPON HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO OBJECT TO ALL OR
ANY PART OF SUCH OFFSET, COUNTERCLAIM AND/OR DEDUCTION AND, IN THE EVENT OF
SUCH OBJECTION, THE MORTGAGOR SHALL NOT EFFECT ANY SUCH OFFSET COUNTERCLAIM
AND/OR DEDUCTION. NEITHER THE MORTGAGEE'S FAILURE TO OBJECT TO ANY SUCH
OFFSET, COUNTERCLAIM AND/OR DEDUCTION NOR ANY OBJECTION TO ANY SUCH OFFSET,
COUNTERCLAIM AND/OR DEDUCTION NOR ANY OBJECTION OR OTHER COMMUNICATION
BETWEEN THE MORTGAGEE AND THE MORTGAGOR SHALL CONSTITUTE AN APPROVAL OF ANY
SUCH OFFSET, COUNTERCLAIM, DEDUCTION AND/OR DEFENCE BY THE MORTGAGEE. THE
MORTGAGOR [AND BORROWER] EXPRESSLY AGREE[S] TO PAY, PROTECT, INDEMNIFY AND
SAVE HARMLESS THE MORTGAGEE FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS,
ACTIONS, SUIT, PROCEEDINGS, DAMAGES, LOSSES, LIABILITIES, JUDGMENTS, COSTS
AND EXPENSES OF EVERY KIND AND NATURE (INCLUDING REASONABLE ATTORNEYS'
FEES) ARISING FROM OR RELATING TO ANY OFFSET, COUNTERCLAIM DEDUCTION AND/OR
ASSERTION OF A DEFENSE BY THE MORTGAGOR AS HEREIN DESCRIBED.
(K) IF ANY ACTION, PROCEEDING, MOTION AND/OR NOTICE SHALL BE COMMENCED OR FILED
WITH RESPECT TO THE MORTGAGOR OR THE MORTGAGED PREMISES, OR ANY PART
THEREOF, IN CONNECTION WITH THE BANKRUPTCY CODE, THE MORTGAGEE SHALL BE
ENTITLED TO APPROVE OF MORTGAGOR'S SELECTION OF ANY COUNSEL RETAINED IN
CONNECTION THEREWITH AND SHALL ALSO HAVE APPROVAL RIGHTS OVER ALL ASPECTS
OF ANY ENSUING LITIGATION. ALTERNATIVELY, THE MORTGAGEE MAY PROCEED IN ITS
OWN NAME IN CONNECTION WITH ANY SUCH LITIGATION, AND THE MORTGAGOR
EXPRESSLY AGREES TO EXECUTE AND DELIVER ALL AND EVERY POWER, CONSENT,
AUTHORIZATION AND OTHER DOCUMENTS REQUIRED BY THE MORTGAGEE IN CONNECTION
THEREWITH. THE MORTGAGOR [AND BORROWER] SHALL PAY TO THE MORTGAGEE ON
DEMAND ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS'
FEES) PAID OR INCURRED AND PAYABLE BY THE MORTGAGEE IN CONNECTION WITH SUCH
LITIGATION AND THE COSTS AND EXPENSES SHALL BE SECURED BY THE LIEN OF THIS
MORTGAGE. THE MORTGAGOR ALSO AGREES
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<PAGE>
NOT TO COMMENCE ANY ACTION, SUIT, PROCEEDING AND/OR CASE OR FILE ANY
APPLICATION OR MAKE ANY MOTION IN RESPECT OF THE GROUND LEASE IN THE
EVENT OF THE MORTGAGOR'S BANKRUPTCY WITHOUT THE PRIOR WRITTEN CONSENT
OF THE MORTGAGEE.
(L) THE MORTGAGOR HEREBY IRREVOCABLY APPOINTS THE MORTGAGEE ITS AGENT AND
ATTORNEY-IN-FACT (WHICH APPOINTMENT IS COUPLED WITH AN INTEREST) TO
OBSERVE AND PERFORM ON BEHALF OF THE MORTGAGOR THE COVENANTS AND
AGREEMENTS CONTAINED IN THIS SECTION AND ANY ADVANCES MADE BY THE
MORTGAGEE IN CONNECTION WITH SUCH PERFORMANCE OR OBSERVANCE SHALL BE
REPAID BY THE MORTGAGOR [AND BORROWER] WITHIN TEN (10) DAYS OF DEMAND
WITH INTEREST AT THE DEFAULT RATE AND THE AMOUNT SO ADVANCED, AND
INTEREST THEREON, SHALL BE A LIEN UPON THE MORTGAGED PREMISES AND
SHALL BE SECURED BY THIS MORTGAGE. SUCH PERFORMANCE OR OBSERVANCE BY
THE MORTGAGEE SHALL NOT PREVENT THE MORTGAGOR'S FAILURE TO PERFORM OR
OBSERVE FROM CONSTITUTING A DEFAULT UNDER THIS MORTGAGE.
(M) IF THE MORTGAGOR SHALL DEFAULT UNDER ANY OF ITS OBLIGATIONS WITH
RESPECT TO THE GROUND LEASE, AND SUCH DEFAULT IS NOT CURED WITHIN ANY
APPLICABLE GRACE PERIOD PROVIDED FOR IN THE GROUND LEASE, OR IF THE
ESTATE CREATED BY THE GROUND LEASE SHALL BE SURRENDERED, OR IF THE
GROUND LEASE SHALL BE ASSIGNED, CANCELLED, TERMINATED, SUPPLEMENTED,
EXTENDED, MODIFIED AND/OR AMENDED WITHOUT THE PRIOR WRITTEN CONSENT OF
THE MORTGAGEE, THEN SUCH SHALL AUTOMATICALLY AND WITHOUT ANY NOTICE TO
THE MORTGAGOR BY THE MORTGAGEE, BE A DEFAULT UNDER THIS MORTGAGE.]
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<PAGE>
EXECUTED this the _______ day of __________, 1996.
Mortgagor's Address: MORTGAGOR:
3860 West Northwest Highway ___________________
Suite 300
Dallas, Texas 75220
Attention:_____________
By:_________________
Name:_______________
Title:______________
Mortgagee's Address:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
P.O. Box 655415
Commercial Real Estate Department
Dallas, Texas 75201
Attn: Mr. Jeff S. Lindsey
Vice President
[ADD APPROPRIATE FORM OF ACKNOWLEDGMENT]
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<PAGE>
EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - Permitted Exceptions
-31-
<PAGE>
EXHIBIT X
NOTICE OF BORROWING
[Date]
Bank One, Texas, N.A.,
as Administrative Agent under the Credit Agreement herein described
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey, Vice President
Ladies and Gentlemen:
The undersigned, American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership (the "Borrower"), refers to the Credit Agreement
dated as of July 31, 1996 (as the same may be amended or modified from time to
time, the "Credit Agreement," the defined terms of which are used in this Notice
of Borrowing unless otherwise defined in this Notice of Borrowing) among the
Borrower, the Banks, the Agent, the Structuring Agent and the Administrative
Agent, and hereby gives you irrevocable notice pursuant to Section 2.02(a) of
the Credit Agreement that the undersigned hereby requests a Borrowing, and in
connection with that request sets forth below the information relating to such
Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the
Credit Agreement:
(a) Business Day of the Proposed Borrowing is ___________________,
19________.
(b) The Proposed Borrowing will be a Borrowing composed of [Prime Rate
Advances] [LIBOR Rate Advances].
(c) The aggregate amount of the Proposed Borrowing is $_______________.
(d) The Interest Period for each LIBOR Rate Advance made as part of the
Proposed Borrowing is [______month[s]].
(e) The Proposed Borrowing is going to be used for:
i. The following acquisition of a Future Property:
<PAGE>
Bank One, Texas, N.A.
[Date]
Page 2
ii. The following Capital Expenditures and FF&E:
iii. The following working capital:
iv: The following other uses:
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(a) the representatives and warranties contained in the Credit Agreement
and the other Security Documents are correct in all material respects,
before and after giving effect to the Proposed Borrowing and the
application of the proceeds therefrom, as though made on the date of the
Proposed Borrowing; and
(b) no Default has occurred and remains uncured, or would result from such
Proposed Borrowing or from the application of the proceeds therefrom.
Very truly yours,
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P.
BY: AGH GP, INC., its general partner
By:_____________________________________
Name:____________________________
Title:___________________________
<PAGE>
EXHIBIT Y
NOTICE OF CONVERSION OR CONTINUATION
[Date]
Bank One, Texas, N.A.
as Administrative Agent under the Credit Agreement herein described
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Dallas, Texas 75201
Attention: Mr. Jeff S. Lindsey, Vice President
Ladies and Gentlemen:
The undersigned, American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership (the "Borrower"), refers to the Credit Agreement
dated as of July 31, 1996 (as the same may be amended or modified from time to
time, the "Credit Agreement," the defined terms of which are used in this Notice
of Conversion or Continuation unless otherwise defined in this Notice of
Conversion or Continuation), among the Borrower, the Banks, the Structuring
Agent, and the Administrative Agent, and hereby gives you irrevocable notice
pursuant to Section 2.02(b) of the Credit Agreement that the undersigned hereby
requests a Conversion or continuation of an outstanding Borrowing, and in
connection with that request sets forth below the information relating to such
Conversion or continuation (the "Proposed Borrowing") as required by Section
2.02(b) of the Credit Agreement:
(a) The Business Day of the Proposed Borrowing is ____________, 19___.
(b) The Proposed Borrowing will be a Borrowing composed of [Prime Rate
Advances] [LIBOR Rate Advances].
(c) The aggregate amount of the Borrowing to be Converted or continued is
$______ and consists of [Prime Rate Advances] [LIBOR Rate Advances].
(d) The Proposed Borrowing consists of [a Conversion to [Prime Rate
Advances] [LIBOR Rate Advances]] [a continuation of [Prime Rate Advances]
[LIBOR Rate Advances]].
<PAGE>
Bank One, Texas, N.A.
[Date]
Page 2
(e) The Interest Period for each LIBOR Rate Advance made as part of the
Proposed Borrowing is [_____ month[s]].
Very truly yours,
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:_______________________________________
Name:__________________________
Title:_________________________
<PAGE>
EXHIBIT "Z"
FORM OF
Recording Requested By And
When Recorded Mail to:
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002
Attention: David W. Locascio
THE STATE OF ___________ (S)
(S)
COUNTY OF ______________ (S)
LESSEE ESTOPPEL, ACKNOWLEDGMENT AND SUBORDINATION AGREEMENT
THIS LESSEE ESTOPPEL, ACKNOWLEDGMENT AND SUBORDINATION AGREEMENT (this
"Agreement") is made as of the ___ day of July, 1996, by AGH LEASING, L.P., a
Delaware limited partnership ("Lessee"), having an office and mailing address at
3860 West Northwest Highway, Suite 300, Dallas, Texas 75220, Attention: Ken Barr
("Lessee"), in favor of BANK ONE, TEXAS, N.A., a national banking association,
as administrative agent ("Agent") for the Banks (as hereinafter defined), having
an office and mailing address at 1717 Main Street, 4th Floor, Commercial Real
Estate Department, Dallas, Texas 75201, Attention: Mr. Jeff S. Lindsey, Vice
President.
WITNESSETH:
WHEREAS, American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership ("Borrower") Agent, as Administrative Agent,
Societe Generale, Southwest Agency, as Structuring Agent, and the banks and
other lenders party thereto (collectively the "Banks") have entered into a
Credit Agreement dated as of ___________, 1996 (as amended or otherwise modified
from time to time, the "Credit Agreement"); and
WHEREAS, Borrower or a subsidiary of Borrower ("Lessor") is leasing or
subleasing the land described on Exhibit "A" attached hereto and the
improvements, equipment, fixtures, furniture and other personal property located
on such land (collectively, the "Property") to Lessee under that certain lease
executed between Lessor and Lessee (the "Lease"); and
WHEREAS, to secure Lessee's obligations to Lessor under the Lease Lessee
executed or caused to be executed the following (collectively, the "Collateral
Documents");
<PAGE>
a. the Assignment of Management Agreements executed by Lessee
to Lessor in connection with the Property;
b. the Assignment of Leases, Rents and Security Deposits
executed by Lessee to Lessor in connection with the Property;
c. the General Assignment and Agreement executed by Lessee to
Lessor in connection with the Property;
d. those instruction letters or agreements executed in
connection with the Property pursuant to which upon the occurrence of
certain events certain depository institutions have agreed wire transfer
funds in various bank accounts of Lessee to a bank account at Agent held in
the name of the Borrower;
e. those instruction letters or agreements executed in
connection with the Property pursuant to which certain credit card
companies have agreed to wire transfer funds owed Lessee into certain bank
accounts of Lessee;
WHEREAS, the Borrower has executed promissory notes of even date with the
Credit Agreement in favor of the Banks in the original aggregate principal
amount of $100,000,000.00 (the "Notes", which term includes any modification,
renewal, extension or alteration thereof); and
WHEREAS, the payment of the indebtedness from time to time evidenced by the
Notes, the payment of all other sums now or hereafter owing by Borrower or
certain other parties under the Credit Agreement or under any other document or
instrument now or hereafter evidencing or securing the aforesaid indebtedness or
otherwise executed in connection herewith or therewith (the Collateral
Assignment (as hereinafter defined), the Notes, the Credit Agreement, the
Mortgage (as hereinafter defined), and all other documents and instruments now
or hereafter evidencing or securing the aforesaid indebtedness or otherwise
executed in connection herewith or therewith, being hereinafter referred to
collectively as the "Credit Documents"), and the performance and observance of
all covenants, agreements, conditions and other provisions set forth herein, in
the Notes and in the other Credit Documents shall be collectively referred to
herein as the "Obligations");
WHEREAS, to secure the Obligations, Lessor mortgaged the Property and
Lessor's rights, title and interests under the Property (including without
limitation the Lease and Lessor's rights, title and interests in and to the
Lease) to Agent for the benefit of the Banks pursuant to a [DEED OF
TRUST/MORTGAGE], Security Agreement, Assignment of Rents and Financing Statement
(the "Mortgage") and certain other security documents (collectively, the
"Security Documents");
-2-
<PAGE>
WHEREAS, to further secure the Obligations, Lessor pledged the Collateral
Documents and Lessor's rights, title and interests under the Collateral
Documents to Agent for the benefit of the Banks pursuant to a Collateral
Assignment and Security Agreement (the "Collateral Assignment") between Lessor
and Agent;
WHEREAS, as a condition to the advancing of funds under the Notes, Lessee
agreed to execute and deliver this Agreement;
NOW, THEREFORE, IN CONSIDERATION of the sum of TEN AND NO/100 DOLLARS
($10.00) in hand paid by Agent to Lessee, Lessee hereby makes certain
representations, covenants and agreements in favor of Agent as set forth herein.
1. Estoppel.
--------
a. The Lease and the Collateral Documents constitute the entire and
only agreements between Lessor and Lessee with respect to the Property.
b. A true and correct copy of the Lease and the Collateral Documents
and all agreements, amendments, guarantees, side letters and other documents
relating thereto have been previously delivered to Agent by Lessor and Lessee.
c. The Lease and the Collateral Documents are in full force and
effect. Neither the Lease, the Collateral Documents nor any interest therein has
been assigned, mortgaged, pledged or otherwise encumbered by Lessee.
d. Neither the collateral pledged to Lessor under the Collateral
Documents, nor any interest therein has been assigned, mortgaged, pledged or
otherwise encumbered by Lessee except to Lessor pursuant to the Collateral
Documents.
e. Lessor does not hold any security deposit under the Lease.
f. No default, or event that but for the passage of time or the
giving of notice, or both, would constitute a default, exists under the Lease on
the part of Lessor.
g. No bankruptcy or insolvency proceedings have been instituted by,
or against, Lessee.
2. Covenants.
---------
-3-
<PAGE>
a. Lease. Lessee shall keep the Lease in full force and effect, and
-----
the Lease shall not be amended, modified, waived, extended or voluntarily
terminated (subject to the terms of Section 4 of this Agreement) without the
prior written consent of Agent, which consent may be granted or denied in
Agent's sole discretion. Lessee shall not assign the Lease or encumber all or
any portion of the Property or Lessee's leasehold interest therein without the
prior written consent of Agent, which consent may be granted or denied in
Agent's sole discretion.
b. Irrevocable Directions to Pay; Payment of Rents to Lenders.
----------------------------------------------------------
Lessee hereby acknowledges receipt of that certain Irrevocable Direction to Pay
(the "Direction to Pay") executed by Lessor and certain affiliates of Lessor.
Lessee hereby agrees that Lessee shall pay all base rent, participating rent and
all other amounts as may become due and payable by Lessee to Lessor under and
pursuant to the Lease directly to the Agent pursuant to the Direction to Pay
until such time as the Agent shall notify the Lessee that the Obligations have
been paid and performed in full.
3. Consent; Waiver. Lessee hereby consents to the assignment of the
---------------
Lease, the Collateral Documents and Lessor's rights, title and interests
thereunder by Lessor to Agent pursuant to the Mortgage and the Collateral
Assignment as security for the repayment of the Obligations and agrees that
Lessor shall not be in default under the Lease by reason of having made such
assignments. Lessee acknowledges and agrees that until the Mortgage and
Collateral Assignment are released (a) no consent by Lessor under the Lease
shall be effective without the written consent of Agent and (b) Agent shall have
the right, but not the obligation, to take any action permitted Lessor under the
Lease or the Collateral Documents in connection with a default by Lessee
thereunder to the extent permitted by the Credit Agreement or Security
Documents.
4. Subordination; Foreclosure; Termination.
---------------------------------------
a. Subordination. Lessee has subordinated and does hereby
-------------
subordinate all of its rights, liens and security interests in and to the
Property and in, to and under the Lease to the following: (i) the Credit
Documents; (ii) all renewals, substitutions, extensions, modifications,
replacements or amendments of the Credit Documents; and (iii) the Obligations
and all other indebtedness secured by the Credit Documents and all advances
thereunder. Notwithstanding anything in the Lease to the contrary, no early
termination fee shall be due and payable under the Lease and Lessee shall not
collect any such fee prior to the repayment in full of the Obligations with no
further obligation to make advances to Borrower under the Credit Agreement.
b. Foreclosure; Termination; Survival. Notwithstanding anything in
----------------------------------
the Lease to the contrary, upon the acquisition of the Property by Agent or a
nominee of Agent or the Banks by foreclosure or by deed-in-lieu of foreclosure,
or by any other person through foreclosure (any of such entities or persons
being referred to herein as a "Subsequent Owner"), the Lease shall be
-4-
<PAGE>
automatically terminated, without payment by the Subsequent Owner of any
termination fee, penalty or liquidated damages assessed by reason of
termination prior to the natural expiration of the term or terms thereof, and
Lessee shall have no further right whatsoever in regard to the Property and
Lessee shall vacate the same immediately. Lessee shall indemnify and hold Agent
and the Banks harmless from any losses or damages suffered by them on account of
the failure by Lessee to surrender possession of the Property at the time
required under this Section 4. Agent's rights under this Agreement and under the
Collateral Assignment and the Lessor's rights under the Collateral Documents
shall survive any termination of the Lease.
5. Notice of Default; Agent's Right to Cure Lessor Defaults; Lessee's
------------------------------------------------------------------
Right to Purchase Loan.
- ----------------------
a. Lessee shall deliver to Agent at the address stated above or such
other address as Agent shall notify Lessee thereof in writing, by certified
mail, a copy of any notice of default served upon Lessor relating to defaults of
Lessor with respect to any Lease contemporaneously with the delivery of such
notice to Lessor. No notice to Lessor shall be effective, no applicable cure
period shall begin to run and neither Agent nor the Banks nor any person
succeeding to their respective interests shall have any obligation to cure
defaults of Lessor unless and until Agent has received a copy of such notice.
Before Lessee may exercise any remedies available to Lessee under a Lease by
virtue of Lessor's default thereunder, Agent, on behalf of Banks, shall be
permitted (but shall not be obligated) to cure any such default by Lessor with
respect to the Lease within thirty (30) days after receipt of such notice. If
such default cannot be cured within the aforesaid thirty (30) days, then Agent
shall have such additional period of time as may be necessary to cure such
default, if within such thirty (30) days, Agent has commenced and is diligently
pursuing the remedies necessary to cure such default (including without
limitation the commencement of foreclosure proceedings if necessary to effect
such a cure), in which event any remedies of Lessee under the Lease, including,
without limitation, such right, if any, as Lessee might otherwise have to
terminate the Lease, shall not be exercised while such remedies are being so
diligently pursued. In addition, Lessee agrees to promptly deliver to Agent a
copy of any written notice of default received from or given to any franchisor,
licensor, manager, or liquor license company with which Lessee has entered into
an agreement or contract related to the Property.
6. Disclaimer of Responsibility. This Agreement shall not operate to
----------------------------
place any responsibility, liability or obligation whatsoever upon Agent or upon
the Banks, except as expressly set forth herein.
7. No waiver. Any forbearance or failure or delay by Agent or the Banks
---------
in exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power
-5-
<PAGE>
or remedy of Agent or the Banks shall continue in full force and effect until
such right, power or remedy is specifically waived in a writing executed by
Agent.
8. Expenses. If Lessee fails to comply with the terms of this Agreement,
--------
Lessee shall pay all reasonable attorneys' fees and expenses actually incurred
by Agent and the Banks in connection with the enforcement of this Agreement.
9. Representations and Warranties. Lessee represents and warrants to
------------------------------
Banks as follows:
a. Lessee is duly organized and validly existing under the laws of
the State of its organization and is duly qualified to do business in all
jurisdictions in which the Hotels are located.
b. The execution, delivery and performance by Lessee of this
Agreement (i) are within the power of Lessee, (ii) have been duly authorized
by all requisite action of Lessee, (iii) have received all necessary
governmental approvals which are applicable to Lessee, and (iv) will not violate
(a) any provision of law which is applicable to Lessee, (b) any order of any
court or agency of government which is applicable to Lessee, (c) the
organizational documents of Lessee, or (d) any indenture, agreement or any
other instrument to which Lessee is a party or by which Lessee or its property
is bound, or result in a breach of or constitute (with due notice and/or lapse
of time) a default under any such indenture, agreement or other instrument or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of Lessee's property or assets.
10. Assignment; Binding Effect. The Banks may assign their rights, in
--------------------------
whole or in part, under this Agreement to any party to whom the Credit Documents
are assigned, and Lessee hereby irrevocably consents and agrees to the same.
Neither this Agreement nor any of the provisions contained herein shall be for
the benefit of third parties whether or not specifically mentioned herein.
Subject to the foregoing, this Agreement shall inure to the benefit of and bind
the successors and assigns of the Banks, and, should an assignment by Lessee be
permitted hereunder, shall inure to the benefit of and bind the successors and
assigns of Lessee.
11. Governing Law. THIS AGREEMENT AND ANY DEALINGS BETWEEN THE PARTIES TO
-------------
THIS AGREEMENT RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR THE
RELATIONSHIPS THAT ARE BEING ESTABLISHED HEREBY AND THEREBY SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. WHERE
APPLICABLE AND EXCEPT AS OTHERWISE DEFINED HEREIN, THE TERMS HEREOF SHALL HAVE
THE
-6-
<PAGE>
MEANINGS GIVEN THEM IN THE UNIFORM COMMERCIAL CODE, AS ENACTED IN THE STATE OF
TEXAS.
12. Consent to Jurisdiction and Services of Process. Lessee hereby
-----------------------------------------------
irrevocably submits generally and unconditionally for itself and in respect of
its property to the jurisdiction of any state court, or any United States court,
sitting in the State of Texas, over any suit, action or proceeding arising out
of or relating to this Agreement. Lessee hereby irrevocably waives, to the
fullest extent permitted by law, any objection that if may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. Any such proceeding against Lessee brought in the State of
Texas may be removed to a federal court of competent jurisdiction in the State
of Texas. Lessee hereby agrees and consents that, in addition to any methods of
service of process provided for under the laws of the State of Texas, all
service of process in any such suit, action or proceeding in any state court, or
any United States federal court, sitting in the State of Texas, may be made by
certified or registered mail, return receipt requested, directed to Lessee at
its address for notice stated herein or at a subsequent address of which Agent
received actual written notice from Lessee in accordance with this Agreement,
and service so made shall be complete within five (5) days after the same shall
have been so mailed. Nothing herein shall affect the right of Banks to serve
process in any manner permitted by law or limit the right of Banks to bring
proceedings against Lessee in any other court or jurisdiction.
13. Waiver of Jury Trial. Lessee hereby knowingly and voluntarily waives
--------------------
its rights to a jury trial of any claim or cause of action based upon or arising
out of this Agreement or any other documents executed in connection with this
Agreement or any dealings between Lessee and Banks relating to the subject
matter of the transactions contemplated hereby and the business relationship
that is being established between them.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Lessee acknowledges that this
waiver is a material inducement to enter into a business relationship, that
Agent and Banks have already relied on this waiver in entering into this
Agreement, and that Agent and Banks will continue to rely on this waiver in
their related future dealings. Lessee further warrants and represents that it
has reviewed this waiver with its legal counsel and it knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE
-7-
<PAGE>
TRANSACTION MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
14. Notices. All notices and demand given under this Agreement shall be
-------
in writing and shall be served by personal delivery courier service or
registered or certified mail. Any such notice shall be fully prepaid and
addressed to the party served at its address as set forth above. Service of any
such notice or demand so made shall be deemed effective as of the date of actual
delivery if sent by personal courier service, or if sent by registered or
certified mail, three (3) days after the date of actual delivery as shown by the
addressee's return receipt, except that service of any notice of default
provided or required by law shall, if mailed, be deemed effective on the date of
mailing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives under seal as of
the day and year first above written.
LESSEE:
Signed, sealed and AGH LEASING, L.P.,
delivered in the presence of: a Delaware limited partnership
__________________________________ By: ___________________
Unofficial Witness its general partner
By:________________________
___________________________________ Name:______________________
Notary Public Title______________________
My Commission Expires:
[AFFIX NOTARIAL SEAL]
AGENT:
Signed, sealed and BANK ONE, TEXAS, N.A.
delivered in the presence of:
__________________________________ By: _______________________
Unofficial Witness Name:_______________________
-8-
<PAGE>
Title:______________________
_________________
Notary Public
My Commission Expires:
[AFFIX NOTARIAL SEAL]
-9-
<PAGE>
EXHIBIT "AA"
FORM OF:
PROPERTY ADJUSTMENT REPORT
This Property Adjustment Report is executed this ___ day of ________, 1996
and is prepared pursuant to Section 2.14 of that certain Credit Agreement (the
"Agreement") between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership (the "Borrower"), SOCIETE GENERALE, SOUTHWEST
AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as Administrative Agent,
and the Banks parties to the Credit Agreement. Capitalized terms used herein
but not otherwise defined herein shall have the meanings specified by the
Agreement:
Borrowing Base as
of last Borrowing Property Adjusted
Base Certificate Adjustment Borrowing Base
1. Real Estate Value $______ $______ $______
2. Line 1 above multiplied
by 40% $______ $______ $______
3. The trailing twelve
months Borrowing Base
EBITDA $______ $______ $______
4. Line 3 above multiplied
by five (5) $______ $______ $______
5. BORROWING BASE
(Lesser of Lines 2 and 4) $______ $______ $______
The Borrower has caused this Property Adjustment Report to be executed this
_____ day of _________, 199__.
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
EXHIBIT "BB"
PROPERTY CERTIFICATE
This Property Certificate is executed this ___ day of ___________, 1996 and
is prepared pursuant to Section 3.04 of that certain Credit Agreement (the
"Agreement") between AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership (the "Borrower"), SOCIETE GENERALE, SOUTHWEST
AGENCY, as Structuring Agent, BANK ONE, TEXAS, N.A., as Administrative Agent,
and the Banks parties to the Credit Agreement. Capitalized terms used herein but
not otherwise defined herein shall have the meanings specified by the Agreement.
This Property Certificate is being given in connection with the following
Hotel Property: _______________________________________________________________.
I, __________________, hereby certify that I am the duly elected
representative of __________________________________________, a
________________________, and hereby further certify that a true and correct
copy of the following documents relating to or for such Hotel Property are
attached hereto as Exhibits A-[K].
Exhibit A: The Franchise Agreement;
Exhibit B: The Management Agreement;
Exhibit C: The Participating Lease;
Exhibit D: The List of the Personal Property for such Hotel Property;
Exhibit E: The Acquisition Agreements;
Exhibit F: A rent roll for the Hotel Property identifying all rentable
space within the Hotel Property, the tenant, concessionaire or
licensee (or if vacant, identified as vacant), the monthly
rental payable (including any adjustments to operating
expenses), the date through which rent is paid, the
termination date of each such leases, concessions and licenses
and a delinquency report.
Exhibit G: The occupancy permit;
Exhibit H: The liquor license for such Hotel Property;
Exhibit I: The Liquor License Concession Agreement and any other
agreements related to the liquor license(s);
<PAGE>
[Exhibit J: The Property Owner's articles of incorporation, by-laws,
partnership agreements, as applicable, and certificates of
existence, good standing and authority to do business from
each appropriate state authority, and partnership or
corporate, as applicable, authorizations authorizing the
execution, delivery and performance of the Security Documents
all certified to be true and complete by a duly authorized
officer of such Property Owner; and]
[Exhibit K: If the Hotel Property is subject to a Ground Lease, the
Ground Lease.]
IN WITNESS WHEREOF, I have hereto set my hand this ____ day of
___________________, 199___.
_______________________________,
a __________________
By:________________________________
Name:______________________________
Title:_____________________________
-2-
<PAGE>
EXHIBIT "CC"
FORM OF
SECURITY AGREEMENT
This Security Agreement dated as of July ____, 1996 (as may be hereafter
amended or otherwise modified from time to time, this "Agreement") is made by
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership ("Borrower"), and the other undersigned entities (the Borrower and
the other signatories being collectively referred to herein as "Debtor") having
an office and mailing address at 3860 West Northwest Highway, Suite 300, Dallas,
Texas 75220, Attention: Ken Barr in favor of BANK ONE, TEXAS, N.A., a national
banking association, as administrative agent ("Secured Party") for the Banks (as
hereinafter defined), having an office and mailing address at 1717 Main Street,
4th Floor, Commercial Real Estate Department, Dallas, Texas 75201, Attention: Mr
Jeff S. Lindsey, Vice President.
WITNESSETH:
WHEREAS, Borrower, Secured Party, as Administrative Agent, Societe
Generale, Southwest Agency, as Structuring Agent, and the banks and other
lenders party thereto (collectively the "Banks") have entered into a Credit
Agreement dated as of ___________, 1996 (as amended or other wise modified from
time to time, the "Credit Agreement"); and
WHEREAS, the Borrower has executed promissory notes of even date with the
Credit Agreement in favor of the Banks in the original aggregate principal
amount of $100,000,000.00 (the "Notes", which term includes any modification,
renewal, extension or alteration thereof); and
WHEREAS, the Notes were executed and delivered to Secured Party and the
Banks, and shall be due and payable in accordance with the Credit Agreement; and
WHEREAS, the terms and provisions of the Notes and Credit Agreement are
incorporated herein by reference and made a part of this Agreement to the same
extent as though set forth in full herein; and
WHEREAS, as a condition to the acceptance of the Notes and the making of
the credit facility evidenced by the Credit Agreement (the "Credit Facility"),
Debtor agreed to execute and deliver this Agreement to secure the payment of the
indebtedness from time to time evidenced by the Notes, the payment of all other
sums now or hereafter owing by Debtor hereunder, under the Credit Agreement or
under any other document or instrument now or hereafter evidencing or securing
the aforesaid indebtedness or otherwise executed in connection herewith or
therewith (this Agreement, the Notes, the Credit Agreement and all other
documents and instruments now or hereafter evidencing or securing the aforesaid
indebtedness or otherwise executed in connection herewith or therewith, being
hereinafter referred to collectively as the "Credit Documents"), and the
performance and observance of
<PAGE>
all covenants, agreements, conditions and other provisions set forth herein, in
the Notes and in the other Credit Documents;
NOW THEREFORE, and for and in consideration of the sum of Ten and No/100
Dollars ($10.00) paid by Secured Party to Debtor and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Debtor and Secured Party hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement, each
-----------
capitalized term shall have the meaning given to such term in the Credit
Agreement. Any terms used in this Security Agreement that are defined in the
Texas Business and Commerce Code ("UCC") shall have the meaning assigned to
those terms by the UCC, whether specified elsewhere in this Security Agreement
or not.
2. Assignment. To secure the payment of this indebtedness from time to
----------
time evidenced by the Notes, the payment of all other sums now or hereafter
owing by the Debtor hereunder, under the Credit Agreement or any other Credit
Document and the performance and observance of all covenants, agreements,
conditions and other provisions set forth herein in the Notes, the Credit
Agreement or any other Credit Document (collectively the "Obligations"), and to
charge the properties, interests and rights hereinafter described with such
payment, performance and observance, Debtor hereby assigns as security to
Secured Party, and hereby grants to Secured Party, a continuing security
interest in the following and Debtor's right, title and interest in, to and
under the following (collectively, the "Collateral"):
a. Equipment. All equipment and vehicles of every kind and
---------
description (collectively herein called the "Equipment");
b. Accounts. All accounts and all rights to payment owing or to be
--------
owing to Debtor, wherever the records for such accounts and rights to
payment are held, including all instruments and chattel paper, wherever
located, that represent (i) any right of Debtor to payment for services
rendered, whether or not it has been earned by performance, or (ii) any
right of Debtor to repayment on account of a loan or intercompany advance
of funds made by Debtor to any Person, whether or not evidenced by a
promissory note (all such accounts, instruments, and chattel paper being
the "Accounts");
c. General Intangibles. All general intangibles relating to, or
-------------------
existing in connection with, any Hotel Property or the other Collateral
(all such general intangibles being "General Intangibles");
d. Bank Accounts. The bank accounts of Borrower and the undersigned
-------------
described on Exhibit "A" attached hereto held with the Secured Party and
all Liquid Investments held in such accounts;
-2-
<PAGE>
e. Records. All ledger sheets, files, records, and documents
-------
relating to the Hotel Properties and the foregoing Collateral; and
f. Proceeds. All proceeds of the foregoing Collateral and, to the
--------
extent not otherwise included, all payments under any insurance, indemnity,
warranty, or guaranty of or for the foregoing Collateral.
3. Power and Authority. Debtor has full power and authority to make this
-------------------
agreement.
4. Obligations and This Agreement. Debtor shall perform promptly all
------------------------------
agreements herein, in the Note, and in the other Credit Documents to which they
are a party. Debtor agrees that any amounts paid to Secured Party pursuant to
this Agreement shall be applied in accordance with the provisions of the Credit
Agreement.
5. Ownership of Collateral. At the time Debtor assigns and grants to
-----------------------
Secured Party a security interest in any Collateral, Debtor shall be the
absolute owner thereof and shall have the right to assign and grant such
security interest. Debtor shall defend the Collateral against all claims and
demands of all persons at any time claiming any interest therein adverse to
Secured Party. Debtor shall keep the Collateral free from all liens and security
interests except those for taxes not yet due and the security interest hereby
created.
6. Delivery of Collateral. Debtor covenants and warrants that Debtor, if
----------------------
requested by Secured Party, will provide to Secured Party, a current, true and
complete copy of the Collateral or list of the Collateral, as applicable, until
Debtor satisfies the Obligations in full.
7. Events of Default. An "Event of Default" under the Credit Agreement
-----------------
shall be deemed an Event of Default hereunder ("Event of default").
8. Remedies of Secured Party. When an Event of Default occurs, at any
-------------------------
time thereafter during the continuance of the Default, Secured Party, without
notice, may take all actions permitted under the Credit Documents and exercise
any rights under the Uniform Commercial Code of the State of Texas (the "Uniform
Commercial Code"), rights and remedies of Secured Party under this Agreement, or
otherwise. Secured party may require Debtor to assemble the Collateral and make
it available to Secured Party at a place which is reasonably convenient to both
parties. Unless the Collateral threatens to decline quickly in value or is of a
type customarily sold on a recognized market, Secured Party will give Debtor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or other intended disposition thereof is to be
made. Expenses of retaking, holding, preparing for sale, selling, leasing or the
like shall include Secured Party's reasonable attorney's fees and legal
expenses. Secured Party shall have the authority to enter upon any premises upon
which any of the same, or any Collateral, may be situated and remove the same
therefrom without liability. Debtor shall be entitled to any surplus and shall
-3-
<PAGE>
be liable to Secured Party for any deficiency. The proceeds of any disposition
after default available to satisfy the Obligations shall be applied to the
Obligations in such order and in such manner as Secured Party in its discretion
shall decide.
9. Attorney-in-Fact. Debtor hereby irrevocably appoints Secured Party,
----------------
and any officer or agent of Secured Party as Secured Party may select in its
sole discretion, as Debtor's true and lawful attorney-in-fact, with full power
of substitution (a) from and after the occurrence and during the continuance of
an Event of Default, to (i) endorse Debtor's name on all applications,
documents, paper and instruments necessary or desirable for Secured Party in the
use of the Collateral or (ii) take any other actions with respect to the
Collateral as Secured Party deems in the best interest of Secured Party, and (b)
from and after the occurrence and during the continuance of an Event of Default,
to assign, pledge, convey or otherwise transfer title in or dispose of the
Collateral to anyone. Debtor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable until the Obligations shall
have been paid in full and discharged or the security interests granted to
Debtor by this Security Agreement have been released.
10. Rights Cumulative. All of Secured Party's rights and remedies with
-----------------
respect to the Collateral, whether established by this Agreement, by the Notes,
by any other Credit Documents, or by law shall be cumulative and may be
exercised singularly or concurrently. Debtor acknowledges and agrees that this
Agreement is not intended to limit or restrict in any way the rights and
remedies of Secured Party under the Notes or any other Credit Document, but
rather is intended to facilitate the exercise of such rights and remedies.
Secured Party shall have, in addition to all other rights and remedies given to
it by terms of this Agreement, all rights and remedies allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Collateral or Debtor may be located.
11. Additional Documents. Debtor shall sign any papers furnished by
--------------------
Secured Party which are necessary or desirable in the judgment of Secured Party
to obtain, maintain and perfect the security interest hereunder and to enable
Secured Party to comply with any federal or state law in order to obtain or
perfect Secured Party's interest in the Collateral or to obtain proceeds of the
Collateral.
12. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Agreement nor consent to any departure by Debtor from this Agreement, shall be
effective unless the same is in writing and signed by Secured Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
13. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Texas and the relevant laws
of the United States of America.
-4-
<PAGE>
14. Recordation and Filing. Secured Party shall have the continuing right
----------------------
to record or file a copy of this Agreement in any public records that Secured
Party desires.
15. Subordination. Debtor has subordinated and does hereby subordinate
-------------
all of its rights, liens and security interests in and to the Collateral to the
following: (i) the Credit Documents; (ii) all renewals, substitutions,
extensions, modifications, replacements or amendments of the Credit Documents;
and (iii) the Obligations and all other indebtedness secured by the Credit
Documents and all advances thereunder.
16. Credit Agreement. To the extent that any of the terms or provisions
----------------
of this Agreement are inconsistent with the terms or provisions of the Credit
Agreement, the terms and provisions of the Credit Agreement shall control.
-5-
<PAGE>
17. Complete Agreement. THIS WRITTEN AGREEMENT, THE NOTES AND ALL OTHER
------------------
CREDIT DOCUMENTS ENTERED INTO BETWEEN THE PARTIES REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be duly executed as
of the date first set forth above.
DEBTOR:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By:______________________________
Name:____________________________
Title:___________________________
AGH UPREIT, LLC, a Delaware limited liability
company
By: American General Hospitality Corporation,
member
By:______________________________
Name:____________________________
Title:___________________________
-6-
<PAGE>
3100 GLENDALE JOINT VENTURE.
an Ohio general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:______________________
Name:____________________
Title:___________________
BY: American General Hospitality Operating
Partnership, L.P., member
BY: AGHGP Inc., its general partner,
By:______________________
Name:____________________
Title:___________________
BY: American General Hospitality Operating
Partnership, L.P., general partner
BY: AGH GP, Inc., general partner,
By:______________________
Name:____________________
Title:___________________
-7-
<PAGE>
MDV LIMITED PARTNERSHIP
a Texas limited partnership
BY: AGH UPREIT, LLC, its general partner
BY: American General Hospitality
Corporation, member
By:______________________
Name:____________________
Title:___________________
By: American General Hospitality Operating
Partnership, L.P., member
BY: AGH GP.Inc., general partner
By:______________________
Name:____________________
Title:___________________
-9-
<PAGE>
MADISON MOTEL ASSOCIATES
a Wisconsin general partnership
By: AGH UPREIT, LLC, its partner
By: American General Hospitality
Corporation, member
By:
Name:
Title:
By: American General Hospitality
Operating Partnership, L.P., its
partner
By: AGH GP, Inc., general
partner
By:
Name:
Title:
By: American General Hospitality Operating
Partnership, L.P., member
By: AGH GP, Inc., its general
partner
By:
Name:
Title:
-10-
<PAGE>
183 HOTEL ASSOCIATES, LTD.,
a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:
Name:
Title:
By: American General Hospitality
Operating Partnership, L.P.,
member
By: AGH GP, Inc.,
general partner
By:
Name:
Title:
-11-
<PAGE>
RICHMOND WILLIAMSBURG ASSOCIATES,
LTD., a Texas limited partnership
By: AGH UPREIT LLC, its general partner
By: American General Hospitality
Corporation, member
By:
Name:
Title:
By: American General Hospitality
Operating Partnership, L.P.,
member
By: AGH GP, Inc.,
general partner
By:
Name:
Title:
-12-
<PAGE>
2929 WILLIAMS LIMITED LIABILITY COMPANY,
a Delaware limited liability company
By: AGH UPREIT, LLC
By: American General Hospitality
Corporation, member
By:
Name:
Title:
By: American General Hospitality
Operating Partnership, L.P.,
member
By: AGH GP, Inc., general
partner
By:
Name:
Title:
By: American General Hospitality Operating
Partnership, L.P., its member
By: AGH GP, Inc., general partner
By:
Name:
Title:
AGH GP, INC., its general partner
By:_______________________________________
Name:_____________________________________
Title:____________________________________
SECURED PARTY
-13-
<PAGE>
BANK ONE, TEXAS, N.A.
By:____________________
Name:__________________
Title:_________________
-14-
<PAGE>
- ---------------------------COMPARISON OF FOOTERS--------------------------------
- -FOOTER 1-
- -1-
- -FOOTER 2-
LOCADW\78305\006471
DALLAS\53118.2
7/17/96--9:52 pm
-15-
<PAGE>
This redlined draft, generated by CompareRite - The Instant Redliner shows the
differences between -
original document :I:\DOCSOPEN\LOCADW\0053118.01
and revised document: I:\DOCSOPEN\LOCADW\0053118.02
CompareRite found 21 change(s) in the text
CompareRite found 2 change(s) in the notes
Deletions appear as struck-through text
Additions appear as bold+dbl underlined text
-16-
<PAGE>
EXHIBIT "DD"
[LETTERHEAD OF BATTLE FOWLER LLP]
July 31, 1996
Societe General
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Department Lending
Dallas, Texas 75201
Re: Credit Facility (the "Credit Facility") of up to $100 million to
American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership (the "Borrower") pursuant to a
Credit Agreement (the "Credit Agreement") by and between the
Borrower and Societe Generale, a French banking corporation
acting through its Southwest Agency, as Structuring Agent (the
"Structuring Agent"); Bank One, Texas, N.A., as Administrative
Agent (the "Administrative Agent"); and the banks and other
financial institutions party thereto (collectively referred to
herein as the "Banks")
-----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to the Borrower, in connection with the
Credit Facility. This opinion is being furnished pursuant to Section 3.01 of the
Credit Agreement. Capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement.
<PAGE>
BATTLE FOWLER LLP PAGE 2
In connection with this option, we have examined the following
materials:
(a) the Credit Agreement and the documents executed and delivered in
connection therewith identified on Schedule I hereto (collectively referred to
herein as the "Credit Documents");
(b) the certificate of limited partnership, as amended (the
"Partnership Certificate"), of the Borrower, as certified by the Secretary of
State of Delaware, as being as a true and correct copy of such document as filed
in the office of the Secretary of State;
(c) the amended and restated articles of incorporation (the
"Charter") of American General Hospitality Corporation (the "Company"), as
certified by the State Department of Assessments and Taxation of the State of
Maryland as being a true and complete copy of such document as filed in the
office of the State Department of Assessments and Taxation (the "SDAT");
(d) the amended and restated agreement of limited partnership (the
"Operating Partnership Agreement") of the Borrower, dated as of July ___, 1996,
as certified by the Secretary of AGH GP, Inc., a Nevada corporation ("AGH GP"),
as general partner of the Borrower, on the date hereof as being complete,
correct and in effect;
(e) the partnership agreement, as amended, of each partnership other
than the Borrower (collectively, the "Partnership Subsidiaries") that are
identified as a Property in Partnership in Schedule II hereto, in each case, as
certified by a general partner of such partnership as of the date hereof as
being complete, correct and in effect;
(f) the operating agreement, as amended, and the certificate of
formation, as amended, of each of the limited liability companies identified on
Schedule II hereto (the "LLC Subsidiaries" and together with the Partnership
Subsidiaries the "Subsidiaries") as certified by an official of the office of
the jurisdictions of formation in which such certificate of formation is filed
on the date indicated on such certificate as being a true and complete copy of
such document as filed in such office;
(g) the Bylaws of the Company as certified by the Secretary of the
Company and as the case may be, as of the date hereof as being complete, correct
and in effect;
(h) certificates of good standing issued by the States of Formation
of the Borrower, the Company and the Subsidiaries;
<PAGE>
BATTLE FOWLER LLP PAGE 3
(i) resolutions of the members of AGH UPREIT LLC, and resolution of
AGH UPREIT LLC, as certified by the members of AGH UPREIT LLC as of the date
hereof as being complete, correct and the effect;
(j) a certificate of the Secretary of the Company and each Corporate
Subsidiary, dated as of the date hereof, as to the incumbency and signatures of
certain officers of the Company or such Corporate Subsidiary;
(k) an executed copy of each of the Credit Documents; and
(l) the other instruments and documents delivered at today's closing,
including certificates or telegrams of public officials as to matters set forth
therein and certificates of representatives of the Borrower as to matters set
forth therein.
In rendering this opinion, we have assumed the capacity to sign and
the genuineness of all signatures of all persons executing agreements,
instruments or documents examined or relied upon by us, the authenticity of all
agreements, instruments or documents submitted to us as originals and the
conformity with the original agreements, instruments or documents of all
agreements, instruments or documents submitted to us as copies.
We have also assumed that as to all parties other than the Borrower,
the Company and the Subsidiaries, the due authorization, execution,
acknowledgement as indicated thereon and delivery of documents referred to
herein, and the validity, binding effect and enforceability thereof against all
parties thereto other than the Borrower, the Company, AGH GP, and the
Subsidiaries and that each of the Banks has full power, authority and legal
right, under its charter and other governing documents and all applicable laws
to execute, deliver and perform their respective obligations under the Credit
Agreement and the other documents referred to therein and herein to which it is
a party.
With respect to matters of fact, we have relied upon the written
statements and certificates of officers of AGH GP (on behalf of the Borrower),
and authorized representatives of the LLC Susidiaries and the general partners
of the Partnership Subsidiaries (including, without limitation, the certificate
attached hereto as Exhibit A, referred to herein as the "Officers Certificate"),
---------
representations made by the Borrower in the Credit Agreement, and certificates
of public officials. Where matters are stated to be "to the best of our
knowledge" or "known to us," our knowledge is limited to the actual knowledge of
those attorneys in our office who have directly participated in this engagement,
their
<PAGE>
BATTLE FOWLER LLP PAGE 4
review of documents provided to us by the Borrower, the Company and the
Subsidiaries in connection with this engagement and inquiries of officers of AGH
GP and the Company, the results of which are reflected in the Officers
Certificate. We have not independently verified the accuracy of the matters set
forth in the written statements or certificates upon which we have relied,
including the organization, existence, good standing, assets, business or
affairs of the Borrower, the Company, or any Subsidiary.
Insofar as our opinion relates to (i) matters of Maryland law, we have
relied upon the opinion of Ballard Spahr Andrews & Ingersoll addressed to us,
dated the date hereof, a copy of which is attached hereto as Exhibit B.
---------
Insofar as our opinion relates to matters of Ohio, Wisconsin, Texas or
Nevada law, we have relied exclusively upon the opinions of McDonald, Hopkins,
Buske & Harber Co., Foley & Lardner, Kane, Russel, Coleman & Logan and McDonald
Carano Wilson McCune Bergin Frankovich & Hicks LLP. A copy of each such opinion
is attached hereto as Exhibit C, Exhibit D, Exhibit E and Exhibit F.
--------- --------- --------- ---------
We are not admitted to practice law in any jurisdiction other than the
State of New York and we do not express any opinion as to the laws of any states
or jurisdictions except as to New York law, the Delaware General Corporation
Law, the Delaware Revised Uniform Limited Partnership Act, the Delaware Limited
Liability Company Act and the Federal law of the United States of America.
Upon the basis of and subject to the foregoing and solely in reliance
thereon, we are of the opinion that:
1. Each of the Borrower and the Subsidiaries, is a limited
partnership, general partnership or limited liability company duly incorporated
or formed, as the case may be, validly existing and in good standing under the
laws of its jurisdiction of incorporation or formation with full corporate,
partnership or limited liability company power and authority to own, lease and
operate its properties and to conduct its business and to execute and perform
their respective obligations under the Credit Documents to which they are a
party.
2. The execution and delivery of, and the performance by the
Borrower and the Subsidiaries of their respective obligations under the Credit
Documents have been duly and validly authorized.
<PAGE>
BATTLE FOWLER LLP PAGE 5
3. Each of the Credit Documents has been duly executed and delivered
by the parties thereto.
This opinion is being rendered to you and the other Banks and the
Bank's respective counsel for your and their sole use and may not be made
available to or relied upon by any other person, firm or entity without our
express prior written consent except for future Banks or participants in the
Credit Facility.
Very truly yours,
<PAGE>
SCHEDULE I
----------
CREDIT DOCUMENTS
----------------
A. GENERAL DOCUMENTS
4. Credit Agreement, between American General Hospital Operating
Partnership, L.P. (the "OP"), Bank One, Texas, N.A. ("Bank One"),
Societe Generale ("SG") and the banks;
5. Manager's Consent and Agreement by American General Hospitality Inc.
(the "Manager") and AGH Leasing ("Lessee") in favor of Bank One, SG
and the banks;
6. Environmental Indemnification Agreement by American General
Hospitality Corporation ("AGHC"), AGH UPREIT LLC ("AGH UPREIT") and
each of the Property Ownership Entities in favor of Bank One, SG and
the banks;
7. Guaranty and Contribution Agreement by American General Hospitality
Corporation ("AGHC"), AGH UPREIT, and each of the Property-Owning
Entities;
8. Note(s) in the aggregate amount of $100,000,000 executed by the OP in
favor of Bank One, SG and the Banks;
9. Security Agreement to be executed by the OP in favor of Bank One and
each of the Property Owning Entities;
10. Letter Agreement regarding cash management between the OP, the
property Owning Entities and Bank One;
B. HOLIDAY INN PARK CENTER PLAZA, SAN JOSE
11. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
12. Pledge Agreement by Steve D. Jorns in favor of Lessee;
13. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of Borrower;
14. Assignment of Management Agreements by Lessee in favor of Borrower;
15. General Assignment and Agreement by Lessee in favor of Borrower;
16. Collateral Assignment and Security Agreement by Borrower in favor of
Bank One;
17. Liquor License Company Consent and Agreement between Lessee and SJBMI
in favor of Bank One, SG and the banks;
<PAGE>
2
18. Assignment of Lease and Rents between Borrower and Bank One;
19. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Borrower for the benefit of Bank One;
20. Depository Account Agreement between Lessee, Owner and the local bank;
21. Depository Account Agreement between Lessee, Borrower and Bank One;
22. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
23. Irrevocable direction letter to pay by Borrower to Lessee.
C. HOLIDAY INN MISSION VALLEY, SAN DIEGO
24. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
25. Pledge Agreement by Steve D. Jorns in favor of Lessee;
26. Assignment of Leases, Rents and Security Deposits, between Lessee in
favor of Borrower;
27. Assignment of Management Agreements between Lessee in favor of
Borrower;
28. General Assignment and Agreement by Lessee and in favor of Borrower;
29. Collateral Assignment and Security Agreement, which by Borrower in
favor of Bank One;
30. Liquor License Company Consent and Agreement by Lessee and SDBMI in
favor of Bank One, SG and the banks;
31. Assignment of Leases and Rents between Borrower and Bank One;
32. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Borrower for the benefit of Bank One;
<PAGE>
3
33. Depository Account Agreement between Lessee, Owner and the local bank;
34. Depository Account Agreement between Lessee, Owner and Bank One;
35. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
36. Irrevocable direction letter to pay by Owner to Lessee.
D. DAYS INN OCEAN CITY
37. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
38. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of Borrower;
39. Assignment of Management Agreements by Lessee in favor of Borrower;
40. General Assignment and Agreement by Lessee in favor of borrower;
41. Collateral Assignment and Security Agreement by Borrower in favor of
Bank One;
42. Assignment of Leases and Rents between Borrower and Bank One;
43. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Borrower in favor of Bank One;
44. Depository Account Agreement between Lessee, Owner and the local bank;
45. Depository Account Agreement between Lessee, Owner and Bank One;
46. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
47. Irrevocable direction letter to pay by Owner to Lessee.
E. LE BARON AIRPORT HOTEL
<PAGE>
48. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
49. Pledge Agreement by Steve D. Jorns and Lessee;
50. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of Borrower;
51. Assignment of Management Agreements by Lessee in favor of Borrower;
52. General Assignment and Agreement by Lessee and in favor of Borrower;
53. Collateral Assignment and Security Agreement by Borrower in favor of
Bank One;
54. Liquor License Company Consent and Agreement by Lessee and LBBMI in
favor of Bank One, SG and the banks;
55. Assignment of Leases and Rents by Lessor in favor of Bank One;
56. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Borrower for the benefit of Bank One;
57. Depository Account Agreement between Lessee, Owner and the local bank;
58. Depository Account Agreement between Lessee, Owner and Bank One;
59. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
60. Irrevocable direction letter to pay by Owner to Lessee.
F. FRED HARVEY ALBUQUERQUE HOTEL
61. Lessee Estoppel Acknowledgment and Subordination Agreement, executed
by Lessee in favor of Bank One, SG and the banks;
62. Pledge Agreement by Steve D. Jorns and Lessee;
63. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of Borrower;
<PAGE>
64. Assignment of Management Agreements by Lessee in favor of Borrower;
65. General Assignment and Agreement by Lessee in favor of Borrower;
66. Collateral Assignment and Security Agreement by Borrower in favor of
Bank One;
67. Liquor License Company Consent and Agreement by Lessee and
[Albuquerque Beverage Management, Inc.] in favor of Bank One, SG and
the banks;
68. Assignment of Leases and Rents by Lessor in favor of Bank One;
69. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Borrower for the benefit of Bank One;
70. Depository Account Agreement between Lessee, Owner and the local bank;
71. Depository Account Agreement between Lessee, Owner and Bank One.
72. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
73. Irrevocable direction letter to pay by Owner to Lessee.
G. HOLIDAY INN NEW ORLEANS AIRPORT
74. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
75. Pledge Agreement by Steve D. Jorns and Lessee;
76. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of 2929 Williams Limited Liability Company;
77. Assignment of Management Agreements by Lessee in favor of Owner
("Owner");
78. General Assignment and Agreement by Lessee in favor or Owner;
79. Collateral Assignment and Security Agreement by Owner in favor of Bank
One;
<PAGE>
6
80. Liquor License Company Consent and Agreement by Lessee and [Kenner
Beverage Management, Inc.] in favor of Bank One, SG and the banks;
81. Assignment of Leases and Rents by Owner in favor of Bank One;
82. Mortgage, Security Agreement, Assignment of Rents and Financing
Statement by Owner in favor of Bank One;
83. Depository Account Agreement between Lessee, Owner and the local bank;
84. Depository Account Agreement between Lessee, Owner and Bank One;
85. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
86. Irrevocable direction letter to pay by Owner to Lessee.
H. HILTON HOTEL - TOLEDO
87. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
88. Pledge Agreement by Steve D. Jorns and Lessee;
89. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of 3100 Glendale Joint Venture ("Owner");
90. Assignment of Management Agreements by Lessee in favor of Owner;
91. General Assignment and Agreement by Lessee in favor of the Owner;
92. Collateral Assignment and Security Agreement by Owner in favor of Bank
One;
93. Liquor License Company Consent and Agreement by Lessee and [Ohio
Beverage Management, Inc.] in favor of Bank One, SG and the banks;
94. Assignment of Leases and Rents by Owner in favor of Bank One;
<PAGE>
7
95. Mortgage, Security Agreement, Assignment of Rents and Financing
Statement to be signed by Owner in favor of Bank One;
96. Depository Account Agreement between Lessee, Owner and the local bank;
97. Depository Account Agreement between Lessee, Owner and Bank One;
98. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
99. Irrevocable direction letter to pay by Owner to Lessee.
I. HOTEL MAISON DE VILLE
100. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
101. Pledge Agreement by Steve D. Jorns in favor of Lessee;
102. Assignment of Leases, Rent and Security Deposits by Lessee in favor of
the MDV Limited Partnership ("Owner");
103. Assignment of Management Agreements by Lessee in favor of the Owner;
104. General Assignment and Agreement by Lessee in favor of Owner;
105. Collateral Assignment and Security Agreement by Owner in favor of Bank
One;
106. Liquor License Company Consent and Agreement by Lessee and [American
General Hospitality of Louisiana] in favor of Bank One, SG and the
banks;
107. Assignment of Leases and Rents by Owner in favor of Bank One;
108. Mortgage, Security Agreement, Assignment of Rents and Financing
Statement to be signed by MDV Limited Partnership in favor of Bank
One;
109. Depository Account Agreement between Lessee, Owner and the local bank;
<PAGE>
8
110. Depository Account Agreement between Lessee, Owner and Bank One;
111. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
112. Irrevocable direction letter to pay by Owner to Lessee.
J. HOLIDAY INN SELECT - MADISON
113. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
114. Pledge Agreement, executed by Craig Stark in favor of Lessee;
115. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of the Madison Motel Associates ("Owner");
116. Assignment of Management Agreements by Lessee in favor of Owner;
117. General Assignment and Agreement by Lessee in favor of Owner;
118. Collateral Assignment and Security Agreement by Owner in favor of
Bank One;
119. Liquor License Company Consent and Agreement by Lessee and [Madison
Lounge Incorporated] in favor of Bank One, SG and the banks;
120. Assignment of Leases and Rents by Lessor in favor of Lender;
121. Mortgage, Security Agreement, Assignment of Rents and Financing
Statement by Owner in favor of Bank One.
122. Depository Account Agreement between Lessee, Owner and the local bank;
123. Depository Account Agreement between Lessee, Owner and Bank One;
124. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
125. Irrevocable direction letter to pay by Owner to Lessee.
<PAGE>
9
K. HOLIDAY INN DALLAS DFW WEST
126. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
127. Pledge Agreement by Steve D. Jorns in favor of Lessee;
128. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of 183 Hotel Associates, Ltd ("Owner');
129. Assignment of Management Agreements by Lessee in favor of the Owner;
130. General Assignment and Agreement by Lessee in favor of Owner;
131. Collateral Assignment and Security Agreement by each Owner in favor of
Bank One;
132. Liquor License Company Consent and Agreement by Lessee and [Elf
Management, Inc.] in favor of Bank One, SG and the banks;
133. Assignment of Leases and Rents by Owner in favor of Bank One;
134. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by 183 Hotel Associates, Ltd. in favor of Bank One;
135. Depository Account Agreement between Lessee, Owner and the local bank;
136. Depository Account Agreement between Lessee, Owner and Bank One;
137. Credit Card Receivables direction letter by Lessee to the Credit Card
Companies;
138. Irrevocable direction letter to pay by Owner to Lessee.
L. HAMPTON INN RICHMOND AIRPORT
139. Lessee Estoppel Acknowledgment and Subordination Agreement by Lessee
in favor of Bank One, SG and the banks;
<PAGE>
140. Assignment of Leases, Rents and Security Deposits by Lessee in favor
of Richmond Williamsburg Associates, Ltd. ("Owner");
141. Assignment of Management Agreements by Lessee in favor of Owner;
142. General Assignment and Agreement by Lessee in favor of Owner
143. Collateral Assignment and Security Agreement, executed by Owner in
favor of Bank One;
144. Assignment of Leases and Rents by Owner in favor of Bank One;
145. Deed of Trust, Security Agreement, Assignment of Rents and Financing
Statement by Owner in favor of Bank One;
146. Depository Account Agreement between Lessee, Owner and the local bank;
147. Depository Account Agreement between Lessee, Owner and Bank One;
148. Credit Card Receivables direction letter by Lessee to the Credit Card
Compaines;
149. Irrevocable direction letter to pay by Owner to Lessee.
<PAGE>
Schedule II
-----------
ENTITY STATE OF FORMATION
- ------ -------------------
LLC Subsidiaries
- ----------------
AGH UPREIT LLC Delaware
2929 Williams Limited Delaware
Liability Company
Partnership Subsidiaries
- ------------------------
3100 Glendale Joint Ohio
Venture (Ohio General Partnership)
MDV Limited Partnership (Texas limited partnership) Texas
Madison Motel Associates (Wisconsin general partnership) Wisconsin
183 Hotel Associates, Ltd. (Texas limited partnership) Texas
Richmond Williamsburg Associates, Ltd. (Texas limited Texas
partnership)
<PAGE>
Exhibit A
---------
OFFICERS CERTIFICATE
<PAGE>
Exhibit B
---------
[Opinion of Ballard Spahr Andrews & Ingersoll]
<PAGE>
Exhibit C
---------
[Opinion of McDonald Hopkins, Buske & Harber Co. related to matters of Ohio law]
<PAGE>
Exhibit D
---------
[Opinion of Foley & Lardner related to matters of Winconsin law]
<PAGE>
Exhibit E
---------
[Opinion of Kane, Russel, Coleman & Logan related to matters of Texas law]
<PAGE>
[LETTERHEAD OF BATTLE FOWLER LLP]
July ____, 1996
Societe Generale
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Real Estate Department
Dallas, Texas 75201
Re: Credit Facility (the "Credit Facility") of up to $100 million to
American General Hospitality Operating Partnership, L.P., a
Delaware limited partnership (the "Borrower") pursuant to a
Credit Agreement (the "Credit Agreement") by and between the
Borrower and Societe Generale, a French banking corporation
acting through its Southwest Agency, as Structuring Agent (the
"Structuring Agent"); Bank One, Texas, N.A., as Administrative
Agent (the "Administrative Agent"); and the banks and other
financial institutions party thereto (collectively referred to
herein as the "Banks")
----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to AGH Leasing, L.P., a Delaware limited
partnership, in connection with the Credit Facility. This opinion is being
furnished pursuant to section 3.01 of the Credit Agreement. Capitalized terms
used herein and not defined herein shall have the meanings ascribed to such
terms in the Credit Agreement.
<PAGE>
BATTLE FOWLER LLP PAGE 2
In connection with this opinion, we have examined the following
materials:
(a) the documents that Lessee executed and delivered in connection
with the Credit Agreement identified on Schedule I hereto (collectively
referred to herein as the "Lessee Documents");
(b) the certificate of limited partnership, as amended (the
"Partnership Certificate"), of Lessee, as certified by the Secretary of State of
the State of Delaware on July 12, 1996 as being as a true and correct copy of
such document as filed in the office of the Secretary of State;
(c) The Agreement of Limited Partnership of Lessee dated as of the
date hereof and certified by the Secretary of AGHL GP, Inc., a Delaware
corporation ("General Partner"), general partner of Lessee;
(d) the certificate of incorporation of General Partner, as certified
by the Secretary of State of the State of Delaware on May 28, 1996 as being a
true and correct copy of such document as filed in the office of the Secretary
of State;
(e) the Bylaws of General Partner, as certified by he Secretary of
General Partner, as of the date hereof as being complete, correct and in effect;
(f) certificates of good standing issued by the State of Delaware for
Lessee and General Partner;
(g) resolutions of the board of directors of General Partner adopted
by unanimous written consent and dated July 11, 1996, as certified by the
Secretary of such Corporate Subsidiary as of the date hereof as being true and
complete and in effect;
(h) a certificate of the Secretary of General Partner and each
Corporate Subsidiary, dated as of the date hereof, as to the incumbency and
signatures of certain officers of General Partner;
(i) the other instruments and documents delivered at today's closing,
including certificates or telegrams of public officials as to matters set forth
therein and certificates of representatives of the Lessee as to matters set
forth therein.
In rendering this opinion, we have assumed the capacity to sign and
the genuineness of all signatures of all persons executing agreements,
instruments or documents examined or relied upon by us, the authenticity of all
agreements, instruments or documents submitted to us as originals and the
conformity with the original
<PAGE>
BATTLE FOWLER LLP PAGE 3
agreements, instruments or documents of all agreements, instruments or documents
submitted to us as copies.
We have also assumed (a) as to all parties other than the Lessee and
General Partner, the due authorization, execution, acknowledgement as indicated
thereon and delivery of documents referred to herein, and the validity, binding
effect and enforceability thereof against all parties thereto other than the
Lessee and General Partner, that each of the Banks has full power, authority and
legal right, under its charter and other governing documents and all applicable
laws to execute, deliver and perform their respective obligations under the
Credit Agreement and the other documents referred to therein and herein to which
it is a party.
With respect to matters of fact, we have relied upon the written
statements and certificate of officers of General Partner (on behalf of the
Lessee), representations made by the Lessee in the Lessee Documents, and
certificates of public officials including, without limitation, the certificate
attached hereto as Exhibit A (the "Certificate"). Where matters are stated to be
---------
"to the best of our knowledge" or "known to us," our knowledge is limited to the
actual knowledge of the those attorneys in our office who have directly
participated in this engagement, their review of documents provided to Lessee
and General Partner in connection with this engagement and inquiries of officers
of General Partner the results of which are reflected in the Officers
Certificate. We have not independently verified the accuracy of the matters set
forth in the written statements or certificates upon which we have relied,
including the organization, existence, good standing, assets, business or
affairs of the Lessee or General Partner.
Except for the opinions set forth in paragraphs (1) through (4) below,
we express no opinions and no opinions should be implied.
We are not admitted to practice law in any jurisdiction other than the
State of New York and we do not express any opinion as to the laws of any states
of jurisdictions except as to New York law, the Delaware General Corporation
Law, the Delaware Revised Uniform Limited Partnership Act, the Delaware Limited
Liability Company Act and the Federal law of the United States of America.
Upon the basis of and subject to the foregoing and solely in reliance
thereon, we are of the opinion that:
<PAGE>
BATTLE FOWLER LLP PAGE 4
its properties and to conduct its business and to execute and perform their
respective obligations under the Lessee Documents.
2. General Partner is a corporation duly incorporated and validly
existing under and by virtue of the laws of the State of Delaware and is in good
standing with the Secretary of State of Delaware, with full corporate power to
own, lease and operate its properties and to conduct its business and to
execute and perform the obligations on behalf of Lessee under the Lessee
Documents.
3. The execution and delivery of, and the performance by the Lessee
of its respective obligations under, the Lessee Documents have been duly and
validly authorized.
4. Each of the Lessee Documents has been duly executed and delivered
by Lessee.
This opinion is being rendered to you and the other Banks and the
Bank's respective counsel for your and their sole use and may not be made
available to or relied upon by any other person, firm or entity without our
express prior written consent, except for future Banks or participants in the
Credit Facility.
Very truly yours,
<PAGE>
EXHIBIT "EE"
[LETTERHEAD OF KANE, RUSSELL, COLEMAN & LOGAN]
July 31, 1996
Societe Generale,
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Commercial Real Estate Lending
Dallas, Texas 75021
Re: Credit Facility (the "Credit Facility") of up to
$100,000,000.00 to AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Borrower") pursuant to a Credit
Agreement (the "Credit Agreement") by and among the
Borrower; SOCIETE GENERALE, a French banking
corporation acting through its Southwest Agency, as
Structuring Agent (the "Structuring Agent"); BANK ONE,
TEXAS, N.A., as Administrative Agent (the
"Administrative Agent"); and the banks and other
financial institution party thereto (collectively
referred to herein as the "Banks").
Gentlemen:
In connection with the Credit Facility, we have acted as special Texas
counsel to Borrower. American General Hospitality Corporation, a Maryland
corporation ("AGHC"), and 183 Hotel Associates, Ltd., a Texas limited
partnership ("Mortgagor") as well as MDV Limited Partnership, a Texas limited
partnership, ("MDV") and Richmond Williamsburg Associates, Ltd., a Texas limited
partnership ("RW") (Mortgagor, MDV and RW are collectively referred to herein as
the "Partnerships"), and American General Hospitality, Inc., a Texas corporation
("AGHI"). The Credit Facility is evidenced, in part, by certain promissory notes
(the "Notes") executed by the Borrower and payable to the Banks, the Credit
Agreement, the documents described below and the other documents executed in
connection with the Credit Facility
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 2
(collectively, the "Credit Documents"). The Mortgagor is leasing certain real
and personal property (collectively, the "Property") to AGH Leasing L.P., a
Delaware limited partnership ("Lessee") pursuant to a lease agreement
(collectively herein, the "Lease") between such parties. The real property is
located in the County of Tarrant (the "County") in the State of Texas (the
"State").
1. DOCUMENTS REVIEWED. For purposes of this opinion (the "Opinion
------------------
Letter"), we have examined the following documents, all of which are dated July
31, 1996, unless otherwise specified:
(a) Deed of Trust, Security Agreement, Assignment of Rents and
Financing Statement (the "Mortgages"), executed by the Mortgagor, securing
payment of the Notes covering each of the Property;
(b) Assignment of Leases, Rents and Security Deposits (the "Mortgagor
Assignment of Leases"), executed by the Mortgagor, further securing payment
of the Notes:
(c) UCC Financing Statements executed by the Mortgagor to be filed in
the real property records (the "Records") of the County and with the
Secretary of State (the "Secretary of State") of the State (respectively,
the "Mortgagor County Financing Statement" and the "Mortgagor State
Financing Statement" and collectively the "Mortgagor Financing
Statements");
(d) Assignment of Leases, Rents and Security Deposits (the "Lessee
Assignment of Leases"), executed by the Lessee in favor of the Mortgagor
securing the Lessee's obligations under the Lease;
(e) UCC Financing Statements executed by the Lessee to be filed in
the Records and with the Secretary of State (respectively, the "Lessee
County Financing Statement" and the "Lessee State Financing Statement" and
collectively the "Lessee Financing Statements").
(f) Credit Agreement;
(g) The Notes;
(h) General Assignments and Agreements ("General Assignments") by and
among the following
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 3
(i) Lessee and Borrower (as to Holiday Inn Park Center Plaza,
Holiday Inn Mission valley, Days Inn Ocean City, and Fred
Harvey Albuquerque Airport Hotel);
(ii) Lessee and 2929 Williams Limited Liability Company,
("2929") a Delaware Limited Liability Company (as to
Holiday Inn New Orleans Airport);
(iii) Lessee and 3100 Glendale Joint Venture, ("3100) an Ohio
joint venture (as to Hilton Hotel-Toledo);
(iv) Lessee and MDV (as to Hotel Maison de Ville);
(v) Lessee and Madison Motel Associates, ("Madison") a
Wisconsin general partnership (as to Holiday Inn Select
Madison);
(vi) Lessee and Mortgagor (as to Holiday Inn DFW Airport West);
and
(vii) Lessee and RW (as to Hampton Inn Richmond Airport).
(i) Collateral Assignment and Security Agreements ("Collateral
Assignments") by and among the following:
(i) Mortgagor and Administrative Agent;
(ii) 2929 and Administrative Agent;
(iii) 3100 and Administrative Agent;
(iv) MDV and Administrative Agent;
(v) Madison and Administrative Agent;
(vi) RW and Administrative Agent; and
(vii) Borrower and Administrative Agent.
(j) Assignments of Management Agreements ("Management Assignments")
by and among the following:
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 4
(i) Lessee and Borrower;
(ii) Lessee and 2929;
(iii) Lessee and 3100;
(iv) Lessee and MDV;
(v) Lessee and Madison;
(vi) Lessee and Mortgagor; and
(vii) Lessee and RW.
(k) Environmental Indemnification Agreement ("Environmental
Indemnity;) by and among Mortgagor, AGHC, Borrower and all of the corporate
and partnership subsidiaries (excepting 455 Meadowlands, Ltd., a Texas
limited partnership and DFW South I Limited Partnership, a Texas limited
partnership) of the Borrower and AGHC, in favor of the Banks.
(l) Guaranty and Contribution Agreement ("Guaranty") by and among
AGHC, AGH Upreit LLC, 3100, MDV, Madison, Mortgagor, RW, and 2929
(collectively, the "Guarantors") in favor of the Banks;
(m) Liquor License Company Consents and Agreements ("Liquor
Consents") by and between Lessee and various corporate entities owned by
Steven D. Jorns;
(n) Liquor License Company Pledge Agreements ("Liquor Pledges") by
and between Steven D. Jorns and Lessee;
(o) Security Agreement ("Security Agreement") by and among Borrower,
Banks, AGH Upreit LLC, MDV, Madison, 183, RW, and 2929;
(p) Manage's Consent and Agreement ("Manager's Consent") by and
between AGHI and Lessee; and
(q) Irrevocable Direction to Pay Rent to Lessee from the Borrower,
3100, MDV, Madison, 183, RW, and 2929.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 5
For purposes of this Opinion Letter, all of the documents described in clauses
(a)-(q) above and executed by the Mortgagor, Lessee, Borrower. Guarantors of
AGHI are hereinafter collectively referred to as the "Executed Documents."
In connection with the opinions hereinafter set forth, we have limited the
scope of the review to the Executed Documents. In addition, in connection with
the opinions hereinafter set forth, we have reviewed such other documents and
certificates of public officials and certificates of representatives of Borrower
and Mortgagor, and have given consideration to such matters of law and fact, as
we have deemed appropriate in our professional judgment, to render such
opinions.
2. OPINIONS. Subject to the matters set forth in subsequent portions of
--------
this Opinion Letter, it is our opinion that:
(a) Each of the Executed Documents constitutes the legal, valid and
binding obligation of the parties thereto, enforceable against the parties
thereto in accordance with their terms.
(b) The Mortgages and the Mortgagor County Financing Statement are in
proper form for filing in the Records and the Mortgagor State Financing
Statement is in proper form for filing with the Secretary of State. Upon
the recording of the Mortgages and the Mortgagor County Financing Statement
in the Records, and upon the filing of the Mortgagor State Financing
Statement with the Secretary of State, no other recording, filing or other
action under the laws of the State is required in order to perfect the
liens in the Property, the security interest in the fixtures created
thereby and the security interest in the personalty described therein.
(c) Upon proper filing of the Mortgagor County Financing Statement in
the Records and the Mortgagor State Financing Statement with the Secretary
of State, the "Said Indebtedness" under the Mortgages will be secured by a
validly created, perfected security interest in favor of the Administrative
Agent for the benefit of the Banks in and to all the right, title and
interest of the Mortgagor in and to the collateral described in the
Mortgagor Financing Statements, to the extent such collateral is located in
the State, and upon the proper filing of the Mortgages in the Records, the
"Said Indebtedness" under the Mortgages will be secured by a validly
created, perfected mortgage lien in favor of the Administrative Agent for
the benefit of the Banks in and to all the right, title and interest of the
Mortgagor in and to the real property and fixtures described in the
Mortgages.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 6
(d) The Lessee County Financing Statement is in proper form for
filing in the Records, and the Lessee State Financing Statement is in
proper form for filing with the Secretary of State. Upon the recording of
the Lessee County Financing Statement in the Records, and upon the filing
of the Lessee State Financing Statement with the Secretary of State, no
other recording, filing or other action under the laws of the State is
required in order to perfect that liens in the property described therein.
(e) Upon proper filing of the Lessee County Financing Statement in
the Records and the Lessee State Financing Statement with the Secretary of
State, the Lessee's obligations under the Lease will be secured by a
validly created, perfected security interest in favor of the Mortgagor in
and to all the right, title and interest of the Lessee in and to the
collateral described in the Lessee Financing Statements, to the extent such
collateral is located in the State.
(f) There are no stamp, recording or similar taxes required to be
paid in connection with the execution, delivery, recording or enforcement
of the Mortgage except for nominal per page recording fees.
(g) The Mortgagor, the Lessee and the Partnerships are each
authorized to do business and are in good standing in the State.
(h) The Partnerships are each duly formed and validly existing under
State law, and all actions or approvals by each of the Partnerships, and
their general partners necessary to bind the Partnerships under the
Executed Documents have been taken or obtained, and each has duly executed
and delivered the Executed Documents.
(i) AGHI is duly formed and validly existing under State law, and has
the requisite corporate power and authority to own its assets and carry out
its business, and all necessary corporate actions have been taken to bind
AGHI under the Executed Documents to which it is a party, and AGHI has duly
executed and delivered the applicable Executed Documents.
(j) To the best of our current actual knowledge, no approval,
authorization or other action by any governmental authority of the State,
is required in connection with the execution and delivery of the Executed
Documents by the Mortgagor and/or the Lessee, and the consummation of the
transactions contemplated thereby.
(k) Based on adherence to existing judicial precedents under State
law, a State court would hold that the choice of Texas law to govern the
construction and interpretation of the provisions of the Credit Documents
would be enforceable.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 7
(l) Assuming that no fees, charges, benefits or other compensation
will be paid, directly or indirectly to you or for your benefit, except as
specified in the Executed Documents and the letter agreement dated June 12,
1996 by and among the Banks, the Borrower and AGHC ("Fee Letter"), and
assuming that no amounts to be paid as specified in the Executed Documents
or the Fee Letter constitute a penalty, the Credit Facility, as evidenced
by the Executed Documents and the Fee Letter does not violate the usury
laws of the State.
3. ASSUMPTIONS. Notwithstanding any provision in this Opinion Letter to
-----------
the contrary, we have assumed, without investigation the following:
(a) CAPACITY. We have assumed the legal capacity of each individual
--------
signing one or more of the Executed Documents or other documentation upon
which this Opinion Letter has been based.
(b) BANKS' AUTHORITY. The Banks are authorized to make the Credit
----------------
Facility in accordance with the Credit Documents. The Executed Documents,
and the transactions evidenced thereby, are valid, binding and enforceable
with regard to the Banks and/or any other parties executing the Executed
Documents other that the Mortgagor and the Lessee.
(c) OTHER PARTIES' AUTHORITY. Except for the Partnerships and AGHI.
------------------------
Each of the other parties to any of the Executed Documents are each duly
formed, are validly existing, and are authorized to do business and in good
standing under the laws of their respective states of creation, are
authorized to do business in Texas and each has the requisite
organizational power and authority to own its assets, transact the business
in which it will be engaged in connection with the Credit Facility, to
execute and deliver the Executed Documents in the capacity therein stated,
and to perform its obligations under the Executed Documents.
(d) GENUINENESS AND AUTHENTICITY. All signatures appearing on all
----------------------------
Executed Documents are genuine; all documents and records submitted to us
as originals are authentic; all documents and records submitted to us as
copies conform to the corresponding original documents and records; and all
statements of fact therein are true.
(e) CONTACTS. Substantial negotiations for the Credit Facility and
---------
the closing of the Credit Facility occurred in Texas. The Structuring
Agent's and the Borrower's and Lessee's principal place of business is in
Texas. The Credit Facility will be funded out of New York. Repayments
under the Credit Facility will be made in Texas.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 8
(f) NO MUTUAL MISTAKE. There has not been any mutual mistake of fact
------------------
or misunderstanding, fraud, duress or undue influence
(g) GOOD FAITH. The conduct of the parties to the Credit Facility
-----------
has complied with any requirement of good faith, fair dealing and
conscionability.
(h) NO UNDERSTANDINGS. There are no agreements or understandings
------------------
among the parties, written or oral, and there is no usage of trade or
course of prior dealing among the parties that would, in either case,
define, supplement or qualify the terms of the Executed Documents.
(i) COLLATERAL DESCRIPTION. The description of the collateral in the
-----------------------
Security Documents is accurate.
(j) USURY. We have assumed with your consent, for purposes of
------
applying State usury laws, that the Banks, Borrower, Mortgagor and any
Guarantor as of the effective date of the Executed Documents, (i) do not
intend to contract in the Executed Documents for interest to be payable to,
or charged or received by, the Banks in an amount, or at a rate, in excess
of the maximum amount allowed by Applicable Laws, and (ii) have not
arranged or structured the terms of the Executed Documents as a device or
subterfuge for the payment of interest in an amount, or at a rate, in
excess of the maximum amount allowed by law.
4. QUALIFICATIONS. The opinions expressed in Section 2 above are also
---------------
subject to the following qualifications:
(a) SPECIFIED LAWS. The opinions contained in Section 2 as to the
---------------
enforceability of the Security Documents and Executed Documents are subject
to the qualification that enforcement of the Security Documents and
Executed Documents further subject to the following: (i) the rights of the
United States under the Federal Tax Lien Act of 1966, as amended; (ii) the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, the doctrine of commercial reasonableness, and other laws
affecting the rights creditors and/or the collection of debtor's
obligations generally; and (iii) principles of equity and/or exercise of
judicial discretion in accordance with principles of equity, which may
limit the availability of certain equitable remedies.
(b) GENERAL LAWS. The opinions contained in Section 2 as to the
-------------
enforceability of the Security Documents and Executed Documents are further
subject to the qualification that the enforceability of certain of the
remedial, waiver and
<PAGE>
Societe Generale
Bank One. Texas, N.A.
July 31, 1996
Page 9
enforcement provisions of the Security Documents and Executed Documents are
subject to other applicable laws, rules and regulations in addition to
those described in subsection 4(a) above; however, such laws, in our
opinion, should not substantially interfere with the practical realization
of the benefits expressed in the Security Documents and Executed Documents,
except for the economic consequences of any procedural delay which may
result from such laws, rules and regulations.
(c) USURY.
-----
(1) The opinions expressed in Section 2 are based upon the
following additional assumptions (without deciding or
opining with respect to such assumptions):
(i) That the late charges and default interest
contracted for by the Banks will be "spread " over the
entire outstanding balance of the Credit Facility for the
full term thereof to determine whether such amounts,
together with the stated accrued interest, exceed the
maximum amount of interest allowed by law; and that the case
Fisher v. Westinghouse Credit Corp., 760 S.W.2d 802 (Tex.
----------------------------------
App-Dallas 1988, no writ.) will not be followed by Texas
courts. In Fisher, the Court ruled that a "a late fee which
------
is computed as interest on past-due interest, accruing
daily, and not a one-time charge, is considered a separate
agreement to be tested for usury separate from any
underlying contract." As a result, the unpaid installment
was considered a separate loan with a term equal to the
period of time it remained unpaid, and the late fee was held
to be usurious.
(ii) That each and every "usury savings clause",
"usury cap" and "spreading clause" contained in the Executed
Documents, which purports to limit the amounts payable
thereunder, will be strictly complied with by the Banks,
will be given its intended effect by the courts of the
State, will also be applied by the Banks, if necessary, to
any monies paid the Banks found to be interest or treated as
interest under the Executed Documents, and will supersede
and control over any conflicting provisions contained in the
Executed Documents.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 10
(iii) That any fees which have been or which may be paid to
the Banks or to any other party, including, without limitation,
inspection fees, appraisal fees and attorneys' fees are, or will
be, both for services actually rendered and reasonable in any
amount
(iv) That the Banks will comply with the State usury laws
in charging and receiving any amounts constituting interest under
State law.
(v) That the Banks will comply with the terms of the
Executed Documents in crediting to Borrower against the Loan or
refunding to Borrower the amount of any charges or interest paid
which would constitute usury if not so credited or refunded to
Borrower.
(d) Finally, we express no opinion in the context of State Laws
whether or not any commitment, funding or letter of credit fee
set forth in the Executed Documents, interest on interest, "LIBOR
Breakage Costs" as defined in the Credit Agreement, prepayment
charges, attorneys' fees, late charges, or other similar
limitations on the calculation of interest designed to protect
borrowers under State Laws would be characterized as interest on
the Credit Facility or as reducing the amount of the Credit
Facility principal available to Borrower.
5. LIMITATIONS. This Opinion Letter is issued subject to the following
-----------
limitations:
(a) LICENSED ONLY IN TEXAS. We are licensed to practice law only in
----------------------
the State of Texas and we express no opinion with respect to the effect of
any laws other than the laws of the State of and laws of the United States
of general application to transactions in the State of Texas.
(b) SUBSEQUENT EVENTS. We undertake no obligation to advise you of
-----------------
facts or changes in law occurring after the date of this Opinion Letter
which might affect the opinions expressed herein.
(c) CAPTIONS. The captions in this Opinion Letter are for
---------
convenience of reference only and shall not limit, amplify or otherwise
modify the provisions hereof.
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 11
(d) NO IMPLIED OPINIONS. This Opinion Letter is limited to the
-------------------
matters expressly set forth herein, and no opinion is to be implied or may
be inferred beyond the matters expressly so stated herein. Moreover, unless
explicitly addressed in this Opinion Letter, the foregoing opinions do not
address any of the following legal issues, and we specifically express no
opinion with respect thereto:
(a) Federal securities laws and regulations administered by the
Securities and Exchange Commission and state "Blue Sky" laws
and regulations:
(b) Federal Reserve Board margin regulations:
(c) Pension and employee benefit laws and regulations (e.g.,
ERISA):
(d) Federal and state antitrust and unfair competition laws and
regulations:
(e) Federal and state laws and regulations concerning filing and
notice requirements (e.g., Hart-Scott-Rodino and Exon-
Florio);
(f) Compliance with fiduciary duty requirements:
(g) Fraudulent transfer and fraudulent conveyance laws:
(h) Federal and state environmental laws and regulations:
(i) Federal and state land use and subdivision laws and
regulations;
(j) Federal and state tax laws and regulations;
(k) Federal patent, copyright and trademark, state trademark and
other Federal and state intellectual property laws and
regulations;
(l) Federal and state racketeering laws and regulations (e.g.,
RICO);
(m) Federal and state labor laws and regulations;
(n) Other Federal and state statutes of general application to
the extent they provide for criminal prosecution (e.g., mail
fraud and wire fraud statutes); and
<PAGE>
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 12
(o) State liquor laws and regulations, or the effect thereof on
any of the Executed Documents.
(e) FINANCIAL INFORMATION. We have made no examination or
---------------------
investigation to verify the truth, accuracy, or completeness of any
financial, accounting or statistical information furnished to the Banks and
express no opinion with respect thereto.
(f) RESTRICTION ON USE. This Opinion Letter is furnished to you and
------------------
the other Banks and your and the other Banks' respective counsel and is
solely for your and the other Banks' benefit, and may not be relied upon
by, nor copies delivered to, any other person without our prior written
consent except for future Banks or participants in the Credit Facility and
their counsel.
Very truly yours,
KANE, RUSSELL, COLEMAN & LOGAN, P.C.
By:___________________________________
Gordon B. Russell, Vice President
GBR/tll
<PAGE>
EXHIBIT "FF"
FORM OF LOCAL COUNSEL OPINION
-----------------------------
____________________
Societe Generale,
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Real Estate Department
Dallas, Texas 75201
Re: Credit Facility (the "Credit Facility") of up to
$100,000,000.00 to AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Borrower") pursuant to a Credit
Agreement (the "Credit Agreement") by and between the
Borrower SOCIETE GENERALE, a French banking corporation
acting through its Southwest Agency, as Structuring
Agent (the "Structuring Agent"); BANK ONE, TEXAS, N.A.,
as Administrative Agent (the "Administrative Agent");
and the banks and other financial institution party
thereto (collectively referred to herein as the
"Banks").
Gentlemen:
In connection with the Credit Facility, we have acted as special _______ counsel
to [Borrower/[_______________, a _______________ ("Mortgagor")]. The Credit
Facility is evidenced, in part, by certain promissory notes (the "Notes")
executed by the Borrower and payable to the Banks, the Credit Agreement, the
documents described below and the other documents executed in connection with
the Credit Facility (collectively, the "Credit Documents"). The Mortgagor is
leasing certain real and personal property (the "Property") to AGH Leasing,
L.P., a Delaware limited partnership ("Lessee") pursuant to a Lease Agreement
(the "Lease") between such parties. The real property is located in the County
of ________ (the "County") and the State of _________ (the "State").
<PAGE>
1. DOCUMENTS REVIEWED. For purposes of this opinion (the "Opinion
------------------
Letter"), we have examined the following documents, all of which are dated
_____, 1996, unless otherwise specified:
(a) [Deed of Trust/Mortgage], Security Agreement, Assignment of Rents
and Financing Statement (the "Mortgage"), executed by the Mortgagor,
securing payment of the Notes, covering the Property;
(b) Assignment of Leases, Rents and Security Deposits (the "Mortgagor
Assignment of Leases"), executed by the Mortgagor, further securing payment
of the Notes;
(c) UCC Financing Statements executed by the Mortgagor to be filed in
the real property records (the "Records") of the County and with the
Secretary of State (the "Secretary of State") of the State (respectively,
the "Mortgagor County Financing Statement" and the "Mortgagor State
Financing Statement" and collectively the "Mortgagor Financing
Statements");
(d) Assignment of Leases, Rents and Security Deposits (the "Lessee
Assignment of Leases"), executed by the Lessee in favor of the Mortgagor
securing the Lessee's obligations under the Lease; and
(e) UCC Financing Statements executed by the Lessee to be filed in
the Records and with the Secretary of State (respectively, the "Lessee
County Financing Statement" and the "Lessee State Financing Statement" and
collectively the "Lessee Financing Statements").
For purposes of this Opinion Letter, the Mortgage and the Mortgagor Assignment
of Leases are hereinafter collectively referred to as the "Security Documents".
All of the documents described in clauses (a)-(e) above and executed by the
Mortgagor or the Lessee are hereinafter collectively referred to as the
"Executed Documents."
2. OPINIONS. Subject to the matters set forth in subsequent portions of
--------
this Opinion Letter, it is our opinion that:
(a) Each of the Security Documents constitutes the legal, valid and
binding obligation of the Mortgagor, enforceable against the Mortgagor in
accordance with their terms.
(b) The Lessee Assignment of Leases constitutes the legal, valid and
binding obligation of the Lessee, enforceable against the Lessee in
accordance with its terms.
(c) The Mortgage and the Mortgagor County Financing Statement are in
proper form for filing in the Records, and the Mortgagor State Financing
Statement
<PAGE>
is in proper form for filing with the Secretary of State. Upon the
recording of the Mortgage and the Mortgagor County Financing Statement in
the Records, and upon the filing of the Mortgagor State Financing Statement
with the Secretary of State, no other recording, filing or other action
under the laws of the State is required in order to perfect the liens in
the Property, the security interest in the fixtures created thereby and the
security interest in the personally described therein.
(d) Upon proper filing of the Mortgagor County Financing Statement in
the Records and the Mortgagor State Financing Statement with the Secretary
of State, the "Said Indebtedness" under the Mortgage will be secured by a
validly created, perfected security interest in favor of the Administrative
Agent for the benefit of the Banks in and to all the right, title and
interest of the Mortgagor in and to the collateral described in the
Mortgagor Financing Statements, to the extent such collateral is located in
the State, and upon the proper filing of the Mortgage in the Records, the
"Said Indebtedness" under the Mortgage will be secured by a validly
created, perfected mortgage lien in favor of the Administrative Agent for
the benefit of the Banks in and to all the right, title and interest of the
Mortgagor in and to the real property and fixtures described in the
Mortgage.
(e) The Lessee County Financing Statements is in proper form for
filing in the Records, and the Lessee State Financing Statement is in
proper form for filing with the Secretary of State. Upon the recording of
the Lessee County Financing Statements in the Records, and upon the filing
of the Lessee State Financing Statements with the Secretary of State, no
other recording, filing or other action under the laws of the State is
required in order to perfect the liens in the property described therein.
(f) Upon proper filing of the Lessee County Financing Statement in
the Records and the Lessee State Financing Statement with the Secretary of
State, the Lessee's obligations under the Lease will be secured by a
validly created, perfected security interest in favor of the Mortgagor in
and to all the right, title and interest of the Lessee in and to the
collateral described in the Lessee Financing Statements, to the extent such
collateral is located in the State.
(g) There are no stamp, recording or similar taxes required to be
paid in connection with the execution, delivery, recording or enforcement
of the Mortgage except as follows:
(h) The Mortgagor and the Lessee are authorized to do business and in
good standing in the State.
(i) To our knowledge after due inquiry, no approval, authorization or
other action by any governmental authority of the State, is required in
connection with the execution and delivery of the Executed Documents by the
Mortgagor and/or the Lessee, and the consummation of the transactions
contemplated thereby.
<PAGE>
(j) Based on adherence to existing judicial precedents under State
law, except for those matters under the Security Documents related to the
perfection of liens on and security interests in real estate, fixtures and
personal property and the exercise of remedies against such collateral, a
State court would hold that the choice of Texas law to govern the
construction and interpretation of the provisions of the Credit Documents,
including without limitation those provisions related to usury, would be
enforceable.
3. ASSUMPTIONS. In delivery of the opinions expressed in Section 2
-----------
above, we have assumed the following:
(a) CAPACITY. We have assumed the legal capacity of each individual
--------
signing one or more of the Executed Documents or other documentation upon
which this Opinion Letter has been based.
(b) BANKS' AUTHORITY. The Banks are authorized to make the Credit
----------------
Facility in accordance with the Credit Documents. The Executed Documents,
and the transactions evidenced thereby, are valid, binding and enforceable
with regard to the Banks and/or any other parties executing the Executed
Documents other than the Mortgagor and the Lessee.
(c) MORTGAGOR'S AND LESSEE'S AUTHORITY. The Mortgagor and the Lessee
----------------------------------
are duly formed, are validly existing, and are authorized to do business
and in good standing under the laws of their respective states of creation.
The Mortgagor has the requisite [partnership] power and authority to own
its assets, to transact the business in which it will be engaged in
connection with the Property, to execute and deliver the Executed Documents
in the capacity therein stated, and to perform its obligations under the
Security Documents. The Lessee has the requisite partnership power and
authority to own its assets, to transact the business in which it will be
engaged in connection with the Property, to execute and deliver the Lessee
Assignment of Leases in the capacity therein stated, and to perform its
obligations under the Lessee Assignment of Leases. Each of the Executed
Documents has been duly executed and delivered by the Mortgagor and the
Lessee, as applicable.
(d) GENUINENESS AND AUTHENTICITY. All signatures appearing on all
----------------------------
Executed Documents are genuine; all documents and records submitted to us
as originals are authentic; all documents and records submitted to us as
copies conform to the corresponding original documents and records; and all
statements of fact therein are true.
(e) CONTRACTS. Substantial negotiations for the Credit Facility and
---------
the closing of the Credit Facility occurred in Texas. The Structuring
Agent's, the Administrative Agent's and the Borrower's and Lessee's
principal place of business is in Texas. The Credit Facility will be funded
out of New York. Repayments under the Credit Facility will be made in
Texas.
<PAGE>
4. QUALIFICATIONS. The opinions expressed in Section 2 above are
--------------
subject to the following qualifications:
(a) SPECIFIED LAWS. The opinions contained in Section 2 as to the
--------------
enforceability of the Security Documents are subject to the qualification
that enforcement of the Security Documents is further subject to the
following: (i) the rights of the United States under the Federal Tax Lien
Act of 1966, as amended; (ii) the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, the doctrine of
commercial reasonableness, and other laws affecting the rights of creditors
and/or the collection of debtor's obligations generally; and (iii)
principles of equity and/or exercise of judicial discretion in accordance
with principles of equity, which may limit the availability of certain
equitable remedies.
(b) GENERAL LAWS. The opinions contained in Section 2 as to the
------------
enforceability of the Security Documents are further subject to the
qualification that the enforceability of certain of the remedial, waiver
and enforcement provisions of the Security Documents are subject to other
applicable laws, rules and regulations in addition to those described in
subsection 4(a) above; however, such laws, in our opinion, should not
substantially interfere with the practical realization of the benefits
expressed in the Security Documents, except for the economic consequences
of any procedural delay which may result from such laws, rules and
regulations.
5. LIMITATIONS. This Opinion Letter is issued subject to the following
-----------
Limitations:
(a) LICENSED ONLY IN _______. We are licensed to practice law only
----------------
in the State of______and we express no opinion with respect to the effect
of any laws other than the laws of the State of______ and laws of the
United States of general application to transactions in the State
of________.
(b) SUBSEQUENT EVENTS. We undertake no obligation to advise you of
-----------------
facts or changes in law occurring after the date of this Opinion Letter
which might effect the opinions expressed herein.
(c) CAPTIONS. The captions in this Opinion Letter are for
--------
convenience of reference only and shall not limit, amplify or otherwise
modify the provisions hereof.
(d) NO IMPLIED OPINIONS. This Opinion Letter is limited to the
-------------------
matters expressly set forth herein, and no opinion is to be implied or may
be inferred beyond the matters expressly so stated herein.
(e) FINANCIAL INFORMATION. We have made no examination or
---------------------
investigation to verify the truth, accuracy, or completeness of any
financial, accounting or statistical information furnished to the Banks and
express no opinion with respect thereto.
<PAGE>
(f) RESTRICTION ON USE. This Opinion Letter is furnished to you and
------------------
the other Banks and your and the other Banks' respective counsel and is
solely for your and the other Banks' benefit, and may not be relied upon
by, nor copies delivered to, any other person without our prior written
consent except for future Banks or participants in the Credit Facility and
their counsel.
Very truly yours,
____________________
<PAGE>
EXHIBIT "GG"
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
July 31, 1996
Battle Fowler LLP
Attn: Peter M. Fass, Esq.
75 East 55th Street
New York, New York 10022
Societe Generale, Southwest Agency
Suite 4900
2001 Ross Avenue
Dallas, Texas 75201
Bank One, Texas, N.A.
Commercial Real Estate Lending
Fourth Floor
1717 Main Street
Dallas, Texas 75201
Re: American General Hospitality Corporation
----------------------------------------
Ladies and Gentlemen:
We have acted as Maryland counsel for American General Hospitality
Corporation, a Maryland corporation (the "Company"), in connection with certain
matters of Maryland law arising out of the execution and delivery by the Company
of an Environmental Indemnification Agreement and a Guaranty and Contribution
Agreement, both dated as of July 31, 1996, both to and for the benefit of
Societe Generale, Southwest Agency and Bank One, Texas, N.A. (collectively, the
"Loan Documents"). This firm did not participate in the drafting or the
negotiation of the Loan Documents.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
<PAGE>
Battle Fowler LLP
Societe Generale, Southwest Agency
Bank One, Texas, N.A.
July 31, 1996
Page 2
1. The charter of the Company (the "Charter"), certified as of a
recent date by the State Department of Assessments and Taxation of Maryland (the
"SDAT");
2. The Bylaws of the Company (the "Bylaws"), certified as of a
recent date by its Secretary;
3. A certificate as of a recent date of the SDAT as to the good
standing of the Company;
4. Resolutions adopted by the Board of Directors of the Company
relating to (a) the organization of the Company and (b) the Company's execution
and delivery of the Loan Documents, certified as of a recent date by the
Secretary of the Company;
5. Copies of the executed Loan Documents, certified as of a recent
date by the Secretary of the Company;
6. A certificate executed by Kenneth E. Barr, Secretary of the
Company, dated July 31, 1996, attached hereto as Exhibit A; and
7. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms except as limited (a) by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws relating to or affecting the
enforcement of creditors, rights and (b) by general equitable principles.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do.
<PAGE>
Battle Fowler LLP
Societe Generale, Southwest Agency
Bank One, Texas, N.A.
July 31, 1996
Page 3
3. Each individual executing any of the Documents, whether on behalf
of such individual or another person, is legally competent to do so.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all Documents are genuine. All public
records reviewed or relied upon by us or on our behalf are true and complete.
All statements and information contained in the Documents are true and complete.
There are no oral or written modifications of or amendments to the Documents,
and there has been no waiver of any of the provisions of the Documents, by
action or conduct of the parties or otherwise.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and validly
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the SDAT. The Company has full corporate power to execute and
deliver the Loan Documents.
2. The Company's execution and delivery of the Loan Documents have
been duly authorized by the Company. The Loan Documents have been duly executed
and, so far as is known to us, delivered by the Company.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to compliance with the securities (or "blue sky") laws
of the State of Maryland or as to federal or state laws regarding fraudulent
transfers. We note that each of the Loan Documents provides that each shall be
governed by the laws of the State of Texas. To the extent that any matter as to
which our opinion is expressed herein would be governed by any jurisdiction
other than the State of Maryland, we do not express any opinion on such matter.
The opinion expressed
<PAGE>
Battle Fowler LLP
Societe Generale, Southwest Agency
Bank One, Texas, N.A.
July 31, 1996
Page 4
herein is subject to the effect of judicial decisions which may permit the
introduction of parol evidence to modify the terms or the interpretation of
agreements.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to Battle Fowler LLP solely for the
express purpose of relying upon this opinion to furnish its opinion of even date
hereof to the Lenders. In addition, this opinion is being furnished to the
Lenders solely for their benefit and the benefit of any future successors,
assigns or participants of the Lenders permitted in the Loan Documents.
Accordingly, it may not be relied upon by, quoted in any manner to, or delivered
to any other person or entity without, in each instance, our prior written
consent.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE>
Societe Generale.
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 8
Banks and/or any other parties executing the Executed Documents other than
the Mortgagor and the Lessee. The Banks are duly incorporated, and are
validly existing and in good standing under applicable laws. The Banks have
complied, and will continue to comply, with all laws, rules and regulations
of the State of Ohio and any other jurisdiction where it is required by law
to comply, to the extent that failure by the Banks to comply therewith,
would impair or affect any of the opinions stated herein.
(c) LESSEE'S AUTHORITY. The lessee is duly formed, validly existing,
------------------
and is authorized to do business and in good standing under the laws of its
state of creation. The Lessee has the requisite partnership power and
authority to own its assets, to transact the business in which it will be
engaged in connection with the Property, to execute and deliver the Lessee
Assignment of Lease and the other Executed Documents to which it is a party
in the capacity therein stated, and to perform its obligations under the
Lessee Assignment of Lease and the other Executed Documents to which party.
Each of the Executed Documents to which the Lessee is a party has been duly
executed and delivered by the Lessee. The execution, delivery and
performance by Lessee of the Executed Documents to which it is a party do
not (i) violate any laws, rules, statutes or regulations of general
applicability to partnerships presently in effect; (ii) breach, or
constitute a default under, any existing obligation of Lessee under any
material agreement to which it is a party or to which its property or
assets are subject; (iii) breach or otherwise violate any existing
obligation of Lessee under any court order; or (iv) result in the
imposition of any lien, charge or encumbrance of any nature upon any of
Lessee's properties or assets other than as granted under the Executed
Documents.
(d) GENUINENESS AND AUTHENTICITY. All signatures appearing on all
----------------------------
Executed Documents are genuine; all documents and records submitted to us
as originals are authentic; all documents and records submitted to us as
copies conform to the corresponding original documents and records; and all
statements of fact therein are true.
(e) CONTACTS. Substantial negotiations for the Credit Facility and
--------
the closing of the Credit Facility occurred in Texas. The Structuring
Agent's, the Administrative Agent's and the Borrower's and Lessee's
principal place of business is in Texas. The Credit Facility will be funded
out of New York. Repayments under the Credit Facility will be made in
Texas.
(f) OTHER. Mortgagor and Lessee hold the requisite title and rights
-----
to any property intended to subject to the Executed Documents. No action
has been taken which amends, renders or otherwise affects any of the
documents, materials or records
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 9
which we have examined. Value has been given by the Banks in connection
with the transactions contemplated by the Executed Documents.
(g) PARTNERSHIP CERTIFICATE. The Partnership Certificate has been, or
-----------------------
will be immediately after the execution of the Credit Agreement, filed of
record in the Recorder's office of Lucas Country, Ohio.
4. QUALIFICATIONS. The opinions expressed in Section 2 above are subject
--------------
to the following qualifications.
(a) SPECIFIED LAWS. The opinions contained in Section 2 are subject to
--------------
the qualification that enforcement of the Executed Documents is further
subject to the following: (i) the rights of the United States under the
Federal Tax Lien Act of 1966, as amended; (ii) the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, the doctrine
of commercial reasonableness, and other laws affecting the rights of
creditors and/or the collection of debtor's obligations generally: (iii)
principles of equity and/or exercise of judicial discretion in accordance
with principles of equity, which may limit the availability of certain
equitable remedies; and (iv) the obligation of the Administrative Agent and
the Banks to act reasonably, in good faith with fairness and subject to
materiality standards in exercising rights under the Executed Documents.
(b) GENERAL LAWS. Applicable laws, including judicial decisions, may
------------
limit or render ineffective certain rights, remedies, waivers and
provisions of the Executed Documents and, therefore, the Executed Documents
may not be enforceable in all respects as stated. For example, (i)
provisions for the recovery of expenses in connection with the enforcement
of remedies, including, among others, legal fees and expenses, may not be
enforceable; (ii) provisions resulting in a waiver by Mortgagor of certain
rights may be limited by legal and equitable principles and public policy;
(iii) the availability of specific performance, injunctive relief or other
equitable remedies and the appointment of a receiver are subject to the
discretion of the court before which any proceeding therefor any be
brought; (iv) late payment charges and default interest rate provisions may
be unenforceable if deemed by a court to constitute a penalty; (v)
provisions for the establishment of evidentiary standards may be
unenforceable; and (vi) the disposition of the personal property
constituting part of the collateral under the Executed Documents, including
without limitation the method, manner, time, place and terms, must be
commercially reasonable as provided in the Uniform Commercial Code as
adopted in Ohio. Furthermore we express no opinion as to any provision of
the
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 10
Executed Documents which (i) purport to give the Banks or any other person
the right to act as attorney-in-fact and thereupon sign documents and take
actions, such as a confession of judgment in the name of the Mortgagor or
Lessee; (ii) purport to waive any right to notice or consent with respect
to extensions or increases of the indebtedness or any surrender or release
of collateral securing the indebtedness; (iii) provide that the choice of
one remedy is not a bar to the availability of any other remedy at law
and/or equity; (iv) attempt to grant to the Banks a power of sale or to
modify or waive any requirements of judicial foreclosure, including but not
limited to, those relating to appraisement, valuation or redemption,
modifications or waivers of stays, extensions, moratorium or homestead
rights or exemptions; and (v) purport to secure any indebtedness or
obligation other than those within the contemplation of the parties as of
the date of the execution and delivery of the Executed Documents.
(c) TITLE. We have made no examination of and express no opinion as
-----
to the title to, or ownership of, the personal and real property
contemplated as security by the Executed Documents, or the status of any
liens or encumbrances thereon, or the priority of the liens and
encumbrances to be created by the Executed Documents, or the accuracy or
sufficiency of the description of any property or the freedom of any
property from any liens and encumbrances. No opinion is given as to the
effect of the granting of a mortgage or other security interest in the
collateral described in the Executed Documents before Mortgagor or Lessee
have rights in the same.
(d) LAWS. We express no opinion with respect to compliance with, or
----
the applicability of, any of the following:
(1) Federal and state securities laws and regulations; (2) Federal Reserve
Board margin regulations; (3) local (i.e. other than those of the State)
laws, ordinances, rules and regulations and judicial decisions to the
extent that they deal with any of the foregoing; (4) federal and state
environmental laws and regulations; (5) federal and state land use and
subdivision laws and regulations; (6) federal patent, copyright and
trademark, state trademark, and other Federal and state intellectual
property laws and regulations; (7) obtaining and maintaining licenses,
permits or other similar documents; and (8) federal and state banking
regulatory laws other than those affecting security interests in real
property.
(e) THIRD PARTIES. Certain of the provisions of the Executed
-------------
Documents which purport to bind lessees or third parties, or to make null
and void certain agreements, instruments, or transactions which may be
entered into between Mortgagor
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 11
and/or Lessee and third parties may not be effective against such lessees
or third parties. Furthermore, the Executed Documents may not be effective
with respect to certain contracts, including but not limited to the Hilton
Hotel Franchise Agreement, which pursuant to their terms are either not
assignable or require the consent of parties other than the Mortgagor or
Lessee.
(f) BANKRUPTCY. The security interest created by the Loan Documents
----------
in personal property that is acquired by Borrower after the date hereof
will be limited by Section 552 of the United States Bankruptcy Code
regarding the extent to which property acquired by a debtor after the
commencement of a case under the United States Bankruptcy Code may be
subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case.
(g) MORTGAGE. The mortgage liens of the Mortgage: (1) will not
--------
extend to after-acquired real property (including, but not limited to,
property which is unitized or pooled with the real property subject to the
Mortgage subsequent to the recording of the Mortgage) until a supplemental
mortgage describing such property has been duly executed, delivered and
recorded: (2) will expire with respect to third parties subsequently
acquiring an interest in the real property described therein twenty-one
years after the stated maturity date contained therein and may be
maintained thereafter only by refiling in the manner provided by Section
5301.30 of the Ohio Revised Code: and (3) accord priority as to future
advances thereunder equivalent to that of advances made on the date the
Mortgage is recorded only if Lender is obligated to make such future
advances in accordance with the Credit Documents.
(h) KNOWLEDGE. The term "our knowledge" as used herein shall mean the
---------
conscious awareness of information about either fact or law by those
lawyers in our firm who have devoted substantive attention to the
transaction contemplated by the Security Documents.
5. LIMITATIONS. This Opinion Letter is issued subject to the following
-----------
limitations:
(a) LICENSED ONLY IN OHIO. We are licensed to practice law only in
---------------------
the State of Ohio and we express no opinion with respect to the effect of
any laws other than the laws of the State of Ohio and laws of the United
States of general application to transactions in the State of Ohio.
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 12
(b) SUBSEQUENT EVENTS. We undertake no obligation to advise you of
-----------------
facts or changes in law or of anything coming to our attention bearing upon
the accuracy of or completeness of any assumption, whether or not material,
occurring after the date of this Opinion Letter which might effect the
opinions expressed herein.
(c) CAPTIONS. The captions in this Opinion Letter are for convenience
--------
of reference only and shall not limit, amplify or otherwise modify the
provisions hereof.
(d) NO IMPLIED OPINIONS. This Opinion Letter is limited to the
-------------------
matters expressly set forth herein, and no opinion is to be implied or may
be inferred beyond the matters expressly so stated herein.
(e) FINANCIAL INFORMATION. We have made no examination or
---------------------
investigation to verify the truth, accuracy, or completeness of any
financial, accounting or statistical information furnished to the Banks and
express no opinion with respect thereto.
(f) RESTRICTION ON USE. This Opinion Letter is furnished to you and
------------------
the other Banks and your and the other Banks' respective counsel and is
solely for your and the other Banks' benefit, and may not be replied upon
by, nor copies delivered to, any other person without our prior written
consent except for future Banks or participants in the Credit Facility and
their counsel or any other counsel rendering an opinion in connection with
the Credit Documents or any of the transactions described therein.
(g) INFORMATION. We do not assume any responsibility for the
-----------
accuracy, completeness or fairness of any information including but not
limited to, financial information, furnished to you by Mortgagor or Lessee
concerning the business or affairs of Mortgagor or Lessee or any other
information furnished to you of a factual nature. Furthermore, we render no
opinion with respect to the past, present or future financial condition of
Mortgagor or Lessee.
This opinion does not constitute a guarantee of the Executed Documents or
the obligations of Mortgagor or Lessee thereunder or any other matter referred
to or opined upon herein, and by rendering this opinion, we are not guaranteeing
the Executed Documents or any such obligations. We bring to your attention that
our views set forth in this letter are an
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 13
expression of professional judgment and are not a guarantee of a result.
Very truly yours,
/s/ McDonald, Hopkins.
Burke & Haber Co., L.P.A.
McDonald, Hopkins. Burke &
Haber Co., L.P.A.
<PAGE>
[LETTERHEAD OF MCDONALD, HOPKINS, BURKE & HABER]
EXHIBIT "HH"
July 31, 1996
Societe Generale,
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.,
As Administrative Agent
1717 Main Street, 4th Floor
Real Estate Department
Dallas, Texas 75201
Battle Fowler LLP
East 55th Street
New York, New York 10022
Re: Credit Facility (the "Credit Facility") of up to $100,000,000.00 to
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP. L.P., a Delaware
limited partnership (the "Borrower") pursuant to a Credit Agreement
(the "Credit Agreement") by and between the Borrower; SOCIETE
GENERALE, a French banking corporation acting through its Southwest
Agency, as Structuring Agent (the "Structuring Agent"); BANK ONE,
TEXAS, N.A., as Administrative Agent (the "Administrative Agent"); and
the banks and other financial institutions which are a party thereto
(collectively referred to herein as the "Banks").
Gentlemen:
In connection with the Credit Facility, we have acted as special Ohio
counsel to 3100 Glendale Joint Venture, an Ohio general partnership,
("Mortgagor") and this opinion letter is being delivered to you at the request
of Mortgagor. The Credit Facility is evidenced, in part, by certain promissory
notes (the "Notes") executed by the Borrower and payable to the Banks, the
Credit Agreement, the documents described in 1.(a) through (e) below and the
other documents executed in connection with the Credit Facility (collectively,
the "Credit Documents"). The Mortgagor is subleasing certain real and personal
property to AGH Leasing, L.P., a Delaware limited partnership ("Lessee")
pursuant to a Lease Agreement (the "Lease") between such parties. The real
property is located in the County of Lucas (the "County") and the State of Ohio
(the "State").
<PAGE>
Societe Generale.
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 2
1. DOCUMENTS REVIEWED. For purposes of this opinion (the "Opinion
------------------
Letter"), we have examined only the following of the Credit Documents, all of
which are dated July 31, 1996, unless otherwise specified:
(a) Open-End Mortgage, Security Agreement, Assignment of Rents and
Financing Statement (the "Mortgage"), executed by the Mortgagor, securing
payment of the Notes, covering certain real and personal property described
in the Mortgage (the "Property");
(b) Assignment of Leases, Rents and Security Deposits (the "Mortgagor
Assignment of Leases"), executed by the Mortgagor, further securing payment
of the Notes;
(c) UCC Financing Statements executed by the Mortgagor to be filed in
the real property records (the "Records") of the County and with the
Secretary of State (the "Secretary of State") of the State (respectively,
the "Mortgagor County Financing Statement" and the "Mortgagor State
Financing Statement" and collectively the "Mortgagor Financing
Statements");
(d) Assignment of Leases, Rents and Security Deposits (the "Lessee
Assignment of Leases"), executed by the Lessee in favour of the Mortgagor
securing the Lessee's obligations under the Lease;
(e) UCC Financing Statements executed by the Lessee to be filed in
the Records and with the Secretary of State (respectively, the "Lessee
County Financing Statement" and the "Lessee State Financing Statement" and
collectively the "Lessee Financing Statements").
(f) Irrevocable Direction to Pay Rent executed by Borrower, Mortgagor
and others;
(g) Security Agreement executed by Borrower, Mortgagor and others;
(h) Environmental Indemnification Agreement executed by Mortgagor and
others for the benefit of the Banks;
(i) Guaranty and Contribution Agreement executed by Mortgagor and
others for the benefit of the Banks; and
<PAGE>
Societe Generale.
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 3
(j) Collateral Assignment and Security Agreement by Mortgagor in
favor of the Banks.
For purposes of this Opinion Letter, the Mortgage and the Mortgagor
Assignment of Leases are hereinafter collectively referred to as the "Security
Documents". All of the documents described in clauses (a)-(j) above and executed
by the Mortgagor or the Lessee are hereinafter collectively referred to as the
"Executed Documents."
For purposes of this opinion letter, we have considered such matters of law
and of fact, and have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction as being true copies, of such
certificates, corporate documents and records, officers' certificates,
certificates of public officials and other documents as we have deemed relevant
and necessary as a basis for the opinions expressed herein, including but not
limited to the following:
(a) First Amended Partnership Certificate of Glendale dated July 31,
1996 executed by the Borrower and AGH UPREIT LLC, a Delaware Limited
Liability Company (the "UPREIT") in recordable form to be filed with
Recorder's office of Lucas County, Ohio ("Partnership Certificate");
(b) Amended and Restated Joint Venture Agreement of Glendale executed
by the Borrower and the UPREIT dated July 31, 1996 ("Partnership
Agreement") as certified by the general partners of Glendale;
(c) Resolutions of the general partners of Glendale dated _____, 1996
as certified by the general partners of Glendale;
(d) Certificate on behalf of Glendale by the Borrower and the UPREIT,
the general partners of Glendale (the "Partners Certificate"), dated as of
the date hereof, relating to the facts set forth herein upon which the
opinions expressed herein are based;
(e) Certificate on behalf of the Borrower by the general partner of
Borrower, dated as of the date hereof, relating to the facts set forth
herein upon which the opinions expressed herein are based;
(f) Certificate on behalf of the UPREIT by the members of the UPREIT,
dated as of the date hereof, relating to the facts set forth herein upon
which the opinions expressed herein are based;
<PAGE>
Societe Generale.
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 4
(g) Officer's Certificate on behalf of AGH GP, Inc. (the "Officer's
Certificate") dated as of the date hereof, relating to the facts set forth
herein upon which the opinions expressed herein are based;
(h) Officer's Certificate on behalf of American General Hospitality
Corporation as a member of the UPREIT (the "Member's Certificate") dated as
of the date hereof, relating to the facts set forth herein upon which the
opinions expressed herein are based;
(i) Certificate for AGH GP, Inc. issued by the Nevada Secretary of
State dated July 15, 1996 relating to the good standing of AGH GP, Inc.,
the general partner of Borrower, which is the general partner of Glendale;
(j) Certificate for AGH LP, Inc. issued by the Nevada Secretary of
State dated July 15, 1996 relating to the good standing of AGH LP, Inc.,
the limited partner of Borrower, which is a general partner of Glendale;
(k) Certificate for AGH UPREIT, LLC issued by the Delaware Secretary
of State dated July 12, 1996 relating to the good standing of AGH UPREIT,
LLC, a general partner of Glendale;
(l) Certificate for American General Hospitality Corporation issued
by the Maryland Secretary of State dated July 12, 1996 relating to the good
standing of American General Hospitality Corporation, which is a member of
the UPREIT;
(m) Certificate for American General Hospitality Operating
Partnership L.P. issued by the Delaware Secretary of State dated July ____,
1996 relating to the good standing of American General Hospitality
Operating Partnership L.P., which is a general partner of Glendale and a
member of the UPREIT;
(n) Certificates for the UPREIT, the Borrower, and AGH GP, Inc.,
issued by the Ohio Secretary of State, each of which is dated July 17,
1996, relating to the qualification of each of such entities to do business
in Ohio;
(o) Certificate for the Lessee issued by the Ohio Secretary of State
dated ______, 1996 relating to the qualification of Lessee to do business
in Ohio;
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 5
(p) Ground Lessor's Estoppel Certificate and Agreement executed on
behalf of the State of Ohio on July ____, 1996 and the Medical College of
Ohio at Toledo on July ____, 1996 ("Estoppel Certificate");
(q) Acknowledgement Concerning Ground Lease and Consent to Sublease
executed on behalf of the state of Ohio on July ____, 1996 and the Medical
College of Ohio at Toledo on July ____, 1996 ("Consent").
As to questions of fact material to the opinions expressed herein, we have
relied upon, and assumed the accuracy of, the certificates and other documents
described above, the representations and warranties made in or pursuant to the
Executed Documents and such certificates, corporate records, searches and other
documents that we have reviewed, including but not limited to those described
above, in connection with giving the opinions expressed herein. We have assumed
that there are no other facts, conditions or circumstances which conflict with
or are inconsistent with those set forth in any of the foregoing. With respect
to such matters, we have not made any independent investigation or verification
of the information contained therein for purposes of this opinion letter.
2. OPINIONS. Subject to the matters set forth in subsequent portions of
--------
this Opinion Letter, it is our opinion that:
(a) Each of the Security Documents constitutes the legal, valid and
binding obligation of the Mortgagor, enforceable against the Mortgagor in
accordance with their terms.
(b) The Lessee Assignment of Leases constitutes the legal, valid and
binding obligation of the Lessee, enforceable against the Lessee in
accordance with its terms.
(c) The Mortgage and the Mortgagor County Financing Statement are in
proper form for filing in the Records, and the Mortgagor State Financing
Statement is in proper form for filing with the Secretary of State. Upon
the recording of the Mortgage and the Mortgagor County Financing Statement
in the Records, and upon the filing of the Mortgagor State Financing
Statement with the Secretary of State no other recording or filing under
the laws of the State is required in order to perfect the liens in those
items and types of collateral described therein that (a) are real property
or (b) are personal property for which a security interest may be perfected
by the filing of financing statements in Ohio under the Uniform Commercial
Code as adopted in Ohio.
<PAGE>
Societe Generale
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, `996
Page 6
(d) Upon proper filing of the Mortgagor County Financing Statement in
the Records and the Mortgagor State Financing Statement with the Secretary
of State, the "Said Indebtedness" under the Mortgage (up to an amount
described in Section 33(a) of the Mortgage) will be secured by a validly
created, perfected security interest in favor of the Administrative Agent
as agent for the Banks and to all the right, title and interest of the
Mortgagor in and to the collateral described in the Mortgagor Financing
Statements, to the extent a security interest may be perfected in such
collateral by the filing of financing statements in Ohio under the Uniform
Commercial Code as adopted in Ohio.
(e) The Lessee County Financing Statement is in proper form for
filing in the Records, and the Lessee State Financing Statement is in
proper form for filing with the Secretary of State. Upon the recording of
the Lessee County Financing Statement in the Records, and upon the filing
of the Lessee State Financing Statement with the Secretary of State, no
other recording or filing under the laws of the State is required in order
to perfect the liens in those items and types of collateral described
therein for which a security interest may be perfected by the filing of
financing statements in Ohio under the Uniform Commercial Code.
(f) Upon proper filing of the Lessee County Financing Statement in
the Records and the Lessee State Financing Statement with the Secretary of
State, the Lessee's obligations under the Lease will be secured by a
validly created, perfected security interest in favor of the Mortgagor in
and to all the right, title and interest of the Lessee in and to the
collateral described in the Lessee Financing Statements, to the extent a
security interest may be perfected in such collateral by the filing of
financing statements in Ohio under the Uniform Commercial Code as adopted
in Ohio.
(g) There are no stamp, recording or similar taxes required to be
paid in connection with the execution, delivery, recording or enforcement
of the Mortgage except nominal recording fees payable at the time of
recording the Mortgage.
(h) The Mortgagor is duly formed and validly existing under the laws
of the State with full power and authority to own, lease and operate its
properties and to conduct its business as described in the Partnership
Agreement and is duly qualified to conduct its business in the State. The
Mortgagor has the requisite power and authority to execute the Executed
Documents to which it is a party in the capacity therein stated, and to
perform its obligations under the Executed Documents to which it is a
party. The Lessee is duly qualified to do business in the State.
<PAGE>
Societe Generale,
Southwest Agency
Bank One, Texas, N.A.
Battle Fowler LLP
July 31, 1996
Page 7
(i) The general partners of Mortgagor have taken all necessary
partnership or corporate action to authorize the execution of the Executed
Documents to which Mortgagor is a party, and Mortgagor has taken all
partnership action necessary to authorize the execution of the Executed
Documents to which it is a party.
(j) Each of the Executed Documents to which Mortgagor is a party has
been executed by duly authorized representatives of the general partners on
behalf of Mortgagor.
(k) All of the outstanding interests of 3100 Glendale are validly
created under the Partnership Agreement forming Glendale and, to our
knowledge based solely on the Partners Certificate, are owned of record in
the following percentage amounts: 99% by the Borrower and 1% by the UPREIT.
(l) To our knowledge, no approval, authorization or other action by
any governmental authority of the State, is required in connection with the
execution and delivery of the Executed Documents by the Mortgagor and/or
the Lessee, and the consummation of the transactions contemplated thereby
other than those contained in the Estoppel Certificate and Consent.
(m) Based on adherence to existing judicial precedents under State
law, except for those matters under the Security Documents related to the
perfection of liens on and security interests in real estate, fixtures and
personal property and the exercise of remedies against such collateral, a
State court would hold that the choice of Texas law to govern the
construction and interpretation of the provisions of the Executed Documents
would be enforceable, except to the extent that the application of Texas
law would be contrary to a fundamental policy of the State of Ohio.
3. ASSUMPTIONS. In delivery of the opinions expressed in Section 2 above,
-----------
we have assumed the following:
(a) CAPACITY. The legal capacity of each individual signing one or
--------
more of the Executed Documents or other documentation upon which this
Opinion Letter has been based.
(b) BANKS' AUTHORITY. The Banks are authorized to make the Credit
----------------
Facility in accordance with the Credit Documents. The Executed Documents,
and the transactions evidenced thereby, are valid, binding and enforceable
with regard to the
<PAGE>
EXHIBIT "II"
[LETTERHEAD OF FOLEY & LARDNER}
July ______, 1996
Societe Generale,
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Real Estate Department
Dallas, Texas 75201
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
Re: Credit Facility (the "Credit Facility") of up to
$100,000,000.00 to AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the
"Borrower") pursuant to a Credit Agreement (the "Credit
Agreement") by and between the Borrower; SOCIETE GENERALE, a
French banking corporation acting through its Southwest
Agency, as Structuring Agent (the "Structuring Agent"); BANK
ONE, TEXAS, N.A., as Administrative Agent (the
"Administrative Agent"); and the banks and other financial
institution party thereto (collectively referred to herein
as the "Banks").
Gentlemen:
In connection with the Credit Facility, we have acted as special
Wisconsin counsel to Madison Motel Associates, a Wisconsin general partnership
("Mortgagor"). The Credit Facility is evidenced, in part, by certain promissory
notes (the "Notes") executed by the Borrower and payable to the Banks, the
Credit
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 2
Agreement, the documents described below and the other documents executed in
connection with the Credit Facility (collectively, the "Credit Documents"). The
Mortgagor is leasing certain real and personal property (the "Property") to AGH
Leasing, L.P., a Delaware limited partnership ("Lessee") pursuant to a Lease
Agreement (the "Lease") between such parties. The real property is located in
the County of Dane (the "County") and the State of Wisconsin (the "State").
1. DOCUMENTS REVIEWED. For purposes of this opinion (the "Opinion
------------------
Letter"), we have examined the following documents, all of which are dated July
___, 1996, unless otherwise specified:
(a) Mortgage, Security Agreement, Assignment of Rents and
Financing Statement (the "Mortgage"), executed by the Mortgagor,
securing payment of the Notes, covering the Property;
(b) Assignment of Leases, Rents and Security Deposits (the
"Mortgagor Assignment of Leases"), executed by the Mortgagor, further
securing payment of the Notes;
(c) UCC Financing Statements executed by the Mortgagor to be
filed in the real property records (the "Records") for the County and
with the Department of Financial Institutions Division of Corporate &
Consumer Services, Uniform Commercial Code Unit (the "Department") of
the State (respectively, the "Mortgagor County Financing Statement"
and the "Mortgagor State Financing Statement" and collectively the
"Mortgagor Financing Statements");
(d) Assignment of Leases, Rents and Security Deposits (the
"Lessee Assignment of Leases"), executed by the Lessee in favor of the
Mortgagor securing the Lessee's obligations under the Lease; and
(e) UCC Financing Statements executed by the Lessee to be filed
in the Records and with the Department (respectively, the "Lessee
County Financing Statement" and the "Lessee State Financing Statement"
and collectively the "Lessee Financing Statements").
For purposes of this Opinion Letter, the Mortgage and the Mortgagor Assignment
of Leases are hereinafter collectively referred to as the "Security Documents".
All of the documents described in clauses (a)-(e) above and executed by the
Mortgagor or the Lessee
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 3
are hereinafter collectively referred to as the "Executed Documents."
2. OPINIONS. Subject to the matters set forth in subsequent
--------
portions of this Opinion Letter, it is our opinion that:
(a) Each of the Security Documents constitutes the legal, valid
and binding obligation of the Mortgagor, enforceable against the
Mortgagor in accordance with their terms.
(b) The Lessee Assignment of Leases constitutes the legal, valid
and binding obligation of the Lessee, enforceable against the Lessee
in accordance with its terms.
(c) The Mortgage and the Mortgagor County Financing Statement
are in proper form for filing in the Records, and the Mortgagor State
Financing Statement is in proper form for filing with the Department.
Upon the recording of the Mortgage and the Mortgagor County Financing
Statement in the Records, and upon the filing of the Mortgagor State
Financing Statement with the Department, no other recording, filing or
other action under the laws of the State is required in order to
perfect (a) the lien in the real estate which is encumbered by the
Mortgage; (b) the security interest in the fixtures; and (c) the
security interest in the collateral described in the Mortgagor
Financing Statements but only to the extent such collateral is located
in the State, is subject to Article 9 of the Uniform Commercial Code
as in force in Wisconsin (the "UCC") and only to the extent a security
interest in such collateral can be perfected by filing in the Records
or with the Department.
(d) Upon proper filing of the Mortgagor County Financing
Statement in the Records and the Mortgagor State Financing Statement
with the Department, the "Said Indebtedness" under the Mortgage will
be secured by a validly created, perfected security interest in favor
of the Administrative Agent for the benefit of the Banks in and to all
the right, title and interest of the Mortgagor in and to such portion
of the collateral described in the Mortgagor Financing Statements
which is located in the State, is subject to Article 9 of the UCC and
which can be perfected by filing in the Records or with the
Department, and upon the proper filing of the Mortgage and the
Mortgagor County Financing Statement in the
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 4
Records, the "Said Indebtedness" under the Mortgage will be secured by
a validly created, perfected mortgage lien in favor of the
Administrative Agent for the benefit of the Banks in and to all the
right, title and interest of the Mortgagor in and to the real property
and fixtures described in the Mortgage.
(e) The Lessee County Financing Statement is in proper form for
filing in the Records, and the Lessee State Financing Statement is in
proper form for filing with the Department. Upon the recording of the
Lessee County Financing Statement in the Records and upon the filing
of the Lessee State Financing Statement with the Department, no other
recording, filing or other action under the laws of the State is
required in order to perfect the liens in the property described
therein to the extent that the collateral is located in the State and
is of a type which is subject to Article 9 of the UCC and which can be
perfected by filing in the Records or with the Department.
(f) Upon proper filing of the Lessee County Financing Statement
in the Records and the Lessee State Financing Statement with the
Department, the Lessee's obligations under the Lease will be secured
by a validly created, perfected security interest in favor of the
Mortgagor in and to all the right, title and interest of the Lessee in
and to the collateral described in the Lessee Financing Statements, to
the extent (a) the Lease is a valid and binding obligation of Lessor
and Lessee, enforceable against each in accordance with its terms; (b)
the Lease grants an effective and enforceable security interest to
Mortgagor in the collateral described in the Lessee Financing
Statements; (c) such collateral is located in the State; and (d) the
collateral is of a type which is subject to Article 9 of the UCC and
which can be perfected by filing in the Records or with the
Department. We also recommend recording the Lessee Assignment of
Leases in the Records so as to perfect the interest secured thereby to
the extent it constitutes an interest in real estate not governed by
Article 9 of the UCC.
(g) There are no stamp, recording or similar taxes required to
be paid in connection with the execution, delivery, recording or
enforcement of the Mortgage except for nominal recording and filing
fees.
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 5
(h) The Lessee is registered to transact business in the State
as a foreign limited partnership under the name AGH Leasing, Limited
Partnership.
(i) Based on adherence to existing judicial precedents under
State law, except for those matters under the Security Documents
related to the perfection of liens on and security interests in real
estate, fixtures and personal property and the exercise of remedies
against such collateral, a State court would hold that the choice of
Texas law to govern the construction and interpretation of the
provisions of the Executed Documents, including without limitation
those provisions related to usury, would be enforceable.
(j) The Mortgagor is duly formed, validly existing and
authorized to do business in the State. The Mortgagor has the
requisite power and authority to own its assets, to transact the
business in which it will be engaged in connection with the Property,
to execute and deliver the Executed Documents in the capacity therein
stated, and to perform its obligations under the Security Documents.
(k) Based on the attached resolutions and officer's certificate,
Mortgagor has taken all partnership action necessary to authorize the
execution and delivery of the Executed Documents.
3. ASSUMPTIONS. In delivery of the opinions expressed in Section 2
-----------
above, we have assumed the following:
(a) CAPACITY. The legal capacity of each individual signing one
--------
or more of the Executed Documents or other documentation upon which
this Opinion Letter has been based.
(b) BANKS' AUTHORITY. The Banks are authorized to make the
----------------
Credit Facility in accordance with the Credit Documents. The Credit
Documents, and the transactions evidenced thereby, are valid, binding
and enforceable with regard to the Banks and/or any other parties
executing the Credit Documents (other than the Mortgagor and the
Lessee to the extent to which we are opining as to the Security
Documents as provided in Section 2(a) and as to the Lessee Assignment
of Leases as provided in Section 2(b) above) and all of such parties
hold all necessary licenses, permits and approvals to engage in
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 6
the subject transactions and have complied with all applicable laws,
rules, regulations and orders in connection with, and which allows
them to engage in, the subject transactions.
(c) MORTGAGOR'S AND LESSEE'S AUTHORITY. The Lessee is duly
----------------------------------
formed, validly existing, and authorized to do business and in good
standing under the laws of its state of creation. The Lessee has the
requisite partnership power and authority, and all necessary
corporate, partnership or other organizational actions of its partners
have been taken by each of them to allow them to authorize the
partnership, to own its assets, to transact the business in which it
will be engaged in connection with the Property, to execute and
deliver the Lessee Assignment of Leases in the capacity therein
stated, and to perform its obligations under the Lessee Assignment of
Leases. Each of the general partners of the Mortgagor has the
requisite power and authority, and all necessary corporate,
partnership or other organizational actions have been taken by each of
them to allow them to authorize the Mortgagor, to own its assets, to
transact the business in which it will be engaged in connection with
the Property, to execute and deliver the Executed Documents and to
perform its obligations thereunder. Each of the Executed Documents has
been duly executed and delivered by the Lessee and the Mortgagor.
(d) GENUINENESS AND AUTHENTICITY. All signatures appearing on
----------------------------
all Executed Documents are genuine; all documents and records
submitted to us as originals are authentic; all documents and records
submitted to us as copies conform to the corresponding original
documents and records; and all statements of fact therein are true.
(e) CONTACTS. Substantial negotiations for the Credit Facility
--------
and the closing of the Credit Facility occurred in Texas. The
Structuring Agent's, the Administrative Agent's and the Borrower's and
Lessee's principal place of business is in Texas. The Credit Facility
will be funded out of New York. Repayments under the Credit Facility
will be made in Texas.
(f) CERTIFICATES OR STATEMENTS OF PUBLIC OFFICIALS. Certificates
----------------------------------------------
or statements of public officials, corporate and partnership documents
and records and other certificates and instruments we have deemed
relevant and
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 7
necessary as a basis for our opinion hereinafter are true and correct,
have not been modified or rescinded and have been properly issued or
adopted, as the case may be.
(g) ACCURACY OF FINANCING STATEMENTS. Each of the financing
--------------------------------
statements as to which we are opining contain an address of the
secured party from which information regarding the secured party's
security interest can be obtained; the debtor under each such
financing statement has rights in the collateral; Dane County,
Wisconsin is the only county in which any real property in which any
goods that are or are to become fixtures are or will be located; the
financing statements and the Mortgage each contain the correct legal
description and tax key number of the real property intended to be
described by the parties and on which all fixtures are located and the
correct name or names of the record owner or owners of the real
property described therein; and the financing statements each contain
an accurate and sufficient description of property as to which the
debtor has granted a security interest.
(h) LACK OF OTHER AGREEMENTS. There are no oral or written
------------------------
agreements or understandings or usage of trade or course of conduct or
other prior dealings among the parties that would limit, expand or
otherwise modify the respective rights and obligations of the parties,
as set forth in the Executed Documents, or that would have an effect
on the opinions expressed herein; there are no judgments, decrees,
orders, agreements or the like that impair or limit the ability of any
party thereto to enter into, execute and deliver, and perform, observe
and be bound by the Executed Documents and the transactions
contemplated thereby.
(i) OTHER CREDIT DOCUMENTS. All of the Credit Documents, other
----------------------
than the Executed Documents, are valid and binding agreements
enforceable against all of the parties thereto in accordance with
their terms. We have not been provided, nor have we reviewed, any of
such Credit Documents other than the Executed Documents and we do not
express any opinion as to any such documents nor do we express any
opinion on the Executed Documents to the extent that they incorporate
by reference any of the Credit Documents.
(j) ADEQUATE CONSIDERATION. Each of the parties to the Executed
----------------------
Documents who is granting a mortgage or
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 8
security interest has received adequate consideration in return for
the granting of such interest and the Mortgagor and the Borrower have
a sufficient relationship between them, contractual or otherwise, to
warrant the Mortgagor granting the security interest created by the
Security Documents to secure the Borrower's obligation.
(k) CONSENTS AND APPROVALS. The consent and/or approval of any
----------------------
third party required for any of the parties to the Credit Documents to
perform their obligations has been obtained.
4. QUALIFICATIONS. The opinions expressed in Section 2 above are
--------------
subject to the following qualifications.
(a) SPECIFIED LAWS. The opinions contained in Section 2 as to
--------------
the enforceability of the Security Documents and the Lessee Assignment
of Leases are subject to the qualification that enforcement of the
Security Documents and the Lessee Assignment of Leases is further
subject to the following: (i) the rights of the United States under
the Federal Tax Lien Act of 1966, as amended; (ii) the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, the doctrine of commercial reasonableness, and other laws
affecting the rights of creditors and/or the collection of debtor's
obligations generally; and (iii) principles of equity and/or exercise
of judicial discretion in accordance with principles of equity, which
may limit the availability of certain equitable remedies. As noted
above, enforceability of the Lessee Assignment of Leases is further
dependent on enforceability of the Lease, as to which we do not opine.
(b) GENERAL LAWS. The opinions contained in Section 2 as to the
------------
enforceability of the Security Documents and the Lessee Assignment of
Leases are further subject to the qualification that the
enforceability of certain of the remedial, waiver and enforcement
provisions of the Security Documents and the Lessee Assignment of
Leases are subject to other applicable laws, rules and regulations in
addition to those described in subsection 4(a) above; however, such
laws, in our opinion, should not substantially interfere with the
practical realization of the benefits expressed in the Security
Documents and the Lessee Assignment of Leases, except for the economic
consequences of any procedural delay which may result from such laws,
rules
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 9
and regulations. We express no opinion regarding the enforceability of
provisions relating to prepayment penalties and late payment fees,
grant of power of attorney or other executing authority to lenders,
the establishment of fiduciary relationships, the enforcement of due
on encumbrance or due on transfer provisions (except as to those
provisions relating to the sale of the encumbered real property
itself), obligations of indemnification or contribution, consent to
service and venue and waiver of trial by jury, or right to appointment
of a receiver as a matter of right.
(c) ASSIGNMENTS OF LEASES. Until recently we were unable to
---------------------
provide lenders with an enforceability opinion as to assignments of
leases and rents as there was no statutory law of Wisconsin directly
on point with respect thereto. Case law of Wisconsin appeared to
dictate that perfection of an assignment of rents may occur only upon
possession of the rent-producing property by the secured party, either
by a peaceable yielding of possession or the appointment of a
receiver, or the happening of a specific triggering event clearly
expressed in the assignment documents. In the most recent case on this
subject, the court in The Matter of Century Investment Fund VIII
------------------------------------------
Limited Partnership, 937 F.2d 371 (7th Cir., 1991), in applying
-------------------
Wisconsin law, held that an assignment of rents is perfected upon the
filing of a foreclosure action and a motion for the appointment of a
receiver, provided that the assignment specifically provides for
entitlement to rents and leases upon default.
A State statute, which has only recently been enacted, provides
that (i) an assignment of rents (including an assignment of rents
contained in a mortgage) is effective against the assignor upon
execution and delivery to the assignee, and (ii) the assignment is
perfected as to all subsequent purchasers, mortgagees, lien creditors
and other third parties, for all purposes, from the time and date of
recording the assignment with the register of deeds for the county in
which the affected real property is located. Wis. Stat. (S) 708.11.
While the statute adds a degree of certainty to the assignment of
rents area, it has not been tested in the State courts.
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 10
5. LIMITATIONS. This Opinion Letter is issued subject to the
-----------
following limitations:
(a) LICENSED ONLY IN WISCONSIN. We are licensed to practice law
--------------------------
only in the State of Wisconsin and we express no opinion with respect
to the effect of any laws other than the laws of the State of
Wisconsin and laws of the United States of general application to
transactions in the State of Wisconsin.
(b) SUBSEQUENT EVENTS. We undertake no obligation to advise you
-----------------
of facts or changes in law occurring after the date of this Opinion
Letter which might affect the opinions expressed herein.
(c) CAPTIONS. The captions in this Opinion Letter are for
--------
convenience of reference only and shall not limit, amplify or
otherwise modify the provisions hereof.
(d) NO IMPLIED OPINIONS. This Opinion Letter is limited to the
-------------------
matters expressly set forth herein, and no opinion is to be implied or
may be inferred beyond the matters expressly so stated herein.
(e) FINANCIAL INFORMATION. We have made no examination or
---------------------
investigation to verify the truth, accuracy, or completeness of any
financial, accounting or statistical information furnished to the
Banks and express no opinion with respect thereto.
(f) TITLE AND PRIORITY ISSUES. We express no opinion as to
-------------------------
matters of title or priority or perfection of liens or security
interests (except to the limited extent concerning perfection as set
forth in Sections 2(c), (d), (e) and (f), above). We understand that,
with respect to the real and personal property security interest
intended to be created by the Executed Documents and the priority of
the liens thereof, you will rely on a title insurance policy and such
Uniform Commercial Code and other searches as you deem adequate, and,
accordingly, we express no opinion as to such matters.
(g) RESTRICTION ON USE. This Opinion Letter is furnished to you
------------------
and the other Banks and your and the other Banks' respective counsel
and is solely for your and the other Banks' benefit, and may not be
relied upon by, nor copies delivered to, any other person without our
prior written consent except for further Banks or
<PAGE>
Southwest Agency
Bank One, Texas, N.A.
July ____, 1996
Page 11
participants in the Credit Facility and their counsel or any other
counsel rendering an opinion in connection with the Credit Documents
or any of the transactions described therein.
Very truly yours,
/s/ Foley & Lardner (HLT)
FOLEY & LARDNER
<PAGE>
MADISON MOTEL ASSOCIATES
CERTIFICATE
TO
FOLEY & LARDNER
The undersigned, Steve Jorns, on behalf of American General
Hospitality Corporation, a Maryland corporation ("AGHC"), and AGH GP, Inc., a
Nevada corporation ("AGHGP"), hereby certifies and represents to Foley &
Lardner, for the purpose of enabling Foley & Lardner to render various opinions
in connection with certain matters involving or relating to Madison Motel
Associates, a Wisconsin general partnership ("MMA"), as follows:
1. He is the duly elected, qualified, and acting Chairman of the
Board, Chief Executive Officer and President of AGHC and AGHGP.
2. AGHGP is and has always been the sole general partner of American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"); immediately prior to the consummation of the
transactions contemplated by the Sale and Contribution Agreement dated April 30,
1996 (the "Sale and Contribution Agreement"), by and among Madison Motor Inns,
Inc., a Delaware corporation ("CSI"), American General Hospitality, Inc., a
Texas corporation, the Operating Partnership, and AGHGP, AGH LP, Inc., a Nevada
corporation ("AGHLP"), was the sole limited partner of the Operating
Partnership.
3. AGHC is a 1% member of AGH UPREIT LLC, a Delaware limited
liability company ("AGHLLC"); the Operating Partnership is a 99% member of
AGHLLC; AGHC and the Operating Partnership are and have always been only members
of AGHLLC; and, no person or entity other than the Operating Partnership or AGHC
has any voting power or control with respect to AGHLLC.
4. Immediately following the consummation of the transactions
contemplated by the Sale and Contribution Agreement and as of the date hereof,
the Operating Partnership and AGHLLC are the only general partners of MMA and no
other person or entity has any voting power or control with respect to MMA; and,
to the best of my knowledge, immediately prior to the consummation of the
transactions contemplated by the Sale and Contribution Agreement, the only
general partners of MMA were MMI and CSI and no other person or entity had
voting power or control with respect thereto.
5. On the date hereof and at all times prior thereto, the duly
elected, qualified, and acting sole director of both AGHLP and AGHGP is and has
been Steven D. Jorns.
<PAGE>
6. On the date hereof and since July 15, 1996, the following persons
are and have been since such date the duly elected, qualified, and acting
directors of AGHC:
H. Cabot Lodge III
James R. Worms
James McCurry
Kent R. Hance
Steven D. Jorns
Prior thereto, Steven D. Jorns had been the sole director of AGHC.
7. On the date hereof, the following persons hold the office or
offices in AGHC, AGHGP, and AGHLP, which are set forth opposite his name:
Name Office(s)
---- ---------
Steven D. Jorns Chairman of the Board, Chief
Executive Officer, and President
Bruce G. Wiles Executive Vice President
Kenneth E. Barr Executive Vice President, Chief
Financial Officer, Principal
Accounting Officer, Secretary,
and Treasurer
8. As of the date hereof, neither the stockholders nor the board of
directors of AGHC have adopted, or are currently considering adopting, a
resolution contemplating the dissolution of AGHC or AGHLLC or any merger or
consolidation of AGHC or AGHLLC with another entity in which AGHC or AGHLLC, as
the case may be, has not been or will not be the surviving entity, and there
have been no articles or certificate of dissolution filed on behalf of AGHC or
AGHLLC with the Maryland Secretary of State or Delaware Secretary of State, as
the case may be.
9. As of the date hereof, the undersigned has no knowledge or notice
that either the members or managers, if any, of AGHLLC have adopted, or are
currently considering adopting, a resolution contemplating the dissolution of
AGHLLC or any merger or consolidation of AGHLLC with another entity in which
AGHLLC has not been or will not be the surviving entity, and there have been no
articles or certificate of dissolution filed on behalf of AGHLLC with the
Delaware Secretary of State.
10. The undersigned has no knowledge or notice that any member of
AGHLLC has retired or resigned or been expelled as a member of AGHLLC, is
bankrupt (as that term is defined and used in the Operating Agreement of AGHLLC
and applicable laws of the State of Delaware), has died or been dissolved, or
been subject to the
-2-
<PAGE>
occurrence of any other event that would cause a dissolution of AGHLLC under the
laws of the State of Delaware.
11. Attached hereto as Exhibit A is a true, correct, and complete
---------
copy of the Second Amended and Restated Agreement of Partnership of MMA, which
immediately following the consummation of the transactions contemplated by the
Sale and Contribution Agreement and on the date hereof is in full force and
effect, and no proceeding for the amendment, modification, or rescission of such
document is pending or contemplated; and attached hereto as Exhibit A-1 is a
-----------
true, correct, and complete copy of the Amended and Restated Agreement of
Partnership of MMA in full force and effect immediately prior to the
consummation of the transactions contemplated by the Sale and Contribution
Agreement, which Amended and Restated Agreement of Partnership was superseded
and replaced on the date hereof upon execution and delivery by the Operating
Partnership and AGHLLC of the Second Amended and Restated Agreement of
Partnership attached hereto as Exhibit A.
---------
12. As of the date hereof, neither the stockholders nor the board of
directors of AGHGP have adopted or currently considered adopting a resolution
contemplating the dissolution of AGHGP or the Operating Partnership or any
merger or consolidation of AGHGP or the Operating Partnership with another
entity in which AGHGP or the Operating Partnership, as the case may be, has not
been or will not be the surviving entity, and there have been no articles or
certificate of dissolution filed on behalf of AGHGP or the Operating Partnership
with the Nevada Secretary of State or Delaware Secretary of State, as the case
may be.
13. As of the date hereof, AGHGP is not bankrupt (as that term is
defined and used in the limited partnership agreement of the Operating
Partnership and applicable laws of the State of Delaware) and has not withdrawn
or been expelled or removed as the general partner of the Operating Partnership,
and the undersigned has no knowledge or notice that any of the other partners of
the Operating Partnership, if any, are bankrupt or have withdrawn or been
expelled or removed as general partners of the Operating Partnership, and the
undersigned has no knowledge or notice of the occurrence of any other events or
circumstances which would result in the dissolution of the Operating Partnership
under its limited partnership agreement or the laws of the State of Delaware.
14. As of the date hereof, neither AGHLLC nor the Operating
Partnership is bankrupt (as that term is defined and used in the Second Amended
and Restated Agreement of Partnership of MMA and applicable laws of the State of
Wisconsin) or has withdrawn or been expelled or removed as a general partner of
MMA, and the undersigned has no knowledge or notice of the occurrence of any
other events or circumstances which would result in the dissolution
-3-
<PAGE>
of MMA under its Second Amended and Restated Agreement of Partnership or the
laws of the State of Wisconsin.
15. Attached hereto as Exhibit B is a true, correct, and complete
---------
copy of the resolutions adopted by the general partners of MMA, at duly called
meetings at which a quorum was present (if required) or upon unanimous written
consent, on connection with matters involving or relating to MMA, which
resolutions remain in full force and effect as of the date hereof and have not
been amended, modified, revoked, or rescinded.
16. To the best of my knowledge, no authorization, consent, or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required to be obtained or made by MMA for the
due execution, delivery, and performance by it of that certain Lease Agreement
dated July _____, 1996, by and between MMA and AGH Leasing, L.P., a Delaware
limited partnership, relating to the Holiday Inn Select-Madison, and the
consummation of the transactions contemplated thereby, except such as have been
duly obtained or made and are in full force and effect on the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of the ____ day of July, 1996.
________________________________
Steven D. Jorns
Chairman of the Board,
Chief Executive Officer and
President of American General
Hospitality Corporation and
AGH GP, Inc.
-4-
<PAGE>
The undersigned, Kenneth E. Barr, the Executive Vice President, Chief
Financial Officer, Principal Accounting Officer, Secretary, and Treasurer of
both AGHC and AGHGP hereby certifies that Steven D. Jorns was, at the time he
executed the foregoing certificate, a duly elected, qualified, and acting
Chairman of the Board, Chief Executive Officer and President of both AGHC and
AGHGP, and he was duly authorized and empowered to do so, and the signature
thereon is genuine.
______________________________
Kenneth E. Barr
Executive Vice-President,
Chief Executive Officer,
Principal Accounting Officer,
Secretary and Treasurer and
President of American General
Hospitality Corporation and
AGH GP, Inc.
-5-
<PAGE>
Exhibit B
Resolutions Adopted by the Partners
-----------------------------------
of Madison Motel Associates ("MMA")
-----------------------------------
RESOLVED, that the form, terms, and provisions of the Lease Agreement
dated July ____, 1996 (the "Holiday Inn Select-Madison Participating
Lease"), by and between MMA and AGH Leasing, L.P., a Delaware limited
partnership, be, and the same hereby is, approved in all respects; and be
it further
RESOLVED, that American General Hospitality Operating Partnership,
L.P., a Delaware limited partnership, and AGH UPREIT LLC, a Delaware
limited liability company (collectively, the "Partners"), be, and each of
them hereby is, authorized in the capacity of general partners of MMA, to
execute and deliver the Holiday Inn Select-Madison Participating Lease on
behalf of MMA, with such additions, deletions, and changes in the final
executed copies as the Partners may approve, such approval to be
conclusively evidenced by the execution and delivery thereof; and be it
further
RESOLVED, that the form, terms, and provisions of the Loan Documents
identified on Schedule I attached hereto be, and the same hereby is
approved in all respects in their entirety; and be it further
RESOLVED, that the Partners be, and each of them hereby is, authorized
in the capacity of general partners of MMA, to execute and deliver the Loan
Documents on behalf of MMA, with such additions, deletions and changes in
the final executed copy as the Partners may approve, such approval to be
conclusively evidenced by the execution and delivery thereof; and be it
further
RESOLVED, that the form, terms and provisions of the financing
statements on Form UCC-1 to be filed pursuant to the Loan Documents (the
"UCC-1 Financing Statements"), are hereby in all respects approved; and be
it further
RESOLVED, that the Partners be, and each of them hereby is, authorized
and empowered to execute and deliver in the capacity of general partners of
MMA, the UCC-1 Financing Statements on behalf of MMA (with such additions,
deletions and changes in the final executed copy as the Partners shall, in
their discretion, deem advisable, such execution to be conclusive evidence
of his approval); and be it further
RESOLVED, that the Partners be, and each of them hereby is, authorized
in the capacity of general partners of MMA, to execute and deliver on
behalf of MMA, such further documents, instruments and agreements as the
Partners may deem necessary or appropriate in connection with the Loan
Documents, including any bills of sale, assignments, assumptions,
certificates, affidavits, deeds and such other documents, instruments and
agreements as may be required by any party to the Loan Documents.
<PAGE>
Schedule 1
1. Credit Agreement (the "Credit Agreement"), by and between American
General Hospitality Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), Societe Generale, a French banking corporation.
Bank One Texas, N.A., and certain other banks and other financial institutions
(collectively, the "Banks"), relating to a $100,000,000.00 credit facility (the
"Credit Facility").
2. Certain promissory notes (the "Notes") executed by the Operating
Partnership and payable to the Banks, evidencing the obligations of the
Operating Partnership under the Credit Facility.
3. Mortgage, Security Agreement, Assignment of Rents and Financing
Statement (the "Mortgage"), executed by Madison Motel Associates, a Wisconsin
general partnership ("MMA"), securing payment of the Notes, covering certain
real and personal property.
4. Assignment of Leases, Rents and Security Deposits (the "Mortgagor
Assignment of Leases"), executed by MMA, further securing payment of the Notes.
5. UCC Financing Statements executed by MMA to be filed in the real
property records (the "Records") for Dane County, Wisconsin, and with the
Department of Financial Institutions, Division of Corporate & Consumer Services,
Uniform Commerical Code Unit (the "Department") of the State of Wisconsin
(respectively, the "Mortgagor County Financing Statement" and the "Mortgagor
State Financing Statement" and collectively the "Mortgagor Financing
Statements").
6. Assignment of Leases, Rents and Security Deposits (the "Lessee
Assignment of Leases"), executed by AGH Leasing, L.P., a Delaware limited
partnership (the "Lessee"), in favor of MMA securing the Lessee's obligations
under the Lease.
7. UCC Financing Statements executed by the Lessee to be filed in the
Records and with the Department (respectively, the "Lessee County Financing
Statement" and the "Lessee State Financing Statement" and collectively the
"Lessee Financing Statements").
<PAGE>
EXHIBIT "JJ"
[LETTERHEAD OF MACDONALD CARANO WILSON MCCUNE BERGIN FRANKOVICH & HICKS]
LEO P. BERGIN Reply to: Reno
July 31, 1996
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Societe Generale
Southwest Agency
2001 Ross Avenue, Suite 4900
Dallas, Texas 75201
Bank One, Texas, N.A.
Real Estate Department
1717 Main Street, 4th Floor
Dallas, Texas 75201
Re: American General Hospitality Corporation
Gentlemen:
We are special local counsel for AGH GP, Inc., a Nevada corporation,
in connection with the Credit Facility (the "Credit Facility") of up to $100
million to American General Hospitality Operating Partnership, L.P., a Delaware
limited partnership (the "Borrower") pursuant to a Credit Agreement (the "Credit
Agreement") by and between the Borrower and Societe Generale, a French banking
corporation acting through its Southwest Agency, as Structuring Agent (the
"Structuring Agent"); Bank One, Texas, N.A., as Administrative Agent (the
"Administrative Agent"); and the banks and other financial institutions party
thereto (collectively referred to herein as the "Banks").
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of:
a. Articles of Incorporation of AGH GP, Inc.;
b. List of Officers and Directors of AGH GP, Inc.;
c. The Amended and Restated Bylaws of AGH GP, Inc.;
d. The consent of special meetings of AGH GP, Inc.;
<PAGE>
[LETTERHEAD OF MACDONALD CARANO WILSON MCCUNE BERGIN FRANKOVICH & HICKS]
Battle Fowler LLP
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 2
e. A stock certificate of AGH GP, Inc.;
f. The Subscription Agreement of AGH GP, Inc.;
g. The minutes of AGH GP, Inc. amending the Articles of
Incorporation of AGH GP, Inc.
Our opinion is subject to qualifications that (a) the enforceability
of any instruments referred to herein may be subject to applicable bankruptcy,
insolvency and fraudulent transfer laws, and similar laws affecting the
enforceability of creditor's rights generally, and (b) the remedies of the
parties therein may be qualified by laws governing specific performance,
injunctive relief and other equitable remedies of creditors, and if any party to
any of the documents referred to in this opinion were to seek an equitable
remedy in Nevada, such as specific performance, the availability of such remedy
would be subject to the discretion of the court requested to grant such remedy.
Based upon and subject to the foregoing, it is our opinion, as of the
date hereof:
1. AGH GP, Inc. is a corporation duly incorporated and validly
existing and in good standing under the laws of the State of
Nevada, and is duly registered and qualified to conduct business
and is in good standing, with full corporate power to own, lease
and operate its properties and assets and to conduct its
business.
2. The execution and delivery of and the performance by AGH GP,
Inc., on behalf of American General Hospitality Operating
Partnership, L.P., as its general partner, of its obligations
under the Loan Documents listed on Schedule I to which it is a
party, have been duly and validly authorized.
We are qualified to practice law in the State of Nevada and express no
opinion herein as to any laws other than those of
<PAGE>
[LETTERHEAD OF McDONALD CARANO WILSON McCUNE BERGIN FRANKOVICH
& HICKS LLP]
Battle Fowler LLP
Societe Generale
Bank One, Texas, N.A.
July 31, 1996
Page 3
the State of Nevada. Our opinion is further limited to laws in affect on
the date hereof.
The opinions rendered herein are delivered solely for Battle
Fowler LLP in giving an opinion to you and the other Banks, and Battle
Fowler LLP may make this letter available to such lenders. In addition,
this opinion is being rendered to the Banks and the Bank's respective
counsel for your and their sole use and may not be made available to or
relied upon by any other person, firm or entity without our express prior
written consent, except for future Banks or participants in the Credit
Facility. This opinion may not be relied on by any other person or in
connection with any other transaction other than those contemplated by
American General Hospitality Corporation Initial Public Offering. No part
of this letter may be quoted or reproduced in any document without our
prior consent. The foregoing shall not prohibit the parties addressed
herein from disseminating this opinion to their attorneys, accountants,
auditors or regulatory examiners.
Sincerely,
McDONALD CARANO WILSON McCUNE
BERGIN FRANKOVICH & HINKS LLP
By /s/ Leo P. Bergin
------------------------------------
Leo P. Bergin
a Partner
LPB: jab
<PAGE>
SCHEDULE 1.01(a)
Commitments
-----------
<TABLE>
<CAPTION>
BANK COMMITMENT
---- ----------
<S> <C>
Societe Generale, Southwest Agency $50,000,000
Bank One, Texas, N.A. $50,000,000
</TABLE>
<PAGE>
[TO BE COMPLETED]
Schedule 1.01(b) - Initial Properties
Allocated Debt Amount, Appraised Values and Cost Basis
<TABLE>
<CAPTION>
Appraised Appraised Allocated
"As Is" "As Improved" Cost Debt
Property Name Location Value Value Basis Amount
- ------------- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
LeBaron/Doubletree San Jose, CA 20,000 30,000
Holiday Inn - Mission Valley San Diego, CA 19,400 21,700
Holiday Inn - Crowne Plaza San Jose, CA 15,500 21,000
Holiday Inn - Airport New Orleans, LA 26,000 28,500
Maison de Ville New Orleans, LA 3,000 3,000
Hampton Inn - Airport Richmond, VA 7,500 7,500
Days Inn/Hampton Inn Ocean City, MD 8,000 10,000
Holiday Inn DFW-West Bedford, TX 14,000 14,000
Toledo Hilton Toledo, OH 10,600 10,600
Madison Holiday Inn Madison, WI 21,500 23,000
Best Western Harvey Albuquerque, NM 12,500 17,500
</TABLE>
<PAGE>
APPROVED PRELIMINARY PROPERTY PLAN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H I J
- ------------------------------------------------------------------------------------------------------------------------------------
1 PROJECTED RENOVATION COSTS
- ------------------------------------------------------------------------------------------------------------------------------------
2 # OF CONSTRUCTION TOTAL PER CHOSEN FRANCHISE PER
- -----------------------------------------------------------------------------------------------------------------------------------
3 PROJECT ROOMS FF/E COST COST COST ROOM UPDATES REQUIRED TIM DIFF
- ------------------------------------------------------------------------------------------------------------------------------------
4 CROWNE PLAZA SAN JOSE 231 1,399,977 3,266,613 4,666,590 20,202 - 4,666,590 4,666,590 -
- ------------------------------------------------------------------------------------------------------------------------------------
5 WYNDHAM ALBUQUERQUE 266 1,505,207 3,512,150 5,017,358 18,862 - 5,017,358 5,017,358 -
- ------------------------------------------------------------------------------------------------------------------------------------
6 SECAUCUS 165 - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
7 TOLEDO 213 102,399 238,932 341,331 1,602 - 341,331 341,331 -
- ------------------------------------------------------------------------------------------------------------------------------------
8 CROWNE PLAZA MADISON 227 514,257 1,199,934 1,714,191 7,552 224,250 1,489,941 1,714,191 -
- ------------------------------------------------------------------------------------------------------------------------------------
9 MAISON DE VILLE 23 15,000 35,000 50,000 2,174 50,000 - 50,000 -
- ------------------------------------------------------------------------------------------------------------------------------------
10 HOLIDAY INN NEW ORLEANS 304 688,405 1,606,278 2,294,683 7,548 - 2,294,683 2,294,683 -
- ------------------------------------------------------------------------------------------------------------------------------------
11 DFW - WEST 243 72,572 169,335 241,908 996 - 241,908 241,908 -
- ------------------------------------------------------------------------------------------------------------------------------------
12 DFW - SOUTH 409 565,386 1,319,234 1,884,620 4,608 - 1,884,620 1,884,620 0
- ------------------------------------------------------------------------------------------------------------------------------------
13 DOUBLETREE SAN JOSE 327 1,950,000 4,550,000 6,500,000 19,878 - 6,500,000 6,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
14 DOUBLETREE MISSION VALLEY 318 751,432 1,753,340 2,504,772 7,877 - 2,504,772 2,504,772
- ------------------------------------------------------------------------------------------------------------------------------------
15 HAMPTON INN OCEAN CITY 162 571,595 1,333,722 1,905,317 11,761 - 1,905,317 1,905,317
- ------------------------------------------------------------------------------------------------------------------------------------
16 HAMPTON INN RICHMOND 124 15,000 35,000 50,000 403 - 50,000 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
17
- ------------------------------------------------------------------------------------------------------------------------------------
18 TOTAL ALL HOTELS 3,012 8,151,231 19,019,538 27,170,769 9,021 274,250 26,896,519 27,170,769 0
- ------------------------------------------------------------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------------------------------------------------------------
20 TOTAL 4 AGH PREDECESSOR HOTELS 555 102,572 239,335 341,908 616 50,000 291,908
- ------------------------------------------------------------------------------------------------------------------------------------
21
- ------------------------------------------------------------------------------------------------------------------------------------
22 TOTAL 9 ACQUISITION HOTELS 2,457 8,048,658 18,780,203 26,828,861 10,919 224,250 26,604,611
- ------------------------------------------------------------------------------------------------------------------------------------
23
- ------------------------------------------------------------------------------------------------------------------------------------
24 TOTAL 7 ACQUISITION HOTELS 2,832 8,722,653 20,352,856 29,075,509 10,267 224,250 28,851,259
- ------------------------------------------------------------------------------------------------------------------------------------
25
- ------------------------------------------------------------------------------------------------------------------------------------
26 TOTAL 7 CONVERSION HOTELS 1,835 7,380,873 17,222,037 24,602,910 13,408 224,250 24,378,660
- ------------------------------------------------------------------------------------------------------------------------------------
27
- ------------------------------------------------------------------------------------------------------------------------------------
28 TOTAL 5 NEW HOTELS - OCEAN CITY 1,531 6,692,468 15,615,759 22,308,227 14,571 224,250 22,083,977
- ------------------------------------------------------------------------------------------------------------------------------------
29
- ------------------------------------------------------------------------------------------------------------------------------------
30 TOTAL 7 CONVERSION/2 REPOSITIO 2,243 7,453,445 17,391,372 24,844,818 11,077 224,250 24,620,568
- ------------------------------------------------------------------------------------------------------------------------------------
31
- ------------------------------------------------------------------------------------------------------------------------------------
32
- ------------------------------------------------------------------------------------------------------------------------------------
33 AS OF 6/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HOLIDAY INN
SAN JOSE, CA
SUMMARY
CROWNE PLAZA CONVERSION
PRODUCT IMPROVEMENT PLAN
JANUARY 26, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EST.COST
- --------------------------------------------------------------------------------
<S> <C> <C>
I. EXTERIOR 138,000.00
II. BUILDING STRUCTURES 706,500.00
III. PUBLIC AREAS 917,580,00
IV. PRIVATE GUEST AREAS 2,210,965.00
V. BACK OF THE HOUSE 231,090.00
VI. GENERAL CONDITIONS 462,454.85
- --------------------------------------------------------------------------------
TOTAL 4,666,589.85
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HOLIDAY INN
SAN JOSE, CA
CROWNE PLAZA CONVERSION
PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
NUMBER OF ROOMS: 240
- ---------------------------------------------------------------------------------------------------------------------------------
RE'D QUANTITY/ UNIT EST.
SCOPE OF WORK YES ALLOWANCE COST COST
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. EXTERIOR
A. LANDSCAPING:
------------------------------------------------------------------------------------------------------------------------
1. PROVIDE ADDITIONAL COLOR/REPLACE MISSING GROUND COVER 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
2. REMOVE OVERGROWN AUSTRALIAN PINES & REPLACE 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
3. PROVIDE ADDITIONAL COURTYARD LANDSCAPING 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
4. UPGRADE LIGHTING 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
B. PARKING LOT AND DRIVES
------------------------------------------------------------------------------------------------------------------------
1. MINOR ASPHALT REPAIRS 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
2. RESURFACE ASPHALT PAVING 50.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
3. STRIPE 20.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
4. REFINISH THE FIRE LANE CURBS 1.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
5. PAINT LIGHT POLES 10.00 DEFER 0.00
------------------------------------------------------------------------------------------------------------------------
C. PARKING GARAGE
------------------------------------------------------------------------------------------------------------------------
1. REFINISH STRIPING THROUGHOUT 260.00 10.00 DEFER
------------------------------------------------------------------------------------------------------------------------
2. REFINISH OR REPLACE CEILING LIGHTS 60.00 200.00 DEFER
------------------------------------------------------------------------------------------------------------------------
3. PAINT POLES ON POLE LIGHTS 10.00 350.00 DEFER
------------------------------------------------------------------------------------------------------------------------
4. REFINISH STRWY RAIL & PROVIDE PART ENCLOSURE 2.00 2,500.00 DEFER
------------------------------------------------------------------------------------------------------------------------
5. REPLACE AND UPGRADE GLOBE LIGHT FIXTURES 30.00 75.00 DEFER
------------------------------------------------------------------------------------------------------------------------
6. REPLACE SCARRED SIGNAGE THROUGHOUT 1.00 1,500.00 DEFER
------------------------------------------------------------------------------------------------------------------------
7. REFINISH/UPGRADE ELEV FLOOR, WALLS, CEILING, DOORS 1.00 3,000.00 DEFER
------------------------------------------------------------------------------------------------------------------------
8. RENOVATE ELEVATOR TO ADA STANDARDS 1.00 10,000.00 DEFER
------------------------------------------------------------------------------------------------------------------------
9. ENTRY DEVICES AND ATTENDANTS BOOTH 1.00 5,000.00 DEFER
------------------------------------------------------------------------------------------------------------------------
11. REPLACE VANS 2.00 24,000.00 48,000.00
------------------------------------------------------------------------------------------------------------------------
12. UPGRADE GARAGE TO MATCH HOTEL EXTERIOR 1.00 40,000.00 40,000.00
------------------------------------------------------------------------------------------------------------------------
D. SIGNAGE
------------------------------------------------------------------------------------------------------------------------
1. BRAND REQUIRED SIGNAGE 1.00 50,000.00 50,000.00
------------------------------------------------------------------------------------------------------------------------
II. BUILDING STRUCTURES
A. COMMERCIAL BUILDING CANOPY
------------------------------------------------------------------------------------------------------------------------
1. REPAIR CRACKED CANOPY CEILING 1.00 3,500.00 3,500.00
------------------------------------------------------------------------------------------------------------------------
2. UPGRADE CANOPY AND ENTRY 1.00 20,000.00 20,000.00
------------------------------------------------------------------------------------------------------------------------
B. COMMERCIAL BUILDINGS
------------------------------------------------------------------------------------------------------------------------
1. REFINISH EXTERIOR WALLS WHERE STAINED SEE #5
------------------------------------------------------------------------------------------------------------------------
2. REFINISH WHERE LIGHT FIXTURES HAVE BEEN CHANGED SEE #5
------------------------------------------------------------------------------------------------------------------------
3. STEAM CLEAN PAVERS UNDER CANOPY 1.00 500.00 500.00
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
4. PROVIDE NEW ROOFLINE DETAIL 4,000.00 10.00 40,000.00
--------------------------------------------------------------------------------------------------------------------------
5. CHANGE EXTERIOR COLOR/SKIN TO COORDINATE W/RENTAL TOWER 1.00 90,000.00 90,000.00
--------------------------------------------------------------------------------------------------------------------------
6. REFINISH CONCRETE PLANTERS 1.00 7,500.00 7,500.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE BRONZE WINDOWS AT STREET LEVEL TO
COORDINATE WITH BUILDING RENOVATION 1.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
8. PROVIDE NEW DECORATIVE EXTERIOR LIGHTING 1.00 20,000.00 20,000.00
--------------------------------------------------------------------------------------------------------------------------
9. PROVIDE FLAG POLES 2.00 1,200.00 2,400.00
--------------------------------------------------------------------------------------------------------------------------
10. REPLACE WASTE RECEPTACLES 6.00 350.00 2,100.00
--------------------------------------------------------------------------------------------------------------------------
C. RENTAL UNIT BUILDING
--------------------------------------------------------------------------------------------------------------------------
1. CLEAN DEBRIS FROM ROOF AND REFINISH EQUIPMENT 1.00 5,500.00 5,500.00
--------------------------------------------------------------------------------------------------------------------------
2. UPGRADE SKIN TO CONCEAL PANELS AT WINDOWS 1.00 440,000.00 440,000.00
--------------------------------------------------------------------------------------------------------------------------
3. MANSARD OR PARAPET ROOF TREATMENT 1.00 75,000.00 75,000.00
--------------------------------------------------------------------------------------------------------------------------
III. PUBLIC AREAS
A. LOBBY
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH LOBBY VESTIBULE DOORS 2.00 1,250.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CRACKED MARBLE TILES IN VESTIBULE FLOOR 1.00 2,000.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE SIGN PACKAGE INCL IN ROOM 0.00
--------------------------------------------------------------------------------------------------------------------------
4. PROVIDE CURRENCY EXCHANGE INFO AT FRONT DESK 1.00 50.00 50.00
--------------------------------------------------------------------------------------------------------------------------
6. CONVERT GIFT SHOP TO LOBBY LOUNGE MINIMUM SEATING 20 1.00 25,000.00 25,000.00
--------------------------------------------------------------------------------------------------------------------------
8. RELOCATE BELL STORAGE TO BEHIND FRONT DESK 1.00 2,500.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
9. RAISE AND COFFER LOBBY CEILING IF POSSIBLE 1.00 15,000.00 15,500.00
--------------------------------------------------------------------------------------------------------------------------
10. INSTALL NEW DECORATIVE LIGHTING IN LOBBY CEILING 1.00 7,500.00 7,500.00
--------------------------------------------------------------------------------------------------------------------------
11. REPLACE VINYL WALL COVERING THROUGHOUT LOBBY 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
12. REPLACE WORN CARPET IN LOBBY ONLY 350.00 25.00 8,750.00
--------------------------------------------------------------------------------------------------------------------------
13. INSTALL SLIP RESISTANT GRANITE MATERIAL IN ENTRY OF LOBBY 800.00 20.00 16,000.00
--------------------------------------------------------------------------------------------------------------------------
14. REFINISH DOOR AND DOORWAYS THROUGHOUT 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
15. REFINISH OAK BASE AND TRIM IN LOBBY, DESK AND CORRIDOR 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
16. REPLACE UPHOLSTERED SEATING 1.00 25,000.00 25,000.00
--------------------------------------------------------------------------------------------------------------------------
17. REDESIGN/RELOCATE PUBLIC PHONE AREA 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
18. PROVIDE MINIMUM OF ONE HOUSE PHONE 1.00 75.00 75.00
--------------------------------------------------------------------------------------------------------------------------
19. REPLACE BELLSTAND WITH LOWER CONCIERGE DESK 1.00 1,500.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
20. REPLACE CARPET ON DESK FACIA 1.00 3,000.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
21. REPLACE CARPET BEHIND THE DESK 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
22. REPLACE CARPET ON WALL BEHIND DESK WITH ALTERNATE 1.00 1,500.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
23. PROVIDE APPROPRIATE ARTWORK OR OTHER WALL DECOR 1.00 750.00 750.00
--------------------------------------------------------------------------------------------------------------------------
24. PROVIDE SEPARATE CHECK-IN FOR CLUB LEVEL 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
B. LOBBY CORRIDORS
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH CEILING TO UNIFORM APPEARANCE 600.00 2.00 1,200.00
--------------------------------------------------------------------------------------------------------------------------
2. PROVIDE BROCHURE AREA 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
3. REDESIGN DECOR 1.00 10,000.00 10,000.00
--------------------------------------------------------------------------------------------------------------------------
C. GIFT SHOP/BUSINESS CENTER
--------------------------------------------------------------------------------------------------------------------------
1. DEMOLISH GIFT SHOP WALLS INCLUDED IN LOBBY AREA
--------------------------------------------------------------------------------------------------------------------------
2. PROVIDE NEW GIFT SHOP/BUSINESS CENTER IN BOARDING ROOM 1.00 25,000.00 25,000.00
--------------------------------------------------------------------------------------------------------------------------
3. FAX/COPY MACHINE AND FURNISHINGS 1.00 4,500.00 4,500.00
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
D. PUBLIC RESTROOMS - COMPLETE REDO
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE SIGNAGE WITH ADA COMPLIANT 8.00 65.00 520.00
--------------------------------------------------------------------------------------------------------------------------
2. REFINISH SCARRED ENTRY DOORS/FRAMES 2.00 250.00 500.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE SCARRED WALL COVER ON CEILING 2.00 1,500.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE TILE 1.00 2,500.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
5. UPGRADE LIGHTING 2.00 1,000.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE VANITIES WITH CULTURED MARBLE OR NAT STONE 2.00 1,500.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE TARNISHED FAUCETS W/ LEVER HANDLE 2.00 1,000.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
8. REFINISH OAK TRIM AROUND VANITY MIRRORS 2.00 250.00 500.00
--------------------------------------------------------------------------------------------------------------------------
9. PROVIDE SEMI RECESSED TOWEL/TRASH DISPENSER 2.00 750.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
10. REPLACE PARTITIONS 2.00 3,500.00 7,000.00
--------------------------------------------------------------------------------------------------------------------------
11. ENSURE ALL PUBLIC RESTROOMS ARE ADA COMPLIANT 2.00 5,000.00 10,000.00
--------------------------------------------------------------------------------------------------------------------------
E. PREFUNCTION AREA
--------------------------------------------------------------------------------------------------------------------------
1. PROVIDE DOOR CASING TO ENCEL METAL DOOR CASING 3.00 1,000.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
2. RAISE CEILING IF POSSIBLE 5,000.00 5.00 20,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE WORN CARPET 555.00 40.00 22,200.00
--------------------------------------------------------------------------------------------------------------------------
4. REFINISH SCARRED TABLES 8.00 100.00 800.00
--------------------------------------------------------------------------------------------------------------------------
5. REFINISH OR REPLACE UPHOLSTERED WOOD FRAME CHAIRS 10.00 275.00 2,750.00
--------------------------------------------------------------------------------------------------------------------------
F. BANQUET ROOMS
--------------------------------------------------------------------------------------------------------------------------
1. REPAIR/REFINISH ALL SERVICE DOORS AND FRAMES 10.00 200.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CEILING TREATMENT/RAISE IF POSSIBLE 3.00 15,000.00 45,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REFINISH OR REPLACE LOUVERED WOOD PANELS 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
4. REMOVE CARPET FROM WALLS AND REPLACE VINYL 500.00 18.00 9,000.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE MISMATCHED, WORN OR SCARRED AIR WALLS 1,080.00 25.00 27,000.00
--------------------------------------------------------------------------------------------------------------------------
6. STEAM CLEAN STAINED CARPETS 1.00 2,500.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE EXISTING W/FLOURESCENT 50.00 150.00 7,500.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE DAMAGED BANQUET TABLES AS NECESSARY 25.00 250.00 6,250.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE YELLOW VINYL CHAIRS 250.00 40.00 10,000.00
--------------------------------------------------------------------------------------------------------------------------
10. CLEAN EXISTING UPHOLSTERED CHAIRS 250.00 10.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
11. REFINISH PODIUM TO LIKE-NEW 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------------------------
12. REFINISH WOOD BASE THROUGHOUT 500.00 1.50 750.00
--------------------------------------------------------------------------------------------------------------------------
13. REFINISH ENTRY DOORS AND FRAMES 5.00 500.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
14. PROVIDE NEW DECOR THROUGHOUT 3.00 10,000.00 30,000.00
--------------------------------------------------------------------------------------------------------------------------
15. CLEAN AND REFINISH A/C VENTS THROUGHOUT 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
16. REPLACE SERVICE CORRIDOR FLOOR 1,000.00 2.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
17. REFINISH SERVICE CORRIDOR CEILING AND WALLS 2,200.00 1.50 3,300.00
--------------------------------------------------------------------------------------------------------------------------
18. REFINISH OR REPLACE SERVICE DOORS IN CORRIDOR 10.00 250.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
19. REPLACE DAMAGED FLOOR TILE IN HOLDING KITCHEN 60.00 5.00 300.00
--------------------------------------------------------------------------------------------------------------------------
G. RESTAURANT AND LOUNGE AREA
--------------------------------------------------------------------------------------------------------------------------
1. NEEDS RECONCEPT AND COMPLETE RENOVATION 1.00 350,000.00 350,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE ALL FINISHES INCLUDED
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE ALL FURNISHINGS INCLUDED
--------------------------------------------------------------------------------------------------------------------------
4. ELIMINATE RAISED LEVEL FOR ADA INCLUDED
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE TABLE TOP DECOR INCLUDED
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE CHINA INCLUDED
--------------------------------------------------------------------------------------------------------------------------
7. PROVIDE PORTABLE PHONE INCLUDED
--------------------------------------------------------------------------------------------------------------------------
8. REDESIGN ENTRY INCLUDED
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE HOSTESS CASHIER STATIONS INCLUDED
--------------------------------------------------------------------------------------------------------------------------
10. PROVIDE PAGING/MUSIC SYSTEM INCLUDED
--------------------------------------------------------------------------------------------------------------------------
H. SWIMMING POOL AND DECK
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH POOL INTERIOR 1.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
2. REFINISH AND RESTORE THE POOL COPING 1.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
3. REMOVE CARPET AND REFINISH DECK 2,000.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE CHAISES 10.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE TABLES AND CHAIRS 4.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE UMBRELLAS 4.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
7. PROVIDE UNIVERSAL NO DIVING SIGNS 1.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
8. REFINISH POOL ENTRY DOORS AND FRAME 1.00 WAIVER 0.00
--------------------------------------------------------------------------------------------------------------------------
9. ADDITIONAL TO REMOVE POOL/CREATE ENTRY/F&B OUTLET 1.00 DEFER 0.00
--------------------------------------------------------------------------------------------------------------------------
I. EXERCISE FACILITY - MIN 325SF - 10' CEILING
--------------------------------------------------------------------------------------------------------------------------
1. PROVIDE 3 PIECES OF EQUIPMENT PER STANDARDS 3.00 3,500.00 10,500.00
--------------------------------------------------------------------------------------------------------------------------
2. PROVIDE 20" OR LARGER TV 1.00 300.00 300.00
--------------------------------------------------------------------------------------------------------------------------
3. PROVIDE WALL MOUNTED CLOCK W/SECOND HAND 1.00 75.00 75.00
--------------------------------------------------------------------------------------------------------------------------
4. PROVIDE COLORFUL GRAPHICS AND MFR INSTRUCTION 4.00 65.00 260.00
--------------------------------------------------------------------------------------------------------------------------
5. RELOCATE TO ACCOUNTING OFFICE AREA 1.00 30,000.00 30,000.00
--------------------------------------------------------------------------------------------------------------------------
6. PROVIDE SEPARATE CHANGING FACILITIES 2.00 5,000.00 10,000.00
--------------------------------------------------------------------------------------------------------------------------
7. PROVIDE SAUNA OR WHIRLPOOL FOR 10 1.00 10,000.00 10,000.00
--------------------------------------------------------------------------------------------------------------------------
J. ELEVATORS
--------------------------------------------------------------------------------------------------------------------------
1. REQUIRE COMPLETE RENOVATION FOR ADA COMPLIANCE 3.00 15,000.00 45,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REFINISH DOORS ON ALL FLOORS 27.00 500.00 13,500.00
--------------------------------------------------------------------------------------------------------------------------
K. STAIRWELLS/HALLWAYS
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH WALLS THROUGHOUT 2.00 10,000.00 20,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REFINISH RAILINGS 2.00 7,500.00 15,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE AND UPGRADE LIGHT FIXTURES 20.00 150.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
IV. PRIVATE GUEST AREAS
A. GUEST ROOM CORRIDOR
--------------------------------------------------------------------------------------------------------------------------
1. PROVIDE NEW SIGN PACKAGE 240.00 65.00 15,600.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE WALL COVERING 2,XX0.00 18.00 50,400.00
--------------------------------------------------------------------------------------------------------------------------
3. REFINISH GUESTROOM DOORS 240.00 150.00 36,000.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE CARPET 1,600.00 32.00 51,200.00
--------------------------------------------------------------------------------------------------------------------------
5. REFINISH EXIT DOORS AND FRAMES 16.00 125.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
6. REFINISH STORAGE ROOM DOORS 16.00 125.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
7. UPGRADED FINISHES FOR CLUB LEVEL FLOOR 1.00 25,000.00 25,000.00
--------------------------------------------------------------------------------------------------------------------------
B. GUEST VENDING AREAS
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH WALLS AND WOOD BASE 8.00 425.00 3,400.00
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
2. REPLACE VINYL FLOORING WITH TILE 8.00 500.00 4,000.00
------------------------------------------------------------------------------------------------------------------------------
3. REPLACE DAMAGED TRASH CANS M/R 0.00
-------------------------------------------------------------------------------------------------------------------------------
C. GUESTROOMS
-------------------------------------------------------------------------------------------------------------------------------
1. REFINISH OR REPLACE ALL ENTRY DOORS/FRAMES IN CORRIDOR 0.00
-------------------------------------------------------------------------------------------------------------------------------
2. ENSURE ALL SELF CLOSERS ARE OPERATIONAL M/R 0.00
-------------------------------------------------------------------------------------------------------------------------------
3. PROVIDE RIGID CLOSET DOORS IN ALL ROOMS 240.00 450.00 108,000.00
-------------------------------------------------------------------------------------------------------------------------------
4. PROVIDE 1" THUMB TURN DEADBOLTS ON CONNECTING DOORS 150.00 75.00 11,250.00
-------------------------------------------------------------------------------------------------------------------------------
5. REPLACE WALL VINYL 210.00 660.00 138,600.00
-------------------------------------------------------------------------------------------------------------------------------
6. REPLACE CARPET THROUGHOUT/USE CARPET BASE 8,085.00 15.00 121,275.00
-------------------------------------------------------------------------------------------------------------------------------
7. PROVIDE CARPET BASE 210.00 100.00 21,000.00
-------------------------------------------------------------------------------------------------------------------------------
8. REPLACE DRAPERIES AND ADD VALANCE 210.00 500.00 105,000.00
-------------------------------------------------------------------------------------------------------------------------------
9. REPLACE KING BEDSPREADS 150.00 85.00 12,750.00
-------------------------------------------------------------------------------------------------------------------------------
10. REPLACE FULL XL BEDSPREADS 200.00 75.00 15,000.00
-------------------------------------------------------------------------------------------------------------------------------
11. REPLACE PILLOWS AS NEEDED 400.00 4.00 1,600.00
-------------------------------------------------------------------------------------------------------------------------------
13. REPLACE ALL CASEGOODS 210.00 1,600.00 336,000.00
-------------------------------------------------------------------------------------------------------------------------------
14. REPLACE FULL LENGTH MIRROR CLOSET DOOR WILL BE MIRROR
-------------------------------------------------------------------------------------------------------------------------------
15. REPLACE ALL LIGHT PACKAGES 210.00 225.00 47,250.00
-------------------------------------------------------------------------------------------------------------------------------
16. REPLACE ALL ARTWORK 420.00 50.00 25,200.00
-------------------------------------------------------------------------------------------------------------------------------
17. REPLACE ANY STAINED OR SAGGING MATTRESS SETS 120.00 250.00 30,000.00
-------------------------------------------------------------------------------------------------------------------------------
18. REPLACE ACTIVITY CHAIRS 180.00 150.00 27,000.00
-------------------------------------------------------------------------------------------------------------------------------
19. PROVIDE LOUNGE CHAIRS AND OTTOMANS FOR KINGS 72.00 375.00 27,000.00
-------------------------------------------------------------------------------------------------------------------------------
20. PROVIDE SOFAS FOR KINGS 72.00 550.00 39,600.00
-------------------------------------------------------------------------------------------------------------------------------
21. REFINISH SCARRED A/C'S 200.00 75.00 15,000.00
-------------------------------------------------------------------------------------------------------------------------------
22. REPLACE INOPERATIVE A/C UNITS W/HEAT PUMP 20.00 625.00 12,500.00
-------------------------------------------------------------------------------------------------------------------------------
23. PROVIDE 25" OR LARGER TV W/REMOTE 240.00 375.00 90,000.00
-------------------------------------------------------------------------------------------------------------------------------
24. PROVIDE 14" CORDS ON ALL GUEST ROOMS PHONES 400.00 12.00 4,800.00
-------------------------------------------------------------------------------------------------------------------------------
25. PROVIDE THREE ADA COMPLIANT ROOMS 3.00 10,000.00 30,000.00
-------------------------------------------------------------------------------------------------------------------------------
26. CONVERT 9 BAYS TO ROOMS 9.00 10,000.00 90,000.00
-------------------------------------------------------------------------------------------------------------------------------
27. PROVIDE CONTOURED WOOD HANGERS FOR ALL ROOMS 165.00 50.00 8,250.00
-------------------------------------------------------------------------------------------------------------------------------
28. ENCLOSE SPRINKLER SYSTEM 240.00 400.00 96,000.00
-------------------------------------------------------------------------------------------------------------------------------
29. BUILD OUT WALL TO ADD ELECTRICAL 120.00 WAIVER 0.00
-------------------------------------------------------------------------------------------------------------------------------
D. CLUB LEVEL UPGRADES - 9TH FLOOR
-------------------------------------------------------------------------------------------------------------------------------
1. UPGRADED CASEGOODS PACKAGE FOR EXECUTIVE LEVEL 30.00 1,600.00 48,000.00
-------------------------------------------------------------------------------------------------------------------------------
2. DRAPERY AND HARD CORNICE FOR EXEC LEVEL 30.00 500.00 15,000.00
-------------------------------------------------------------------------------------------------------------------------------
3. UPGRADED LIGHT PACKAGE FOR CLUB LEVEL 30.00 400.00 12,000.00
-------------------------------------------------------------------------------------------------------------------------------
4. REPLACE MATTRESS/SPRINGS 30.00 300.00 9,000.00
-------------------------------------------------------------------------------------------------------------------------------
5. REPLACE BEDSPREADS W/UPGRADED COMFORTER/DUST RUFFLE 30.00 250.00 7,500.00
-------------------------------------------------------------------------------------------------------------------------------
6. REPLACE WALL VINYL 30.00 660.00 19,800.00
-------------------------------------------------------------------------------------------------------------------------------
7. REPLACE CARPET AND ADD BASE 1,100.00 15.00 16,500.00
-------------------------------------------------------------------------------------------------------------------------------
8. ADD MINI BARS 30.00 400.00 12,000.00
-------------------------------------------------------------------------------------------------------------------------------
9. REPLACE ARTWORK 90.00 75.00 6,750.00
-------------------------------------------------------------------------------------------------------------------------------
10. PROVIDE CLUB LEVEL LOUNGE ON 9TH FLOOR 1.00 10,000.00 10,000.00
-------------------------------------------------------------------------------------------------------------------------------
11. PROVIDE EXECUTIVE BOARDROOM CONVERSION 1.00 10,000.00 10,000.00
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
<TABLE>
<S> <C> <C> <C>
E. REGULAR GUEST BATHROOMS
---------------------------------------------------------------------------------------------------------------------------
1. REFINISH DOORS AND FRAMES AS NECESSARY 240.00 50.00 12,000.00
---------------------------------------------------------------------------------------------------------------------------
2. RECONDITION TILE AND GROUT TO LIKE NW 210.00 110.00 23,100.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE WALL VINYL 210.00 144.00 30,240.00
---------------------------------------------------------------------------------------------------------------------------
4. REPAINT CEILINGS 240.00 35.00 8,400.00
---------------------------------------------------------------------------------------------------------------------------
5. REPLACE VANITY HARDWARE 240.00 75.00 18,000.00
---------------------------------------------------------------------------------------------------------------------------
6. REWORK LIGHT BOX SOFFIT TO ELIMINATE WOOD TRIM AND BRIGHTEN 240.00 300.00 72,000.00
---------------------------------------------------------------------------------------------------------------------------
7. PROVIDE SHOWER CURTAIN W/SEPARATE LINER 210.00 15.00 3,150.00
---------------------------------------------------------------------------------------------------------------------------
8. REPLACE ANY WORN TUB HARDWARE 150.00 100.00 15,000.00
---------------------------------------------------------------------------------------------------------------------------
9. REMOVE AND REPLACE TUB SURROUND 240.00 800.00 192,000.00
---------------------------------------------------------------------------------------------------------------------------
10. REPLACE WASTE CONTAINERS 480.00 15.00 7,200.00
---------------------------------------------------------------------------------------------------------------------------
11. PROVIDE HAIR DRYERS 240.00 25.00 6,000.00
---------------------------------------------------------------------------------------------------------------------------
12. LIGHTED MAKE-UP MIRRORS 240.00 50.00 12,000.00
---------------------------------------------------------------------------------------------------------------------------
13. COFFEE MAKERS 240.00 30.00 7,200.00
---------------------------------------------------------------------------------------------------------------------------
14. BATHROBES 400.00 20.00 8,000.00
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
F. CLUB LEVEL BATH UPGRADES
---------------------------------------------------------------------------------------------------------------------------
1. NEW VANITIES 30.00 325.00 9,750.00
---------------------------------------------------------------------------------------------------------------------------
2. PROVIDE UPGRADED SHOWER CURTAIN AND LINER 30.00 30.00 900.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE WALLCOVERING 350.00 18.00 6,300.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE TILE FLOORS W/UPGRADED MATERIAL 30.00 350.00 10,500.00
---------------------------------------------------------------------------------------------------------------------------
V. BACK OF THE HOUSE
A. KITCHEN
---------------------------------------------------------------------------------------------------------------------------
1. REFINISH ENTRY DOORS 4.00 150.00 600.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE DAMAGED KICK/PUSH PLATES 4.00 100.00 400.00
---------------------------------------------------------------------------------------------------------------------------
3. REFINISH CEILING IN F&B DIRECTOR OFFICE 120.00 2.00 240.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE DAMAGED FLOOR TILE IN DRY STORAGE 25.00 10.00 250.00
---------------------------------------------------------------------------------------------------------------------------
5. REPLACE BROKEN CEILING LIGHT LENSES 5.00 50.00 250.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE DAMAGED DOOR GASKETS IN WALK IN 4.00 50.00 200.00
---------------------------------------------------------------------------------------------------------------------------
7. REPLACE RUSTED STORAGE RACKS IN WALK IN 1.00 1,000.00 1,000.00
---------------------------------------------------------------------------------------------------------------------------
8. REFINISH RUSTED CEILING IN WALK IN 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------------------------
9. REFINISH WALLS IN PRODUCE WALK-IN 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------------------------------
10. REPLACE BURNED LIGHT LENS IN PRODUCE WALK-IN 1.00 50.00 50.00
---------------------------------------------------------------------------------------------------------------------------
11. CLEAN AND REFINISH HVAC VENTS THROUGHOUT KITCHEN 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------------------------
B. EMPLOYEE BREAKROOM
---------------------------------------------------------------------------------------------------------------------------
1. REFINISH THROUGHOUT 1.00 1,000.00 1,000.00
---------------------------------------------------------------------------------------------------------------------------
2. REFINISH EMPLOYEES RESTROOMS 2.00 500.00 1,000.00
---------------------------------------------------------------------------------------------------------------------------
C. MISCELLANEOUS
---------------------------------------------------------------------------------------------------------------------------
1. DATAPORT PHONE IN ADDTN TO REG PHONE 240.00 75.00 18,000.00
---------------------------------------------------------------------------------------------------------------------------
2. FULL SIZE ELECTRIC IRON/BOARD/CADDY 240.00 65.00 15,600.00
---------------------------------------------------------------------------------------------------------------------------
3. CONVERSION ITEMS 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------------------------------------------
4. SALES AUTOMATION 1.00 DEFER 0.00
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 7
<PAGE>
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------
5. UNIFORMS 100.00 250.00 25,000.00
-----------------------------------------------------------------------
6. BANQUET EQUIPMENT 1.00 35,000.00 35,000.00
-----------------------------------------------------------------------
7. GRAND OPENING 1.00 0.00 0.00
-----------------------------------------------------------------------
8. LINEN REPLACEMENT 1.00 55,000.00 55,000.00
-----------------------------------------------------------------------
9. REPAIR SEISMIC CRACKING 1.00 30,000.00 30,000.00
-----------------------------------------------------------------------
10. AUDIO VISUAL EQUIPMENT 1.00 20,000.00 20,000.00
-----------------------------------------------------------------------
VI. GENERAL CONDITIONS
-----------------------------------------------------------------------
A. GENERAL CONDITIONS 4,204,135.00 0.09 378,372.15
-----------------------------------------------------------------------
B. DEPARTMENT INCENTIVE 4,204,135.00 0.01 42,041.35
-----------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 4,204,135.00 0.01 42,041.35
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL 4,666,589.85
- --------------------------------------------------------------------------------
</TABLE>
Page 8
<PAGE>
WYNDHAM
ALBUQUERQUE, NM
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------
<S> <C>
I. EXTERIOR 232,500.00
II. BUILDING STRUCTURES 372,500.00
III. PUBLIC AREAS 557,598.00
IV. PRIVATE GUEST AREAS 3,149,340.00
V. BACK OF THE HOUSE 0.00
VI. MISCELLANEOUS 208,199.00
VII. GENERAL CONDITIONS 497,215.07
- --------------------------------------------------------
TOTAL 5,017,352.07
- --------------------------------------------------------
</TABLE>
Page 1
<PAGE>
WYNDHAM
ALBUQUERQUE, NM
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
RE'D QUANTITY/ UNIT EST.
AREAS SCOPE OF WORK YES ALLOWANCE COST COST
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. EXTERIOR
A. LANDSCAPING
---------------------------------------------------------------------------------------
1. UPGRADE PLANTS AND LIGHTING 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------
B. PARKING LOT AND DRIVES
---------------------------------------------------------------------------------------
1. REPAIR AND STRIPE 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------
C. SIGNAGE
---------------------------------------------------------------------------------------
1. BRAND REQUIRED SIGNAGE 1.00 75,000.00 75,000.00
---------------------------------------------------------------------------------------
D. DUMPSTER SCREENING
---------------------------------------------------------------------------------------
1. FENCING TO CONCEAL DUMPSTER 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------
E. EXTERIOR SWIMMING POOL AREA
---------------------------------------------------------------------------------------
1. UPGRADE FURNISHINGS/LANDSCAPE/DECK 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------
F. PARKING LOT LIGHTING
---------------------------------------------------------------------------------------
1. UPGRADE LIGHTING 2.00 10,000.00 20,000.00
---------------------------------------------------------------------------------------
G. COMMERCIAL BUILDING
---------------------------------------------------------------------------------------
1. COORDINATE W/EXTERIOR OF TOWER 1.00 50,000.00 50,000.00
---------------------------------------------------------------------------------------
H. COOLING TOWERS
---------------------------------------------------------------------------------------
1. CONCEAL EQUIPMENT 1.00 7,500.00 7,500.00
---------------------------------------------------------------------------------------
I. CABANA
---------------------------------------------------------------------------------------
1. ADD CAP TO CONCEAL POOL GLAZING 1.00 3,000.00 0.00
---------------------------------------------------------------------------------------
II. BUILDING STRUCTURES
A. COVERED DRIVE (CANOPIES)
---------------------------------------------------------------------------------------
1. PAINT CANOPY COORD. W/BUILDING 1.00 5,500.00 5,500.00
---------------------------------------------------------------------------------------
2. UPGRADE CANOPY CEILING LIGHTING 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------
3. INSTALL PAVERS UNDER CANOPY 700.00 10.00 7,000.00
---------------------------------------------------------------------------------------
4. RECONFIGURE MAIN ENTRY 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------
</TABLE>
PAGE 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
B. GUEST ROOM TOWER
-----------------------------------------------------------------------
1. PAINT ENTIRE STRUCTURE 140,000.00 0.75 105,000.00
-----------------------------------------------------------------------
2. REPAIR RAILINGS 1.00 25,000.00 25,000.00
-----------------------------------------------------------------------
3. PARAPET ROOF DETAIL 650.00 300.00 195,000.00
-----------------------------------------------------------------------
III. PUBLIC AREAS
A. LOBBY
-----------------------------------------------------------------------
1. REPLACE TILE FLOOR 2,500.00 15.00 37,500.00
-----------------------------------------------------------------------
2. REPLACE VINYL WALLCOVERING 200.00 18.00 3,600.00
-----------------------------------------------------------------------
3. REPLACE CARPET 100.00 30.00 3,000.00
-----------------------------------------------------------------------
4. ADD ART ACCESSORIES 1.00 10,000.00 10,000.00
-----------------------------------------------------------------------
5. REPLACE FURNISHINGS 1.00 25,000.00 25,000.00
-----------------------------------------------------------------------
6. REPLACE LOBBY SIGNAGE 1.00 2,000.00 2,000.00
-----------------------------------------------------------------------
7. REPLACE DOOR TO EXER. AREA 1.00 450.00 450.00
-----------------------------------------------------------------------
8. LOBBY RESTROOMS 2.00 12,000.00 24,000.00
-----------------------------------------------------------------------
9. PROVIDE NEW PHONE PARTITIONS 1.00 7,500.00 7,500.00
-----------------------------------------------------------------------
10. REPLACE LAY IN CEILING
W/SHEETROCK 2,500.00 6.00 15,000.00
-----------------------------------------------------------------------
11. ADD WOOD BASE 200.00 5.00 1,000.00
-----------------------------------------------------------------------
B. FRONT DESK
-----------------------------------------------------------------------
1. REPLACE FRONT DESK 1.00 15,000.00 15,000.00
-----------------------------------------------------------------------
2. REMOVE INDENTS/REFINISH
BEHIND F/D 300.00 8.00 2,400.00
-----------------------------------------------------------------------
C. PUBLIC RESTROOMS PREFUNCTION AREA
-----------------------------------------------------------------------
1. RECONFIG TO ENLARGE AND
MEET ADA 2.00 20,000.00 40,000.00
-----------------------------------------------------------------------
D. PREFUNCTION AREA
-----------------------------------------------------------------------
1. REFINISH STUCCO WALL 750.00 0.50 375.00
-----------------------------------------------------------------------
2. REFINISH TILE FLOOR 1,054.00 2.00 2,108.00
-----------------------------------------------------------------------
3. REPLACE RUGS/FURNISHINGS 1.00 10,000.00 10,000.00
-----------------------------------------------------------------------
4. REPLACE DOORS 4.00 650.00 2,600.00
-----------------------------------------------------------------------
5. REPLACE DOORS TO OUTSIDE 4.00 650.00 2,600.00
-----------------------------------------------------------------------
6. REPLACE SIGNAGE 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------
7. REPLACE CEILING LIGHTING 1.00 5,000.00 5,000.00
-----------------------------------------------------------------------
8. REPLACE LAY IN CEILING
W/SHEETROCK 1,056.00 2.50 2,640.00
-----------------------------------------------------------------------
E. EXISTING BALLROOM
-----------------------------------------------------------------------
1. REPLACE CARPET 500.00 35.00 DEFER
-----------------------------------------------------------------------
2. REPLACE VINYL WALLCOVERING 300.00 18.00 DEFER
-----------------------------------------------------------------------
3. BUILD PERMANENT DIVISIONS
FOR BREAKOUTS 2,800.00 10.00 DEFER
-----------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
4. PROVIDE WALLCOVER FOR NEW PARTITIONS 250.00 18.00 DEFER
-----------------------------------------------------------------------------------------------------------------
5. REMOVE AIRWALLS 1.00 5,000.00 DEFER
-----------------------------------------------------------------------------------------------------------------
6. REPLACE DROP IN CEILING W/SHEETROCK 1,200.00 3.50 DEFER
-----------------------------------------------------------------------------------------------------------------
7. REPLACE CHANDALIERS W/NEW LIGHTING 4.00 2,500.00 DEFER
-----------------------------------------------------------------------------------------------------------------
8. REPLACE CHAIRS 500.00 40.00 DEFER
-----------------------------------------------------------------------------------------------------------------
9. REPLACE ANY BROKEN TABLES 20.00 300.00 DEFER
-----------------------------------------------------------------------------------------------------------------
F. BROAD/DIRECTORS ROOM
-----------------------------------------------------------------------------------------------------------------
1. CREATE NEW FROM BEDROOM ON 15TH FLOOR VIP 1.00 3,500.00 3,500.00
-----------------------------------------------------------------------------------------------------------------
2. FURNISHINGS 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------------
G. RESTAURANT/LOUNGE
-----------------------------------------------------------------------------------------------------------------
1. RECONFIGURE BAR TO CREATE LOBBY BAR 1.00 75,000.00 75,000.00
-----------------------------------------------------------------------------------------------------------------
2. REMOVE BUFFET 1.00 3,500.00 3,500.00
-----------------------------------------------------------------------------------------------------------------
3. ACCESSORIZE EXIST THEME/MORE ESTAB. LOOK 1.00 20,000.00 20,000.00
-----------------------------------------------------------------------------------------------------------------
4. RECONCEPT LILS TO PVT DINING IN SW REST. 1.00 20,000.00 20,000.00
-----------------------------------------------------------------------------------------------------------------
5. CLEAN CARPET 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------------------------------------------------
6. REPLACE FIRE EXIT DOOR AT REAR 1.00 450.00 450.00
-----------------------------------------------------------------------------------------------------------------
7. CREATE DISPLAY KITCHEN 1.00 200,000.00 DELETE
-----------------------------------------------------------------------------------------------------------------
H. EXERCISE FACILITY
-----------------------------------------------------------------------------------------------------------------
1. GUT & RECONFIG W/NEW EQUIP 1.00 30,000.00 30,000.00
-----------------------------------------------------------------------------------------------------------------
2. REFINISH HALLWAY/CONCEAL WIRE MOLD 1.00 3,500.00 3,500.00
-----------------------------------------------------------------------------------------------------------------
3. ADD WINDOW TREATMENT 8.00 250.00 2,000.00
-----------------------------------------------------------------------------------------------------------------
4. REPLACE CARPET IN HALLWAY 25.00 35.00 875.00
-----------------------------------------------------------------------------------------------------------------
I. GIFT SHOP/BUSINESS CENTER
-----------------------------------------------------------------------------------------------------------------
1. REDUCE SIZE OF GIFT SH/ADD BUS.CENTER 1.00 15,000.00 15,000.00
-----------------------------------------------------------------------------------------------------------------
J. ELEVATORS
-----------------------------------------------------------------------------------------------------------------
1. UPGRADE INTERIOR FINISH 2.00 5,000.00 10,000.00
-----------------------------------------------------------------------------------------------------------------
2. EQUIP EMPTY SHAFT FOR THIRD ELEV. 1.00 150,000.00 150,000.00
-----------------------------------------------------------------------------------------------------------------
K. CONCIERGE LOUNGE
-----------------------------------------------------------------------------------------------------------------
1. CONVERT 15TH FLOOR VIP 1.00 10,000.00 10,000.00
-----------------------------------------------------------------------------------------------------------------
L. NEW BALLROOM
-----------------------------------------------------------------------------------------------------------------
1. CONSTRUCT 5000 SF BALLROOM 5,000.00 200.00 DEFER
-----------------------------------------------------------------------------------------------------------------
IV. PRIVATE GUEST AREAS
A. GUEST ROOM CORRIDOR/ELEVATOR LOBBIES
-----------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET 2,200.00 30.00 66,000.00
-----------------------------------------------------------------------------------------------------------------
2. REPLACE CARPET PAD 2,200.00 3.00 6,600.00
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
3. ADD WOOD BASE 5,200.00 5.00 26,000.00
------------------------------------------------------------------------------------------------------
4. REPLACE VINYL WALLCOVERING 4,500.00 18.00 81,000.00
------------------------------------------------------------------------------------------------------
5. COFFER CEILING 4,000.00 13.00 52,000.00
------------------------------------------------------------------------------------------------------
6. REMOVE CEILING FLOURESC/ADD SCONCES 13.00 3,000.00 39,000.00
------------------------------------------------------------------------------------------------------
7. ELEVATOR LOBBY FURNISHINGS 13.00 750.00 9,750.00
------------------------------------------------------------------------------------------------------
8. IMPROVE HOUSE PHONE PRESENTATION 13.00 350.00 4,550.00
------------------------------------------------------------------------------------------------------
9. DIRECTIONAL SIGNAGE 1.00 10,000.00 10,000.00
------------------------------------------------------------------------------------------------------
B. GUEST VENDING AREAS
------------------------------------------------------------------------------------------------------
1. REPLACE BIN ICE MACHINES 6.00 3,800.00 22,800.00
------------------------------------------------------------------------------------------------------
2. REPLACE WALL FINISHES 630.00 13.00 8,190.00
------------------------------------------------------------------------------------------------------
3. REPLACE TILE FLOORS 1,430.00 5.00 7,150.00
------------------------------------------------------------------------------------------------------
4. REPLACE DOORS 13.00 450.00 5,850.00
------------------------------------------------------------------------------------------------------
C. GUEST ROOMS
------------------------------------------------------------------------------------------------------
1. REPLACE CASEGOODS 280.00 1,500.00 420,000.00
------------------------------------------------------------------------------------------------------
2. COVERLET AND DUST RUFFLE 450.00 125.00 56,250.00
------------------------------------------------------------------------------------------------------
3. DRAPERY AND SHEER 280.00 500.00 140,000.00
------------------------------------------------------------------------------------------------------
4. REPLACE CARPET/PAD/BASE 280.00 700.00 190,000.00
------------------------------------------------------------------------------------------------------
5. REPLACE VWC 14,000.00 12.00 168,000.00
------------------------------------------------------------------------------------------------------
6. REPLACE LIGHT PACKAGE 280.00 250.00 70,000.00
------------------------------------------------------------------------------------------------------
7. REPLACE MATTRESS AND SPRINGS 450.00 250.00 112,500.00
------------------------------------------------------------------------------------------------------
8. REPLACE DESK CHAIRS 552.00 150.00 82,800.00
------------------------------------------------------------------------------------------------------
9. REPLACE LOUNGE CHAIRS 276.00 375.00 103,500.00
------------------------------------------------------------------------------------------------------
10. REPLACE SOFA/SLEEPERS IN STUDIOS W/SICO 4.00 3,000.00 12,000.00
------------------------------------------------------------------------------------------------------
12. RECLAIM/MAKE 14 ROOMS ON SECOND/THIRD FLOOR 8.00 7,500.00 60,000.00
------------------------------------------------------------------------------------------------------
13. REPLACE ALL ENTRY DOORS 280.00 375.00 105,000.00
------------------------------------------------------------------------------------------------------
14. REPLACE ALL CONNECTING DOORS 160.00 300.00 48,000.00
------------------------------------------------------------------------------------------------------
15. ELECTRONIC LOCKS 280.00 325.00 91,000.00
------------------------------------------------------------------------------------------------------
16. SECOND TELEPHONE W/DATAPORT 280.00 75.00 21,000.00
------------------------------------------------------------------------------------------------------
17. ALL NEW DOOR NUMBERS 280.00 30.00 8,400.00
------------------------------------------------------------------------------------------------------
D. GUEST BATHROOMS
------------------------------------------------------------------------------------------------------
1. COMPLETE GUT AND REDO 279.00 4,000.00 1,116,000.00
------------------------------------------------------------------------------------------------------
INCLUDES CLOSET AND COFFEE MAKER SHELF
------------------------------------------------------------------------------------------------------
V. BACK OF THE HOUSE
A.
------------------------------------------------------------------------------------------------------
1. 0.00
------------------------------------------------------------------------------------------------------
2. 0.00
------------------------------------------------------------------------------------------------------
VI. MISCELLANEOUS
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
A. CONVERSION ITEMS
------------------------------------------------------------------------------------------------------
1. CONVERSION ITEMS-LOGO 1.00 30,000.00 30,000.00
------------------------------------------------------------------------------------------------------
2. UNIFORMS 1.00 15,000.00 15,000.00
------------------------------------------------------------------------------------------------------
3. F&B TABLETOP/EQUIPMENT 1.00 25,000.00 25,000.00
------------------------------------------------------------------------------------------------------
4. FURNISHINGS FOR NEW BALLROOM 1.00 42,000.00 DEFER
------------------------------------------------------------------------------------------------------
5. AUDIO VISUAL 1.00 20,000.00 20,000.00
------------------------------------------------------------------------------------------------------
6. LINEN REPLACEMENT 1.00 20,000.00 17,199.00
------------------------------------------------------------------------------------------------------
7. REPAIR COOLING TOWERS 2.00 20,000.00 0.00
------------------------------------------------------------------------------------------------------
8. PMS SYSTEM 1.00 45,000.00 45,000.00
------------------------------------------------------------------------------------------------------
B. TRANSPORTATION
------------------------------------------------------------------------------------------------------
1. REPLACE VANS 2.00 28,000.00 56,000.00
------------------------------------------------------------------------------------------------------
VII. GENERAL CONDITIONS
------------------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 4,520,137.00 0.09 406,812.33
------------------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 4,520,137.00 0.01 45,201.37
------------------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 4,520,137.00 0.01 45,201.37
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TOTAL: 5,017,352.07
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HILTON TOLEDO
TOLEDO, OH
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST. COST
- --------------------------------------------------------------------------------
<S> <C>
I. EXTERIOR 0.00
II. BUILDING STRUCTURES 0.00
III. PUBLIC AREAS 68,486.67
IV. PRIVATE GUEST AREAS 240,410.00
V. BACK OF THE HOUSE
VI. MISCELLANEOUS 0.00
VII. GENERAL CONDITIONS 32,434.15
- --------------------------------------------------------------------------------
TOTAL 341,330.82
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HILTON TOLEDO
TOLEDO, OH
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
RE'D QUANITY UNIT EST.
AREAS SCOPE OF WORK YES ALLOWANCE COST COST
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. EXTERIOR
A. SIGNAGE REQUIRED
---------------------------------------------------------------------------------------------------------------
1. REPLACE ENTRY SIGN W/SCRIPT LOGO 1.00 5,000.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
2. INSTALL SCRIPT LOGO ON PORTE COCHERE 1.00 5,000.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
0.00
0.00
II. BUILDING STRUCTURES 0.00
0.00
III. PUBLIC AREAS 0.00
0.00
A. LOBBY 0.00
---------------------------------------------------------------------------------------------------------------
1. REPLACE PEDIMAT IN ENTRY VESTIBULE AREA 1.00 2,200.00 2,200.00
---------------------------------------------------------------------------------------------------------------
2. REPLACE CONCIEGE DESK 1.00 450.00 450.00
---------------------------------------------------------------------------------------------------------------
3. REPLACE MARBLE TILE IN LOBBY & 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------------
ADJACENT AREA AS NEEDED 0.00
---------------------------------------------------------------------------------------------------------------
4. REPLACE AREA CARPET 64.00 30.00 1,920.00
---------------------------------------------------------------------------------------------------------------
5. REPLACE UPHOLST SEATING COORD. W/CARPET 1.00 4,000.00 4,000.00
---------------------------------------------------------------------------------------------------------------
6. REPLACE MANUAL ENTRY W/AUTO ENTRY DOOR 1.00 18,000.00 NOT CONSIDERED
---------------------------------------------------------------------------------------------------------------
0.00
B. RESTAURANT DINING AREA - SQ.FT. 0.00
---------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 388.89 30.00 11,666.67
---------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
3. REFINISH BASE MOULDINGS 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------------------
4. REPLACE HOSTESS/CASHIER STAND 1.00 3,000.00 3,000.00
---------------------------------------------------------------------------------------------------------------
5. PROVIDE A PERM. BUFFET LINE WITH 1.00 6,000.00 6,000.00
---------------------------------------------------------------------------------------------------------------
CABINTRY SOLID SURFACE & STONE TOP 0.00
---------------------------------------------------------------------------------------------------------------
0.00
C. LOUNGE 0.00
---------------------------------------------------------------------------------------------------------------
1. REPLACE VINYL WALLCOVERING 300.00 18.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
2. INSTALL VINYL WALLCOVERING INCLUDED DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
3. REPLACE VINYL BASE W/WOOD R CARPET BASE 1.00 2,500.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
4. REFINISH WOOD SURFACE ABOVE FIREPLACE 1.00 500.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
5. INSTALL MANTLE R HOOD TO FIREPLACE 1.00 1,500.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
6. REFINISH MILLWORK AT SERVICE AREA 1.00 1,500.00 DEFERRED 1997
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
7. REFINISH DANCE FLOOR 400.00 1.50 DEFERRED 1997
--------------------------------------------------------------------------------------------------------
8. PAINT CEILINGS 3,000.00 1.25 DEFERRED 1997
--------------------------------------------------------------------------------------------------------
0.00
D. PREFUNCTION SPACE 0.00
--------------------------------------------------------------------------------------------------------
1. REPLACE CEILING TILE - AS NEEDED 1.00 5,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
2. INSTALL UPHOLST SEATING CONSOLE TABLES 1.00 15,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
3. INSTALL END TABLES INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
4. INSTALL PROTABLE LIGHTING 1.00 1,500.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
5. INSTALL MISC. FURNISHINGS INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
6. REPLACE WINDOW TREATMENT 1.00 20,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
7. INSTALL SHEER/CASEMENT & OVERDRAPERY INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
8. REPLACE VINYL BASE W/ WOOD BASE 600.00 6.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
9. INSTALL ADA COMPLIANT SIGNAGE 1.00 2,500.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
0.00
E. BALLROOM 0.00
--------------------------------------------------------------------------------------------------------
1. REMOVE BRASS PANELS ON ENTRY DOOR 800 600.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
2. INSTALL APPLIED MOUNDINGS TO ENTRY DOOR INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
3. INSTALL LAMINATE R WOOD VENEER AS NEEDED INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
4. FIND SOLUTION TO ELIMNATE LIGHT LEAKS 1.00 5,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
IN SOFFITS AROUND PERIM OF CONFFERED AREA DEFER 1997
--------------------------------------------------------------------------------------------------------
5. INSTALL DECOR LIGHTING IN COFFERED AREA 1.00 6,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
0.00
F. MAJESTIC BALLROOM 0.00
--------------------------------------------------------------------------------------------------------
1. REPLACE VINYL WALLCOVERING 175.00 18.00 3,150.00
--------------------------------------------------------------------------------------------------------
2. INSTALL VINYL WALLCOVERING INCLUDED 0.00
--------------------------------------------------------------------------------------------------------
3. REPLACE CARPET & PAD 210.00 35.00 7,350.00
--------------------------------------------------------------------------------------------------------
4. INSTALL CARPET & PAD INCLUDED 0.00
--------------------------------------------------------------------------------------------------------
5. REPLACE WINDOW TREATMNT INCLUD BLACKOUT 1.00 8,000.00 8,000.00
--------------------------------------------------------------------------------------------------------
6. DETERMINE IF COLUMN CAN BE REMOVED M/R 0.00
--------------------------------------------------------------------------------------------------------
7. ELIMINATE BOX AT BASE OF COLUMN M/R 0.00
--------------------------------------------------------------------------------------------------------
8. REFINISH BASE MOULDING 144.00 3.00 432.00
--------------------------------------------------------------------------------------------------------
9. RE CONFIG SERV AREA TO CREATE VESTIBULE 1.00 3,500.00 3,500.00
--------------------------------------------------------------------------------------------------------
10. INSTALL DECORATIVE CEILING LIGHTING 1,250.00 3.50 4,410.00
--------------------------------------------------------------------------------------------------------
11. INSTALL ADA COMPLIANT SIGNAGE 1.00 400.00 400.00
--------------------------------------------------------------------------------------------------------
12. INSTALL CHAIR RAILS & OTHER DECOR MOULDINGS 144.00 12.00 1,728.00
--------------------------------------------------------------------------------------------------------
13. MISC. 1.00 2,780.00 2,780.00
--------------------------------------------------------------------------------------------------------
0.00
G. POOL AREA 0.00
--------------------------------------------------------------------------------------------------------
1. INSTALL CERMAIC TILER OTHER APPROVED 3,000.00 6.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
SURFACE OVER DECKING DEFER 1997
--------------------------------------------------------------------------------------------------------
2. REPLACE CARPET & PAD INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
3. INSTALL CARPET & PAD R APPROVED SURFACE INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
4. REPLACE VINYL BASE COORD W/FLOOR SURFACE INCLUDED DEFER 1997
--------------------------------------------------------------------------------------------------------
5. REPAIR & PAINT GYPSUM BOARD WALLS 1.00 5,000.00 DEFER 1997
--------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
6. INSTALL ADA COMPLIANT SIGNAGE 1.00 1,000.00 DEFER 1997
------------------------------------------------------------------------------------------------------
0.00
0.00
IV. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOM CORRIDOR 0.00
------------------------------------------------------------------------------------------------------
1. REPLACE VINYL BASE W/CARPET R WOOD 2,700.00 1.50 4,050.00
------------------------------------------------------------------------------------------------------
2. INSTALL ADA COMPLIANT SIGNAGE 213.00 85.00 18,105.00
------------------------------------------------------------------------------------------------------
3. PAINT DOORS & DOOR MOULDINGS 213.00 35.00 7,455.00
------------------------------------------------------------------------------------------------------
4. REPLACE SOFA IN ELEVATOR LOBBIES X EA FL 4.00 600.00 2,400.00
------------------------------------------------------------------------------------------------------
5. REPLACE CARPET INSET & PAD ELEV. LOBBY 1.00 800.00 800.00
------------------------------------------------------------------------------------------------------
6. INSTALL CARPET & PAD INCLUDED 0.00
------------------------------------------------------------------------------------------------------
7. REMAINING GRAPHICS PER ADA INCLUDED 0.00
------------------------------------------------------------------------------------------------------
0.00
------------------------------------------------------------------------------------------------------
0.00
B. GUEST ROOMS 0.00
------------------------------------------------------------------------------------------------------
1. INSTALL ADDITIONAL PHONE AT NIGHTSTAND 213.00 75.00 15,975.00
------------------------------------------------------------------------------------------------------
2. BEDSETS SAGGING CHECK WARRANTY 0.00
------------------------------------------------------------------------------------------------------
3. REFINISH DESKS 213.00 150.00 31,950.00
------------------------------------------------------------------------------------------------------
4. REPLACE NIGHTSTAND LAMPS 272.00 75.00 20,400.00
------------------------------------------------------------------------------------------------------
5. REPLACE DESK LAMP SHADES 213.00 40.00 8,520.00
------------------------------------------------------------------------------------------------------
6. INSTALL BATON PULL HARDWARE DRAPERY 213.00 100.00 21,300.00
------------------------------------------------------------------------------------------------------
7. INSTALL SOUND STRIP TO CONNECTING DOORS 80.00 25.00 2,000.00
------------------------------------------------------------------------------------------------------
8. REPLACE/PROF CLEAN OTTOMANS 68.00 100.00 6,800.00
------------------------------------------------------------------------------------------------------
9. 1998 REPLACE VWC & VINYL BASE 0.00
------------------------------------------------------------------------------------------------------
10. INSTALL ADDITIONAL SEATING IN SUITE PARLORS 2.00 2,500.00 5,000.00
------------------------------------------------------------------------------------------------------
12. REPLACE CASEGOODS IN ALL SUITE BEDROOMS 2.00 1,500.00 3,000.00
------------------------------------------------------------------------------------------------------
0.00
D. GUEST BATHROOMS 0.00
------------------------------------------------------------------------------------------------------
1. INSTALL SHOWER MASSAGE UNITS 213.00 35.00 7,455.00
------------------------------------------------------------------------------------------------------
2. REPLACE VINYL WALLCOVERING 213.00 150.00 31,950.00
------------------------------------------------------------------------------------------------------
3. INSTALL VINYL WALLCOVERING INCLUDED 0.00
------------------------------------------------------------------------------------------------------
4. ELIMINATE INSET UTILITY CABINETS 213.00 35.00 7,455.00
------------------------------------------------------------------------------------------------------
5. REPLACE NON SLIP SURFACE ON TUB BOTTOM 213.00 25.00 5,325.00
------------------------------------------------------------------------------------------------------
6. WRAP FACIA BOARD WITH VWC 213.00 25.00 5,325.00
------------------------------------------------------------------------------------------------------
7. REPLACE LOUVER W/CLEAR ACRYLIC PARAHEX LOUVER 213.00 100.00 21,000.00
------------------------------------------------------------------------------------------------------
8. REPLACE FLOURESCENT TUBES W/COLOR INDEX OF 82 INCLUDED 0.00
------------------------------------------------------------------------------------------------------
9. COLOR FLOOR GROUT DARK GRAY 213.00 65.00 13,845.00
------------------------------------------------------------------------------------------------------
?? RECOMMEND CHANGE FLOURESCENT LIGHT BALLAST INCLUDED 0.00
------------------------------------------------------------------------------------------------------
& TUBES TO CURRENT TECHNOLOGY 0.00
------------------------------------------------------------------------------------------------------
0.00
0.00
V. BACK OF THE HOUSE 0.00
0.00
</TABLE>
Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
VI. MISCELLANEOUS 0.00
0.00
0.00
VII. GENERAL CONDITIONS 0.00
0.00
----------------------------------------------------------------------
A. GENERAL CONDITIONS 308,896.67 0.09 27,800.70
----------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 308,896.67 0.01 2,316.73
----------------------------------------------------------------------
C. DEPARTMENT INCENTIVES 308,896.67 0.01 2,316.73
----------------------------------------------------------------------
0.00
0.00
- --------------------------------------------------------------------------------
TOTAL 341,330.82
- --------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
HOLIDAY INN
MADISON, WS
SUMMARY
PRODUCT IMPROVEMENT PLAN - HOLIDAY INN "CROWNE PLAZA"
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
I. LIFE SAFETY 0.00
II. LOBBY/ENTRANCE/FRONT DESK 106,469.00
III. PUBLIC RESTROOMS 1,050.00
IV. FOOD SERVICE FACILITIES 43,325.00
V. LOUNGE FACILITIES 151,200.00
VI. MEETING ROOMS 67,714.00
VII. HOLIDOME/ATRIUMS/POOL ENCLOSURES 10,000.00
VIII. INTERIOR CORRIDORS 104,011.00
IX. GUEST ROOMS 689,935.00
X. GUEST BATH ROOMS 113,475.00
XI. EXTERIOR 84,955.00
XII. MISCELLANEOUS 179,170.00
XIII. GENERAL CONDITIONS 162,886.92
- --------------------------------------------------------------------------------
TOTAL 1,714,190.92
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HOLIDAY INN
MADISON, WS
PRODUCT IMPROVEMENT PLAN - HOLIDAY INN "CROWNE PLAZA"
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
QUANTITY/ UNIT EST.
AREAS SCOPE OF WORK ALLOWANCE COST COST
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. LIFE SAFETY
A. FIRE SAFETY SYSTEM
-------------------------------------------------------------------------------------------------
1 MUST COMPLY WITH HOLIDAY INN'S STANDARDS COMPLIES 0.00
-------------------------------------------------------------------------------------------------
0.00
II. LOBBY/ENTRANCE/FRONT DESK 0.00
0.00
A. LOBBY 0.00
-------------------------------------------------------------------------------------------------
1 PROVIDE NEW DIRECTIONAL SIGNAGE INCLUDED IN GRAPHICS PACKAGE
-------------------------------------------------------------------------------------------------
2 ADD GLASS STORAGE TO TOP OF BAR 1.00 3,500.00 3,500.00
-------------------------------------------------------------------------------------------------
3 NEW LOBBY BAR CABINETS-UPGRADE 1.00 6,000.00 6,000.00
-------------------------------------------------------------------------------------------------
4 REFINISH CABINET NEXT TO PEARLS ENTRANCE INCLUDED 0.00
-------------------------------------------------------------------------------------------------
5 ENCASE LARGE SCREEN TV 1.00 1,000.00 1,000.00
-------------------------------------------------------------------------------------------------
6 NEW WINDOW TREATMENTS AT LOBBY BAR 1.00 800.00 800.00
-------------------------------------------------------------------------------------------------
7 REDESIGN SEATING AREA - TOO CROWDED 1.00 6,000.00 6,000.00
-------------------------------------------------------------------------------------------------
8 REPLACE MISMATCHED LAMPS 1.00 1,000.00 1,000.00
-------------------------------------------------------------------------------------------------
9 LOBBY BAR-LOWER LEVEL-REPLACE CHAIRS 30.00 250.00 7,500.00
-------------------------------------------------------------------------------------------------
10 LOBBY BAR-LOWER LEVEL-REPLACE TABLES 6.00 200.00 1,200.00
-------------------------------------------------------------------------------------------------
11 PROVIDE NEW ARTWORK THROUGHOUT LOBBY 1.00 5,000.00 5,000.00
-------------------------------------------------------------------------------------------------
12 MODIFY FACE OF GIFT SHOP - TOO CROWDED 1.00 4,000.00 4,000.00
-------------------------------------------------------------------------------------------------
13 REPLACE SHOE STAND-OVERSCALED 1.00 600.00 600.00
-------------------------------------------------------------------------------------------------
14 PROVIDE LOCKABLE LUGGAGE STORAGE 1.00 3,500.00 3,500.00
-------------------------------------------------------------------------------------------------
15 PROVIDE BUSINESS CENTER W/EQUIPMENT 1.00 6,000.00 6,000.00
-------------------------------------------------------------------------------------------------
16 REFINISH OAK MILLWORK THRU OUT 1.00 3,500.00 3,500.00
-------------------------------------------------------------------------------------------------
17 LOW WALLS TO SEPARATE LOUNGE FROM LOBBY 70.00 100.00 7,000.00
-------------------------------------------------------------------------------------------------
18 AREA RUG IN FRONT OF FRONT DESK 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------
19 REPLACE ALL SEATING/TABLES/LAMPS 1.00 8,000.00 8,000.00
-------------------------------------------------------------------------------------------------
20 REMOVE FAKE PALM TREES FROM LOBBY 8.00 3,000.00 24,000.00
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
B. FRONT DESK
-------------------------------------------------------------------------------------------------
1 ELIMINATE BACK COUNTER 1.00 150.00 150.00
-------------------------------------------------------------------------------------------------
2 ELIMINATE CLUTTER-SIDE CABINETS OPERATIONAL 0.00
-------------------------------------------------------------------------------------------------
3 RESURFACE BACK WALL 8.00 18.00 144.00
-------------------------------------------------------------------------------------------------
4 OWNER/OPERATOR SIGN 1.00 75.00 75.00
-------------------------------------------------------------------------------------------------
5 RELOCATE SAFE DEPOSIT BOXES TO ACCESS AREA RECOMMENDATION ONLY 0.00
-------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
0.00
C. ADMIN. OFFICES 0.00
-------------------------------------------------------------------------------------------------------------------
1 UPGRADE WITH CARPET, FURNITURE, PAINT, ETC. 2,500.00 6.00 15,000.00
-------------------------------------------------------------------------------------------------------------------
0.00
III. PUBLIC RESTROOMS 0.00
0.00
A. LOBBY AREA 0.00
-------------------------------------------------------------------------------------------------------------------
1 REPLACE DATED WALL COVERING 30.00 18.00 540.00
-------------------------------------------------------------------------------------------------------------------
2 PROVIDE LEVER FAUCETS 6.00 85.00 510.00
-------------------------------------------------------------------------------------------------------------------
0.00
IV. FOOD SERVICE FACILITIES 0.00
0.00
A. ATRIUM DINING 0.00
-------------------------------------------------------------------------------------------------------------------
1 PROVIDE WALL DECOR INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------
2 REPLACE TABLE TOP DECOR 40.00 100.00 4,000.00
-------------------------------------------------------------------------------------------------------------------
3 OWNER/OPERATOR SIGN 1.00 75.00 75.00
-------------------------------------------------------------------------------------------------------------------
4 CLEAN/REFINISH TABLE BASES 40.00 50.00 2,000.00
-------------------------------------------------------------------------------------------------------------------
5 REPLACE WICKER CHAIRS 125.00 250.00 31,250.00
-------------------------------------------------------------------------------------------------------------------
6 REUPOLSTER BOOTHS 1.00 6,000.00 6,000.00
-------------------------------------------------------------------------------------------------------------------
0.00
V. LOUNGE FACILITIES 0.00
0.00
A. LOUNGE 0.00
-------------------------------------------------------------------------------------------------------------------
1 REFURBISH/REPLACE ENTRANCE DOORS 2.00 600.00 1,200.00
-------------------------------------------------------------------------------------------------------------------
2 HVAC-ADD VENTILATION FOR SMOKE M/R 0.00
-------------------------------------------------------------------------------------------------------------------
3 NEW CONCEPT 1.00 150,000.00 150,000.00
-------------------------------------------------------------------------------------------------------------------
VI. MEETING ROOMS 0.00
0.00
A. PRE-FUNCTION 0.00
-------------------------------------------------------------------------------------------------------------------
1 ELIMINATE BRASS TRIM FROM DOORS 16.00 400.00 6,400.00
-------------------------------------------------------------------------------------------------------------------
2 REPLACE CEILING TILES 1,328.00 3.00 3,984.00
-------------------------------------------------------------------------------------------------------------------
3 TILE AT SERVICE AREA 40.00 10.00 400.00
-------------------------------------------------------------------------------------------------------------------
4 REPLACE FURNISHINGS 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------------
5 PROVIDE ADDITIONAL WALL DECOR 1.00 1,000.00 1,000.00
-------------------------------------------------------------------------------------------------------------------
6 REMOVE FROM TELEPHONE ENCLOSURES 1.00 500.00 500.00
-------------------------------------------------------------------------------------------------------------------
0.00
-------------------------------------------------------------------------------------------------------------------
0.00
B. MEETING BANQUET FACILITIES 0.00
-------------------------------------------------------------------------------------------------------------------
1 DOOR HARDWARE/FRAMES-REPAIR AS NEEDED 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------------
2 REPLACE DRAPERY I PEBBLE/MADERIA ROOMS 2.00 800.00 1,600.00
-------------------------------------------------------------------------------------------------------------------
3 PROVIDE WALL DECOR IN SMALL MEETING ROOMS 1.00 800.00 800.00
-------------------------------------------------------------------------------------------------------------------
4 REPLACE NON-CONFORMING STACK CHAIRS 400.00 40.00 16,000.00
-------------------------------------------------------------------------------------------------------------------
5 REPLACE WORN LECTURNS 3.00 900.00 2,700.00
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
6 REPLACE CARPET IN BALLROOM 565.00 30.00 16,950.00
------------------------------------------------------------------------------------------------------
C. BOARD ROOM X 1 0.00
------------------------------------------------------------------------------------------------------
1 NEW BOARD TABLE WITH CHAIRS 1.00 9,600.00 9,600.00
------------------------------------------------------------------------------------------------------
2 NEW ARTWORK 1.00 400.00 400.00
------------------------------------------------------------------------------------------------------
3 NEW DRAPERY 1.00 800.00 800.00
------------------------------------------------------------------------------------------------------
4 NEW VWC 60.00 18.00 1,080.00
------------------------------------------------------------------------------------------------------
5 MISC. 1.00 500.00 500.00
------------------------------------------------------------------------------------------------------
0.00
VII. HOLIDOMES/ATRIUMS/POOL ENCLOSURES 0.00
0.00
A. EXERCISE ROOM 0.00
------------------------------------------------------------------------------------------------------
1 ENCLOSE FOR SECURITY 1.00 4,000.00 4,000.00
------------------------------------------------------------------------------------------------------
2 CLEAN FLOOR TILE FOR ACCEPTABLE CONDITION M/R 0.00
------------------------------------------------------------------------------------------------------
3 CONVERT SAUNA TO EXERCISE ROOM 1.00 6,000.00 6,000.00
------------------------------------------------------------------------------------------------------
0.00
VIII. INTERIOR CORRIDORS 0.00
0.00
A. VESTIBULES 0.00
------------------------------------------------------------------------------------------------------
1 REFINISH ALL CONSOLE TABLES AND MIRRORS 5.00 150.00 750.00
------------------------------------------------------------------------------------------------------
0.00
B. CORRIDORS 0.00
------------------------------------------------------------------------------------------------------
1 NEW GRAPHICS PACKAGE 227.00 105.00 23,835.00
------------------------------------------------------------------------------------------------------
2 REPLACE CEILING TILE FIRST FLOOR 1,092.00 3.00 3,276.00
------------------------------------------------------------------------------------------------------
3 REPLACE DRAPERY SHEERS ON ELEVATOR LANDINGS 5.00 500.00 2,500.00
------------------------------------------------------------------------------------------------------
4 PROVIDE WOOD FLOOR BASE 3,100.00 5.00 15,500.00
------------------------------------------------------------------------------------------------------
5 PROVIDE WOOD CHAIR RAIL 3,100.00 5.00 15,500.00
------------------------------------------------------------------------------------------------------
0.00
------------------------------------------------------------------------------------------------------
C. CLUB FLOOR
------------------------------------------------------------------------------------------------------
1 REPLACE CARPET 325.00 30.00 9,750.00
------------------------------------------------------------------------------------------------------
2 REPLACE VWC. 525.00 18.00 9,450.00
------------------------------------------------------------------------------------------------------
3 UPGRADE ELEVATOR LOBBY 250.00 25.00 6,250.00
------------------------------------------------------------------------------------------------------
4 PROVIDE WALL DECOR 12.00 100.00 1,200.00
------------------------------------------------------------------------------------------------------
5 PROVIDE CLUB LEVEL LOUNGE 1.00 16,000.00 16,000.00
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
0.00
IX. GUEST ROOMS 0.00
0.00
A. GUEST ROOMS 0.00
------------------------------------------------------------------------------------------------------
1 REPLACE VINYL WALL COVERING-CLUB LEVEL 42.00 600.00 25,200.00
------------------------------------------------------------------------------------------------------
2 REPLACE LIGHTING-TARNISHED 227.00 200.00 45,400.00
------------------------------------------------------------------------------------------------------
3 CASEGOODS - REFINISH 30.00 150.00 4,500.00
------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------
4 REPLACE DRAPERY - TOO SHORT 227.00 450.00 102,150.00
------------------------------------------------------------------------------
5 DESK CHAIRS - TO MAKE 2 PER ROOM 90.00 125.00 11,250.00
------------------------------------------------------------------------------
6 REPLACE BEDSPREADS-CLUB LEVEL 42.00 170.00 7,140.00
------------------------------------------------------------------------------
7 PROVIDE DUST RUFFLE-CLUB LEVEL 42.00 170.00 7,140.00
------------------------------------------------------------------------------
8 MINI-REFRIGERATORS-CLUB LEVEL 42.00 150.00 6,300.00
------------------------------------------------------------------------------
9 PROVIDE CROWNE MOLDING-CLUB LEVEL 42.00 350.00 14,700.00
------------------------------------------------------------------------------
10 REPLACE BLONDE CASEGOODS 197.00 1,500.00 295,500.00
------------------------------------------------------------------------------
11 PROVIDE ARMOIRE FOR DARK CASE GOODS 30.00 400.00 12,000.00
------------------------------------------------------------------------------
12 SEATING PER CP STANDARDS 197.00 500.00 98,500.00
------------------------------------------------------------------------------
13 PROVIDE FRAMED FULL LENGTH MIRRORS 227.00 65.00 14,755.00
------------------------------------------------------------------------------
14 REPLACE WALL DECOR 227.00 200.00 45,400.00
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
0.00
X. GUEST BATH ROOMS 0.00
0.00
A. GUEST BATH ROOMS 0.00
------------------------------------------------------------------------------
1 REFINISH DOORS AND FRAMES 227.00 35.00 7,945.00
------------------------------------------------------------------------------
2 REPLACE WORN HARDWARE 227.00 25.00 5,675.00
------------------------------------------------------------------------------
3 PROVIDE STONE FLOOR-CLUB LEVEL 42.00 500.00 21,000.00
------------------------------------------------------------------------------
4 REPLACE VWC-CLUB LEVEL 42.00 175.00 7,350.00
------------------------------------------------------------------------------
5 PROVIDE CLOSET DOORS 227.00 300.00 68,100.00
------------------------------------------------------------------------------
6 PROVIDE CONTOURED WOOD HANGERS 227.00 15.00 3,405.00
------------------------------------------------------------------------------
7 REPLACE ANY DAMAGED VANITIES M/R 0.00
------------------------------------------------------------------------------
0.00
XI. EXTERIOR 0.00
0.00
A. COMMERCIAL BUILDING 0.00
------------------------------------------------------------------------------
1 PROVIDE STAMPED CONCRETE
UNDER PORTE COCHERE 1,200.00 6.00 7,200.00
------------------------------------------------------------------------------
2 CLEAN SURFACES TO ACCEPTABLE
CONDITION 1.00 60,000.00 60,000.00
------------------------------------------------------------------------------
3 CONCEAL DUMPSTER WITH SOLID
FENCE 1.00 2,500.00 2,500.00
------------------------------------------------------------------------------
4 FINISH SURROUNDS AT CHILLERS 1.00 500.00 500.00
------------------------------------------------------------------------------
0.00
B. PARKING LOT 0.00
------------------------------------------------------------------------------
1 FILL CRACKS/SEAL/RESTRIPE 227.00 65.00 14,755.00
------------------------------------------------------------------------------
0.00
XII. MISCELLANEOUS 0.00
0.00
A. REQUIRED ITEMS TO BE A CROWNE PLAZA 0.00
------------------------------------------------------------------------------
1 IDENTIFICATION SIGNAGE 1.00 50,000.00 50,000.00
------------------------------------------------------------------------------
2 PRINTED MATERIAL/ROOM SUPPLIES 227.00 125.00 28,375.00
------------------------------------------------------------------------------
3 UPGRADED LINENS 227.00 85.00 19,295.00
------------------------------------------------------------------------------
4 UNIFORMS 1.00 10,000.00 10,000.00
------------------------------------------------------------------------------
5 MISC. 1.00 15,000.00 15,000.00
------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------
6 F&B SUPPLIES 1.00 20,000.00 20,000.00
--------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------
B. ENGINEERING/ENVIROMENTAL
--------------------------------------------------------------------------
1 DRAINAGE PROBLEM 1.00 36,500.00 36,500.00
--------------------------------------------------------------------------
2
--------------------------------------------------------------------------
3
--------------------------------------------------------------------------
0.00
XIII. GENERAL CONDITIONS 0.00
0.00
A. ALLOWANCE 0.00
--------------------------------------------------------------------------
1 GENERAL CONDITIONS 1,551,304.00 0.09 139,617.36
--------------------------------------------------------------------------
2 DEPARTMENT INCENTIVES 1,551,304,00 0.01 11,634.78
--------------------------------------------------------------------------
3 DEPARTMENT OVERHEAD 1,551,304.00 0.01 11,634.78
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL 1,714,190.92
- --------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
MAISON DE VILLE
NEW ORLEANS, LA
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
I. EXTERIOR 12,700.00
II. BUILDING STRUCTURES 1,200.00
III. PUBLIC AREAS 6,500.00
IV. PRIVATE GUEST AREAS 28,800.00
V. BACK OF THE HOUSE
VI. MISCELLANEOUS
VII. GENERAL CONDITIONS 800.00
- --------------------------------------------------------------------------------
TOTAL 50,000.00
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
MAISON DE VILLE
NEW ORLEANS, LA
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
QUANITY/ UNIT EST.
AREAS SCOPE OF WORK ALLOWANCE COST COST
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I. EXTERIOR
A. BISTRO COURTYARD
---------------------------------------------------------------------------------------------------
1. PATIO COVER 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
B. COTTAGES
---------------------------------------------------------------------------------------------------
1. IRON SECURITY GATES @ COTTAGES 1.00 2,700.00 2,700.00
---------------------------------------------------------------------------------------------------
- 0.00
II. BUILDING STRUCTURES 0.00
A. BISTRO BUILDING
---------------------------------------------------------------------------------------------------
1. ADD ONE GAS LIGHT 1.00 1,200.00 1,200.00
---------------------------------------------------------------------------------------------------
0.00
III. PUBLIC AREAS 0.00
0.00
A. LOBBY 0.00
---------------------------------------------------------------------------------------------------
1. REFINISH WOOD FLOOR INCLUDED IN GUESTROOM FLOORS
---------------------------------------------------------------------------------------------------
0.00
B. BISTRO REATAURANT 0.00
---------------------------------------------------------------------------------------------------
1. BRASS MENU BOX 1.00 2,000.00 2,000.00
---------------------------------------------------------------------------------------------------
2. REFRIGERATED WINE STORAGE 1.00 2,000.00 2,000.00
---------------------------------------------------------------------------------------------------
3. MICROS CASH REGISTERS 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------
0.00
IV. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOMS 0.00
---------------------------------------------------------------------------------------------------
1. REMOVE GOLD CARPET AND REFINISH EXIST WOOD FLS. 1.00 11,800.00 11,800.00
---------------------------------------------------------------------------------------------------
2. PROVIDE AREA RUGS FOR WOOD FLOORS 1.00 8,000.00 8,000.00
---------------------------------------------------------------------------------------------------
3. REFINISH 2 BATH TUBS 2.00 250.00 500.00
---------------------------------------------------------------------------------------------------
4. MISC FURNITURE REFINISHING 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------
5. NEW HVAC FOR ROOM NO.2 1.00 3,500.00 3,500.00
---------------------------------------------------------------------------------------------------
6. CORRECT WINDOW PROBLEM 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------
0.00
V. BACK OF THE HOUSE 0.00
0.00
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
VI. MISCELLANEOUS 0.00
0.00
VII. GENERAL CONDITIONS 0.00
0.00
----------------------------------------------------------------------
A. GENERAL CONDITIONS 1.00 800.00 800.00
----------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 0.00 0.01 0.00
----------------------------------------------------------------------
C. DEPARTMENT INCENTIVES 0.00 0.01 0.00
----------------------------------------------------------------------
0.00
0.00
- --------------------------------------------------------------------------------
TOTAL 50,000.00
- --------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
HOLIDAY INN "SELECT"
NEW ORLEANS, LA. - AIRPORT
SUMMARRY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
1. EXTERIOR 5,500.00
11. BUILDING STRUCTURES 28,000.00
111. PUBLIC AREAS 167,350.00
1V. PRIVATE GUEST AREAS 1,518,174.00
V. MECHANICAL - ELECTRICAL 500.00
V1. MISCELLANEOUS 357,020.00
V11. GENERAL CONDITIONS 218,037.12
- --------------------------------------------------------------------------------
TOTAL 2,294,581.12
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HOLIDAY INN "SELECT"
NEW ORLEANS, LA. - AIRPORT
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RE'D QUANTITY/ UNIT EST.
AREAS SCOPE OF WORK YES ALLOWANCE COST COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. EXTERIOR
A. SIGNAGE
--------------------------------------------------------------------------------------------------------------------------
1. CVR BRICK @ BASE OF PRIMARY SIGN 1.00 1,500.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
WITH SYNTHETIC STUCCO 0.00
--------------------------------------------------------------------------------------------------------------------------
2. CVR BRICK @ BASE OF ENTRY SIGN 1.00 1,500.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
WITH SYNTHETIC STUCCO 0.00
--------------------------------------------------------------------------------------------------------------------------
0.00
B. DUMPSTER SCREENING 0.00
--------------------------------------------------------------------------------------------------------------------------
1. UPGRADE DUMPSTER SCREEN 1.00 2,500.00 2,500.00
--------------------------------------------------------------------------------------------------------------------------
0.00
11. BUILDING STRUCTURES 0.00
0.00
A. RENTAL UNIT BUILDINGS 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE WINDOWS/FRAMES - AS NEEDED 140.00 200.00 28,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REMOVE EXTERIOR ENTRANCES 60.00 1,200.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
0.00
11. PUBLIC AREAS 0.00
0.00
A. VESTIBULE 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH CEILING 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------------------------
0.00
B. LOBBY 0.00
--------------------------------------------------------------------------------------------------------------------------
1. UPGRADE INTERIOR SIGNAGE 304.00 125.00 38,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CEILING TILES - DAMAGED 1,500.00 2.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REPAIR CEILING GRID SYSTEM 1,500.00 1.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE HVAC VENTS - RUSTED 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
0.00
C. FRONT DESK 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH FACING OF FRONT DESK 20.00 50.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REFINISH CEILING - AS NEEDED 150.00 2.00 300.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE CARPET & PAD BEHIND FRONT DESK 60.00 20.00 1,200.00
--------------------------------------------------------------------------------------------------------------------------
4. REFINISH BELL STAND 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------------------------
0.00
D. LOBBY CORRIDOR 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CEILING TILES 1,000.00 2.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. REPAIR DAMAGED GRIDS 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE HVAC VENTS 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------------------------
0.00
E. BANQUET ROOMS - NO. & SQ. FT 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH ENTRY & SERVICE DOOR/FRAMES 9.00 200.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE DOOR HARDWARE AS NEEDED 1.00 2,500.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
3. PROVIDE UPDATED DOOR SIGNAGE INCLUDED DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
4. REPAIR CEILING GRID SYSTEM 4,400.00 1.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE CEILING TILE - AS NEEDED 4,400.00 2.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE VINYL WALLCOVERING 375.00 18.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
7. INSTALL VINYL WALLCOVERING INCLUDED DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
8. REFINISH BASEBOARD & CHAR RAIL 200.00 6.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE MOVABLE WALL FINISHES INCLUDED DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
10. REPLACE CARPET & PAD 586.80 30.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
11. INSTALL CARPET & PAD INCLUDED DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
12. PROVIDE UPGRADED WALL DECOR 1.00 3,000.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
13. PROVIDE PROPER COMBO OF LIGHTING X RMS 4,400.00 3.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
14. PROVIDE LIGHT DIMMER SWITCHES X RMS 1.00 2,000.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
15. PROVIDE WALL SCONCES 20.00 300.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
16. REPAIR PODIUM 3.00 900.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
0.00
F. LOUNGE/RESTAURANT 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH DOOR/FRAMES INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CEILING TILES - AS NEEDED INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
3. REPAIR GRID SYSTEM INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
4. REPAIR VENTS - RUSTED INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
5. UPGRADE ALL LOUNGE SIGNAGE INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
6. REFINISH BAR STOOLS INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
7. REFINISH BAR ARM REST INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
8. RECONDITION BAR FACING INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE WALL COVERING ON BAR FRONT INCLUDED 0.00
--------------------------------------------------------------------------------------------------------------------------
10. MISC. NOTED ABOVE 1.00 15,000.00 15,000.00
--------------------------------------------------------------------------------------------------------------------------
11. NEW CONCEPT FOR DINING 1.00 85,000.00 85,000.00
--------------------------------------------------------------------------------------------------------------------------
0.00
G. SAUNA 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH WOOD X.00 800.00 800.00
--------------------------------------------------------------------------------------------------------------------------
0.00
H. HOLIDOME AREAS 0.00
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE WINDOWS - AS NEEDED 60.00 200.00 12,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPAINT RAILS DOME AREA 1.00 4,500.00 4,500.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE JAL LOUVERS W/STORE FRONT PANEL 4.00 200.00 800.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE WALL ANDE POLE LIGHT FIXTURES 77.00 150.00 DEFER TO 1998
--------------------------------------------------------------------------------------------------------------------------
0.00
I. SEATING TERRACE LEVEL 0.00
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
1. REPLACE CHAIRS 1.00 9,000.00 DEFER TO 1998
------------------------------------------------------------------------------------------------
2. REPLACE COUCHES INCLUDED 0.00
------------------------------------------------------------------------------------------------
3. REPLACE TABLES INCLUDED 0.00
------------------------------------------------------------------------------------------------
J. HOLIDOME RESTROOMS 0.00
------------------------------------------------------------------------------------------------
1. PROVIDE UPGRADED SIGNAGE COMPLY/ADA INCLUDED 0.00
------------------------------------------------------------------------------------------------
2. REPLACE HAND & KICKPLATES DOORS INCLUDED 0.00
------------------------------------------------------------------------------------------------
3. REFINISH DOORS/FRAMES INCLUDED 0.00
------------------------------------------------------------------------------------------------
4. REPLACE ALL CERAMIC TILE (6' TILE MINIMUM) INCLUDED 0.00
------------------------------------------------------------------------------------------------
5. INSTALL CERAMIC TILE (6' TILE MINIMUM) INCLUDED 0.00
------------------------------------------------------------------------------------------------
6. REPLACE VINYL WALL COVERING INCLUDED 0.00
------------------------------------------------------------------------------------------------
7. INSTALL VINYL WALL COVERING INCLUDED 0.00
------------------------------------------------------------------------------------------------
8. REPLACE 1X1 FLOOR TILE W/4X4 NEUTRAL INCLUDED 0.00
------------------------------------------------------------------------------------------------
9. PROVIDE CERAMIC COVER BASE TILE INCLUDED 0.00
------------------------------------------------------------------------------------------------
10. REPLACE LIGHT FIXTURES INCLUDED 0.00
------------------------------------------------------------------------------------------------
11. PROVIDE VANITIES AS PER STANDARD INCLUDED 0.00
------------------------------------------------------------------------------------------------
12. PROVIDE SKIRTING (10") AS PER STANDARD INCLUDED 0.00
------------------------------------------------------------------------------------------------
13. REPLACE BASINS - AS NEEDED INCLUDED 0.00
------------------------------------------------------------------------------------------------
14. REPLACE SINK HARDWARE - TARNISHED INCLUDED 0.00
------------------------------------------------------------------------------------------------
15. REPLACE MIRRORS - DESILVERED INCLUDED 0.00
------------------------------------------------------------------------------------------------
16. PROVIDE SOAP DISPENSERS INCLUDED 0.00
------------------------------------------------------------------------------------------------
17. PROVIDE SEMI RECESSED STEEL TOWEL DISPENS INCLUDED 0.00
------------------------------------------------------------------------------------------------
18. PROVIDE WASTE RECEPTACLE INCLUDED 0.00
------------------------------------------------------------------------------------------------
19. REPLACE PARTITION WALLS INCLUDED 0.00
------------------------------------------------------------------------------------------------
20. PROVIDE RSRVE TISSUE DISPENS PER/STANDARD INCLUDED 0.00
------------------------------------------------------------------------------------------------
21. REPLACE COMMODE SEATS & LIDS INCLUDED 0.00
------------------------------------------------------------------------------------------------
22. REPLACE COMMODE HARDWARE - TARNISHED INCLUDED 0.00
------------------------------------------------------------------------------------------------
23. REPLACE SHOWER STALL FINISHES INCLUDED 0.00
------------------------------------------------------------------------------------------------
24. REPLACE SHOWER STALL FURNISHINGS INCLUDED 0.00
------------------------------------------------------------------------------------------------
25. REPLACE SHOWER STALL FIXTURES INCLUDED 0.00
------------------------------------------------------------------------------------------------
26. PROVIDE EMERGENCY LIGHTS AS PER STANDARD INCLUDED 0.00
------------------------------------------------------------------------------------------------
27. COMPLETE RENOVATION REQUIRED 2.00 12,000.00 DEFER TO 1998
------------------------------------------------------------------------------------------------
0.00
IV. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOM CORRIDOR 0.00
------------------------------------------------------------------------------------------------
1. MAJOR RENOVATION REQUIRED 0.00
------------------------------------------------------------------------------------------------
2. PROVIDE DIRECTIONAL SIGNAGE INCLUDED 0.00
------------------------------------------------------------------------------------------------
3. REPLACE VINYL WALLCOVERING 3,293.00 18.00 59,274.00
------------------------------------------------------------------------------------------------
4. INSTALL VINYL WALLCOVERING INCLUDED 0.00
------------------------------------------------------------------------------------------------
5. REPLACE CARPET & PAD 1,646.00 30.00 49,380.00
------------------------------------------------------------------------------------------------
6. INSTALL CARPET & PAD INCLUDED 0.00
------------------------------------------------------------------------------------------------
7. REPAINT GUEST ROOM DOORS/FRAMES 304.00 35.00 10,640.00
------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8. PROVIDE UPGRADED CORRIDOR LIGHTING 150.00 125.00 18,750.00
---------------------------------------------------------------------------------------------------------
0.00
C. GUEST ROOMS 0.00
---------------------------------------------------------------------------------------------------------
1. REPAINT DOOR FRAMES - AS NEEDED 304.00 35.00 10,640.00
---------------------------------------------------------------------------------------------------------
2. PROVIDE UPGRADED NUMBERS PKG PER ADA INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
3. REPLACE SELF CLOSING HARDWARE - AS NEED 100.00 45.00 4,500.00
---------------------------------------------------------------------------------------------------------
4. REPLACE JALOUSIES LOUVERS (GST RM ENTRY) 4.00 100.00 400.00
---------------------------------------------------------------------------------------------------------
W/STORE FRONT PANEL 0.00
---------------------------------------------------------------------------------------------------------
5. PAINT STOREFRONT PANEL/MATCH GST RM DOOR INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
6. PAINT CONNECTING DOORS 60.00 25.00 1,500.00
---------------------------------------------------------------------------------------------------------
7. REFINISH CEILINGS - AS NEEDED 304.00 100.00 30,400.00
---------------------------------------------------------------------------------------------------------
8. REPLACE VINYL WALLCOVERING 304.00 800.00 243,200.00
---------------------------------------------------------------------------------------------------------
9. INSTALL VINYL WALLCOVERING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
10. REPLACE CARPET & PAD 304.00 455.00 138,320.00
---------------------------------------------------------------------------------------------------------
11. INSTALL CARPET & PAD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
12. REPLACE DRAPES - SIZE 304.00 200.00 60,800.00
---------------------------------------------------------------------------------------------------------
13. REPLACE BEDSPREADS - KING 128.00 85.00 10,880.00
---------------------------------------------------------------------------------------------------------
14. REPLACE BEDSPREADS - FULL XL 350.00 75.00 26,250.00
---------------------------------------------------------------------------------------------------------
15. REPLACE MATTRESS - KING 30.00 300.00 9,000.00
---------------------------------------------------------------------------------------------------------
16. REPLACE MATTRESS - FULL XL 26.00 200.00 5,200.00
---------------------------------------------------------------------------------------------------------
17. REPLACE PILLOWS 1,216.00 4.50 5,472.00
---------------------------------------------------------------------------------------------------------
18. REPLACE LINEN 304.00 85.00 25,840.00
---------------------------------------------------------------------------------------------------------
19. PROVIDE FULL LENGTH MIRROR X EA ROOM 304.00 45.00 13,680.00
---------------------------------------------------------------------------------------------------------
20. REPLACE MIRRORS - DESILVERED 110.00 130.00 14,300.00
---------------------------------------------------------------------------------------------------------
21. REPLACE/UPGRADE CASE GOODS 304.00 1,100.00 334,400.00
---------------------------------------------------------------------------------------------------------
22. REPLACE CREDENZA LIGHT FIXTURES 304.00 200.00 60,800.00
---------------------------------------------------------------------------------------------------------
23. REPLACE ACTIVITY LIGHT FIXTURES INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
24. REPLACE BED LIGHT FIXTURES INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
25. RELOCATE ALARM CLOCK RADIO TO BEDSIDE COMPLIES
---------------------------------------------------------------------------------------------------------
26. CONCEAL ELECTRIC CORDS 203.00 15.00 3,045.00
---------------------------------------------------------------------------------------------------------
0.00
D. GUEST BATHROOMS 0.00
---------------------------------------------------------------------------------------------------------
1. PAINT ENTRY DOOR/FRAME 304.00 35.00 10,640.00
---------------------------------------------------------------------------------------------------------
2. REPLACE THRESHOLDS 304.00 25.00 7,600.00
---------------------------------------------------------------------------------------------------------
3. REPLACE 1X1 FLOOR TILE W/4X4 NEUTRAL 304.00 300.00 91,200.00
---------------------------------------------------------------------------------------------------------
4. REPLACE VINYL WALLCOVERING 304.00 125.00 38,000.00
---------------------------------------------------------------------------------------------------------
5. INSTALL VINYL WALLCOVERING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
6. REPLACE CEILING TILES - DAMAGED 304.00 35.00 10,640.00
---------------------------------------------------------------------------------------------------------
7. REPAIR CEILING GRID SYSTEM 304.00 15.00 4,560.00
---------------------------------------------------------------------------------------------------------
8. REPLACE VANITIES 125.00 300.00 37,500.00
---------------------------------------------------------------------------------------------------------
9. REPLACE SINKS 125.00 300.00 37,500.00
---------------------------------------------------------------------------------------------------------
10. REPLACE VANITY HARDWARE 125.00 85.00 10,625.00
---------------------------------------------------------------------------------------------------------
11. REPLACE TISSUE DISPENSERS 125.00 12.00 1,500.00
---------------------------------------------------------------------------------------------------------
12. REPLACE VANITY LIGHT W/UPDATED FIXTURES 125.00 150.00 18,750.00
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13. REPLACE VANITY MIRRORS 304.00 125.00 38,000.00
---------------------------------------------------------------------------------------------------------
14. REFINISH/REPLACE TUBS 304.00 25.00 7,600.00
---------------------------------------------------------------------------------------------------------
15. REPLACE BATHTUB HARDWARE 304.00 85.00 25,840.00
---------------------------------------------------------------------------------------------------------
16. REPLACE NON-SLIP TREATMENT 304.00 15.00 4,560.00
---------------------------------------------------------------------------------------------------------
17. REPAIR TUB TILE GROUTING 1.00 7,500.00 7,500.00
---------------------------------------------------------------------------------------------------------
18. REPLACE GRAB BARS 304.00 25.00 7,600.00
---------------------------------------------------------------------------------------------------------
19. REPLACE COMMODE SEATS/LIDS 304.00 25.00 7,600.00
---------------------------------------------------------------------------------------------------------
20. REPLACE TOILET TISSUE HOLDER 304.00 35.00 10,640.00
---------------------------------------------------------------------------------------------------------
21. PROVIDED CHROME RSVE TISSUE HOLDER X EA RM INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
22. REPLACE SHOWER CURTAINS 304.00 12.00 3,648.00
---------------------------------------------------------------------------------------------------------
0.00
V. MECHANICAL - ELECTRICAL 0.00
0.00
A. LAUNDRY (BACK OF HOUSE) 0.00
---------------------------------------------------------------------------------------------------------
1. PROVIDE SMOKE DETECTOR OR SPRINKLER HEAD 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------
0.00
B. FIRE SAFETY SYSTEM 0.00
---------------------------------------------------------------------------------------------------------
1. WRITTEN DOC MUST BE SUBMITTED TO HOLIDAY INN COMPLIES 0.00
---------------------------------------------------------------------------------------------------------
CERTIFYING SYTEMS MEETS R EXCEEDS HI STANDARDS 0.00
---------------------------------------------------------------------------------------------------------
0.00
VI. MISCELLANEOUS 0.00
0.00
A. OPERATIONAL REQUIREMENTS 0.00
---------------------------------------------------------------------------------------------------------
1. F & B EQUIPMENT/SUPPLIES 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------
2. UNIFORMS 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
B. ADDITIONAL ITEMS TO BE A "SELECT" 0.00
---------------------------------------------------------------------------------------------------------
1. UPGRADE FITNESS CENTER 1.00 12,000.00 12,000.00
---------------------------------------------------------------------------------------------------------
2. PROVIDE 2 PHONES IN EACH ROOM 196.00 75.00 14,700.00
---------------------------------------------------------------------------------------------------------
3. HAIR DRYER IN ROOMS 304.00 25.00 7,600.00
---------------------------------------------------------------------------------------------------------
4. IRON, IRONING BOARD, HANGER 304.00 4.00 1,216.00
---------------------------------------------------------------------------------------------------------
5. UPGRADE COAT HANGERS 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------------
6. PROVIDE MAKEUP MIRRORS 304.00 75.00 22,800.00
---------------------------------------------------------------------------------------------------------
7. UPGRADE LINEN/TERRY 1.00 30,000.00 30,000.00
---------------------------------------------------------------------------------------------------------
8. PROVIDE CROWNE MOLDING 304.00 100.00 30,400.00
---------------------------------------------------------------------------------------------------------
9. PROVIDE 2 PARLOR BEDROOM SUITES 2.00 7,500.00 15,000.00
---------------------------------------------------------------------------------------------------------
10. PROVIDE SHOWER CURTAIN W/LINER 304.00 24.00 7,204.00
---------------------------------------------------------------------------------------------------------
11. FAX MACHINE IN 5 ROOMS 5.00 500.00 2,500.00
---------------------------------------------------------------------------------------------------------
12. EXECUTIVE ROOMS - DRAPERY VALANCES 20.00 250.00 5,000.00
---------------------------------------------------------------------------------------------------------
13. EXECUTIVE ROOMS - CORNICE MOLDING 20.00 300.00 6,000.00
---------------------------------------------------------------------------------------------------------
14. EXECUTIVE ROOMS - CLOSET W/DOORS 20.00 300.00 6,000.00
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
15. EXECUTIVE ROOMS - LOGO BATH ROBES 2.00 20.00 40.00
---------------------------------------------------------------------------------------------------------
16. EXECUTIVE ROOMS - AMENITIES TRAY 1.00 60.00 60.00
---------------------------------------------------------------------------------------------------------
17. EXECUTIVE ROOMS - UPGRADED ROOMS 20.00 2,000.00 40,000.00
---------------------------------------------------------------------------------------------------------
18. SIGNAGE 1.00 75,000.00 75,000.00
---------------------------------------------------------------------------------------------------------
19. LOGO/PRINTED MATERIALS 1.00 30,000.00 30,000.00
---------------------------------------------------------------------------------------------------------
20. MISC. CONVERSION ITEMS 1.00 20,000.00 20,000.00
---------------------------------------------------------------------------------------------------------
21.
---------------------------------------------------------------------------------------------------------
22.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
0.00
VII. GENERAL CONDITIONS 0.00
0.00
---------------------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 2,076,544.00 0.09 186,888.96
---------------------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 2,076,544.00 0.01 15,574.08
---------------------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 2,076,544.00 0.01 15,574.08
---------------------------------------------------------------------------------------------------------
0.00
0.00
- -------------------------------------------------------------------------------------------------------------------
TOTAL: 2,294,581.12
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
HOLIDAY INN - DFW WEST
BEDFORD TEXAS
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------
<S> <C>
I. EXTERIOR 0.00
II. BUILDING STRUCTURES 0.00
III. PUBLIC AREAS 38,745.00
IV. PRIVATE GUEST AREAS 158,371.00
V. BACK OF THE HOUSE 21,805.00
VI. MECHANICAL - ELECTRICAL
VII. GENERAL CONDITIONS 22,986.70
- --------------------------------------------------------
TOTAL 241,907.71
- --------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HOLIDAY INN - DFW WEST
BEDFORD, TEXAS
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
RE'D QUANTITY/ UNIT EST.
AREAS SCOPE OF WORK YES ALLOWANCE COST COST
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I. EXTERIOR
II. PUBLIC AREAS 0.00
0.00
A. RESTAURANT 0.00
-----------------------------------------------------------------------------------------------------------
1. REVISE SEATING LAYOUT 1.00 30,000.00 30,000.00
-----------------------------------------------------------------------------------------------------------
0.00
B. MEETING ROOMS 0.00
-----------------------------------------------------------------------------------------------------------
1. EXECUTIVE SUITES-REPLACE CARPET 150.00 30.00 4,500.00
-----------------------------------------------------------------------------------------------------------
0.00
C. PUBLIC RESTROOMS 0.00
-----------------------------------------------------------------------------------------------------------
1. FLOOR DISCOLORED 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------------------------------------------
2. FITNESS CENTER-FLOOR DISCOLORED 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------------------------------------------
3. BANQUET-FIXTURES TARNISHED 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------------------------------------------
0.00
D. RECREATION AREA 0.00
-----------------------------------------------------------------------------------------------------------
1. EQUIPMENT BENCH TORN-EX.RM. 1.00 200.00 200.00
-----------------------------------------------------------------------------------------------------------
2. WALL CLOCK-EX.RM. 1.00 45.00 45.00
-----------------------------------------------------------------------------------------------------------
3. WHIRLPOOL-DISCOLORED 1.00 1,000.00 1,000.00
-----------------------------------------------------------------------------------------------------------
0.00
IV. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOM CORRIDOR 0.00
-----------------------------------------------------------------------------------------------------------
1. REPLACE WALL COVERING 2,527.00 18.00 45,486.00
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
0.00
B. GUEST ROOMS 0.00
-----------------------------------------------------------------------------------------------------------
1. PRINTED MATERIALS 1.00 5,0O0.O0 5,000.00
-----------------------------------------------------------------------------------------------------------
2. CLOTHES HANGERS-INADEQUATE SUPPLY 1.00 2,500.00 2,500.00
-----------------------------------------------------------------------------------------------------------
3. REPLACE DESILVERED FULL LENGTH MIRRORS 100.00 65.00 6,500.00
-----------------------------------------------------------------------------------------------------------
4. LIGHT FIXTURES TARNISHED 120.00 200.00 24,000.00
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
0.00
D. GUEST BATHROOMS 0.00
-----------------------------------------------------------------------------------------------------------
1. REPLACE TILE FLOORS X 50% 122.00 300.00 36,600.00
-----------------------------------------------------------------------------------------------------------
2. CLEAN/REPAIR TILE FLOORS 50% 121.00 85.00 10,285.00
-----------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
3. TUB RUSTY BY DRAIN-REPAIR 80.00 350.00 28,000.00
-----------------------------------------------------------------------------------------------
0.00
V. BACK OF THE HOUSE 0.00
0.00
A. HOUSEKEEPING 0.00
0.00
B. OPERATIONAL REQUIREMENTS
-----------------------------------------------------------------------------------------------
1. BANQUET, F & B EQUIPMENT 1.00 21,805.00 21,805.00
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
VI. MECHANICAL - ELECTRICAL 0.00
0.00
VII. GENERAL CONDITIONS 0.00
0.00
-----------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 218,921.00 0.09 19,702.89
-----------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 218,921.00 0.01 1,641.91
-----------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 218,921.00 0.01 1,641.91
-----------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TOTAL: 241,907.71
- --------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
HOLIDAY INN - DFW SOUTH
IRVING, TX
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
I. EXTERIOR 53,969.00
II. BUILDING STRUCTURES 389,600.00
III. PUBLIC AREAS 230,508.33
IV. PRIVATE GUEST AREAS 1,016,461.50
V. BACK OF THE HOUSE 15,000.00
VI. MECHANICAL - ELECTRICAL 0.00
VII. GENERAL CONDITIONS 179,081.58
- --------------------------------------------------------------------------------
TOTAL 1,884,620.41
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HOLIDAY INN - DFW SOUTH
IRVING, TX
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
RE'D QUANITY UNIT EST.
AREAS SCOPE OF WORK YES ALLOWANCE COST COST
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. EXTERIOR
A. PARKING LOT SURFACE
-------------------------------------------------------------------------------------------------------------
1. REPAIR PARKING LOT 1.00 10,000.00 10,000.00
-------------------------------------------------------------------------------------------------------------
2. RESEAL PARKING LOT 407.00 40.00 16,280.00
-------------------------------------------------------------------------------------------------------------
3. RESTRIPE PARKING LOT 407.00 7.00 2,849.00
-------------------------------------------------------------------------------------------------------------
0.00
B. PARKING LOT LIGHTING 0.00
-------------------------------------------------------------------------------------------------------------
1. REPAIR DAMAGED CONCRETE BASES 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------
2. REPAINT RUSTED LIGHT POLES 1.00 5,000.00 5,000.00
-------------------------------------------------------------------------------------------------------------
0.00
0.00
C. EXTERIOR SWIMMING POOL AREA 0.00
-------------------------------------------------------------------------------------------------------------
1. COVER POOL ENTRANCE W/SYNTHETIC STUCCO 640.00 6.00 3,840.00
-------------------------------------------------------------------------------------------------------------
2. REPAINT POOL FENCE/REPLACE 300.00 45.00 13,500.00
-------------------------------------------------------------------------------------------------------------
0.00
0.00
II. BUILDING STRUCTURES 0.00
A. COVERED DRIVE (CANOPIES) 0.00
-------------------------------------------------------------------------------------------------------------
1. HI APPROVED MATERIAL TO ENHANCE ROOF LINE 1.00 50,000.00 50,000.00
-------------------------------------------------------------------------------------------------------------
0.00
B. SATELLITE DISH SCREENING 0.00
-------------------------------------------------------------------------------------------------------------
1. PROVIDE SYNTHETIC STUCCO FINISH 1.00 5,000.00 5,000.00
-------------------------------------------------------------------------------------------------------------
0.00
C. RENTAL UNIT BUILDINGS 0.00
-------------------------------------------------------------------------------------------------------------
1. HI APPROVED MATERIAL TO ENHANCE ROOF LINE 1.00 200,000.00 200,000.00
-------------------------------------------------------------------------------------------------------------
2. HI APPROVED ARCHITECTUAL FEATURES/ROOFLINE INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------
3. REPLACE DAMAGED WINDOWS 100.00 200.00 20,000.00
-------------------------------------------------------------------------------------------------------------
4. PROVIDE ROOFLINE TREATMENT BRICK TOWERS 3.00 25,000.00 75,000,00
-------------------------------------------------------------------------------------------------------------
5. PROVIDE SYNTHETIC STUCCO W/ARCH, END WALLS 3,960.00 10.00 39,600.00
-------------------------------------------------------------------------------------------------------------
0.00
III. PUBLIC AREAS 0.00
0.00
A. LOBBY RESTROOMS 0.00
-------------------------------------------------------------------------------------------------------------
1. REPLACE VINYL WALL COVERING 60.00 18.00 1,080.00
-------------------------------------------------------------------------------------------------------------
2. INSTALL VINYL WALL COVERING INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3. REPLACE VANITIES 2.00 800.00 1,600.00
------------------------------------------------------------------------------------------------------------------
4. SKIRTING (10") COORDINATE WITH VANITIES INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
0.00
B. BANQUET ROOMS - NO.& SQ.FT. 0.00
------------------------------------------------------------------------------------------------------------------
1. REPLACE ENTRY & SERVICE DOORS 1.00 40,000.00 40,000.00
------------------------------------------------------------------------------------------------------------------
2. PROVIDE DOOR VIEWER ENTRY & SERVICE DOORS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
3. PAINT CEILINGS 5,780.00 1.25 7,225.00
------------------------------------------------------------------------------------------------------------------
4. PROVIDE PROPER COMBO OF LIGHTING X RMS 5,780.00 3.50 20,230.00
------------------------------------------------------------------------------------------------------------------
5. PROVIDE LIGHT DIMMER SWITCHES X RM'S 1.00 7,000.00 7,000.00
-----------------------------------------------------------------------------------------------------------------
6. REFINISH PODIUM 5.00 900.00 4,500.00
------------------------------------------------------------------------------------------------------------------
0.00
C. BANQUET ROOMS RESTROOMS 0.00
------------------------------------------------------------------------------------------------------------------
1. REPLACE DOORS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
2. PAINT CEILING INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
3. REPLACE 1X1 FLOOR TILE W/4X4 NEUTRAL COLOR INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
4. COORD. CERAMIC COVE BASE TILE W/FLOOR TILE INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
5. UPGRADE LIGHT FIXTURES INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
6. REPLACE MIRRORS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
7. REPLACE PARTITION WALLS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
8. REPLACE COMMODE SEATS & LIDS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
9. PROVIDE GFI OUTLETS PER STANDARDS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
10. COMPLETELY RENOVATE 2.00 12,000.00 24,000.00
------------------------------------------------------------------------------------------------------------------
0.00
D. RESTAURANT DINING AREA - SQ.FT. 0.00
------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 277.78 30.00 8,333.33
------------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
3. REPLACE VINYL WALL COVERING 300.00 18.00 5,400.00
------------------------------------------------------------------------------------------------------------------
4. INSTALL VINYL WALL COVERING INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
5. REFINISH WOOD FLOOR 1,000.00 1.25 1,250.00
------------------------------------------------------------------------------------------------------------------
0.00
E. LOUNGE 0.00
------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 325.00 30.00 9,750.00
------------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
3. REFINISH BAR STOOL FRAMES 75.00 75.00 5,625.00
------------------------------------------------------------------------------------------------------------------
4. REPLACE FABRIC CHAIRS 1.00 2,500.00 2,500.00
------------------------------------------------------------------------------------------------------------------
0.00
F. EXERCISE FACILITY 0.00
------------------------------------------------------------------------------------------------------------------
1. REFINISH DOORS AND FRAMES, ENTRANCE 2.00 65.00 130.00
------------------------------------------------------------------------------------------------------------------
2. PAINT CEILING 500.00 1.00 500.00
------------------------------------------------------------------------------------------------------------------
3. REPLACE CARPET & PAD 60.00 20.00 1,200.00
------------------------------------------------------------------------------------------------------------------
4. INSTALL CARPET & PAD INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------
5. REFINISH HVAC CABINET. 1.00 50.00 50.00
------------------------------------------------------------------------------------------------------------------
6. REPLACE FLOOR TILE AROUND HVAC CABINET 1.00 250.00 250.00
------------------------------------------------------------------------------------------------------------------
0.00
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
G. HOLIDOME AREAS 0.00
-----------------------------------------------------------------------------------------------------------------
1. REPLACE BLACK TILE AT GST ROOM ENTRANCES 1,800.00 10.00 18,000.00
-----------------------------------------------------------------------------------------------------------------
2. COVER PANELS GST RM WINDOWS W/SYN STUCCO 2,400.00 7.00 16,800.00
-----------------------------------------------------------------------------------------------------------------
3. PROVIDE NEW COLOR SCHEME 1.00 25,000.00 25,000.00
-----------------------------------------------------------------------------------------------------------------
0.00
H. KIDS KORNER 0.00
-----------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 40.00 20.00 800.00
-----------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
3. REPLACE 1X1 FLOOR TILE W/4X4 NEUTRAL COLOR 1.00 400.00 400.00
-----------------------------------------------------------------------------------------------------------------
4. REPLACE WORN THRESHOLD 1.00 25.00 25.00
-----------------------------------------------------------------------------------------------------------------
0.00
I. SECOND LEVEL SEATING 0.00
-----------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 175.00 30.00 5,250.00
-----------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
3. REPLACE CHAIRS 40.00 175.00 7,000.00
-----------------------------------------------------------------------------------------------------------------
4. REPLACE TABLES 10.00 150.00 1,500.00
-----------------------------------------------------------------------------------------------------------------
5. REFINISH WALL TREATMENT 1.00 2,500.00 2,500.00
-----------------------------------------------------------------------------------------------------------------
0.00
J. POOL AREA RESTROOMS 0.00
-----------------------------------------------------------------------------------------------------------------
1. REPLACE HAND & KICK PLATES, DOORS 2.00 400.00 800.00
-----------------------------------------------------------------------------------------------------------------
2. REFINISH DOORS INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
3. PAINT CEILINGS 1,200.00 0.50 600.00
-----------------------------------------------------------------------------------------------------------------
4. REPLACE VINYL WALL COVERING 2.00 400.00 800.00
-----------------------------------------------------------------------------------------------------------------
5. INSTALL VINYL WALL COVERING INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
6. REPLACE VANITIES 2.00 900.00 1,800.00
-----------------------------------------------------------------------------------------------------------------
7. COORDINATE SKIRTING W/NEW VANITIES INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
8. REPLACE BASINS 6.00 125.00 750.00
-----------------------------------------------------------------------------------------------------------------
9. REPLACE SINK HARDWARE - TARNISHED 6.00 85.00 510.00
-----------------------------------------------------------------------------------------------------------------
10. REPLACE MIRRORS 2.00 400.00 800.00
-----------------------------------------------------------------------------------------------------------------
11. REPLACE PARTITION WALLS 2.00 3,000.00 6,000.00
-----------------------------------------------------------------------------------------------------------------
12. REPLACE TOILET TISSUE DISPENSERS 8.00 50.00 400.00
-----------------------------------------------------------------------------------------------------------------
13. REPLACE COMMODE SEATS COORD. W/BOWL 6.00 25.00 150.00
-----------------------------------------------------------------------------------------------------------------
0.00
0.00
IV. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOM CORRIDOR 0.00
-----------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET & PAD 2,204.00 30.00 66,120.00
-----------------------------------------------------------------------------------------------------------------
2. INSTALL CARPET & PAD INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
3. REFINISH WOOD CHAIR RAIL & BASEBOARDS 1.00 15,000.00 15,000.00
-----------------------------------------------------------------------------------------------------------------
4. REFINISH STORAGE DOORS 24.00 75.00 1,800.00
-----------------------------------------------------------------------------------------------------------------
0.00
B. GUEST LAUNDRY 0.00
-----------------------------------------------------------------------------------------------------------------
1. PAINT CEILING 1.00 300.00 300.00
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
2. PAINT PIPES TO BLEND W/CEILING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
C. GUEST ROOMS 0.00
---------------------------------------------------------------------------------------------------------------------------
1. PROVIDE CARPET SWEEPS GST ROOM DOORS 100.00 25.00 2,500.00
---------------------------------------------------------------------------------------------------------------------------
2. UPGRADE INTERIOR SIGNAGE 409.00 100.00 40,900.00
---------------------------------------------------------------------------------------------------------------------------
3. CONNECT DOORS - PAINT DOORS & FRAMES 80.00 35.00 2,800.00
---------------------------------------------------------------------------------------------------------------------------
4. CONNECT DOORS - REPLACE INSULATION 80.00 35.00 2,800.00
---------------------------------------------------------------------------------------------------------------------------
5. REPLACE LIGHT FIXTURES - TARNISHED 250.00 200.00 50,000.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE LAMPSHADES - STAINED 50.00 40.00 2,000.00
---------------------------------------------------------------------------------------------------------------------------
7. REFINISH CEILINGS - AS NEEDED 100.00 100.00 10,000.00
---------------------------------------------------------------------------------------------------------------------------
8. REPLACE VWC - DAMAGED 150.00 600.00 90,000.00
---------------------------------------------------------------------------------------------------------------------------
9. INSTALL VWC INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
9. REPLACE CARPET & PAD 409.00 455.00 186,095.00
---------------------------------------------------------------------------------------------------------------------------
10. INSTALL CARPET & PAD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
12. REPLACE DRAPES 150.00 200.00 30,000.00
---------------------------------------------------------------------------------------------------------------------------
12. REPLACE BEDSPREADS - KING 0.00
---------------------------------------------------------------------------------------------------------------------------
13. REPLACE BEDSPREADS - DOUBLE 350.00 75.00 26,250.00
---------------------------------------------------------------------------------------------------------------------------
14. REPLACE PILLOWS - WORN, STAINED 1,227.00 4.50 5,521.50
---------------------------------------------------------------------------------------------------------------------------
15. FULL LENGTH MIRRORS X EACH ROOM 250.00 45.00 11,250.00
---------------------------------------------------------------------------------------------------------------------------
16. REFINISH CASE GOODS - #1193 150.00 150.00 22,500.00
---------------------------------------------------------------------------------------------------------------------------
17. REFINISH CASE GOODS - #1133 INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
18. REPLACE MATTRESS - KING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
19. REPLACE MATTRESS - DOUBLE 150.00 250.00 37,500.00
---------------------------------------------------------------------------------------------------------------------------
20. ENSURE ALL TV'S WORK W/REMOTE M/R 0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
D. GUESS BATHROOMS 0.00
---------------------------------------------------------------------------------------------------------------------------
1. PAINT ENTRY DOORS & FRAMES 150.00 35.00 5,250.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE THRESHOLDS COORD. W/FLOOR TITLE 150.00 25.00 3,750.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE 1X1 FLOOR TILE W/4X4, NEUTRAL COLOR 150.00 300.00 45,000.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE CARPET & PAD AT VANITY AREA INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
5. INSTALL CARPET & PAD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE WALL TILES 150.00 400.00 60,000.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE VINYL WALL COVERING 150.00 125.00 18,750.00
---------------------------------------------------------------------------------------------------------------------------
7. INSTALL VINYL WALL COVERING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
8. PAINT CEILING FINISH INCLUDED 35.00 0.00
---------------------------------------------------------------------------------------------------------------------------
9. REPLACE CEILING TILES - DAMAGED 150.00 100.00 15,000.00
---------------------------------------------------------------------------------------------------------------------------
10. REPLACE/UPGRADE VANITY LIGHTING 150.00 200.00 30,000.00
---------------------------------------------------------------------------------------------------------------------------
11. UPGRADE VANITY LIGHTING FIXTURES 150.00 150.00 22,500.00
---------------------------------------------------------------------------------------------------------------------------
12. REPLACE CLOTHES RACKS - RUSTED 150.00 45.00 6,750.00
---------------------------------------------------------------------------------------------------------------------------
13. REPLACE VANITIES 150.00 300.00 45,000.00
---------------------------------------------------------------------------------------------------------------------------
14. VANITY SKIRTS (10") - COORD. W/VANITIES INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
15. REPAIR SINKS - DAMAGED 150.00 85.00 12,750.00
---------------------------------------------------------------------------------------------------------------------------
16. REPLACE VANITY HARDWARE - BRASSY, TARNISHED 150.00 85.00 12,750.00
---------------------------------------------------------------------------------------------------------------------------
17. REPLACE TISSUE DISP. - TARNISHED, SCRATCHED 150.00 85.00 12,750.00
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
18. REPLACE VANITY MIRRORS-DESILVERED 150.00 90.00 13,500.00
-----------------------------------------------------------------------------------------------------------------
19. PROVIDE MIRRIORS THAT EXTEND WIDTH OF VANTIY INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
20. REFINISH/REPLACE TUBS - DAMAGED 50.00 350.00 17,500.00
-----------------------------------------------------------------------------------------------------------------
21. REPLACE B.TUB HARDWARE-BRASSY, TARNISHED 150.00 85.00 12,750.00
-----------------------------------------------------------------------------------------------------------------
22. REPLACE B.TUB SKID TREATMENT - WORN 150.00 15.00 2,250.00
-----------------------------------------------------------------------------------------------------------------
23. REPLACE B. TUB ENCLOSD WALL TILES - DAMAGED 150.00 400.00 60,000.00
-----------------------------------------------------------------------------------------------------------------
24. REPAIR TUB TILE GROUT-DAMAGED, DISCOLORED INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
25. REPLACE GRAB BARS -TARNISHED, WORN 150.00 25.00 3,750.00
-----------------------------------------------------------------------------------------------------------------
26. REPLACE COMMODES - WORN 25.00 375.00 9,375.00
-----------------------------------------------------------------------------------------------------------------
27. REPLACE COMMODES SEATS/LIDS - WORN 150.00 25.00 3,750.00
-----------------------------------------------------------------------------------------------------------------
0.00
0.00
V. BACK OF THE HOUSE 0.00
0.00
A. EMPLOYEE BREAKROOM 0.00
-----------------------------------------------------------------------------------------------------------------
1. COMPLETE RENOVATION 1.00 5,000.00 5,000.00
-----------------------------------------------------------------------------------------------------------------
0.00
B. EMPLOYEE RESTROOMS 0.00
-----------------------------------------------------------------------------------------------------------------
1. COMPLETE RENOVATION 2.00 5,000.00 10,000.00
-----------------------------------------------------------------------------------------------------------------
C. OPERATIONAL REQUIREMENTS
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
0.00
VI. MECHANICAL - ELECTRICAL 0.00
0.00
A. FIRE SAFETY SYSEM 0.00
-----------------------------------------------------------------------------------------------------------------
1. WRITTEN DOC MUST BE SUBMITTED TO HOLIDAY INN COMPLIES 0.00
-----------------------------------------------------------------------------------------------------------------
CERTIFYING SYSTEM MEETS or EXCEEDS HI STAND. 0.00
-----------------------------------------------------------------------------------------------------------------
0.00
0.00
VII. GENERAL CONDITIONS 0.00
0.00
------------------------------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 1,705,538.83 0.09 153,498.50
------------------------------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 1,705,538.83 0.01 12,791.54
------------------------------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 1,705,538.83 0.01 12,791.54
------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------
</TABLE>
Page 6
<PAGE>
LE BARON HOTEL
SAN JOSE, CALIFORNIA
SUMMARY
MARCH 26, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EST.COST
- --------------------------------------------------------------------------------
<S> <C> <C>
I. EXTERIOR 112,500.00
II. BUILDING STRUCTURES 572,075.00
III. PUBLIC AREAS 1,234,625.00
IV. PRIVATE GUEST AREAS 3,226,949.92
V. BACK OF HOUSE 25,650.00
VI. MISCELLANEOUS 203,502.83
VII. NEW CONSTRUCTION 588,000.00
VIII. GENERAL CONDITIONS 536,697.25
- --------------------------------------------------------------------------------
TOTAL 6,500,000.00
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
LE BARON HOTEL
SAN JOSE, CALIFORNIA
PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
NUMBER OF ROOMS: 332
- ------------------------------------------------------------------------------------------------------------------------------------
QUANITY/ UNIT EST.
SCOPE OF WORK ALLOWANCE COST COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I. EXTERIOR
A. SIGNAGE
-------------------------------------------------------------------------------------------------------------
1. REPLACEMENT REQUIRED TO MEET STANDARDS 1.00 60,000.00 60,000.00
-------------------------------------------------------------------------------------------------------------
B. LANDSCAPE
-------------------------------------------------------------------------------------------------------------
1. UPGRADE THROUGHOUT 1.00 25,000.00 25,000.00
-------------------------------------------------------------------------------------------------------------
2. PROVIDE DECORATIVE LIGHTING ELEMENTS 1.00 20,000.00 20,000.00
-------------------------------------------------------------------------------------------------------------
C. PARKING LOTS & DRIVES
-------------------------------------------------------------------------------------------------------------
1. REPAIR/RESURFACE/STRIPE LOT 330.00 100.00 DEFER
-------------------------------------------------------------------------------------------------------------
2. IMPROVE LIGHTING 1.00 20,000.00 DEFER
-------------------------------------------------------------------------------------------------------------
3. REPAIR ANY DAMAGED CURBS OR WALKWAYS 1.00 2,000.00 DEFER
-------------------------------------------------------------------------------------------------------------
4. MINOR REPAIR AND STRIPE ONLY 7,500.00
-------------------------------------------------------------------------------------------------------------
II. BUILDING STRUCTURES
A. CANOPIES
-------------------------------------------------------------------------------------------------------------
1. REMOVE BRASS TRIM AND REFINISH 1,500.00 1.50 2,250.00
-------------------------------------------------------------------------------------------------------------
2. RECLAD COLUMNS 2.00 500.00 1,000.00
-------------------------------------------------------------------------------------------------------------
3. REMOVE BOLLARDS: REPLACE DAMAGED PAVERS UNDER 3,000.00 10.00 30,000.00
-------------------------------------------------------------------------------------------------------------
4. PROVIDE NEW ROOF DETAIL 115.00 175.00 10,000.00
-------------------------------------------------------------------------------------------------------------
5. REMOVE BRASS TREATMENT UNDERNEATH AND REPLACE WITH NEW MATERIAL 1,200.00 5.00 6,000.00
-------------------------------------------------------------------------------------------------------------
6. REPLACE FIXTURES UNDER CANOPY AND ON COLUMNS 1.00 5,500.00 5,500.00
-------------------------------------------------------------------------------------------------------------
7. REMOVE BARREL AWNING CANOPY AT CAR RENTAL ENTRY 1.00 1,500.00 1,500.00
-------------------------------------------------------------------------------------------------------------
8. REWORK ISLAND AT ENTRY W/LANDSCAPE ETC. 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------
B. COMMERICAL BUILDING
-------------------------------------------------------------------------------------------------------------
1. REPAINT IN NEW COLOR SCHEME TO COORDINATE W/TOWER 1.00 75,000.00 75,000.00
-------------------------------------------------------------------------------------------------------------
2. REFINISH TILE AT INTERNATIONAL BALLROOM ENTRY 500.00 1.50 750.00
-------------------------------------------------------------------------------------------------------------
3. REMOVE DISPLAY WINDOWS AND COVER W/STUCCO 2.00 200.00 400.00
-------------------------------------------------------------------------------------------------------------
4. REPLACE WALL SCONCES 3.00 125.00 375.00
-------------------------------------------------------------------------------------------------------------
5. CONCEAL DUMPSTER/COMPACTOR/SERVICE AREA 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------
6. REPAIR DAMAGED WALL ON MAINTENANCE SHOP 250.00 1.00 250.00
-------------------------------------------------------------------------------------------------------------
7. IMPROVE APPEARANCE OF EMPLOYEE ENTRY/SCREEN 1.00 1,500.00 1,500.00
-------------------------------------------------------------------------------------------------------------
8. REPLACE INDOOR/OUTDOOR CARPET AT EMPLOYEE ENTRY 50.00 6.00 300.00
-------------------------------------------------------------------------------------------------------------
9. REFINISH PATIO ON IVORY'S RESTAURANT 500.00 3.50 1,750.00
-------------------------------------------------------------------------------------------------------------
10. ROOF TREATMENT 1.00 50,000.00 50,000.00
-------------------------------------------------------------------------------------------------------------
11. IVORY'S PATIO AWNING 1.00 15,000.00 DEFER
-------------------------------------------------------------------------------------------------------------
C. GUESTROOM BUILDING
-------------------------------------------------------------------------------------------------------------
1. PAINT EXTERIOR OF TOWER 45,000.00 6.00 270,000.00
-------------------------------------------------------------------------------------------------------------
2. MOVE STOREFRONTS OUT ON 7-8 84.00 1,000.00 DELETE
-------------------------------------------------------------------------------------------------------------
3. REPLACE METAL GRILLS W/LOUVERED METAL GRILLS 332.00 200.00 DELETE
-------------------------------------------------------------------------------------------------------------
4. PAINT OR REMOVE RAILINGS 332.00 100.00 WAIVER
-------------------------------------------------------------------------------------------------------------
5. REPLACE TILE UNDER NORTH CANOPY 1.00 3,000.00 3,000.00
-------------------------------------------------------------------------------------------------------------
6. REFINISH UNDERSIDE OF CANOPY 1.00 2,500.00 2,500.00
-------------------------------------------------------------------------------------------------------------
7. PROVIDE PARAPET ROOF TREATMENT 600.00 175.00 105,000.00
-------------------------------------------------------------------------------------------------------------
III. PUBLIC AREAS
A. LOBBY
-------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 350.00 30.00 10,500.00
-------------------------------------------------------------------------------------------------------------
2. REPLACE TILE FROM ENTRY THROUGHOUT LOBBY 4,000.00 10.00 40,000.00
-------------------------------------------------------------------------------------------------------------
3. REPLACE WINDOW TREATMENTS 2.00 750.00 1,500.00
-------------------------------------------------------------------------------------------------------------
4. REPLACE ALL LOBBY FURNITURE 1.00 20,000.00 20,000.00
-------------------------------------------------------------------------------------------------------------
5. REPLACE LIGHTING/CHANDELIERS 1.00 20,000.00 20,000.00
-------------------------------------------------------------------------------------------------------------
6. REPLACE ALL WALLCOVERING 500.00 18.00 9,000.00
-------------------------------------------------------------------------------------------------------------
7. REPLACE CEILING 300.00 2.50 750.00
-------------------------------------------------------------------------------------------------------------
8. RELOCATE GIFT SHOP/ CREATE BELLSTORAGE AND BELLSTAND 1.00 10,000.00 10,000.00
-------------------------------------------------------------------------------------------------------------
9. REWORK ENTRY COMPLETELY 1.00 30,000.00 30,000.00
-------------------------------------------------------------------------------------------------------------
10. REPLACE FRONT DESK 1.00 10,000.00 10,000.00
-------------------------------------------------------------------------------------------------------------
11. REPLACE WALL FINISH BEHIND FRONT DESK 50.00 18.00 900.00
-------------------------------------------------------------------------------------------------------------
12. REMOVE HANGING LIGHTS OVER FRONT DESK AND ADD NEW LIGHTING 1.00 1,500.00 1,500.00
-------------------------------------------------------------------------------------------------------------
13. REPLACE ARTWORK BEHIND DESK 1.00 300.00 300.00
-------------------------------------------------------------------------------------------------------------
14. REPLACE STAIRCASE TO BALLROOM 1.00 25,000.00 25,000.00
-------------------------------------------------------------------------------------------------------------
15. COMPLETE NEW SIGN PACKAGE 1.00 35,000.00 35,000.00
-------------------------------------------------------------------------------------------------------------
16. LOBBY MURAL 1.00 20,000.00 DELETE
-------------------------------------------------------------------------------------------------------------
B. ADMINISTRATIVE AREA
-------------------------------------------------------------------------------------------------------------
1. REPLACE ENTRY DOOR 1.00 650.00 650.00
-------------------------------------------------------------------------------------------------------------
2. CONVERT ADMIN OFFICE TO MEETING SPACE/BUS CENTER 1.00 20,000.00 20,000.00
-------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
C. PUBLIC RESTROOMS/TOILETS (LOBBY)
--------------------------------------------------------------------------------------------------------------------------
1. GUT AND REDO TO ADA STANDARDS 2.00 15,000.00 30,000.00
--------------------------------------------------------------------------------------------------------------------------
D. FIESTA BALLROOM RESTROOMS 0.00
--------------------------------------------------------------------------------------------------------------------------
1. GUT AND REDO TO ADA STANDARDS 2.00 15,000.00 30,000.00
--------------------------------------------------------------------------------------------------------------------------
E. LOBBY BAR
--------------------------------------------------------------------------------------------------------------------------
1. RECONCEPT/REDO 1.00 100,000.00 100,000.00
--------------------------------------------------------------------------------------------------------------------------
F. RESTAURANT
--------------------------------------------------------------------------------------------------------------------------
1. RECONCEPT/RELOCATE 1.00 200,000.00 200,000.00
--------------------------------------------------------------------------------------------------------------------------
G. MEETING PRE-FUNCTION (INTERNATIONAL)
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE WALLCOVERING 150.00 18.00 2,700.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE FURNISHINGS 1.00 1,500.00 1,500.00
--------------------------------------------------------------------------------------------------------------------------
H. MEETING PRE-FUNCTION (FIESTA BALLROOM)
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 500.00 25.00 12,500.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE VINYL 400.00 18.00 7,200.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE/UPGRADE LIGHTING 1.00 7,500.00 7,500.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE DOORS TO BALLROOM 3.00 2,000.00 6,000.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE DOORS TO MONTEREY AND CARMEL ROOMS 2.00 650.00 1,300.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE CEILING 3,100.00 2.50 7,750.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE FURNISHINGS 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
8. LOWER WATER FOUNTAIN 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE ARTWORK 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
10. REPLACE/RELOCATE PHONE PARTITIONS 1.00 5,500.00 5,500.00
--------------------------------------------------------------------------------------------------------------------------
I. FIESTA BALLROOM
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 1,500.00 25.00 37,500.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE VINYL WALLCOVERING 750.00 19.00 13,500.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE AIRWALL COVER 1,600.00 18.00 28,800.00
--------------------------------------------------------------------------------------------------------------------------
4. REPAIR AIR WALLS 1.00 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE AIRWALL PASS THRU DOORS 4.00 500.000 2,000.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE SERVICE CORRIDOR DOORS 1.00 8,000.00 8,000.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE WINDOW TREATMENTS 6.00 750.00 4,500.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE CHANDELIERS 12.00 2,500.00 30,000.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE CEILING 12,000.00 2.50 30,000.00
--------------------------------------------------------------------------------------------------------------------------
10. IMPROVE LIGHTING 1.00 20,000.00 20,000.00
--------------------------------------------------------------------------------------------------------------------------
11. CLEAN UP ROOF TOP VIEW FROM WEST END OF BALLROOM 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
12. REPLACE ALL CHAIRS 1,000.00 40.00 40,000.00
--------------------------------------------------------------------------------------------------------------------------
13. REPLACE TABLES AS NEEDED 50.00 250.00 12,500.00
--------------------------------------------------------------------------------------------------------------------------
14. REPLACE CHAIR RAIL 550.00 5.00 2,750.00
--------------------------------------------------------------------------------------------------------------------------
15. REPLACE ARTWORK 1.00 3,500.00 3,500.00
--------------------------------------------------------------------------------------------------------------------------
16. REPLACE AIRWALLS 1.00 125,000.00 125,000.00
--------------------------------------------------------------------------------------------------------------------------
17. NEW AUDIO VISUAL SYSTEM 1.00 50,000.00 50,000.00
--------------------------------------------------------------------------------------------------------------------------
J. INTERNATIONAL BALLROOM
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 475.00 25.00 11,875.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE WALL COVERING 250.00 18.00 4,500.00
--------------------------------------------------------------------------------------------------------------------------
4. REPLACE WOOD BASE 250.00 5.00 1,250.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE ARTWORK 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE CEILING 3,900.00 2.50 9,750.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE TABLES 20.00 250.00 5,000.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE CHAIRS 200.00 40.00 8,000.00
--------------------------------------------------------------------------------------------------------------------------
K. MONTEREY ROOM
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 65.00 25.00 1,625.00
--------------------------------------------------------------------------------------------------------------------------
2. USE VINYL WALLCOVER INSTEAD OF PAINT 100.00 18.00 1,800.00
--------------------------------------------------------------------------------------------------------------------------
3. REFINISH TRIM 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
4. REFINISH/REPLACE CEILING 1,000.00 2.50 2,500.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE WINDOW TREATMENT 1.00 750.00 750.00
--------------------------------------------------------------------------------------------------------------------------
6. UPGRADE LIGHTING 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE WOOD BASE 100.00 5.00 500.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE TABLES 5.00 250.00 1,250.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE CHAIRS 50.00 40.00 2,000.00
--------------------------------------------------------------------------------------------------------------------------
L. CARMEL ROOM
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET AND PAD 65.00 25.00 1,625.00
--------------------------------------------------------------------------------------------------------------------------
2. USE VINYL WALLCOVERING INSTEAD OF PAINT 100.00 18.00 1,800.00
--------------------------------------------------------------------------------------------------------------------------
3. REFINISH TRIM 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
4. REFINISH/REPLACE CEILING 1,000.00 2.50 2,500.00
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE WINDOW TREATMENT 1.00 750.00 750.00
--------------------------------------------------------------------------------------------------------------------------
6. UPGRADE LIGHTING 1.00 1,000.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE WOOD BASE 100.00 5.00 500.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE BOARD TABLE 1.00 3,000.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
9. REPLACE CHAIRS 10.00 350.00 3,500.00
--------------------------------------------------------------------------------------------------------------------------
M. SWIMMING POOL & DECK
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE CHAISES 16.00 200.00 15,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CHAIRS 40.00 100.00 4,000.00
--------------------------------------------------------------------------------------------------------------------------
3. REPLACE TABLES 4.00 300.00 1,200.00
--------------------------------------------------------------------------------------------------------------------------
4. UPGRADE LANDSCAPE 1.00 7,500.00 7,500.00
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
5. REPLACE TILE AND COPING 1.00 3,500.00 3,500.00
--------------------------------------------------------------------------------------------------------------------------
6. RECESS NO DIVING AND DEPTH MARKERS 20.00 65.00 1,300.00
--------------------------------------------------------------------------------------------------------------------------
7. COMPLETELY REFINISH POOL RESTROOMS 2.00 500.00 1,000.00
--------------------------------------------------------------------------------------------------------------------------
8. REPLACE UMBRELLAS 4.00 400.00 1,600.00
--------------------------------------------------------------------------------------------------------------------------
9. NEW DECK MATERIAL 5,000.00 6.00 DEFER
--------------------------------------------------------------------------------------------------------------------------
N. FITNESS CENTER/EXERCISE ROOM
--------------------------------------------------------------------------------------------------------------------------
1. REFINISH WALLS AND ENCLOSE HVAC 1.00 3,000.00 3,000.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE CARPET 65.00 15.00 975.00
--------------------------------------------------------------------------------------------------------------------------
3. PROVIDE HOUSE PHONE 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------------------------
4. PROVIDE COLORFUL GRAPHICS & WALL DECOR. 1.00 300.00 300.00
--------------------------------------------------------------------------------------------------------------------------
5. PROVIDE INSTRUCTIONS FOR USE OF EXERCISE EQUIPMENT 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
6. REPLACE EXERCISE EQUIPMENT 0.00
--------------------------------------------------------------------------------------------------------------------------
TREADMILL 1.00 3,500.00 3,500.00
--------------------------------------------------------------------------------------------------------------------------
EXERCISE BIKES 2.00 550.00 1,100.00
--------------------------------------------------------------------------------------------------------------------------
CLIMBER 1.00 3,300.00 3,300.00
--------------------------------------------------------------------------------------------------------------------------
TELEVISION 1.00 325.00 325.00
--------------------------------------------------------------------------------------------------------------------------
SCALES 1.00 300.00 300.00
--------------------------------------------------------------------------------------------------------------------------
7. REPLACE EXHAUST FAN 1.00 500.00 500.00
--------------------------------------------------------------------------------------------------------------------------
O. INTERIOR STAIRWELLS
--------------------------------------------------------------------------------------------------------------------------
1. REPLACE DAMAGED HARDWARE 14.00 300.00 4,200.00
--------------------------------------------------------------------------------------------------------------------------
2. REPLACE PUSH & KICK PLATES 14.00 300.00 4,200.00
--------------------------------------------------------------------------------------------------------------------------
P. ELEVATORS
--------------------------------------------------------------------------------------------------------------------------
1. UPGRADE ELEVATOR TO ADA STANDARDS 3.00 15,000.00 45,000.00
--------------------------------------------------------------------------------------------------------------------------
IV. PRIVATE GUEST AREAS
A. INTERIOR GUEST ROOM CORRIDORS
---------------------------------------------------------------------------------------------------------------------------
1. REPLACE CARPET 1,700.00 22.00 37,400.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE CARPET PAD AND BASE 1,700.00 4.50 7,650.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE WALLCOVERING 3,500.00 18.00 83,000.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE CEILING TILES 15,000.00 2.50 37,500.00
---------------------------------------------------------------------------------------------------------------------------
5. REPLACE LIGHTING FIXTURE - WALL 170.00 65.00 11,060.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE LIGHTING FIXTURE - CEILING 240.00 100.00 24,000.00
---------------------------------------------------------------------------------------------------------------------------
7. REMOVE MIRRORS FROM ELEVATOR LOBBIES 8.00 750.00 8,000.00
---------------------------------------------------------------------------------------------------------------------------
8. REPLACE DOORS 332.00 325.00 107,900.00
---------------------------------------------------------------------------------------------------------------------------
9. REPLACE ELEVATOR LOBBY FURNISHINGS 7.00 750.00 5,250.00
---------------------------------------------------------------------------------------------------------------------------
B. GUEST ROOM CORRIDOR VENDING
---------------------------------------------------------------------------------------------------------------------------
1. PROVIDE NON-SLIP TILE FLOORING 7.00 400.00 2,800.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE WALL SURFACE 80.00 18.00 1,440.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE LIGHTING 7.00 100.00 700.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE DOORS TO SERVICE ELEVATOR 7.00 300.00 2,100.00
---------------------------------------------------------------------------------------------------------------------------
C. GUESTROOMS
---------------------------------------------------------------------------------------------------------------------------
1. PROVIDE ELECTRONIC LOCKS 332.00 350.00 115,200.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE DOOR NUMBERS W/BRAILLE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE CONNECTIONS DOORS 160.00 150.00 24,000.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE WALL FINISH 332.00 600.00 199,200.00
---------------------------------------------------------------------------------------------------------------------------
5. REPLACE CARPET/PAD/BASE 332.00 650.00 215,800.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE LIGHT PACKAGE 332.00 250.00 83,000.00
---------------------------------------------------------------------------------------------------------------------------
7. REPLACE CASEGOODS 332.00 1,200.00 398,400.00
---------------------------------------------------------------------------------------------------------------------------
8. REPLACE ACTIVITY CHAIRS 332.00 125.00 41,500.00
---------------------------------------------------------------------------------------------------------------------------
9. PROVIDE LOUNGE CHAIR & OTTOMAN 100.00 350.00 35,000.00
---------------------------------------------------------------------------------------------------------------------------
10. REPLACE SOFA/SLEEPERS 60.00 575.00 34,500.00
---------------------------------------------------------------------------------------------------------------------------
11. REPLACE ALL TELEVISIONS 332.00 350.00 115,200.00
---------------------------------------------------------------------------------------------------------------------------
12. REPLACE WINDOW TREATMENT 332.00 450.00 149,400.00
---------------------------------------------------------------------------------------------------------------------------
13. REPLACE ARTWORK 332.00 120.00 39,840.00
---------------------------------------------------------------------------------------------------------------------------
14. REPLACE MATTRESSESS - FULL XL 332.00 250.00 83,000.00
---------------------------------------------------------------------------------------------------------------------------
15. REPLACE MATTRESSESS - KING 166.00 300.00 49,800.00
---------------------------------------------------------------------------------------------------------------------------
17. REPLACE BEDSPREADS W/COVERLET AND DUST SKIRT 332.00 125.00 41,500.00
---------------------------------------------------------------------------------------------------------------------------
18. REPLACE BEDSPREADS - KING 166.00 85.00 14,110.00
---------------------------------------------------------------------------------------------------------------------------
19. REPLACE LINEN 1.00 35,000.00 MOVE TO OPS
---------------------------------------------------------------------------------------------------------------------------
20. PROVIDE HANDICAP ACCESSIBLE ROOMS 7.00 5,000.00 35,000.00
---------------------------------------------------------------------------------------------------------------------------
21. REPLACE THRU WALL A/C UNITS 332.00 600.00 199,200.00
---------------------------------------------------------------------------------------------------------------------------
22. PAINT CEILINGS, DOORS, FRAMES, ETC. 332.00 250.00 83,000.00
---------------------------------------------------------------------------------------------------------------------------
23. INSTALL FF/E 332.00 150.00 49,800.00
---------------------------------------------------------------------------------------------------------------------------
24. CONVERT CAR LEASE, BEAUTY SALON AND GUEST LAUNDRY BACK TO ROOMS 4.00 12,000.00 49,800.00
---------------------------------------------------------------------------------------------------------------------------
25. CONVERT CMU ON INTERIOR WALL W/SHEETROCK 332.00 200.00 66,400.00
---------------------------------------------------------------------------------------------------------------------------
26. MINI BARS 360.00 400.00 DEFER
---------------------------------------------------------------------------------------------------------------------------
D. GUEST BATHROOMS
---------------------------------------------------------------------------------------------------------------------------
1. REPLACE VANITIES 332.00 300.00 99,600.00
---------------------------------------------------------------------------------------------------------------------------
2. REPLACE TUB AND SURROUND 332.00 872.56 289,689.92
---------------------------------------------------------------------------------------------------------------------------
3. REPLACE TILE FLOOR 332.00 300.00 99,600.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE LIGHTING ABOVE VANITY 332.00 200.00 66,400.00
---------------------------------------------------------------------------------------------------------------------------
5. PROVIDE GFI OUTLET 332.00 45.00 14,940.00
---------------------------------------------------------------------------------------------------------------------------
6. REPLACE VANITY FITTINGS 332.00 65.00 21,580.00
---------------------------------------------------------------------------------------------------------------------------
7. PAINT TRIM 332.00 100.00 33,200.00
---------------------------------------------------------------------------------------------------------------------------
8. REPLACE BATH DOOR 332.00 150.00 49,800.00
---------------------------------------------------------------------------------------------------------------------------
9. REPLACE DAMAGED MIRRORS 100.00 95.00 9,500.00
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
10. REPLACE WALLCOVERING 332.00 250.00 83,000.00
---------------------------------------------------------------------------------------------------------------------------
11. CREATE BATHS W/ROLL IN SHOWERS 3.00 10,000.00 30,000.00
---------------------------------------------------------------------------------------------------------------------------
V. BACK OF HOUSE
A. KITCHEN/BANQUET EQUIPMENT
---------------------------------------------------------------------------------------------------------------------------
1. ALLOWANCE FOR REPAIR AND MAINTENANCE 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------------------------------------------
2. A/C FOR HOUSEKEEPING 1.00 650.00 650.00
---------------------------------------------------------------------------------------------------------------------------
VI. MISCELLANEOUS
---------------------------------------------------------------------------------------------------------------------------
1. REPLACE ALL UNIFORMS 100.00 300.00 30,000.00
---------------------------------------------------------------------------------------------------------------------------
2. SALES AUTOMATION 1.00 40,000.00 DEFER
---------------------------------------------------------------------------------------------------------------------------
3. GRAND OPENING 1.00 0.00 0.00
---------------------------------------------------------------------------------------------------------------------------
4. REPLACE P.O.S. SYSTEM IN RESTAURANT AND BAR 1.00 25,000.00 DEFER
---------------------------------------------------------------------------------------------------------------------------
5. AUDIO VISUAL EQUIPMENT 1.00 20,002.83 20,002.83
---------------------------------------------------------------------------------------------------------------------------
6. VANS 2.00 28,000.00 56,000.00
---------------------------------------------------------------------------------------------------------------------------
7. REPAIR ANNUNCIATOR PANEL 1.00 65,000.00 65,000.00
---------------------------------------------------------------------------------------------------------------------------
8. REPAIR/REPLACE COMMERCIAL ROOFTOP UNITS 5.00 6,500.00 32,500.00
---------------------------------------------------------------------------------------------------------------------------
9. ALLOWANCE FOR ROOF REPAIRS 1.00 50,000.00 DEFER
---------------------------------------------------------------------------------------------------------------------------
10. SEPARATE DATA AND PHONE LINES/NEW SWITCH 1.00 200,000.00 DEFER
---------------------------------------------------------------------------------------------------------------------------
VII. NEW CONSTRUCTION
---------------------------------------------------------------------------------------------------------------------------
1. CONVERT 9TH FLOOR TO CONCIERGE FLOOR W/LOUNGE 28.00 21,000.00 588,000.00
---------------------------------------------------------------------------------------------------------------------------
VIII. GENERAL CONDITIONS
-------------------------------------------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 5,963,302.75 0.09 535,697.25
-------------------------------------------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 5,963,302.75 0.0075 44,724.77
-------------------------------------------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 5,963,302.75 0.0075 44,724.77
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
TOTAL: 6,500,000.00
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DOUBLETREE HOTEL
MISSION VALLEY, CA
SUMMARY
PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
I. LIFE SAFETY 15,000.00
II. LOBBY/ENTRANCE/FRONT DESK 110,255.00
III. PUBLIC RESTROOMS 26,300.00
IV. FOOD SERVICE FACILITIES 75,035.00
V. LOUNGE FACILITIES 75,000.00
VI. MEETING ROOMS (RENOVATE EXISTING ONLY) 153,125.00
VII. PUBLIC AREAS 1,453.00
VIII. INTERIOR CORRIDORS 190,536.50
IX. GUEST ROOMS 824,090.00
X. GUEST BATH ROOMS 98,870.00
XI. EXTERIOR 534,100.00
XII. BACK OF THE HOUSE 163,000.00
XIII. GENERAL CONDITIONS 238,010.27
- --------------------------------------------------------------------------------
TOTAL 2,504,774.77
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
DOUBLETREE HOTEL
MISSION VALLEY, CA
PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
QUANITY/ UNIT EST.
AREAS SCOPE OF WORK ALLOWANCE COST COST
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I. LIFE SAFETY
A. FIRE SAFETY SYSTEM
---------------------------------------------------------------------------------------------------
1 MUST COMPLY WITH DOUBLETREE STANDARDS 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------
0.00
II. LOBBY/ENTRANCE/FRONT DESK 0.00
0.00
A. LOBBY 0.00
---------------------------------------------------------------------------------------------------
1 REPLACE CARPET 16.00 30.00 480.00
---------------------------------------------------------------------------------------------------
2 REPLACE PLANTER POTS 16.00 250.00 4,000.00
---------------------------------------------------------------------------------------------------
3 REPLACE FURNITURE 1.00 7,000.00 15,000.00
---------------------------------------------------------------------------------------------------
4 MISC. PAINT 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------
5 LIGHTING-ADD CHANDELIERS 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------------------
6 AREA RUGS 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------
7 MISC. DOUBLETREE UPGRADES 1.00 50,000.00 50,000.00
---------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------
B. FRONT DESK
---------------------------------------------------------------------------------------------------
1 OWNER/OPERATOR SIGN 1.00 75.00 75.00
---------------------------------------------------------------------------------------------------
2 REPLACE/UPGRADE 1.00 15,000.00 20,000.00
---------------------------------------------------------------------------------------------------
0.00
C. HALLWAYS 0.00
---------------------------------------------------------------------------------------------------
1. UPGRADE 600.00 7.00 4,200.00
---------------------------------------------------------------------------------------------------
0.00
III. PUBLIC RESTROOMS 0.00
0.00
A. LOBBY AREA 0.00
---------------------------------------------------------------------------------------------------
1 MODIFY VANITIES FOR ADA 2.00 150.00 300.00
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
B. POOL AREA - OUTSIDE
---------------------------------------------------------------------------------------------------
1 RENOVATE 2.00 10,000.00 20,000.00
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
C. POOL AREA - INSIDE
---------------------------------------------------------------------------------------------------
1 MINOR REPAIRS 2.00 3,000.00 6,000.00
---------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------------------
0.00
IV. FOOD SERVICE FACILITIES 0.00
0.00
A. RESTAURANT 0.00
--------------------------------------------------------------------------------------------
1 REPLACE CARPET 217.00 30.00 6,510.00
--------------------------------------------------------------------------------------------
2 UPGRADE BUFFET 1.00 3,500.00 3,500.00
--------------------------------------------------------------------------------------------
3 OWNER/OPERATOR SIGN 1.00 75.00 75.00
--------------------------------------------------------------------------------------------
4 REFINISH CHAIRS 66.00 75.00 4,950.00
--------------------------------------------------------------------------------------------
5 ACCESSORIES 1.00 0.00
--------------------------------------------------------------------------------------------
6 INCREASE LIGHTING 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------
7 MISC. TO DOUBLETREE STANARDS 1.00 55,000.00 55,000.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
0.00
V. LOUNGE FACILITIES 0.00
0.00
A. LOUNGE 0.00
--------------------------------------------------------------------------------------------
1 NEW CONCEPT 1.00 75,000.00 75,000.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
VI. MEETING ROOMS 0.00
0.00
A. PRE-FUNCTION 0.00
--------------------------------------------------------------------------------------------
1 COMPLETELY RENOVATE 704.00 25.00 17,600.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
0.00
B. MEETING ROOM - VALLEY 0.00
--------------------------------------------------------------------------------------------
1 COMPLETELY RENOVATE 2,146.00 25.00 53,650.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
C. MEETING ROOM - CABANA 0.00
--------------------------------------------------------------------------------------------
1 COMPLETELY RENOVATE 2,075.00 25.00 51,875.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
D. MEETING ROOMS - 214, 210, 200, 1000
--------------------------------------------------------------------------------------------
1 COMPLETELY RENOVATE 2,000.00 15.00 30,000.00
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
VII. PUBLIC AREAS 0.00
0.00
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
A. EXERCISE ROOM 0.00
-----------------------------------------------------------------------------------------------------------
1 ADD CLOCK 1.00 45.00 45.00
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
B. GUEST LAUNDRY
-----------------------------------------------------------------------------------------------------------
1 UPGRADE AREA 176.00 8.00 1,408.00
-----------------------------------------------------------------------------------------------------------
VIII. INTERIOR CORRIDORS 0.00
0.00
A. CORRIDORS - 10 STORY TOWER 0.00
-----------------------------------------------------------------------------------------------------------
1 NEW GRAPHICS PACKAGE 212.00 125.00 26,500.00
-----------------------------------------------------------------------------------------------------------
2 REPLACE CARPET 1,200.00 30.00 36,000.00
-----------------------------------------------------------------------------------------------------------
3 REPLACE VWC 2,200.00 18.00 39,600.00
-----------------------------------------------------------------------------------------------------------
4 PAINT DOORS/FRAMES 212.00 35.00 7,420.00
-----------------------------------------------------------------------------------------------------------
5 REPLACE WALL SCOUNCES 130.00 150.00 19,500.00
-----------------------------------------------------------------------------------------------------------
6 REFINISH ELEVATOR DOORS 20.00 200.00 4,000.00
-----------------------------------------------------------------------------------------------------------
7 PAINT CEILING 9,833.00 0.50 4,916.50
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
0.00
-----------------------------------------------------------------------------------------------------------
B. ELEVATORS
-----------------------------------------------------------------------------------------------------------
1 UPGRADE 4.00 8,000.00 32,000.00
-----------------------------------------------------------------------------------------------------------
C. VENDING
-----------------------------------------------------------------------------------------------------------
1 CLEAN/REPAIR FLOOR TILE 800.00 7.00 5,600.00
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
D. STAIRWELLS
-----------------------------------------------------------------------------------------------------------
1 PAINT RAILINGS/WALLS/FLOORS 1.00 15,000.00 15,000.00
-----------------------------------------------------------------------------------------------------------
0.00
IX. GUEST ROOMS 0.00
0.00
A. GUEST ROOMS - 10 STORY TOWER 0.00
-----------------------------------------------------------------------------------------------------------
1 REPLACE CARPET 212.00 520.00 110,240.00
-----------------------------------------------------------------------------------------------------------
2 CARPET BASE 212.00 105.00 22,260.00
-----------------------------------------------------------------------------------------------------------
3 REPLACE CASEGOODS 212.00 1,500.00 318,000.00
-----------------------------------------------------------------------------------------------------------
4 REPLACE ARTWORK 212.00 120.00 25,440.00
-----------------------------------------------------------------------------------------------------------
5 REPLACE LIGHTING PACKAGE 212.00 250.00 53,000.00
-----------------------------------------------------------------------------------------------------------
6 REPLACE ENTRY FOYER LIGHTS 212.00 100.00 21,200.00
-----------------------------------------------------------------------------------------------------------
7 REPLACE SAGGING MATTRESSES 100.00 300.00 30,000.00
-----------------------------------------------------------------------------------------------------------
8 REPLACE NON - COMPLIANCE TV'S 30.00 275.00 8,250,00
-----------------------------------------------------------------------------------------------------------
9 SOUND STRIP ENTRANCE DOORS - ALL 316.00 30.00 9,480.00
-----------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
10 FULL LENGTH MIRRORS 316.00 45.00 14,220.00
---------------------------------------------------------------------------------------------------------------
11 REPAIR WALLS UNDER WINDOWS 212.00 150.00 31,800.00
---------------------------------------------------------------------------------------------------------------
12 MISC. 212.00 200.00 42,400.00
---------------------------------------------------------------------------------------------------------------
13 REPLACE BEDSPREADS 424.00 75.00 31,800.00
---------------------------------------------------------------------------------------------------------------
14 REPLACE DRAPERY 212.00 500.00 105,000.00
---------------------------------------------------------------------------------------------------------------
15
---------------------------------------------------------------------------------------------------------------
16
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
0.00
X GUEST BATH ROOMS 0.00
0.00
A. GUEST BATH ROOMS 0.00
---------------------------------------------------------------------------------------------------------------
1 REPLACE DESILVERED MIRRORS 100.00 85.00 8,500.00
---------------------------------------------------------------------------------------------------------------
2 REPLACE VANITY LIGHTS 212.00 125.00 26,500.00
---------------------------------------------------------------------------------------------------------------
3 PAINT DOORS/FRAMES 212.00 35.00 7,420.00
---------------------------------------------------------------------------------------------------------------
4 REPAIR GROUT AT TUBS 212.00 75.00 15,900.00
---------------------------------------------------------------------------------------------------------------
5 REPLACE DAMAGED VANITIES 25.00 350.00 8,750.00
---------------------------------------------------------------------------------------------------------------
6 MISC. 212.00 150.00 31,800.00
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
0.00
XI. EXTERIOR 0.00
0.00
A. CANOPY 0.00
---------------------------------------------------------------------------------------------------------------
1 UPGRADE PORTE COCHERE STRUCTURE 1.00 50,000.00 50,000.00
---------------------------------------------------------------------------------------------------------------
2 CLEAN SURFACES TO ACCEPTABLE CONDITION 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------------------------------
3 CONCEAL DUMPSTER WITH SOLID FENCE 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------------------
4 FINISH SURROUNDS AT CHILLERS 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------------
5 NEW WALKWAY AND STEPS 10,000.00 0.00
---------------------------------------------------------------------------------------------------------------
0.00
B. BUILDING STRUCTURES
---------------------------------------------------------------------------------------------------------------
1 SCREEN EQUIPMENT ON ROOF - COMM, BLDG. 1.00 20,000.00 20,000.00
---------------------------------------------------------------------------------------------------------------
2 SCREEN EQUIPMENT - GROUND LEVEL 1.00 4,000.00 4,000.00
---------------------------------------------------------------------------------------------------------------
3 PAINT ALL BUILDING ENTERIORS 1.00 120,000.00 120,000.00
---------------------------------------------------------------------------------------------------------------
4 REPLACE BALCONY RAILING 3,744.00 25.00 93,600.00
---------------------------------------------------------------------------------------------------------------
5 ROOF LINE DETAIL 0.00 125.00 0.00
---------------------------------------------------------------------------------------------------------------
6 ARCHITECTURAL ROOF ELEMENTS 75,000.00 0.00
---------------------------------------------------------------------------------------------------------------
7 COVER EXPOSED BLOCK WALLS 20,000.00 0.00
---------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------
0.00
B. PARKING LOT 0.00
---------------------------------------------------------------------------------------------------------------
1 REPAIR SUBGRADE/RESURFACE/STRIPE 1.00 78,000.00 78,000.00
---------------------------------------------------------------------------------------------------------------
2 REPLACE BROKEN CURBS INCLUDED
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
C. SIGNAGE
---------------------------------------------------------------------------------------------------------------
1 PROVIDE NEW DOUBLETREE SIGNAGE 1.00 75,000.00 75,000.00
---------------------------------------------------------------------------------------------------------------
2
---------------------------------------------------------------------------------------------------------------
D. LANDSCAPING
---------------------------------------------------------------------------------------------------------------
1 UPGRADE REQUIRED 1.00 40,000.00 40,000.00
---------------------------------------------------------------------------------------------------------------
2 0.00
---------------------------------------------------------------------------------------------------------------
0.00
E. EXTERIOR SWIMMING POOL AREA 0.00
---------------------------------------------------------------------------------------------------------------
1 REFINISH POOL DECK 2,500.00 4.00 10,000.00
---------------------------------------------------------------------------------------------------------------
2 REFINISH POOL & SPA 1.00 16,000.00 16,000.00
---------------------------------------------------------------------------------------------------------------
3 NEW PERIMETER TILE 1.00 2,000.00 2,000.00
---------------------------------------------------------------------------------------------------------------
4 REINSTATE WATER FEATURE 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------------------
5 UPGRADE AREA 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
XII. BACK OF THE HOUSE 0.00
A. LAUNDRY
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
B. KITCHEN 0.00
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
C. OPERATIONAL REQUIREMENTS
---------------------------------------------------------------------------------------------------------------
1 LINEN/TEXTILES 1.00 18,000.00 18,000.00
---------------------------------------------------------------------------------------------------------------
2 UNIFORMS 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------------
3 F & B SUPPLIES 1.00 20,000.00 20,000.00
---------------------------------------------------------------------------------------------------------------
4 A/V EQUIPMENT 1.00 10,000.00 10,000.00
---------------------------------------------------------------------------------------------------------------
5 DOUBLETREE CONVERSION ITEMS, SUPPLIES, PRINTED 1.00 50,000.00 50,000.00
---------------------------------------------------------------------------------------------------------------
6 DOUBLETREE RESERVATION EQUIPMENT 1.00 50,000.00 50,000.00
---------------------------------------------------------------------------------------------------------------
7 NEW TELEPHONE SWITCH 0.00 200,000.00 0.00
---------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------
D. ENGINEERING/ENVIRONMENTAL
---------------------------------------------------------------------------------------------------------------
1
---------------------------------------------------------------------------------------------------------------
2
---------------------------------------------------------------------------------------------------------------
3
---------------------------------------------------------------------------------------------------------------
4
---------------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
<TABLE>
<S> <C> <C> <C>
XIII. GENERAL CONDITIONS 0.00
0.00
A. ALLOWANCE 0.00
------------------------------------------------------------------------------------------------
1 GENERAL CONDITIONS 2,266,764.50 0.09 204,008.81
------------------------------------------------------------------------------------------------
2 DEPARTMENT INCENTIVES 2,266,764.50 0.01 17,000.73
------------------------------------------------------------------------------------------------
3 DEPARTMENT OVERHEAD 2,266,764.50 0.01 17,000.73
------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
TOTAL 2,504,774.77
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
DAYS INN
OCEAN CITY, MD
SUMMARY
PRODUCT IMPROVEMENT PLAN - HAMPTON INN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AREAS EST.COST
- --------------------------------------------------------------------------------
<S> <C>
1. EXTERIOR 424,918.00
II. LOBBY/ENTRANCE/FRONT DESK 237,100.00
III. PRIVATE GUEST AREAS 1,054,157.00
IV. BACK OF THE HOUSE 25,545.00
V. MISCELLANEOUS 38,950.00
VI. GENERAL CONDITIONS 124,646.90
- --------------------------------------------------------------------------------
TOTAL 1,905,316.90
- --------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
DAYS INN
OCEAN CITY, MD
PRODUCT IMPROVEMEMT PLAN - HAMPTON INN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY/ UNIT EST.
AREAS SCOPE OF WORK ALLOWANCE COST COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I. EXTERIOR
A. GENERAL SITE ITEMS
---------------------------------------------------------------------------------------------------------------------------
1 ONE PARK PER 8 ADDITIONAL ROOMS WAIVER 0.00
---------------------------------------------------------------------------------------------------------------------------
2 PROVIDE LIGHTING FOR CITY OVERFLOW LOT 1.00 8,000.00 8,000.00
---------------------------------------------------------------------------------------------------------------------------
2 CLEAN CANOPY PAVING 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------------------------
3 ADDITIONAL BUMPERS AT HC PARKING 6.00 25.00 150.00
---------------------------------------------------------------------------------------------------------------------------
4 PAINT LIGHT POLES AND BASES 1.00 3,000.00 3,000.00
---------------------------------------------------------------------------------------------------------------------------
5 PROVIDE ONE FC LIGHTING 1.00 18,000.00 18,000.00
---------------------------------------------------------------------------------------------------------------------------
6 PROVIDE 40 FT FLAGPOLE WITH LIGHTING 1.00 3,500.00 3,500.00
---------------------------------------------------------------------------------------------------------------------------
7 PROVIDE ADDITIONAL PERIMETER LANDSCAPING 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------------------------
8 PROVIDE ADDITIONAL PARKING LOT LANDSCAPING 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------------------------
9 CORRECT WATER PONDING PROBLEM 1.00 3,000.00 3,000.00
---------------------------------------------------------------------------------------------------------------------------
10 PROVIDE IRRIGATION SYSTEM WAIVER 18,000.00 0.00
---------------------------------------------------------------------------------------------------------------------------
11 PROVIDE DUMPSTER ENCLOSURE 1.00 3,500.00 3,500.00
---------------------------------------------------------------------------------------------------------------------------
12 PROVIDE PRIMARY SIGN ACCORDING TO HAMPTON INN 1.00 15,000.00 15,000.00
---------------------------------------------------------------------------------------------------------------------------
13 PROVIDE SCRIPT SIGNS TO HAMPTON INN 2.00 12,000.00 24,000.00
---------------------------------------------------------------------------------------------------------------------------
14 PROVIDE OFF-SITE SIGNS TO HAMPTON INN 1.00 8,000.00 8,000.00
---------------------------------------------------------------------------------------------------------------------------
15 SCREEN ROOF MOUNTED HVAC-AT REAR ABOVE DECK 1.00 6,000.00 6,000.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
B. CANOPY 0.00
---------------------------------------------------------------------------------------------------------------------------
1 PROVIDE CANOPY PER HAMPTON INN 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------------------------------------------
2 REFINISH CANOPY PAVING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
3 REPLACE LIGHT FIXTURES, SPRINKLER HEADS, ETC. 1.00 3,000.00 3,000.00
---------------------------------------------------------------------------------------------------------------------------
4 REFINISH CANOPY EXTERIOR INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
5 REFINISH PARAPET MANSARD ROOF INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
6 REPAIR MOISTURE PROBLEM CAUSING DAMAGE 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------------------------
7 PROVIDE 12'-6" CLEARANCE WAIVER 0.00
---------------------------------------------------------------------------------------------------------------------------
8 PROVIDE NEW TRASH/ASH URNS 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
C. EXTERIOR WALL FINISH 0.00
---------------------------------------------------------------------------------------------------------------------------
1 PROVIDE MANSARD ROOF PER HIS WAIVER 200.00 0.00
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
2 REFINISH CAULK JOINTS INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
3 REFINISH ENTRY DOORS/FRAMES 162.00 75.00 12,150.00
---------------------------------------------------------------------------------------------------------------------------
4 REFINISH EXIT DOORS 14.00 75.00 1,050.00
---------------------------------------------------------------------------------------------------------------------------
5 PROVIDE EXIT DOOR HARDWARE AT POOL AREA 1.00 450.00 450.00
---------------------------------------------------------------------------------------------------------------------------
6 PROVIDE EXIT DOOR LIGHTING 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------------------------
7 ELIMINATE TRIP HAZARD AT SLIDING GLASS DOORS 162.00 50.00 8,100.00
---------------------------------------------------------------------------------------------------------------------------
8 REPLACE EXISTING HVAC LOUVERS TO MATCH RAILINGS 162.00 100.00 16,200.00
---------------------------------------------------------------------------------------------------------------------------
9 TOTALLY RECAULK AND RECOAT EIFS SYSTEM 162.00 500.00 81,000.00
---------------------------------------------------------------------------------------------------------------------------
10 INSTALL 6" CAP ON BALCONY RAILINGS 2,448.00 20.00 48,960.00
---------------------------------------------------------------------------------------------------------------------------
11 REFINISH STOREFRONTS WINDOWS AT LOBBY 1.00 1,200.00 1,200.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
D. EXTERIOR WALKWAYS 0.00
---------------------------------------------------------------------------------------------------------------------------
1 PROVIDE EMERGENCY LIGHTING 12.00 350.00 4,200.00
---------------------------------------------------------------------------------------------------------------------------
2 PROVIDE FIRE ALARM HORNS 12.00 300.00 3,600.00
---------------------------------------------------------------------------------------------------------------------------
3 REFINISH ANY WORN BALCONY RAILINGS 2,443.00 6.00 14,658.00
---------------------------------------------------------------------------------------------------------------------------
4 REPLACE BALCONY LIGHTING 162.00 125.00 20,250.00
---------------------------------------------------------------------------------------------------------------------------
5 REFINISH HVAC CONDENSING UNIT CABINETS 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------------------------
6 REPAIR CAULKING AT BUILDING LINE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
E. INDOOR SWIMMING POOL 0.00
---------------------------------------------------------------------------------------------------------------------------
1 NEW POOL FURNITURE AND UMBRELLAS 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------------------------
2 REFINISH CEILING-ADD ACOUST.TILE/BANNERS 3,500.00 2.00 7,000.00
---------------------------------------------------------------------------------------------------------------------------
3 PROVIDE ACOUSTICAL ENVIRONMENT 1.00 3,500.00 3,500.00
---------------------------------------------------------------------------------------------------------------------------
4 REPLACE HVAC/DEHUMIDIFICATION SYSTEM 1.00 25,000.00 25,000.00
---------------------------------------------------------------------------------------------------------------------------
5 ENSURE POOL HEATER IS WORKING M/R 0.00
---------------------------------------------------------------------------------------------------------------------------
6 PROVIDE PANIC HARDWARE AT EXIT DOORS 2.00 450.00 900.00
---------------------------------------------------------------------------------------------------------------------------
7 PROVIDE EXIT SIGNS WITH RESERVE POWER 2.00 600.00 1,200.00
---------------------------------------------------------------------------------------------------------------------------
8 PROVIDE ADDITIONAL EMERGENCY LIGHTING 2.00 250.00 500.00
---------------------------------------------------------------------------------------------------------------------------
9 ENSURE GLASS CLOSURE IS WATERTIGHT 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------------------------
10 PROVIDE CERAMIC OR TERRA COTTA POTS 8.00 250.00 2,000.00
---------------------------------------------------------------------------------------------------------------------------
11 REPAINT WALL AT WATER FOUNTAIN 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------------------------
12 ENSURE FOUNTAIN WORKS M/R 0.00
---------------------------------------------------------------------------------------------------------------------------
13 REFINISH ENTIRE EIFS SURFACES 1.00 2,000.00 2,000.00
---------------------------------------------------------------------------------------------------------------------------
14 PROVIDE HOYER LIFT FOR ADA 1.00 2,500.00 2,500.00
---------------------------------------------------------------------------------------------------------------------------
15 CONFIRM VAPOR BARRIER BETWEEN POOL AND OTHER WAIVER-VERIFY IF EXIST 0.00
---------------------------------------------------------------------------------------------------------------------------
16 REPLACE RUSTED PIPE AT POOL HEATER 1.00 350.00 350.00
---------------------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------------------
0.00
0.00
II. LOBBY/ENTRANCE/FRONT DESK 0.00
</TABLE>
Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
0.00
A. LOBBY/BREAKFAST AREA 0.00
----------------------------------------------------------------------------------------------
1 REPLACE ACOUSTICAL TILE 2,500.00 3.00 7,500.00
----------------------------------------------------------------------------------------------
2 PROVIDE ELECTRICAL OIUTLETS 1.00 750.00 750.00
----------------------------------------------------------------------------------------------
3 PROVIDE OUTLETS IN BREAKFAST AREA 1.00 500.00 500.00
----------------------------------------------------------------------------------------------
4 PROVIDE HOUSE PHONE 1.00 350.00 350.00
----------------------------------------------------------------------------------------------
5 PROVIDE HC DRING FOUNTAIN 1.00 900.00 900.00
----------------------------------------------------------------------------------------------
6 CLEAN FURNITURE, TABLES LAMPS, CHAIRS TO NEW 1.00 10,000.00 10,000.00
----------------------------------------------------------------------------------------------
7 PROVIDE ADDITIONAL LANDSCAPING 1.00 1,500.00 1,500.00
----------------------------------------------------------------------------------------------
8 CLEAN FLOOR TO NEW CONDITION 1.00 800.00 800.00
----------------------------------------------------------------------------------------------
9 MOVE VENDING FROM ENTRY VESTIBULE M/R 0.00
----------------------------------------------------------------------------------------------
10 PROVIDE BRASS STAND AND 100% GUARANTEE 1.00 125.00 125.00
----------------------------------------------------------------------------------------------
11 CLEAN CARPET TO NEW CONDITION 1.00 200.00 200.00
----------------------------------------------------------------------------------------------
12 INSTALL WOOD BASE IN LOUNGE AREA 200.00 6.00 1,200.00
----------------------------------------------------------------------------------------------
13 CONFIRM ALL FOAM AND UPHOLSTERED GOODS MEET HIS M/R 0.00
----------------------------------------------------------------------------------------------
14 SEATING TO BE IN NEW CONDITION M/R 0.00
----------------------------------------------------------------------------------------------
0.00
----------------------------------------------------------------------------------------------
0.00
----------------------------------------------------------------------------------------------
0.00
B. REGISTRATION DESK AREA 0.00
----------------------------------------------------------------------------------------------
1 REPLACE ALL ACOUSTICAL TILE 300.00 3.00 900.00
----------------------------------------------------------------------------------------------
2 REFINISH WALLS-REMOVE SHELF BACK WALL 200.00 18.00 3,600.00
----------------------------------------------------------------------------------------------
3 PROVIDE ELECT/CABINETRY FOR HMS 1.00 5,000.00 5,000.00
----------------------------------------------------------------------------------------------
4 PROVIDE FAN IN DESK FOR HEAT 1.00 125.00 125.00
----------------------------------------------------------------------------------------------
5 PROVIDE OPERATOR SIGNAGE 1.00 75.00 75.00
----------------------------------------------------------------------------------------------
6 SAFE DEPOSIT BOXES-ONE PER 10 GUESTROOMS 1.00 750.00 750.00
----------------------------------------------------------------------------------------------
7 REPLACE CARPET AND PAD 20.00 20.00 400.00
----------------------------------------------------------------------------------------------
8 REMOVE ART FROM BACK WALL ADD SCRIPT SIGN 1.00 500.00 500.00
----------------------------------------------------------------------------------------------
0.00
----------------------------------------------------------------------------------------------
0.00
----------------------------------------------------------------------------------------------
0.00
C. COMPUTER ROOM 0.00
----------------------------------------------------------------------------------------------
CONVERT SALES TO PBX ROOM 0.00
----------------------------------------------------------------------------------------------
1 PROVIDE ELECTRICAL OUTLETS 1.00 500.00 500.00
----------------------------------------------------------------------------------------------
2 PROVIDE PANEL FOR HMS CIRCUITS 1.00 1,200.00 1,200.00
----------------------------------------------------------------------------------------------
3 PROVIDE LIGHTING 1.00 150.00 150.00
----------------------------------------------------------------------------------------------
4 PROVIDE CEILING FINISH 1.00 75.00 75.00
----------------------------------------------------------------------------------------------
5 PROVIDE WALL FINISH 1.00 100.00 100.00
----------------------------------------------------------------------------------------------
6 PROVIDE FLOOR FINISH 1.00 250.00 250.00
----------------------------------------------------------------------------------------------
7 PROVIDE BASE 1.00 80.00 80.00
----------------------------------------------------------------------------------------------
8 PROVIDE SHELVING 1.00 250.00 250.00
----------------------------------------------------------------------------------------------
9 PROVIDE DOOR AND FRAME 1.00 250.00 250.00
----------------------------------------------------------------------------------------------
10 PROVIDE DOOR HARDWARE 1.00 85.00 85.00
----------------------------------------------------------------------------------------------
11 PROVIDE HVAC 1.00 600.00 600.00
----------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12 PROVIDE J-BOX FOR HMS 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------
13 PROVIDE TELEPHONE JACK 1.00 75.00 75.00
---------------------------------------------------------------------------------------------------------
0.00
D. PBX/TELEPHONE 0.00
---------------------------------------------------------------------------------------------------------
1 PROVIDE PLYWOOD PHONE RACK 1.00 65.00 65.00
---------------------------------------------------------------------------------------------------------
2 PROVIDE ELECTRICAL OUTLETS 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------
3 PROVIDE LIGHTING 1.00 75.00 75.00
---------------------------------------------------------------------------------------------------------
4 PROVIDE CEILING FINISH 1.00 75.00 75.00
---------------------------------------------------------------------------------------------------------
5 PROVIDE WALL FINISH 1.00 100.00 100.00
---------------------------------------------------------------------------------------------------------
6 PROVIDE FLOOR FINISH 4.00 250.00 1,000.00
---------------------------------------------------------------------------------------------------------
7 PROVIDE BASE 1.00 80.00 80.00
---------------------------------------------------------------------------------------------------------
8 PROVIDE DOOR/FRAME/HARDWARE 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
E. GENERAL OFFICE AREA 0.00
---------------------------------------------------------------------------------------------------------
1 PROVIDE SAMPLE AND SPEC. ON CARPET AND PAD 60.00 25.00 1,500.00
---------------------------------------------------------------------------------------------------------
2 PROVIDE BASE 1.00 175.00 175.00
---------------------------------------------------------------------------------------------------------
3 OUTLET FOR HMS 1.00 150.00 150.00
---------------------------------------------------------------------------------------------------------
4 J-BOX FOR HMS 1.00 150.00 150.00
---------------------------------------------------------------------------------------------------------
5 PROVIDE ADEQUATE LIGHTING 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------
6 PROVIDE FURNITURE 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------------
7 PROVIDE DESK INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
8 PROVIDE FAX MACHINES 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
F. MANAGER'S OFFICE 0.00
---------------------------------------------------------------------------------------------------------
1 PROVIDE SAFE 1.00 450.00 450.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
G. LIFE SAFETY 0.00
---------------------------------------------------------------------------------------------------------
1 PROVIDE SOUNDING DEVICES/PULL STATIONS COMPLIES 10,000.00 0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
H. PUBLIC RESTROOMS 0.00
---------------------------------------------------------------------------------------------------------
1 PROVIDE ADA SIGNAGE 2.00 75.00 150.00
---------------------------------------------------------------------------------------------------------
2 REFINISH DOOR AND HARDWARE FOR ADA 2.00 150.00 300.00
---------------------------------------------------------------------------------------------------------
3 PROVIDE TWO COAT HOOKS 4.00 5.00 20.00
---------------------------------------------------------------------------------------------------------
4 REPLACE VANITIES-MAN MADE MARBLE 2.00 450.00 900.00
---------------------------------------------------------------------------------------------------------
5 CONCEAL PIPING BELOW VANITIES 2.00 400.00 800.00
---------------------------------------------------------------------------------------------------------
6 PROVIDE RECESSED FACIAL TISSUE HOLDER 2.00 35.00 70.00
---------------------------------------------------------------------------------------------------------
7 PROVIDE BUILT IN ASHTRAY 2.00 50.00 100.00
---------------------------------------------------------------------------------------------------------
8 REPLACE TILE FLOORS AND GROUT 400.00 8.00 3,200.00
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
9 PROVIDE PAPER TOWEL RECEPTACLE IN MEN'S 1.00 250.00 250.00
--------------------------------------------------------------------------------------------------------
10 REPLACE VINYL WALL COVERING (MENS ROOM) 25.00 18.00 450.00
--------------------------------------------------------------------------------------------------------
0.00
I LIFE SAFETY 0.00
--------------------------------------------------------------------------------------------------------
1. PROVIDE SOUNDING DEVICES IN ALL PUBLIC AREAS 1.00 5,000.00 5,000.00
--------------------------------------------------------------------------------------------------------
0.00
J HOSPITALITY/MEETING ROOM (? CONVERT TO EXER/BOARD RM R SUITE) 0.00
--------------------------------------------------------------------------------------------------------
1. CORRECT WATER INFILT PROB FROM OUTSIDE WALLS. CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
2. PROVIDE DOOR SIGNAGE CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
3. REPLACE ACCOUST TILES W/ 2X2 TEGULAR REVEAL EDGE CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
4. CORRECT SEVERE LEAK AT WINDOW DECK WALL CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
5. REPLACE SOFFET & PAINT AT WINDOW/DECK WALL CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
6. PROVIDE WINDOW TREATMENT W/BLACKOUT ABILITY CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
7. PROVIDE DECOR CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
8. PROVIDE 50 FOOT CANDLES OF LIGHT AT TABLE TOP CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
9. REPLACE TABLES & CHAIRS CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
10. PROVIDE AUDIO VISUAL UNIT CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
11. PROVIDE REFIGERATOR/ICE MAKER CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
12. PROVIDE WET BAR UNIT CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
13. PROVIDE MATV /TELEPHONE RECEPTACLE CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
14. PROVIDE PLABTS IN CONTAINERS CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
15. PROVIDE TELEPHONE MESSAGE WAIT SYSTEM CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
16. PROVIDE FULL LENGTH MIRROR ??? CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
17. ADD CARPET BASE CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
18. PROVIDE PANIC HARDWARE ON DOORS CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
19. CLEAN CARPET TO NEW CONDITION CONVERT TO 6 GUEST ROOMS 0.00
--------------------------------------------------------------------------------------------------------
20. CONVERT TO 5 GUEST ROOMS 6.00 25,000.00 150,000.00
--------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
0.00
K. LIFE SAFETY 0.00
--------------------------------------------------------------------------------------------------------
1. PROVIDE VISUAL DEVICES/HORNS & EXIT LIGHTING INCLUDED 0.00
--------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
0.00
K. GAME ROOM 0.00
--------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
0.00
L. BOARDROOM (WANTS TO ADD BOARD RM DELETE BQT ROOM) 0.00
--------------------------------------------------------------------------------------------------------
1. PROVIDE PERMANANT CONFERANCE TABLE INCLUDED 0.00
--------------------------------------------------------------------------------------------------------
2. PROVIDE CONF. CHAIRS W/CASTERS INCLUDED 0.00
--------------------------------------------------------------------------------------------------------
</TABLE>
Page 6
<PAGE>
<TABLE>
<S> <C> <C> <C>
3. PROVIDE VISUAL UNIT BOARD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
4. PROVIDE TLEVISION/TELEPHONE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
5. PROVIDE BUILTIN COUNTER, BEV.SERVICE R TABLE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
6. PROVIDE WALLS/CEILING FINISH INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
7. PROVIDE FLOOR FINISH INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
8. PROVIDE WINDOW TREATMENT W/BLACKOUT ABILITY INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
9. PROVIDE DECOR INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
10. PROVIDE LIGHTING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
11. PROVIDE SMOKE DETECTOR/SPRINKLER INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
12. CLEAN FLOOR & GOUT TO NEW CONDITION INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
13. CONVERT TO 2 BOARDROOMS 2.00 15,000.00 30,000.00
---------------------------------------------------------------------------------------------------------------
0.00
0.00
III. PRIVATE GUEST AREAS 0.00
0.00
A. GUEST ROOM CORRIDOR 0.00
---------------------------------------------------------------------------------------------------------------
1. ELIMINATE DARK SPOTS BETWEEN RM ENTRIES 81.00 400.00 32,400.00
---------------------------------------------------------------------------------------------------------------
2. PROVIDE DIRECTIONAL SIGNAGE 162.00 65.00 10,530.00
---------------------------------------------------------------------------------------------------------------
3. SPRAY ACCOUSTICAL CEILING TILES WAIVER 0.00
---------------------------------------------------------------------------------------------------------------
4. REPLACE CARPET AND PAD CLEAN
---------------------------------------------------------------------------------------------------------------
5. PROVIDE 5 FOOT CANDLES OF LIGHTING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
6. POSITION LOW SCONCES CORRECTLY INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
7. PROVIDE ADDITIONAL SCONCES INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
8. PROVIDE MAKE-UP AIR SYSTEM/EQUIPMENT 1.00 40,000.00 40,000.00
---------------------------------------------------------------------------------------------------------------
9. CLEAN/REPLACE CARPET & PAD CLEAN 0.00
---------------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------------
0.00
B. LIFE SAFETY 0.00
----------------------------------------------------------------------------------------------------------------
1. PROVIDE MANUAL PULL STATIONS/SOUNDING DEVICES INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
2. FIRE EXTINGUISHERS TO CODE COMPLIES 0.00
----------------------------------------------------------------------------------------------------------------
0.00
C. GUEST VENDING AREAS 0.00
----------------------------------------------------------------------------------------------------------------
1. PROVIDE SIGNAGE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------------
2. CONCEAL ALL WATER LINES, FILTRATION LINES ETC. 6.00 200.00 1,200.00
---------------------------------------------------------------------------------------------------------------
3. REPLACE ICE MACHINES (DISPENSER TYPE) COMPLIES 3,700.00 0.00
----------------------------------------------------------------------------------------------------------------
0.00
D. GUEST STAIRWELLS 0.00
----------------------------------------------------------------------------------------------------------------
1. PROVIDE FIRE SIGNAGE 18.00 25.00 450.00
---------------------------------------------------------------------------------------------------------------
2. PROVIDE EXIT SIGNAGE IN 6" REFLEC LETTERS ON CORR. SID 18.00 35.00 630.00
---------------------------------------------------------------------------------------------------------------
3. PROVIDE FLOOR LEVEL 6" REFLEC # ON STAIR SIDE 18.00 25.00 450.00
---------------------------------------------------------------------------------------------------------------
4. PROVIDE EXIT DIRECTLY TO EXT OF BLDG WAIVER-VERIFY WITH FIRE MARSHALL
---------------------------------------------------------------------------------------------------------------
5. REPAIR EIFS CRACKED STAIRWELL WALLS 1.00 3,500.00 3,500.00
---------------------------------------------------------------------------------------------------------------
6. REFINISH LANDING/TREADS 18.00 200.00 3,600.00
---------------------------------------------------------------------------------------------------------------
7. REPLACE LIGHTING FIXTURES 18.00 150.00 2,700.00
----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. PROVIDE EMEGENCY LIGHTING INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
9. PROVIDE MANUAL PULL STATIONS NEAR DOORS 18.00 250.00 4,500.00
---------------------------------------------------------------------------------------------------------
10. PROVIDE WALL MOUNTED HANDRAILS 18.00 300.00 5,400.00
---------------------------------------------------------------------------------------------------------
11. REPAIR STAIRWELL LANDING AT UNDERSIDE JOINT 1.00 1,500.00 1,500.00
---------------------------------------------------------------------------------------------------------
12. PROVIDE PANIC HARDWARE PER STANDARD 18.00 350.00 6,300.00
---------------------------------------------------------------------------------------------------------
13. PROVIDE LIGHTING AT RM ENTRY PER STANDARD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
14. REFINISH/REPAINT RAILINGS AT END OF STAIRWELL INCLUDED 0.00 0.00
---------------------------------------------------------------------------------------------------------
15. PAINT SPRINKLER STANDPIPE 1.00 800.00 800.00
---------------------------------------------------------------------------------------------------------
16. ENSURE ALL FIRE EXTING. TESTED AND LABELED M/R 0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
--------------------------------------------------------------------------------------------------------
0.00
E. ELEVATORS 0.00
---------------------------------------------------------------------------------------------------------
1. ENSURE 36 SECOND MAX WAIT TIME VERIFY CONDITION 0.00
---------------------------------------------------------------------------------------------------------
2. REPLACE CARPET AND PAD 2.00 85.00 170.00
---------------------------------------------------------------------------------------------------------
3. PROVIDE GRABE BARS 32" FROM FLOOR 3 SIDES 2.00 500.00 1,000.00
---------------------------------------------------------------------------------------------------------
4. PROVIDE EMERGENCY LIGHTING 2.00 250.00 500.00
---------------------------------------------------------------------------------------------------------
5. CONFIRM SHAFT WALL RATINGS AT 2 HOURS VERIFY CONDITION 0.00
---------------------------------------------------------------------------------------------------------
6. PROVIDE FIRE SIGNAGE X CABS X LANDING 2.00 500.00 1,000.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
0.00
F. GUEST ROOMS 0.00
---------------------------------------------------------------------------------------------------------
1. REMOVE SIGNAGE & REPAINT DOOR (METAL DOORS) 180.00 35.00 6,300.00
---------------------------------------------------------------------------------------------------------
2. REPLACE DOOR NUMBERS TO CONFORM WITH ADA 162.00 20.00 3,240.00
---------------------------------------------------------------------------------------------------------
3. PROVIDE VINYL BULB TYPE WEATHERSTRIPPING ON ALL 162.00 30.00 4,860.00
---------------------------------------------------------------------------------------------------------
GST ROOM DOORS & CONNECTING DOORS 50.00 25.00 1,250.00
---------------------------------------------------------------------------------------------------------
4. INSTALL ELECTRONIC LOCKSETS PER STANDARD 162.00 225.00 36,450.00
---------------------------------------------------------------------------------------------------------
5. PROVIDE SECONDARY DOOR LOCK W/SAFETY CHAIN 162.00 8.00 1,296.00
---------------------------------------------------------------------------------------------------------
6. REPLACE CONNECTING DOOR HARDWARE 50.00 45.00 2,250.00
---------------------------------------------------------------------------------------------------------
7. PROVIDE STANDARD LOCK CONFIGURATION PER STANDARD INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
8. RMS W/SLIDING GLASS DOUBLE DOORS INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
(POSSIBLE TRIP HAZARD) 0.00
---------------------------------------------------------------------------------------------------------
9. PROVIDE DOUBLE CARPET PAD BETWEEN CONNECT DRS 50.00 30.00 1,500.00
---------------------------------------------------------------------------------------------------------
10. PROVIDE APPROPRIATE HARDWARE TO CONNECT DRS INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
12. PROVIDE CLOSET DOORS W/APPROPRIATE HANGERS 162.00 300.00 48,600.00
---------------------------------------------------------------------------------------------------------
13. PROVIDE 15" DEEP SHELVES 162.00 50.00 8,100.00
---------------------------------------------------------------------------------------------------------
14. REPAIR/CLEAN WALL FINISH 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------
15. RECARPET 35 ROOMS 35.00 455.00 15,925.00
---------------------------------------------------------------------------------------------------------
16. TOUCH UP CEILINGS AS NEEDED 162.00 100.00 16,200.00
---------------------------------------------------------------------------------------------------------
17. REPLACE BEDSPREADS 324.00 75.00 24,300.00
---------------------------------------------------------------------------------------------------------
18. PROVIDE NEW PILLOWS, LINEN AND TERRY 162.00 85.00 13,770.00
---------------------------------------------------------------------------------------------------------
19. PROVIDE ALARM CLOCKS 162.00 18.00 2,916.00
---------------------------------------------------------------------------------------------------------
20. PROVIDE LUGGAGE BENCH W/WOOD BUMBERS ABOVE 162.00 125.00 20,250.00
---------------------------------------------------------------------------------------------------------
</TABLE>
Page 8
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
21. PROVIDE TWO DRAWER CHESTS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
22. REPLACE ALL 19" CASE GOODS 132.00 1,000.00 132,000.00
------------------------------------------------------------------------------------------------------------------------
23. PROVIDE TV ARMOIRES X EA ROOM INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
24. REMOVE ALL TV PEDESTALS 30.00 350.00 10,500.00
------------------------------------------------------------------------------------------------------------------------
25. PROVIDE DESK & DESK CHAIR IN KING RM 30.00 300.00 9,000.00
------------------------------------------------------------------------------------------------------------------------
26. PROVIDE NEW ACTIVITY CHAIRS 324.00 125.00 40,500.00
------------------------------------------------------------------------------------------------------------------------
27. PROVIDE NEW TABLES WITH PEDESTAL BASES INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
28. PROVIDE LOUNGE CH/OTTOMAN R RECLINER, KING ROOM 30.00 300.00 9,000.00
------------------------------------------------------------------------------------------------------------------------
29. REPLACE SOFA SLEEPERS 6.00 600.00 3,600.00
------------------------------------------------------------------------------------------------------------------------
30. PROVIDE COFFEE TABLES WITH SOFA SLEEPERS 6.00 125.00 750.00
------------------------------------------------------------------------------------------------------------------------
31. REPLACE ALL ORIG NIGHTSTANDS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
32. REPLACE ALL FORMICA CASEGOODS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
33. REPLACE HEADBOARDS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
34. REPLACE LIGHTING 162.00 200.00 32,400.00
------------------------------------------------------------------------------------------------------------------------
35. REPLACE WALL DECOR 35 ROOMS 132.00 120.00 15,840.00
------------------------------------------------------------------------------------------------------------------------
36. PROVIDE 1 XTRA LARGE PIX OVER SOFA IN KING RM 30.00 60.00 1,800.00
------------------------------------------------------------------------------------------------------------------------
37. REPLACE MATTRESSES & BOX SPRINGS 60 DD ROOMS 120.00 200.00 24,000.00
------------------------------------------------------------------------------------------------------------------------
38. PROVIDE GARMENT BAG HOOKS 5 TO 6 ABOVE FLOOR 162.00 15.00 2,430.00
------------------------------------------------------------------------------------------------------------------------
39. PROVIDE PORTABLE LUGGAGE RACKS IN DD ROOMS INCLUDED 0.00
------------------------------------------------------------------------------------------------------------------------
40 INSTALL UNITS FOR MICROFRIDGE/WAVE 100.00 200.00 20,000.00
------------------------------------------------------------------------------------------------------------------------
41. PROVIDE CARPET OR VINYL BASE IN ALL GST RM SUITES 162.00 105.00 17,010.00
------------------------------------------------------------------------------------------------------------------------
0.00
------------------------------------------------------------------------------------------------------------------------
0.00
0.00
G. EQUIPMENT 0.00
-------------------------------------------------------------------------------------------------------------------------
1. REPLACE WORN HVAC UNITS 5.00 600.00 3,000.00
-------------------------------------------------------------------------------------------------------------------------
2. REPLACE GRILLS INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------
3. REPLACE TELEVISIONS 7YRS OR OLDER ALL W/REMOTES 162.00 300.00 48,600.00
-------------------------------------------------------------------------------------------------------------------------
4. PROVIDE TELEPHONES W/14 CORDS 162.00 18.00 2,916.00
-------------------------------------------------------------------------------------------------------------------------
5. PROVIDE DATA JACKS 162.00 8.00 1,296.00
-------------------------------------------------------------------------------------------------------------------------
6. PROVIDE MATV OUTLETS 0.00
-------------------------------------------------------------------------------------------------------------------------
0.00
H. MISC/SUITES 0.00
-------------------------------------------------------------------------------------------------------------------------
1. PROVIDE 75% NON-SMOKING ROOMS INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------
2. ENSURE RECLINERS IN NEW CONDITION 6.00 300.00 1,800.00
-------------------------------------------------------------------------------------------------------------------------
3. REPLACE SLEEPER SOFAS 6.00 600.00 3,000.00
-------------------------------------------------------------------------------------------------------------------------
4. INSTALL CARPET AND BASE 420.00 13.00 5,460.00
-------------------------------------------------------------------------------------------------------------------------
5. CLEAN REFRIDG TO NEW CONDITION 6.00 600.00 3,600.00
-------------------------------------------------------------------------------------------------------------------------
6. REPLACE SINKS ADD GARBAGE DISPOS. 6.00 500.00 3,000.00
-------------------------------------------------------------------------------------------------------------------------
7. INSTALL RECESSED LIGHTING 6.00 300.00 1,800.00
-------------------------------------------------------------------------------------------------------------------------
8. PROVIDE CHAIR & BAR STOOLS TO MATCH CASEGDS 6.00 300.00 1,800.00
-------------------------------------------------------------------------------------------------------------------------
9. INSTALL VWC IN KITCHEN SUITE AREAS 150.00 12.00 1,800.00
-------------------------------------------------------------------------------------------------------------------------
10. TOUCH UP WOOD TRIM CABNETRY 6.00 150.00 900.00
-------------------------------------------------------------------------------------------------------------------------
11. REPLACE BOWED COUNTERTOPS 6.00 1,200.00 7,200.00
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 9
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.00
-------------------------------------------------------------------------------------------------------------------------------
0.00
I GUEST BATHROOMS 0.00
-------------------------------------------------------------------------------------------------------------------------------
1. REPLACE DOOR HARDWARE 162.00 30.00 4,860.00
-------------------------------------------------------------------------------------------------------------------------------
2. REFINISH DOORS/FRAMES 162.00 25.00 4,050.00
-------------------------------------------------------------------------------------------------------------------------------
3. REPLACE ALL FLOOR BASE TILES 162.00 350.00 56,700.00
-------------------------------------------------------------------------------------------------------------------------------
4. REPLACE FLOOR TILE GROUT INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
5. REPAIR/CLEAN VWC AS NEEDED 162.00 150.00 24,300.00
-------------------------------------------------------------------------------------------------------------------------------
6. INSTALL EXHAUST FAN SWITCHES 162.00 75.00 12,150.00
-------------------------------------------------------------------------------------------------------------------------------
7. REPLACE LIGHTING 162.00 125.00 20,250.00
-------------------------------------------------------------------------------------------------------------------------------
8. REPLACE VANITIES 162.00 400.00 64,800.00
-------------------------------------------------------------------------------------------------------------------------------
9. REPLACE SINKS 162.00 85.00 13,770.00
-------------------------------------------------------------------------------------------------------------------------------
10. PROVIDE VANITY BASE CABINETS INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
12. PROVIDE DUAL ROLL TISSUE DISPENSER 162.00 45.00 7,290.00
-------------------------------------------------------------------------------------------------------------------------------
13. PROVIDE TOWEL BAR/SHELF W/BRACKETS 162.00 40.00 6,480.00
-------------------------------------------------------------------------------------------------------------------------------
14. PROVIDE STACK RACKS 162.00 20.00 3,240.00
-------------------------------------------------------------------------------------------------------------------------------
15. REPLACE TUBS AS NEEDED 162.00 250.00 40,500.00
-------------------------------------------------------------------------------------------------------------------------------
16. PROVIDE FULL LENGTH MIRRORS 162.00 45.00 7,290.00
-------------------------------------------------------------------------------------------------------------------------------
17. REPLACE SHOWER CHROME & ESCUTCHEON PLATES 162.00 85.00 13,770.00
-------------------------------------------------------------------------------------------------------------------------------
18. REPLACE TUB TILE GROUT 162.00 65.00 10,530.00
-------------------------------------------------------------------------------------------------------------------------------
19. PROVIDE TWO SOAP DISHES 162.00 45.00 7,290.00
-------------------------------------------------------------------------------------------------------------------------------
20. REPLACE SHOWER CURTAINS 162.00 12.00 1,944.00
-------------------------------------------------------------------------------------------------------------------------------
21. PROVIDE SHOWERS AT 6'6" HEIGHT 162.00 12.00 1,944.00
-------------------------------------------------------------------------------------------------------------------------------
22. PROVIDE 24" VERTICLE GRAB BARS 162.00 25.00 4,050.00
-------------------------------------------------------------------------------------------------------------------------------
23. REPLACE TOILET SEATS W/OPEN FRONT SEATS & LIDS 162.00 25.00 4,050.00
-------------------------------------------------------------------------------------------------------------------------------
24. PROVIDE RESERVE TISSUE DISPENSER INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
25. PROVIDE DOUBLE ROBE HOOK 162.00 5.00 810.00
-------------------------------------------------------------------------------------------------------------------------------
0.00
-------------------------------------------------------------------------------------------------------------------------------
0.00
J. HANDICAPS ROOM 0.00
-------------------------------------------------------------------------------------------------------------------------------
1. PROVIDE 2ND DOOR VIEWER 42" FROM FLOOR 10.00 5.00 50.00
-------------------------------------------------------------------------------------------------------------------------------
0.00
-------------------------------------------------------------------------------------------------------------------------------
0.00
K. HANDICAP BATHROOMS 0.00
-------------------------------------------------------------------------------------------------------------------------------
1. PROVIDE HANDICAP EQUIPMENT 10.00 200.00 2,000.00
-------------------------------------------------------------------------------------------------------------------------------
2. PROVIDE 2 30" HORIZONTAL BARS @ 9" ABOVE TUB 10.00 350.00 3,500.00
-------------------------------------------------------------------------------------------------------------------------------
AND 3'0" ABOVE FINISH FLOOR ON SOAPDISH WALL INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
3. PROVIDE 24" HORIZONTAL GRAB BARS 24" ABOVE TOILET\ INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
AT 33"-36" ABOVE FINISH FLOOR INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
4. PROVIDE 24" HORIZONTAL GRAB BARS BOTH ENDS OF TUB INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
5. PROVIDE 42" GRAB BAR ABOVE TOILET INCLUDED 0.00
-------------------------------------------------------------------------------------------------------------------------------
6. ENSURE ALL SWITCHES ARE ACCESSABLE 48" OR LOWER 10.00 75.00 750.00
-------------------------------------------------------------------------------------------------------------------------------
7. PROVIE 30" CLEARANCE UNDER LAVATORY COUNTER 10.00 300.00 3,000.00
-------------------------------------------------------------------------------------------------------------------------------
8. PROVIDE HAND HELD SHOWER ON FLEX HOSE 10.00 35.00 350.00
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
0.00
IV. BACK OF THE HOUSE 0.00
0.00
0.00
A. LAUNDRY / GENERAL LINEN AREA 0.00
---------------------------------------------------------------------------------------------------------
1. PAINT WALLS 1.00 450.00 450.00
---------------------------------------------------------------------------------------------------------
2. PROVIDE VIONYL WALL BASE 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------
3. PROVIDE HEATING/AC 1.00 5,000.00 5,000.00
---------------------------------------------------------------------------------------------------------
4. PROVIDE TELEPHONE 1.00 125.00 125.00
---------------------------------------------------------------------------------------------------------
5. PROVIDE DRYER ENCLOSURE W/HEAT DETECTOR 1.00 1,200.00 1,200.00
---------------------------------------------------------------------------------------------------------
6. PROVIDE COMBUSTION AIR LOUVER 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------
7. PROVIDE MAKE-UP AIR LOUVER 1.00 500.00 500.00
---------------------------------------------------------------------------------------------------------
8. PROVIDE FIRST AID KIT 1.00 45.00 45.00
---------------------------------------------------------------------------------------------------------
9. PAINT EXPPOSED PIPING TO NEW CONDITION 1.00 450.00 450.00
---------------------------------------------------------------------------------------------------------
10. PAINT CMU WALLS TO NEW CONDITION 1.00 250.00 250.00
---------------------------------------------------------------------------------------------------------
11. CLEAN UP CHEM STORAGE AREA M/R 0.00
---------------------------------------------------------------------------------------------------------
12. ENSURE ALL PENETRATIONS ARE PROPERLY FIREPROOF 1.00 200.00 200.00
---------------------------------------------------------------------------------------------------------
0.00
B. LINEN/MAIDS ROOM 0.00
---------------------------------------------------------------------------------------------------------
1. REFINISH ENTRANCE DOORS 3.00 35.00 105.00
---------------------------------------------------------------------------------------------------------
2. PROVIDE SIGNAGE INCLUDED 0.00
---------------------------------------------------------------------------------------------------------
3. REFINISH DOOR FRAME 3.00 35.00 105.00
---------------------------------------------------------------------------------------------------------
4. INSTALL VINYL COMPOSITE TILE FLOORS 3.00 2,500.00 7,500.00
---------------------------------------------------------------------------------------------------------
5. PROVIDE ADDITIONAL SHELVING 3.00 450.00 1,350.00
---------------------------------------------------------------------------------------------------------
6. REPAINT WALLS 3.00 250.00 750.00
---------------------------------------------------------------------------------------------------------
7. CONCEAL ALL PIPING AND WIRING 3.00 600.00 1,800.00
---------------------------------------------------------------------------------------------------------
0.00
C. MAINTENANCE SHOP 0.00
---------------------------------------------------------------------------------------------------------
1. PROVIDE 10LB ABC FIRE EXTINGUISHER 1.00 65.00 65.00
---------------------------------------------------------------------------------------------------------
2. REMOVE CLUTTER M/R 0.00
---------------------------------------------------------------------------------------------------------
3. ENSURE NO FLAMMABLES STORED IN MAINT. SHOP M/R 0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
D. EMPLOYEE BREAKROOM 0.00
---------------------------------------------------------------------------------------------------------
1. PROVIDE WALL CABINETS 1.00 800.00 800.00
---------------------------------------------------------------------------------------------------------
2. PROVIDE BASE CABINETS 1.00 800.00 800.00
---------------------------------------------------------------------------------------------------------
3. PROVIDE SINK 1.00 350.00 350.00
---------------------------------------------------------------------------------------------------------
4. PROVIDE TABLE AND CHAIRS 3.00 600.00 1,800.00
---------------------------------------------------------------------------------------------------------
5. PROVIDE LIGHTING 1.00 350.00 350.00
---------------------------------------------------------------------------------------------------------
6. PROVIDE 10 LOCKERS 1.00 800.00 800.00
---------------------------------------------------------------------------------------------------------
0.00
---------------------------------------------------------------------------------------------------------
0.00
V. MISCELLANEOUS 0.00
</TABLE>
Page 11
<PAGE>
<TABLE>
<S> <C> <C> <C>
0.00
A. WATER/HEATING 0.00
-----------------------------------------------------------------------------------------------------------------
1. PAINT BOILER CABINETRY 1.00 200.00 200.00
-----------------------------------------------------------------------------------------------------------------
2. PROVIDE WATER SOFTENER WAIVER - BASED UPON WATER REPORT
-----------------------------------------------------------------------------------------------------------------
3. REPAINT WALLS 1.00 250.00 250.00
-----------------------------------------------------------------------------------------------------------------
4. ENSURE BOILERS PROPERLY EXHAUSTED COMPLIES 0.00
-----------------------------------------------------------------------------------------------------------------
5. ENSURE GENERATOR WORKS PROPERLY COMPLIES 0.00
-----------------------------------------------------------------------------------------------------------------
6. PAINT WALLS BY GENERATOR 1.00 200.00 200.00
-----------------------------------------------------------------------------------------------------------------
7. REPAIR LEAK AT SPRINKLER SYSTEM M/R 0.00
-----------------------------------------------------------------------------------------------------------------
8. PAINT/FINISH CMU WALLS 1.00 500.00 500.00
-----------------------------------------------------------------------------------------------------------------
9. PAINT PIPING 1.00 300.00 300.00
-----------------------------------------------------------------------------------------------------------------
10. REMOVE CORROSION 1.00 200.00 200.00
-----------------------------------------------------------------------------------------------------------------
11. PROVIDE DIELECTRIC UNIONS ON PIPING WAIVER 0.00
-----------------------------------------------------------------------------------------------------------------
12. REPLACE BENT DUCTING 1.00 800.00 800.00
-----------------------------------------------------------------------------------------------------------------
13. REPLACE/REPAIR EXHAUST FANS IF INOPERABLE M/R 0.00
-----------------------------------------------------------------------------------------------------------------
14. ENSURE ROOFTOP UNITS SERVICED PROPERLY M/R 0.00
-----------------------------------------------------------------------------------------------------------------
0.00
-----------------------------------------------------------------------------------------------------------------
0.00
0.00
B. ELECTRICAL EQUIP ROOM (EACH FLOOR) 0.00
-----------------------------------------------------------------------------------------------------------------
1. PROVIDE HEAT DETECTORS 6.00 250.00 1,500.00
-----------------------------------------------------------------------------------------------------------------
0.00
B. HMS SYSTEM 0.00
-----------------------------------------------------------------------------------------------------------------
1. PROVIDE COMPUTERS 1.00 35,000.00 35,000.00
-----------------------------------------------------------------------------------------------------------------
2. PROVIDE PRINTERS INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
3. PROVIDE MONITORS INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
4. PROVIDE SATELLITE DISH INCLUDED 0.00
-----------------------------------------------------------------------------------------------------------------
0.00
C. TELEPHONE SYSTEM 0.00
-----------------------------------------------------------------------------------------------------------------
1. PROVIDE CALL WAITING SYSTEM COMPLIES PER 25,000.00 0.00
-----------------------------------------------------------------------------------------------------------------
0.00
D. MATV 0.00
-----------------------------------------------------------------------------------------------------------------
1. PROVIDE 24 HOUR MOVIE CHANNEL 0.00
-----------------------------------------------------------------------------------------------------------------
VI. GENERAL CONDITIONS
-----------------------------------------------------------------------------------------------------------------
A. GENERAL CONDITIONS 1,780,670.00 0.07 124,646.90
-----------------------------------------------------------------------------------------------------------------
B. DEPARTMENT INCENTIVES 1,780,670.00 0.01 13,355.03
-----------------------------------------------------------------------------------------------------------------
C. DEPARTMENT OVERHEAD 1,780,670.00 0.01 13,355.03
-----------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL: 1,932,026.95
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
HAMPTON INN
RICHMOND, VA.
SUMMARY
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
TOTAL $50,000.00
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
HAMPTON INN
RICHMOND, VA.
CAPITAL IMPROVEMENT GENERAL OVERVIEW - PRODUCT IMPROVEMENT PLAN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
RE'D QUANITY/ UNIT
AREAS SCOPE OF WORK YES ALLOWANCE COST
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C. MISCELLANEOUS
---------------------------------------------------------------------------------------------------------
1. HAMPTON PIP ITEMS - ALLOWANCE 1.00 50,000.00
---------------------------------------------------------------------------------------------------------
VII. GENERAL CONDITIONS
---------------------------------------------------------------------------------------------------------
A. ALLOWANCE - 15% OF TOTAL 0.00
---------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL 50,000.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
SCHEDULE 1.01(d)
ENGINEER
SCOPE OF SERVICES
PROPERTY CONDITION REVIEW
(PCR)
ASSIGNMENT OBJECTIVES
- ---------------------
The purpose of the Property Condition Review (PCR) is: To determine the existing
conditions of the building(s) and its systems including structural, plumbing,
heating and ventilating, air conditioning, electrical, fire protection, finish
materials, exterior facades, roof, and site amenities. To identify any areas or
materials which may require repair or corrective action due to deferred
maintenance or present deficient conditions. To identify and list any
outstanding code violations against the property on file with the various
Municipal and Federal agencies, including the local building department, fire
department, etc. To evaluate the adequacy of the capacities of the HVAC and
electrical systems. To perform an Americans with Disabilities Act (ADA) survey
of the existing building(s) and property to determine compliance with the
legislation. To estimate the cost of the required remedial work indicated by any
of the preceding determinations. Note: The Property Condition Review (PCR)
assignment does not include any work with environmental issues, but Consultant
should be generally aware of and note any obvious existing or potential
conditions. Consultant shall utilize personnel having the appropriate
professional designations for those tasks outlined above (at a minimum, an AIA
and PE).
The Property Condition Review (PCR) assignment should include, at a minimum, a
review and description of the following aspects of the Project:
1. A description of the site and all improvements thereon, based upon field
observations as well as a review of all available documents.
2. Determine the general conformance of visible construction of the building
and site development to the construction documents, soils report, and
industry standards for such construction.
3. Consultant shall list all codes, regulations and public sector criteria
with which the Project must comply, including special permits, zoning,
development orders and other actions of local, state, and federal
authorities. Copies of the actual documents (building permits, certificates
of occupancy, etc.) should be included in the report.
4. Review of existing conditions of the building including exterior, roof,
interior spaces, MEP systems, structural members (including seismic
conditions, where applicable), site drainage, parking, landscaping and site
utilities; with conclusions and recommendations for conceivable repairs and
deficiencies along with cost estimates for the suggested repairs. Estimates
should be provided in the following format: IMMEDIATE, SHORT-TERM (1-5
years), and LONG-TERM REPAIRS (1-10 years).
1
<PAGE>
5. Review should include interviews and discussions with the property manager,
building engineer, maintenance staff, etc. Interior spaces reviewed should
include an adequate number of units or leased spaces to conclude an opinion.
6. Determine the appropriateness of the existing building materials found in
place, with regard to the need for extraordinary maintenance or low
durability potential, and with respect to the quality of materials and
findings for the type of facility as built.
7. Conduct a replacement cost analysis (insurable value) to determine the
potential cost of all construction in current year's dollars adjusted for
project location.
8. Consultant shall determine and state the estimated remaining useful life of
the property.
9. Conduct a thorough review of the overall project for owner-related Americans
with Disabilities Act (ADA) requirements to determine compliance with this
legislation, listing all current violations and cost estimates for their
recommended implementation.
10. Consultant shall provide two original reports, including color photographs
with labeled descriptions to more clearly define examples of unique
features, overall building condition, defective conditions and potential
repair/maintenance requirements as determined by any of the proceeding
findings. Consultant shall also provide statement of qualifications
information on their respective firm, including evidence of required
insurance coverages (naming Societe Generale, Southwest Agency, as
additional insured).
SAMPLE OUTLINE REPORT FORMAT
PROPERTY CONDITION REVIEW
-------------------------
I. Executive Summary
II. Objectives
III. Project Description and Overview
IV. Replacement Cost Analysis
V. ADA Survey Results
VI. Conclusions
VII. Project Documentation Log - listing and copies of documents received and
reviewed.
VIII. Project Observations - note date of review, parties present, and
interviews held.
IX. Photographs
2
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 1.01 APPROVED ENGINEERS
* ATEC ASSOCIATES/ATC
* EMG
* LAW ENGINEERING
* JAMES HARWICK & PARTNERS, INC.
* CONSTRUCTION ASSET ADVISORS, INC.
* HNTB CORPORATION
* THE BENTLEY GROUP
Future reports will be provided by EMG, however, a periodic review and bid
process will be undertaken to insure quality reports.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 1.01(f)
ENVIRONMENTAL
SCOPE OF SERVICES
PHASE I ENVIRONMENTAL SITE ASSESSMENT
(ESA)
ASSIGNMENT OBJECTIVES
- ---------------------
The Phase I Environmental Site Assessment (ESA) survey is for the determination
of the condition of the Property (building(s) and site) as it relates to any
existing and potential hazardous waste materials or situations. The Scope should
address and comply with the new ASTM E 1527 Environmental Assessment standards
or standards set forth below, whichever is more stringent.
The ESA assignment should include at a minimum a review and description of the
following aspects of the Property:
1. Identify project name, legal description, geographic coordinates, local
address, city, county and state for each site.
2. Provide a general description of the Property and site improvements,
including acres, square footages and age of improvements.
3. Identify inspection date and consultant performing the inspection. Describe
the qualifications of the individual conducting the inspection.
4. Conduct and review a fifty-year recorded Chain of Title search. Identify
and review historical and current property uses/ownerships. Use Sanborn
maps and local directories when available and appropriate.
5. Review historical and current aerial photographs, and provide in the report
at least two original aerials (one from pre-1975, and one after 1985).
Provide a narrative discussion of the aerial photo review. Aerial
photographs should show the subject Property and surrounding areas.
6. Perform an on-site environmental inspection of the subject Property.
Interview on-site personnel and adjacent property owners where appropriate,
and provide records of all such communications. Review the available on-
site environmental records, including the compliance history of the subject
Property, if any.
7. Review and discuss groundwater and surface water characteristics. Include a
general direction of the gradient as well as depth to potable and shallow
groundwater. Include a description of groundwater uses and surface water
bodies on-site. Discuss any available existing data on water quality.
Consultant should have someone with Hydrology or Hydro-Geology credentials
specifically comment on this matter.
8. Review and discuss area geology and soil characteristics. Identify the
general soil permeability and corrosiveness tendencies. Discuss any
available data on soil conditions.
1
<PAGE>
9. Identify and describe any hazardous materials used or stored on-site,
significant spills, dumping, emissions, evidence of contaminated soils or
water. Specifically,
a) Describe uses for hazardous materials; identify all wastestreams
generated at the site; and describe handling and disposal methods and
waste management handling, storage, and disposal areas. Also include a
discussion about areas previously used for these purposes, if any.
b) List permits and authorizations held, and describe permitted
activities, operating restrictions, and compliance reports,
inspections, and orders.
c) Discuss whether on-site electrical equipment contains PCBs, and
identify the party with compliance responsibility.
d) Describe in detail the observed on-site conditions of waters, soils,
vegetation, and production and waste management areas.
e) Review records of spills and release events, and describe materials
and areas involved, remediation activities, and regulatory agency
involvement, if any.
f) Consultant should address all environmental concerns, including but
not limited to special statutory issues, lead paint, lead in drinking
water and wetlands.
10. Perform and discuss a one mile area reconnaissance, and describe all
adjacent site usages. Identify all potential sources of off-site
contamination and the impact of these findings, including landfills,
gasoline stations, industrial facilities, tank terminals, airports and
military bases or installations.
11. Review and provide all local, state and federal regulatory agency inquiry
(EPA, TWC, etc.) results for the site - as well as for properties contained
within a one mile radius of the site. Specifically discuss: The NPL List,
CERCLIS, SARA Title III, RCRA Notifiers List, TSD List, UST List, LUST
List, and Landfill List. For Properties found on these lists, identify
distance, direction and any potential impact to the subject site.
12. For USTs and ASTs on-site or within one mile radius - identify the number
of tanks, registration, size, age, tank contents and tank material for
each. For offsite tanks, identify distance, direction and subsurface
gradient direction from site for each. Describe former USTs on-site and
also the compliance status of current on-site USTs.
13. Review and provide local government and municipal inquiry results. Include
at least the following: the electric company, water/sewer authorities,
city/county health department and local fire marshall's office. Provide a
record of these communications.
14. A sufficient number of asbestos and radon samples should be taken,
analyzed, and discussed to provide a representative sampling. The number of
samples may vary, but the rationale for determining the number and location
of the samples should be described. Provide information on: methods of
analysis and laboratory used, sample collection method, and certification
of the inspectors, as per the attached EXHIBIT A. Describe and locate on
plan the locations and materials sampled.
15. Provide a color topographical area site map, with scale, noting the subject
site.
2
<PAGE>
16. If available, describe the circumstances of any known citizen complaints in
the area, the nature of the facility's relationship with its neighbors and
citizens, etc.
17. Provide a professionally prepared and detailed site map of the project,
noting all adjacent properties, location of any USTs, ASTs, drums,
transformers, areas of contamination, waste management areas, etc.
18. Provide a minimum of eight color labeled photographs depicting the site and
adjacent sites.
19. A copy of all records of communications (ROCs) should be provided in the
report for each including: date and time of a conversation, name and title
of person, name of company and a brief summary of the topic discussed. Also
provide a copy of all permits, available soil and water data, and any
available enforcement records and documents.
20. Provide a list of any and all published references utilized.
21. Provide a statement of qualifications on the firm conducting the
assessment, and evidence of all required insurance coverages (naming
Societe Generale, Southwest Agency, as additional insured).
22. Two original reports are required for this assignment, and should follow,
in general, the outline on the last page.
3
<PAGE>
EXHIBIT "A"
ASBESTOS SURVEY
The asbestos survey shall be performed by appropriately trained personnel,
trained in accordance with the most recent federal, state and local
requirements, including but not limited to AHERA. The personnel shall determine
if suspect ACM is present. Suspect friable ACM shall be reported on and sampled
according to the following scope. Suspect non-friable ACM shall be reported on
according to the following scope, but without sampling.
The consultant's report shall include the following:
- ---------------------------------------------------
- The date(s) the inspection/sampling was performed.
- A general description of construction, mechanical, and electrical
systems at the property based on the site visit and a cursory review of
construction documents (drawings, specifications, change orders, etc.), if
available.
- A description of the history of the property, including the dates of
original construction and the dates and scopes of major remodeling work.
- A description of any prior asbestos abatement work that was performed
at the property and an evaluation of the work's compliance with governing codes,
statutes, regulations and ordinances.
- A review of the suspect materials throughout the property and a
description of the sampling strategy. A sufficient number of samples should be
obtained in order to conclude the specific results required.
- An evaluation of the condition of any and all positive material found
at the property in accordance with a hazard ranking system. Note material
locations with respect to building occupants, potential for disturbance and air
flow.
- A description of the process for inspection and representative
sampling for asbestos-containing materials.
- A summary of testing results and a graphic representation of the
locations from which the samples were taken indicating which samples are
positive.
- An estimate of the total quantity of ACM (friable and non-friable)
within the entire facility, including each tenant space, mechanical area, office
area, maintenance area and common area. Provide an estimate of probable costs to
correct or remove ACM's identified from the positive sampling process and
survey.
- A list of tenants at the property, by name and space number, the
materials sampled and the results of the analysis and the quantity of asbestos
found.
- The signature of the responsible individual. The individual shall
certify that the sampling and report has been conducted and prepared according
to the licensing requirements of the state in which the property is located.
4
<PAGE>
SAMPLE OUTLINE REPORT FORMAT
PHASE I ENVIRONMENTAL SITE ASSESSMENT
1. Executive Summary
2. Objectives
3. Site Overview
4. Site Background/Operating History
a) Current Ownership
b) Prior Ownership
c) Review of Aerial Photographs
d) Historical City Directories/Fire Insurance Maps
5. Environmental Setting
a) Surface Water Characteristics
b) Ground Water Characteristics
c) Soils/Geology
6. Results of the On-Site Inspection
a) Observations
b) Hazardous Substance Identification/Inventory
c) Area Reconnaissance
d) Sampling Results (Asbestos) (Radon)
7. Regulatory/Governmental Agency Inquiries
a) Federal and State Regulatory Agency Inquiries
b) City Governmental Inquiries
8. Conclusions
9. Recommendations
a) Additional Studies
b) O & M Program
10. References
11. Appendices
a) Recorded Chain of Title
b) Aerial Photographs
c) Photographs
d) Permits/Records
12. Tables
a) Asbestos and Radon Sampling Results
5
<PAGE>
================================================================================
SCHEDULE 1.01Q APPROVED ENVIRONMENTAL
CONSULTANTS
* ATEC ASSOCIATES/ATC
* EMG
* LAW ENGINEERING
* CLAYTON
* FUGRO WEST, INC.
* RONE ENGINEER, INC.
* RERC
Future reports will be provided by EMG, however, a periodic review and bid
process will be undertaken to insure quality reports.
================================================================================
<PAGE>
SCHEDULE 1.01(h)
Franchisors
BRAND OR AFFILIATION CONSIDERATIONS FOR AGHC FUTURE ACQUISITIONS
DOUBLETREE HOTELS CORPORATION DoubleTree Hotel or Resort
DoubleTree Club Hotel
DoubleTree Guest Suites Hotel
HILTON HOTELS CORPORATION Hilton Hotel, Inn or Resort
Hilton Suites Hotel
Hilton Garden Inn
HOLIDAY INN WORLDWIDE Crowne Plaza Hotel or Resort
Holiday Inn
Holiday Inn Express
Holiday Inn Hotel & Suites
Holiday Inn Select
Holiday Inn Sunspree Resort
HYATT HOTELS CORPORATION Hyatt Regency Hotel or Resort
Hyatt Hotel
ITT SHERATON CORPORATION Sheraton Hotel or Resort
Sheraton Suites Hotel
Four Points Hotel
MARRIOTT CORPORATION Marriott Hotel or Resort
Marriott Suites Hotel
Residence Inn
Fairfield Inn, Inn & Suites
Courtyard by Marriott
OMNI HOTELS Omni Hotel or Resort
PROMUS HOTEL CORPORATION Embassy Suites Hotel or Resort
Homewood Suites
Hampton Inn, Inn & Suites
RADISSON HOTELS WORLDWIDE Radisson Hotel, Plaza Hotel or Resort
Radisson Inn
Radisson Suite Hotel
WESTIN HOTELS & RESORTS Westin Hotel or Resort
WYNDHAM HOTELS AND RESORTS Wyndham Hotel or Resort
Wyndham Garden Hotel
POSSIBLE (IF FRANCHISING BECOMES
AVAILABLE) Renaissance Hotels & Resorts
Red Lion Hotels & Inns
Ritz-Carlton
Inter-Continental
Four Seasons
Sofitel/Novotel
Nikko
Le Meridian/Forte
AmeriSuites
Vista/Hilton International
Fairmont
Adam's Mark
<PAGE>
SCHEDULE 1.01(i)
Ground Leases
-------------
ALBUQUERQUE, NEW MEXICO
That certain ground lease by and between the City of Albuquerque, New
Mexico and Fred Harvey, Inc. dated November 10, 1969 as amended by the
First Supplemental Lease Agreement dated May 17, 1971 and the Second
Supplemental Lease Agreement dated October 2, 1972.
NEW ORLEANS, LOUISIANA
That certain Sublease Agreement between James L. Monaghan, as sub-lessor,
and Grantor, as sublessee, dated July 8, 1994 and recorded in COB 923,
Folio 521, records of Orleans Parish of that certain Lease of Commercial
Property granted by Mon-Tay Enterprises, Inc., as owner, and James
Monaghan, as lessee, dated December 11, 1985 recorded in COB 808A, Folio
15, records of Orleans Parish.
SAN JOSE, CALIFORNIA
That certain Sublease dated as of February 1, 1973 executed by and between
Claitor Properties Co. and Hotel Circle, Inc. and recorded on February 7,
1973 in Book 0225, Page 727 of the Official Records, as assigned to 1350
North First Street Company, as recorded on June 14, 1976 in Book C080, Page
157 in the Official Records, as further assigned to The Chase Manhattan
Bank (National Association), and recorded on September 17, 1976 in Book
C288, Page 36, as further assigned to North First-Gish Corporation, as
recorded on September 17, 1976 in Book C288, Page 45, as amended by that
certain Amendment to Sublease dated December 1, 1978 by and between Claitor
Properties Co. and North First-Gish Corporation and recorded on March 13,
1979 in Book E340, Page 285, as further assigned to Le Baron Hotels, Inc.
and recorded on March 13, 1979 in Book E341, Page 258, and as further
amended by that certain Consent to Amendment of Sublease and Release of
Reserved Right dated April 11, 1980 executed by and between William E.
Kiersted and William S. Boyd, as Trustees, Le Baron Hotels, Inc. and The
Chase Manhattan Bank, N.A. and recorded on April 29, 1980 in Book F298,
Page 632 of the Official Records.
TOLEDO, OHIO
That certain Lease by and among the State of Ohio, acting by and through
the Department of Administrative Services, the Medical College of Ohio at
Toledo, an Ohio College of Medicine authorized and created by Section
3350.01, Ohio Revised Code ("MCO"), and Toledo Hotel Investors Limited
Partnership, an Ohio limited partnership ("Original Lessee"),
<PAGE>
recorded at Recorder's Number 86-0812A01 of the records of the Lucas County
Recorder, under which State and MCO leased to Original Lessee a certain
unimproved approximately 8,781 acre tract of land located on the campus of MCO
in Toledo, Lucas County, Ohio; as modified by and Affidavit dated November 15,
1986, recorded December 16, 1986, at Recorder's Number 86-1943A08 of the records
of the Lucas County Recorder; as further amended by First Amendment to Lease by
and among State, MCO, and Original Lessee, recorded March 24, 1988, at
Recorder's Number 88-332C11 of the records of the Lucas County Recorder; as
further amended by Second Amendment to Lease by and among State, MCO, and
Original Lessee, recorded October 30, 1992, at Recorder's Number 92-3155C04 of
the records of the Lucas County Recorder; as further affected by that certain
Cooperating Agreement dated May 23, 1986, by and between MCO and Original Lessee
-2-
<PAGE>
SCHEDULE 1.01(j)
Guarantors
----------
American General Hospitality Corporation, a Maryland corporation
AGH UPREIT, LLC, a Delaware limited liability company
3100 Glendale Joint Venture, an Ohio general partnership
MDV Limited Partnership, a Texas limited partnership
Madison Motel Associates, a Wisconsin general partnership
183 Hotel Associates, Ltd., a Texas limited partnership
Richmond Williamsburg Associates, Ltd., a Texas limited partnership
2929 Williams Limited Liability Company, a Delaware limited liability company
<PAGE>
SCHEDULE 1.01(K)
HOTEL AND CAPITAL OPERATING LEASE LIMITS
Hotel Capital Lease Limit - Capital Leases will be limited to no more than
$1,000 per room.
Hotel Operating Lease Limit - Operating Leases will be limited to no more than
$750 per room.
<PAGE>
Schedule 1.01(l)
LIQUOR CORPS FOR REIT HOTELS
Courtyard by Marriott Secaucus
New Jersey Beverage Management, Inc.
Holiday Inn DFW South
Beverage & Lounge Management, Inc.
Holiday Inn DFW West
ELF Management, Inc.
Holiday Inn New Orleans Airport
Kenner Beverage Management, Inc.
Hotel Maison de Ville
American General Hospitality of Louisiana, Inc.
Hilton Hotel Toledo
Ohio Beverage Management, Inc.
Holiday Inn East Towne Madison
Madison Lounge, Incorporated
Holiday Inn Park Center Plaza San Jose
SJBMI
Holiday Inn Mission Valley San Diego
SDBMI
LeBaron Hotel San Jose
LBBMI
Best Western ABQ Airport Hotel
Albuquerque Beverage Management, Inc.
<PAGE>
Schedule 1.01(m)
PARTICIPATING LEASES
1. Lease Agreement between American General Hospitality Operating Partnership,
L.P. ("Borrower") and AGH Leasing, L.P. (the "Lessee") with respect to
Holiday Inn Park Center Plaza, dated of even date herewith.
2. Lease Agreement between Borrower and Lessee with respect to Holiday Inn
Mission Valley, dated of even date herewith.
3. Lease Agreement between Borrower and Lessee with respect to Days and Ocean
City, dated of even date herewith.
4. Lease Agreement between Borrower and Lessee with respect to LeBaron Hotel,
dated of even date herewith.
5. Lease Agreement between Borrower and Lessee with respect to Fred Harvey
Albuquerque Airport Hotel, dated of even date herewith.
6. Lease Agreement between 2929 Williams Limited Liability Company and Lessee
with respect to Holiday Inn New Orleans Airport (Kenner), dated of even
date herewith.
7. Lease Agreement between 3100 Glendale Joint Venture and Lessee with respect
to Hilton Hotel Toledo, dated of even date herewith.
8. Lease Agreement Between MDV Limited Partnership and Lessee with respect to
Hotel Maison De Ville, dated of even date herewith.
9. Lease Agreement between Madison Motel Associates and Lessee with respect to
Holiday Inn Select Madison, dated of even date herewith.
10. Lease Agreement between 183 Hotel Associates, Ltd. and Lessee with respect
to Holiday Inn Dallas DFW Airport West, dated of even date herewith.
11. Lease Agreement between Richmond Williamsburg Associates, Ltd. and Lessee
with respect to Hampton and Richmond Airport, dated of even date herewith.
<PAGE>
Schedule 4.01
SUBSIDIARIES
<TABLE>
<CAPTION>
NAME STATE OF FORMATION PRINCIPAL OFFICE
---- ------------------ ----------------
<S> <C> <C>
2929 Williams Limited Liability Company Delaware 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
3100 Glendale Joint Venture Ohio 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
MDV Limited Partnership Texas 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
Madison Motel Associates Wisconsin 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
183 Hotel Associates, Ltd. Texas 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
455 Meadowlands Associates, Ltd.* Texas 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
DFW South Limited Partnership* Texas 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
Richmond Williamsburg Associates, Ltd. Texas 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
AGH UPREIT LLC Delaware 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
AGH Secaucus LLC* Delaware 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
AGH DFW South LLC* Delaware 3860 West Northwest Highway
Suite 300
Dallas, TX 75220
</TABLE>
____________________________
* Permitted other subsidiary
<PAGE>
SCHEDULE 4.08
PENDING LITIGATION
<TABLE>
<CAPTION>
Hotel Litigation Insured Company
- ----- ---------- ------- -------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Best Western ABQ Airport Hotel N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Courtyard by Marriott-Meadowlands 9/21/95-Bernardo-Slipped & fell on sidewalk Yes Fireman's Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Day's Inn-Ocean City N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Hampton Inn-Richmond Airport N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Hotel-Toledo Hilton 9/27/93-Suesse-Slipped & fell in parking lot. Yes ITT Hartford
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn-DFW South N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn-DFW West N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn-East Towne N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn-Mission Valley N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn-New Orleans Eatheray Cage- Workers' Compensation Yes Prior Management Company
- ------------------------------------------------------------------------------------------------------------------------------------
Holiday Inn Park Center Plaza N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Hotel Maison De Ville N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Le Baron Hotel N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Knowledge of outstanding litigation is limited to the above.
In all cases insurance is available to cover the loss
A comprehensive insurance plan is also available should any
new litigation arise. Claims which have not yet been reported which
occurred prior to AGHC ownership will be referred to the prior owner's
insurance company. An aggressive claim prevention & claim management plan
will be maintained for these properties.
H Bertini, ARM
Director, Risk & Insurance Services
American General Hospitality Inc.
<PAGE>
SCHEDULE 4.15
Loan and Lease Disclosures
Space Leases
. Le Baron - San Jose -- Full Service Beauty Salon Lease with Lupe Vargas.
. Le Baron - San Jose -- Gift Shop Lease with Hanif Saya and Irfan Muhammad
(dba Golden Choice Enterprises).
. Le Baron - San Jose -- Enterprise Rent-A-Car.
. Fred Harvey Hotel - Albuquerque -- Lease of Roof Space for Antennas with:
ABQ Ambulance Service, Ardis Company, QTE Airfone, Motorola, Inc.,
Presbyterian Healthcare.
. Hotel Maison de Ville - New Orleans -- Restaurant Lease "The Bistro" with
James L. Monaghan.
. Holiday Inn - Park Center Plaza - San Jose -- Gift Shop Lease.
. Holiday Inn Select - Madison -- Gift Shop Lease with Judy's Wisconsin Gift
Shop
. Holiday Inn Select - Madison -- Enterprise Rent-A-Car.
. Holiday Inn DFW South - Dallas -- Gift Shop Lease with US West Financial
Services.
<PAGE>
Schedule 4.17
LEGAL REQUIREMENTS; ZONING; UTILITIES; ACCESS
1. Holiday Inn Park Center Plaza; San Jose, California-
----------------------------------------------------
The Property has a sign located on Almaden Boulevard which does not
meet the Zoning Code. In addition, the property was developed as a hotel
before the requirements for a Conditional Use Permit and, therefore, is
considered a legal non-conforming use.
2. leBaron Airport Hotel, San Jose, California-
--------------------------------------------
When the Hotel was constructed, San Jose required Site Development
Permit approval, but not Conditional Use Permit approval. A hotel is now
permitted in this C-3 Commercial District with Conditional Use Permit
approval. The Hotel, however, only obtained the Site Development Permits
and variances required at the time of construction including:
(1) a variance to reduce the number of off-street parking spaces;
approved May 8, 1972;
(2) a variance to grant an increase in height to 9-stories, approved
May 8, 1972;
(3) a variance to reduce off-street loading spaces from seven to one
for the Hotel, approved November 9, 1972; and
(4) a Site Development Permit for a 9-story, 302 room hotel with a
2-story banquet, coffee shop, cocktail lounge, and kitchen,
approved March 5, 1973.
The Hotel, therefore, is considered a legal non-conforming use.
3. Hotel Maison De Ville Louisiana; New Orleans, louisiana-
--------------------------------------------------------
The current use is in compliance with the City of New Orleans
Comprehensive Zoning Ordinance as a legal non-conforming use provided the
guest accommodations are used for the purpose of offering overnight lodging
facilities to the general public for comprehensive.
<PAGE>
SCHEDULE 4.19
PARTICIPATING LESSEE PERSONAL PROPERTY
Approximately $435,000 of equipment, fixtures, furniture and other personal
property owned in connection with the Hotel Properties located in Alburquerque,
New Mexico and San Jose (Park Center Plaza), California.
<PAGE>
SCHEDULE 4.21
CASH MANAGEMENT SYSTEMS
TENANT OPERATING ACCOUNTS
MAINTAINED WITH CASH MANAGER
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. 1822924419
American General Hospitality, Inc., Manager
(Days Inn Ocean City) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924427
American General Hospitality, Inc., Manager
(Hampton Inn Richmond Airport) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924443
American General Hospitality, Inc., Manager
(Holiday Inn DFW West) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924450
American General Hospitality, Inc., Manager
(Holiday Inn New Orleans Airport) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924468
American General Hospitality, Inc., Manager
(Hotel Maison De Ville) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924476
American General Hospitality, Inc., Manager
(Hilton Hotel Toledo) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924484
American General Hospitality, Inc., Manager
(Holiday Inn East Towne Madison) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924492
American General Hospitality, Inc., Manager
(Holiday Inn Park Center Plaza San Jose) - Operating Account
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. 1822924500
American General Hospitality, Inc. Manager
(Holiday Inn Mission Valley San Diego) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924518
American General Hospitality, Inc., Manager
(Best Western Fred Harvey Hotel) - Operating Account
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1822924526
American General Hospitality, Inc., Manager
(LeBaron Hotel San Jose) - Operating Account
================================================================================
<PAGE>
TENANT LOCAL DEPOSIT ACCOUNTS
MAINTAINED WITH DEPOSITORY BANKS
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. Depository Account
------------------
American General Hospitality, Inc., Manager 3933669120
(Days Inn Ocean City) - Depository Account
------------------
NationsBank
4401 Coastal Hwy.
Ocean City, MD 21842
(410) 289-6818
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 7911878032
American General Hospitality, Inc., Manager
(Hampton Inn Richmond) - Depository Account
------------------
Central Fidelity
5215 Williamsburg
Sanston, VA 23150
(804) 236-2245
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1000006028
American General Hospitality, Inc., Manager
(Holiday Inn DFW West) - Depository Account
------------------
First Interstate Bank
P.O. Box 650291
Dallas, TX 75265
(214) 954-3793
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 0019756
American General Hospitality, Inc., Manager
(Holiday Inn New Orleans Airport) - Depository Account
------------------
Metairie Bank & Trust
7124 Veterans Blvd.
Metairie, AL 70004
(504) 832-5690
- --------------------------------------------------------------------------------
1
<PAGE>
================================================================================
ACCOUNTING NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. 110648986
American General Hospitality, Inc., Manager
(Hotel Maison de Ville) - Depository Account
------------------
First National Bank of Commerce
210 Baronne St.
New Orleans, LA 70112
(504) 561-1371
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 5002885083
American General Hospitality, Inc., Manger
(Hilton Hotel Toledo) - Depository Account
------------------
Society Bank & Trust
1950 Reynold Rd.
Toledo, OH 43614
(419) 259-8380
- ------------------------------------------------------------------------------
AGH Leasing, L.P. 0004787233
American General Hospitality, Inc., Manger
(Holiday Inn East Towne Madison) - Depository Account
------------------
M&I Bank of Madison
4726 East Towne Blvd.
Madison, WI
(608) 249-8638
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 8501079662
American General Hospitality, Inc., Manger
(Holiday Inn Park Center Plaza San Jose) - Depository Account
------------------
Comerica Bank
333 W. Santa Clara Street
San Jose, CA 95113
(408) 244-1700
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P.
American General Hospitality, Inc., Manager
(Holiday Inn Mission Valley San Diego) - Depository Account
------------------
Bank of America
150 Long Beach Blvd.
Long Beach, CA 90802
(310) 624-4800
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 6011010755
American General Hospitality, Inc., Manager
(Best Western ABQ Airport Hotel/Fred Harvey) - Depository
----------
Account
- -------
First Security Bank
40 First Plaza Center NW
Albuquerque, NM 87102
(505) 765-4003
- --------------------------------------------------------------------------------
AGH Leasing, L.P.
American General Hospitality, Inc., Manager
(LeBaron Hotel San Jose) - Depository Account
------------------
Bank of America
150 Long Beach Blvd.
Long Beach, CA 90802
(310) 624-4800
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 3933669133
American General Hospitality, Inc., Manager
(Days Inn Ocean City) - General Manager Account
-----------------------
NationsBank
4401 Coastal Hwy.
Ocean City, MD 21842
(410) 289-6818
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. 7911878040
American General Hospitality, Inc., Manager
(Hampton Inn Richmond) - General Manager Account
-----------------------
Central Fidelity
5215 Williamsburg
Sanston, VA 23150
(804) 236-2245
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 1000006036
American General Hospitality, Inc., Manager
(Holiday Inn DFW West) - General Manager Account
-----------------------
First Interstate Bank
P.O. Box 650291
Dallas, TX 75265
(214) 954-3793
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 0019763
American General Hospitality, Inc., Manager
(Holiday Inn New Orleans Airport) - General Manager Account
-----------------------
Metairie Bank & Trust
7124 Veterans Blvd.
Metairie, LA 70004
(504) 832-5690
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 110648994
American General Hospitality, Inc., Manager
(Hotel Maison de Ville) - General Manager Account
-----------------------
First National Bank of Commerce
210 Baronne St.
New Orleans, LA 70112
(504) 561-1371
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
ACCOUNT NAME ACCOUNT NO.
================================================================================
AGH Leasing, L.P. 5002885095
American General Hospitality, Inc., Manager
(Hilton Hotel Toledo) - General Manager Account
-----------------------
Society Bank & Trust
1950 Reynolds Rd.
Toledo, OH 43614
(419) 259-8380
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 0004787189
American General Hospitality, Inc., Manager
(Holiday Inn East Towne Madison) - General Manager Account
-----------------------
M&I Bank of Madison
4726 East Towne Blvd.
Madison, WI
(608) 249-8638
- --------------------------------------------------------------------------------
AGH Leasing, L.P. 8501079670
American General Hospitality, Inc., Manager
(Holiday Inn Park Center Plaza San Jose) - General Manager
---------------
Account
- -------
Comerica Bank
333 W. Santa Clara Street
San Jose, CA 95113
(408) 244-1700
- --------------------------------------------------------------------------------
AGH Leasing, L.P.
American General Hospitality, Inc., Manager
(Holiday Inn Mission Valley San Diego) - General Manager
---------------
Account
- -------
Bank of America
150 Long Beach Blvd.
Long Beach, CA 90802
(310) 624-4800
- --------------------------------------------------------------------------------
5
<PAGE>
========================================================================
ACCOUNT NAME ACCOUNT NO.
========================================================================
AGH Leasing, L.P. 6011010649
American General Hospitality, Inc., Manager
(Best Western ABQ Airport Hotel/Fred Harvey) - General
-------
Manager Account
- ---------------
First Security Bank
40 First Plaza Center NW
Albuquerque, NM 87102
(505) 765-4003
- ------------------------------------------------------------------------
AGH Leasing, L.P.
American General Hospitality, Inc., Manager
(LeBaron Hotel San Jose) - General Manager Account
-----------------------
Bank of America
150 Long Beach Blvd.
Long Beach, CA 90802
(310) 624-4800
========================================================================
6
<PAGE>
PARTNERSHIP ACCOUNTS
MAINTAINED WITH CASH MANAGER
========================================================================
ACCOUNT NAME ACCOUNT NO.
========================================================================
American General Hospitality Corporation 1822924534
- ------------------------------------------------------------------------
AGH Leasing, L.P. 1822924609
- ------------------------------------------------------------------------
AGHL GP, Inc. 1822924617
- ------------------------------------------------------------------------
AGH UPREIT LLC 1822924625
- ------------------------------------------------------------------------
AGH GP, Inc. 1822924716
- ------------------------------------------------------------------------
3100 Glendale Joint Venture 1822924641
Hilton Hotel and Conference Center, Toledo, OH
- ------------------------------------------------------------------------
MDV Limited Partnership 1822924658
Hotel Maison de Ville, New Orleans, LA
- ------------------------------------------------------------------------
Madison Motel Associates 1822924666
Holiday Inn Select, Madison, WI
- ------------------------------------------------------------------------
183 Hotel Associates, Ltd. 1822924674
Holiday Inn DFW Airport West
- ------------------------------------------------------------------------
Richmond Williamsburg Associates, Ltd. 1822924682
Hampton Inn Richmond Airport, Richmond, VA
- ------------------------------------------------------------------------
2929 Williams Limited Liability Company 1822924732
Holiday Inn New Orleans Airport, LA
========================================================================
1
<PAGE>
OTHER ACCOUNTS
MAINTAINED WITH CASH MANAGER
===============================================================================
ACCOUNT NAME ACCOUNT NO.
===============================================================================
American General Hospitality Operating Partnership, L.P. 1822924542
Operating Account (Borrower)
- -------------------------------------------------------------------------------
Bank One Texas, N.A. as Administrative Agent for the benefit of 1892347897
American General Hospitality Operating Partnership, L.P.
Concentration Bank Account
- -------------------------------------------------------------------------------
Bank One Texas, N.A. as Administrative Agent for the benefit of 1892347905
American General Hospitality Operating Partnership, L.P.
CapEx Reserve Account
===============================================================================
1
<PAGE>
SCHEDULE 4.22
- -------------
<TABLE>
<CAPTION>
Franchise Agreements expected to terminate (a) Date of Termination (b) Fees Due (c) Replacement Franchise (d)
<S> <C> <C> <C>
Holiday Inn Select East Towne - Madison, WI July 31, 1996 -0- Crown Plaza
Days Inn - Ocean City, MD July 31, 1996 -0- Days Inn (6 mos)/Hampton Inn
Holiday Inn New Orleans Airport - Kenner, LA July 31, 1996 -0- Holiday Inn Select
Holiday Inn Mission Valley - San Diego, CA July 31, 1996 -0- Holiday Inn (6 mos)/Double Tree
Holiday Inn Park Center Plaza - San Jose, CA July 31, 1996 -0- Crowne Plaza
Holiday Inn D/FW Airport South - Irving, TX July 31, 1996 -0- Holiday Inn
Hampton Inn Richmond Airport - Standston, VA July 31, 1996 -0- Hampton Inn
</TABLE>
<PAGE>
Replacement Franchise Material Terms
CROWNE PLAZA EAST TOWNE - MADISON WI
Term: 10 years
Royalty Fees: Will operate as a Holiday Inn until renovations are complete
(1st qtr 1997)
Holiday Inn
Franchise Fees = 5% of Rooms Revenue
Marketing Contribution = 1.5% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,459.61
Crowne Plaza
Franchise Fees = 4% of Rooms Revenue for years 1-3
5% of Rooms Revenue thereafter
Marketing Contribution = 2% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,459.61
DAYS INN - OCEAN CITY, MD
Term: 1 year with 30-day notice of termination with no damages after 6
months
Royalty Fees: 8.8% of Room Revenue
Hampton Inn
Term: 21 Years
Royalty Fees: Franchise Fees = 4% of Room Revenue
Marketing/Reservation Contribution = 4% of Room Revenue
HOLIDAY INN SELECT NEW ORLEANS AIRPORT - KENNER, LA
Term: 10 Years
Royalty Fees: Will operate as a Holiday Inn until renovations are complete
(1st qtr 1997)
Holiday Inn
Franchise Fees = 5% of Rooms Revenue
Marketing Contribution = 1.5% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,954.72
Holiday Inn Select
Franchise Fees = 5% of Rooms Revenue
Marketing Contribution = 2% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,954.72
<PAGE>
HOLIDAY INN MISSION VALLEY - SAN DIEGO, CA
Term: Holiday Inn - 10 Years; DoubleTree - 10 Years
Royalty Fees: Will operate as a Holiday Inn until renovations are complete
(1st qtr 1997)
Holiday Inn
Franchise Fees = 5% of Rooms Revenue
Marketing Contribution = 1.5% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $2,031.88
DoubleTree
Franchise Fees = 2% of Rooms Revenue for year 1
3% of Rooms Revenue for year 2
4% of Rooms Revenue thereafter
Marketing Contribution = 3.5% of Rooms Revenue
CROWNE PLAZA PARK CENTER PLAZA - SAN JOSE, CA
Term: 10 years
Royalty Fees: Will operate as a Holiday Inn until renovations are complete
(1st qtr 1997)
Holiday Inn
Franchise Fees = 5% of Rooms Revenue
Marketing Contribution = 1.5% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,485.33
Crowne Plaza
Franchise Fees = 2% of Rooms Revenue for years 1-2
4% of Rooms Revenue for year 3
5% of Rooms Revenue thereafter
Marketing Contribution = 2% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $1,485.33
HOLIDAY INN D/FW AIRPORT SOUTH - IRVING, TX
Term: 10 years
Royalty Fees: Franchise Fees = 4% of Rooms Revenue for 1 year
5% of Rooms Revenue thereafter
Marketing Contribution = 1.5% of Rooms Revenue
Reservation Contribution = 1% of Rooms Revenue
Monthly Reservation Fee = $2,629.87
HAMPTON INN RICHMOND AIRPORT - SANDSTON, VA
Term: 12 years
Royalty Fees: Franchise Fees = 4% of Room Revenue
<PAGE>
Marketing/Reservation Contribution = +% of Room Revenue
<PAGE>
Schedule 4.23
MANAGEMENT AGREEMENTS
1. Management Agreement between AGH Leasing, L.P. ("Lessee") and American
General Hospitality, Inc. ("Manager") with respect to Holiday Inn Park
Center Plaza, dated of even date herewith.
2. Management Agreement between Lessee and Manager with respect to Holiday Inn
Mission Valley, dated of even date herewith.
3. Management Agreement between Lessee and Manager with respect to Days and
Ocean City, dated of even date herewith
4. Management Agreement between Lessee and Manager with respect to LeBaron
Hotel Airport, dated of even date herewith
5. Management Agreement between Lessee and Manager with respect to Fred Harvey
Albuquerque Airport Hotel, dated of even date herewith.
6. Management Agreement between Lessee and Manager with respect to New Orleans
Airport Kenner, dated of even date herewith.
7. Management Agreement between Lessee and Manager with respect to Hilton
Hotel Toledo, dated of even date herewith.
8. Management Agreement between Lessee and Manager with respect to Hilton
Maison de Ville, dated of even date herewith.
9. Management Agreement between Lessee and Manager with respect to Holiday Inn
Select Madison, dated of even date herewith.
10. Management Agreement between Lessee and Manager with respect to Holiday
Dallas DFW Airport West, dated of even date herewith.
11. Management Agreement between Lessee and Manager with respect to Hampton and
Richmond Airport, dated of even date herewith.
<PAGE>
Schedule 5.06
PCR REPAIRS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AMERICAN GENERAL HOSPITALITY TRUST
- ------------------------------------------------------------------------------------------------------------------------------
PROPERTY CONDITION REVIEW (PCR)
- ------------------------------------------------------------------------------------------------------------------------------
REQUIRED REPAIRS
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
FIRM REPORT
- ------------------------------------------------------------------------------------------------------------------------------
NO. PROPERTY NAME LOCATION NAME DATE REPORT ITEM NUMBER
- --- ------------- -------- ---- ---- -------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Holiday Inn DFW-South Irving, TX EMG 4/11/96 6.4; 6.5
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
2 Holiday Inn DFW-West Dallas, TX ATEC 4/12/96 4.1.1; 4.1.2 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
3 Marriott Courtyard Secaucus, NJ EMG 4/11/96 None required
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
4 Hampton Inn Richmond Sandston, VA EMG 4/11/96 None required
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
5 Hilton Toledo Toledo, OH EMG 4/9/96 None required
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
6 Maison De Ville New Orleans, LA ATEC 4/10/96 4.1.1; 4.1.2; 4.1.3; (ADA unknown)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
7 Holiday Inn NO Airport Kenner, LA ATEC 4/13/96 4.1.1; 4.1.2; 4.1.3; 4.1.8 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
8 Holiday Inn Select Madison, WI EMG 4/5/96 5.3; 5.5
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
9 Le Baron Hotel San Jose, CA ATEC 4/10/96 4.1.3; 4.1.6 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
ATC 7/23/96 None required
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
10 Holiday Inn San Jose, CA HRB 12/10/95 report unacceptable
- ------------------------------------------------------------------------------------------------------------------------------
Rocha 12/15/95 update report to confirm
- ------------------------------------------------------------------------------------------------------------------------------
structural repairs
- ------------------------------------------------------------------------------------------------------------------------------
ATEC 6/27/96 4.1.4 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
11 Holiday Inn Mission Val San Diego, CA ATEC 4/10/96 4.1.1; 4.1.2; 4.1.3 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
12 Best Western Albuquerque, NM EMG 4/4/96 None required
- ------------------------------------------------------------------------------------------------------------------------------
EMG 6/18/96 2.1 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
13 Days Inn Ocean City, MD ATEC 4/10/96 4.1.2 - 4.1.6; 4.1.7 (ADA)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ESA RQMNTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AMERICAN GENERAL HOSPITALITY TRUST
- ---------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL SITE ASSESSMENT (ESA)
- ---------------------------------------------------------------------------------------------------------------------------
REQUIRED ITEMS
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
FIRM REPORT
- ---------------------------------------------------------------------------------------------------------------------------
NO. PROPERTY NAME LOCATION NAME DATE REPORT ITEM NUMBER
- --- ------------- -------- ---- ---- -------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
1 Holiday Inn DFW-South Irving, TX RERC 1/17/96 3.7.b (O & M program)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
2 Holiday Inn DFW-West Dallas, TX ATEC 4/24/96 5.2 (O & M program)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
3 Marriott Courtyard Secaucus, NJ EMG 4/3/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
4 Hampton Inn Richmond Sandston, VA EMG 3/29/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
5 Hilton Toledo Toledo, OH EMG 3/29/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
6 Maison De Ville New Orleans, LA EMG 4/10/96 6.6 (O & M program)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
7 Holiday Inn NO Airport Kenner, LA ATEC 4/26/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
8 Holiday Inn Select Madison, WI EMG 3/29/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
9 Le Baron Hotel San Jose, CA EMG 4/12/96 6.6 (O & M program)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
10 Holiday Inn San Jose, CA Ocean west 10/4/88 asbestos survey - see
- ---------------------------------------------------------------------------------------------------------------------------
below
- ---------------------------------------------------------------------------------------------------------------------------
Clayton 12/14/95 4.5; 5.0 - see below
- ---------------------------------------------------------------------------------------------------------------------------
Clayton 1/11/96 5.0 - None required
- ---------------------------------------------------------------------------------------------------------------------------
Clayton 1/12/96 4.5 - Need O & M program
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
11 Holiday Inn Mission Val San Diego, CA EMG 4/10/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
12 Best Western Albuquerque, NM EMG 4/3/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
13 Days Inn Ocean City, MD EMG 4/8/96 None required
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 9.02
Notices
-------
DOMESTIC LENDING OFFICE LIBOR LENDING OFFICE
- ----------------------- --------------------
SOCIETE GENERALE, SOUTHWEST AGENCY SOCIETE GENERALE, SOUTHWEST AGENCY
4900 Trammell Crow Center 4900 Trammell Crow Center
2001 Ross Avenue 2001 Ross Avenue
Dallas, Texas 75201 Dallas, Texas 75201
Attn: Mr. Thomas K. Day Attn: Mr. Thomas K. Day
Vice President Vice President
Telephone: (214)979-2774 Telephone: (214)979-2774
Telecopy: (214)979-2727 Telecopy: (214)979-2727
BANK ONE, TEXAS, N.A. BANK ONE, TEXAS, N.A.
1717 Main Street, 4th Floor 1717 Main Street, 4th Floor
Dallas, Texas 75201 Dallas, Texas 75201
Attn: Commercial Real Estate Department Attn: Commercial Real Estate Department
Mr. Jeff S. Lindsey Mr. Jeff S. Lindsey
Vice President Vice President
Telephone: (214)290-2385 Telephone: (214)290-2385
Telecopy: (214)290-2275 Telecopy: (214)290-2275
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-11,
filed on or about the date hereof, of our reports dated November 27, 1996, on
our audits of the financial statements and financial statement schedule
American General Hospitality Corporation; dated September 19, 1996, on our
audits of the financial statements and financial statement schedule of AGH
Predecessor Hotels; dated April 8, 1996, on our audits of the financial
statements and financial statement schedule of Other Initial Hotels; and dated
November 26, 1996, on our audit of the financial statements of Days Inn Lake
Buena Vista hotel. We also consent to the reference to our firm under the
caption "Experts."
Coopers & Lybrand L.L.P.
Dallas, Texas
January 10, 1997
