<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 8, 1998
American General Hospitality Corporation
(Exact Name of Registrant as Specified in its Charter)
Maryland 1-11903 75-2648842
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5605 MacArthur Blvd., Suite 1200, Irving, Texas 75038
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (972) 550-6800
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 8, 1998 (i) American General Hospitality Operating
Partnership, L.P. (the "Operating Partnership"), a subsidiary of American
General Hospitality Corporation (the "Company" or "Registrant"), together with
two of its subsidiaries, Mt. Arlington LLC and Portland/Shelton LLC, acquired a
portfolio of eight hotels ("Prime Group I Acquisition") from Prime Hospitality
Corp., an entity unaffiliated with the Company, the Operating Partnership or its
subsidiaries. The aggregate purchase price of the Prime Group I Acquisition was
approximately $138.4 million, which was payable as follows: (i) approximately
$114.4 million in cash, (ii) approximately $13.8 million through the issuance of
518,437 units of limited partnership interests of the Operating Partnership ("OP
Units") and (iii) the assumption of approximately $10.2 million of mortgage
indebtedness collateralized by the Crowne Plaza Portland and the Ramada Plaza
Shelton. The aggregate purchase price of the Prime Group I Acquisition was
arrived at through arms-length negotiations. A description of the hotels is as
follows:
. Crowne Plaza Suites Las Vegas - The Operating Partnership acquired the
201 room all suite Crowne Plaza located in Las Vegas, Nevada. The hotel
is less than two miles from the Las Vegas Strip and the Las Vegas
Convention Center.
. St. Tropez Suites Las Vegas - The Operating Partnership acquired the
149 room all suite hotel located in Las Vegas, Nevada. The hotel is
directly across from the Hard Rock Cafe & Casino, three blocks from the
Las Vegas Strip, near the Las Vegas Convention Center, and two miles
from the Las Vegas International Airport.
. Ramada Inn Mahwah - The Operating Partnership acquired the 128 room
full-service Ramada Inn located in Mahwah, New Jersey. The hotel is
located in the northern section of Bergen County, one of the country's
most affluent communities, which is approximately 40 minutes northwest
of Manhattan.
. Sheraton Crossroads Hotel Mahwah - The Operating Partnership acquired
the 225 room full-service Sheraton located in Mahwah, New Jersey. The
hotel is situated within a 22-story multi-use building in the northern
New Jersey suburban area of Mahwah. The hotel is a prominent landmark
with a superior reputation for dining and banquet services.
. Ramada Plaza Meriden - The Operating Partnership acquired the 150 room
full-service Ramada Plaza located in Meriden, Connecticut. The hotel is
centrally located at midway between Hartford and New Haven, Connecticut
in one of the state's fastest growing industrial parks called "Research
Parkway".
. Sheraton Four Points Hotel Mt. Arlington - Mt. Arlington New Jersey
LLC, a subsidiary of the Operating Partnership, acquired the 124 room
Sheraton Four Points Hotel is located in Mount Arlington, New Jersey.
The hotel is located along Interstate 80 in Morris County, which is a
center of corporate activity between Parsippany and the Free Trade
Zone.
. Crowne Plaza Portland - Portland/Shelton LLC, a subsidiary of the
Operating Partnership, acquired the 161 room Crowne Plaza located in
Portland, Oregon. This full-service hotel is seven miles south of
downtown Portland in the suburb of Lake Oswego.
2
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. Ramada Plaza Hotel Shelton - Portland/Shelton LLC, a subsidiary of the
Operating Partnership, acquired the 155 room full service Ramada Plaza
located in Shelton, Connecticut. The hotel offers panoramic views of
the Naugatuck Valley community and is strategically located in the
heart of one of Connecticut's fastest growing corporate and industrial
centers.
Each of the Prime Group I Acquisition hotels are leased and managed by
independent lessees (together the "Prime Lessee") that are affiliates
of Prime Hospitality Corp., a NYSE listed company ("Prime"), pursuant
to separate participating leases (the "Participating Leases"). The
Participating Leases entered into with the Prime Lessee are for a term
of 10 years and prohibit the Operating Partnership from selling the
hotels for a period of three years but otherwise have terms and
conditions substantially similar to the Operating Partnership's other
Participating Leases.
The Prime Lessee is required to maintain a minimum net worth of $3.4
million through the end of 1998, and thereafter an amount equal to
17.5% of the aggregate rent paid to the Company in the prior years in
the form of cash, marketable securities and/or letter(s) of credit or
any combination thereof. Moreover, Prime, which owns the Prime Lessee,
is contractually obligated to wholly own the Prime Lessee during the
term of the Participating Leases.
The cash required to purchase the Prime Group I Acquisition hotels was
provided by borrowings under the Operating Partnership's credit facility from
its credit facility lenders, Societe Generale, Southwest Agency, Bank One,
Texas, N.A., Bank of Nova Scotia and Wells Fargo Bank, National Association.
The Company currently owns an approximate 89.3% interest in the
Operating Partnership. AGH GP, Inc., a wholly owned subsidiary of the Company,
is the sole general partner of the Operating Partnership and owns a 1.0%
interest in the Operating Partnership. AGH LP, Inc., also a wholly owned
subsidiary of the Company, owns an 88.3% limited partnership interest in the
Operating Partnership. The remaining 10.7% interest is held by the former owners
of the hotels acquired by the Operating Partnership.
Salomon Smith Barney acted as an advisor to the Company in connection
with the Prime Group I Acquisition.
ITEM 5. OTHER EVENTS
The Company has entered into contracts to purchase an additional 31
hotels (the "Proposed Acquisition Hotels") for purchase prices aggregating
approximately $628 million. The purchases of the Proposed Acquisition Hotels are
subject to satisfactory completion of various closing conditions and therefore
no assurance can be given that any or all of these acquisitions will be
completed. Set forth below are summary descriptions of the Proposed Acquisition
Hotels.
. Prime Group II Acquisition - This acquisition consists of 11
full-service hotels (together with the Prime Group I Acquisition
hotels, the "Prime Portfolio Acquisition") containing 2,210 guest
rooms. The closing of the purchase is scheduled between September 30,
1998 and March 31, 1999. The purchase price is payable entirely in
cash. In 1998, Prime is obligated to complete an $18 million
improvement program on the Prime Group II Acquisition hotels and the
closing of the Prime Group II Acquisition will follow the completion of
the renovation program. Each of the Prime Group II Acquisition hotels
is expected to be leased and managed by the Prime Lessee or other
affiliates of Prime. The Prime Group II Acquisition hotels are operated
under franchise affiliations with Crowne Plaza, Holiday Inn, Radisson,
Sheraton and Ramada. A description of the hotels is as follows:
. Armonk, New York -- This 140-room Ramada full-service hotel is
located in the Westchester Business Park, approximately 35 miles
north of New York City.
. Danbury, Connecticut -- This 181-room Ramada full-service hotel
is located along Interstate 84 in the center of Danbury,
Connecticut.
. Elmsford, New York -- This 101-room Ramada full-service hotel is
located between White Plains, New York and the Tappan Zee Bridge.
. Fairfield, New Jersey -- This 176-room Ramada full-service hotel
is located along Route 46 in a commercial district. The hotel has
access to Interstate 80 and the Garden State Parkway.
. Fairfield, New Jersey -- This 240-room full-service Radisson
Hotel & Suites is located along Route 46 in Fairfield, New
Jersey.
. Hasbrouck Heights, New Jersey -- This 335-room Crowne Plaza full-
service hotel has access from Interstate 80 and the major
arteries of Route 17 and Route 46.
. Jamesburg (Monroe), New Jersey -- This 150-room Holiday Inn full-
service hotel is located in a major industrial park in Northern
New Jersey off the New Jersey Turnpike.
. Princeton, New Jersey -- This 240-room Holiday Inn full-service
hotel has a prominent location at the northern entry to the
Princeton commercial corridor along US 1.
. Saratoga Springs, New York -- This 240-room Sheraton full-service
hotel is located in downtown Saratoga Springs, the home to one of
New York's primary thoroughbred horse racing facilities and a
major leisure and meeting center.
. Secaucus, New Jersey -- This 151-suite Radisson full-service
hotel is located in the Harmon Meadow Commercial Complex, a
retail and office park in the Meadowlands area.
. Trevose, Pennsylvania -- This 272-room Radisson full-service
hotel is located in the township of Trevose, Pennsylvania,
approximately one mile from the intersection of US 1 and
Interstate 276/Pennsylvania Turnpike.
. Potomac Portfolio Acquisition - This acquisition consists of three full
service hotels and one limited-service hotel containing 815 guest
rooms. The Company expects to complete the Potomac Portfolio
Acquisition by January 31, 1998. The purchase price is payable entirely
in cash.
3
<PAGE>
The Company expects that the Potomac Portfolio Acquisition hotels will
be leased to AGH Leasing, L.P. ("AGH Leasing") and managed by American
General Hospitality, Inc. ("AGHI"). The Potomac Portfolio Acquisition
hotels are operated under franchise affiliations with Holiday Inn,
Ramada and Holiday Inn Express. A description of the hotels is as
follows:
. Alexandria, Virginia -- This 258-room Ramada Plaza full-service
hotel is positioned favorably near historic "Old Town"
Alexandria.
. Alexandria, Virginia -- This 178-room Holiday Inn and Suites
full-service hotel is located five miles from Washington, D.C.
. Annapolis, Maryland -- This 220-room Holiday Inn full-service
hotel is near the U.S. Naval Academy and the Maryland state
capitol.
. Hanover, Maryland -- This 159-room Holiday Inn Express limited-
service hotel is approximately 2.5 miles from
Baltimore/Washington International Airport and is the closest
hotel to the National Security Agency.
. FSA Portfolio Acquisition - This acquisition consists of 12
full-service and two limited-service hotels containing 3,229
guestrooms. The Company expects to complete the FSA Portfolio
Acquisition by mid-February 1998. The purchase price is payable
entirely in cash. The Company intends to strategically dispose of five
of the FSA Portfolio Acquisition hotels either as a group or
individually. Thirteen of the FSA Portfolio Acquisition hotels will be
leased to AGH Leasing and managed by AGHI. The Company expects that the
remaining FSA Portfolio Acquisition hotel will continue to be leased to
and managed by its current independent operator. The FSA Portfolio
Acquisition Hotels are operated under franchise affiliations with
DoubleTree, Radisson, Courtyard by Marriott, Holiday Inn, Ramada,
Howard Johnson and Select Inn. A description of the hotels is as
follows:
. Bloomington, Minnesota -- This 148-room Select Inn full-service
hotel is located approximately eight miles from the Minneapolis -
St. Paul International Airport and approximately five miles from
the Mall of America.
. Century City, California -- This 134-room Courtyard by Marriott
full-service hotel is located on the western edge of Century
City, two miles from UCLA, ten miles from the Los Angeles
International Airport and ten miles from the Los Angeles central
business district.
. Clearwater Beach, Florida -- This 426-room DoubleTree Resort
full-service hotel is located directly on Clearwater Beach, a
resort island approximately one mile west of downtown Clearwater.
. Clearwater Beach, Florida -- This 289-room Ramada Inn full-
service hotel consists of two guest room towers; one with nine
stories and one with seven stories in Clearwater Beach, a resort
island approximately one mile west of Clearwater.
. Fort Lauderdale Beach, Florida -- This 240-room Holiday Inn full-
service hotel is a 13-story hotel with penthouse meeting rooms.
. Key Largo, Florida -- This 100-room Howard Johnson limited-
service hotel is located on Florida Bay in Key Largo, the key
entrance from mainland Florida to the Florida Keys.
. Lake Buena Vista (Walt Disney Village), Florida -- This 323-room
Courtyard by Marriott full-service hotel is located in Walt
Disney Village and is within walking distance of the Disney
Village Market Place, Planet Hollywood and Pleasure Island.
. Madeira Beach, Florida -- This 149-room Holiday Inn full-service
hotel is located in Madeira Beach, a leisure oriented destination
area on the world famous white sand Gulf beaches of Pinellas
County, Florida.
. Marina del Rey, California -- This 276-room Courtyard by Marriott
full-service hotel is within walking distance of Chase Harbor,
the social, entertainment and retail center of Marina del Rey.
. Mystic, Connecticut -- This 77-room Lodge at the Seaport limited-
service hotel is proximate to both the Mystic area attractions
and the Foxwoods Casino.
. Richmond, Virginia -- This 280-room Holiday Inn full-service
hotel is located in Richmond, Virginia in a commercial
neighborhood which includes both office and retail properties.
. Rochester, New York -- This 171-room Radisson Inn full-service
hotel is adjacent to the Rochester Institute of Technology three
miles from Rochester Airport.
. St. Louis (Forest Park), Missouri -- This 120-room Holiday Inn
full-service hotel is located in an area known as Midtown in St.
Louis. The hotel is six miles from downtown St. Louis and one
mile from Forest Park, which is home to the St. Louis Zoo,
Science Center, Art Museum, Missouri Historical Museum and MUNY
Opera.
. Tampa (Tampa Airport), Florida -- This 496-room DoubleTree full-
service hotel is located adjacent to Tampa International Airport,
a primary source of commercial and air crew demand.
. Holiday Inn O'Hare International Hotel - The Holiday Inn O'Hare
International Hotel is a full-service hotel with 507 guestrooms located
near O'Hare International Airport and directly across from the
Rosemont, Illinois Convention Center. The purchase price is payable
with a combination of cash, the issuance of approximately 1,370,370
Class C OP Units (based on the fair market value of the Company's
common stock as of the date hereof) and mortgage debt assumption. The
Class C OP Units bear a preferred annual distribution rate of $1.89 per
Class C OP Unit until such time the dividend distribution rate for the
Class C OP Units shall equal the distribution rate on the Company's
common stock. In addition, the holders of the Class C OP Units are
entitled to receive additional OP Units if the fair market value of the
Company's common stock (as reported on the New York Stock Exchange,
Inc.) is not trading at least $30 per share on the anniversary date of
the closing of the acquisition. The Company expects to complete the
acquisition by January 31, 1998 and that upon acquisition that the
hotel will be leased to AGH Leasing and managed by AGHI.
. Madison Hotel - The acquisition will occur following the complete
renovation of the hotel to a full-service 202 room Holiday Inn. The
acquisition of the hotel is conditioned upon the seller's renovation of
the hotel, which is currently owned by a private partnership, which
consists primarily of AGHI shareholders and include certain executive
officers of the Company. The hotel will be purchased with a combination
of cash and OP Units. The Company expects that the hotel will be leased
to AGH Leasing and continue to be managed by AGHI. The purchase of the
Madison Hotel is expected to close during the second quarter of 1998.
. Line of Credit Modification - On January 16, 1998 the Company received
a commitment from its lead Line of Credit lenders to increase the
Company's credit facility from $300 million to $600 million and upgrade
the credit to an unsecured facility. The credit facility will be used
principally to fund the Company's hotel acquisition and renovation
programs. In addition, the commitment improves the facility's terms by,
among other things, reducing its interest rate to a variable rate
starting at LIBOR plus 140 basis points, depending on the Company's
leverage, and extending its maturity date.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
The following audited financial statements are included in this
Form 8-K:
. Prime Portfolio Acquisition hotels as of December 31, 1994, 1995
and 1996 and unaudited information for the nine months ended
September 30, 1996 and 1997
. Potomac Portfolio Acquisition hotels as of December 31, 1996 and
unaudited information for the nine months ended September 30, 1996
and 1997
. FSA Portfolio Acquisition hotels as of December 31, 1995 and
1996, the nine months ended September 30, 1997 and unaudited
information for the nine months ended September 30, 1996
. Holiday Inn O'Hare International Hotel as of December 31, 1996
and unaudited information for the nine months ended September 30,
1996 and 1997
<TABLE>
<CAPTION>
Index to Financial Statements Page
----------------------------- ----
<S> <C>
Prime Portfolio Acquisition
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1995 and 1996 and
September 30, 1997 (unaudited) F-2
Statements of Operations for the Years Ended December 31, 1994,
1995 and 1996 and the Nine Months Ended
September 30, 1996 and 1997 (unaudited) F-3
Statements of Equity for the Years Ended December 31, 1994, 1995
and 1996 and the Nine Months Ended September 30, 1997
(unaudited) F-4
Statements of Cash Flows for the Years Ended December 31, 1994,
1995 and 1996 and the Nine Months Ended
September 30, 1996 and 1997 (unaudited) F-5
Notes to Financial Statements F-6
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996 F-11
Potomac Portfolio Acquisition
Report of Independent Accountants F-13
Balance Sheets as of December 31, 1996 and
September 30, 1997 (unaudited) F-14
Statements of Operations for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996
and 1997 (unaudited) F-15
Statements of Equity for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997 (unaudited) F-16
Statements of Cash Flows for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996 and 1997
(unaudited) F-17
Notes to Financial Statements F-18
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996 F-21
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
FSA Portfolio Acquisition
Report of Independent Accountants F-22
Balance Sheets as of December 31, 1996 and September 30, 1997 F-23
Statements of Operations for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996 (unaudited)
and 1997 F-24
Statements of Equity for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997 F-25
Statements of Cash Flows for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996 (unaudited)
and 1997 F-26
Notes to Financial Statements F-27
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996 F-31
Holiday Inn O'Hare International Airport
Report of Independent Accountants F-33
Balance Sheets as of December 31, 1996 and
September 30, 1997 (unaudited) F-34
Statements of Operations for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996
and 1997 (unaudited) F-35
Statements of Equity for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997 (unaudited) F-36
Statements of Cash Flows for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1996 and 1997
(unaudited) F-37
Notes to Financial Statements F-38
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996 F-41
</TABLE>
(b) Unaudited Pro Forma Financial Information
<TABLE>
<CAPTION>
Index to Pro Forma Financial Statements Page
--------------------------------------- ----
<S> <C>
American General Hospitality Corporation
Pro Forma Balance Sheet as of September 30, 1997 (unaudited) .............. F-42
Pro Forma Statements of Operations for the Year Ended
December 31, 1996 and the Nine Months Ended
September 30, 1997 (unaudited) ........................................ F-45
AGH Leasing, L.P.
Pro Forma Statements of Operations for the Year Ended
December 31, 1996 and the Nine Months Ended
September 30, 1997 (unaudited) ........................................ F-49
Clifton Holding Corp.
Pro Forma Statements of Operations for the Year Ended
December 31, 1996 and the Nine Months Ended
September 30, 1997 (unaudited) ......................................... F-53
</TABLE>
6
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(c) The following are filed as Exhibits to this Report.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
2.1 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between Prime
and the Operating Partnership (Crowne Plaza Suites Las Vegas)
2.2 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between Prime
and the Operating Partnership (St. Tropez Suites Las Vegas)
2.3 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between Prime
and the Operating Partnership (Ramada Inn Mahwah)
2.4 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between Prime
and the Operating Partnership (Ramada Plaza Meriden)
2.5 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between
Mahwah Holding Corp. and the Operating Partnership (Sheraton Crossroads Hotel Mahwah)
2.6 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between Prime
and Mt. Arlington New Jersey, LLC (Sheraton Four Points Hotel Mount Arlington)
2.7 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between
Fairfield Holding Corp. and Portland/Shelton LLC (Crowne Plaza Portland)
2.8 Amended and Restated Purchase and Sale Agreement, dated January 7, 1998, between
Fairfield Holding Corp. and Portland/Shelton LLC (Ramada Plaza Shelton)
2.9 Form of Participating Lease for the Prime Group I Acquisition hotels and the Lease
Modification Letter, dated January 7, 1998, from American General Hospitality
Operating Partnership, L.P. to Prime Hospitality Corp.
10.1 Commitment Letter and Term sheet, dated January 15, 1998 for credit facility.
23.1 Consent of Coopers & Lybrand, L.L.P.
</TABLE>
7
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 23, 1998
American General Hospitality Corporation
(Registrant)
By: /s/ KENNETH E. BARR
--------------------------------
Kenneth E. Barr
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
8
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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 Prime Portfolio Acquisition Hotels (described in Note
1) as of December 31, 1994, 1995 and 1996 and the related combined statements of
operations, equity and cash flows for the years then ended. These combined
financial statements are the responsibility of the Prime Portfolio Acquisition
Hotels' management. Our responsibility is to express an opinion on these
combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission ("SEC") as described in Note 1 to the financial statements and are
not intended to be a complete presentation of the Prime Portfolio Acquisition
Hotels.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Prime Portfolio
Acquisition Hotels as of December 31, 1994, 1995, and 1996, and the results of
their operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above which is presented for the
purpose of additional analysis and to comply with the rules and regulations of
the SEC, 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
December 19, 1997, except for Note 7
which is dated January 9, 1998
F-1
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PRIME PORTFOLIO ACQUISITION HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------- September 30,
1995 1996 1997
------------ ------------- --------------
ASSETS (unaudited)
<S> <C> <C> <C>
Investments in hotel properties, at cost:
Land and land improvements....................... $ 22,612,313 $ 18,703,642 $ 21,699,000
Building and improvements........................ 123,169,831 125,658,540 136,616,325
Furniture, fixtures and equipment................ 35,760,453 39,173,323 43,995,563
------------- -------------- ----------------
181,542,597 183,535,505 202,310,888
Less: accumulated depreciation........................ 22,594,494 19,720,190 27,877,973
------------- -------------- ----------------
Net investment in hotel properties.................... 158,948,103 163,815,315 174,432,915
Cash and cash equivalents............................. 789,345 1,802,509 2,349,403
Restricted cash....................................... 1,229,952 700,114 489,870
Accounts receivable, net.............................. 4,396,132 5,545,669 6,065,275
Inventories........................................... 2,047,777 2,387,036 2,456,510
Prepaid expenses...................................... 2,817,776 951,887 1,125,685
Deferred expenses..................................... 2,739,175 2,279,492 2,221,459
Other assets.......................................... 62,669 77,526 63,859
------------- -------------- ----------------
Total assets..................................... $173,030,929 $ 177,559,548 $ 189,204,976
============= ============== ================
LIABILITIES AND EQUITY
Mortgage payable...................................... $ 79,457,417 $ 38,078,025 $ 36,016,004
Intercompany advance.................................. 59,361,379 92,828,197 92,089,851
Accounts payable, trade............................... 3,067,294 2,718,169 2,414,290
Accrued expenses and other liabilities................ 5,150,764 4,941,806 6,188,234
------------- -------------- ----------------
Total liabilities................................ 147,036,854 138,566,197 136,708,379
Commitments and contingencies (Note 5)
Capital............................................... 24,136,846 23,952,105 23,952,105
Retained earnings..................................... 1,857,229 15,041,246 28,544,492
------------- -------------- ----------------
Total equity..................................... 25,994,075 38,993,351 52,496,597
------------- -------------- ----------------
Total liabilities and equity..................... $173,030,929 $ 177,559,548 $ 189,204,976
============= ============== ================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-2
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
December 31, September 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
(unaudited) (unaudited)
Revenues:
Room revenue.......................... $53,509,863 $61,374,689 $ 75,762,299 $56,230,804 $66,320,843
Food and beverage revenue............. 31,072,682 32,398,484 35,149,769 24,043,936 26,983,933
Other revenue......................... 4,958,848 3,918,088 3,557,400 2,665,392 3,140,478
------------ ------------ ------------- ------------ ------------
Total revenue.................... 89,541,393 97,691,261 114,469,468 82,940,132 96,445,254
------------ ------------ ------------- ------------ ------------
Expenses:
Property operating costs and expenses. 15,864,464 17,779,877 20,530,841 15,044,498 16,994,165
Food and beverage costs and expenses.. 22,957,777 23,872,749 25,896,719 18,476,590 20,172,664
General and administrative............ 5,417,544 6,550,258 7,752,288 5,673,493 6,245,326
Advertising and promotion............. 5,044,528 5,577,807 6,620,451 4,919,765 5,156,895
Repairs and maintenance............... 4,201,669 4,588,975 4,937,985 3,685,800 3,959,017
Utilities............................. 4,956,843 5,377,086 5,798,292 4,422,299 4,592,378
Management fees....................... 3,055,991 3,268,342 3,693,651 2,697,981 3,052,692
Franchise costs....................... 1,605,296 1,841,240 2,213,297 1,661,131 2,042,486
Depreciation and amortization......... 3,296,625 5,410,831 8,551,401 6,157,598 8,220,683
Real estate and personal property
taxes, and property insurance....... 3,936,981 3,360,570 3,375,206 2,587,327 2,882,670
Interest expense...................... 8,343,184 6,498,968 4,179,695 3,308,824 853,139
Lease expense......................... 4,644,525 5,028,341 7,172,184 5,348,569 5,855,965
Other expense......................... 76,263 66,095 47,855 35,891 752,168
------------ ------------ ------------- ------------ ------------
Total expenses................... 83,401,690 89,221,139 100,769,865 74,019,766 80,780,248
------------ ------------ ------------- ------------ ------------
Net income....................... $ 6,139,703 $ 8,470,122 $ 13,699,603 $ 8,920,366 $15,665,006
============ ============ ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-3
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<S> <C>
Balance, December 31, 1993............................................................... $ 11,937,250
Net income......................................................................... 6,139,703
-----------------
Balance, December 31, 1994............................................................... 18,076,953
Distributions...................................................................... 553,000
Net income......................................................................... 8,470,122
-----------------
Balance, December 31, 1995............................................................... 25,994,075
Distributions...................................................................... 700,327
Net income......................................................................... 13,699,603
-----------------
Balance, December 31, 1996............................................................... 38,993,351
Distributions (unaudited).......................................................... 2,161,760
Net income (unaudited)............................................................. 15,665,006
-----------------
Balance, September 30, 1997 (unaudited).................................................. $ 52,496,597
=================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-4
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31, September 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
---------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:........ (unaudited) (unaudited)
Net income............................... $ 6,139,703 $ 8,470,122 $ 13,699,603 $ 8,920,366 $ 15,665,006
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization............ 3,296,625 5,410,831 8,551,401 6,157,598 8,220,683
Changes in assets and liabilities:
Restricted cash........................ 419,132 (622,075) 529,838 1,048,651 210,244
Accounts receivable.................... (1,142,691) (1,532,899) (1,149,537) (1,477,913) (519,606)
Inventories............................ (212,323) (748,303) (339,259) (481,077) (69,474)
Prepaid expenses....................... 1,219,761 (98,817) 1,865,889 1,359,123 (173,798)
Other assets........................... 8,947 50,577 (14,857) (14,857) 13,667
Accounts payable....................... 232,246 758,418 (349,125) (765,388) (303,879)
Accrued expenses and other liabilities. 785,464 1,534,536 (208,958) 444,074 1,246,428
------------- ------------- ------------- ------------- -------------
Net cash provided by operating
activities........................ 10,746,864 13,222,390 22,584,995 15,190,577 24,289,271
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of hotel properties, net of
cash acquired.......................... (11,797,879) (15,258,563) (4,310,617) (4,310,617) (11,179,945)
Improvements and additions to properties. (7,561,190) (20,162,146) (8,472,233) (6,502,968) (7,493,530)
------------- ------------- ------------- ------------- -------------
Net cash used in investing
activities....................... (19,359,069) (35,420,709) (12,782,850) (10,813,585) (18,673,475)
------------- ------------- ------------- ------------- -------------
Cash flows from financing activities:
Principal payments on borrowings......... (1,546,262) (1,732,452) (41,379,392) (41,083,153) (2,062,021)
Proceeds from borrowings................. 13,550,000
Payment of deferred costs................ (2,291,917) (176,080) (129,810) (106,775)
Increase (decrease) in intercompany
advance................................ 10,579,774 12,695,407 33,466,818 38,246,915 (738,346)
Distributions paid....................... (553,000) (700,327) (150,327) (2,161,760)
------------- ------------- ------------- ------------- -------------
Net cash used in financing
activities........................ 9,033,512 21,668,038 (8,788,981) (3,116,375) (5,068,902)
------------- ------------- ------------- ------------- -------------
Net change in cash and cash equivalents..... 421,307 (530,281) 1,013,164 1,260,617 546,894
Cash and cash equivalents at beginning of
period................................... 898,319 1,319,626 789,345 789,345 1,802,509
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents at end of period.. $ 1,319,626 $ 789,345 $ 1,802,509 $ 2,049,962 $ 2,349,403
============= ============= ============= ============= =============
Supplemental disclosures of cash
flow information:
Cash paid during the year for interest... $ 7,259,053 $ 5,819,637 $ 5,799,881 $ 4,874,085 $ 996,415
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-5
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Organization - American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company" or "Registrant"), together with two of its
subsidiaries, Mt. Arlington L.L.C and Portland/Shelton L.L.C will acquire a 100%
ownership interest in nineteen hotels (the "Prime Portfolio Acquisition Hotels")
from entities unaffiliated with the Company, the Operating Partnership or its
subsidiaries (the "Selling Corporations"). The portfolio will be purchased in
two phases. Eight hotels ("Prime Group I Acquisition") were acquired on January
8, 1998 and the remaining eleven hotels ("Prime Group II Acquisition") will be
acquired between September 30, 1998 and March 31, 1999. The Company, established
to acquire, own and lease hotel properties, was formed as a Maryland corporation
qualifying as a real estate investment trust ("REIT"). The Company completed an
Initial Public Offering of its common stock on July 31, 1996.
Basis of Presentation - The accompanying combined financial statements
of the Prime Portfolio Acquisition Hotels have been prepared to comply with the
rules and regulations of the Securities and Exchange Commission ("SEC") and are
presented on a combined basis consistent with the Company due to anticipated
common ownership and management since the entities will be the subject of a
business combination with the Company. The Prime Portfolio Acquisition Hotels
consist of the following:
<TABLE>
<CAPTION>
Property Name Location No. of Rooms
------------- -------- ------------
<S> <C> <C>
Prime Group I Acquisition:
St. Tropez Suites Las Vegas Las Vegas, Nevada 149
Crowne Plaza Suites Las Vegas Las Vegas, Nevada 201
Ramada Inn Mahwah Mahwah, New Jersey 128
Sheraton Crossroads Hotel Mahwah Mahwah, New Jersey 225
Ramada Plaza Meriden Meriden, Connecticut 150
Sheraton Four Points Hotel Mt. Arlington Mt. Arlington, New Jersey 124
Crowne Plaza Portland Portland, Oregon 161
Ramada Plaza Shelton Shelton, Connecticut 155
---------------
1,293
---------------
Prime Group II Acquisition:
Ramada Inn Armonk Armonk, New York 140
Ramada Inn Danbury Danbury, Connecticut 181
Ramada Inn Elmsford Elmsford, New York 101
Radisson Hotel and Suites Fairfield Fairfield, New Jersey 204
Ramada Inn Fairfield Fairfield, New Jersey 176
Crowne Plaza Hotel Hasbrouck Heights Hasbrouck Heights, New Jersey 355
Holiday Inn Jamesburg Jamesburg, New Jersey 150
Holiday Inn Princeton Princeton, New Jersey 240
Sheraton Hotel Saratoga Springs Saratoga Springs, New York 240
Radisson Suites Secaucus Secaucus, New Jersey 151
Radisson Hotel Trevose Trevose, Pennsylvania 272
---------------
2,210
---------------
Total Prime Portfolio Acquisition Hotels 3,503
===============
</TABLE>
F-6
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
In February 1997, the Selling Corporations acquired the Holiday Inn
Jamesburg for approximately $11.2 million in cash. The acquisition was accounted
for as a purchase and accordingly, the revenues and expenses have been included
in reported results from the date of acquisition.
In September 1996, the Selling Corporations acquired the Radisson
Suites Secaucus for $16.5 million including $12.2 million in assumed debt. The
results of operations for periods prior to acquisition by the selling
corporation have been included in the accompanying financial statements.
In August 1995, the Selling Corporation acquired the St. Tropez Suites
Las Vegas for $15.2 million. The results of operations for periods prior to
acquisition by the Selling Corporations have been included in the accompanying
financial statements.
The Selling Corporations conducted business as taxable corporations.
These financial statements have been prepared to show the operations and
financial position of the combined Prime Portfolio Acquisition Hotels,
substantially all of whose assets and operations will be acquired by the
Company. The Company is a REIT and accordingly, will not pay any federal income
taxes, therefore, the financial statements have been presented on a pretax
basis.
2. Summary of Significant Accounting Policies
Investment in Hotel Properties - The hotel properties are stated at
cost and are depreciated using the straight-line method over estimated useful
lives of 20-40 years for building and improvements and 3-10 years for furniture,
fixtures and equipment.
The owners of the Prime Portfolio Acquisition 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 owners of the Prime Portfolio Acquisition
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 the hotel property is recoverable based on the undiscounted future cash
flows.
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 principally for capital and property tax reserves.
Inventories - Inventories consist primarily of supplies, 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 and license fees. Amortization of deferred loan costs is computed
using the effective yield method based upon the terms of the loan agreement.
Amortization of license fees is computed using the straight-line method over the
life of the agreement.
Income Taxes - The Prime Portfolio Acquisition Hotels results of
operations are included in the tax returns of the owners. The owner's tax
returns and the amount of allocable income or loss are subject to examination by
federal and state taxing authorities. If such examinations result in changes to
income or loss, the tax liability of the owners could be changed accordingly.
The Company is a REIT and will therefore not be subject to corporate income
taxes. Accordingly, the combined statements of operations contain no provision
for federal income taxes.
F-7
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
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. Such losses have been within the owners' estimates.
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, 1996, bank account
balances exceeded Federal Deposit Insurance Corporation limits by approximately
$1,021,750.
Seasonality - The hotel industry is seasonal in nature. Generally,
revenue at these hotels is greater in the second and third quarters of a
calendar year.
Recently Issued Statement of Financial Accounting Standards - The Prime
Portfolio Acquisition Hotels adopted the 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 Prime Portfolio
Acquisition Hotels financial statements.
Interim Financial Information - The unaudited interim financial
statements as of September 30, 1997 and for the nine months ended September 30,
1996 and 1997 have been prepared pursuant to the rules and regulations of the
SEC. The notes to the interim financial statements included herein are intended
to highlight significant changes to the notes to the December 31, 1996 combined
financial statements and present interim disclosures required by the SEC. The
accompanying interim combined financial statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the combined
interim financial statements. All such adjustments are of a normal and recurring
nature.
3. Debt
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
First mortgage notes payable in monthly installments including interest
at fixed rates ranging from 9.2% to 12.455% maturing at various dates
through November 2014.................................................... $ 16,801,378 $ 10,443,781
First mortgage notes payable in monthly installments including
interest at floating rates ranging from prime
(8.25% at December 31, 1996) to prime plus 4.75% maturing
at various dates through July 2007....................................... 62,656,039 27,634,244
----------------- -----------------
$ 79,457,417 $ 38,078,025
================= =================
</TABLE>
Mortgage debt is collateralized by the investment in hotel properties.
The Selling Corporations incurred debt of $1,550,000 in connection with
the purchase of the Holiday Inn Princeton in January 1995. The Selling
Corporations also incurred debt of $12,000,000 in connection with the purchase
of the Sheraton Crossroads Hotel Mahwah in February 1995.
F-8
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
Aggregate annual principal payments for the Prime Portfolio Acquisition
Hotels' debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ---------------
<S> <C>
1997 ..................................... $ 8,077,933
1998 ..................................... 8,783,910
1999 ..................................... 8,333,758
2000 ..................................... 1,351,681
2001 ..................................... 560,112
Thereafter ............................... 10,970,631
---------------
$ 38,078,025
===============
</TABLE>
4. Leases
Eight of the Prime Portfolio Acquisition hotels are subject to leases
with third parties with respect to the building and/or land underlying each such
hotel. The leases require the tenant to pay all expenses of owning and operating
the hotels, including real estate taxes and structural maintenance and repairs.
The Radisson Hotel and Suites Secaucus is encumbered by a ground lease
expiring in June 2062. The lease requires minimum rent payments equal to the sum
of the number of guest rooms times $1,000 and percentage rent payments equal to
10% of the gross room revenue in excess of the number of guest rooms times
$23,500.
The Ramada Inn Fairfield is encumbered by a ground lease expiring in
November 2000 with two extension options of 10 years each and one extension
option of 20 years. The lease requires minimum annual lease payments of $364,440
payable in equal monthly installments.
The Ramada Inn Armonk is encumbered by a ground lease expiring in June
2000 with five additional five year renewal options. The lease requires minimum
annual lease payments of $261,468 plus a percentage rent equal to 10% of gross
room receipts in excess of $7,000, multiplied by the number of guest rooms at
the hotel, less applicable use and occupancy taxes.
The building and underlying land related to the Radisson Hotel and
Suites Fairfield is encumbered by a lease expiring in December 1999 with three
renewal options of 10 years each. Minimum annual lease payments are based upon
the amount due under existing mortgages held by the lessor plus an amount equal
to 10% of net operating income.
The building and underlying land related to the Holiday Inn Princeton
is encumbered by a lease expiring in December 2004 with three renewal options of
10 years each. Minimum annual lease payments are based upon the amount due under
existing mortgages held by the lessor plus a percent of net operating income, as
defined, ranging from 5% to 22.5%.
The building and underlying land related to the Ramada Inn Elmsford is
encumbered by a lease expiring in December 2003 with five renewal options of
five years each. The lease requires minimum annual lease payments of $273,552
plus a percentage rent of 10% of gross room receipts in excess of $7,500,
multiplied by the number of guest rooms at the hotel, less all applicable use
and occupancy taxes.
The building, underlying land, and certain equipment related to the
Sheraton Hotel Saratoga Springs is encumbered by a lease expiring in December
2007. Minimum annual lease payments are based on an amount equal to one-sixth of
the amount payable by the lessor as interest on the next interest payment date
and one-twelfth of the amount payable by the lessor as principal on the next
bond payment date.
The building and underlying land related to the Sheraton Four Points
Hotel Mt. Arlington is encumbered by a lease expiring in August 1998 with 99 one
year renewal options. Renewals will be automatic unless the lessor is notified
in writing, at least 60 days before the end of the initial term or any renewal
term, of the lessee's election not to renew.
F-9
<PAGE>
PRIME PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
In the event the lessee notifies the lessor of its election not to renew the
lease, the lessor shall have the option to convert the lease to a management
agreement between the lessor, as owner, and lessee, as managing agent.
Management fee payments would equal 5% of gross receipts from the operation of
the hotel and would expire five years after its commencement. Minimum annual
lease payments are based on i) an amount equal to the required monthly bond
payments due from the lessor to the New Jersey Economic Development Authority,
ii) monthly installments due to the lessor of $5,833, and iii) a percentage rent
due to the lessor, payable annually, in the amount of 5% of gross room receipts
in excess of $20,000, multiplied by the number of guest rooms, less applicable
use and occupancy taxes.
5. Commitments
The intercompany advance is due to the Selling Corporations and their
affiliates for advances used to pay for operating expenses incurred, management
fees, and mortgage financings. The intercompany advance is non-interest bearing.
Management fees of 3% to 5% of gross revenues of each hotel are paid to
an affiliate of the hotels.
Franchise fees represent the annual expense for franchise royalties and
reservation services under the terms of the hotel franchise agreement. The Prime
Portfolio Acquisition Hotels' franchise fees range from 1.5% to 5% of gross room
revenue.
The Prime Portfolio Acquisition Hotels are required to remit 1% to 4.5%
of gross room revenue to franchisers for sales and advertising expenses incurred
to promote the hotels at the national level. Additional sales and advertising
costs are incurred at the local property level.
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 Prime Portfolio Acquisition 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 Prime
Portfolio Acquisition Hotels' debt approximates fair value due to the Prime
Portfolio Acquisition Hotels' ability to obtain such borrowings at comparable
interest rates.
7. Subsequent Events
As discussed in Note 1, the Company has entered into an agreement to
purchase the Prime Portfolio Acquisition Hotels in 1998. The acquisition will be
accounted for by the Company using the purchase method of accounting. These
financial statements do not reflect any transaction in connection with the
acquisition of the Prime Portfolio Acquisition Hotels by the Company.
On January 8, 1998, the Company, the Operating Partnership and two of
its subsidiaries purchased the first phase of the portfolio, the Prime Group I
Acquisition. The acquisition was 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,
postacquisition debt is different than the historical debt reflected in the
accompanying financial statements. The combined financial statements do not
reflect any of the transactions in connection with the acquisition of the Prime
Group I Acquisition by the Company.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PRIME PORTFOLIO ACQUISITION HOTELS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended December 31, 1996
Real estate as of December 31, 1996:
-----------------------------------
<TABLE>
<CAPTION>
Accumulated Net
Depreciation Book Value
Land and Building and Building and Building and
Description Encumbrances Improvements Improvements Total Improvements Improvements
----------- ------------ ------------ ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
St. Tropez Suites Las Vegas $ 4,930,378 $ 10,013,384 $ 14,943,762 $ 405,587 $ 9,607,797
Crowne Plaza Suites Las Vegas 1,027,500 6,091,247 7,118,747 661,844 5,429,403
Ramada Inn Mahwah $ 2,890,987 216,460 1,434,642 1,651,102 202,243 1,232,399
Sheraton Crossroads Hotel Mahwah 11,310,550 3,603,948 12,790,395 16,394,343 812,148 11,978,247
Ramada Plaza Meriden 530,397 2,400,011 2,930,408 266,414 2,133,597
Sheraton Four Points Hotel Mt. 189,367 189,367 28,883 160,484
Arlington
Crowne Plaza Portland 5,414,882 1,508,189 9,396,678 10,904,867 1,162,310 8,234,368
Crowne Plaza Shelton 5,028,899 1,348,562 7,694,703 9,043,265 891,706 6,802,997
Ramada Inn Armonk 303,663 303,663 70,173 233,490
Ramada Inn Danbury 642,882 2,991,246 3,634,128 391,247 2,599,999
Ramada Inn Elmsford 1,139,811 1,139,811 359,061 780,750
Radisson Hotel and Suites Fairfield 19,526,377 19,526,377 492,600 19,033,777
Ramada Inn Fairfield 992,433 992,433 81,504 910,929
Crowne Plaza Hotel Hasbrouck Heights 3,759,476 17,833,782 21,593,258 860,887 16,972,895
Holiday Inn Princeton 1,262,500 3,533,181 3,533,181 226,009 3,307,172
Sheraton Hotel Saratoga Springs 8,212,527 8,212,527 1,740,171 6,472,356
Radisson Suites Secaucus 12,170,207 14,057,149 14,057,149 146,542 13,910,607
Radisson Hotel Trevose 1,135,850 7,057,944 8,193,794 670,336 6,387,608
-------------- ------------- -------------- ------------- ------------- -------------
$ 38,078,025 $ 18,703,642 $ 125,658,540 $144,362,182 $ 9,469,665 $116,188,875
============== ============= ============== ============= ============= =============
<CAPTION>
Life Upon
Expected Which
Date of Depreciation
Date of Company in Statement
Description Acquisition Acquisition Is Computed
----------- ----------- ----------- -----------
<S> <C> <C> <C>
St. Tropez Suites Las Vegas 1994 1998 20 - 40 Yrs.
Crowne Plaza Suites Las Vegas 1993 1998 20 - 40 Yrs.
Ramada Inn Mahwah 1992 1998 20 - 40 Yrs.
Sheraton Crossroads Hotel Mahwah 1994 1998 20 - 40 Yrs.
Ramada Plaza Meriden 1993 1998 20 - 40 Yrs.
Sheraton Four Points Hotel Mt. 1984 1998 20 - 40 Yrs.
Arlngton
Crowne Plaza Portland 1993 1998 20 - 40 Yrs.
Crowne Plaza Shelton 1990 1998 20 - 40 Yrs.
Ramada Inn Armonk 1975 1998 20 - 40 Yrs.
Ramada Inn Danbury 1993 1998 20 - 40 Yrs.
Ramada Inn Elmsford 1974 1998 20 - 40 Yrs.
Radisson Hotel and Suites Fairfield 1996 1998 20 - 40 Yrs.
Ramada Inn Fairfield 1974 1998 20 - 40 Yrs.
Crowne Plaza Hotel Hasbrouck Heights 1994 1998 20 - 40 Yrs.
Holiday Inn Princeton 1995 1998 20 - 40 Yrs.
Sheraton Hotel Saratoga Springs 1983 1998 20 - 40 Yrs.
Radisson Suites Secaucus 1996 1998 20 - 40 Yrs.
Radisson Hotel Trevose 1994 1998 20 - 40 Yrs.
</TABLE>
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PRIME PORTFOLIO ACQUISITION HOTELS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended December 31, 1996 - (Continued)
<TABLE>
<S> <C>
Reconciliation of Real Estate:
-----------------------------
Balance at December 31, 1994 ................................. $ 128,422,087
Additions .................................................. 17,360,057
----------------
Balance at December 31, 1995 ................................. 145,782,144
Additions and revaluation due to hotel ownership
transfer, net............................................. (1,419,962)
----------------
Balance at December 31, 1996 ................................. $ 144,362,182
================
Reconciliation of Accumulated Depreciation:
------------------------------------------
Balance at December 31, 1994 ................................. $ 14,459,378
Depreciation and revaluation due to hotel ownership
transfer, net............................................. (3,544,314)
----------------
Balance at December 31, 1995 ................................. 10,915,064
Depreciation and revaluation due to hotel ownership
transfer, net............................................... (1,445,399)
----------------
Balance at December 31, 1996.................................. $ 9,469,665
================
</TABLE>
F-12
<PAGE>
Report of Independent Accountants
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying combined balance sheet and financial
statement schedule of the Potomac Portfolio Acquisition Hotels (described in
Note 1) as of December 31, 1996 and the related combined statements of
operations, partners' capital and cash flows for the year then ended. These
combined financial statements are the responsibility of the Potomac Portfolio
Acquisition Hotels' management. Our responsibility is to express an opinion on
these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Potomac
Portfolio Acquisition Hotels as of December 31, 1996, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above which is presented for the purpose of
additional analysis and to comply with the rules and regulations of the
Securites and Exchange Commission, 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 3, 1997
F-13
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
----------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Investments in hotel properties, at cost:
Land and land improvements.................................... $ 3,959,897 $ 3,959,897
Building and improvements..................................... 41,881,752 41,890,244
Furniture, fixtures and equipment............................. 11,532,784 12,418,600
----------------- ----------------
57,374,433 58,268,741
Less: accumulated depreciation.................................... 21,303,016 22,703,003
----------------- ----------------
Net investment in hotel properties................................ 36,071,417 35,565,738
Cash and cash equivalents......................................... 0 0
Restricted cash................................................... 1,980,071 2,524,372
Accounts receivable, net.......................................... 722,379 2,371,817
Inventories....................................................... 372,996 360,258
Prepaid expenses.................................................. 466,013 1,589,802
Deferred expenses................................................. 647,448 577,560
Other assets...................................................... 8,900 3,067
----------------- ----------------
Total assets.................................................. $ 40,269,224 $ 42,992,614
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Mortgage payable.................................................. $ 27,061,468 $ 26,600,929
Bank overdraft.................................................... 43,952 202,239
Payable to affiliate.............................................. 658,171
Accounts payable, trade........................................... 464,538 610,565
Accrued expenses and other liabilities............................ 1,016,222 1,317,754
----------------- ----------------
Total liabilities............................................. 28,586,180 29,389,658
Commitments and contingencies (Note 4)
Partners' capital................................................. 11,683,044 13,602,956
----------------- ----------------
Total liabilities and partners' capital....................... $ 40,269,224 $ 42,992,614
================= ================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-14
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
December 31, -------------------------------
1996 1996 1997
---------------- ------------- -------------
(unaudited)
<S> <C> <C> <C>
Revenues:
Room revenue.................................. $ 16,343,788 $ 12,318,266 $ 13,153,364
Food and beverage revenue..................... 6,336,526 4,502,916 4,626,149
Other revenue................................. 797,053 571,932 695,420
---------------- ------------- -------------
Total revenue............................ 23,477,367 17,393,114 18,474,933
Expenses:
Property operating costs and expenses......... 4,628,571 3,451,564 3,618,729
Food and beverage costs and expenses.......... 5,078,578 3,701,143 3,746,996
General and administrative.................... 1,633,099 1,187,808 1,256,573
Advertising and promotion..................... 1,295,176 971,189 934,203
Repairs and maintenance....................... 1,199,385 874,515 909,804
Utilities..................................... 1,090,440 835,835 855,869
Management fees............................... 693,552 513,483 543,930
Franchise costs............................... 669,654 528,598 569,633
Depreciation.................................. 1,939,327 1,300,355 1,399,987
Amortization.................................. 70,804 45,464 69,888
Real estate and personal property taxes, and
property insurance........................ 659,449 505,871 479,235
Interest expense.............................. 1,963,850 1,480,714 1,426,832
Other expense................................. 658,299 461,401 397,574
---------------- ------------- -------------
Total expenses........................... 21,580,184 15,857,940 16,209,253
---------------- ------------- -------------
Net income............................... $ 1,897,183 $ 1,535,174 $ 2,265,680
================ ============= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-15
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S> <C>
Balance, December 31, 1995.............................................................. $ 9,785,861
Net income........................................................................... 1,897,183
----------------
Balance, December 31, 1996.............................................................. 11,683,044
Distributions (unaudited)............................................................ (345,768)
Net income (unaudited)............................................................... 2,265,680
----------------
Balance, September 30, 1997 (unaudited)................................................. $ 13,602,956
================
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-16
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
September 30,
December 31, ---------------------------
1996 1996 1997
---------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income.................................................... $ 1,897,183 $ 1,535,174 $ 2,265,680
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.................................................. 1,939,327 1,300,355 1,399,987
Amortization.................................................. 70,804 45,464 69,888
Loss on fixed asset disposal.................................. 25,410 25,410
Changes in assets and liabilities:
Restricted cash............................................ (911,663) (1,687,606) (544,301)
Accounts receivable........................................ 440,208 (1,176,219) (1,649,438)
Inventories................................................ (8,365) 5,342 12,738
Prepaid expenses........................................... (193,074) (288,740) (1,123,789)
Other assets............................................... 200 5,833
Accounts payable........................................... (53,839) 100,130 146,027
Payable to affiliate....................................... 658,171
Accrued expenses and other liabilities..................... 162,287 412,509 301,532
---------------- ------------ ------------
Net cash provided by operating activities................ 3,368,478 271,819 1,542,328
---------------- ------------ ------------
Cash flows from investing activities:
Improvements and additions to properties...................... (2,591,997) (791,512) (894,308)
---------------- ------------ ------------
Cash flows from financing activities:
Increase (decrease) in bank overdraft......................... (155,385) 1,019,840 158,287
Principal payments on borrowings.............................. (522,916) (401,967) (460,539)
Payment of deferred financing costs........................... (98,180) (98,180)
Distributions................................................. (345,768)
---------------- ------------ ------------
Net cash provided by financing activities................ (776,481) 519,693 (648,020)
---------------- ------------ ------------
Net change in cash and cash equivalents.......................... 0 0 0
Cash and cash equivalents at beginning of period................. 0 0 0
---------------- ------------ ------------
Cash and cash equivalents at end of period....................... $ 0 $ 0 $ 0
================ ============ ============
Supplemental disclosures of information:
Cash paid during the year for interest........................ $ 1,963,850 $ 1,480,714 $ 1,426,832
================ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-17
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Organization - American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company" or "Registrant"), will acquire a 100% ownership
interest in four hotels (the "Potomac Portfolio Acquisition Hotels") from
entities unaffiliated with the Company and the Operating Partnership. The
Company, established to acquire, own and lease hotel properties, was formed as
a Maryland corporation qualifying as a real estate investment trust ("REIT").
The Company completed an Initial Public Offering of its common stock on
July 31, 1996.
Basis of Presentation - The accompanying combined financial statements
of the Potomac Portfolio Acquisition Hotels have been prepared to comply with
the rules and regulations of the Securities and Exchange Commission ("SEC") and
are presented on a combined basis consistent with the Company due to anticipated
common ownership and management since the entities will be the subject of a
business combination with the Company. The Potomac Portfolio Acquisition Hotels
consist of the following:
<TABLE>
<CAPTION>
Property Name Location No. of Rooms
------------- -------- ------------
<S> <C> <C>
Ramada Old Town Alexandria Alexandria, Virginia 258
Holiday Inn Historic District Alexandria Alexandria, Virginia 178
Holiday Inn Annapolis Annapolis, Maryland 220
Holiday Inn Express BWI Airport Hanover, Maryland 159
</TABLE>
2. Summary of Significant Accounting Policies
Investment in Hotel Properties - The hotel properties are stated at cost and
are depreciated using the straight-line method over estimated useful lives of
31-40 years for building and improvements and 5-10 years for furniture, fixtures
and equipment.
The owners of the Potomac Portfolio Acquisition 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 owners of the Potomac Portfolio Acquisition
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 the hotel property is recoverable based on the undiscounted future cash
flows.
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 principally for capital and property tax reserves.
Inventories - Inventories consist primarily of supplies, 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 and license fees. Amortization of deferred loan costs is computed using
the effective yield method based upon the terms of the loan agreement.
Amortization of license fees is computed using the straight-line method over the
life of the agreement. Accumulated amortization at December 31, 1996 is
$126,166.
F-18
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
Income Taxes - The Potomac Portfolio Acquisition Hotels are included in
limited partnerships which are not taxable entities. The results of operations
are included in the tax returns of the partners, accordingly, the statements of
operations contain no provision for federal income taxes. The partnership's tax
returns and the amount of allocable income or loss are subject to examination by
federal and state taxing authorities. If such examinations result in changes to
income or loss, the tax liability of the partners could be 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. Such losses have been within the owners' estimates.
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, 1996, bank account balances
exceeded Federal Deposit Insurance Corporation limits by approximately
$1,980,071.
Seasonality - The hotel industry is seasonal in nature. Generally, revenue
at the Potomac Portfolio Acquisition Hotels is greater in the second and third
quarters of a calendar year.
Interim Financial Information - The unaudited interim financial statements
as of September 30, 1997 and for the nine month periods ended September 30, 1996
and 1997 have been prepared pursuant to the rules and regulations of the SEC.
The notes to the interim financial statements included herein are intended to
highlight significant changes to the notes to the December 31, 1996 combined
financial statements and present interim disclosures required by the SEC. The
accompanying interim combined financial statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the combined
interim financial statements. All such adjustments are of a normal and recurring
nature.
3. Debt
Debt as of December 31, 1996 consists of the following:
<TABLE>
<S> <C>
First mortgage notes payable in monthly installments including interest at the fixed
rate of 9.02% maturing August 31, 2000.................................................... $ 13,685,719
First mortgage note payable in monthly installments including interest at the floating
rate of prime (8.25% at December 31, 1996) plus 2% maturing January 31, 2015.............. 5,004,302
First mortgage note payable in monthly installments including interest at the fixed
rate of 8.375% maturing January 3, 2001................................................... 5,287,217
First mortgage note payable in monthly installments including interest at the floating
rate of LIBOR (5.44% at December 31, 1996) plus 4.25% maturing December 31, 2001.......... 3,084,230
---------------
$ 27,061,468
===============
</TABLE>
Mortgage debt is collateralized by the investment in hotel properties.
F-19
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
NOTES TO FINANCIAL STATEMENTS
Aggregate annual principal payments for the Potomac Portfolio Acquisition
Hotels' debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- -------------
<S> <C>
1997...................................... $ 581,650
1998...................................... 639,229
1999...................................... 702,559
2000...................................... 13,135,989
2001...................................... 7,573,246
Thereafter................................ 4,428,795
-------------
$ 27,061,468
=============
</TABLE>
4. Commitments
Management fees of 3% of gross revenues of each hotel are paid to an
affiliate of the hotels, except for the Holiday Inn Historic District Alexandria
for which the base management fee is 4% of gross revenues. Additionally, the
Holiday Inn Historic District Alexandria pays incentive management fees of 1% of
gross revenues in excess of $2,670,000. Management fees of $693,552 were paid in
1996 which includes $39,768 of incentive fees.
Franchise fees represent the annual expense for franchise royalties and
reservation services under the terms of the hotel franchise agreement. The
Potomac Portfolio Acquisition Hotels' franchise fees range from 3% to 5% of
gross room revenue.
The Potomac Portfolio Acquisition Hotels are required to remit 1% to 3% of
gross room revenue to franchisers for sales and advertising expenses incurred to
promote the hotels at the national level. 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 Potomac Portfolio Acquisition 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 Potomac
Portfolio Acquisition Hotels' debt approximates fair value due to the Potomac
Portfolio Acquisition Hotels' ability to obtain such borrowings at comparable
interest rates.
6. Subsequent Events
As discussed in Note 1, the Company has entered into an agreement to
purchase the Potomac Portfolio Acquisition Hotels in 1998. The acquisition will
be accounted for by the Company using the purchase method of accounting. These
financial statements do not reflect any transaction in connection with the
acquisition of the Potomac Portfolio Acquisition Hotels by the Company.
F-20
<PAGE>
POTOMAC PORTFOLIO ACQUISITION HOTELS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended December 31, 1996
<TABLE>
<CAPTION>
Real estate as of December 31, 1996:
- -------------------------------------
Accumulated
Depreciation
Land and Building and Building and
Description Encumbrances Improvements Improvements Total Improvements
----------- ------------ ------------ ------------ ----- ------------
Ramada Old Town Alexandria $ 5,287,217 $ 686,824 $ 7,950,709 $ 8,637,533 $ 4,492,709
Holiday Inn Historic District
Alexandria 13,685,719 67,826 16,171,189 16,239,015 4,357,605
Holiday Inn Annapolis 5,004,302 1,754,178 11,616,616 13,370,794 3,292,421
Holiday Inn Express BWI Airport 3,084,230 1,451,069 6,143,238 7,594,307 1,210,641
----------- ----------- ----------- ----------- -----------
$27,061,468 $ 3,959,897 $41,881,752 $45,841,649 $13,353,376
=========== =========== =========== =========== ===========
<CAPTION>
Life Upon
Which
Net Depreciation
Book Value Expected in
Building and Date of Date of Statement
Description Improvements Construction Acquisition Is Computed
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Ramada Old Town Alexandria $ 3,458,000 1977 1998 31 - 40 Yrs.
Holiday Inn Historic District
Alexandria 11,813,584 1983 1998 31 - 40 Yrs.
Holiday Inn Annapolis 8,324,195 1988 1998 31 - 40 Yrs.
Holiday Inn Express BWI Airport 4,932,597 1988 1998 31 - 40 Yrs.
------------
$ 28,528,376
============
</TABLE>
<TABLE>
<S> <C>
Reconciliation of Real Estate:
------------------------------
Balance at December 31, 1995............................. $ 45,745,853
Additions............................................ 95,796
-------------
Balance at December 31, 1996............................ $ 45,841,649
=============
Reconciliation of Accumulated Depreciation:
-------------------------------------------
Balance at December 31, 1995............................ $ 12,144,022
Depreciation......................................... 1,209,354
-------------
Balance at December 31, 1996............................ $ 13,353,376
=============
</TABLE>
F-21
<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 FSA Portfolio Acquisition Hotels (described in Note 1)
as of December 31, 1996 and September 30, 1997 and the related combined
statements of operations, equity and cash flows for the years ended December 31,
1995 and 1996, and for the nine month period ended September 30, 1997. These
combined financial statements are the responsibility of the FSA Portfolio
Acquisition Hotels' 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 ("SEC") as described in Note 1 to the financial statements and are
not intended to be a complete presentation of the FSA Portfolio Acquisition
Hotels.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of the FSA
Portfolio Acquisition Hotels as of December 31, 1996 and September 30, 1997 and
the combined results of their operations and their cash flows for the years
ended December 31, 1995 and 1996, and for the nine month period ended September
30, 1997, in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above
which is presented for the purpose of additional analysis and to comply with the
rules and regulations of the SEC, 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
January 15, 1998
F-22
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1996 1997
-------------- --------------
<S> <C> <C>
Investments in hotel properties, at cost:
Land and land improvement......................................... $ 17,410,300 $ 17,410,300
Buildings and improvements........................................ 153,600,775 156,963,663
Furniture, fixtures and equipment................................. 13,817,423 23,559,780
-------------- --------------
184,828,498 197,933,743
Less accumulated depreciation......................................... (11,870,537) (17,834,042)
-------------- --------------
Net investment in hotel properties.................................... 172,957,961 180,099,701
Cash and cash equivalents............................................. 6,115,749 5,848,141
Accounts receivable, net.............................................. 3,650,813 4,115,546
Intercompany receivable............................................... 1,314,695 1,635,944
Inventories........................................................... 450,067 479,897
Prepaid expenses...................................................... 775,341 1,209,378
Other assets, net..................................................... 443,216 498,040
-------------- --------------
Total assets.............................................. $ 185,707,842 $ 193,886,647
============== ==============
LIABILITIES AND EQUITY
Accounts payable, trade............................................... $ 1,156,129 $ 1,080,662
Accrued expenses and other liabilities................................ 3,475,479 5,459,184
-------------- --------------
Total liabilities......................................... 4,631,608 6,539,846
-------------- --------------
Commitments and contingencies (Notes 4 and 5)
Capital............................................................... 198,664,240 190,258,581
Accumulated deficit................................................... (17,588,006) (2,911,780)
-------------- --------------
Total equity.............................................. 181,076,234 187,346,801
-------------- --------------
Total liabilities and equity.............................. $ 185,707,842 $ 193,886,647
============== ==============
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-23
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended For the Nine Month Period Ended
December 31, September 30,
-------------------------------- ---------------------------------
1995 1996 1996 1997
--------------- --------------- ---------------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Room revenue.......................... $ 49,889,032 $ 53,420,099 $ 41,249,204 $ 52,212,194
Food and beverage revenue............. 12,559,730 13,093,606 9,484,045 11,920,407
Lease revenue......................... 415,799 433,136 296,952 353,972
Other revenue......................... 3,754,443 4,064,616 3,062,649 3,483,513
--------------- --------------- ---------------- ----------------
Total revenues................ 66,619,004 71,011,457 54,092,850 67,970,086
--------------- --------------- ---------------- ----------------
Expenses:
Property operating costs and
expenses............................ 14,513,577 15,385,916 11,729,413 13,553,302
Food and beverage costs and expenses.. 10,257,783 10,696,785 7,814,850 9,340,014
General and administrative............ 7,058,768 7,412,892 5,472,295 5,704,824
Advertising and promotion............. 4,476,519 5,243,745 3,907,476 4,535,476
Repairs and maintenance............... 3,847,221 4,029,018 2,970,054 3,166,285
Utilities............................. 4,194,643 4,308,091 3,273,599 3,295,026
Management fees....................... 1,465,413 1,453,691 1,113,672 1,423,762
Franchise costs....................... 2,114,220 1,863,307 1,426,694 1,915,319
Depreciation.......................... 5,629,152 6,241,385 4,681,039 5,963,505
Real estate and personal property
taxes, and property insurance....... 3,282,075 3,584,526 2,747,393 2,624,371
Other expenses........................ 2,269,517 1,961,239 1,340,197 1,771,976
--------------- --------------- ---------------- ----------------
Total expenses................ 59,108,888 62,180,595 46,476,682 53,293,860
--------------- --------------- ---------------- ----------------
Net income.................... $ 7,510,116 $ 8,830,862 $ 7,616,168 $ 14,676,226
=============== =============== ================ ================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-24
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
Equity
-----------------
<S> <C>
Balance, December 31, 1994................................... $ 175,645,663
Net income............................................... 7,510,116
Capital contributions.................................... 3,235,946
Distributions............................................ (6,833,286)
-----------------
Balance, December 31, 1995................................... 179,558,439
Net income............................................... 8,830,862
Capital contributions.................................... 4,461,757
Distributions............................................ (11,774,824)
-----------------
Balance, December 31, 1996................................... 181,076,234
Net income............................................... 14,676,226
Capital contributions.................................... 14,820,420
Distributions............................................ (23,226,079)
-----------------
Balance, September 30, 1997.................................. $ 187,346,801
=================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-25
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended For the Nine Month Period Ended
December 31, September 30,
-------------------------------- ---------------------------------
1995 1996 1996 1997
--------------- ---------------- ---------------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 7,510,116 $ 8,830,862 $ 7,616,168 $ 14,676,226
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 5,629,152 6,241,385 4,681,039 5,963,505
Changes in assets and liabilities:
Accounts receivable....................... (1,641,507) (717,628) (1,148,983) (464,733)
Intercompany receivable................... (57,130) (28,256) (13,561) (321,249)
Inventories............................... (111,670) (15,978) (4,247) (29,830)
Prepaid expenses.......................... (620,467) (9,300) (56,231) (434,037)
Other assets.............................. (233,774) (21,772) (356,833) (54,824)
Accounts payable, trade................... 511,021 (426,348) (227,061) (75,467)
Accrued expenses and other liabilities.... (662,190) 1,021,258 2,079,041 1,983,705
--------------- ---------------- ---------------- ----------------
Net cash provided by operating
activities........................... 10,323,551 14,874,223 12,569,332 21,243,296
--------------- ---------------- ---------------- ----------------
Cash flows from investing activities:
Improvements and additions to hotel
properties................................ (5,248,803) (5,476,695) (2,367,533) (13,105,245)
--------------- ---------------- ---------------- ----------------
Net cash used in investing activities.. (5,248,803) (5,476,695) (2,367,533) (13,105,245)
--------------- ---------------- ---------------- ----------------
Cash flows from financing activities:
Capital contributions....................... 3,235,946 4,461,757 1,441,332 14,820,420
Distributions paid.......................... (6,833,286) (11,774,824) (10,384,556) (23,226,079)
--------------- ---------------- ---------------- ----------------
Net cash used in financing activities.. (3,597,340) (7,313,067) (8,943,224) (8,405,659)
--------------- ---------------- ---------------- ----------------
Net change in cash and cash equivalents......... 1,477,408 2,084,461 1,258,575 (267,608)
Cash and cash equivalents at beginning of
periods....................................... $ 2,553,880 $ 4,031,288 $ 4,031,288 $ 6,115,749
--------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of periods..... $ 4,031,288 $ 6,115,749 $ 5,289,863 $ 5,848,141
=============== ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-26
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Organization - American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company" or "Registrant"), has contracted to acquire a 100%
equity interest in 14 hotels (the "FSA Portfolio Acquisition Hotels") from
entities (the "Selling Entities") unaffiliated with the Operating Partnership.
American General Hospitality Corporation (the "Company"), established to
acquire, own and lease hotel properties, was formed as a Maryland corporation
qualifying as a real estate investment trust ("REIT"). The Company completed an
Initial Public Offering of its common stock on July 31, 1996.
Basis of Presentation - The FSA Portfolio Acquisition Hotels are under
common control by virtue of various contractual agreements, and it is intended
that every Selling Entity be the subject of a business combination with the
Company. Therefore, the accompanying financial statements of the FSA Portfolio
Acquisition Hotels have been presented on a combined basis and have been
prepared to comply with the rules and regulations of the Securities and Exchange
Commission ("SEC"). The FSA Portfolio Acquisition Hotels consist of the
following:
<TABLE>
<CAPTION>
No. of
Property Name Location Rooms
------------- -------- ------
<S> <C> <C>
Select Inn Bloomington Bloomington, Minnesota 148
Courtyard by Marriott Century City Century City, California 134
DoubleTree Resort Surfside Clearwater Beach Clearwater Beach, California 426
Ramada Inn Gulfview Clearwater Beach Clearwater Beach, California 289
Holiday Inn Fort Lauderdale Beach Fort Lauderdale Beach, Florida 240
Howard Johnson Resort Key Largo Key Largo, Florida 100
Courtyard by Marriott Disney Village Lake Buena Vista, Florida 323
Holiday Inn Madeira Beach Madeira Beach, California 149
Courtyard by Marriott Marina del Rey Marina del Rey, California 276
Mystic Hotel Mystic, Connecticut 77
Holiday Inn Richmond West Richmond, Virginia 280
Radisson Inn Rochester Rochester, New York 171
Holiday Inn Forest Park St. Louis St. Louis, Missouri 120
DoubleTree Hotel Tampa Airport Tampa, Florida 496
</TABLE>
The Selling Entities conducted business so that income taxes were the
responsibility of the owners. Substantially all of the assets and operations of
the Selling Entities will be acquired by the Company, which is a REIT and
accordingly, not subject to federal income taxes. Therefore, the financial
statements have been presented with no provision for federal income taxes.
2. Summary of Significant Accounting Policies
Investment in Hotel Properties - The individual hotel properties were
acquired by the respective Selling Entities during the period from 1992 to 1994,
either through foreclosure or deed-in-lieu of foreclosure of the collateral of
the loan receivables. Hotel properties are stated at the lower of cost or fair
value less selling costs and are depreciated using the straight-line method over
estimated useful lives of 39 years for buildings and improvements and 5 to 10
years for furniture, fixtures and equipment.
F-27
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
The individual Selling Entities 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 affected Selling Entity will prepare a projection of the
undiscounted future cash flows, without interest charges, of the specific hotel
property and determine if the investment in the hotel property is recoverable
based on the undiscounted future cash flows.
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 consist primarily of supplies, 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.
Income Taxes - The Selling Entities conducted business so that income
taxes were the responsibility of their respective owners. The owners' 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 said owners could be changed accordingly.
The Company is a REIT under the Code and accordingly not subject to corporate
income taxes. Accordingly, the financial statements 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.
Recently Issued Statement of Financial Accounting Standards - The FSA
Portfolio Acquisition Hotels adopted the 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 FSA Portfolio
Acquisition Hotels financial statements.
Interim Financial Information - The interim financial statements for
the period ended September 30, 1996 have been prepared pursuant to the rules and
regulations of 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.
F-28
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
3. Lease Revenue
The Select Inn Bloomington hotel is operated by a third party entity
under a Fee Lease which expires in December 2000 with one extension option of 10
years. Minimum future rental income under the Fee Lease at September 30, 1997 is
as follows:
<TABLE>
<CAPTION>
Year Amount
---- ---------------
<S> <C>
1997........................................... $ 80,000
1998........................................... 320,000
1999........................................... 320,000
2000........................................... 320,000
---------------
$ 1,040,000
===============
</TABLE>
In addition to the $320,000 annual base rent, a percentage rent shall
be paid equal to 23% of the amount, if any, by which the annual gross sales, as
defined, shall exceed $1,391,304. The lease requires the tenant to pay all
expenses of owning and operating the hotel, including real estate taxes and
structural maintenance and repairs.
The Mystic Hotel was operated by a third party entity under a Fee Lease
that terminated in December 1995. Upon the termination of the lease, the lessor
retained all rights and obligations related to owning and operating the hotel.
4. Ground Leases
Three of the FSA Portfolio Acquisition Hotels are subject to ground
leases with third parties with respect to the land underlying each such hotel.
The ground leases require the tenant to pay all expenses of owning and operating
the hotels, including real estate taxes and structural maintenance and repairs.
The Radisson Inn Rochester hotel is encumbered by a ground lease
expiring on December 31, 2021 with two 25 year renewal options. The lease
requires minimum annual rent payments of $60,000 through 1999 and thereafter an
annual rent of $60,000 plus a percentage rent payment equal to 1% of gross
receipts in excess of the minimum annual rent.
The DoubleTree Resort Surfside Clearwater Beach hotel is encumbered by
a ground lease expiring in February 2079. Annual lease payments are based upon
the greater of a $283,970 base rent or a percentage rent equal to 3% of gross
room revenues and 1% of gross receipts from the sale of food and beverage. The
annual base rent shall be adjusted every 10 years to equal the average rental
payments for the preceding 10 year period.
The Courtyard by Marriott Disney Village hotel is encumbered by a
ground lease expiring on September 30, 2046. Annual lease payments are based
upon the greater of a $500,000 base rent or a percentage rent equal to 8.5% of
gross room revenues, 4% of gross receipts from the sale of food, 6% of gross
receipts from the sale of beverages, 25% of gross receipts from subleases,
concessionaires and rent of exhibition, and meeting and conference facilities,
and 7% of gross receipts from all other sources, including sale of merchandise,
service charges, and vending machines. The annual base rent shall be adjusted
every five years to the greater of the minimum annual rent during the prior five
years or 75% of the average total rent paid during such five year period.
F-29
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
Minimum future rental payments required under the ground leases at
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ---------------
<S> <C>
1997........................................... $ 210,992
1998........................................... 843,970
1999........................................... 843,970
2000........................................... 843,970
2001........................................... 843,970
Thereafter..................................... 45,849,660
---------------
$ 49,436,532
===============
</TABLE>
Ground lease expense included in Other expenses was $1,005,460 and
$1,531,659, for the years ended December 31, 1995 and 1996, respectively, and
$1,168,050 for the nine month period ended September 30, 1997.
5. Commitments
Management fees represent amounts paid to third party entities for
various operational services. The base management fee is based upon a percentage
of gross revenues ranging from 1% to 2%. An incentive fee is paid based upon a
percentage of gross operating profits ranging from 2.25% to 4.5%. Management and
incentive fees of $1,465,413 and $1,453,691 were paid as of December 31, 1995
and 1996, respectively, and $1,423,762 was paid for the nine month period ended
September 30, 1997.
Franchise fees represent the annual expense for franchise royalties,
sales and advertising expenses and reservation services under the terms of hotel
franchise agreements. Franchise fees are based upon a percentage of gross room
revenue ranging from 3.25% to 7.5%.
In addition, accounting fees are paid for various record keeping
services ranging from $500 to $3,000 per month.
6. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 requires all
entities to disclose the fair value of certain financial instruments in their
financial statements. Accordingly, the FSA Portfolio Acquisition Hotels report
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.
7. Related Party Transactions
Intercompany receivables related to hotel operations are due from
affiliates of the owners in the amount of $1,314,695 and $1,635,944 as of
December 31, 1996 and September 30, 1997, respectively, and are non-interest
bearing.
8. Subsequent Events
As discussed in Note 1, the Company has entered into an agreement to
purchase the FSA Portfolio Acquisition Hotels in 1998. The acquisition will be
accounted for by the Company using the purchase method of accounting. These
financial statements do not reflect any transaction in connection with the
acquisition of the FSA Portfolio Acquisition Hotels by the Company.
F-30
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended September 30, 1997
Real estate as of September 30, 1997:
- ------------------------------------
<TABLE>
<CAPTION>
Life Upon
Accumulated Net Which
Depreciation Book Value Expected Depreciation
Land and Building and Building and Building and Date of Date of in Statement
Description Improvements Improvements Total Improvements Improvements Construction Acquisition Is Computed
----------- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Select Inn Bloomington..... $ 200,000 $ 1,800,000 $ 2,000,000 $ 150,192 $ 1,849,808 1962 1998 39 Yrs.
Courtyard by Marriott
Century City............. 1,400,000 13,081,381 14,481,381 1,147,490 13,333,891 1986 1998 39 Yrs.
DoubleTree Resort Surfside
Clearwater Beach......... 3,771,500 33,943,500 37,715,000 2,832,251 34,882,749 1980 1998 39 Yrs.
Ramada Inn Gulfview
Clearwater Beach......... 2,062,400 23,158,550 25,220,950 2,466,905 22,754,045 1969 1998 39 Yrs.
Holiday Inn Fort
Lauderdale Beach......... 1,616,700 21,608,966 23,225,666 2,623,866 20,601,800 1969 1998 39 Yrs.
Howard Johnson Resort
Key Largo................ 900,000 8,204,855 9,104,855 696,808 8,408,047 1971 1998 39 Yrs.
Courtyard by Marriott
Disney Village........... 1,210,000 11,511,982 12,721,982 1,032,888 11,689,094 1972 1998 39 Yrs.
Holiday Inn
Madeira Beach............ 1,311,900 15,212,513 16,524,413 1,665,330 14,859,083 1972 1998 39 Yrs.
Courtyard by Marriott
Marina del Rey........... 1,436,200 18,125,668 19,561,868 2,117,070 17,444,798 1976 1998 39 Yrs.
Mystic Hotel............... 370,000 3,696,993 4,066,993 351,153 3,715,840 1967 1998 39 Yrs.
Holiday Inn
Richmond West............ 1,078,700 11,216,786 12,295,486 1,111,343 11,184,143 1975 1998 39 Yrs.
Radisson Inn
Rochester................ 400,000 3,759,666 4,159,666 332,274 3,827,392 1971 1998 39 Yrs.
Holiday Inn Forest
Park St. Louis........... 430,000 4,055,880 4,485,880 360,038 4,125,842 1978 1998 39 Yrs.
DoubleTree Hotel
Tampa Airport............ 1,222,900 11,146,703 12,369,603 946,434 11,423,169 1972 1998 39 Yrs.
------------ ------------ ------------ ------------ ------------
$ 17,410,300 $180,523,443 $197,933,743 $ 17,834,042 $180,099,701
============ ============ ============ ============ ============
</TABLE>
F-31
<PAGE>
FSA PORTFOLIO ACQUISITION HOTELS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended September 30, 1997 - (Continued)
<TABLE>
<S> <C>
Reconciliation of Real Estate:
-----------------------------
Balance at December 31, 1995........................... $ 179,351,803
Additions............................................ 5,476,695
----------------
Balance at December 31, 1996........................... 184,828,498
Additions............................................ 13,105,245
----------------
Balance at September 30, 1997.......................... $ 197,933,743
================
Reconciliation of Accumulated Depreciation:
------------------------------------------
Balance at December 31, 1995........................... $ 5,629,152
Depreciation......................................... 6,241,385
----------------
Balance at December 31, 1996........................... 11,870,537
Depreciation......................................... 5,963,505
----------------
Balance at September 30, 1997.......................... $ 17,834,042
================
</TABLE>
F-32
<PAGE>
Report of Independent Accountants
To the Board of Directors
American General Hospitality Corporation
We have audited the accompanying balance sheet and financial statement
schedule of the Holiday Inn O'Hare International Hotel (the "O'Hare Hotel")
(described in Note 1) as of December 31, 1996 and the related statements of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the O'Hare Hotel'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 financial position of the O'Hare Hotel as of
December 31, 1996, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above
which is presented for the purpose of additional analysis and to comply with the
rules and regulations of the Securities and Exchange Commission, 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
October 22, 1997
F-33
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
---------------- -----------------
ASSETS (unaudited)
<S> <C> <C>
Investments in hotel property, at cost:
Land and land improvements..................................... $ 2,360,000 $ 2,360,000
Building and improvements...................................... 15,563,628 15,627,193
Furniture, fixtures and equipment.............................. 3,060,035 3,229,555
---------------- -----------------
20,983,663 21,216,748
Less: accumulated depreciation..................................... 9,743,257 10,313,272
---------------- -----------------
Net investment in hotel property................................... 11,240,406 10,903,476
Cash and cash equivalents.......................................... 45,732 309,539
Restricted cash.................................................... 1,095,887 1,173,305
Accounts receivable, net........................................... 669,103 417,934
Inventories........................................................ 140,092 213,117
Prepaid expenses................................................... 81,984 287,157
Deferred expenses.................................................. 251,505 243,795
Other assets....................................................... 55,818 54,568
---------------- -----------------
Total assets................................................... $ 13,580,527 $ 13,602,891
================ =================
LIABILITIES AND PARTNERS' DEFICIT
Mortgage payable................................................... $ 22,500,000 $ 22,011,645
Notes payable to partners.......................................... 3,000,000 2,590,481
Capital lease obligation........................................... 17,435 5,718
Accounts payable, trade............................................ 969,575 639,800
Accrued expenses and other liabilities............................. 1,618,376 2,039,433
---------------- -----------------
Total liabilities.............................................. 28,105,386 27,287,077
Commitments and contingencies (Notes 4 and 5)
Partners' deficit.................................................. (14,524,859) (13,684,186)
---------------- -----------------
Total liabilities and partners' deficit........................ $ 13,580,527 $ 13,602,891
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
December 31, -------------------------------
1996 1996 1997
---------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Revenues:
Room revenue............................................... $ 12,899,993 $ 9,535,921 $ 10,927,272
Food and beverage revenue.................................. 7,793,598 5,693,457 6,435,223
Other revenue.............................................. 963,547 706,008 735,353
---------------- -------------- --------------
Total revenue......................................... 21,657,138 15,935,386 18,097,848
Expenses:
Property operating costs and expenses...................... 3,763,987 2,768,443 3,091,420
Food and beverage costs and expenses....................... 5,720,079 4,221,712 5,246,098
General and administrative................................. 2,012,815 1,458,262 1,641,953
Advertising and promotion.................................. 1,235,590 899,266 963,503
Repairs and maintenance.................................... 992,935 726,746 781,304
Utilities.................................................. 821,724 624,113 649,953
Management fees............................................ 536,466 394,752 448,767
Franchise costs............................................ 644,310 476,106 546,371
Depreciation............................................... 758,587 569,412 570,015
Amortization............................................... 21,084 15,813 15,210
Real estate and personal property taxes, and property
insurance.............................................. 1,164,686 1,068,103 943,175
Interest expense........................................... 2,205,495 1,660,659 1,695,845
Refinancing costs.......................................... 2,827,000
Other expense.............................................. 41,757 644,836 663,561
---------------- -------------- --------------
Total expenses........................................ 22,746,515 15,528,223 17,257,175
---------------- -------------- --------------
Net income (loss)..................................... $ (1,089,377) $ 407,163 $ 840,673
================ ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<S> <C>
Balance, December 31, 1995.............................................................. $ (13,435,482)
Net loss............................................................................. (1,089,377)
----------------
Balance, December 31, 1996.............................................................. (14,524,859)
Net income (unaudited)............................................................... 840,673
----------------
Balance, September 30, 1997 (unaudited)................................................. $ (13,684,186)
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
December 31, ----------------------------
1996 1996 1997
---------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)............................................. $ (1,089,377) $ 407,163 $ 840,673
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.................................................. 758,587 569,412 570,015
Amortization.................................................. 21,084 15,813 15,210
Changes in assets and liabilities:
Restricted cash............................................ 266,435 408,257 (77,418)
Accounts receivable........................................ 93,110 130,292 251,169
Inventories................................................ 21,135 (13,633) (73,025)
Prepaid expenses........................................... 19,856 10,832 (205,173)
Other assets............................................... 38,867 38,867 1,250
Accounts payable........................................... 409,823 (288,567) (329,775)
Accrued expenses and other liabilities..................... (196,836) 616,181 421,057
---------------- ------------ ------------
Net cash provided by operating activities................ 342,684 1,894,617 1,413,983
---------------- ------------ ------------
Cash flows from investing activities:
Improvements and additions to properties...................... (814,162) (548,725) (233,085)
---------------- ------------ ------------
Cash flows from financing activities:
Principal payments on borrowings.............................. (2,695,244) (718,101) (897,874)
Payments on capital lease obligation.......................... (11,374) (8,530) (11,717)
Payment of deferred financing costs........................... (96,510) (7,500)
Proceeds from notes payable to partners....................... 3,000,000
---------------- ------------ ------------
Net cash provided by financing activities................ 196,872 (726,631) (917,091)
---------------- ------------ ------------
Net change in cash and cash equivalents.......................... (274,606) 619,261 263,807
Cash and cash equivalents at beginning of period................. 320,338 320,338 45,732
---------------- ------------ ------------
Cash and cash equivalents at end of period....................... $ 45,732 $ 939,599 $ 309,539
================ ============ ============
Supplemental disclosures of information:
Cash paid during the year for interest........................ $ 5,217,529 $ 1,659,248 $ 1,525,151
================ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
NOTES TO FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Organization - American General Hospitality Operating Partnership, L.P.
(the "Operating Partnership"), a subsidiary of American General Hospitality
Corporation (the "Company" or "Registrant"), will acquire through a subsidiary a
100% ownership interest in the 507 room Holiday Inn O'Hare International Hotel
(the "O'Hare Hotel") located in Rosemont, Illinois from entities unaffiliated
with the Company and the Operating Partnership. The Company, established to
acquire, own and lease hotel properties, was formed as a Maryland corporation
qualifying as a real estate investment trust ("REIT"). The Company completed an
Initial Public Offering ("IPO") of its common stock on July 31, 1996.
Basis of Presentation - The accompanying financial statements of the O'Hare
Hotel have been prepared to comply with the rules and regulations of the
Securities and Exchange Commission ("SEC") and are presented on a basis
consistent with the Company due to 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 cost and
is depreciated using the straight-line method over estimated useful lives of
15-45 years for building and improvements and 7-10 years for furniture, fixtures
and equipment.
The owners of the O'Hare Hotel 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
owners of the O'Hare 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 the hotel property is recoverable based on the
undiscounted future cash flows.
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 principally for capital and property tax reserves.
Inventories - Inventories consist primarily of supplies, 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 and license fees. Amortization of deferred loan costs is computed using
the effective yield method based upon the terms of the loan agreement.
Amortization of license fees is computed using the straight-line method over the
life of the agreement. Accumulated amortization at December 31, 1996 is $75,205.
Income Taxes - The O'Hare 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, accordingly, the statements of operations contain no
provision for federal income taxes. The partnership's tax returns and the amount
of allocable income or loss are subject to examination by federal and state
taxing authorities. If such examinations result in changes to income or loss,
the tax liability of the partners could be changed accordingly.
F-38
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
NOTES TO FINANCIAL STATEMENTS
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. Such losses have been within the owners' estimates.
Seasonality - The hotel industry is seasonal in nature. Generally, revenue
at this hotel is greater in the second and third quarters of a calendar year.
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, 1996, bank account balances
exceeded Federal Deposit Insurance Corporation limits by approximately $492,084.
Interim Financial Information - The unaudited interim financial statements
as of September 30, 1997 and for the nine months ended September 30, 1996 and
1997 have been prepared pursuant to the rules and regulations of the SEC. The
notes to the interim financial statements included herein are intended to
highlight significant changes to the notes to the December 31, 1996 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
On December 31, 1996, the O'Hare Hotel refinanced the existing mortgage
note of $23,919,537 using proceeds from (i) a new note in the amount of
$22,500,000 and (ii) notes payable to partners totaling $3,000,000. Additional
interest of $2,827,000 was paid by the O'Hare Hotel upon refinancing. Debt as of
December 31, 1996 consists of the following:
<TABLE>
<S> <C>
First mortgage note payable in monthly installments of $228,267 including interest at the
fixed rate of 9% maturing January 1, 2012.................................................. $ 22,500,000
Note payable to partner payable in monthly installments of $31,138 including interest at
the fixed rate of 9.0% maturing December 31, 2001.......................................... 1,500,000
Note payable to partner payable in monthly principal installments of $25,000 plus interest
at the floating rate of prime (8.25% at December 31, 1996) plus .5% maturing
December 1, 2001........................................................................... 1,500,000
--------------
$ 25,500,000
==============
</TABLE>
Mortgage debt is collateralized by the investment in hotel property.
Aggregate annual principal payments for the O'Hare Hotel's debt at December
31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ---------------
<S> <C>
1997......................................... $ 1,220,703
1998......................................... 1,378,129
1999......................................... 1,479,632
2000......................................... 1,590,514
2001......................................... 1,717,755
Thereafter................................... 18,113,267
---------------
$ 25,500,000
===============
</TABLE>
F-39
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
NOTES TO FINANCIAL STATEMENTS
4. Leases
Capital lease obligations represent the present value of future rental
payments under various equipment leases. Minimum future rental payments required
under these capital leases (together with the present value of net minimum lease
payments) at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1997.............................................. $ 12,923
1998.............................................. 5,385
-----------
Total minimum lease payment....................... 18,308
Less imputed interest............................. 873
-----------
Present value of net minimum lease payments....... $ 17,435
===========
</TABLE>
Leased capital assets are included in equipment and at December 31, 1996 had
a net book value of $18,551 ($55,000 less $36,449 in accumulated depreciation).
5. Commitments
Management fees of 2.5% of gross revenues are paid to an affiliate of the
hotel. The payment of management fees is prohibited in the event that there are
not sufficient operating revenues to first pay current operating expenses, debt
service and escrow requirements under the mortgage. Management fees of $536,466
were paid in 1996.
Franchise fees represent the annual expense for franchise royalties and
reservation services under the terms of the hotel franchise agreement. The
O'Hare Hotel franchise fees are 5% of gross room revenue. The agreement expires
in 2001.
The O'Hare Hotel is required to remit 1.5% of gross room revenue to the
franchiser 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.
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 O'Hare 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 O'Hare Hotel's debt
approximates fair value due to the O'Hare Hotel's ability to obtain such
borrowings at comparable interest rates.
7. Subsequent Events
As discussed in Note 1, the Company has entered into an agreement to
purchase the O'Hare Hotel in 1998. The acquisition will be accounted for by the
Company using the purchase method of accounting. These financial statements do
not reflect any transaction in connection with the acquisition of the O'Hare
Hotel by the Company.
F-40
<PAGE>
HOLIDAY INN O'HARE INTERNATIONAL HOTEL
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of and for the period ended December 31, 1996
<TABLE>
<CAPTION>
Real estate as of December 31, 1996:
- ------------------------------------
Accumulated
Depreciation
Land and Building and Building and
Description Encumbrances Improvements Improvements Total Improvements
----------- ------------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C>
Holiday Inn O'Hare International $ 22,500,000 $ 2,360,000 $ 15,563,628 $ 17,923,628 $ 7,845,899
-------------- ------------- ------------- ------------- --------------
$ 22,500,000 $ 2,360,000 $ 15,563,628 $ 17,923,628 $ 7,845,899
============== ============= ============= ============= ==============
<CAPTION>
Life Upon
Which
Net Depreciation
Book Value Expected in
Building and Date of Date of Statement
Description Improvements Construction Acquisition Is Computed
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Holiday Inn O'Hare International $ 7,717,729 1975 1998 15-45 Yrs.
-------------
$ 7,717,729
=============
</TABLE>
<TABLE>
<S> <C>
Reconciliation of Real Estate:
------------------------------
Balance at December 31, 1995........................... $ 17,380,579
Additions........................................... 543,049
---------------
Balance at December 31, 1996........................... $ 17,923,628
===============
Reconciliation of Accumulated Depreciation:
-------------------------------------------
Balance at December 31, 1995........................... $ 7,361,564
Depreciation........................................ 484,335
---------------
Balance at December 31, 1996........................... $ 7,845,899
===============
</TABLE>
F-41
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1997
The following unaudited Pro Forma Consolidated Balance Sheet is
presented as if the Company had completed (i) the sale of 2,671,705 shares
of common stock to certain investment funds and separate accounts advised by
ABKB/LaSalle Securities Limited Partnership and LaSalle Advisors Limited
Partnership (the "ABKB Offering") and the follow-on primary offering of
4,250,000 shares of common stock (the "Second 1997 Offering") and (ii) the
acquisition of the 40 Acquired and Proposed Acquisition Hotels (collectively
with the 26 current hotels the "Hotels") including the Prime Portfolio
Acquisition Hotels, the Potomac Portfolio Acquisition Hotels, the FSA Portfolio
Acquisition Hotels, the Holiday Inn O'Hare International Hotel and the Madison
Hotel Acquisition as of September 30, 1997.
In management's opinion, all material adjustments necessary to reflect
the effect of these transactions have been made.
The following unaudited Pro Forma Consolidated Balance Sheet is derived
from the Company's Consolidated Balance Sheet as of September 30, 1997 and
should be read in conjunction with the financial statements filed with American
General Hospitality Corporation's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1997.
The following Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been assuming such
transactions had been completed as of September 30, 1997, nor does it purport to
represent the future financial position of American General Hospitality
Corporation.
F-42
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
ABKB Offering
Phase I Hotel Acquisitions
Company and Second and Pro Forma
Historical 1997 Offering Pro Forma Offerings Combined
(A) (B) Balance Sheet (C)(D) Pro Forma
------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in hotel
properties, net.......... $544,181,550 $544,181,550 $790,022,876 (I) $1,334,204,426
Cash and cash equivalents.. 1,537,567 1,537,567 1,537,567
Restricted cash............ 653,796 653,796 653,796
Accounts receivable, net... 9,740,389 9,740,389 9,740,389
Deferred expenses, net..... 4,670,759 4,670,759 1,499,900 (J) 6,170,659
Other assets............... 981,170 981,170 981,170
Notes receivable - Lessee.. 248,160 248,160 248,160
------------- -------------- ------------- ------------- ---------------
Total assets........... $562,013,391 $562,013,391 $791,522,776 $1,353,536,167
============= ============== ============= ============= ===============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Debt....................... $ 36,336,431 $ 36,336,431 $ 32,459,365 (K) 68,795,796
Debt, Line of Credit....... 180,501,000 $(127,938,823) (E) 52,562,177 409,838,783 (L) 462,400,960
Distributions payable...... 7,239,591 7,239,591 7,239,591
Accounts payable, trade,
accrued expenses and
other liabilities........ 11,602,161 11,602,161 11,602,161
Minority interest in
Operating Partnership.... 41,705,512 3,222,148 (F) 44,927,660 (F) 45,358,121 (M) 90,285,781
------------- -------------- ------------- ------------- ---------------
Total liabilities...... 277,384,695 (124,716,675) 152,668,020 487,656,269 640,324,289
------------- -------------- ------------- ------------- ---------------
Common stock............... 147,701 49,401 (G) 197,102 114,865 311,967
Additional paid-in
capital.................. 286,863,208 124,667,274 (H) 411,530,482 303,751,642 715,282,124
Unearned officers'
compensation............. (769,167) (769,167) (769,167)
Earnings in excess of
distributions............ (1,613,046) (1,613,046) (1,613,046)
------------- -------------- ------------- ------------- ---------------
Total shareholders'
equity............... 284,628,696 124,716,675 409,345,371 303,866,507 713,211,878
------------- -------------- ------------- ------------- ---------------
Total liabilities
and shareholders'
equity............... $562,013,391 $ $562,013,391 $791,522,776 $1,353,536,167
============= ============== ============= ============= ===============
</TABLE>
F-43
<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, 1997.
(B) Represents the net proceeds and related allocation to minority interest
in connection with (i) the sale of approximately $18 million of common
stock to certain investment funds and separate accounts advised by
ABKB/LaSalle Securities Limited Partnership (the "ABKB Offering Phase
I") and (ii) the follow-on primary offering of 4,250,000 shares of
common stock (the "Second 1997 Offering").
(C) Represents the acquisition of the assets relating to the Acquired and
Proposed Acquisition Hotels, including estimated closing costs. The
acquisitions are financed through borrowings under the Company's Line
of Credit, the assumption of indebtedness and the issuance of
approximately 1,902,457 units of limited partnership interests of
Operating Partnership ("OP Units"). Additionally, franchise transfer
costs of $1,499,900 related to the Acquired and Proposed Acquisition
Hotels were estimated.
(D) Represents the net proceeds and related allocation to minority interest
in connection with (i) the sale of approximately $50 million of common
stock to certain investment funds and separate accounts advised by
ABKB/LaSalle Securities Limited Partnership and LaSalle Advisors
Limited Partnership (the "ABKB Offering Phase II", together with the
ABKB Offering Phase I, the "ABKB Offering") and (ii) a pro forma
follow-on primary offering of 9,500,000 shares of common stock (the
"Pro Forma 1998 Offering") at $27.6875 per share (the last reported
sale price of the Common Stock on the New York Stock Exchange) to
decrease its Line of Credit. The Prime Group II Acquisition may be
closed at any time from September 30, 1998 through March 31, 1999, at
the option of the Company. Because the Company is able to control the
timing of the acquisition, it will endeavor to consummate the Pro Forma
1998 Equity Offering at such time that it is able to secure favorable
pricing and maximize the proceeds from that offering.
(E) Represents the use of the net proceeds from the ABKB Offering Phase I
and the Second 1997 Offering to repay borrowings outstanding at
September 30, 1997. The Company's borrowing limit under its current
Line of Credit is $300 million. The Company has received a commitment
from its credit facility lenders to increase the Credit Facility to
$600 million.
(F) Represents the recognition of minority interest in the Operating
Partnership that will not be owned by the Company (9.9%).
(G) Represents the $0.01 par value of (i) the 688,837 shares of common
stock issued in connection with the ABKB Offering Phase I and (ii)
4,250,000 shares of common stock issued in connection with the Second
1997 Offering.
(H) Represents the net proceeds from the ABKB Offering Phase I and the
Second 1997 Offering.
(I) Represents the increase resulting from the purchase of Acquired and
Proposed Acquisition Hotels, including estimated closing costs (the
purchase included only the land, building and improvements and
furniture, fixtures and equipment).
(J) The increase represents the estimated franchise transfer costs relating
to the Acquired and Proposed Acquisition Hotels.
(K) Represents the mortgage indebtedness assumed on three of the Acquired
and Proposed Acquisition Hotels.
(L) Represents the borrowings made under the Company's Credit Facility and
the repayment of borrowings with the net proceeds from the ABKB
Offering Phase II and the Pro Forma 1998 Offering.
(M) Represents the issuance of 1,902,457 of OP Units and the recognition of
minority interest in the Operating Partnership that will not be owned
by the Company (11.2%).
(N) Represents the $0.01 par value of (i) the 1,982,868 shares of common
stock issued in connection with the ABKB Offering Phase II and (ii)
9,500,000 shares of common stock issued in connection with the Pro
Forma 1998 Offering.
(O) Represents the net proceeds from the ABKB Offering Phase II and the Pro
Forma 1998 Offering after the appropriate allocations to common stock
and minority interest in the Operating Partnership.
F-44
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997
The following unaudited Pro Forma Consolidated Statements of Operations
are presented as if the Company had completed (i) the initial public offering of
8,075,000 shares of common stock (the "IPO"), the follow-on primary public
offering of 6,368,300 shares of common stock (the "1997 Public Offering"), the
sale of 2,671,705 shares of common stock to certain investment funds and
separate accounts advised by ABKB/LaSalle Securities Limited Partnership and
LaSalle Advisors Limited Partnership (the "ABKB Offering") and the follow-on
primary offering of 4,250,000 shares of common stock (the "Second 1997
Offering") and (ii) the acquisition of the 26 hotels and office building owned
as of September 30, 1997 and the acquisition of the 40 Acquired and Proposed
Acquisition Hotels (collectively the "Hotels") including the Prime Portfolio
Acquisition Hotels, the Potomac Portfolio Acquisition Hotels, the FSA Portfolio
Acquisition Hotels, the Holiday Inn O'Hare International Hotel and the Madison
Hotel Acquisition as of January 1, 1996.
In management's opinion, all material adjustments necessary to reflect
the effect of these transactions have been made.
The following unaudited Pro Forma Consolidated Statements of Operations
are derived from the Company's Consolidated Statements of Operations as of
December 31, 1996 and September 30, 1997 and should be read in conjunction with
the financial statements filed with American General Hospitality Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996 and Quarterly
Report on Form 10-Q for the nine months ended September 30, 1997, respectively
The following Pro Forma Consolidated Statements of Operations are not
necessarily indicative of what the actual results of operations would have been
assuming such transactions had been completed as of January 1, 1996.
F-45
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Historical Second Hotel
July 31, 1996 Quarter 1997 ABKB Offering Acquisitions
through Acquisitions Phase I and Pro Forma
December 31, Pro Forma Pro Forma and Second Pro Forma Year Ended
1996 Adjustments Adjustments 1997 Offering Offerings December 31,
(A) (B) (B) (C) (B)(C) 1996
-------------- ------------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Participating Lease
revenue (D).............. $13,387,719 $32,064,815 $20,324,107 $ 80,622,571 $146,399,212
Office building rental
income (E)............... 2,143,833 2,143,833
Interest income (F)........ 108,075 (8,602) 99,473
-------------- ------------ ------------ -------------- ------------- -------------
Total revenue............ $13,495,794 $32,056,213 $22,467,940 $ 80,622,571 $148,642,518
-------------- ------------ ------------ -------------- ------------- -------------
Expenses
Depreciation (G)........... 2,635,380 6,983,615 6,852,384 30,539,495 47,010,874
Amortization (H)........... 273,425 636,028 334,047 149,990 1,393,490
Real estate and personal
property taxes and
property insurance (I)... 1,444,592 3,611,733 2,111,542 9,102,827 16,270,694
Office building
operating expense (E).... 1,344,552 1,344,552
General and
administrative (J)....... 822,113 877,887 233,488 1,066,648 3,000,136
Ground lease expense (K)... 545,279 504,245 5,581,514 6,631,038
Amortization of
unearned officers'
compensation (L)......... 36,979 51,771 88,750
Interest expense (M)....... 1,412,117 1,707,104 11,678,888 (9,595,412) 33,075,130 38,277,827
-------------- ------------ ------------ -------------- ------------- -------------
Total expenses........... 7,169,885 14,372,383 22,554,901 (9,595,412) 79,515,604 114,017,361
-------------- ------------ ------------ -------------- ------------- -------------
Income before
minority interest........ 6,325,909 17,683,830 (86,961) 9,595,412 1,106,967 34,625,157
Minority interest (N)...... 1,196,728 3,890,689
============== =============
Net income applicable to
common stockholders...... $ 5,129,181 $ 30,734,468
============== =============
Net income per
common share............. $ 0.63 $ 0.98
============== =============
Weighted average number
of shares of common
stock outstanding........ 8,170,029 31,296,980
============== =============
</TABLE>
F-46
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Historical
Nine Months ABKB Offering Hotel
Ended Phase I Acquisitions Pro Forma Nine
September 30, Pro Forma and Second and Pro Forma Months Ended
1997 Adjustments 1997 Offering Offerings September 30,
(O) (P) (C) (B)(C) 1997
------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues
Participating Lease revenue (D).......... $42,108,012 $13,549,658 $72,539,863 $128,197,533
Office building rental income (E)........ 592,629 1,134,582 1,727,211
Interest income (F)...................... 738,688 738,688
------------- ------------ ------------- ------------- --------------
Total revenue.......................... 43,439,329 14,684,240 72,539,863 130,663,432
------------- ------------ ------------- ------------- --------------
Expenses
Depreciation (G)......................... 9,209,942 3,790,044 23,260,121 36,260,107
Amortization (H)......................... 763,975 168,649 112,493 1,045,117
Real estate and personal property
taxes and property insurance (I)....... 4,929,000 1,099,916 7,198,552 13,227,468
Office building operating expense (E).... 303,979 658,611 962,590
General and administrative (J)........... 1,450,116 799,986 2,250,102
Ground lease expense (K)................. 956,518 4,468,555 5,425,073
Amortization of unearned
officers' compensation (L)............. 81,354 81,354
Interest expense (M)..................... 5,973,945 6,772,725 (7,196,559) 25,443,857 30,993,968
------------- ------------ ------------- ------------- --------------
Total expenses......................... 23,668,829 12,489,945 (7,196,559) 61,283,564 90,245,779
------------- ------------ ------------- ------------- --------------
Income before minority interest.......... $19,770,500 $ 2,194,295 $ 7,196,559 $11,256,299 $ 40,417,653
Minority interest (N).................... 2,558,352 4,541,568
------------- --------------
Net income applicable to
common stockholders.................... $17,212,148 $ 35,876,085
============= ==============
Net income per common share.............. $ 1.25 $ 1.15
============= ==============
Weighted average number of shares
of common stock outstanding............ 13,768,442 31,296,980
============= ==============
</TABLE>
F-47
<PAGE>
AMERICAN GENERAL HOSPITALITY CORPORATION
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(A) Represents the historical consolidated statement of operations of the
Company for the period July 31, 1996 (inception of operations) through
December 31, 1996.
(B) Represents the adjustments to reflect the pro forma operations of the
20 hotels acquired prior to April 1, 1997 that were owned by the
Company as of September 30, 1997, the 6 hotels acquired during the
second quarter during 1997 ("Second Quarter 1997 Acquisitions") that
were owned by the Company as of September 30, 1997 and the 40 Acquired
and Proposed Acquisition Hotels (together, the "Hotels") as if all of
the Hotels were acquired on January 1, 1996 and leased to a Lessee
pursuant to a Participating Lease since that date.
(C) Represents the adjustments to interest expense due to the change in
borrowings outstanding after the ABKB Offering, the Second 1997
Offering and the Pro Forma 1998 Offering.
(D) Represents lease payments from the Lessees 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.
(E) Represents the rental income and operating expenses associated with the
Houston Office Building.
(F) Represents interest income on the advance to AGH Leasing for the
purchase of certain furniture, fixtures and equipment from the
Company. The current balance is $248,160.
(G) 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.
(H) Represents amortization of deferred loan costs related to the Company's
Credit Facility, amortization of franchise transfer costs and
amortization of organizational costs and other deferred expenses.
Deferred loan costs are amortized utilizing a method which approximates
the interest method over the remaining term of the Credit Facilities
(including extension options). Franchise transfer costs are amortized
over the term of the related franchise agreements which approximates 10
years. Organizational costs and other deferred expenses are amortized
over terms ranging from 5 to 12 years.
(I) Represents amounts to be paid by the Operating Partnership for real
estate and personal property taxes and property insurance. The amounts
included were derived from the historical amounts paid with respect to
the Hotels adjusted for estimated probable real estate and personal
property tax increases.
(J) Represents estimated general and administrative expenses. The expenses
include salaries and wages, professional fees, directors' and officers'
insurance, Board of Directors' fees and other operating expenses.
(K) Represents the amounts to be paid by the Operating Partnership for
ground leases underlying the properties. In addition to the four
current hotels with ground leases, eight additional Acquired and
Proposed Acquisition Hotels are subject to ground leases.
(L) 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, 20% on
the first and second anniversary dates of the IPO and 25% on the third
and fourth anniversary dates of the IPO. The shares were issued at
$17.75.
(M) Represents interest expense on the: Credit Facility, the mortgage
indebtedness related to the Holiday Inn DFW South, the mortgage
indebtedness related to the Courtyard by Marriott Secaucus, the
mortgage indebtedness related to the DoubleTree Guest Suites Atlanta,
the mortgage indebtedness related to the Radisson Hotel Arlington
Heights, the mortgage indebtedness related to the Crowne Plaza
Portland, the mortgage indebtedness related to the Ramada Plaza Shelton
and the mortgage indebtedness related to the Holiday Inn O'Hare
International Airport. Also, represents the adjustment to interest
expense due to change in borrowings after the Pro Forma 1998 Offering
is considered.
(N) Calculated at 11.2% of income before minority interest.
(O) Represents the Company's historical statement of operations for the
nine months ended September 30, 1997.
(P) Represents the adjustments to reflect the pro forma operations of the
26 hotels that were owned by the Company as of September 30, 1997
F-48
<PAGE>
AGH LEASING, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997
The following unaudited Pro Forma Consolidated Statements of Operations
are presented as if the Company had completed the acquisition of the 26 hotels
owned as of September 30, 1997 and the acquisition of 21 of the Acquired and
Proposed Acquisition Hotels leased to AGH Leasing, L.P. (collectively the "AGH
Hotels") including the Potomac Portfolio Acquisition Hotels, the FSA Portfolio
Acquisition Hotels, the Holiday Inn O'Hare International Hotel and the Madison
Hotel Acquisition as of January 1, 1996.
In management's opinion, all material adjustments necessary to reflect
the effect of these transactions have been made.
The following unaudited Pro Forma Consolidated Statements of Operations
are derived from the AGH Leasing's Consolidated Statements of Operations as of
December 31, 1996 and September 30, 1997 and should be read in conjunction with
the financial statements filed with American General Hospitality Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996 and Quarterly
Report on Form 10-Q for the nine months ended September 30, 1997, respectively
The following Pro Forma Consolidated Statements of Operations are not
necessarily indicative of what the actual results of operations would have been
assuming such transactions had been completed as of January 1, 1996.
F-49
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
For The Year Ended December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Historical July
31, 1996 September 30, Acquired
through 1997 Hotels And
December 31, Pro Forma Proposed Management Fees
1996 Adjustments Acquisitions Adjustment Combined
(A) (B) (B) (F) Pro Forma
--------------- ------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues
Room revenue (C)....................... $ 26,725,200 $ 110,086,642 $ 84,639,642 $ 221,451,484
Food and beverage revenue (C).......... 8,374,459 35,801,976 27,587,810 71,764,245
Other revenue (C)...................... 1,691,472 7,845,837 6,369,467 15,906,776
Minority interest income D)............ 1,284,177 1,284,177
--------------- -------------- ------------- --------------- ---------------
Total revenue........................ $ 36,791,131 $ 155,018,632 $118,596,919 $ 310,406,682
--------------- -------------- ------------- --------------- ---------------
Expenses
Property operating costs and
expenses (E)......................... 7,235,297 30,349,334 24,467,818 62,052,449
Food and beverage costs and
expenses (E)......................... 6,262,071 26,331,855 21,719,066 54,312,992
General and administrative (E)......... 3,270,481 13,129,314 11,376,346 27,776,141
Advertising and promotion (E).......... 2,305,776 10,413,836 7,925,128 20,644,740
Repairs and maintenance (E)............ 1,450,987 7,503,668 6,364,962 15,319,617
Utilities (E).......................... 1,628,490 6,835,787 6,356,010 14,820,287
Management fees (F).................... 947,632 4,123,386 2,363,095 (1,273,350) 6,160,763
Franchise costs (G).................... 950,307 3,776,900 3,221,776 7,948,983
Depreciation (H)....................... 26,250 36,750 63,000
Amortization (I)....................... 6,753 6,753
Interest expense (J)................... 13,314 18,375 31,689
Other expense.......................... 27,093 331,916 359,009
Participating Lease expenses (K)....... 13,387,719 52,388,922 37,730,212 103,506,853
--------------- -------------- ------------- -------------- ---------------
Total expenses....................... 37,512,170 155,240,043 121,524,413 (1,273,350) 313,003,276
--------------- -------------- ------------- -------------- ---------------
Net loss............................. $ (721,039) $ (221,411) $ (2,927,494) $ 1,273,350 $ (2,596,594)
=============== ============== ============= ============== ===============
</TABLE>
F-50
<PAGE>
AGH LEASING, L.P.
PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Historical Nine September 30, Acquired
Months Ended 1997 Hotels And
September 30, Pro Forma Proposed Management Fees
1997 Adjustments Acquisitions Adjustment Combined
(L) (B) (B) (F) Pro Forma
--------------- ------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues
Room revenue (C).................. $ 88,220,166 $25,705,067 $ 79,192,841 $193,118,074
Food and beverage revenue (C)..... 22,974,602 9,163,567 23,298,450 55,436,619
Other revenue (C)................. 5,639,468 1,651,882 5,427,799 12,719,149
Minority interest income (D)...... 906,115 70,009 976,124
--------------- ------------- ------------ --------------- ---------------
Total revenue................... $117,740,351 $36,590,525 $107,919,090 $262,249,966
--------------- ------------- ------------ --------------- ---------------
Expenses
Property operating costs and
expenses (E).................... 23,768,303 6,275,280 21,080,178 51,123,761
Food and beverage costs and
expenses (E).................... 18,599,366 6,298,355 18,560,884 43,458,605
General and administrative (E).... 10,557,733 2,718,131 9,027,141 22,303,005
Advertising and promotion (E)..... 8,549,791 2,362,637 6,598,915 17,511,343
Repairs and maintenance (E)....... 4,688,910 1,698,630 4,999,116 11,386,656
Utilities (E)..................... 5,157,997 1,453,801 4,962,149 11,573,947
Management fees (F)............... 1,740,554 1,049,217 2,108,767 1,099,569 5,998,107
Franchise costs (G)............... 3,282,760 957,253 3,117,428 7,357,441
Depreciation (H).................. 47,250 47,250
Amortization (I).................. 30,649 30,649
Interest expense (J).............. 20,605 20,605
Other expense..................... 120,924 170,085 291,009
Participating Lease expenses (K).. 42,108,012 13,549,661 35,977,605 91,635,278
--------------- ------------- ------------ --------------- ---------------
Total expenses.................. 118,672,854 36,533,050 106,432,183 1,099,569 262,737,656
--------------- ------------- ------------ --------------- ---------------
Net loss........................ $ (932,503) $ 57,475 $ 1,486,907 $(1,099,569) $ (487,690)
=============== ============= ============ =============== ===============
</TABLE>
F-51
<PAGE>
AGH LEASING, L.P.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma consolidated statements of operations of AGH Leasing,
L.P. (the "AGH Lessee") include the results of operations of the 47 hotels
leased from the American General Hospitality Operating Partnership, L.P. (the
"Operating Partnership") due to the AGH Lessee's control over the operations of
the hotels during the twelve-year term of the Participating Leases. The AGH
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 AGH Lessee. The AGH Lessee has the right to manage or
to enter into management contracts with other parties to manage the hotels. If
the AGH Lessee elects to enter into management contracts with parties other than
American General Hospitality, Inc. ("AGHI"), the AGH Lessee must obtain the
prior written consent of the Company, which consent may not be unreasonably
withheld.
The AGH 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.
(A) Represents the historical consolidated statement of operations of the
Company for the period July 31, 1996 (inception of operations) through
December 31, 1996.
(B) Represents the adjustments to reflect the pro forma operations of the
26 hotels owned by the Company as of September 30, 1997 and 21 of the
Acquired and Proposed Acquisition Hotels leased to AGH Leasing, L.P.
(together, the "AGH Lessee Hotels") as if all of the Hotels were
acquired on January 1, 1996 and leased to the AGH Lessee pursuant to a
Participating Lease since that date.
(C) Represents historical room, food and beverage and other revenues of
the AGH Lessee Hotels.
(D) Represents the amount of the AGH Lessee's minority interest investment
in Twin Towers Leasing, L.P. (the "Twin Towers Lessee", together with
AGH Leasing, L.P. the "AGH Lessee") which leases the Radisson Orlando
Twin Towers hotel from the Operating Partnership. The Twin Towers
Lessee is owned 51% by the AGH Lessee, which is the sole general
partner, and 49% by Regent Carolina Corporation, which is the sole
limited partner. Regent Carolina Corporation is not affiliated with
the Company, the Operating Partnership or the AGH Lessee.
(E) Represents the historical expenses of the AGH Hotels.
(F) Represents management fees to be incurred under the Management
Agreements. The management fees payable to AGHI 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 0.01% increase in annual total revenues
over the total revenues for the preceding twelve month period up to
the maximum incentive fee. The payment of the management fees to AGHI
by the AGH Lessee is subordinate to the AGH Lessee's obligations to
the Company under the Participating Leases. The full management fee
payable during 1996 and 1997 will be earned only to the extent that
the Lessee has taxable income equal to or greater than $50,000. If
the AGH Lessee's taxable income is below $50,000 in 1996 and 1996,
management fees are forfeited by AGHI to increase the AGH Lessee's
taxable income to $50,000.
(G) 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 impact including possible revenue
enhancements and operating expense reductions are also not included.
(H) Historical depreciation at the AGH 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 AGH Lessee from the Operating
Partnership. The FF&E is depreciated over an estimated useful life of 5
years.
(I) Historical deferred loan costs and the related amortization has been
eliminated since the AGH Lessee is not expected to incur similar costs.
Amortization expense relates to the amortization of organization costs
which are being amortized over a 60 month period.
(J) Any future interest expense related to debt for the AGH Hotels will be
incurred and paid by the Operating Partnership. Interest expense
related to an advance made by the Operating Partnership to the AGH
Lessee for the FF&E purchase. The advance of $315,000 bears interest at
10%. The September 30, 1997 balance of the note is $248,160.
(K) Represents lease payments to the Operating Partnership from the AGH
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 AGH Hotels. The departmental thresholds in the
Participating Leases are seasonally adjusted for interim periods.
(L) Represents the Company's historical statement of operations for the
nine months ended September 30, 1997.
F-52
<PAGE>
CLIFTON HOLDING CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997
The following unaudited Pro Forma Combined Statements of Operations are
presented as if the Company had completed the acquisitions of the 19 Prime
Portfolio Acquisition Hotels as of January 1, 1996.
In management's opinion, all material adjustments necessary to reflect
the effect of these transactions have been made.
The following unaudited Pro Forma Combined Statements of Operations are
derived from the Prime Portfolio Acquisition Hotels' Combined Statement of
Operations as of December 31, 1996 and September 30, 1997 and should be read in
conjunction with the financial statements filed with American General
Hospitality Corporation's Report on Form 8-K.
The following Pro Forma Combined Statement of Operations are not
necessarily indicative of what the actual results of operations would have been
assuming such transactions had been completed on January 1, 1996.
F-53
<PAGE>
CLIFTON HOLDING CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Historical
December 31,
1996 Pro Forma
(A) Adjustments Pro Forma
---------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Room revenue (B)................... $ 75,762,299 $ $ 75,762,299
Food and beverage revenue (B)...... 35,149,769 35,149,769
Other revenue (B).................. 3,557,400 3,557,400
---------------- --------------- ---------------
Total revenue................. 114,469,468 114,469,468
Expenses:
Property operating costs and
expenses (C)..................... 20,530,841 20,530,841
Food and beverage costs and
expenses (C)..................... 25,896,719 25,896,719
General and administrative (C)..... 7,752,288 7,752,288
Advertising and promotion (C)...... 6,620,451 6,620,451
Repairs and maintenance (C)........ 4,937,985 4,937,985
Utilities (C)...................... 5,798,292 5,798,292
Management fees (D)................ 3,693,651 (3,693,651)
Franchise costs (E)................ 2,213,297 2,213,297
Depreciation and amortization (F).. 8,551,401 (8,551,401)
Real estate and personal property
taxes, and property
insurance (G).................... 3,375,206 (3,375,206)
Interest expense (H)............... 4,179,695 (4,179,695)
Lease expense (I).................. 7,172,184 (5,581,514) 1,590,670
Other expense (C).................. 47,855 47,855
Participating Lease expense (J).... 42,544,359 42,544,359
---------------- --------------- ---------------
Total expenses................ 100,769,865 17,162,892 117,932,757
---------------- --------------- ---------------
Net income.................... $ 13,699,603 $ (17,162,892) $ (3,463,289)
================ =============== ===============
</TABLE>
F-54
<PAGE>
CLIFTON HOLDING CORP.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Historical Nine
Months Ended
September 30,
1997 Pro Forma
(K) Adjustments Pro Forma
---------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Room revenue (B)....................... $ 66,320,843 $ $ 66,320,843
Food and beverage revenue (B).......... 26,983,933 26,983,933
Other revenue (B)...................... 3,140,478 3,140,478
---------------- -------------- --------------
Total revenue..................... 96,445,254 96,445,254
Expenses:
Property operating costs and
expenses (C)......................... 16,994,165 16,994,165
Food and beverage costs and
expenses (C)......................... 20,172,664 20,172,664
General and administrative (C)......... 6,245,326 6,245,326
Advertising and promotion (C).......... 5,156,895 5,156,895
Repairs and maintenance (C)............ 3,959,017 3,959,017
Utilities (C).......................... 4,592,378 4,592,378
Management fees (D).................... 3,052,692 (3,052,692)
Franchise costs (E).................... 2,042,486 2,042,486
Depreciation and amortization (F)...... 8,220,683 (8,220,683)
Real estate and personal property
taxes, and property
insurance (G)........................ 2,882,670 (2,882,670)
Interest expense (H)................... 853,139 (853,139)
Lease expense (I)...................... 5,855,965 (4,468,555) 1,387,410
Other expense (C)...................... 752,168 752,168
Participating Lease expense (J)........ 36,270,299 36,270,299
---------------- -------------- --------------
Total expenses.................... 80,780,248 16,792,560 97,572,808
---------------- -------------- --------------
Net income........................ $ 15,665,006 $ (16,792,560) $ (1,127,554)
================ ============== ==============
</TABLE>
F-55
<PAGE>
CLIFTON HOLDING CORP.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The pro forma combined statements of operations of the Clifton Corp.
(the "Prime Lessee") include the results of operations of the 19 hotels leased
from American General Hospitality Operating Partnership, L.P. due to the Prime
Lessee's control over the operations of the hotels during the ten-year term of
the Participating Leases. The Prime 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 Prime Lessee.
The Prime Lessee has the right to manage or to enter into management contracts
with other parties to manage the hotels. If the Prime Lessee elects to enter
into management contracts with other parties, the Prime Lessee must obtain the
prior written consent of the Company, which consent may not be unreasonably
withheld.
The Prime 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.
(A) Represents the historical combined statement of operations of the Prime
Portfolio Acquisition Hotels for the year ended December 31, 1996.
(B) Represents historical room, food and beverage and other revenues of the
Prime Lessee Hotels.
(C) Represents the historical expenses of the Prime Lessee Hotels.
(D) Historical management fees have been eliminated based on the
new Lessee arrangement with the Operating Partnership.
(E) Represents the historical franchise costs of the Hotels. Franchise fees
associated with the hotel conversions are not included in the pro forma
statements of operations since other impact including possible revenue
enhancements and operating expense reductions are also not included.
(F) Historical depreciation and amortization at the Prime Lessee Hotels has
been eliminated due to depreciation and amortization of deferred loan
costs being recorded by the Operating Partnership.
(G) Historical real estate and personal property taxes, and property
insurance expense has been eliminated due to these costs being recorded
by the Operating Partnership
(H) Any future interest expense related to debt for the Prime Lessee Hotels
will be incurred and paid by the Operating Partnership.
(I) Represents the elimination of ground lease expense to be paid by the
Operating Partnership.
(J) Represents lease payments to the Operating Partnership from the Prime
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 Prime Lessee Hotels. The departmental revenue
thresholds in the Participating Leases are seasonally adjusted for
interim periods.
(K) Represents the Company's historical statement of operations for the
nine months ended September 30, 1997.
F-56
<PAGE>
Exhibit 2.1
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as Purchaser
January 7, 1998
Las Vegas, Nevada (Crowne Plaza)
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS....................................... 1
1.1. "Acquisition Costs"..................................... 1
1.2. "Adjustments"........................................... 2
1.3. "Affiliate"............................................. 2
1.4. "Agreement"............................................. 2
1.5. "Business Day".......................................... 2
1.6. "Change in Control"..................................... 2
1.7. "Closing"............................................... 2
1.8. "Closing Date".......................................... 2
1.9. "Code".................................................. 2
1.10. "Construction Costs"................................... 2
1.11. "Contracts"............................................ 3
1.12. "Cut-Off Time"......................................... 3
1.13. "Defective Property"................................... 3
1.14. "Deposit".............................................. 3
1.15. "Diligence Notice"..................................... 3
1.16. "Documents"............................................ 3
1.17. "Due Diligence Material"............................... 4
1.18. "Environmental Laws"................................... 4
1.19. "Environmental Report"................................. 4
1.20. "Escrow Agent"......................................... 4
1.21. "Escrow Agreement"..................................... 4
1.22. "Estoppel Certificate"................................. 4
1.23. "Exchange Act"......................................... 5
1.24. "Excluded Intellectual Property"....................... 5
1.25. "FF&E"................................................. 5
1.26. "FF&E Leases".......................................... 5
1.27. "Financial Statements"................................. 5
1.28. "Franchise Agreement".................................. 5
1.29. "Franchisor Comfort Letters"........................... 5
1.30. "Full Service Hotels".................................. 5
1.31. "Group Two Sale Agreement"............................. 5
1.32. "Hazardous Substance".................................. 6
1.33. "Hotel"................................................ 6
1.34. "Improvements"......................................... 6
1.35. "Intangible Property".................................. 6
1.36. "Leased FF&E".......................................... 6
1.37. "Letter of Credit...................................... 6
1.38. "Liquidated Damages"................................... 6
1.39. "Liquor License"....................................... 6
1.40. "Mortgagee"............................................ 6
1.41. "Offer"................................................ 6
1.42. "Operating Leases"..................................... 7
1.43. "Operating Lessee"..................................... 7
1.44. "Original Agreement"................................... 7
1.45. "Other Agreements"..................................... 7
1.46. "Other Revenues"....................................... 7
1.47. "Permitted Encumbrances"............................... 7
1.48. "Person"............................................... 7
1.49. "Project Plan"......................................... 7
(i)
<PAGE>
1.50. "Property"............................................. 7
1.51. "Proposed AmeriSuites Hotel"........................... 7
1.52. "Prorations Settlement"................................ 8
1.53. "Purchase Price"....................................... 8
1.54. "Purchaser"............................................ 8
1.55. "Real Property"........................................ 8
1.56. "REIT"................................................. 8
1.57. "Restricted Period".................................... 8
1.58. "Room Revenues"........................................ 8
1.59. "SEC Documents"........................................ 8
1.60. "Seller"............................................... 8
1.61. "Seller's knowledge"................................... 8
1.62. "Seller Subsidiary".................................... 8
1.63. "Space Leases"......................................... 8
1.64. "Subordination, Nondisturbance and Attornment
Agreement"........................................... 9
1.65. "Survey"............................................... 9
1.66. "Survival Period"...................................... 9
1.67. "Title Commitment"..................................... 9
1.68. "Title Company"........................................ 9
1.69. "WARN Act"............................................. 9
SECTION 2. PURCHASE AND SALE................................. 9
2.1. Purchase and Sale....................................... 9
2.2. Deposit................................................. 9
2.3. Closing................................................. 9
2.4. Purchase Price.......................................... 10
2.5. Tax Free Exchange....................................... 10
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION.............. 11
3.1. Diligence Inspections................................... 11
3.2. Defective Property...................................... 13
3.3. Title Matters........................................... 14
3.4. Survey.................................................. 15
3.5. Additional Termination Option........................... 15
3.6. Adjournment of Closing.................................. 16
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE..... 16
4.1. Closing Documents....................................... 16
4.2. Condition of the Property............................... 18
4.3. Title Policies.......................................... 18
4.4. Opinions of Counsel..................................... 18
4.5. Other Approvals......................................... 19
4.6. Representations......................................... 19
4.7. Default Under Group Two Sale Agreement.................. 19
4.8. Default under Other Agreements.......................... 19
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE........ 19
5.1. Purchase Price.......................................... 19
5.2. Closing Documents....................................... 20
5.3. Opinion of Counsel...................................... 20
5.4. Other Approvals......................................... 20
5.5. Representations......................................... 20
5.6. Default Under Group Two Sale Agreement.................. 20
(ii)
<PAGE>
5.7. Default under Other Agreements......................... 21
SECTION 6. REPRESENTATIONS OF SELLER......................... 21
6.1. Status and Authority of Seller......................... 21
6.2. Action of Seller....................................... 21
6.3. No Violations of Agreements............................ 21
6.4. Litigation............................................. 22
6.5. Existing Leases, Agreements, Etc....................... 22
6.6. Franchise Agreement.................................... 22
6.7. Contracts.............................................. 22
6.8. Taxes.................................................. 22
6.9. Not a Foreign Person................................... 22
6.10. Hazardous Substances................................... 23
6.11. Insurance.............................................. 23
6.12. FF&E................................................... 23
6.13. Employment and Union Contracts......................... 23
6.14. Adjacent Land Leases................................... 23
6.15. Trademarks............................................. 23
6.16. Compliance with Laws................................... 23
6.17. Inventory.............................................. 23
6.18. Holder of Liquor License............................... 23
SECTION 7. REPRESENTATIONS OF PURCHASER...................... 25
7.1. Status and Authority of Purchaser...................... 25
7.2. Action of Purchaser.................................... 25
7.3. No Violations of Agreements............................ 25
7.4. Litigation............................................. 25
7.5. No Conflicts........................................... 26
SECTION 8. COVENANTS OF SELLER AND PURCHASER................. 27
8.1. Covenants of Seller.................................... 27
SECTION 9. CLOSING COSTS..................................... 29
9.1. Closing Costs.......................................... 29
SECTION 10. DEFAULT.......................................... 30
10.1. Default by Seller...................................... 30
10.2. Default by Purchaser................................... 30
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT............... 31
11.1. Liquor License......................................... 31
11.2. Franchise Agreement.................................... 31
11.3. License for Excluded Intellectual Property............. 32
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS............. 33
12.1. Matters to be Adjusted or Prorated..................... 33
12.2. Certiorari Proceeding.................................. 35
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION................ 35
13.1. Right of First Refusal on Full Service Hotels.......... 35
(iii)
<PAGE>
13.2. Radius Restriction..................................... 37
13.3. AmeriSuites Hotels..................................... 37
13.4. Multi-Property Exception............................... 40
13.5. Survival and Damages................................... 40
13.6. General Provisions..................................... 41
SECTION 14. MISCELLANEOUS.................................... 42
14.1. Agreement to Indemnify................................. 42
14.2. Brokerage Commissions.................................. 43
14.3. Publicity.............................................. 43
14.4. Confidentiality........................................ 44
14.5. Notices................................................ 45
14.6. Waivers, Etc........................................... 46
14.7. Assignment; Successors and Assigns..................... 46
14.8. Severability........................................... 47
14.9. Counterparts, Etc...................................... 47
14.10. Governing Law......................................... 47
14.11. Performance on Business Days.......................... 48
14.12. Attorneys' Fees....................................... 48
14.13. Section and Other Headings............................ 48
14.14. Financing and Priority of Operating Leases............ 48
14.15. Group Two Purchase and Sale Agreement................. 48
14.16. Exceptions to Liquidated Damages...................... 48
EXHIBITS*
Exhibit B Legal Description of the Premises
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Leases and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit O Form of Representation Letter in favor of Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
- ------------------
* The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and
Exchange Commission upon request.
(iv)
<PAGE>
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser entered into that certain
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Seller and Purchaser desire to amend and restate the
Original Agreement in the form of eight separate contracts, one contract for
each of the Properties (as defined in the Original Agreement) (such contracts
other than this Agreement being referred to herein as the "Other Agreements");
----------------
and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller is willing to sell Seller's interest in the
Property to Purchaser, subject to and upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other professional fees, any due diligence expenses incurred in assessing the
Proposed AmeriSuites Hotel, title and survey costs, transfer taxes and pre-
opening expenses of the hotel, including without limitation, costs incurred in
the reflagging of the hotel, promotional and advertising expenses,
administrative
<PAGE>
expenses, employee hiring and training expenses, the cost of supplies, equipment
and furniture purchased for the hotel, governmental, utility or other deposits
required for operation of the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that , directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
---------- -
as it and they may be amended from time to time as herein provided.
1.5. "Business Day" shall mean any day other than a Saturday,
------------
Sunday or any other day on which banking institutions in the State of New York
are authorized by law or executive action to close.
1.6. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.7. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.8. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.9. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the treasury regulations promulgated thereunder.
1.10. "Construction Costs" shall mean all hard and soft costs
------------------
incurred by Seller or the Seller Subsidiary, as appropriate, in connection with
the acquisition of the site and
-2-
<PAGE>
construction and related improvements for a Proposed AmeriSuites Hotel,
including without limitation (a) the cost of funds used for such construction,
whether provided by a third party lender or by Seller (the interest on such
funds being calculated in the latter event at a rate equal to the prime rate
reported in the Money Rates column or comparable section of The Wall Street
---------------
Journal (or if The Wall Street Journal is no longer published, a different
- ------- -----------------------
publication designated by Seller) as the rate then in effect for corporate loans
at large U.S. money center commercial banks, plus three percent (3%) compounded
monthly), (b) attorney, accountant, engineer, architect, contractor and other
professional fees; (c) any due diligence expenses incurred in assessing a site
for the Proposed AmeriSuites Hotel; (d) title and survey costs; (e) transfer
taxes; and (f) pre-opening expenses of the hotel, including without limitation,
promotional and advertising expenses, administrative expenses, employee hiring
and training expenses, the cost of supplies, equipment and furniture ordered or
purchased for the hotel, governmental, utility or other deposits required for
operation of the hotel and similar costs.
1.11. "Contracts" shall mean, all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.12. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.13. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
1.14. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.15. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
1.16. "Documents" shall mean, with respect to any Property,
---------
all books, records and files relating to the leasing, maintenance, management or
operation of the Property.
-3-
<PAGE>
1.17. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.18. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.19. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.10.
------------
1.20. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.21. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.22. "Estoppel Certificate" shall mean a statement made by
--------------------
the franchisor under the Franchise Agreement in favor of Purchaser and/or any
Mortgagee certifying to such matters as Purchaser and/or its Mortgagee may
reasonably request, including, without limitation, the following: that an
attached copy of the Franchise Agreement is a true, correct and complete copy of
such Franchise Agreement which has not been modified except as identified; that
Seller is not in monetary or other default under the Franchise Agreement and
that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise Agreement; and to any
other matters which franchisor is required to certify pursuant to the terms of
the Franchise Agreement;
in a form reasonably acceptable to said franchisor; provided, however, that if
the Franchise Agreement (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the Franchise
Agreement on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(h), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
-4-
<PAGE>
1.23. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.24. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.25. "FF&E" shall mean, all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.26. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
1.27. "Financial Statements" shall have the meaning given such
--------------------
term in Section 3.1(b).
--------------
1.28. "Franchise Agreement" shall mean the hotel licensing
--------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.29. "Franchisor Comfort Letters" shall mean letters from
----------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.30. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.31. "Group Two Sale Agreement" shall have the meaning given
------------------------
that term in Section 14.15.
-------------
-5-
<PAGE>
1.32. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.33. "Hotel" shall mean the hotel located at the Property.
-----
1.34. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
1.35. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including without limitation all trademarks, trade names,
copyrights, patents or technical processes, owned and used by Seller which
pertain solely to the Property and expressly excluding the Excluded Intellectual
Property and all trademarks, trade names, copyrights, patents or technical
processes used with respect to Seller itself or Seller's Affiliates, and
expressly excluding the Contracts.
1.36. "Leased FF&E" shall have the meaning given such term in
-----------
Section 6.12.
- ------------
1.37. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.38. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.39. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.40. "Mortgagee" shall mean any and all lenders who provides
---------
financing to Purchaser in connection with the Property.
1.41. "Offer" shall have the meaning given such term in
----
Section 13.
- ----------
-6-
<PAGE>
1.42. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.43. "Operating Lessee" shall mean a wholly-owned subsidiary
----------------
of Seller as tenant, of an Operating Lease(s); which is a single-purpose entity
with the sole purpose of leasing, managing, maintaining, operating and
performing other related functions for the Hotel.
1.44. "Original Agreement" shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.45. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.46. "Other Revenues" shall have the meaning given such term
--------------
in Section 12.1.
------------
1.47. "Permitted Encumbrances" shall mean (a) liens for taxes,
----------------------
assessments and governmental charges with respect to the Property not yet due
and payable or due and payable but not yet delinquent or as to which adequate
reserves are provided therefor; (b) the Space Leases; (c) applicable zoning
regulations and ordinances provided the same do not prohibit or impair in any
material respect use of the Property as a hotel as currently operated and
constructed; (d) UCC Financing Statements securing the purchase price of FF&E
under the FF&E Leases identified on Exhibit I; provided, however, that such
---------
liens shall be confined to the asset in question and the aggregate principal
amount of indebtedness secured by such liens shall not exceed the cost of
acquisition or construction of the property subject thereto; (e) such other
nonmonetary encumbrances with respect to the Property which are not objected to
by Purchaser in accordance with Section 3; and (f) such exceptions or matters,
---------
as the case may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.48. "Person" shall mean any individual, corporation, general
------
and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.49. "Project Plan" shall have the meaning given such term in
------------
Section 13.3.
- ------------
1.50. "Property" shall mean all of the Seller's interest in
--------
the Real Property, and in the FF&E, the Documents, the Improvements and the
Intangible Property related to the Real Property.
1.51. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
-7-
<PAGE>
1.52. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.53. "Purchase Price" shall have the meaning given such term
--------------
in Section 2.4.
-----------
1.54. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.55. "Real Property" shall mean the real property described
-------------
on Exhibit B, together with all easements, rights of way, privileges, licenses
---------
and appurtenances which Seller may now own with respect thereto.
1.56. "REIT" shall mean American General Hospitality
----
Corporation.
1.57. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.58. "Room Revenues" shall have the meaning given such term
-------------
in Section 12.1.
------------
1.59. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.60. "Seller" shall have the meaning given such term in the
------
preamble to this Agreement.
1.61. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.61 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.62. "Seller Subsidiary" shall have the meaning set forth in
-----------------
Section 13.1.
- ------------
1.63. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on
Exhibit K.
- ---------
-8-
<PAGE>
1.64. "Subordination, Nondisturbance and Attornment Agreement"
------------------------------------------------------
shall mean if Mortgagee desires a lien superior in priority to the Operating
Lease, an agreement substantially in the form attached hereto as Exhibit L.
---------
1.65. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.66. "Survival Period" shall have the meaning given such term
---------------
in Section 6.
---------
1.67. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.68. "Title Company" shall mean, collectively, Chicago Title
-------------
Insurance Company and Commonwealth Land Title Insurance Company, each as a 50%
co-insurers, or such other title insurance company or companies as shall have
been reasonably approved by Purchaser and Seller.
1.69. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE.
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
-------
the sum of One Million Four Hundred Thirty-Six Thousand Two Hundred Fifty
Dollars ($1,436,250) (together with all interest accrued thereon, if any, the
"Deposit") in the form of an unconditional, irrevocable letter of credit issued
-------
by Bank One, Texas, N.A. (the "Letter of Credit"). The Letter of Credit shall be
----------------
in the amount of Seven Million Five Hundred Thousand Dollars ($7,500,000), which
amount shall represent the Deposit as well as the deposits required pursuant to
the Other Agreements. The Deposit (and the Letter of Credit) shall be held
pursuant to, and disbursed according to, the terms of the Escrow Agreement.
Notwithstanding anything to the contrary contained in this Agreement, until the
Deposit is disbursed in accordance with the Escrow Agreement, this Agreement
shall not terminate and shall remain in full force and effect to the extent
necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall be
-------
consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
-9-
<PAGE>
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations with respect
---------
to that Property under Section 4, unless such obligations shall have been waived
---------
by Purchaser and provided that such adjournment with respect to the Property
shall not adjourn the Closing Date with respect to any of the other properties
to be conveyed under the Other Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Twenty-Six
--------------
Million Five Hundred Thousand Dollars ($26,500,000), allocated Twenty-Three
Million Four Hundred Fifty Thousand Dollars ($23,450,000) to the Real Property
and Improvements and Three Million Fifty Thousand Dollars ($3,050,000) to the
personal property including, without limitation the FF&E and the Intangible
Property.
(b) The Purchase Price (plus or minus adjustments and
prorations set forth in Section 12 hereof) shall be payable by wire transfer of
----------
immediately available federal funds on the Closing Date to an account to be
designated by Seller prior to the Closing.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring one or more Section 1031 exchanges, if so desired by Seller,
provided that such structuring shall not materially adversely affect Purchaser's
rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser in
connection with Purchaser complying with the terms of this Section 2.5 shall be
-----------
paid by Seller.
-10-
<PAGE>
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise provided to
Purchaser pursuant to this Agreement. Purchaser agrees and acknowledges that it
has investigated and/or received the opportunity to investigate the Property to
its satisfaction and that it is not relying on any materials, statements,
representations or warranties of any kind, other than as specifically set forth
in this Agreement, in purchasing the Property. To the extent that, in connection
with such investigation, Purchaser, its agents, representatives or contractors,
has damaged or disturbed or does damage or disturb the Real Property or the
Improvements located thereon, Purchaser shall return the same to substantially
the same condition which existed immediately prior to such damage or
disturbance. In the event that the transactions contemplated by this Agreement
are not closed and consummated for any reason, Purchaser shall deliver to Seller
all tests, reports and inspections of the Property made and conducted by
Purchaser or for its benefit or any other documents or information Purchaser has
received pursuant to this Agreement. Purchaser shall indemnify, defend and hold
harmless Seller from and against any and all cost, expense, liability, loss or
damage which Seller may incur as a result of any act or omission of Purchaser or
its representatives, agents or contractors in connection with such examinations
and inspections, other than to the extent that any expense, loss or damage
arises from any gross negligence or willful misconduct of Seller. The provisions
of this Section 3.1(a) shall survive the termination of this Agreement and the
--------------
Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for
-11-
<PAGE>
the current year to date and each of the three (3) years prior to the year of
this Agreement (the "Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and other
patrons of the Hotel; management fees; maintenance, repairs and other expenses
relating to the management and operation of the Hotel; occupancy statistics for
the Hotel for the current year to date and the prior three (3) calendar years;
and all capital expenditures made during the aforementioned periods. To the
extent that the Financial Statements provided by Seller for the current year do
not include any period up to and including the Closing Date, Seller shall,
within 25 days after the Closing Date, provide Purchaser with monthly unaudited
Financial Statements applicable to such period inclusive of the Closing Date;
(iii) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in Seller's
possession or control or readily available without expense, notices of appraised
value for the Real Property and Improvements;
(iv) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser shall
return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) All notices received from governmental authorities
in connection with the Hotel;
(viii) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(ix) All FF&E Leases;
-12-
<PAGE>
(x) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xi) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to any Hotel;
(xii) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
(xiii) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotel, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Purchaser's representatives a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same
-13-
<PAGE>
to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property.
(b) If Purchaser timely gives notice to Seller of any
Defective Property, and Purchaser and Seller shall, acting reasonably and in
good faith, be unable or unwilling to agree (x) that Seller shall, at its sole
cost, attempt to remedy the applicable defect prior to the Closing (in which
event Seller shall have the right to adjourn the Closing Date pursuant to the
provisions of Section 3.7 for up to ninety (90) days for such purpose), (y) that
-----------
Purchaser shall, notwithstanding such defect, acquire the Defective Property
subject to a reduction in the Purchase Price, as reasonably determined by Seller
and Purchaser, sufficient to compensate Purchaser for such defect, or (z) on the
substitution of another property owned by Seller for such Defective Property,
this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
--------------
Company a preliminary title commitment for a fee policy having an effective date
after the date of the Original Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to the Property, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "Title
-----
Commitment"). Except as set forth in the Diligence Notice, Purchaser
- ----------
acknowledges that it does not have any other objections to title exceptions
shown on the Title Commitment. Seller acknowledges and agrees that Seller shall
attempt to remedy the objections set forth in the Diligence Notice with respect
to the Property. Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.6 for up to ninety (90) days for such purpose. If Seller
-----------
shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
-----------
Agreement, and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notices by Purchaser. Failure of Purchaser to give such
notice shall be deemed an election by Purchaser to proceed in accordance with
clause (ii) above, and such exception shall be a Permitted Encumbrance.
-14-
<PAGE>
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect to
------
the Real Property (the "Survey") by a licensed surveyor in the jurisdiction in
------
which the Property is located, which (i) contains an accurate legal description
of the Property, (ii) shows the location, dimension and description (including
applicable recording information) of all utilities, easements, encroachments and
other physical matters affecting the Property, the number of striped parking
spaces located thereon and all applicable building set-back lines, (iii) states
whether the Property is located within a 100-year flood plain and (iv) is
certified to Purchaser and the Title Company and such other persons as shall
have been requested by Purchaser or Seller. Except as set forth in the Diligence
Notice, Purchaser acknowledges and agrees that it does not have any other
objections to any matter shown on the Survey. Seller acknowledges and agrees
that Seller shall attempt to remedy the objections set forth in the Diligence
Notice with respect to the Survey. Seller shall have the right to adjourn the
Closing Date for up to ninety (90) days pursuant to Section 3.6 for such
-----------
purpose. If Seller shall be unable to remove any such survey defect to which
Purchaser has objected, Purchaser may elect (i) to terminate this Agreement and
this Agreement shall terminate and be of no further force or effect except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or fifth Business Day after Seller's notice of its inability to
cure such defect and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above
and such matter shall be a Permitted Encumbrance.
3.5. Additional Termination Option. If Purchaser shall elect,
-----------------------------
pursuant to any provision of this Agreement or the Other Agreements to terminate
any three or more of the Other Agreements and/or this Agreement, then, together
with such notice of termination with respect to this Agreement or an Other
Agreement which taken by itself or together with any prior notices of
termination would result in three or more such terminations, Purchaser may, in
such notice, or Seller may, within 10 Business Days of receipt of such notice of
termination by written notice to Purchaser, terminate this Agreement and
simultaneously terminate the Other Agreements and the Group Two
-15-
<PAGE>
Sale Agreement, in which event the Deposit shall be returned to Purchaser and
the parties to this Agreement shall have no further obligations under this
Agreement, the Other Agreements and the Group Two Sale Agreement except as
expressly provided in this Agreement, the Other Agreements or the Group Two Sale
Agreement. Notwithstanding the foregoing, if any provision in any Other
Agreement expressly provides that a termination thereof shall not be considered
for purposes of determining whether three such terminations have occurred, such
provision of the Other Agreement shall be controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(h)), Franchisor Comfort Letters (as
--------------
required by Section 4.1(j) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the other Properties to be conveyed under the Other
Agreements until such Estoppel Certificates, Franchisor Comfort Letters or
consents are obtained provided such adjournment shall not be longer than ninety
(90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the Property is located, in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
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<PAGE>
(b) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(c) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(d) Duly executed transfer tax forms, as required by
applicable law;
(e) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(f) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(g) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(h) Duly executed Estoppel Certificates from the franchisor
under the Franchise Agreement; provided that any such Estoppel Certificate shall
be provided to Purchaser prior to Closing promptly following receipt by Seller
of the same;
(i) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(j) Franchisor Comfort Letters;
(k) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel;
(l) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(m) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
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<PAGE>
(n) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(o) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to the state in which the Property is located.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as the Purchaser may reasonably require. Seller
and Purchaser shall agree upon local
-18-
<PAGE>
counsel for the jurisdiction in which the Property is located to provide an
appropriate jurisdiction-specific opinion, the cost of which local counsel will
be shared equally by Seller and Purchaser. An opinion from in-house counsel to
Seller shall satisfy this Section 4.4 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the franchisor, if required; (c) the consent of
the ground lessor under that certain Lease dated June 29, 1973 (as amended, the
"Armonk Lease") for premises located in Armonk, New York to the transactions
------------
contemplated by the Group Two Sale Agreement; and (d) a modification of such
Armonk Lease to extend the initial term thereof such that at the closing of such
property there shall be at least thirty (30) years of the initial term
remaining.
4.6. Representations. All representations and warranties made
---------------
herein by Seller shall be true and correct in all material respects.
4.7. Default Under Group Two Sale Agreement. Seller shall not
--------------------------------------
be in default, or have committed an act or failed to perform an act which, with
the giving of notice, the passage of time or both, will become a default under,
the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be in
------------------------------
default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided,
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of which may be waived by Seller in its sole and
absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
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<PAGE>
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner; and
(c) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller or the Title Company may reasonably
require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a written
------------------
opinion from counsel to Purchaser regarding the organization and authority of
Purchaser, the due execution and delivery of this Agreement and the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as Seller may reasonably require. As set forth
in Section 4.3, Seller and Purchaser shall agree upon local counsel for the
-----------
jurisdiction in which the Property is located to provide an appropriate
jurisdiction-specific opinion, the cost of which local counsel will be shared
equally by Seller and Purchaser. An opinion from in-house counsel to Purchaser
shall satisfy this Section 5.3 with respect to all matters which customarily do
-----------
not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all consents of franchisors, if
------------
required; (c) the consent of the ground lessor under the Armonk Lease to the
transactions contemplated by the Group Two Sale Agreement; and (d) a
modification of such Armonk Lease to extend the initial term thereof such that
at the closing of such property there shall be at least thirty (30) years of the
initial term remaining.
5.5. Representations. All representations and warranties made
---------------
herein by Purchaser shall be true and correct in all material respects.
5.6. Default Under Group Two Sale Agreement. Purchaser shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
-20-
<PAGE>
5.7. Default under Other Agreements. Purchaser shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate, and except with respect
to the failure of the conditions set forth in Section 5.1, Section 5.6 and
Section 5.7 (which shall be a default under this Agreement), such failure of a
condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a corporation
------------------------------
duly organized, validly existing and in corporate good standing under the laws
of its state of incorporation, and has all requisite power and authority under
the laws of such state and its respective charter documents to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. Seller has duly qualified to transact business in each
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where failure to do so could not reasonably be expected to
have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action
----------------
to authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller on or prior
to the Closing Date, such document shall constitute the valid and binding
obligation and agreement of Seller, as the case may be, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
-21-
<PAGE>
6.4. Litigation. Seller has not received any written notice
----------
of and, to Seller's knowledge, no action or proceeding is pending or threatened
and no investigation looking toward such an action or proceeding has begun,
which (a) questions the validity of this Agreement or the Operating Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the Property,
(c) will result in or subject the Property to a material liability, or (d)
involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Franchise Agreement listed on
-------------------
Exhibit D is the sole franchise agreement affecting the Property as of the date
- ---------
hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is a true and complete copy of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.7. Contracts. The copies of the Contracts provided or made
---------
available to Purchaser not later than December 1, 1997 are true and complete
copies of said Contracts and, to Seller's knowledge, are valid, in full force
and effect and no party has breached any material condition or provision
thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.9. Not a Foreign Person. Seller is not a "foreign person"
--------------------
within the meaning of Section 1445 of the Code.
-22-
<PAGE>
6.10. Hazardous Substances. To the best of Sellers' knowledge,
--------------------
and except for the conditions specifically described in the environmental report
listed on Exhibit X (the "Environmental Report"), (i) no Hazardous Substances
--------- --------------------
are located on or have been released or disposed of in, on, under or from the
Hotel so as to impose liability or require remediation under any Environmental
Laws and (ii) no liability under or violation of any Environmental Laws or
condition that could give rise to such liability or violation exists with
respect to the Hotel, including without limitation liabilities relating to
offsite disposal of waste in connection with the Hotel. To the best of Seller's
knowledge, there are no pending or threatened claims by any person arising out
of any alleged violation of Environmental Laws or any release or threatened
release of Hazardous Substances arising out of the ownership or operation of the
Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such items
----
listed on Exhibit T (the "Leased FF&E") and any such items which are owned by
--------- -----------
tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land or
--------------------
facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.18. Holder of Liquor License. The holder of the Liquor
License for the Property is Prime Hospitality Corp., a Delaware corporation.
-23-
<PAGE>
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.18 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written notice of a breach thereof within
the Survival Period (but in any event promptly after learning of such breach)
specifying in sufficient detail the facts constituting such alleged breach and
the loss then reasonably ascertainable as a consequence thereof, and an
opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property, pest control matters,
soil conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information pertaining to the Property or the
market and physical environments in which they are located. Purchaser
acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than
-24-
<PAGE>
those specifically set forth in this Agreement or in any document to be
delivered to Purchaser at the Closing made by Seller. Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Property in its "as is" condition on the Closing
Date.
SECTION 7. REPRESENTATIONS OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions
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<PAGE>
the validity of this Agreement or the Operating Lease or any action taken or to
be taken pursuant hereto or pursuant to the Operating Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it, any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
-26-
<PAGE>
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition of
the Property or of any event or circumstance which makes any representation or
warranty of Seller to Purchaser under this Agreement untrue or misleading in any
material respect, promptly to notify Purchaser thereof (Purchaser agreeing, on
learning of any such fact or condition, promptly to notify Seller thereof);
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement in a good and businesslike fashion consistent with
its past practices (which Seller believes to be in compliance with the Franchise
Agreement) and to cause the Property to be maintained in good working order and
condition in a manner consistent with its past practice;
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property;
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases or the Franchise Agreement, other than those modifications,
renewals or extensions required by the terms of the applicable document, or
enter into any other leases, agreements, mortgages or other loan documents or
other commitments relating to the Property or the operation of the Hotel other
than in the normal course of business and which are by their terms terminable
without penalty upon not more than thirty (30) days notice;
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the
-27-
<PAGE>
Hotel as of the Closing Date shall remain the employees of Seller after the
Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser from
and against any and all liability, cost, damages and expenses arising from or
relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing;
--------------
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement in a fashion
consistent with its past practice (which Seller believes to be in compliance
with such Liquor License and Franchise Agreement); (vi) maintaining supplies and
personalty consistent with the prior operations of Seller; (vii) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (viii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (viii) shall survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases, the Franchise Agreement, the Liquor
License and the Contracts for the Hotel, and all other applicable contractual
arrangements relating to the Hotel consistent with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts or Space Leases, without Purchaser's prior
written consent, except that the Seller
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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 thirty (30) days prior notice without cost or expense. Any such new
agreement or renewal or extension of existing agreements to which Purchaser's
consent was not obtained, whether or not such consent is required under this
Section 8.1(i) shall subject the applicable agreement to Purchaser's review
- --------------
under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and any consents and
approvals necessary for the transaction contemplated by this Agreement at least
one week prior to the Closing; to continue to use reasonable, good faith efforts
to obtain such items thereafter; to promptly inform Purchaser of any issues or
problems which Seller foresees in obtaining any such items; and to deliver each
such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its
-------------
own expenses in connection with this Agreement and the transactions contemplated
hereby, including, without
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limitation, any legal and accounting fees, inspection fees, and the costs and
expenses of preparing engineering and environment reports, market studies and
appraisals, whether or not the transactions contemplated hereby are consummated.
The cost of the Survey, Title Commitment (and the policies and endorsements
issued pursuant thereto), all state and local sales, transfer, excise, value-
added or other similar taxes, all recording and filing fees that may be imposed
by reason of the sale, transfer, assignment and delivery of the Property shall
be shared equally by Seller and Purchaser. As between Purchaser and Seller, the
cost of seeking consents including, without limitation, any transfer or
assumption fees incurred in connection therewith, Franchisor Comfort Letters and
Estoppel Certificates shall be borne solely by Seller.
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser One Million
Four Hundred Thirty-Six Thousand Two Hundred Fifty Dollars ($1,436,250) as
liquidated damages and not as a penalty (the "Liquidated Damages"). Purchaser
------------------
and Seller acknowledge that the damages which may be incurred by Purchaser in
the event of Seller's default are difficult to quantify as of the date of this
Agreement; the Liquidated Damages represent the parties reasonable estimate of
Purchaser's probable future damages in the event of Seller's default and the
Liquidated Damages represent fair and reasonable compensation to Purchaser in
the event of Seller's default. Except with respect to the Liquidated Damages,
Purchaser hereby waives any and all rights it may have to sue Seller for money
damages in connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of
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this Agreement; the Liquidated Damages represent the parties reasonable estimate
of Seller's probable future damages in the event of Purchaser's default and the
Liquidated Damages represent fair and reasonable compensation to Seller in the
event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.
11.1. Liquor License. Seller currently holds the Liquor
--------------
License for the Hotel and if, in compliance with all applicable laws, statutes,
rules, regulations and ordinances, Seller may continue to hold such Liquor
License following the Closing, Seller shall maintain the Liquor License and
Purchaser shall not interfere with the maintenance of the Liquor License. If
Seller may not continue to hold a Liquor License for the Property following the
Closing or if the existing Liquor License needs to be revised to reflect the
Purchaser as owner of the Property, then Seller shall apply for a new or
modified Liquor License or, if advised by local counsel to be required under
local laws, regulations or orders, Purchaser or its designee shall apply for a
liquor license for the Hotel, at Seller's sole cost and expense, promptly after
Closing. Seller and Purchaser shall cooperate to obtain a liquor license for the
Hotel or modifications to the existing Liquor License or to maintain the
existing Liquor License in effect. Until such time as such new or modified
liquor license is obtained, Seller shall take all steps reasonably necessary to
enable the current Liquor License to be used by the Hotel and to permit the
uninterrupted sale and service of alcoholic beverages at the Hotel. The
provisions of this Section 11.1 shall survive the Closing.
------------
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or consents of
franchisors, after using commercially reasonable, good faith efforts to do so in
accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters,
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<PAGE>
such consents or otherwise in connection with the transaction contemplated by
this Purchase Agreement shall be limited to the first One Hundred Thousand
Dollars ($100,000) of the collective administrative fees required by the
franchisor and by any franchisor in connection with the transactions
contemplated by the Other Agreements and one-half of all amounts in excess
thereof, and Purchaser hereby covenants and agrees to pay the other one-half of
such administrative fees in excess of One Hundred Thousand Dollars ($100,000).
In no event shall the requirement of payment of administrative fees constitute a
reason for Purchaser to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in good
faith to an adjustment of the rent payable pursuant to the Operating Lease,
based on the terms and conditions of the new franchise agreement and its
anticipated effect on Gross Revenues (as defined in the Operating Lease).
(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller,
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and Purchaser shall have no further right to use the Excluded Intellectual
Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS.
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and
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<PAGE>
its related businesses, including business and occupation taxes, retail sales
taxes, gross receipts taxes, and other special lodging or hotel taxes, but
excluding income taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking services, revenues from any "mini-bars" located in
the Hotel rooms and all other revenues (the "Other Revenues"), provided that
--------------
Other Revenues arising from the sale of food and beverages in restaurants and
bars which do not remain open the entire Cut-Off Night shall be apportioned as
of the last hour at which the applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreement, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j), it is the intent of
Seller and Purchaser that all income and expenses relating to the Property shall
be prorated as provided in this Section 12 such that Seller shall have the
----------
benefit of all income and be responsible for all expenses and liabilities
incurred in connection with the Property fairly allocable to the period prior to
the Closing Date and that Operating Lessee under the Operating Lease at the
Property shall have the benefit of all income and be responsible for all
expenses and liabilities of the Property relating to the period from and after
the Closing Date. With respect to the prorations and Adjustments set forth in
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subparagraph (a) of this Section 12.1, the Purchase Price shall be adjusted
------------
based on the prorations between Seller and Purchaser with respect to such
subparagraph.
12.2. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to the current tax year or
could affect the taxes due for a subsequent tax year and Purchaser shall have
the right to participate in and approve tax settlements of such certiori
proceedings which relate to the current tax year, which settlements shall not be
effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION.
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no longer manages the Property (the "Restricted Period") on any and
-----------------
all Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or
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<PAGE>
guaranteeing the accuracy of such information (though Seller shall not deliver
any information which it knows to be untrue or misleading), it being agreed that
Purchaser shall be responsible for making an independent investigation and
determination with respect to such information. Within ten (10) Business Days
after the receipt of Seller's notice and the documents referred to in clause (y)
of this Section 13.1, Purchaser shall notify Seller and the Seller Subsidiary in
writing whether Purchaser desires to purchase the applicable Full Service Hotel
at the price and on the terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above, Purchaser shall be
deemed conclusively to have elected not to purchase the Full Service Hotel. In
such event or if Purchaser elects not to purchase the Full Service Hotel, Seller
or the Seller Subsidiary shall have the right to transfer the Full Service Hotel
covered by the Offer to the party making the Offer, substantially in accordance
with the terms of the Offer and without material modifications beneficial to
said third party purchaser, without any further notice to Purchaser. If,
however, Seller or the Seller Subsidiary and such third party purchaser
thereafter agree to terms for such purchase which are materially different from
those provided in the Offer and beneficial to the third party purchaser, then
Purchaser's right of first refusal under this Section 13.1 shall be renewed with
------------
respect to such Full Service Hotel, on the terms of the Offer as so modified. If
the sale of a Full Service Hotel is consummated with a third party, provided
that Seller shall have complied with the requirements of this Section 13.1, this
------------
Section 13.1 shall no longer be applicable with respect to such Full Service
Hotel simultaneously with the sale. The exercise or non-exercise by Purchaser of
the right to purchase a Full Service Hotel does not affect Purchaser's
continuing right of first refusal with respect to any other Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any other properties for which Purchaser has terminated this
Agreement or any of the Other
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<PAGE>
Agreements, as applicable, or which has been eliminated from the Group Two Sale
Agreement (unless the problem which Purchaser identified in the applicable
notice of termination has been remedied in full), and Seller may sell such
Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
------------
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St. Thomas and known as "Frenchman's Reef" and Purchaser may sell
that property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed, detailed
plans and specifications for the construction of the Proposed AmeriSuites Hotel;
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(ii) a schedule for the estimated costs of construction
prepared jointly by the contractor engaged to perform the work and Seller; a
construction schedule setting forth the target commencement date, substantial
completion date and final completion date for the construction of the Projected
AmeriSuites Hotel and the dates for completion of the various phases of
construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months after
opening and for periods thereafter, to the extent then developed;
(iv) historical occupancy and Rev Par information for the
preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's name
relating to the site of the Proposed AmeriSuites Hotel, together with copies of
all documents referenced therein;
(vii) a survey of the site for the Proposed AmeriSuites
Hotel;
(viii) any environmental or engineering reports prepared
in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without limitation
market information) with respect to a Proposed AmeriSuites Hotel as may be
reasonably necessary to permit a purchaser to adequately evaluate the same,
provided such information has been developed and is in the possession of Seller
or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites Hotel
shall be either (X) one hundred five percent (105%) of Construction Costs, if
Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of Acquisition
Costs, if Seller acquires an existing Proposed AmeriSuites Hotel; provided,
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<PAGE>
however, that if Seller is able to assign to Purchaser any contract of sale
between Seller and an owner of a Proposed AmeriSuites Hotel, without penalty,
consent or a requirement of Seller's continuing liability thereafter, then
Purchaser, in its sole discretion, may accept such assignment and pay to Seller
in lieu of the purchase price described in this subparagraph (i), an amount
equal to the sum of (A) any deposits made by Seller under the contract of sale,
(B) any reasonable costs or expenses incurred by Seller as of the date of the
assignment and (C) an amount equal to that which, absent the assignment to
Purchaser, would have been five percent (5%) of Acquisition Costs or
Construction Costs, as appropriate;
(ii) Within three (3) Business Days after providing its
notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of the
purchase price, which deposit, at Purchaser's election, may be in the form of a
letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites brand
------------
hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit E-1;
-----------
and
(v) If Seller constructs the Proposed AmeriSuites Hotel,
the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the Proposed
AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed
-39-
<PAGE>
conclusively to have rejected its option to purchase the Proposed AmeriSuites
Hotel. In such event or if Purchaser rejects its option to purchase a Proposed
AmeriSuites Hotel, this Agreement immediately shall terminate and be of no
further force and effect with respect to such Proposed AmeriSuites Hotel.
Notwithstanding the foregoing, Seller shall be obligated to re-offer such
Proposed AmeriSuites Hotel to Purchaser in accordance with this Section 13.3 if
------------
the size of the Proposed AmeriSuites Hotel is changed substantially or any
projection of total costs and expenses for such Proposed AmeriSuites Hotel shows
total costs and expenses which are substantially less than those contained in
the Project Plan. The exercise or non-exercise by Purchaser of the right to
purchase a particular Proposed AmeriSuites Hotel does not affect Purchaser's
continuing rights under this Section 13.3 with respect to any other Proposed
------------
AmeriSuites Hotels.
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Properties Exception. Notwithstanding anything to
--------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a
-40-
<PAGE>
Seller Subsidiary shall breach any of the covenants and provisions contained in
this Section 13, Purchaser shall be entitled to enforce the terms of this
----------
section by specific performance or seek damages in a court of law and the
provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions in this Section 13 shall not be
----------
included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
-41-
<PAGE>
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
----------
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
(i) Notwithstanding anything to the contrary contained in
this Agreement, Seller retains the unrestricted right to continue to grant
franchise agreements for "AmeriSuites" hotels to unaffiliated third-parties. So
long as such franchisees are not Seller Affiliates, the provisions of this
Section 13 shall be inapplicable with respect thereto.
- ----------
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS.
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases or the Contracts and relating to
periods prior to the Closing or (y) any damage to property of others or injury
to or death of any person or any claims for any debts or obligations occurring
on or about or in connection with the Property or any portion thereof at any
time or times prior to the Closing or (z) all accounts payable and sales taxes
due for or on account of the period prior to Closing, and (ii) Purchaser shall
indemnify and hold harmless Seller from and against any and all obligations,
claims, losses, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (x) the Contracts or the Space Leases relating to periods on or
after the Closing, or (y) any damage to property of others or injury to or death
of any person or any claims for any debts or obligations occurring on or about
the Property or any portion thereof at any time or times on or after the Closing
or (z) sales taxes due for or on account of the period from and after the
Closing.
-42-
<PAGE>
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise
-43-
<PAGE>
furnish information regarding this Agreement, the transactions contemplated by
this Agreement or any materials provided or prepared in accordance with this
Agreement (including without limitation, all due diligence materials, whether
prepared by Seller or Purchaser) to any third party without the consent of the
other parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except as required by law or contractual obligations of such
parties to third parties or as advised by reputable counsel to be in accordance
with law or such contractual obligation. No party, or its employees shall trade
in the securities of any parent or affiliate of Seller or of Purchaser until a
public announcement of the transactions contemplated by this Agreement has been
made. No party shall record this Agreement or any notice thereof. The provisions
of this Section 14.3 shall survive the Closing or earlier termination of this
------------
Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of action,
judgments, damages, losses, fines, penalties, costs and expenses, including
without limitation reasonable attorneys' fees and disbursements relating to the
a breach by such indemnifying party (or its directors, officers, shareholders,
partners, members, agents, employees or any independent contractors retained by
it) of any of the covenants to be performed by such party contained in this
Section 14.4. Notwithstanding anything to the contrary contained in this
- ------------
Agreement, the provisions of this Section 14.4 shall survive the Closing for a
------------
period of two (2) years. With respect to the indemnity obligations or any breach
of this Section 14.4, the provisions of Section 10 shall
------------ ----------
-44-
<PAGE>
not apply and the indemnified party may seek damages in a court of law or
exercise any other remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
-45-
<PAGE>
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(d) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the right to designate an Affiliate of
Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
-46-
<PAGE>
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
-47-
<PAGE>
14.11. Performance on Business Days. In the event the date on
----------------------------
which performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-48-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ RICHARD SZYMANSKI
------------------------------------------
Richard Szymanski
Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its sole general partner
By: /s/ BRUCE G. WILES
-----------------------------------------
Bruce G. Wiles
Executive Vice President
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<PAGE>
EXHIBIT 2.2
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as Purchaser
January 7, 1998
Las Vegas, Nevada (St. Tropez)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS......................................................................................1
1.1. "Acquisition Costs" ...................................................................................1
1.2. "Adjustments" .........................................................................................2
1.3. "Affiliate" ...........................................................................................2
1.4. "Agreement" ...........................................................................................2
1.5. "Business Day" ........................................................................................2
1.6. "Change in Control" ...................................................................................2
1.7. "Closing" .............................................................................................2
1.8. "Closing Date" ........................................................................................2
1.9. "Code" ................................................................................................2
1.10. "Construction Costs" .................................................................................2
1.11. "Contracts" ..........................................................................................3
1.12. "Cut-Off Time" .......................................................................................3
1.13. "Defective Property" .................................................................................3
1.14. "Deposit" ............................................................................................3
1.15. "Diligence Notice" ...................................................................................3
1.16. "Documents" ..........................................................................................3
1.17. "Due Diligence Material" .............................................................................4
1.18. "Environmental Laws" .................................................................................4
1.19. "Environmental Report" ...............................................................................4
1.20. "Escrow Agent" .......................................................................................4
1.21. "Escrow Agreement" ...................................................................................4
1.22. "Estoppel Certificate" ...............................................................................4
1.23. "Exchange Act" .......................................................................................5
1.24. "Excluded Intellectual Property" .....................................................................5
1.25. "FF&E" ...............................................................................................5
1.26. "FF&E Leases" ........................................................................................5
1.27. "Financial Statements" ...............................................................................5
1.28. "Franchise Agreement" ................................................................................5
1.29. "Full Service Hotels" ................................................................................5
1.30. "Group Two Sale Agreement" ...........................................................................5
1.31. "Hazardous Substance" ................................................................................5
1.32. "Hotel" ..............................................................................................5
1.33. "Improvements" .......................................................................................6
1.34. "Intangible Property" ................................................................................6
1.35. "Leased FF&E" ........................................................................................6
1.36. "Letter of Credit.....................................................................................6
1.37. "Liquidated Damages" .................................................................................6
1.38. "Liquor License" .....................................................................................6
1.39. "Mortgagee" ..........................................................................................6
1.40. "Offer" ..............................................................................................6
1.41. "Operating Lease" ....................................................................................6
1.42. "Operating Lessee" ...................................................................................6
1.43. "Original Agreement...................................................................................7
1.44. "Other Agreements" ...................................................................................7
1.45. "Other Revenues" .....................................................................................7
1.46. "Permitted Encumbrances ..............................................................................7
1.47. "Person" .............................................................................................7
1.48. "Project Plan" .......................................................................................7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
1.49. "Properties" .........................................................................................7
1.50. "Proposed AmeriSuites Hotel" .........................................................................7
1.51. "Prorations Settlement" ..............................................................................7
1.52. "Purchase Price" .....................................................................................7
1.53. "Purchaser" ..........................................................................................7
1.54. "Real Property" ......................................................................................8
1.55. "REIT" ...............................................................................................8
1.56. "Restricted Period" ..................................................................................8
1.57. "Room Revenues" ......................................................................................8
1.58. "SEC Documents" ......................................................................................8
1.59. "Seller" .............................................................................................8
1.60. "Seller's knowledge" .................................................................................8
1.61. "Seller Subsidiary" ..................................................................................8
1.62. "Shopping Center Leases" .............................................................................8
1.63. "Space Leases" .......................................................................................8
1.64. "Subordination, Nondisturbance and Attornment Agreement" .............................................8
1.65. "Survey" .............................................................................................9
1.66. "Survival Period" ....................................................................................9
1.67. "Title Commitment" ...................................................................................9
1.68. "Title Company" ......................................................................................9
1.69. "WARN Act" ...........................................................................................9
SECTION 2. PURCHASE AND SALE ..............................................................................9
2.1. Purchase and Sale .....................................................................................9
2.2. Deposit ...............................................................................................9
2.3. Closing ...............................................................................................9
2.4. Purchase Price .......................................................................................10
2.5. Tax Free Exchange ....................................................................................10
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION ...........................................................10
3.1. Diligence Inspections ................................................................................10
3.2. Defective Properties .................................................................................13
3.3. Title Matters ........................................................................................14
3.4. Survey ...............................................................................................14
3.5. Additional Termination Option ........................................................................15
3.6. Adjournment of Closing ...............................................................................16
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE ..................................................16
4.1. Closing Documents ....................................................................................16
4.2. Condition of the Properties ..........................................................................18
4.3. Title Policies .......................................................................................18
4.4. Opinions of Counsel...................................................................................18
4.5. Other Approvals ......................................................................................19
4.6. Representations ......................................................................................19
4.7. Default under Group Two Sale Agreement ...............................................................19
4.8. Default under Other Agreements .......................................................................19
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE .....................................................19
5.1. Purchase Price .......................................................................................19
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
5.2. Closing Documents.....................................................................................19
5.3. Opinion of Counsel....................................................................................20
5.4. Other Approvals.......................................................................................20
5.5. Representations.......................................................................................20
5.6. Default under Group Two Sale Agreement................................................................20
5.7. Default under Other Agreements........................................................................20
SECTION 6. REPRESENTATIONS OF SELLER.......................................................................21
6.1. Status and Authority of Seller........................................................................21
6.2. Action of Seller......................................................................................21
6.3. No Violations of Agreements...........................................................................21
6.4. Litigation............................................................................................21
6.5. Existing Leases, Agreements, Etc......................................................................22
6.6. Franchise Agreement...................................................................................22
6.7. Contracts.............................................................................................22
6.8. Taxes.................................................................................................22
6.9. Not A Foreign Person..................................................................................22
6.10. Hazardous Substances.................................................................................22
6.11. Insurance............................................................................................23
6.12. FF&E.................................................................................................23
6.13. Employment and Union Contracts.......................................................................23
6.14. Adjacent Land Leases.................................................................................23
6.15. Trademarks...........................................................................................23
6.16. Compliance with Laws.................................................................................23
6.17. Inventory............................................................................................23
6.18. Holder of Liquor License............................................................................ 23
SECTION 7. REPRESENTATIONS OF PURCHASER....................................................................25
7.1. Status and Authority of Purchaser.....................................................................25
7.2. Action of Purchaser...................................................................................25
7.3. No Violations of Agreements...........................................................................25
7.4. Litigation............................................................................................25
7.5. No Conflicts..........................................................................................25
SECTION 8. COVENANTS OF SELLER AND PURCHASER...............................................................26
8.1. Covenants of Seller...................................................................................26
SECTION 9. CLOSING COSTS...................................................................................29
9.1. Closing Costs.........................................................................................29
SECTION 10. DEFAULT........................................................................................30
10.1. Default by Seller....................................................................................30
10.2. Default by Purchaser.................................................................................30
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.............................................................30
11.1. Liquor License.......................................................................................30
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
11.2. License for Excluded Intellectual Property...........................................................30
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS..........................................................31
12.1. Matters to be Adjusted or Prorated...................................................................31
12.2. Security Deposits for Shopping Center Leases.........................................................33
12.3. Certiorari Proceeding................................................................................33
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL PURCHASE OPTION..................33
13.1. Right of First Refusal on Full Service Hotels........................................................33
13.2. Radius Restriction...................................................................................35
13.3. AmeriSuites Hotels...................................................................................35
13.4. Multi-Property Exception.............................................................................39
13.5. Survival and Damages.................................................................................39
13.6. General Provisions...................................................................................39
SECTION 14. MISCELLANEOUS..................................................................................41
14.1. Agreement to Indemnify...............................................................................41
14.2. Brokerage Commissions................................................................................42
14.3. Publicity............................................................................................42
14.4. Confidentiality......................................................................................42
14.5. Notices..............................................................................................43
14.6. Waivers, Etc.........................................................................................45
14.7. Assignment; Successors and Assigns...................................................................45
14.8. Severability.........................................................................................45
14.9. Counterparts, Etc....................................................................................45
14.10. Governing Law.......................................................................................46
14.11. Performance on Business Days........................................................................46
14.12. Attorneys' Fees.....................................................................................46
14.13. Section and Other Headings..........................................................................46
14.14. Financing and Priority of Operating Leases..........................................................47
14.15. Group Two Purchase and Sale Agreement...............................................................47
14.16. Exceptions to Liquidated Damages....................................................................47
</TABLE>
EXHIBITS*
Exhibit B Legal Description of the Property
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Lease and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment
Agreement
________________
The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and Exchange
Commission upon request.
(iv)
<PAGE>
Exhibit O Form of Accountant's Representation Letter
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit S-1 Form of Assignment and Assumption of Shopping Center Leases
and Restaurant Lease
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts (from Seller
to Operating Lessee)
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made
as of the 7th day of January, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser entered into that certain
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Seller and Purchaser desire to amend and restate the
Original Agreement in the form of eight separate contracts, one contract for
each of the Properties (as defined in the Original Agreement) (such contracts
other than this Agreement being referred to herein as the "Other Agreements");
----------------
and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase Seller's interest in the Property, subject to and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other professional fees, any due diligence expenses incurred in assessing the
Proposed AmeriSuites Hotel, title and survey costs, transfer taxes and pre-
opening expenses of the hotel, including without limitation, costs incurred in
the reflagging of the
-1-
<PAGE>
hotel, promotional and advertising expenses, administrative expenses, employee
hiring and training expenses, the cost of supplies, equipment and furniture
purchased for the hotel, governmental, utility or other deposits required for
operation of the hotel and similar costs.
1.2. "Adjustments shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that , directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
----------
as it and they may be amended from time to time as herein provided.
1.5. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.6. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.7. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.8. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.9. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the treasury regulations promulgated thereunder.
1.10. "Construction Costs" shall mean all hard and soft costs
------------------
incurred by Seller or the Seller Subsidiary, as
-2-
<PAGE>
appropriate, in connection with the acquisition of the site and construction and
related improvements for a Proposed AmeriSuites Hotel, including without
limitation (a) the cost of funds used for such construction, whether provided by
a third party lender or by Seller (the interest on such funds being calculated
in the latter event at a rate equal to the prime rate reported in the Money
Rates column or comparable section of The Wall Street Journal (or if The Wall
----------------------- --------
Street Journal is no longer published, a different publication designated by
- --------------
Seller) as the rate then in effect for corporate loans at large U.S. money
center commercial banks, plus three percent (3%) compounded monthly), (b)
attorney, accountant, engineer, architect, contractor and other professional
fees; (c) any due diligence expenses incurred in assessing a site for the
Proposed AmeriSuites Hotel; (d) title and survey costs; (e) transfer taxes; and
(f) pre-opening expenses of the hotel, including without limitation, promotional
and advertising expenses, administrative expenses, employee hiring and training
expenses, the cost of supplies, equipment and furniture ordered or purchased for
the hotel, governmental, utility or other deposits required for operation of the
hotel and similar costs.
1.11. "Contracts" shall mean all hotel licensing agreements
---------
and other service contracts, equipment leases, booking agreements and other
arrangements or agreements to which Seller is a party affecting the ownership,
repair, maintenance, management, leasing or operation of the Property, to the
extent Seller's interest therein is assignable or transferable.
1.12. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.13. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
1.14. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.15. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
- ------------ ---
1.16. "Documents" shall mean, with respect to any Property,
---------
all books, records and files relating to the leasing, maintenance, management or
operation of the Property.
-3-
<PAGE>
1.17. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.18. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et
seq., the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33
U.S.C. (S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601,
et seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq.,
as any of the preceding have been amended prior to the date hereof, and any
other federal, state, or local law, ordinance, regulation, rule, order, decision
or permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.19. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.12.
------------
1.20. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.21. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.22. "Estoppel Certificate" shall mean a statement in favor
--------------------
of Purchaser and/or any Mortgagee certifying to such matters as Purchaser and/or
its Mortgagee may reasonably request, including, without limitation, when from a
tenant of a Shopping Center Lease, the following: that an attached copy of the
Shopping Center Lease is a true, correct and complete copy of such Shopping
Center Lease which has not been modified except as identified; to the material
terms of the Shopping Center Lease, including the amount of rent due thereunder
and the date through which rent has been paid, that Seller, as lessor, is not in
monetary or other default under the Shopping Center Lease and that no event has
occurred which with the giving of notice or the passage of time or both will
become a default under the Shopping Center Lease; and to any other matters which
the tenant is required to certify pursuant to the terms of the Shopping Center
Lease; each in a form reasonably acceptable to said tenant; provided, however,
that if a Shopping Center Lease (i) does not require and the estoppel
certificate is delivered without the inclusion of a statement that no event has
occurred which with the giving of notice or the passage of time or both will
become a default, or (ii) refers to any non-monetary, immaterial defaults under
the relevant document on an estoppel certificate, then in either case the
estoppel certificate shall be deemed satisfactory to fulfill Seller's
obligations under Section 4.1(h), provided Seller shall indemnify and hold
--------------
harmless Purchaser against any loss, cost, damage, claim or liability occasioned
by such immaterial default.
-4-
<PAGE>
1.23. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.24. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.25. "FF&E" shall mean all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.26. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E. 1.27. "Financial Statements" shall have the meaning given such term
in Section 3.1(b).
1.27. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.28. "Franchise Agreement" shall mean a hotel licensing
-------------------
agreement pursuant to which a hotel shall be operated under an identified flag.
1.29. "Full Service Hotel" shall mean hotels with a
------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.30. "Group Two Sale Agreement" shall have the meaning given
------------------------
that term in Section 14.15.
-------------
1.31. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.32. "Hotel" shall mean the hotel located at the Property.
-----
-5-
<PAGE>
1.33. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Rea l Property.
1.34. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including without limitation all trademarks, trade names,
copyrights, patents or technical processes, owned and used by Seller which
pertain solely to the Property and expressly excluding the Excluded Intellectual
Property and all trademarks, trade names, copyrights, patents or technical
processes used with respect to Seller itself or Seller's Affiliates, and
expressly excluding the Contracts.
1.35. "Leased FF&E" shall have the meaning given such term in
-----------
Section 6.12.
- ------------
1.36. "Letter of Credit shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.37. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.38. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at a hotel issued by the state in which a hotel is located
or other applicable governmental authority.
1.39. "Mortgagee" shall mean any and all lenders who provides
---------
financing to Purchaser in connection with the Property.
1.40. "Offer" shall have the meaning given such term in
-----
Section 13.
1.41. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.42. "Operating Lessee" shall mean a wholly-owned subsidiary
----------------
of Seller as tenant, of an Operating Lease(s); which is a single-purpose entity
with the sole purpose of leasing, managing, maintaining, operating and
performing other related functions for the Hotel.
-6-
<PAGE>
1.43. "Original Agreement shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.44. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.45. "Other Revenues" shall have the meaning given such term
--------------
in Section 12.1.
------------
1.46. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) applicable
zoning regulations and ordinances provided the same do not prohibit or impair in
any material respect use of the Property as a hotel as currently operated and
constructed; (d) UCC Financing Statements securing the purchase price of FF&E
under the FF&E Leases identified on Exhibit I; provided, however, that such
---------
liens shall be confined to the asset in question and the aggregate principal
amount of indebtedness secured by such liens shall not exceed the cost of
acquisition or construction of the property subject thereto; (e) such other
nonmonetary encumbrances with respect to the Property which are not objected to
by Purchaser in accordance with Section 3; and (f) such exceptions or matters,
---------
as the case may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.47. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.48. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.49. "Property" shall mean all of the Seller's interest in
--------
the Real Property, and in the FF&E, the Documents, the Improvements and the
Intangible Property related to the Real Property.
1.50. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
1.51. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.52. "Purchase Price" shall have the meaning given such term
--------------
in Section 2.4.
-----------
1.53. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
-7-
<PAGE>
1.54. "Real Property" shall mean the real property described
-------------
on Exhibit B attached hereto and made a part hereof, together with all
easements, rights of way, privileges, licenses and appurtenances which Seller
may now own with respect thereto.
1.55. "REIT" shall mean American General Hospitality
----
Corporation.
1.56. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.57. "Room Revenues" shall have the meaning given such term
-------------
in Section 12.1.
------------
1.58. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.59. "Seller" shall have the meaning given such term in the
------
preamble to this Agreement.
1.60. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.60 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.61. "Seller Subsidiary" shall have the meaning set forth in
-----------------
Section 13.1.
- ------------
1.62. "Shopping Center Leases" shall mean those certain Space
----------------------
Leases for portions of the Property located in Las Vegas, Nevada and known as
the "St. Tropez" which are part of a retail shopping mall located on the
Property.
1.63. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on
Exhibit K.
- ---------
1.64. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
-8-
<PAGE>
1.65. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.66. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.67. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.68. "Title Company" shall mean, collectively, Chicago Title
-------------
Insurance Company and Commonwealth Land Title Insurance Company, each as a 50%
co-insurers, or such other title insurance company or companies as shall have
been reasonably approved by Purchaser and Seller.
1.69. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
-------
the sum of One Million Four Hundred Eleven Thousand Five Hundred Dollars
($1,411,500) (together with all interest accrued thereon, if any, the "Deposit")
-------
in the form of an unconditional, irrevocable letter of credit issued by Bank
One, Texas, N.A. (the "Letter of Credit"). The Letter of Credit shall be in the
----------------
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000), which amount
shall represent the Deposit as well as the deposits required pursuant to the
Other Agreements. The Deposit (and the Letter of Credit) shall be held pursuant
to, and disbursed according to, the terms of the Escrow Agreement.
Notwithstanding anything to the contrary contained in this Agreement, until the
Deposit is disbursed in accordance with the Escrow Agreement, this Agreement
shall not terminate and shall remain in full force and effect to the extent
necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall
-------
be consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations under Section
--------- -------
4,
- -
-9-
<PAGE>
unless such obligations shall have been waived by Purchaser and provided that
such adjournment with respect to the Property shall not adjourn the Closing Date
with respect to any of the other Properties to be conveyed under the Other
Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Twenty-Six
--------------
Million Fifty-Five Thousand Dollars ($26,055,000), allocated Twenty-Three
Million Three Hundred Twenty Thousand Dollars ($23,320,000) to the Real Property
and Improvements and Two Million Seven Hundred Thirty-Five Thousand Dollars
($2,735,000) to the personal property including, without limitation, the FF&E
and the Intangible Property.
(b) The Purchase Price (plus or minus adjustments and
prorations as set forth in Section 12 hereof) shall be payable by wire transfer
----------
of immediately available federal funds on the Closing Date to an account to be
designated by Seller prior to the Closing.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring one or more Section 1031 exchanges, if so desired by Seller,
provided that such structuring shall not materially adversely affect Purchaser's
rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser
in connection with Purchaser complying with the terms of this Section 2.5 shall
-----------
be paid by Seller.
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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,
-10-
<PAGE>
specifications, permits, certificates of occupancy and other files that are
relevant to the management, ownership, operation, use, occupancy, construction
and leasing of the Hotel, as are in Seller's possession and control, and have
not been otherwise provided to Purchaser pursuant to this Agreement. Purchaser
agrees and acknowledges that it has investigated and/or received the opportunity
to investigate the Property to its satisfaction and that it is not relying on
any materials, statements, representations or warranties of any kind, other than
as specifically set forth in this Agreement, in purchasing the Property. To the
extent that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, has damaged or disturbed or does damage or
disturb the Real Property or the Improvements located thereon, Purchaser shall
return the same to substantially the same condition which existed immediately
prior to such damage or disturbance. In the event that the transactions
contemplated by this Agreement are not closed and consummated for any reason,
Purchaser shall deliver to Seller all tests, reports and inspections of the
Property made and conducted by Purchaser or for its benefit or any other
documents or information Purchaser has received pursuant to this Agreement.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all cost, expense, liability, loss or damage which Seller may incur as a
result of any act or omission of Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any gross negligence or
willful misconduct of Seller. The provisions of this Section 3.1(a) shall
survive the termination of this Agreement and the Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for the current year to date and
each of the three (3) years prior to the year of this Agreement (the
"Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and
other patrons of the Hotel; management fees; maintenance,
-11-
<PAGE>
repairs and other expenses relating to the management and operation of the
Hotel; occupancy statistics for the Hotel for the current year to date and the
prior three (3) calendar years; and all capital expenditures made during the
aforementioned periods. To the extent that the Financial Statements provided
by Seller for the current year do not include any period up to and including
the Closing Date, Seller shall, within 25 days after the Closing Date, provide
Purchaser with monthly unaudited Financial Statements applicable to such
period inclusive of the Closing Date.
(iii) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in
Seller's possession or control or readily available without expense, notices
of appraised value for the Real Property and Improvements;
(iv) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser
shall return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) All notices received from governmental authorities
in connection with the Hotel;
(viii) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(ix) All FF&E Leases;
(x) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to the Hotel;
(xi) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
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<PAGE>
(xii) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as
defined in this Agreement) of any material inaccuracy, misstatement or omission
in any of the information furnished to Purchaser pursuant to this Section
-------
3.1(b), Seller shall notify Purchaser in writing of the same and shall supply
- ------
Purchaser with updated information or schedules, as required. Upon notification
to Purchaser, any representations and warranties of Seller in this Agreement
related to such information shall be deemed modified to incorporate such
information. If any of Seller's representations or warranties is modified such
that any representation or warranty is materially and adversely different than
that made upon execution of this Agreement, then Purchaser may terminate this
Agreement by notice given to Seller within ten (10) Business Days after Seller
has provided such information.
Purchaser's representatives shall have access to all financial
and other information relating to the Hotel, to the extent in Seller's
possession and control (and without requiring Seller to expend funds except a
diminimus amount), sufficient to enable the REIT to prepare audited financial
statements in conformity with Regulation S-X of the SEC and to enable the REIT
to satisfy its reporting obligations under the Exchange Act or to prepare a
registration statement, report or disclosure statement for filing with the U.S.
Securities and Exchange Commission on behalf of the REIT and/or its Affiliates.
Prior to completion of the audits of the Property currently being performed by
Coopers & Lybrand, L.L.P., Seller shall provide to Coopers & Lybrand, L.L.P. a
signed representation letter substantially in the form attached hereto as
Exhibit O for the Property.
- ---------
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property.
(b) If Purchaser timely gives notice to Seller that it
considers the Property a Defective Property, and Purchaser and Seller shall,
acting reasonably and in good faith, be unable or unwilling to agree (x) that
Seller shall, at its sole cost, attempt to remedy the applicable defect prior to
the Closing (in
-13-
<PAGE>
which event Seller shall have the right to adjourn the Closing Date pursuant to
the provisions of Section 3.7 for up to ninety (90) days for such purpose), (y)
-----------
that Purchaser shall, notwithstanding such defect, acquire the Defective
Property subject to a reduction in the Purchase Price, as reasonably determined
by Seller and Purchaser, sufficient to compensate Purchaser for such defect, or
(z) on the substitution of another property owned by Seller for such Defective
Property, this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the date of the Original Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to the Property, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "Title
-----
Commitment"). Except as set forth in the Diligence Notice, Purchaser
- ----------
acknowledges that it does not have any other objections to title exceptions
shown on the Title Commitment. Seller acknowledges and agrees that Seller shall
attempt to remedy the objections set forth in the Diligence Notice with respect
to the Property. Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.6 for up to ninety (90) days for such purpose. If Seller
-----------
shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
-----------
Agreement and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notices by Purchaser. Failure of Purchaser to give such
notice shall be deemed an election by Purchaser to proceed in accordance with
clause (ii) above, and such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect
------
to the Real Property (the "Survey") by a licensed surveyor in the jurisdiction
------
in which the Property is located, which (i) contains an accurate legal
description of the Property, (ii) shows the location, dimension and description
(including
-14-
<PAGE>
applicable recording information) of all utilities, easements, encroachments and
other physical matters affecting the Property, the number of striped parking
spaces located thereon and all applicable building set-back lines, (iii) states
whether the Property is located within a 100-year flood plain and (iv) is
certified to Purchaser and the Title Company and such other persons as shall
have been requested by Purchaser or Seller. Except as set forth on the Diligence
Notice, Purchaser acknowledges and agrees that it does not have any other
objections to any matter shown on the Survey. Seller acknowledges and agrees
that Seller shall attempt to remedy the objections set forth in the Diligence
Notice with respect to the Survey; Seller shall have the right to adjourn the
Closing Date pursuant to Section 3.6 for up to ninety (90) days for such
-----------
purpose. If Seller shall be unable to remove any such survey defect to which
Purchaser has objected, Purchaser may elect (i) to terminate this Agreement and
this Agreement shall terminate and be of no further force or effect except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or fifth Business Day after Seller's notice of its inability to
cure such defect and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above
and such matter shall be a Permitted Encumbrance.
3.5. Additional Termination Option.
-----------------------------
If Purchaser shall elect, pursuant to any provision of this
Agreement or of the Other Agreements, to terminate any three or more of the
Other Agreements and/or this Agreement, then, together with such notice of
termination with respect to this Agreement or an Other Agreement which taken by
itself or together with any prior notices of termination would result in the
three or more such terminations, Purchaser may, in such notice, or Seller may,
within 10 Business Days of receipt of such notice of termination by written
notice to Purchaser, terminate this Agreement and simultaneously terminate the
Other Agreements and the Group Two Sale Agreement, in which event the Deposit
shall be returned to Purchaser and the parties to this Agreement shall have no
further obligations under this Agreement, the Other Agreements or the Group Two
Sale Agreement except as expressly provided in this Agreement, the Other
Agreements or the Group Two Sale Agreement. Notwithstanding the foregoing, if
any provision in any Other Agreement expressly provides that a termination
thereof shall not be considered for purposes of determining whether three such
terminations have occurred, such provision of the Other Agreement shall be
controlling.
-15-
<PAGE>
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(h)) or any necessary consents and
---------------
approvals (as required by Section 4.5)), then unless such requirement is waived
-------------
by Purchaser in its sole and absolute discretion, Seller shall have the right to
adjourn the Closing for up to ninety (90) days. If at Closing Seller is unable
to deliver any required Estoppel Certificates or any necessary consents and
approvals or any Franchisor Comfort Letters (as defined in the Other Agreements)
for three or more Properties under any of the Other Agreements and/or this
Agreement, then unless the parties shall otherwise mutually agree (or unless
such requirement is waived by Purchaser in its sole and absolute discretion),
the Closing shall be adjourned with respect to the Property and all other
Properties to be conveyed under the Other Agreements until such Estoppel
Certificates, Franchisor Comfort Letters or consents are obtained, provided such
adjournment shall not be longer than ninety (90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser to acquire the Property on the
Closing Date shall be subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, any or all of which may be waived by
Purchaser in its sole and absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdictions in which the Property is located, in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(c) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of
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<PAGE>
Seller's right, title and interest in, to and under the Space Leases with
respect to the Property;
(d) Duly executed transfer tax forms, as required by
applicable law;
(e) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(f) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(g) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(h) Duly executed Estoppel Certificates from the tenants of
the Shopping Center Leases; provided that any such Estoppel Certificate shall be
provided to Purchaser prior to Closing promptly following receipt by Seller of
the same;
(i) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(j) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(k) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
(l) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code;
(m) To the extent the same are in Seller's possession, the
original, fully executed copies of the Shopping Center Leases and if such
originals are not available, copies thereof;
(n) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S-1, duly executed and acknowledged by
-----------
Seller, with respect to all of Seller's right, title and interest in, to and
under the Shopping Center Leases; and
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<PAGE>
(o) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property in the State of Nevada.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects; provided that the failure of
the Hotel to have a Liquor License and/or a Franchise Agreement as of the
Closing Date shall not constitute a failure of a condition to Purchaser's
obligation to close under this Section 4.
---------
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement, the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as the Purchaser may reasonably require. Seller
and Purchaser shall agree upon local counsel for the jurisdiction in which the
Property is located to provide an appropriate jurisdiction-specific opinion, the
cost of which local counsel will be shared equally by Seller and Purchaser. An
opinion from in-house counsel to Seller shall
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<PAGE>
satisfy this Section 4.4 with respect to all matters which customarily do not
-----------
require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the ground lessor under that certain Lease dated
June 29, 1973 (as amended, the "Armonk Lease") for premises located in Armonk,
------------
New York to the transactions contemplated by the Group Two Sale Agreement; and
(c) a modification of such Armonk Lease to extend the initial term thereof such
that at the closing of such property there shall be at least thirty (30) years
of the initial term remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be in
------------------------------
default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to convey the Property on the
Closing Date to Purchaser is subject to the satisfaction of the following
conditions precedent on and as of the Closing Date, any or all of which may be
waived by Seller in its sole and absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
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<PAGE>
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner; and
(c) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller or the Title Company may reasonably
require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for the jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) the consent of the ground
------------
lessor under the Armonk Lease to the transactions contemplated by the Group Two
Sale Agreement; and (c) a modification of such Armonk Lease to extend the
initial term thereof such that at the closing of such property there shall be at
least thirty (30) years of the initial term remaining.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default under Group Two Sale Agreement. Purchaser
--------------------------------------
shall not be in default, or have committed an act or failed to perform an act
which, with the giving of notice, the passage of time or both, will become a
default under, the Group Two Sale Agreement.
5.7. Default under Other Agreements. Purchaser shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of
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<PAGE>
time or both, will become a default under, any of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate; except with respect to
the failure of the conditions set forth in Section 5.1, Section 5.6 and Section
----------- ----------- -------
5.7 (which shall be a default under this Agreement), such failure of a condition
- ---
shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER
To induce Purchaser to enter into this Agreement, Seller
represents to Purchaser as follows:
6.1. Status and Authority of Seller. Seller is a
------------------------------
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
----------------
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by Seller on
or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller, as the case may be, enforceable
against Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
6.4. Litigation. Seller has not received any written notice
----------
of and, to Seller's knowledge, no action or proceeding is pending or threatened
and no investigation looking toward such an action or proceeding has begun,
which (a)
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<PAGE>
questions the validity of this Agreement or the Operating Lease or any action
taken or to be taken pursuant hereto, (b) will result in any material adverse
change in the business, operation, affairs or condition of the Property, (c)
will result in or subject the Property to a material liability, or (d) involves
condemnation or eminent domain proceedings against any part of the Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Property is not currently
-------------------
operated pursuant to a Franchise Agreement.
6.7. Contracts. The copies of the Contracts provided or
---------
made available to Purchaser not later than December 1, 1997 are true and
complete copies of said Contracts and, to Seller's knowledge, are valid, in full
force and effect and no party has breached any material condition or provision
thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign person"
--------------------
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report which are listed on Exhibit X (the "Environmental Report"),
--------- --------------------
(i) no Hazardous Substances are located on or have been released or disposed of
in, on, under or from the Hotel so as to impose liability or require remediation
under any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the
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<PAGE>
Hotel, including without limitation liabilities relating to offsite disposal of
waste in connection with the Hotel. To the best of Seller's knowledge, there are
no pending or threatened claims by any person arising out of any alleged
violation of Environmental Laws or any release or threatened release of
Hazardous Substances arising out of the ownership or operation of the Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.18. Holder of Liquor License. The Property does not have a
------------------------
liquor license currently issued for the sale of alcoholic beverages at the
Property.
The representations made in this Agreement by Seller shall be
deemed remade by Seller as of the Closing Date with the same force and effect as
if made on, and as of, such date; provided, however, that, Seller shall have the
right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to
Purchaser. If a Seller representation or warranty thereby is
-23-
<PAGE>
modified to an extent that the representation or warranty is materially and
adversely different than that made upon execution of this Agreement, then
Purchaser may terminate this Agreement, provided notice of such termination is
given to Seller within ten (10) Business Days after Seller has provided notice
of the modification.
The representations made in Section 6.1 and Section 6.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 6.3
-----------
through and including Section 6.18 shall survive Closing for a period of one (1)
------------
year (the "Survival Period") and, upon termination of the Survival Period, shall
---------------
terminate absolutely will full and final discharge of liability except to the
extent that Purchaser shall have given to Seller written notice of a breach
thereof within the Survival Period (but in any event promptly after learning of
such breach) specifying in sufficient detail the facts constituting such alleged
breach and the loss then reasonably ascertainable as a consequence thereof, and
an opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or
any documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Property or matters affecting the Property, whether made by Seller, on Seller's
behalf or otherwise, including, without limitation, the physical condition of
the Property, title to or the boundaries of the Real Property, pest control
matters, soil conditions, the presence, existence or absence of hazardous
wastes, toxic substances or other environmental matters, compliance with
building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Property or the market and physical environments in which they are located.
Purchaser acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than those specifically set forth in this Agreement or in any
document to be delivered to Purchaser at the Closing made by Seller. Purchaser
further acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering,
-24-
<PAGE>
property management and other advisors. Subject to the provisions of this
Agreement, Purchaser shall purchase the Property in its "as is" condition on the
Closing Date.
SECTION 7. REPRESENTATIONS OF PURCHASER
To induce Seller to enter into this Agreement, Purchaser
represents to Seller as follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict
-25-
<PAGE>
with or result in a material breach or violation of, or constitute a default
under the charter, bylaws, certificate of limited partnership or limited
partnership agreement, as the case may be, of the Purchaser; any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument to which Purchaser is a party or to which it, any of its properties
or other assets is subject; or any applicable material statute, judgment,
decree, order, rule or regulation of any court or governmental agency or body
applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
-26-
<PAGE>
(a) Upon learning of any material change in any condition
with respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate the Property
in a good and businesslike fashion consistent with its past practices and to
cause the Property to be maintained in good working order and condition in a
manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property.
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases, other than those modifications, renewals or extensions required by
the terms of the applicable document, or enter into any other leases, agreements
(including any Franchise Agreement), mortgages or other loan documents or other
commitments relating to the Property or the operation of the Hotel other than in
the normal course of business and which are by their terms terminable without
penalty upon not more than thirty (30) days notice.
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the Hotel as of the Closing Date shall remain the employees of Seller after
the Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser
from and against any and all liability, cost, damages and expenses arising from
or relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing.
--------------
-27-
<PAGE>
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) maintaining supplies and
personalty consistent with the prior operations of Seller; (vi) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (vii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (vii) shall survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases and the Contracts for the Hotel, and
all other applicable contractual arrangements relating to the Hotel consistent
with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts or Space Leases, without Purchaser's prior
written consent, except that the 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 thirty (30) days prior
notice without cost or expense. Any such new agreement or renewal or extension
of existing agreements to which Purchaser's consent was not obtained, whether or
not such consent is required under this Section 8.1(i) shall subject the
--------------
applicable agreement to Purchaser's review under Section 3;
---------
(j) To 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
-28-
<PAGE>
repairs, maintenance, and replacements to keep the Hotel and all FF&E in good
operating condition;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates and any consents and approvals necessary for the
transaction contemplated by this Agreement at least one week prior to the
Closing; to continue to use reasonable, good faith efforts to obtain such items
thereafter; to promptly inform Purchaser of any issues or problems which Seller
foresees in obtaining any such items; and to deliver each such item to Purchaser
promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
SECTION 9. CLOSING COSTS
9.1. Closing Costs. Each of the parties hereto shall pay its
-------------
own expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, inspection
fees, and the costs and expenses of preparing engineering and environment
reports, market studies and appraisals, whether or not the transactions
contemplated hereby are consummated. The cost of the Survey, Title Commitment
(and the policies and endorsements issued pursuant thereto), all state and local
sales, transfer, excise, value-added or other similar taxes, all recording and
filing fees that may be imposed by reason of the sale, transfer, assignment and
delivery of the Property shall be shared equally by Seller and Purchaser. As
between Purchaser and Seller, the cost of seeking consents and Estoppel
Certificates shall be borne solely by Seller.
-29-
<PAGE>
SECTION 10. DEFAULT
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser One Million
Four Hundred Eleven Thousand Five Hundred Dollars ($1,411,500) as liquidated
damages and not as a penalty (the "Liquidated Damages"). Purchaser and Seller
------------------
acknowledge that the damages which may be incurred by Purchaser in the event of
Seller's default are difficult to quantify as of the date of this Agreement; the
Liquidated Damages represent the parties reasonable estimate of Purchaser's
probable future damages in the event of Seller's default and the Liquidated
Damages represent fair and reasonable compensation to Purchaser in the event of
Seller's default. Except with respect to the Liquidated Damages, Purchaser
hereby waives any and all rights it may have to sue Seller for money damages in
connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of this Agreement; the Liquidated Damages represent the
parties reasonable estimate of Seller's probable future damages in the event of
Purchaser's default and the Liquidated Damages represent fair and reasonable
compensation to Seller in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSE.
11.1. Liquor License. Seller and Purchaser shall cooperate
--------------
to obtain a Liquor License for the Hotel if the parties mutually agree that a
Liquor License for the Hotel is desirable. The provisions of this Section 11.1
------------
shall survive the Closing.
11.2. License for Excluded Intellectual Property
------------------------------------------
At the Closing, as part of the bill of sale and assignment
-30-
<PAGE>
agreement, Seller shall grant to Purchaser a nonexclusive license to use the
Excluded Intellectual Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.2(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
The provisions of this Section 11.2 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
-31-
<PAGE>
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking services, revenues from any "mini-bars" located in
the Hotel rooms and all other revenues (the "Other Revenues"), provided that
--------------
Other Revenues arising from the sale of food and beverages in restaurants and
bars which do not remain open the entire Cut-Off Night shall be apportioned as
of the last hour at which the applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts and FF&E Leases
which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
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<PAGE>
Seller shall pay all accounts payable at the Hotel relating to
services or goods provided prior to Closing.
With respect to subparagraph (b) through (j) (but excluding
subparagraph (e) with respect to the Shopping Center Leases and any deposits
held by Seller in connection therewith), it is the intent of Seller and
Purchaser that all income and expenses relating to the Property shall be
prorated as provided in this Section 12 such that Seller shall have the benefit
----------
of all income and be responsible for all expenses and liabilities incurred in
connection with the Property fairly allocable to the period prior to the Closing
Date and that Operating Lessee under the Operating Lease at the Property shall
have the benefit of all income and be responsible for all expenses and
liabilities of the Property relating to the period from and after the Closing
Date. With respect to the prorations and Adjustments set forth in subparagraphs
(a) and (e) (with respect to the Shopping Center Leases only) of this Section
-------
12.1, the Purchase Price shall be adjusted based on the prorations between
- ----
Seller and Purchaser with respect to such subparagraphs.
12.2. Security Deposits for Shopping Center Leases. Seller
--------------------------------------------
shall assign its right, title and interest in and to, and Purchaser shall assume
all obligations for, all security deposits of Seller as landlord under the
Shopping Center Leases and Seller shall pay the amount of such security deposits
to Purchaser at Closing.
12.3. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to the current tax year or
could affect the taxes due for a subsequent tax year and Purchaser shall have
the right to participate in and approve tax settlements of such certiori
proceedings which relate to the current tax year, which settlements shall not be
effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no longer manages the Property (the "Restricted Period") on any and
-----------------
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<PAGE>
all Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
------------
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above, Purchaser shall be
deemed conclusively to have elected not to purchase the Full Service Hotel. In
such event or if Purchaser elects not to purchase the Full Service Hotel, Seller
or the Seller Subsidiary shall have the right to transfer the Full Service Hotel
covered by the Offer to the party making the Offer, substantially in accordance
with the terms of the Offer and without material modifications beneficial to
said third party purchaser, without any further notice to Purchaser. If,
however, Seller or the Seller Subsidiary and such third party purchaser
thereafter agree to terms for such purchase which are materially different from
those provided in the Offer and beneficial to the third party purchaser, then
Purchaser's right of first refusal under this Section 13.1 shall be renewed with
------------
respect to such Full Service Hotel, on the terms of the Offer as so modified. If
the sale of a Full Service Hotel is consummated with a third party, provided
that Seller shall have complied with the requirements of this Section 13.1, this
------------
Section 13.1 shall no longer be applicable with respect to such Full Service
- ------------
Hotel
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<PAGE>
simultaneously with the sale. The exercise or non-exercise by Purchaser of the
right to purchase a Full Service Hotel does not affect Purchaser's continuing
right of first refusal with respect to any other Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any other Properties for which Purchaser has terminated this
Agreement or any of the Other Agreements, as applicable, or which has been
elimiated from the Group Two Sale Agreement (unless the problem which Purchaser
identified in the applicable notice of termination has been remedied in full),
and Seller may sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
------------
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
------------
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St Thomas and known as "Frenchman's Reef" and Purchaser may sell that
property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand
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<PAGE>
hotel within a radius of three (3) miles of the Property (each a "Proposed
--------
AmeriSuites Hotel") at any time during the Restricted Period, Purchaser or any
- -----------------
of its Affiliates shall have the right and option to purchase said Proposed
AmeriSuites Hotel (or Seller's interest therein) pursuant to the terms and
conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed, detailed
plans and specifications for the construction of the Proposed AmeriSuites
Hotel;
(ii) a schedule for the estimated costs of construction
prepared jointly by the contractor engaged to perform the work and Seller; a
construction schedule setting forth the target commencement date, substantial
completion date and final completion date for the construction of the
Projected AmeriSuites Hotel and the dates for completion of the various phases
of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months
after opening and for periods thereafter, to the extent then developed;
(iv) historical occupancy and Rev Par information for
the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed AmeriSuites
Hotel;
(viii) any environmental or engineering reports prepared
in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed
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<PAGE>
AmeriSuites Hotel as may be reasonably necessary to permit a purchaser to
adequately evaluate the same, provided such information has been developed and
is in the possession of Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this
Section 13.3(b), Seller shall not be warranting or guaranteeing the accuracy of
- ---------------
such information (though Seller shall not deliver any information which it knows
to be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction
Costs, if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of
Acquisition Costs, if Seller acquires an existing Proposed AmeriSuites Hotel;
provided, however, that if Seller is able to assign to Purchaser any contract
of sale between Seller and an owner of a Proposed AmeriSuites Hotel, without
penalty, consent or a requirement of Seller's continuing liability thereafter,
then Purchaser, in its sole discretion, may accept such assignment and pay to
Seller in lieu of the purchase price described in this subparagraph (i), an
amount equal to the sum of (A) any deposits made by Seller under the contract
of sale, (B) any reasonable costs or expenses incurred by Seller as of the
date of the assignment and (c) an amount equal to that which, absent the
assignment to Purchaser, would have been five percent (5%) of Acquisition
Costs or Construction Costs, as appropriate;
(ii) Within three (3) Business Days after providing its
notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of
the purchase price, which deposit, at Purchaser's election, may be in the form
of a letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites
------------
brand hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
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<PAGE>
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit
-------
E-1; and
---
(v) If Seller constructs the Proposed AmeriSuites Hotel,
the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the
Proposed AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel does not affect Purchaser's continuing rights under this
Section 13.3 with respect to any other Proposed AmeriSuites Hotels.
- ------------
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those
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<PAGE>
certain AmeriSuites hotels located at (i) Shelton, CT, (ii) Secaucus, NJ, (iii)
Princeton, NJ and (iv) Las Vegas, NV, and Seller may own, operate and/or
construct such AmeriSuites hotels without regard to this Agreement.
13.4. Multi-Property Exception. Notwithstanding anything to
------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions in this Section 13 shall not be
----------
included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
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<PAGE>
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
----------
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
(i) Notwithstanding anything to the contrary contained in
this Agreement, Seller retains the unrestricted right to continue to grant
franchise agreements for "AmeriSuites" hotels to unaffiliated third-parties. So
long as such franchisees are not Seller Affiliates, the provisions of this
Section 13 shall be inapplicable with respect thereto.
- ----------
(j) The provisions of this Section 13 shall survive the
----------
Closing.
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<PAGE>
SECTION 14. MISCELLANEOUS
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) the Contracts or the Space Leases and relating
to periods prior to the Closing or (y) any damage to property of others or
injury to or death of any person or any claims for any debts or obligations
occurring on or about or in connection with the Property or any portion thereof
at any time or times prior to the Closing or (z) all accounts payable and sales
taxes due for or on account of the period prior to Closing, and (ii) Purchaser
shall indemnify and hold harmless Seller from and against any and all
obligations, claims, losses, damages, liabilities and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) the Contracts or the Space Leases relating to
periods on or after the Closing, or (y) any damage to property of others or
injury to or death of any person or any claims for any debts or obligations
occurring on or about the Property or any portion thereof at any time or times
on or after the Closing or (z) sales taxes due for or on account of the period
from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this
-41-
<PAGE>
Section 14.1 shall survive the Closing and the termination of this Agreement.
- ------------
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof. The provisions of this Section 14.3 shall
------------
survive the Closing or earlier termination of this Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential,
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<PAGE>
including without limitation any oral and written information concerning the
Seller and the Hotel (collectively, the "Due Diligence Material"), provided that
----------------------
the parties to this Agreement may disclose such information and documents to
their respective legal counsel, accountants, employees (to the extent an
employee's services are requested in connection with this Agreement), lenders
and their counsel, brokers, boards of directors, any hotel franchisors, any
marketing company employed to do feasibility studies or any investment banking,
environmental or engineering consultants retained in connection with the
proposed transaction, subject to this confidentiality provision. If the purchase
and sale contemplated by this Agreement is not consummated for any reason
whatever, each party to this Agreement shall as soon as reasonably practicable,
return all such information and documents (and any copies thereof in such
parties' possession) to the other party. Purchaser and Seller each hereby agree
to indemnify and hold harmless the other from and against any and all claims,
demands, suits, causes of action, judgments, damages, losses, fines, penalties,
costs and expenses, including without limitation reasonable attorneys' fees and
disbursements relating to the a breach by such indemnifying party (or its
directors, officers, shareholders, partners, members, agents, employees or any
independent contractors retained by it) of any of the covenants to be performed
by such party contained in this Section 14.4. Notwithstanding anything to the
------------
contrary contained in this Agreement, the provisions of this Section 14.4 shall
------------
survive the Closing for a period of two (2) years. With respect to the indemnity
obligations or any breach of this Section 14.4, the provisions of Section 10
------------ ----------
shall not apply and the indemnified party may seek damages in a court of law or
exercise any other remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
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<PAGE>
(b) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(a) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
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<PAGE>
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the right to designate an Affiliate of
Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be
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<PAGE>
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and shall supersede and take
the place of any other instruments purporting to be an agreement of the parties
hereto relating to the subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date on
----------------------------
which performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
-46-
<PAGE>
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ RICHARD SZYMANSKI
--------------------------
Richard Szymanski
Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its sole general partner
By: /s/ BRUCE G. WILES
--------------------------
Bruce G. Wiles
Executive Vice President
-48-
<PAGE>
EXHIBIT 2.3
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as Purchaser
January 7, 1998
Mahwah, New Jersey
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ............................................. 1
1.1. "Acquisition Costs" ........................................... 1
1.2. "Adjustments" ................................................. 2
1.3. "Affiliate" ................................................... 2
1.4. "Agreement" ................................................... 2
1.5. "Business Day" ................................................ 2
1.6. "Change in Control" ........................................... 2
1.7. "Closing" ..................................................... 2
1.8. "Closing Date" ................................................ 2
1.9. "Code" ........................................................ 2
1.10. "Construction Costs" ......................................... 2
1.11. "Contracts" .................................................. 3
1.12. "Cut-Off Time" ............................................... 3
1.13. "Defective Property" ......................................... 3
1.14. "Deposit" .................................................... 3
1.15. "Diligence Notice" ........................................... 3
1.16. "Documents" .................................................. 3
1.17. "Due Diligence Material" ..................................... 4
1.18. "Environmental Laws" ......................................... 4
1.19. "Environmental Report" ....................................... 4
1.20. "Escrow Agent" ............................................... 4
1.21. "Escrow Agreement" ........................................... 4
1.22. "Estoppel Certificate" ....................................... 4
1.23. "Exchange Act" ............................................... 5
1.24. "Excluded Intellectual Property" ............................. 5
1.25. "FF&E" ....................................................... 5
1.26. "FF&E Leases" ................................................ 5
1.27. "Financial Statements" ....................................... 5
1.28. "Franchise Agreement" ........................................ 5
1.29. "Franchisor Comfort Letters" ................................. 5
1.30. "Full Service Hotels" ........................................ 5
1.31. "Group Two Sale Agreement" ................................... 5
1.32. "Hazardous Substance" ........................................ 6
1.33. "Hotel" ...................................................... 6
1.34. "Improvements" ............................................... 6
1.35. "Intangible Property" ........................................ 6
1.36. "Leased FF&E" ................................................ 6
1.37. "Letter of Credit............................................. 6
1.38. "Liquidated Damages" ......................................... 6
1.39. "Liquor License" ............................................. 6
1.40. "Mortgagee" .................................................. 6
1.41. "Offer" ...................................................... 6
1.42. "Operating Leases" ........................................... 7
1.43. "Operating Lessee" ........................................... 7
1.44. "Original Agreement" ......................................... 7
1.45. "Other Agreements" ........................................... 7
1.46. "Other Revenues" ............................................. 7
1.47. "Permitted Encumbrances" ..................................... 7
1.48. "Person" ..................................................... 7
1.49. "Project Plan" ............................................... 7
(i)
<PAGE>
1.50. "Property" ................................................... 7
1.51. "Proposed AmeriSuites Hotel" ................................. 7
1.52. "Prorations Settlement" ...................................... 8
1.53. "Purchase Price" ............................................. 8
1.54. "Purchaser" .................................................. 8
1.55. "Real Property" .............................................. 8
1.56. "REIT" ....................................................... 8
1.57. "Restricted Period" .......................................... 8
1.58. "Room Revenues" .............................................. 8
1.59. "SEC Documents" .............................................. 8
1.60. "Seller" ..................................................... 8
1.61. "Seller's knowledge" ......................................... 8
1.62. "Seller Subsidiary" .......................................... 8
1.63. "Space Leases" ............................................... 8
1.64. "Subordination, Nondisturbance and Attornment Agreement" ..... 9
1.65. "Survey" ..................................................... 9
1.66. "Survival Period" ............................................ 9
1.67. "Title Commitment" ........................................... 9
1.68. "Title Company" .............................................. 9
1.69. "WARN Act" ................................................... 9
SECTION 2. PURCHASE AND SALE....................................... 9
2.1. Purchase and Sale ............................................. 9
2.2. Deposit ....................................................... 9
2.3. Closing ....................................................... 9
2.4. Purchase Price................................................. 10
2.5. Tax Free Exchange.............................................. 10
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION..................... 11
3.1. Diligence Inspections.......................................... 11
3.2. Defective Property............................................. 13
3.3. Title Matters.................................................. 14
3.4. Survey ........................................................ 15
3.5. Additional Termination Option.................................. 15
3.6. Adjournment of Closing......................................... 16
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE............ 16
4.1. Closing Documents.............................................. 16
4.2. Condition of the Property...................................... 18
4.3. Title Policies................................................. 18
4.4. Opinions of Counsel............................................ 18
4.5. Other Approvals................................................ 19
4.6. Representations................................................ 19
4.7. Default Under Group Two Sale Agreement......................... 19
4.8. Default under Other Agreements................................. 19
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE............... 19
5.1. Purchase Price................................................. 19
5.2. Closing Documents.............................................. 20
5.3. Opinion of Counsel............................................. 20
5.4. Other Approvals................................................ 20
5.5. Representations................................................ 20
5.6. Default Under Group Two Sale Agreement......................... 20
(ii)
<PAGE>
5.7. Default under Other Agreements................................. 21
SECTION 6. REPRESENTATIONS OF SELLER................................ 21
6.1. Status and Authority of Seller................................. 21
6.2. Action of Seller............................................... 21
6.3. No Violations of Agreements.................................... 21
6.4. Litigation..................................................... 22
6.5. Existing Leases, Agreements, Etc............................... 22
6.6. Franchise Agreement............................................ 22
6.7. Contracts...................................................... 22
6.8. Taxes.......................................................... 22
6.9. Not a Foreign Person........................................... 22
6.10. Hazardous Substances.......................................... 23
6.11. Insurance..................................................... 23
6.12. FF&E.......................................................... 23
6.13. Employment and Union Contracts................................ 23
6.14. Adjacent Land Leases.......................................... 23
6.15. Trademarks.................................................... 23
6.16. Compliance with Laws.......................................... 23
6.17. Inventory..................................................... 23
6.18. Holder of Liquor License...................................... 23
SECTION 7. REPRESENTATIONS OF PURCHASER............................. 25
7.1. Status and Authority of Purchaser.............................. 25
7.2. Action of Purchaser............................................ 25
7.3. No Violations of Agreements.................................... 25
7.4. Litigation..................................................... 25
7.5. No Conflicts................................................... 26
SECTION 8. COVENANTS OF SELLER AND PURCHASER........................ 26
8.1. Covenants of Seller............................................ 27
SECTION 9. CLOSING COSTS............................................ 29
9.1. Closing Costs.................................................. 29
SECTION 10. DEFAULT................................................. 30
10.1. Default by Seller............................................. 30
10.2. Default by Purchaser.......................................... 30
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT...................... 31
11.1. Liquor License................................................ 31
11.2. Franchise Agreement........................................... 31
11.3. License for Excluded Intellectual Property.................... 32
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS.................... 33
12.1. Matters to be Adjusted or Prorated............................ 33
12.2. Certiorari Proceeding......................................... 34
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION....................... 35
13.1. Right of First Refusal on Full Service Hotels................. 35
(iii)
<PAGE>
13.2. Radius Restriction............................................ 37
13.3. AmeriSuites Hotels............................................ 37
13.4. Multi-Property Exception...................................... 40
13.5. Survival and Damages.......................................... 40
13.6. General Provisions............................................ 40
SECTION 14. MISCELLANEOUS........................................... 42
14.1. Agreement to Indemnify........................................ 42
14.2. Brokerage Commissions......................................... 43
14.3. Publicity..................................................... 43
14.4. Confidentiality............................................... 44
14.5. Notices....................................................... 44
14.6. Waivers, Etc.................................................. 46
14.7. Assignment; Successors and Assigns............................ 46
14.8. Severability.................................................. 46
14.9. Counterparts, Etc............................................. 47
14.10. Governing Law................................................ 47
14.11. Performance on Business Days................................. 47
14.12. Attorneys' Fees.............................................. 47
14.13. Section and Other Headings................................... 48
14.14. Financing and Priority of Operating Leases................... 48
14.15. Group Two Purchase and Sale Agreement........................ 48
14.16. Exceptions to Liquidated Damages............................. 48
EXHIBITS*
Exhibit B Legal Description of the Premises
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of
Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of
Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject
to UCC Financing Statements
Exhibit K List of Space Leases and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and
Attornment Agreement
Exhibit O Form of Representation Letter in favor of
Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union
Contracts
______________________________________
* The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and
Exchange Commission upon request.
(iv)
<PAGE>
Exhibit V Exclusions to Representations Regarding
Compliance with Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser entered into that certain
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Seller and Purchaser desire to amend and restate the
Original Agreement in the form of eight separate contracts, one contract for
each of the Properties (as defined in the Original Agreement) (such contracts
other than this Agreement being referred to herein as the "Other Agreements");
----------------
and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller is willing to sell Seller's interest in the
Property to Purchaser, subject to and upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other professional fees, any due diligence expenses incurred in assessing the
Proposed AmeriSuites Hotel, title and survey costs, transfer taxes and
pre-opening expenses of the hotel, including without limitation, costs incurred
in the reflagging of the hotel, promotional and advertising expenses,
administrative
<PAGE>
expenses, employee hiring and training expenses, the cost of supplies, equipment
and furniture purchased for the hotel, governmental, utility or other deposits
required for operation of the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term
-----------
in Section 12.1.
1.3. "Affiliate" shall mean, with respect to any entity,
----------
any entity that , directly or indirectly, controls or is controlled by or is
under common control with such entity. For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
as it and they may be amended from time to time as herein provided.
1.5. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.6. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.7. "Closing" shall have the meaning given such term in
-------
Section 2.3.
1.8. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
1.9. "Code" shall mean the Internal Revenue Code of 1986,
----
as amended, and the treasury regulations promulgated thereunder.
1.10. "Construction Costs" shall mean all hard and soft
------------------
costs incurred by Seller or the Seller Subsidiary, as appropriate, in connection
with the acquisition of the site and
-2-
<PAGE>
construction and related improvements for a Proposed AmeriSuites Hotel,
including without limitation (a) the cost of funds used for such construction,
whether provided by a third party lender or by Seller (the interest on such
funds being calculated in the latter event at a rate equal to the prime rate
reported in the Money Rates column or comparable section of The Wall Street
---------------
Journal (or if The Wall Street Journal is no longer published, a different
- ------- -----------------------
publication designated by Seller) as the rate then in effect for corporate loans
at large U.S. money center commercial banks, plus three percent (3%) compounded
monthly), (b) attorney, accountant, engineer, architect, contractor and other
professional fees; (c) any due diligence expenses incurred in assessing a site
for the Proposed AmeriSuites Hotel; (d) title and survey costs; (e) transfer
taxes; and (f) pre-opening expenses of the hotel, including without limitation,
promotional and advertising expenses, administrative expenses, employee hiring
and training expenses, the cost of supplies, equipment and furniture ordered or
purchased for the hotel, governmental, utility or other deposits required for
operation of the hotel and similar costs.
1.11. "Contracts" shall mean, all hotel licensing
---------
agreements and other service contracts (including without limitation the
Franchise Agreement), equipment leases, booking agreements and other
arrangements or agreements to which Seller is a party affecting the ownership,
repair, maintenance, management, leasing or operation of the Property, to the
extent Seller's interest therein is assignable or transferable.
1.12. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.13. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
1.14. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.15. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
- ------------ ---
1.16. "Documents" shall mean, with respect to any Property,
---------
all books, records and files relating to the leasing, maintenance, management or
operation of the Property.
-3-
<PAGE>
1.17. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.18. "Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.19. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.10.
------------
1.20. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.21. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.22. "Estoppel Certificate" shall mean a statement made by
--------------------
the franchisor under the Franchise Agreement in favor of Purchaser and/or any
Mortgagee certifying to such matters as Purchaser and/or its Mortgagee may
reasonably request, including, without limitation, the following: that an
attached copy of the Franchise Agreement is a true, correct and complete copy of
such Franchise Agreement which has not been modified except as identified; that
Seller is not in monetary or other default under the Franchise Agreement and
that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise Agreement; and to any
other matters which franchisor is required to certify pursuant to the terms of
the Franchise Agreement;
in a form reasonably acceptable to said franchisor; provided, however, that if
the Franchise Agreement (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the Franchise
Agreement on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(h), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
-4-
<PAGE>
1.23. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.24. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.25. "FF&E" shall mean, all supplies, appliances,
----
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
located in or at, or used exclusively in connection with the ownership,
operation or maintenance of the Property, excluding however (a) the Leased FF&E
and (b) any such items which are owned by tenants, subtenants, concessionaires
or licenses under the Space Leases, guests, invitees, employees, agents or
independent contractors.
1.26. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
1.27. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.28. "Franchise Agreement" shall mean the hotel licensing
--------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.29. "Franchisor Comfort Letters" shall mean letters from
--------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.30. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.31. "Group Two Sale Agreement" shall have the meaning
------------------------
given that term in Section 14.15.
-------------
-5-
<PAGE>
1.32. "Hazardous Substance" shall mean any substance
-------------------
defined as a "hazardous waste," "hazardous substance," "toxic substance,"
"hazardous material," pollutant, contaminant or any word of similar import under
any Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.33. "Hotel" shall mean the hotel located at the Property.
-----
1.34. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
1.35. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including without limitation all trademarks, trade names,
copyrights, patents or technical processes, owned and used by Seller which
pertain solely to the Property and expressly excluding the Excluded Intellectual
Property and all trademarks, trade names, copyrights, patents or technical
processes used with respect to Seller itself or Seller's Affiliates, and
expressly excluding the Contracts.
1.36. "Leased FF&E" shall have the meaning given such term
-----------
in Section 6.12.
------------
1.37. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.38. "Liquidated Damages" shall have the meaning given
------------------
such term in Section 10.1.
------------
1.39. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at a hotel issued by the state in which a hotel is located
or other applicable governmental authority.
1.40. "Mortgagee" shall mean any and all lenders who
---------
provides financing to Purchaser in connection with the Property.
1.41. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
-6-
<PAGE>
1.42. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.43. "Operating Lessee" shall mean a wholly-owned
----------------
subsidiary of Seller as tenant, of an Operating Lease(s); which is a single-
purpose entity with the sole purpose of leasing, managing, maintaining,
operating and performing other related functions for the Hotel.
1.44. "Original Agreement" shall have the meaning given
------------------
such term in the recitals to this Agreement.
1.45. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.46. "Other Revenues" shall have the meaning given such
--------------
term in Section 12.1.
------------
1.47. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) applicable
zoning regulations and ordinances provided the same do not prohibit or impair in
any material respect use of the Property as a hotel as currently operated and
constructed; (d) UCC Financing Statements securing the purchase price of FF&E
under the FF&E Leases identified on Exhibit I; provided, however, that such
---------
liens shall be confined to the asset in question and the aggregate principal
amount of indebtedness secured by such liens shall not exceed the cost of
acquisition or construction of the property subject thereto; (e) such other
nonmonetary encumbrances with respect to the Property which are not objected to
by Purchaser in accordance with Section 3; and (f) such exceptions or matters,
---------
as the case may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.48. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.49. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.50. "Property" shall mean all of the Seller's interest in
--------
the Real Property, and in the FF&E, the Documents, the Improvements and the
Intangible Property related to the Real Property.
1.51. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
-7-
<PAGE>
1.52. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.53. "Purchase Price" shall have the meaning given such
--------------
term in Section 2.4.
-----------
1.54. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.55. "Real Property" shall mean the real property
-------------
described on Exhibit B, together with all easements, rights of way, privileges,
---------
licenses and appurtenances which Seller may now own with respect thereto.
1.56. "REIT" shall mean American General Hospitality
----
Corporation.
1.57. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.58. "Room Revenues" shall have the meaning given such
-------------
term in Section 12.1.
------------
1.59. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.60. "Seller" shall have the meaning given such term in
------
the preamble to this Agreement
1.61. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.61 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.62. "Seller Subsidiary" shall have the meaning set forth
-----------------
in Section 13.1.
------------
1.63. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on Exhibit
-------
K.
- -
-8-
<PAGE>
1.64. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.65. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.66. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.67. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.68. "Title Company" shall mean, collectively, Chicago
-------------
Title Insurance Company and Commonwealth Land Title Insurance Company, each as a
50% co-insurers, or such other title insurance company or companies as shall
have been reasonably approved by Purchaser and Seller.
1.69. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE.
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow
-------
Agent the sum of Four Hundred Forty-Three Thousand Two Hundred Fifty Dollars
($443,250) (together with all interest accrued thereon, if any, the "Deposit")
-------
in the form of an unconditional, irrevocable letter of credit issued by Bank
One, Texas, N.A. (the "Letter of Credit"). The Letter of Credit shall be in the
----------------
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000), which amount
shall represent the Deposit as well as the deposits required pursuant to the
Other Agreements. The Deposit (and the Letter of Credit) shall be held pursuant
to, and disbursed according to, the terms of the Escrow Agreement.
Notwithstanding anything to the contrary contained in this Agreement, until the
Deposit is disbursed in accordance with the Escrow Agreement, this Agreement
shall not terminate and shall remain in full force and effect to the extent
necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall
-------
be consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
-9-
<PAGE>
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations with respect
---------
to that Property under Section 4, unless such obligations shall have been waived
---------
by Purchaser and provided that such adjournment with respect to the Property
shall not adjourn the Closing Date with respect to any of the other properties
to be conveyed under the Other Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Eight Million
--------------
One Hundred Eighty-Two Thousand Dollars ($8,182,000), allocated Seven Million
Three Hundred Twenty-Five Thousand Dollars ($7,325,000) to the Real Property and
Improvements and Eight Hundred Fifty-Seven Thousand Dollars ($857,000) to the
personal property including, without limitation, the FF&E and the Intangible
Property.
(b) The Purchase Price (plus or minus adjustments and
prorations set forth in Section 12 hereof) shall be payable by wire transfer of
----------
immediately available federal funds on the Closing Date to an account to be
designated by Seller prior to the Closing.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring one or more Section 1031 exchanges, if so desired by Seller,
provided that such structuring shall not materially adversely affect Purchaser's
rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser in
connection with Purchaser complying with the terms of this Section 2.5 shall be
-----------
paid by Seller.
-10-
<PAGE>
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION.
3.1. Diligence Inspections.
---------------------
(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise provided to
Purchaser pursuant to this Agreement. Purchaser agrees and acknowledges that it
has investigated and/or received the opportunity to investigate the Property to
its satisfaction and that it is not relying on any materials, statements,
representations or warranties of any kind, other than as specifically set forth
in this Agreement, in purchasing the Property. To the extent that, in connection
with such investigation, Purchaser, its agents, representatives or contractors,
has damaged or disturbed or does damage or disturb the Real Property or the
Improvements located thereon, Purchaser shall return the same to substantially
the same condition which existed immediately prior to such damage or
disturbance. In the event that the transactions contemplated by this Agreement
are not closed and consummated for any reason, Purchaser shall deliver to Seller
all tests, reports and inspections of the Property made and conducted by
Purchaser or for its benefit or any other documents or information Purchaser has
received pursuant to this Agreement. Purchaser shall indemnify, defend and hold
harmless Seller from and against any and all cost, expense, liability, loss or
damage which Seller may incur as a result of any act or omission of Purchaser or
its representatives, agents or contractors in connection with such examinations
and inspections, other than to the extent that any expense, loss or damage
arises from any gross negligence or willful misconduct of Seller. The provisions
of this Section 3.1(a) shall survive the termination of this Agreement and the
--------------
Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for
-11-
<PAGE>
the current year to date and each of the three (3) years prior to the year of
this Agreement (the "Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and other
patrons of the Hotel; management fees; maintenance, repairs and other expenses
relating to the management and operation of the Hotel; occupancy statistics for
the Hotel for the current year to date and the prior three (3) calendar years;
and all capital expenditures made during the aforementioned periods. To the
extent that the Financial Statements provided by Seller for the current year do
not include any period up to and including the Closing Date, Seller shall,
within 25 days after the Closing Date, provide Purchaser with monthly unaudited
Financial Statements applicable to such period inclusive of the Closing Date;
(iii) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in Seller's
possession or control or readily available without expense, notices of appraised
value for the Real Property and Improvements;
(iv) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser shall
return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) All notices received from governmental authorities
in connection with the Hotel;
(viii) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(ix) All FF&E Leases;
-12-
<PAGE>
(x) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xi) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to any Hotel;
(xii) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
(xiii) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotel, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Purchaser's representatives a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same
-13-
<PAGE>
to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property.
(b) If Purchaser timely gives notice to Seller of any
Defective Property, and Purchaser and Seller shall, acting reasonably and in
good faith, be unable or unwilling to agree (x) that Seller shall, at its sole
cost, attempt to remedy the applicable defect prior to the Closing (in which
event Seller shall have the right to adjourn the Closing Date pursuant to the
provisions of Section 3.7 for up to ninety (90) days for such purpose), (y) that
-----------
Purchaser shall, notwithstanding such defect, acquire the Defective Property
subject to a reduction in the Purchase Price, as reasonably determined by Seller
and Purchaser, sufficient to compensate Purchaser for such defect, or (z) on the
substitution of another property owned by Seller for such Defective Property,
this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the date of the Original Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to the Property, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "Title
-----
Commitment"). Except as set forth in the Diligence Notice, Purchaser
- ----------
acknowledges that it does not have any other objections to title exceptions
shown on the Title Commitment. Seller acknowledges and agrees that Seller shall
attempt to remedy the objections set forth in the Diligence Notice with respect
to the Property. Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.6 for up to ninety (90) days for such purpose. If Seller
-----------
shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
-----------
Agreement, and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notices by Purchaser. Failure of Purchaser to give such
notice shall be deemed an election by Purchaser to proceed in accordance with
clause (ii) above, and such exception shall be a Permitted Encumbrance.
-14-
<PAGE>
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect
------
to the Real Property (the "Survey") by a licensed surveyor in the jurisdiction
------
in which the Property is located, which (i) contains an accurate legal
description of the Property, (ii) shows the location, dimension and description
(including applicable recording information) of all utilities, easements,
encroachments and other physical matters affecting the Property, the number of
striped parking spaces located thereon and all applicable building set-back
lines, (iii) states whether the Property is located within a 100-year flood
plain and (iv) is certified to Purchaser and the Title Company and such other
persons as shall have been requested by Purchaser or Seller. Except as set forth
in the Diligence Notice, Purchaser acknowledges and agrees that it does not have
any other objections to any matter shown on the Survey. Seller acknowledges and
agrees that Seller shall attempt to remedy the objections set forth in the
Diligence Notice with respect to the Survey. Seller shall have the right to
adjourn the Closing Date for up to ninety (90) days pursuant to Section 3.6 for
-----------
such purpose. If Seller shall be unable to remove any such survey defect to
which Purchaser has objected, Purchaser may elect (i) to terminate this
Agreement and this Agreement shall terminate and be of no further force or
effect except as otherwise expressly provided herein, or (ii) to consummate the
transactions contemplated hereby, notwithstanding such defect, without any
abatement or reduction in the Purchase Price on account thereof. Purchaser shall
make any such election by written notice to Seller given on or prior to the
earlier of the Closing Date or fifth Business Day after Seller's notice of its
inability to cure such defect and time shall be of the essence with respect to
the giving of such notice by Purchaser. Failure of Purchaser to give such notice
shall be deemed an election by Purchaser to proceed in accordance with clause
(ii) above and such matter shall be a Permitted Encumbrance.
3.5. Additional Termination Option. If Purchaser shall
-----------------------------
elect, pursuant to any provision of this Agreement or the Other Agreements to
terminate any three or more of the Other Agreements and/or this Agreement, then,
together with such notice of termination with respect to this Agreement or an
Other Agreement which taken by itself or together with any prior notices of
termination would result in three or more such terminations, Purchaser may, in
such notice, or Seller may, within 10 Business Days of receipt of such notice of
termination by written notice to Purchaser, terminate this Agreement and
simultaneously terminate the Other Agreements and the Group Two
-15-
<PAGE>
Sale Agreement, in which event the Deposit shall be returned to Purchaser and
the parties to this Agreement shall have no further obligations under this
Agreement, the Other Agreements and the Group Two Sale Agreement except as
expressly provided in this Agreement, the Other Agreements or the Group Two Sale
Agreement. Notwithstanding the foregoing, if any provision in any Other
Agreement expressly provides that a termination thereof shall not be considered
for purposes of determining whether three such terminations have occurred, such
provision of the Other Agreement shall be controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(h)), Franchisor Comfort Letters (as
--------------
required by Section 4.1(j) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the other Properties to be conveyed under the Other
Agreements until such Estoppel Certificates, Franchisor Comfort Letters or
consents are obtained provided such adjournment shall not be longer than ninety
(90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the Property is located, in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
-16-
<PAGE>
(b) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(c) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(d) Duly executed transfer tax forms, as required by
applicable law;
(e) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(f) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(g) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(h) Duly executed Estoppel Certificates from the franchisor
under the Franchise Agreement; provided that any such Estoppel Certificate shall
be provided to Purchaser prior to Closing promptly following receipt by Seller
of the same;
(i) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(j) Franchisor Comfort Letters;
(k) Intentionally omitted;
(l) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(m) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
-17-
<PAGE>
(n) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(o) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to the state in which the Property is located.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Franchise Agreement.
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as the Purchaser may reasonably require. Seller
and Purchaser shall agree upon local
-18-
<PAGE>
counsel for the jurisdiction in which the Property is located to provide an
appropriate jurisdiction-specific opinion, the cost of which local counsel will
be shared equally by Seller and Purchaser. An opinion from in-house counsel to
Seller shall satisfy this Section 4.4 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the franchisor, if required; (c) the consent of
the ground lessor under that certain Lease dated June 29, 1973 (as amended, the
"Armonk Lease") for premises located in Armonk, New York to the transactions
------------
contemplated by the Group Two Sale Agreement; and (d) a modification of such
Armonk Lease to extend the initial term thereof such that at the closing of such
property there shall be at least thirty (30) years of the initial term
remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default Under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided,
however, such failure of a condition shall not be a default under this
Agreement.
AECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of which may be waived by Seller in its sole and
absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
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<PAGE>
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner; and
(c) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller or the Title Company may reasonably
require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for the jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all consents of franchisors, if
------------
required; (c) the consent of the ground lessor under the Armonk Lease to the
transactions contemplated by the Group Two Sale Agreement; and (d) a
modification of such Armonk Lease to extend the initial term thereof such that
at the closing of such property there shall be at least thirty (30) years of the
initial term remaining.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default Under Group Two Sale Agreement. Purchaser
--------------------------------------
shall not be in default, or have committed an act or failed to perform an act
which, with the giving of notice, the passage of time or both, will become a
default under, the Group Two Sale Agreement.
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<PAGE>
5.7. Default under Other Agreements. Purchaser shall not
------------------------------
be in default, or have committed an act or failed to perform an act which, with
the giving of notice, the passage of time or both, will become a default under,
any of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate, and except with respect
to the failure of the conditions set forth in Section 5.1, Section 5.6 and
----------- -----------
Section 5.7 (which shall be a default under this Agreement), such failure of a
- -----------
condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a
------------------------------
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
----------------
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by Seller on
or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller, as the case may be, enforceable
against Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
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<PAGE>
6.4. Litigation. Seller has not received any written
----------
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Operating Lease
or any action taken or to be taken pursuant hereto, (b) will result in any
material adverse change in the business, operation, affairs or condition of the
Property, (c) will result in or subject the Property to a material liability, or
(d) involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
---------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Franchise Agreement listed
-------------------
on Exhibit D is the sole franchise agreement affecting the Property as of the
---------
date hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is a true and complete copy of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.7. Contracts. The copies of the Contracts provided or
---------
made available to Purchaser not later than December 1, 1997 are true and
complete copies of said Contracts and, to Seller's knowledge, are valid, in full
force and effect and no party has breached any material condition or provision
thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.9. Not a Foreign Person. Seller is not a "foreign
--------------------
person" within the meaning of Section 1445 of the Code.
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<PAGE>
6.10. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice
----------
that the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.18. Holder of Liquor License. The Property does not have
------------------------
a liquor license currently issued for the sale of alcoholic beverages at the
Property.
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<PAGE>
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.18 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written notice of a breach thereof within
the Survival Period (but in any event promptly after learning of such breach)
specifying in sufficient detail the facts constituting such alleged breach and
the loss then reasonably ascertainable as a consequence thereof, and an
opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property, pest control matters,
soil conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information pertaining to the Property or the
market and physical environments in which they are located. Purchaser
acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than
-24-
<PAGE>
those specifically set forth in this Agreement or in any document to be
delivered to Purchaser at the Closing made by Seller. Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Property in its "as is" condition on the Closing
Date.
SECTION 7. REPRESENTATIONS OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all
-------------------
necessary action to authorize the execution, delivery and performance of its
obligations under this Agreement and the Operating Lease, and upon the execution
and delivery of any document to be delivered by Purchaser on or prior to the
Closing Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions
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<PAGE>
the validity of this Agreement or the Operating Lease or any action taken or to
be taken pursuant hereto or pursuant to the Operating Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it, any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
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<PAGE>
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition of
the Property or of any event or circumstance which makes any representation or
warranty of Seller to Purchaser under this Agreement untrue or misleading in any
material respect, promptly to notify Purchaser thereof (Purchaser agreeing, on
learning of any such fact or condition, promptly to notify Seller thereof);
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement in a good and businesslike fashion consistent with
its past practices (which Seller believes to be in compliance with the Franchise
Agreement) and to cause the Property to be maintained in good working order and
condition in a manner consistent with its past practice;
(c) To provide to Purchaser, promptly upon reasonable request,
such unaudited financial and other information and certifications of Seller with
respect to the Property as Purchaser may from time to time reasonably request in
order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission. Without limiting the foregoing, Seller shall provide to Purchaser a
copy of each monthly profit and loss statement for the Property;
(d) Seller shall not, without the Purchaser's written consent,
enter into any modifications, renewals or extensions of any of the Space Leases
or the Franchise Agreement, other than those modifications, renewals or
extensions required by the terms of the applicable document, or enter into any
other leases, agreements, mortgages or other loan documents or other commitments
relating to the Property or the operation of the Hotel other than in the normal
course of business and which are by their terms terminable without penalty upon
not more than thirty (30) days notice;
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the
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<PAGE>
Hotel as of the Closing Date shall remain the employees of Seller after the
Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser from
and against any and all liability, cost, damages and expenses arising from or
relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing;
--------------
(f) To operate, manage, and maintain the Hotel consistent with
Seller's prior practice and as a reasonable and prudent operator of like-kind
hotels in the same competitive market would operate, manage, and maintain the
Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Franchise Agreement in a fashion consistent with its past
practice (which Seller believes to be in compliance with such Franchise
Agreement); (vi) maintaining supplies and personalty consistent with the prior
operations of Seller; (vii) expending such amounts for advertising and
promotions as are scheduled to be expended prior to Closing pursuant to Seller's
1997 operating budget for the Hotel; and (viii) expending such amounts for
capital improvements as are scheduled to be expended prior to Closing pursuant
to Seller's 1997 capital budget for the Hotel, provided that if any such
scheduled capital improvement is not completed prior to Closing, Seller shall
complete such improvements at its sole cost and expense in a manner consistent
with Seller's past operation of the Hotel and this subparagraph (viii) shall
survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases, the Franchise Agreement and the
Contracts for the Hotel, and all other applicable contractual arrangements
relating to the Hotel consistent with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts or Space Leases, without Purchaser's prior
written consent, except that the Seller
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<PAGE>
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 thirty (30) days prior notice without cost or expense. Any such new
agreement or renewal or extension of existing agreements to which Purchaser's
consent was not obtained, whether or not such consent is required under this
Section 8.1(i) shall subject the applicable agreement to Purchaser's review
- --------------
under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and any consents and
approvals necessary for the transaction contemplated by this Agreement at least
one week prior to the Closing; to continue to use reasonable, good faith efforts
to obtain such items thereafter; to promptly inform Purchaser of any issues or
problems which Seller foresees in obtaining any such items; and to deliver each
such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
SECTION 9. CLOSING COSTS.
9.1 Closing Costs. Each of the parties hereto shall pay
-------------
its own expenses in connection with this Agreement and the transactions
contemplated hereby, including, without
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<PAGE>
limitation, any legal and accounting fees, inspection fees, and the costs and
expenses of preparing engineering and environment reports, market studies and
appraisals, whether or not the transactions contemplated hereby are consummated.
The cost of the Survey, Title Commitment (and the policies and endorsements
issued pursuant thereto), all state and local sales, transfer, excise, value-
added or other similar taxes, all recording and filing fees that may be imposed
by reason of the sale, transfer, assignment and delivery of the Property shall
be shared equally by Seller and Purchaser. As between Purchaser and Seller, the
cost of seeking consents including, without limitation, any transfer or
assumption fees incurred in connection therewith, Franchisor Comfort Letters and
Estoppel Certificates shall be borne solely by Seller.
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser Four
Hundred Forty-Three Thousand Two Hundred Fifty Dollars ($443,250) as liquidated
damages and not as a penalty (the "Liquidated Damages"). Purchaser and Seller
------------------
acknowledge that the damages which may be incurred by Purchaser in the event of
Seller's default are difficult to quantify as of the date of this Agreement; the
Liquidated Damages represent the parties reasonable estimate of Purchaser's
probable future damages in the event of Seller's default and the Liquidated
Damages represent fair and reasonable compensation to Purchaser in the event of
Seller's default. Except with respect to the Liquidated Damages, Purchaser
hereby waives any and all rights it may have to sue Seller for money damages in
connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made
--------------------
any representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of this Agreement; the Liquidated Damages represent the
parties
-30-
<PAGE>
reasonable estimate of Seller's probable future damages in the event of
Purchaser's default and the Liquidated Damages represent fair and reasonable
compensation to Seller in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.
11.1. Liquor License. Seller and Purchaser shall cooperate
--------------
to obtain a Liquor License for the Hotel if the parties mutually agree that a
Liquor License for the Hotel is desirable. The provisions of this Section 11.1
------------
shall survive the Closing.
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or consents of
franchisors, after using commercially reasonable, good faith efforts to do so in
accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters, such
consents or otherwise in connection with the transaction contemplated by this
Purchase Agreement shall be limited to the first One Hundred Thousand Dollars
($100,000) of the collective administrative fees required by the franchisor and
by any franchisor in connection with the transactions contemplated by the Other
Agreements and one-half of all amounts in excess thereof, and Purchaser hereby
covenants and agrees to pay the other one-half of such administrative fees in
excess of One Hundred Thousand Dollars ($100,000). In no event shall the
requirement of payment of administrative fees constitute a reason for Purchaser
to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in good
faith to an adjustment of the rent payable pursuant to the
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Operating Lease, based on the terms and conditions of the new franchise
agreement and its anticipated effect on Gross Revenues (as defined in the
Operating Lease).
(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date until
the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not permit
the license for the Excluded Intellectual Property to be used in any manner
which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
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The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS.
12.1. Matters to be Adjusted or Prorated. To the extent
----------------------------------
then capable of being calculated or estimated, on the Closing Date (the
"Prorations Settlement"), and otherwise within 30 days after the Closing Date,
---------------------
the following items shall be apportioned as of the Cut-Off Time with respect to
the Property and appropriate payments made as described in this Agreement in
respect thereof (collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other than
Room Revenues, including without limitation, revenues from the sale of food,
beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking
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services, revenues from any "mini-bars" located in the Hotel rooms and all other
revenues (the "Other Revenues"), provided that Other Revenues arising from the
--------------
sale of food and beverages in restaurants and bars which do not remain open the
entire Cut-Off Night shall be apportioned as of the last hour at which the
applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreement, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j), it is the intent of
Seller and Purchaser that all income and expenses relating to the Property shall
be prorated as provided in this Section 12 such that Seller shall have the
----------
benefit of all income and be responsible for all expenses and liabilities
incurred in connection with the Property fairly allocable to the period prior to
the Closing Date and that Operating Lessee under the Operating Lease at the
Property shall have the benefit of all income and be responsible for all
expenses and liabilities of the Property relating to the period from and after
the Closing Date. With respect to the prorations and Adjustments set forth in
subparagraph (a) of this Section 12.1, the Purchase Price shall be adjusted
------------
based on the prorations between Seller and Purchaser with respect to such
subparagraph.
12.2. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to the current tax year or
could affect the taxes due for a subsequent tax year and Purchaser shall have
the right to participate in and approve tax settlements of such certiori
proceedings which relate to the current tax year, which settlements shall not be
effective without Purchaser's prior written approval.
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SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first refusal
for a period commencing on the Closing Date and terminating on the earlier of
(i) the fifth anniversary of the Closing Date and (ii) the date upon which
Article XXXVI of the Operating Lease for the Property is effected such that
Seller no longer manages the Property (the "Restricted Period") on any and all
-----------------
Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above, Purchaser shall be
deemed conclusively to have elected not to purchase the Full Service Hotel. In
such event or if Purchaser elects not to purchase the Full Service Hotel, Seller
or the Seller Subsidiary shall have the right to transfer the Full Service Hotel
covered by the Offer to the party making the Offer, substantially in accordance
with the terms of the Offer and
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<PAGE>
without material modifications beneficial to said third party purchaser, without
any further notice to Purchaser. If, however, Seller or the Seller Subsidiary
and such third party purchaser thereafter agree to terms for such purchase which
are materially different from those provided in the Offer and beneficial to the
third party purchaser, then Purchaser's right of first refusal under this
Section 13.1 shall be renewed with respect to such Full Service Hotel, on the
- ------------
terms of the Offer as so modified. If the sale of a Full Service Hotel is
consummated with a third party, provided that Seller shall have complied with
the requirements of this Section 13.1, this Section 13.1 shall no longer be
------------
applicable with respect to such Full Service Hotel simultaneously with the sale.
The exercise or non-exercise by Purchaser of the right to purchase a Full
Service Hotel does not affect Purchaser's continuing right of first refusal with
respect to any other Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the provisions of this Section 13.1 shall not apply to the Property
------------
or to any other properties for which Purchaser has terminated this Agreement or
any of the Other Agreements, as applicable, or which has been eliminated from
the Group Two Sale Agreement (unless the problem which Purchaser identified in
the applicable notice of termination has been remedied in full), and Seller may
sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not apply
------------
to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
------------
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in this
Agreement, this Section 13.1 shall not apply to the Full Service Hotel located
------------
in St. Thomas and known as "Frenchman's Reef" and Purchaser may sell that
property without regard to this Section 13.1.
------------
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<PAGE>
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed,
detailed plans and specifications for the construction of the Proposed
AmeriSuites Hotel;
(ii) a schedule for the estimated costs of
construction prepared jointly by the contractor engaged to perform the work and
Seller; a construction schedule setting forth the target commencement date,
substantial completion date and final completion date for the construction of
the Projected AmeriSuites Hotel and the dates for completion of the various
phases of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months after
opening and for periods thereafter, to the extent then developed;
(iv) historical occupancy and Rev Par information
for the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
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<PAGE>
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed
AmeriSuites Hotel;
(viii) any environmental or engineering reports
prepared in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction Costs,
if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of Acquisition
Costs, if Seller acquires an existing Proposed AmeriSuites Hotel; provided,
however, that if Seller is able to assign to Purchaser any contract of sale
between Seller and an owner of a Proposed AmeriSuites Hotel, without penalty,
consent or a requirement of Seller's continuing liability thereafter, then
Purchaser, in its sole discretion, may accept such assignment and pay to Seller
in lieu of the purchase price described in this subparagraph (i), an amount
equal to the sum of (A) any deposits made by Seller under the contract of sale,
(B) any reasonable costs or expenses incurred by Seller as of the date of the
assignment and (c) an amount equal to that which, absent the assignment to
Purchaser, would have been five percent (5%) of Acquisition Costs or
Construction Costs, as appropriate;
(ii) Within three (3) Business Days after providing
its notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of the
purchase price, which deposit, at Purchaser's election, may be in
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<PAGE>
the form of a letter of credit issued by a bank or other lending institution
reasonably approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites brand
------------
hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit E-1;
-----------
and
(v) If Seller constructs the Proposed AmeriSuites
Hotel, the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the Proposed
AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel does not affect Purchaser's continuing rights under this
Section 13.3 with respect to any other Proposed AmeriSuites Hotels.
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns
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<PAGE>
or which Seller or any Seller Subsidiary has the right to sell, and Seller shall
cause such Seller Subsidiaries desiring to sell any "AmeriSuites" or similar
hotel to comply with this Section 13.3 on the same terms as Seller. Reference to
------------
"sell" in this Section 13.3 shall refer to sale of fee simple title, ground
------------
lease, joint venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to any
------------
AmeriSuites hotels which are owned, operated or under construction by Seller or
a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Properties Exception. Notwithstanding anything
--------------------------
to the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
----------
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
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(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions in this Section 13 shall not be
----------
included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
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<PAGE>
(i) Notwithstanding anything to the contrary contained in this
Agreement, Seller retains the unrestricted right to continue to grant franchise
agreements for "AmeriSuites" hotels to unaffiliated third-parties. So long as
such franchisees are not Seller Affiliates, the provisions of this Section 13
----------
shall be inapplicable with respect thereto.
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS.
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to the
contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases or the Contracts and relating to
periods prior to the Closing or (y) any damage to property of others or injury
to or death of any person or any claims for any debts or obligations occurring
on or about or in connection with the Property or any portion thereof at any
time or times prior to the Closing or (z) all accounts payable and sales taxes
due for or on account of the period prior to Closing, and (ii) Purchaser shall
indemnify and hold harmless Seller from and against any and all obligations,
claims, losses, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (x) the Contracts or the Space Leases relating to periods on or
after the Closing, or (y) any damage to property of others or injury to or death
of any person or any claims for any debts or obligations occurring on or about
the Property or any portion thereof at any time or times on or after the Closing
or (z) sales taxes due for or on account of the period from and after the
Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly
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<PAGE>
and furnish such copies of documents (and make originals thereof available) and
such other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof. The provisions of this Section 14.3 shall
survive the Closing or earlier termination of this Agreement.
-43-
<PAGE>
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of action,
judgments, damages, losses, fines, penalties, costs and expenses, including
without limitation reasonable attorneys' fees and disbursements relating to the
a breach by such indemnifying party (or its directors, officers, shareholders,
partners, members, agents, employees or any independent contractors retained by
it) of any of the covenants to be performed by such party contained in this
Section 14.4. Notwithstanding anything to the contrary contained in this
- ------------
Agreement, the provisions of this Section 14.4 shall survive the Closing for a
------------
period of two (2) years. With respect to the indemnity obligations or any breach
of this Section 14.4, the provisions of Section 10 shall not apply and the
------------ ----------
indemnified party may seek damages in a court of law or exercise any other
remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
-44-
<PAGE>
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
-45-
<PAGE>
(d) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
-------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as
----------------------------------
otherwise expressly set forth in this Agreement, this Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties; provided, however, that (a) Purchaser
shall have the right to designate an Affiliate(s) of Purchaser to receive record
title to the Property, (b) Seller shall have the right to designate an Affiliate
of Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
14.8. Severability. If any provision of this Agreement
------------
shall be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed
-46-
<PAGE>
and construed in any such jurisdiction or case as if such invalid, inoperative
or unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
------------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date
----------------------------
on which performance or payment of any obligation of a party required hereunder
is other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
-47-
<PAGE>
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-48-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ RICHARD SZYMANSKI
---------------------------------------
Richard Szymanski
Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its sole general partner
By: /s/ BRUCE G. WILES
---------------------------------------
Bruce G. Wiles
Executive Vice President
-49-
<PAGE>
EXHIBIt 2.4
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as Purchaser
January 7, 1998
Meriden, Connecticut
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ..............................................1
1.1. "Acquisition Costs" ............................................1
1.2. "Adjustments" ..................................................2
1.3. "Affiliate" ....................................................2
1.4. "Agreement" ....................................................2
1.5. "Business Day" .................................................2
1.6. "Change in Control" ............................................2
1.7. "Closing".......................................................2
1.8. "Closing Date" .................................................2
1.9. "Code"..........................................................2
1.10. "Construction Costs" ..........................................2
1.11. "Contracts" ...................................................3
1.12. "Cut-Off Time" ................................................3
1.13. "Defective Property" ..........................................3
1.14. "Deposit"......................................................3
1.15. "Diligence Notice" ............................................3
1.16. "Documents" ...................................................3
1.17. "Due Diligence Material" ......................................4
1.18. "Environmental Laws" ..........................................4
1.19. "Environmental Report" ........................................4
1.20. "Escrow Agent" ................................................4
1.21. "Escrow Agreement" ............................................4
1.22. "Estoppel Certificate" ........................................4
1.23. "Exchange Act" ................................................5
1.24. "Excluded Intellectual Property" ..............................5
1.25. "FF&E".........................................................5
1.26. "FF&E Leases" .................................................5
1.27. "Financial Statements" ........................................5
1.28. "Franchise Agreement" .........................................5
1.29. "Franchisor Comfort Letters" ..................................5
1.30. "Full Service Hotels" .........................................5
1.31. "Group Two Sale Agreement" ....................................5
1.32. "Hazardous Substance" .........................................6
1.33. "Hotel"........................................................6
1.34. "Improvements" ................................................6
1.35. "Intangible Property" .........................................6
1.36. "Leased FF&E" .................................................6
1.37. "Letter of Credit..............................................6
1.38. "Liquidated Damages" ..........................................6
1.39. "Liquor License" ..............................................6
1.40. "Mortgagee" ...................................................6
1.41. "Offer"........................................................6
1.42. "Operating Leases" ............................................7
1.43. "Operating Lessee" ............................................7
1.44. "Original Agreement" ..........................................7
1.45. "Other Agreements" ............................................7
1.46. "Other Revenues" ..............................................7
1.47. "Permitted Encumbrances" ......................................7
1.48. "Person".......................................................7
1.49. "Project Plan" ................................................7
(i)
<PAGE>
1.50. "Property" .....................................................7
1.51. "Proposed AmeriSuites Hotel" ...................................7
1.52. "Prorations Settlement" ........................................8
1.53. "Purchase Price" ...............................................8
1.54. "Purchaser" ....................................................8
1.55. "Real Property" ................................................8
1.56. "REIT"..........................................................8
1.57. "Restricted Period" ............................................8
1.58. "Room Revenues" ................................................8
1.59. "SEC Documents" ................................................8
1.60. "Seller"........................................................8
1.61. "Seller's knowledge" ...........................................8
1.62. "Seller Subsidiary" ............................................8
1.63. "Space Leases" .................................................8
1.64. "Subordination, Nondisturbance and Attornment Agreement" .......9
1.65. "Survey"........................................................9
1.66. "Survival Period" ..............................................9
1.67. "Title Commitment" .............................................9
1.68. "Title Company" ................................................9
1.69. "WARN Act" .....................................................9
SECTION 2. PURCHASE AND SALE.........................................9
2.1. Purchase and Sale................................................9
2.2. Deposit..........................................................9
2.3. Closing..........................................................9
2.4. Purchase Price..................................................10
2.5. Tax Free Exchange...............................................10
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION......................11
3.1. Diligence Inspections...........................................11
3.2. Defective Property..............................................13
3.3. Title Matters...................................................14
3.4. Survey..........................................................15
3.5. Additional Termination Option...................................15
3.6. Adjournment of Closing..........................................16
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.............16
4.1. Closing Documents...............................................16
4.2. Condition of the Property.......................................18
4.3. Title Policies..................................................18
4.4. Opinions of Counsel.............................................18
4.5. Other Approvals.................................................19
4.6. Representations.................................................19
4.7. Default Under Group Two Sale Agreement..........................19
4.8. Default under Other Agreements..................................19
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE................19
5.1. Purchase Price..................................................20
5.2. Closing Documents...............................................20
5.3. Opinion of Counsel..............................................20
5.4. Other Approvals.................................................20
5.5. Representations.................................................20
5.6. Default Under Group Two Sale Agreement..........................21
(ii)
<PAGE>
5.7. Default under Other Agreements..................................21
SECTION 6. REPRESENTATIONS OF SELLER.................................21
6.1. Status and Authority of Seller..................................21
6.2. Action of Seller................................................21
6.3. No Violations of Agreements.....................................21
6.4. Litigation......................................................22
6.5. Existing Leases, Agreements, Etc................................22
6.6. Franchise Agreement.............................................22
6.7. Contracts.......................................................22
6.8. Taxes...........................................................22
6.9. Not a Foreign Person............................................23
6.10. Hazardous Substances...........................................23
6.11. Insurance......................................................23
6.12. FF&E...........................................................23
6.13. Employment and Union Contracts.................................23
6.14. Adjacent Land Leases...........................................23
6.15. Trademarks.....................................................23
6.16. Compliance with Laws...........................................23
6.17. Inventory......................................................23
6.18. Holder of Liquor License.......................................24
SECTION 7. REPRESENTATIONS OF PURCHASER..............................25
7.1. Status and Authority of Purchaser...............................25
7.2. Action of Purchaser.............................................25
7.3. No Violations of Agreements.....................................25
7.4. Litigation......................................................26
7.5. No Conflicts....................................................26
SECTION 8. COVENANTS OF SELLER AND PURCHASER.........................27
8.1. Covenants of Seller.............................................27
SECTION 9. CLOSING COSTS.............................................30
9.1. Closing Costs...................................................30
SECTION 10. DEFAULT..................................................30
10.1. Default by Seller..............................................30
10.2. Default by Purchaser...........................................30
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.......................31
11.1. Liquor License.................................................31
11.2. Franchise Agreement............................................31
11.3. License for Excluded Intellectual Property.....................32
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS.....................33
12.1. Matters to be Adjusted or Prorated.............................33
12.2. Certiorari Proceeding..........................................35
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION........................35
13.1. Right of First Refusal on Full Service Hotels..................35
(iii)
<PAGE>
13.2. Radius Restriction.............................................37
13.3. AmeriSuites Hotels.............................................37
13.4. Multi-Property Exception.......................................40
13.5. Survival and Damages...........................................41
13.6. General Provisions.............................................41
SECTION 14. MISCELLANEOUS............................................42
14.1. Agreement to Indemnify.........................................42
14.2. Brokerage Commissions..........................................43
14.3. Publicity......................................................44
14.4. Confidentiality................................................44
14.5. Notices........................................................45
14.6. Waivers, Etc...................................................46
14.7. Assignment; Successors and Assigns.............................46
14.8. Severability...................................................47
14.9. Counterparts, Etc..............................................47
14.10. Governing Law.................................................47
14.11. Performance on Business Days..................................48
14.12. Attorneys' Fees...............................................48
14.13. Section and Other Headings....................................48
14.14. Financing and Priority of Operating Leases....................48
14.15. Group Two Purchase and Sale Agreement.........................48
14.16. Exceptions to Liquidated Damages..............................49
EXHIBITS*
Exhibit B Legal Description of the Premises
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Leases and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit O Form of Representation Letter in favor of Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
- ----------------
* The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and
Exchange Commission upon request.
(iv)
<PAGE>
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P. ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Seller and Purchaser entered into that certain
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Seller and Purchaser desire to amend and restate the
Original Agreement in the form of eight separate contracts, one contract for
each of the Properties (as defined in the Original Agreement) (such contracts
other than this Agreement being referred to herein as the "Other Agreements");
----------------
and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller is willing to sell Seller's interest in the
Property to Purchaser, subject to and upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other professional fees, any due diligence expenses incurred in assessing the
Proposed AmeriSuites Hotel, title and survey costs, transfer taxes and
pre-opening expenses of the hotel, including without limitation, costs incurred
in the reflagging of the hotel, promotional and advertising expenses,
administrative
<PAGE>
expenses, employee hiring and training expenses, the cost of supplies, equipment
and furniture purchased for the hotel, governmental, utility or other deposits
required for operation of the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that , directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
----------
as it and they may be amended from time to time as herein provided.
1.5. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.6. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.7. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.8. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.9. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the treasury regulations promulgated thereunder.
1.10. "Construction Costs" shall mean all hard and soft costs
-----------------
incurred by Seller or the Seller Subsidiary, as appropriate, in connection with
the acquisition of the site and
-2-
<PAGE>
construction and related improvements for a Proposed AmeriSuites Hotel,
including without limitation (a) the cost of funds used for such construction,
whether provided by a third party lender or by Seller (the interest on such
funds being calculated in the latter event at a rate equal to the prime rate
reported in the Money Rates column or comparable section of The Wall Street
---------------
Journal (or if The Wall Street Journal is no longer published, a different
- ------- -----------------------
publication designated by Seller) as the rate then in effect for corporate loans
at large U.S. money center commercial banks, plus three percent (3%) compounded
monthly), (b) attorney, accountant, engineer, architect, contractor and other
professional fees; (c) any due diligence expenses incurred in assessing a site
for the Proposed AmeriSuites Hotel; (d) title and survey costs; (e) transfer
taxes; and (f) pre-opening expenses of the hotel, including without limitation,
promotional and advertising expenses, administrative expenses, employee hiring
and training expenses, the cost of supplies, equipment and furniture ordered or
purchased for the hotel, governmental, utility or other deposits required for
operation of the hotel and similar costs.
1.11. "Contracts" shall mean, all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.12. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.13. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
1.14. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.15. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
1.16. "Documents" shall mean, with respect to any Property,
---------
all books, records and files relating to the leasing, maintenance, management or
operation of the Property.
-3-
<PAGE>
1.17. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.18. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.19. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.10.
------------
1.20. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.21. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.22. "Estoppel Certificate" shall mean a statement made by
--------------------
the franchisor under the Franchise Agreement in favor of Purchaser and/or any
Mortgagee certifying to such matters as Purchaser and/or its Mortgagee may
reasonably request, including, without limitation, the following: that an
attached copy of the Franchise Agreement is a true, correct and complete copy of
such Franchise Agreement which has not been modified except as identified; that
Seller is not in monetary or other default under the Franchise Agreement and
that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise Agreement; and to any
other matters which franchisor is required to certify pursuant to the terms of
the Franchise Agreement;
in a form reasonably acceptable to said franchisor; provided, however, that if
the Franchise Agreement (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the Franchise
Agreement on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(h), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
-4-
<PAGE>
1.23. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.24. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.25. "FF&E" shall mean, all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.26. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
1.27. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.28. "Franchise Agreement" shall mean the hotel licensing
-------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.29. "Franchisor Comfort Letters" shall mean letters from
--------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.30. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.31. "Group Two Sale Agreement" shall have the meaning given
------------------------
that term in Section 14.15.
-------------
-5-
<PAGE>
1.32. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.33. "Hotel" shall mean the hotel located at the Property.
-----
1.34. "Improvements" shall mean all buildings, fixtures,
------------
walls,fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
1.35. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including without limitation all trademarks, trade names,
copyrights, patents or technical processes, owned and used by Seller which
pertain solely to the Property and expressly excluding the Excluded Intellectual
Property and all trademarks, trade names, copyrights, patents or technical
processes used with respect to Seller itself or Seller's Affiliates, and
expressly excluding the Contracts.
1.36. "Leased FF&E" shall have the meaning given such term in
-----------
Section 6.12.
- ------------
1.37. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.38. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.39. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.40. "Mortgagee" shall mean any and all lenders who provides
---------
financing to Purchaser in connection with the Property.
1.41. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
-6-
<PAGE>
1.42. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.43. "Operating Lessee" shall mean a wholly-owned subsidiary
----------------
of Seller as tenant, of an Operating Lease(s); which is a single-purpose entity
with the sole purpose of leasing, managing, maintaining, operating and
performing other related functions for the Hotel.
1.44. "Original Agreement" shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.45. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.46. "Other Revenues" shall have the meaning given such term
--------------
in Section 12.1.
------------
1.47. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) applicable
zoning regulations and ordinances provided the same do not prohibit or impair in
any material respect use of the Property as a hotel as currently operated and
constructed; (d) UCC Financing Statements securing the purchase price of FF&E
under the FF&E Leases identified on Exhibit I; provided, however, that such
---------
liens shall be confined to the asset in question and the aggregate principal
amount of indebtedness secured by such liens shall not exceed the cost of
acquisition or construction of the property subject thereto; (e) such other
nonmonetary encumbrances with respect to the Property which are not objected to
by Purchaser in accordance with Section 3; and (f) such exceptions or matters,
---------
as the case may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.48. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.49. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.50. "Property" shall mean all of the Seller's interest in
--------
the Real Property, and in the FF&E, the Documents, the Improvements and the
Intangible Property related to the Real Property.
1.51. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
-------------
-7-
<PAGE>
1.52. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.53. "Purchase Price" shall have the meaning given such term
--------------
in Section 2.4.
-----------
1.54. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.55. "Real Property" shall mean the real property described
-------------
on Exhibit B, together with all easements, rights of way, privileges, licenses
---------
and appurtenances which Seller may now own with respect thereto.
1.56. "REIT" shall mean American General Hospitality
----
Corporation.
1.57. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.58. "Room Revenues" shall have the meaning given such term
-------------
in Section 12.1.
------------
1.59. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.60. "Seller" shall have the meaning given such term in the
------
preamble to this Agreement
1.61. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.61 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.62. "Seller Subsidiary" shall have the meaning set forth in
-----------------
Section 13.1.
- ------------
1.63. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on Exhibit
-------
K.
- -
-8-
<PAGE>
1.64. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.65. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.66. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.67. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.68. "Title Company" shall mean, collectively, Chicago Title
-------------
Insurance Company and Commonwealth Land Title Insurance Company, each as a 50%
co-insurers, or such other title insurance company or companies as shall have
been reasonably approved by Purchaser and Seller.
1.69. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
-------
the sum of Five Hundred Thirteen Thousand Seven Hundred Fifty Dollars ($513,750)
(together with all interest accrued thereon, if any, the "Deposit") in the form
-------
of an unconditional, irrevocable letter of credit issued by Bank One, Texas,
N.A. (the "Letter of Credit"). The Letter of Credit shall be in the amount of
----------------
Seven Million Five Hundred Thousand Dollars ($7,500,000), which amount shall
represent the Deposit as well as the deposits required pursuant to the Other
Agreements. The Deposit (and the Letter of Credit) shall be held pursuant to,
and disbursed according to, the terms of the Escrow Agreement. Notwithstanding
anything to the contrary contained in this Agreement, until the Deposit is
disbursed in accordance with the Escrow Agreement, this Agreement shall not
terminate and shall remain in full force and effect to the extent necessary for
such purpose.
2.3. Closing. The purchase and sale of the Property shall be
-------
consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
-9-
<PAGE>
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations with respect
---------
to that Property under Section 4, unless such obligations shall have been waived
---------
by Purchaser and provided that such adjournment with respect to the Property
shall not adjourn the Closing Date with respect to any of the other properties
to be conveyed under the Other Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Nine Million
--------------
Four Hundred Eighty-Five Thousand Dollars ($9,485,000), allocated Eight Million
Four Hundred Ninety Thousand Dollars ($8,490,000) to the Real Property and
Improvements and Nine Hundred Ninety-Five Thousand Dollars ($995,000) to the
personal property including, without limitation, the FF&E and the Intangible
Property.
(b) The Purchase Price (plus or minus adjustments and
prorations set forth in Section 12 hereof) shall be payable by wire transfer of
----------
immediately available federal funds on the Closing Date to an account to be
designated by Seller prior to the Closing.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring one or more Section 1031 exchanges, if so desired by Seller,
provided that such structuring shall not materially adversely affect Purchaser's
rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser
in connection with Purchaser complying with the terms of this Section 2.5 shall
-----------
be paid by Seller.
-10-
<PAGE>
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise provided to
Purchaser pursuant to this Agreement. Purchaser agrees and acknowledges that it
has investigated and/or received the opportunity to investigate the Property to
its satisfaction and that it is not relying on any materials, statements,
representations or warranties of any kind, other than as specifically set forth
in this Agreement, in purchasing the Property. To the extent that, in connection
with such investigation, Purchaser, its agents, representatives or contractors,
has damaged or disturbed or does damage or disturb the Real Property or the
Improvements located thereon, Purchaser shall return the same to substantially
the same condition which existed immediately prior to such damage or
disturbance. In the event that the transactions contemplated by this Agreement
are not closed and consummated for any reason, Purchaser shall deliver to Seller
all tests, reports and inspections of the Property made and conducted by
Purchaser or for its benefit or any other documents or information Purchaser has
received pursuant to this Agreement. Purchaser shall indemnify, defend and hold
harmless Seller from and against any and all cost, expense, liability, loss or
damage which Seller may incur as a result of any act or omission of Purchaser or
its representatives, agents or contractors in connection with such examinations
and inspections, other than to the extent that any expense, loss or damage
arises from any gross negligence or willful misconduct of Seller. The provisions
of this Section 3.1(a) shall survive the termination of this Agreement and the
--------------
Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for
-11-
<PAGE>
the current year to date and each of the three (3) years prior to the year of
this Agreement (the "Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and other
patrons of the Hotel; management fees; maintenance, repairs and other expenses
relating to the management and operation of the Hotel; occupancy statistics for
the Hotel for the current year to date and the prior three (3) calendar years;
and all capital expenditures made during the aforementioned periods. To the
extent that the Financial Statements provided by Seller for the current year do
not include any period up to and including the Closing Date, Seller shall,
within 25 days after the Closing Date, provide Purchaser with monthly unaudited
Financial Statements applicable to such period inclusive of the Closing Date;
(iii) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in Seller's
possession or control or readily available without expense, notices of appraised
value for the Real Property and Improvements;
(iv) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser shall
return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) All notices received from governmental authorities
in connection with the Hotel;
(viii) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(ix) All FF&E Leases;
-12-
<PAGE>
(x) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xi) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to any Hotel;
(xii) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
(xiii) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotel, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Purchaser's representatives a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a
-13-
<PAGE>
Defective Property, (ii) the Property is not, prior to the Closing, restored to
a condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property .
(b) If Purchaser timely gives notice to Seller of any
Defective Property, and Purchaser and Seller shall, acting reasonably and in
good faith, be unable or unwilling to agree (x) that Seller shall, at its sole
cost, attempt to remedy the applicable defect prior to the Closing (in which
event Seller shall have the right to adjourn the Closing Date pursuant to the
provisions of Section 3.7 for up to ninety (90) days for such purpose), (y) that
-----------
Purchaser shall, notwithstanding such defect, acquire the Defective Property
subject to a reduction in the Purchase Price, as reasonably determined by Seller
and Purchaser, sufficient to compensate Purchaser for such defect, or (z) on the
substitution of another property owned by Seller for such Defective Property,
this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the date of the Original Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to the Property, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "Title
-----
Commitment"). Except as set forth in the Diligence Notice, Purchaser
- ----------
acknowledges that it does not have any other objections to title exceptions
shown on the Title Commitment. Seller acknowledges and agrees that Seller shall
attempt to remedy the objections set forth in the Diligence Notice with respect
to the Property. Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.6 for up to ninety (90) days for such purpose. If Seller
-----------
shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
-----------
Agreement, and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notices by Purchaser. Failure of Purchaser to give such
-14-
<PAGE>
notice shall be deemed an election by Purchaser to proceed in accordance with
clause (ii) above, and such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect to
------
the Real Property (the "Survey") by a licensed surveyor in the jurisdiction in
------
which the Property is located, which (i) contains an accurate legal description
of the Property, (ii) shows the location, dimension and description (including
applicable recording information) of all utilities, easements, encroachments and
other physical matters affecting the Property, the number of striped parking
spaces located thereon and all applicable building set-back lines, (iii) states
whether the Property is located within a 100-year flood plain and (iv) is
certified to Purchaser and the Title Company and such other persons as shall
have been requested by Purchaser or Seller. Except as set forth in the Diligence
Notice, Purchaser acknowledges and agrees that it does not have any other
objections to any matter shown on the Survey. Seller acknowledges and agrees
that Seller shall attempt to remedy the objections set forth in the Diligence
Notice with respect to the Survey. Seller shall have the right to adjourn the
Closing Date for up to ninety (90) days pursuant to Section 3.6 for such
-----------
purpose. If Seller shall be unable to remove any such survey defect to which
Purchaser has objected, Purchaser may elect (i) to terminate this Agreement and
this Agreement shall terminate and be of no further force or effect except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or fifth Business Day after Seller's notice of its inability to
cure such defect and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above
and such matter shall be a Permitted Encumbrance.
3.5. Additional Termination Option. If Purchaser shall
-----------------------------
elect, pursuant to any provision of this Agreement or the Other Agreements to
terminate any three or more of the Other Agreements and/or this Agreement, then,
together with such notice of termination with respect to this Agreement or an
Other Agreement which taken by itself or together with any prior notices of
termination would result in three or more such
-15-
<PAGE>
terminations, Purchaser may, in such notice, or Seller may, within 10 Business
Days of receipt of such notice of termination by written notice to Purchaser,
terminate this Agreement and simultaneously terminate the Other Agreements and
the Group Two Sale Agreement, in which event the Deposit shall be returned to
Purchaser and the parties to this Agreement shall have no further obligations
under this Agreement, the Other Agreements and the Group Two Sale Agreement
except as expressly provided in this Agreement, the Other Agreements or the
Group Two Sale Agreement. Notwithstanding the foregoing, if any provision in any
Other Agreement expressly provides that a termination thereof shall not be
considered for purposes of determining whether three such terminations have
occurred, such provision of the Other Agreement shall be controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(h)), Franchisor Comfort Letters (as
---------------
required by Section 4.1(j) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-------------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the other Properties to be conveyed under the Other
Agreements until such Estoppel Certificates, Franchisor Comfort Letters or
consents are obtained provided such adjournment shall not be longer than ninety
(90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the
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<PAGE>
Property is located, in proper statutory form for recording, duly executed and
acknowledged by Seller, conveying fee simple title to the Property, free from
all liens and encumbrances other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(c) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(d) Duly executed transfer tax forms, as required by
applicable law;
(e) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(f) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(g) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(h) Duly executed Estoppel Certificates from the franchisor
under the Franchise Agreement; provided that any such Estoppel Certificate shall
be provided to Purchaser prior to Closing promptly following receipt by Seller
of the same;
(i) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(j) Franchisor Comfort Letters;
(k) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel;
(l) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
-17-
<PAGE>
(m) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
(n) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(o) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to the state in which the Property is located.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the
-18-
<PAGE>
customary and reasonable assumptions and qualifications, and such other matters
with respect to the transactions contemplated by this Agreement or the Operating
Lease as the Purchaser may reasonably require. Seller and Purchaser shall agree
upon local counsel for the jurisdiction in which the Property is located to
provide an appropriate jurisdiction-specific opinion, the cost of which local
counsel will be shared equally by Seller and Purchaser. An opinion from in-house
counsel to Seller shall satisfy this Section 4.4 with respect to all matters
-----------
which customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the franchisor, if required; (c) the consent of
the ground lessor under that certain Lease dated June 29, 1973 (as amended, the
"Armonk Lease") for premises located in Armonk, New York to the transactions
------------
contemplated by the Group Two Sale Agreement; and (d) a modification of such
Armonk Lease to extend the initial term thereof such that at the closing of such
property there shall be at least thirty (30) years of the initial term
remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default Under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be in
------------------------------
default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided,
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of
-19-
<PAGE>
which may be waived by Seller in its sole and absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner; and
(c) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller or the Title Company may reasonably
require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for the jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all consents of franchisors, if
------------
required; (c) the consent of the ground lessor under the Armonk Lease to the
transactions contemplated by the Group Two Sale Agreement; and (d) a
modification of such Armonk Lease to extend the initial term thereof such that
at the closing of such property there shall be at least thirty (30) years of the
initial term remaining.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
-20-
<PAGE>
5.6. Default Under Group Two Sale Agreement. Purchaser shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
5.7. Default under Other Agreements. Purchaser shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate, and except with respect
to the failure of the conditions set forth in Section 5.1, Section 5.6 and
----------- -----------
Section 5.7 (which shall be a default under this Agreement), such failure of a
- -----------
condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a corporation
------------------------------
duly organized, validly existing and in corporate good standing under the laws
of its state of incorporation, and has all requisite power and authority under
the laws of such state and its respective charter documents to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. Seller has duly qualified to transact business in each
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where failure to do so could not reasonably be expected to
have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action
----------------
to authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller on or prior
to the Closing Date, such document shall constitute the valid and binding
obligation and agreement of Seller, as the case may be, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any
-21-
<PAGE>
lien, charge or encumbrance upon the Property pursuant to the terms of any
indenture, mortgage, deed of trust, note, evidence of indebtedness or any other
agreement or instrument by which Seller is bound.
6.4. Litigation. Seller has not received any written notice
----------
of and, to Seller's knowledge, no action or proceeding is pending or threatened
and no investigation looking toward such an action or proceeding has begun,
which (a) questions the validity of this Agreement or the Operating Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the Property,
(c) will result in or subject the Property to a material liability, or (d)
involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Franchise Agreement listed on
-------------------
Exhibit D is the sole franchise agreement affecting the Property as of the date
- ---------
hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is a true and complete copy of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.7. Contracts. The copies of the Contracts provided or made
---------
available to Purchaser not later than December 1, 1997 are true and complete
copies of said Contracts and, to Seller's knowledge, are valid, in full force
and effect and no party has breached any material condition or provision
thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are
-22-
<PAGE>
outstanding or unpaid, other than amounts not yet due and payable or, if due and
payable, not yet delinquent.
6.9. Not a Foreign Person. Seller is not a "foreign
--------------------
person" within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the
-23-
<PAGE>
Property in a manner consistent with the operation of the Property immediately
prior to the Closing by Seller.
6.18. Holder of Liquor License. The holder of the Liquor
------------------------
License for the Property is Prime Hospitality Corp., a Delaware corporation.
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.18 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written notice of a breach thereof within
the Survival Period (but in any event promptly after learning of such breach)
specifying in sufficient detail the facts constituting such alleged breach and
the loss then reasonably ascertainable as a consequence thereof, and an
opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property, pest control matters,
soil conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information
-24-
<PAGE>
pertaining to the Property or the market and physical environments in which they
are located. Purchaser acknowledges (i) that Purchaser has made and is relying
upon its own investigation or that of third parties with respect to the
physical, environmental, economic and legal condition of the Property and (ii)
that Purchaser is not relying upon any statements, representations or warranties
of any kind, other than those specifically set forth in this Agreement or in any
document to be delivered to Purchaser at the Closing made by Seller. Purchaser
further acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Property in its "as is" condition on the Closing
Date.
SECTION 7. REPRESENTATIONS OF PURCHASER
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed
-25-
<PAGE>
of trust, note, evidence of indebtedness or any other agreement or instrument by
which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it, any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
-26-
<PAGE>
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition of
the Property or of any event or circumstance which makes any representation or
warranty of Seller to Purchaser under this Agreement untrue or misleading in any
material respect, promptly to notify Purchaser thereof (Purchaser agreeing, on
learning of any such fact or condition, promptly to notify Seller thereof);
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement in a good and businesslike fashion consistent with
its past practices (which Seller believes to be in compliance with the Franchise
Agreement) and to cause the Property to be maintained in good working order and
condition in a manner consistent with its past practice;
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property;
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases or the Franchise Agreement, other than those modifications,
renewals or extensions required by the terms of the applicable document, or
enter into any other leases, agreements, mortgages or other loan documents or
other commitments relating to the Property or the operation of the Hotel other
than in the normal course of business and which are by their terms terminable
without penalty upon not more than thirty (30) days notice;
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid
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triggering any notification requirements under the Worker Adjustment Retraining
and Notification Act ("WARN Act"), without limiting Seller's ability to
--------
discharge any or all of such employees thereafter (provided, however, that no
such discharge will trigger a WARN Act notification or otherwise impose any
obligations on Seller). Any employees of Seller working at the Hotel as of the
Closing Date shall remain the employees of Seller after the Closing Date. Seller
hereby agrees to indemnify and hold harmless Purchaser from and against any and
all liability, cost, damages and expenses arising from or relating to the
failure of Seller to comply with this Section 8.1(e). The provisions of this
--------------
Section 8.1(e) shall survive the Closing;
- --------------
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement in a fashion
consistent with its past practice (which Seller believes to be in compliance
with such Liquor License and Franchise Agreement); (vi) maintaining supplies and
personalty consistent with the prior operations of Seller; (vii) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (viii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (viii) shall survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases, the Franchise Agreement, the Liquor
License and the Contracts for the Hotel,
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and all other applicable contractual arrangements relating to the Hotel
consistent with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts or Space Leases, without Purchaser's prior
written consent, except that the 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 thirty (30) days prior
notice without cost or expense. Any such new agreement or renewal or extension
of existing agreements to which Purchaser's consent was not obtained, whether or
not such consent is required under this Section 8.1(i) shall subject the
--------------
applicable agreement to Purchaser's review under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and any consents and
approvals necessary for the transaction contemplated by this Agreement at least
one week prior to the Closing; to continue to use reasonable, good faith efforts
to obtain such items thereafter; to promptly inform Purchaser of any issues or
problems which Seller foresees in obtaining any such items; and to deliver each
such item to Purchaser promptly after receipt thereof; and
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(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
SECTION 9. CLOSING COSTS
9.1. Closing Costs. Each of the parties hereto shall pay
-------------
its own expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any legal and accounting
fees, inspection fees, and the costs and expenses of preparing engineering and
environment reports, market studies and appraisals, whether or not the
transactions contemplated hereby are consummated. The cost of the Survey, Title
Commitment (and the policies and endorsements issued pursuant thereto), all
state and local sales, transfer, excise, value-added or other similar taxes, all
recording and filing fees that may be imposed by reason of the sale, transfer,
assignment and delivery of the Property shall be shared equally by Seller and
Purchaser. As between Purchaser and Seller, the cost of seeking consents
including, without limitation, any transfer or assumption fees incurred in
connection therewith, Franchisor Comfort Letters and Estoppel Certificates shall
be borne solely by Seller.
SECTION 10. DEFAULT
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser Five
Hundred Thirteen Thousand Seven Hundred Fifty Dollars ($513,750) as liquidated
damages and not as a penalty (the "Liquidated Damages"). Purchaser and Seller
------------------
acknowledge that the damages which may be incurred by Purchaser in the event of
Seller's default are difficult to quantify as of the date of this Agreement; the
Liquidated Damages represent the parties reasonable estimate of Purchaser's
probable future damages in the event of Seller's default and the Liquidated
Damages represent fair and reasonable compensation to Purchaser in the event of
Seller's default. Except with respect to the Liquidated Damages, Purchaser
hereby waives any and all rights it may have to sue Seller for money damages in
connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and
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<PAGE>
exclusive remedy at law and in equity, terminate this Agreement, whereupon
Purchaser shall be obligated to pay Seller an amount equal to the Liquidated
Damages, as liquidated damages and not as a penalty. The Deposit shall be
retained by Seller and offset against the Liquidated Damages. Purchaser and
Seller acknowledge that the damages which may be incurred by Seller in the event
of Purchaser's default are difficult to quantify as of the date of this
Agreement; the Liquidated Damages represent the parties reasonable estimate of
Seller's probable future damages in the event of Purchaser's default and the
Liquidated Damages represent fair and reasonable compensation to Seller in the
event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT
11.1. Liquor License. Seller currently holds the Liquor
--------------
License for the Hotel and if, in compliance with all applicable laws, statutes,
rules, regulations and ordinances, Seller may continue to hold such Liquor
License following the Closing, Seller shall maintain the Liquor License and
Purchaser shall not interfere with the maintenance of the Liquor License. If
Seller may not continue to hold a Liquor License for the Property following the
Closing or if the existing Liquor License needs to be revised to reflect the
Purchaser as owner of the Property, then Seller shall apply for a new or
modified Liquor License or, if advised by local counsel to be required under
local laws, regulations or orders, Purchaser or its designee shall apply for a
liquor license for the Hotel, at Seller's sole cost and expense, promptly after
Closing. Seller and Purchaser shall cooperate to obtain a liquor license for the
Hotel or modifications to the existing Liquor License or to maintain the
existing Liquor License in effect. Until such time as such new or modified
liquor license is obtained, Seller shall take all steps reasonably necessary to
enable the current Liquor License to be used by the Hotel and to permit the
uninterrupted sale and service of alcoholic beverages at the Hotel. The
provisions of this Section 11.1 shall survive the Closing.
------------
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the
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transactions described in this Agreement; provided that the failure of Seller to
obtain such Franchisor Comfort Letters or consents of franchisors, after using
commercially reasonable, good faith efforts to do so in accordance with Section
-------
8.1(o), shall not be a default under this Agreement; provided further that
- ------
Seller's obligation and liability to pay administrative fees imposed by the
franchisor for such Franchisor Comfort Letters, such consents or otherwise in
connection with the transaction contemplated by this Purchase Agreement shall be
limited to the first One Hundred Thousand Dollars ($100,000) of the collective
administrative fees required by the franchisor and by any franchisor in
connection with the transactions contemplated by the Other Agreements and one-
half of all amounts in excess thereof, and Purchaser hereby covenants and agrees
to pay the other one-half of such administrative fees in excess of One Hundred
Thousand Dollars ($100,000). In no event shall the requirement of payment of
administrative fees constitute a reason for Purchaser to fail to close on the
Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in good
faith to an adjustment of the rent payable pursuant to the Operating Lease,
based on the terms and conditions of the new franchise agreement and its
anticipated effect on Gross Revenues (as defined in the Operating Lease).
(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the
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Closing Date; or (ii) a termination pursuant to the provisions of Section
-------
11.3(d) below;
- -------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS AND DEPOSITS
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar
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<PAGE>
benefits, vacation and sick pay, unemployment compensation, social security and
other payroll taxes, and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking services, revenues from any "mini-bars" located in
the Hotel rooms and all other revenues (the "Other Revenues"), provided that
--------------
Other Revenues arising from the sale of food and beverages in restaurants and
bars which do not remain open the entire Cut-Off Night shall be apportioned as
of the last hour at which the applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreement, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j), it is the intent of
Seller and Purchaser that all income and expenses relating to the Property shall
be prorated as provided in this Section 12 such that Seller shall have the
----------
benefit of all income and be responsible for all expenses and liabilities
incurred in
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<PAGE>
connection with the Property fairly allocable to the period prior to the Closing
Date and that Operating Lessee under the Operating Lease at the Property shall
have the benefit of all income and be responsible for all expenses and
liabilities of the Property relating to the period from and after the Closing
Date. With respect to the prorations and Adjustments set forth in subparagraph
(a) of this Section 12.1, the Purchase Price shall be adjusted based on the
------------
prorations between Seller and Purchaser with respect to such subparagraph.
12.2. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to the current tax year or
could affect the taxes due for a subsequent tax year and Purchaser shall have
the right to participate in and approve tax settlements of such certiori
proceedings which relate to the current tax year, which settlements shall not be
effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no longer manages the Property (the "Restricted Period") on any and
-----------------
all Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical
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<PAGE>
occupancy and Rev PAR information, title policies, title commitments and copies
of documents referenced therein, surveys, environmental audits, zoning reports,
engineering reports, appraisals, budgets and other similar materials, all to the
extent in Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above, Purchaser shall be
deemed conclusively to have elected not to purchase the Full Service Hotel. In
such event or if Purchaser elects not to purchase the Full Service Hotel, Seller
or the Seller Subsidiary shall have the right to transfer the Full Service Hotel
covered by the Offer to the party making the Offer, substantially in accordance
with the terms of the Offer and without material modifications beneficial to
said third party purchaser, without any further notice to Purchaser. If,
however, Seller or the Seller Subsidiary and such third party purchaser
thereafter agree to terms for such purchase which are materially different from
those provided in the Offer and beneficial to the third party purchaser, then
Purchaser's right of first refusal under this Section 13.1 shall be renewed with
------------
respect to such Full Service Hotel, on the terms of the Offer as so modified. If
the sale of a Full Service Hotel is consummated with a third party, provided
that Seller shall have complied with the requirements of this Section 13.1, this
Section 13.1 shall no longer be applicable with respect to such Full Service
- ------------
Hotel simultaneously with the sale. The exercise or non-exercise by Purchaser of
the right to purchase a Full Service Hotel does not affect Purchaser's
continuing right of first refusal with respect to any other Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full
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<PAGE>
Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any other properties for which Purchaser has terminated this
Agreement or any of the Other Agreements, as applicable, or which has been
eliminated from the Group Two Sale Agreement (unless the problem which Purchaser
identified in the applicable notice of termination has been remedied in full),
and Seller may sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
------------
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St. Thomas and known as "Frenchman's Reef" and Purchaser may sell
that property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated
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<PAGE>
completion date for construction set forth in the Project Plan. The Project Plan
shall be comprised of the following:
(i) to the extent then available or completed, detailed
plans and specifications for the construction of the Proposed AmeriSuites Hotel;
(ii) a schedule for the estimated costs of construction
prepared jointly by the contractor engaged to perform the work and Seller; a
construction schedule setting forth the target commencement date, substantial
completion date and final completion date for the construction of the Projected
AmeriSuites Hotel and the dates for completion of the various phases of
construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months after
opening and for periods thereafter, to the extent then developed;
(iv) historical occupancy and Rev Par information for
the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed AmeriSuites
Hotel;
(viii) any environmental or engineering reports prepared
in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser
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<PAGE>
shall notify Seller whether it will acquire the Proposed AmeriSuites Hotel on
the following terms and conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction Costs,
if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of Acquisition
Costs, if Seller acquires an existing Proposed AmeriSuites Hotel; provided,
however, that if Seller is able to assign to Purchaser any contract of sale
between Seller and an owner of a Proposed AmeriSuites Hotel, without penalty,
consent or a requirement of Seller's continuing liability thereafter, then
Purchaser, in its sole discretion, may accept such assignment and pay to Seller
in lieu of the purchase price described in this subparagraph (i), an amount
equal to the sum of (A) any deposits made by Seller under the contract of sale,
(B) any reasonable costs or expenses incurred by Seller as of the date of the
assignment and (c) an amount equal to that which, absent the assignment to
Purchaser, would have been five percent (5%) of Acquisition Costs or
Construction Costs, as appropriate;
(ii) Within three (3) Business Days after providing its
notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of the
purchase price, which deposit, at Purchaser's election, may be in the form of a
letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites brand
------------
hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit E-1;
-----------
and
(v) If Seller constructs the Proposed AmeriSuites Hotel,
the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the Proposed
AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a
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<PAGE>
Seller Subsidiary, as applicable, and Purchaser shall execute and deliver a
contract of sale relating to such Proposed AmeriSuites Hotel, containing (among
other terms) the terms and conditions set forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel does not affect Purchaser's continuing rights under this
Section 13.3 with respect to any other Proposed AmeriSuites Hotels.
- ------------
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Properties Exception. Notwithstanding anything to
--------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be
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<PAGE>
subject to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
----------
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions in this Section 13 shall not be
----------
included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated
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<PAGE>
damages provisions, which Seller may have under said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
----------
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
(i) Notwithstanding anything to the contrary contained in this
Agreement, Seller retains the unrestricted right to continue to grant franchise
agreements for "AmeriSuites" hotels to unaffiliated third-parties. So long as
such franchisees are not Seller Affiliates, the provisions of this Section 13
----------
shall be inapplicable with respect thereto.
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases or the Contracts and relating to
periods prior to the Closing or (y) any damage to property of others or injury
to or death of any person or any claims for any debts or obligations occurring
on or about or in connection with the Property or any portion thereof at any
time or times prior to the Closing or (z) all accounts payable and sales taxes
due for or on account of the period prior to Closing, and (ii) Purchaser shall
indemnify and hold harmless
-42-
<PAGE>
Seller from and against any and all obligations, claims, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) the Contracts or the
Space Leases relating to periods on or after the Closing, or (y) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about the Property or any portion thereof
at any time or times on or after the Closing or (z) sales taxes due for or on
account of the period from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs,
-43-
<PAGE>
successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof. The provisions of this Section 14.3 shall
------------
survive the Closing or earlier termination of this Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of
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<PAGE>
action, judgments, damages, losses, fines, penalties, costs and expenses,
including without limitation reasonable attorneys' fees and disbursements
relating to the a breach by such indemnifying party (or its directors, officers,
shareholders, partners, members, agents, employees or any independent
contractors retained by it) of any of the covenants to be performed by such
party contained in this Section 14.4. Notwithstanding anything to the contrary
------------
contained in this Agreement, the provisions of this Section 14.4 shall survive
------------
the Closing for a period of two (2) years. With respect to the indemnity
obligations or any breach of this Section 14.4, the provisions of Section 10
------------ ----------
shall not apply and the indemnified party may seek damages in a court of law or
exercise any other remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
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<PAGE>
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(d) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the
-46-
<PAGE>
right to designate an Affiliate of Seller to be the Operating Lessee under the
Operating Lease. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement is not intended and shall not
be construed to create any rights in or to be enforceable in any part by any
other persons.
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of
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<PAGE>
a jurisdiction other than the State of New York; or (vii) any combination of the
foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date on
----------------------------
which performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained
--------------------------
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
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<PAGE>
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
10 shall not apply to any rights or obligations of Seller or Purchaser which
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ RICHARD SZYMANSKI
-------------------------------
Richard Szymanski
Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited
partnership
By: AGH GP, Inc., its sole general partner
By: /s/ BRUCE G. WILES
-------------------------------
Bruce G. Wiles
Executive Vice President
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<PAGE>
EXHIBIT 2.5
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
MAHWAH HOLDING CORP.,
as Seller,
and
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
as Purchaser
January 7, 1998
Mahwah Crossroads, New Jersey
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS...............................................1
1.1. "Acquisition Costs".............................................1
1.2. "Adjustments" ..................................................2
1.3. "Affiliate" ....................................................2
1.4. "Agreement" ....................................................2
1.5. "Business Day" .................................................2
1.6. "Change in Control" ............................................2
1.7. "Closing" ......................................................2
1.8. "Closing Date" .................................................2
1.9. "Code"..........................................................2
1.10. "Condominium Association" .....................................3
1.11. "Construction Costs" ..........................................3
1.12. "Contracts" ...................................................3
1.13. "Cut-Off Time" ................................................3
1.14. "Declaration of Condominium" ..................................3
1.15. "Defective Property" ..........................................3
1.16. "Deposit" .....................................................4
1.17. "Diligence Notice".............................................4
1.18. "Documents" ...................................................4
1.19. "Due Diligence Material" ......................................4
1.20. "Environmental Laws" ..........................................4
1.21. "Environmental Reports" .......................................4
1.22. "Escrow Agent" ................................................4
1.23. "Escrow Agreement" ............................................4
1.24. "Estoppel Certificate" ........................................4
1.25. "Exchange Act" ................................................5
1.26. "Exchange Act Documents" ......................................5
1.27. "Exchange Rights Agreement" ...................................5
1.28. "Excluded Intellectual Property" ..............................5
1.29. "FF&E" ........................................................5
1.30. "FF&E Leases" .................................................6
1.31. "Financial Statements" ........................................6
1.32. "Franchise Agreement" .........................................6
1.33. "Franchisor Comfort Letters" ..................................6
1.34. "Full Service Hotels" .........................................6
1.35. "Group Two Sale Agreement" ....................................6
1.36. "Hazardous Substance" .........................................6
1.37. "Hotel" .......................................................6
1.38. "Improvements" ................................................6
1.39. "Intangible Property" .........................................6
1.40. "Leased FF&E" .................................................7
1.41. "Liquidated Damages" ..........................................7
1.42. "Liquor License" ..............................................7
1.43. "Lock-Up Agreement" ...........................................7
1.44. "LP Agreement" ................................................7
1.45. "LP Units" ....................................................7
1.46. "Mortgagee" ...................................................7
1.47. "Offer" .......................................................7
1.48. "Operating Leases" ............................................7
(i)
<PAGE>
1.49. "Operating Lessee" .............................................7
1.50. "Original Agreement"............................................7
1.51. "Other Agreements"..............................................8
1.52. "Other Revenues" ...............................................8
1.53. "Permitted Encumbrances"........................................8
1.54. "Person" .......................................................8
1.55. "Project Plan" .................................................8
1.56. "Properties" ...................................................8
1.57. "Proposed AmeriSuites Hotel" ...................................8
1.58. "Prorations Settlement" ........................................8
1.59. "Purchase Price" ...............................................8
1.60. "Purchaser" ....................................................8
1.61. "Real Property" ................................................8
1.62. "REIT" .........................................................9
1.63. "Registration Rights Agreement" ................................9
1.64. "Restricted Period" ............................................9
1.65. "Room Revenues" ................................................9
1.66. "Securities Act" ...............................................9
1.67. "SEC Documents" ................................................9
1.68. "Seller" .......................................................9
1.69. "Seller's knowledge" ...........................................9
1.70. "Seller Subsidiary" ............................................9
1.71. "Space Leases" .................................................9
1.72. "Subordination, Nondisturbance and Attornment Agreement" .......9
1.73. "Surveys" .....................................................10
1.74. "Survival Period" .............................................10
1.75. "Title Commitments" ...........................................10
1.76. "Title Company" ...............................................10
1.77. "Unit Component" ..............................................10
1.78. "WARN Act" ....................................................10
SECTION 2. PURCHASE AND SALE........................................10
2.1. Purchase and Sale...............................................10
2.2. Deposit.........................................................10
2.3. Closing.........................................................11
2.4. Purchase Price..................................................11
2.5 Tax Free Exchange...............................................12
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION......................12
3.1. Diligence Inspections...........................................12
3.2. Defective Property..............................................15
3.3. Title Matters...................................................16
3.4. Survey..........................................................17
3.5. Additional Termination Option...................................17
3.6. Adjournment of Closing..........................................18
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.............18
4.1. Closing Documents...............................................18
4.2. Condition of Properties.........................................20
4.3. Title Policies..................................................21
4.4. Opinions of Counsel.............................................21
4.5. Other Approvals.................................................21
(ii)
<PAGE>
4.6. Representations.................................................21
4.7. Default under Group Two Sale Agreement..........................21
4.8. Default under Other Agreements..................................21
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE................22
5.1. Purchase Price..................................................22
5.2. Closing Documents...............................................22
5.3. Opinion of Counsel..............................................22
5.4. Other Approvals.................................................23
5.5. Representations.................................................23
5.6. Default under Group Two Sale Agreement..........................23
5.7. Amendment to LP Agreement.......................................23
5.8. Default under Other Agreements..................................23
SECTION 6. REPRESENTATIONS OF SELLER.................................23
6.1. Status and Authority of Seller..................................24
6.2. Action of Seller................................................24
6.3. No Violations of Agreements.....................................24
6.4. Litigation......................................................24
6.5. Existing Leases, Agreements, Etc................................24
6.6. Franchise Agreement.............................................25
6.7. Declaration of Condominium......................................25
6.8. Contracts.......................................................25
6.9. Taxes...........................................................25
6.10. Not A Foreign Person...........................................25
6.11. Hazardous Substances...........................................25
6.12. Insurance......................................................26
6.13. FF&E...........................................................26
6.14. Employment and Union Contracts.................................26
6.15. Adjacent Land Leases...........................................26
6.16. Trademarks.....................................................26
6.17. Compliance with Laws...........................................26
6.18. Inventory......................................................26
6.19. Securities Laws................................................26
6.20. Holder of Liquor License.......................................28
SECTION 7. REPRESENTATIONS OF PURCHASER..............................30
7.1. Status and Authority of Purchaser...............................30
7.2. Action of Purchaser.............................................30
7.3. No Violations of Agreements.....................................30
7.4. Litigation......................................................30
7.5. No Conflicts....................................................30
7.6. LP Units and the Partnership....................................31
7.7. REIT Status.....................................................31
7.8. REIT Filings....................................................31
SECTION 8. COVENANTS OF SELLER AND PURCHASER.........................32
8.1. Covenants of Seller.............................................32
8.2. Covenants of Purchaser..........................................35
SECTION 9. CLOSING COSTS.............................................36
9.1. Closing Costs...................................................36
(iii)
<PAGE>
SECTION 10. DEFAULT..................................................36
10.1. Default by Seller..............................................36
10.2. Default by Purchaser...........................................37
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.......................37
11.1. Liquor License.................................................37
11.2. Franchise Agreement............................................38
11.3. License for Excluded Intellectual Property.....................39
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS....................39
12.1. Matters to be Adjusted or Prorated.............................39
12.2. Certiorari Proceeding..........................................41
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION........................41
13.1. Right of First Refusal on Full Service Hotels..................41
13.2. Radius Restriction............................................43
13.3. AmeriSuites Hotels............................................43
13.4. Multi-Property Exception......................................47
13.5. Survival and Damages..........................................47
13.6. General Provisions............................................47
SECTION 14. MISCELLANEOUS............................................48
14.1. Agreement to Indemnify.........................................49
14.2. Brokerage Commissions..........................................50
14.3. Publicity......................................................50
14.4. Confidentiality................................................50
14.5. Notices........................................................51
14.6. Waivers, Etc...................................................52
14.7. Assignment; Successors and Assigns.............................53
14.8. Severability...................................................53
14.9. Counterparts, Etc..............................................53
14.10. Governing Law.................................................54
14.11. Performance on Business Days..................................54
14.12. Attorneys' Fees...............................................54
14.13. Section and Other Headings....................................54
14.14. Financing and Priority of Operating Lease.....................54
14.15. Group Two Purchase and Sale Agreement.........................55
14.16. Exceptions to Liquidated Damages..............................55
(iv)
<PAGE>
EXHIBITS*
Exhibit B Legal Description of the Property
Exhibit C Form of Exchange Rights Agreement
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of
Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of
Mortgagee
Exhibit G Form of Lock-Up Agreement
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject
to UCC Financing Statements
Exhibit J Form of Registration Rights Agreement
Exhibit K List of Space Lease and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and
Attornment Agreement
Exhibit O Form of Representation Letter to Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
Exhibit V Exclusions to Representations Regarding
Compliance with Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
(from Seller to Operating Lessee)
Exhibit X Environmental Report
- --------------------
* The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and Exchange
Commission upon request.
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between MAHWAH HOLDING CORP., a Delaware corporation
("Seller"), as seller, and AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP,
L.P. ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Prime Hospitality Corp., a Delaware corporation
("Prime"), and Purchaser entered into that certain Purchase and Sale Agreement
-----
dated as of November 20, 1997, as amended by Amendment to Purchase and Sale
Agreement dated January 7, 1998 (the "Original Agreement"), for the sale of
------------------
certain properties, including the Property (as defined below); and
WHEREAS, Prime and Purchaser desire to amend and restate the
Original Agreement in the form of eight separate contracts, one contract for
each of the Properties (as defined in the Original Agreement) (such contracts
other than this Agreement being referred to herein as the "Other Agreements");
----------------
and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller, a wholly-owned subsidiary of Prime, is the
fee owner to the Property;
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase Seller's interest in the Property, subject to and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other professional fees, any due diligence expenses incurred in assessing the
Proposed AmeriSuites Hotel, title and survey costs, transfer taxes and pre-
opening expenses of the hotel, including without limitation, costs incurred in
the reflagging of the
<PAGE>
hotel, promotional and advertising expenses, administrative expenses, employee
hiring and training expenses, the cost of supplies, equipment and furniture
purchased for the hotel, governmental, utility or other deposits required for
operation of the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term
-----------
in Section 12.1.
------------
1.3. "Affiliate" shall mean, with respect to any entity,
---------
any entity that , directly or indirectly, controls or is controlled by or is
under common control with such entity. For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
----------
as it and they may be amended from time to time as herein provided.
1.5. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.6. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.7. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.8. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.9. "Code" shall mean the Internal Revenue Code of 1986,
----
as amended, and the treasury regulations promulgated thereunder.
2
<PAGE>
1.10. "Condominium Association" shall mean that certain
-----------------------
Crossroads Condominium Association, Inc. established pursuant to the Declaration
of Condominium.
1.11. "Construction Costs" shall mean all hard and soft
------------------
costs incurred by Seller or the Seller Subsidiary, as appropriate, in connection
with the acquisition of the site and construction and related improvements for a
Proposed AmeriSuites Hotel, including without limitation (a) the cost of funds
used for such construction, whether provided by a third party lender or by
Seller (the interest on such funds being calculated in the latter event at a
rate equal to the prime rate reported in the Money Rates column or comparable
section of The Wall Street Journal (or if The Wall Street Journal is no longer
----------------------- -----------------------
published, a different publication designated by Seller) as the rate then in
effect for corporate loans at large U.S. money center commercial banks, plus
three percent (3%) compounded monthly), (b) attorney, accountant, engineer,
architect, contractor and other professional fees; (c) any due diligence
expenses incurred in assessing a site for the Proposed AmeriSuites Hotel; (d)
title and survey costs; (e) transfer taxes; and (f) pre-opening expenses of the
hotel, including without limitation, promotional and advertising expenses,
administrative expenses, employee hiring and training expenses, the cost of
supplies, equipment and furniture ordered or purchased for the hotel,
governmental, utility or other deposits required for operation of the hotel and
similar costs.
1.12. "Contracts" shall mean all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.13. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.14. "Declaration of Condominium" shall mean that certain
--------------------------
Master Deed for Crossroads Condominium dated December 28, 1994 and recorded in
Deed Book 7761, Page 1 of the land records for Bergen County, New Jersey.
1.15. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
3
<PAGE>
1.16. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.17. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
1.18. "Documents" shall mean all books, records and files
---------
relating to the leasing, maintenance, management or operation of the Property.
1.19. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.20. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.21. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.11.
------------
1.22. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.23. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.24. "Estoppel Certificate" shall mean a statement in
--------------------
favor of Purchaser and/or any Mortgagee certifying to such matters as Purchaser
and/or its Mortgagee may reasonably request, including, without limitation, the
following:
(a) when from the Condominium Association, that an attached
copy of the Declaration of Condominium is a true, correct and complete copy of
such Declaration of Condominium which has not been modified except as
identified; the date through which Seller has paid all assessments and common
charges, that Seller is not in monetary or other default under the Declaration
of Condominium; that no event has occurred which with the giving of notice or
the passage of time or both will become a default under the Declaration of
Condominium; and to any other
4
<PAGE>
matters which the Condominium Association is required to certify pursuant to the
terms of the Declaration of Condominium;
(b) when from the franchisor under the Franchise Agreement,
that an attached copy of the Franchise Agreement is a true, correct and complete
copy of such Franchise Agreement which has not been modified except as
identified; that Seller is not in monetary or other default under the Franchise
Agreement and that no event has occurred which with the giving of notice or the
passage of time or both will become a default under the Franchise Agreement; and
to any other matters which franchisor is required to certify pursuant to the
terms of the Franchise Agreement;
each in a form reasonably acceptable to said Condominium Association or
franchisor; provided, however, that if any Declaration of Condominium or
Franchise Agreement, (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the relevant
document on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(h), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
1.25. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.26. "Exchange Act Documents" shall have the meaning given
----------------------
such term in Section 7.8.
-----------
1.27. "Exchange Rights Agreement" shall mean that certain
-------------------------
Exchange Rights Agreement, substantially in the form of Exhibit C, to be entered
---------
into by Purchaser, American General Hospitality Corporation and Prime, as of the
Closing Date.
1.28. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.29. "FF&E" shall mean all supplies, appliances,
----
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
located in or at, or used exclusively in connection with the ownership,
operation or maintenance of the Property, excluding however (a) the Leased FF&E
and (b) any such items which are owned by tenants,
5
<PAGE>
subtenants, concessionaires or licenses under the Space Leases, guests,
invitees, employees, agents or independent contractors.
1.30. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
1.31. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.32. "Franchise Agreement" shall mean the hotel licensing
-------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.33. "Franchisor Comfort Letters" shall mean letters from
--------------------------
franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.34. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.35. "Group Two Sale Agreement" shall have the meaning
------------------------
given that term in Section 14.15.
-------------
1.36. "Hazardous Substance" shall mean any substance
-------------------
defined as a "hazardous waste," "hazardous substance," "toxic substance,"
"hazardous material," pollutant, contaminant or any word of similar import under
any Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.37. "Hotel" shall mean the hotel located at the Property.
-----
1.38. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property or the Lease Property.
1.39. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy,
6
<PAGE>
operating permits, sign permits, development rights and approvals, certificates,
licenses, warranties and guarantees, telephone exchange numbers identified with
the Property held by Seller and all other transferable intangible property,
miscellaneous rights, benefits and privileges of any kind or character with
respect to the Property held by Seller, including without limitation all
trademarks, trade names, copyrights, patents or technical processes, owned and
used by Seller which pertain solely to the Property and expressly excluding the
Excluded Intellectual Property and all trademarks, trade names, copyrights,
patents or technical processes used with respect to Seller itself or Seller's
Affiliates, and expressly excluding the Contracts.
1.40. "Leased FF&E" shall have the meaning given such term
-----------
in Section 6.13.
------------
1.41. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.42. "Liquidated Damages" shall have the meaning given
------------------
such term in Section 10.1.
------------
1.43. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.44. "Lock-Up Agreement" shall mean that certain Lock-Up
-----------------
Agreement, substantially in the form of Exhibit G.
---------
1.45. "LP Agreement" shall have the meaning given such term
------------
in Section 2.4.
-----------
1.46. "LP Units" shall have the meaning given such term in
--------
Section 2.4.
- -----------
1.47. "Mortgagee" shall mean any and all lenders who
---------
provides financing to Purchaser in connection with the Property .
1.48. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
1.49. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.50. "Operating Lessee" shall mean a wholly-owned
----------------
subsidiary of Seller as tenant, of an Operating Lease(s); which is a single-
purpose entity with the sole purpose of leasing, managing, maintaining,
operating and performing other related functions for the Hotel.
7
<PAGE>
1.51. "Original Agreement" shall have the meaning given
------------------
such term in the recitals to this Agreement.
1.52. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.53. "Other Revenues" shall have the meaning given such
--------------
term in Section 12.1.
------------
1.54. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) the
Declaration of Condominium and related documents and restrictions, (d)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect use of the Property as a hotel as currently
operated and constructed; (e) UCC Financing Statements securing the purchase
price of FF&E under the FF&E Leases identified on Exhibit I; provided, however,
---------
that such liens shall be confined to the asset in question and the aggregate
principal amount of indebtedness secured by such liens shall not exceed the cost
of acquisition or construction of the property subject thereto; (f) such other
nonmonetary encumbrances with respect to the Property which are not objected to
by Purchaser in accordance with Section 3; and (g) such exceptions or matters,
---------
as the case may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.55. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.56. "Prime" shall have the meaning given such term in the
-----
recitals to this Agreement.
1.57. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.58. "Property" shall mean, all of the Seller's interest
--------
in the Real Property and in the FF&E, the Documents, the Improvements and the
Intangible Property relating to the Real Property.
1.59. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
1.60. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.61. "Purchase Price" shall have the meaning given such
--------------
term in Section 2.4.
-----------
8
<PAGE>
1.62. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.63. "Real Property" shall mean the real property
-------------
described in Exhibit B, together with all easements, rights of way, privileges,
---------
licenses and appurtenances which Seller may now own with respect thereto.
1.64. "REIT" shall have the meaning given such term in
----
Section 2.4.
- -----------
1.65. "Registration Rights Agreement" shall mean that
-----------------------------
certain Registration Rights Agreement, substantially in the form of Exhibit J,
---------
to be entered into by Purchaser, American General Hospitality Corporation and
Prime, as of the Closing Date.
1.66. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.67. "Room Revenues" shall have the meaning given such
-------------
term in Section 12.1.
------------
1.68. "Securities Act" shall have the meaning given such
--------------
term in Section 6.20.
------------
1.69. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.70. "Seller" shall have the meaning given such term in
------
the preamble to this Agreement
1.71. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.71 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.72. "Seller Subsidiary" shall have the meaning set forth
-----------------
in Section 13.1.
------------
9
<PAGE>
1.73. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on Exhibit
-------
K.
- -
1.74. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.75. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.76. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.77. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.78. "Title Company" shall mean, collectively, Chicago
-------------
Title Insurance Company and Commonwealth Land Title Insurance Company, each as a
50% co-insurers, or such other title insurance company or companies as shall
have been reasonably approved by Purchaser and Seller.
1.79. "Unit Component" shall have the meaning given such
--------------
term in Section 2.3.
-----------
1.80. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow
-------
Agent the sum of One Million Three Hundred Thirty-Eight Thousand Dollars
($1,338,000) (together with all interest accrued thereon, the "Deposit") in the
form of an unconditional, irrevocable letter of credit issued by Bank One,
Texas, N.A. (the "Letter of Credit"). The Letter of Credit shall be in the
----------------
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000), which amount
shall represent the Deposit as well as the deposits required pursuant to the
Other Agreements. The Deposit (and the Letter of Credit) shall be held pursuant
to, and disbursed according to, the terms of the Escrow Agreement.
Notwithstanding anything to the contrary contained in this Agreement, until the
Deposit is disbursed in accordance with the Escrow Agreement,
10
<PAGE>
this Agreement shall not terminate and shall remain in full force and effect to
the extent necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall
-------
be consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations under Section
--------- -------
4, unless such obligations shall have been waived by Purchaser and provided that
- -
such adjournent with respect to the Property shall not adjourn the Closing with
respect to any of the other Properties to be conveyed under the Other
Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Twenty Four
--------------
Million Six Hundred Ninety-Five Thousand Dollars ($24,695,000), allocated
Twenty-Two Million One Hundred Thousand Dollars ($22,100,000) to the Real
Property and Improvements and Two Million Five Hundred Ninety-Five Thousand
Dollars ($2,595,000) to the personal property including, without limitation, the
FF&E and the Intangible Property.
(b) A portion of the Purchase Price (plus or minus
adjustments and prorations as set forth in Section 12 hereof) shall be paid in
----------
LP Units in accordance with Section 2.4(c), and the remainder of the Purchase
--------------
Price shall be payable by wire transfer of immediately available federal funds
on the Closing Date to an account or accounts to be designated by Seller prior
to the Closing.
(c) Purchaser shall pay to Seller a portion of the Purchase
Price equal to Thirteen Million Eight Hundred Forty Thousand Seven Hundred
Dollars ($13,840,700) (the "Unit Component") in the form of Class B units of
--------------
limited partnership interest in Purchaser (the "LP Units"). Seller hereby
--------
designates Prime, parent of Seller, as the entity to receive the LP Units. The
cash equivalent of an LP Unit shall be equal to the average of the high and low
sales prices of the common stock of American General Hospitality Corporation
(the "REIT"), as reported in the Wall Street Journal, in the New York Stock
----
Exchange Composite Transaction Section during the ten (10) trading day period
immediately preceding the date hereof. Effective as of and subject to the
occurrence of the Closing, Prime, upon receiving LP Units, hereby subscribes for
and agrees to accept the issuance of the LP Units and to be bound by the terms
and conditions of that certain Amended and Restated Agreement of Limited
Partnership of American General Hospitality Operating
11
<PAGE>
Partnership, L.P. dated as of July 31, 1996, as amended by Amendment to the
Limited Partnership Agreement dated as of June 27, 1997 and as the same may be
amended from time to time in accordance with the terms of the LP Agreement (the
"LP Agreement"), a copy of which has been provided to Prime (and a true,
------------
complete and correct copy (including all amendments) of which shall be delivered
to Prime at the Closing), and to execute and deliver at the Closing such other
documents or instruments as may be required to effect the admission of Prime as
a limited partner in and to Purchaser, including signature pages to the LP
Agreement. Prime shall have the right to transfer the LP Units and to exchange
the LP Units for cash or, at the option of the REIT, common stock of the REIT
and sell or otherwise transfer such LP Units or common stock of the REIT, as the
case may be, in accordance with the terms of the LP Agreement, the Registration
Rights Agreement, the Exchange Rights Agreement and the Lock-Up Agreement, as
applicable. Any purported attempt to sell, transfer, assign or convey such
common stock or LP Units, as the case may be, other than in accordance with the
preceding agreements shall be null and void and of no effect. The provisions of
this Section 2.4(c) shall survive the Closing.
--------------
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring one or more Section 1031 exchanges, if so desired by Seller,
provided that such structuring shall not materially adversely affect Purchaser's
rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser
in connection with Purchaser complying with the terms of this Section 2.5 shall
-----------
be paid by Seller.
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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,
12
<PAGE>
specifications, permits, certificates of occupancy and other files that are
relevant to the management, ownership, operation, use, occupancy, construction
and leasing of the Hotel, as are in Seller's possession and control, and have
not been otherwise provided to Purchaser pursuant to this Agreement. Purchaser
agrees and acknowledges that it has investigated and/or received the opportunity
to investigate the Property to its satisfaction and that it is not relying on
any materials, statements, representations or warranties of any kind, other than
as specifically set forth in this Agreement, in purchasing the Property. To the
extent that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, has damaged or disturbed or does damage or
disturb any of the Real Property or the Improvements located thereon, Purchaser
shall return the same to substantially the same condition which existed
immediately prior to such damage or disturbance. In the event that the
transactions contemplated by this Agreement are not closed and consummated for
any reason, Purchaser shall deliver to Seller all tests, reports and inspections
of the Property made and conducted by Purchaser or for its benefit or any other
documents or information Purchaser has received pursuant to this Agreement.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all cost, expense, liability, loss or damage which Seller may incur as a
result of any act or omission of Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any gross negligence or
willful misconduct of Seller. The provisions of this Section 3.1(a) shall
-------------
survive the termination of this Agreement and the Closing.
(b) Seller has delivered 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, guaranties, indemnities and
claims for the benefit of Seller relating to the Hotel or any part thereof
which are still in effect;
(ii) Financial statements prepared in accordance
with generally accepted accounting principals, balance sheets, income
statements, general ledgers and budgets for the Hotel, for the current year to
date and each of the three (3) years prior to the year of this Agreement (the
"Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and
other patrons of the Hotel; management fees; maintenance,
13
<PAGE>
repairs and other expenses relating to the management and operation of the
Hotel; occupancy statistics for the Hotel for the current year to date and the
prior three (3) calendar years; and all capital expenditures made during the
aforementioned periods. To the extent that the Financial Statements provided
by Seller for the current year do not include any period up to and including
the Closing Date, Seller shall, within 25 days after the Closing Date, provide
Purchaser with monthly unaudited Financial Statements applicable to such
period inclusive of the Closing Date.
(iii) All of the most recent real estate and
personal property tax statements with respect to the Hotel and, to the extent
in Seller's possession or control or readily available without expense,
notices of appraised value for the Real Property and Improvements;
(iv) To the extent in Seller's possession or control
or readily obtainable without expense, all engineering and architectural
plans, drawings and specifications relating to the Hotel, as well as copies of
any environmental reports, boundary surveys, engineering reports and
subsurface studies affecting the Hotel. If the Hotel is purchased by
Purchaser, all such documents and information shall thereupon be and become
the property of Purchaser without payment of any additional consideration
therefor; provided, however, in the event that the Closing does not actually
occur, Purchaser shall return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) All notices received from governmental
authorities in connection with the Hotel;
(viii) A list of all current Hotel employees and
their salaries or wages and all employment benefits accompanied by copies of
their employment agreements and/or union contracts, if any;
(ix) All FF&E Leases;
(x) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
14
<PAGE>
(xi) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to the Hotel;
(xii) Any leases of adjacent land or facilities used
in connection with the operation of the Hotel;
(xiii) Seller's 1997 capital and operating budgets
and all materials relating to its marketing program; and
(xiv) The Condominium Declaration.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotel, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
complection of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Coopers & Lybrand, L.L.P., a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
15
<PAGE>
prompt written notice of any casualty or condemnation affecting the Property.
(b) If Purchaser timely gives notice to Seller that it
considers the Property a Defective Property, and Purchaser and Seller shall,
acting reasonably and in good faith, be unable or unwilling to agree (x) that
Seller shall, at its sole cost, attempt to remedy the applicable defect prior to
the Closing (in which event Seller shall have the right to adjourn the Closing
Date pursuant to the provisions of Section 3.7 for up to ninety (90) days for
-----------
such purpose), (y) that Purchaser shall, notwithstanding such defect, acquire
the Defective Property subject to a reduction in the Purchase Price, as
reasonably determined by Seller and Purchaser, sufficient to compensate
Purchaser for such defect, or (z) on the substitution of another property owned
by Seller for such Defective Property, this Agreement shall, at Purchaser's
option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the date of the Original Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to the Property, together with complete and legible copies of all instruments
and documents referred to as exceptions to title (collectively, the "Title
-----
Commitment"). Except as set forth on the Diligence Notice, Purchaser
- ----------
acknowledges and agrees that it does not have any other objections to any title
exceptions shown on the Commitment. Seller acknowledges and agrees that Seller
shall attempt to remedy the objections set forth in the Diligence Notice with
respect to the Property; Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.6 for up to ninety (90) days for such purpose. If Seller
-----------
shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
-----------
Agreement, and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notices by Purchaser. Failure of Purchaser to give such
notice shall be deemed an election by Purchaser to proceed in accordance with
clause (ii) above, and such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to take any
and all actions necessary to remove as a title exception (and shall not have the
aforesaid option to not cure) any mortgages, deeds of trust, judgments and other
liens of a monetary nature, as well as any liens or encumbrances created,
16
<PAGE>
permitted or suffered by Seller from and after the date of the Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect
------
to the Real Property (the "Survey") by a licensed surveyor in the jurisdiction
------
in which the Property is located, which (i) contains an accurate legal
description of the Property, (ii) shows the location, dimension and description
(including applicable recording information) of all utilities, easements,
encroachments and other physical matters affecting the Property, the number of
striped parking spaces located thereon and all building set-back lines, (iii)
states whether the Property is located within a 100-year flood plain and (iv) is
certified to Purchaser and the Title Company and such other persons as shall
have been requested by Purchaser or Seller. Except as set forth on the Diligence
Notice, Purchaser acknowledges and agrees that it does not have any other
objections to any matter shown on the Survey. Seller acknowledges and agrees
that Seller shall attempt to remedy the objections set forth in the Diligence
Notice with respect to the Survey; Seller shall have the right to adjourn the
Closing Date pursuant to Section 3.6 for up to ninety (90) days for such
-----------
purpose. If Seller shall be unable to remove any such survey defect to which
Purchaser has objected, Purchaser may elect (i) to terminate this Agreement and
this Agreement shall terminate and be of no further force or effect except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or fifth Business Day after Seller's notice of its inability to
cure such defect and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above
and such matter shall be a Permitted Encumbrance.
3.5. Additional Termination Option.
-----------------------------
If Purchaser shall elect, pursuant to any provision of this
Agreement or of the Other Agreements, to terminate any three or more of the
Other Agreements and/or this Agreement, then, together with such notice of
termination with respect to this Agreement or an Other Agreement which taken by
itself or together with any prior notices of termination would result in three
or more such terminations, Purchaser may, in such notice, or Seller may, within
10 Business Days of receipt of such notice of termination by written notice to
Purchaser, terminate this Agreement and simultaneously terminate the Other
Agreements and the Group Two Sale Agreement, in which event the Deposit shall be
returned to Purchaser and the parties to this Agreement shall have no further
obligations under this Agreement, the Other Agreements or the Group Two Sale
Agreement except as expressly provided in this Agreement, the Other Agreements
or the Group Two
17
<PAGE>
Sale Agreement. Notwithstanding the foregoing, if any provision in an Other
Agreement expressly provides that a termination thereof shall not be considered
for purposes of determining with respect to this Section 3.5 whether three such
-----------
terminations have occurred, such provision of the Other Agreement shall be
controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(h)), Franchisor Comfort Letters (as
---------------
required by Section 4.1(j) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the other Properties to be conveyed under the Other
Agreements until such Estoppel Certificates, Franchisor Comfort Letters or
consents are obtained provided such adjournment shall not be longer than ninety
(90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the Property is located in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of
18
<PAGE>
Seller's right, title and interest in, to and under the FF&E, the Documents and
the Intangible Property with respect to the Property;
(c) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(d) Duly executed transfer tax forms, as required by
applicable law;
(e) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(f) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(g) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(h) Duly executed Estoppel Certificates from the Condominium
Association and the franchisor under the Franchise Agreement; provided that any
such Estoppel Certificate shall be provided to Purchaser prior to Closing
promptly following receipt by Seller of the same;
(i) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(j) Franchisor Comfort Letters;
(k) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel;
(l) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(m) A duly executed original counterpart of the Registration
Rights Agreement;
(n) A duly executed original counterpart of the Exchange
Rights Agreement;
19
<PAGE>
(o) A duly executed original counterpart of the Lock-Up
Agreement;
(p) Signature pages to the LP Agreement reflecting the
admission of Prime as a limited partner of Purchaser as holder of the LP Units;
(q) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller and
Prime;
(r) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code;
(s) A resignation from the Person(s) who represents Seller on
the board of directors of the Condominium Association; and
(t) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to each state in which the Property is located
and (i) a current letter of non-applicability, (ii) a negative declaration or
(iii) a no further action letter.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
20
<PAGE>
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller and Prime, the due execution and delivery of this Agreement, the
Operating Lease, the Registration Rights Agreement, the Exchange Rights
Agreement and the Lock-Up Agreement, having the customary and reasonable
assumptions and qualifications, and such other matters with respect to the
transactions contemplated by this Agreement or the Operating Lease as the
Purchaser may reasonably require. Seller and Purchaser shall agree upon local
counsel for the jurisdiction in which the Property is located to provide an
appropriate jurisdiction-specific opinion, the cost of which local counsel will
be shared equally by Seller and Purchaser. An opinion from in-house counsel to
Seller shall satisfy this Section 4.4 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the Condominium Association, if required; (c) the
consent of the franchisor, if required; (d) the consent of the ground lessor
under that certain Lease dated June 29, 1973 (as amended, the "Armonk Lease")
------------
for premises located in Armonk, New York to the transactions contemplated by the
Group Two Sale Agreement; and (e) a modification of such Armonk Lease to extend
the initial term thereof such that at the closing of such property there shall
be at least thirty (30) years of the initial term remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
21
<PAGE>
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of which may be waived by Seller in its sole and
absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
------------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 (including, without limitation, the
-----------
Registration Rights Agreement) where applicable;
(b) Certified copies of all charter documents, partnership
agreements (including a true and correct copy of the LP Agreement), applicable
resolutions and certificates of incumbency with respect to Purchaser and its
general partner;
(c) Duly executed and acknowledged counterpart to and
signature pages of the LP Agreement with a new Exhibit A referencing Prime as a
limited partner of the Purchaser as holder of the LP Units;
(d) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller, Prime or the Title Company may
reasonably require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller and Prime shall have
------------------
received a written opinion from counsel to Purchaser regarding the organization
and authority of Purchaser and the REIT, the due execution and delivery of this
Agreement, the Operating Lease, the Registration Rights Agreement and the
Exchange Rights Agreement, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for the jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and
22
<PAGE>
Purchaser. An opinion from in-house counsel to Purchaser shall satisfy this
Section 5.3 with respect to all matters which customarily do not require a local
- -----------
counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) the consent of the Condominium
------------
Association, if required; (c) the consents of the franchisor, if required; (d)
the consent of the ground lessor under the Armonk Lease to the transactions
contemplated by the Group Two Sale Agreement; and (e) a modification of such
Armonk Lease to extend the initial term thereof such that at the closing of such
property there shall be at least thirty (30) years of the initial term
remaining.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default under Group Two Sale Agreement. Purchaser
--------------------------------------
shall not be in default, or have committed an act or failed to perform an act
which, with the giving of notice, the passage of time or both, will become a
default under, the Group Two Sale Agreement.
5.7. Amendment to LP Agreement. Purchaser shall have taken
-------------------------
all actions necessary to admit Prime as a limited partner to Purchaser, with
full rights related thereto, in accordance with Article 12 of the LP Agreement.
5.8. Default under Other Agreements. Purchaser shall not
------------------------------
be in default, or have committed an act or failed to perform an act which, with
the giving of notice, the passage of time or both, will become a default under,
any of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate; provided, however,
except with respect to the failure of the conditions set forth in Section 5.1,
-----------
Section 5.6, Section 5.7 and Section 5.8 (which shall be a default under this
- ----------- ----------- -----------
Agreement), such failure of a condition shall not be a default under this
Agreement.
SECTION 6. REPRESENTATIONS OF SELLER
To induce Purchaser to enter into this Agreement, Seller or Prime, as set forth
below, represents to Purchaser as follows:
23
<PAGE>
6.1. Status and Authority of Seller. Seller is a
------------------------------
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
----------------
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by Seller on
or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller, as the case may be, enforceable
against Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
6.4. Litigation. Seller has not received any written
----------
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Operating Lease
or any action taken or to be taken pursuant hereto, (b) will result in any
material adverse change in the business, operation, affairs or condition of the
Property, (c) will result in or subject the Property to a material liability, or
(d) involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space
24
<PAGE>
Leases provided or made available to Purchaser not later than December 15, 1997
are full and complete copies of said Space Leases and, to Seller's knowledge,
are valid, in full force and effect and no party has breached any material
condition or provision thereof. No tenant under any Lease has prepaid rent or
additional rent or any other items under the Space Leases for more than one (1)
month in advance and there are no security deposits held by Seller under any of
the Space Leases other than as set forth on Exhibit K.
---------
6.6. Franchise Agreement. The Franchise Agreement listed
--------------------
on Exhibit D is the sole franchise agreement affecting the Property as of the
---------
date hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is a true and complete copy of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.7. Declaration of Condominium. The copy of the
--------------------------
Declaration of Condominium provided or made available to Purchaser not later
than December 1, 1997, is a true and complete copy of said Declaration of
Condominium and, to Seller's knowledge, is valid, in full force and effect and
no party has breached any material condition or provision thereof.
6.8. Contracts. The copies of the Contracts provided or
---------
made available to Purchaser not later December 1, 1997 are true and complete
copies of said Contracts and, to Seller's knowledge, are valid, in full force
and effect and no party has breached any material condition or provision
thereof.
6.9. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.10. Not A Foreign Person. Seller is not a "foreign
--------------------
person" within the meaning of Section 1445 of the Code.
6.11. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
25
<PAGE>
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.12. Insurance. Seller has not received any written
---------
notice from any insurance carrier of defects or inadequacies in the Property
which, if uncorrected, would result in a termination of insurance coverage or a
material increase in the premiums charged therefor.
6.13. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.14. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.15. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.16. Trademarks. Seller has received no written notice
----------
that the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.17. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.18. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.19. Securities Law.
--------------
(a) Prime understands that an investment in the LP Units
involves risks. Prime, by reason of its business and financial experience,
together with the business and financial experience of those persons, if any,
retained by it to represent or advise it with respect to its investment in LP
Units, (i) has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that it is
capable of evaluating the merits and risks of and of making an informed
investment decision with respect to an investment in LP Units, (ii) is capable
of protecting its own interests or has engaged representatives or advisors to
assist it in protecting its interests and (iii) is capable of bearing the
economic risk of such investment including the loss of its entire
26
<PAGE>
investment. Prime is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). If Prime has retained or retains a person to represent or
--------------
advise it with respect to its investment in LP Units, Prime will advise
Purchaser of such retention and, at Purchaser's request, Prime shall, prior to
or at the Closing, (i) acknowledge in writing such representation and (ii) cause
such representative or advisor to deliver a certificate to Purchaser and the
REIT containing such representations as may be reasonably requested by Purchaser
and the REIT.
(b) Prime understands that an investment in Purchaser
involves substantial risks. It has been given the opportunity to make a thorough
investigation of Purchaser and has been furnished with materials relating to
Purchaser and its activities including material books, records and all material
contracts and documents. It has been afforded the opportunity to obtain any
additional information requested by it. It has had an opportunity to ask
questions of and receive answers from representatives of Purchaser concerning
Purchaser and the REIT and its activities and the terms and conditions of an
investment in LP Units.
(c) Prime further understands the following:
(i) In making an investment decision, Prime must
rely on its own examination of the REIT and Purchaser and the terms of this
offering, including the merits and risks involved. The LP Units offered hereby
have not been recommended by any federal or state securities commission or
regulatory authority. Any representation to the contrary is a criminal offense.
(ii) The LP Units offered hereby are subject to
restrictions on transferability and resale and may not be transferred or resold
except as permitted under the Securities Act and the applicable state securities
laws, pursuant to registration or exemption therefrom. Prime should be aware
that it will be required to bear the financial risks of this investment for an
indefinite period of time.
(d) The LP Units to be issued to Prime at the Closing will
be acquired by Prime for its own account, for investment only and not with a
view to, or with any intention of, a distribution or resale thereof, in whole or
in part, or the grant of any participation therein. Prime was not formed for the
specific purpose of acquiring an interest in the Purchaser.
(e) Prime acknowledges that (i) the LP Units to be issued to
it at the Closing have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws, (ii)
the REIT's and Purchaser's reliance on such exemptions is predicated in part on
the accuracy and completeness of the representations and
27
<PAGE>
warranties of Prime contained in this section, (iii) the LP Units to be issued
to Prime at the Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state securities laws, or
unless an exemption from registration is available, (iv) there is no public
market for such LP Units, (v) neither Purchaser nor any person acting on its
behalf offered or sold LP Units to Prime by any form of general solicitation or
advertising including, but not limited to, communication via newspapers,
magazines, television, radio, or any seminar or meeting organized through
general solicitation or general advertising, or to Prime's knowledge, by any
form of general solicitation, and (vi) neither the REIT nor Purchaser has any
obligation or intention to register such LP Units under the Securities Act or
any state securities laws or to take any action that would make available any
exemption from the registration requirements of such laws, except as provided in
the Exchange Rights Agreement and the Registration Rights Agreement. Prime
hereby acknowledges that it may have to bear the economic risk of the investment
commitment evidenced by this Agreement and any LP Units issued hereunder for an
indefinite period of time, although (x) subject to the Lock-Up Agreement and
under the terms of the LP Agreement and Exchange Rights Agreement, LP Units will
be exchangeable, at the request of the holder thereof, for cash or, at the
option of the REIT, common stock of the REIT, and (y) subject to the Lock-Up
Agreement, the holder of any such Common Stock issued upon exchange of LP Units
will be afforded certain rights to have such Common Stock registered under the
Securities Act and applicable state securities laws pursuant to the Registration
Rights Agreement.
(f) Prime's principal place of business is 700 Route 46
East, Fairfield, NJ 07007-2700 and it has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such residence or principal place of business is located.
(g) Prime acknowledges that it will be provided, upon
request, with all Forms 10K and 10Q filed by the REIT with the SEC.
(h) Prime agrees that it will not sell or otherwise transfer
the LP Units unless the LP Units are registered under the Securities Act or
unless an exemption from such registration is available.
6.20. Holder of Liquor License. The holder of the Liquor
------------------------
License for the Property is Mahwah Holding Corp., a Delaware corporation.
The representations made in this Agreement by Seller and Prime shall be deemed
remade by Seller and Prime as of the Closing Date with the same force and effect
as if made on, and as of, such date; provided, however, that, Seller shall have
the right, from time to time prior to the Closing Date, to modify the
28
<PAGE>
representations as necessary to conform to factual changes by notice to
Purchaser. If a Seller representation or warranty thereby is modified to an
extent that the representation or warranty is materially and adversely different
than that made upon execution of this Agreement, then Purchaser may terminate
this Agreement, provided notice of such termination is given to Seller within
ten (10) Business Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.20 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller or Prime, as applicable, written notice of
a breach thereof within the Survival Period (but in any event promptly after
learning of such breach) specifying in sufficient detail the facts constituting
such alleged breach and the loss then reasonably ascertainable as a consequence
thereof, and an opportunity to cure such breach within a reasonable period of
time after Purchaser having learned of such breach. Notwithstanding any
provision to the contrary set forth in this Agreement, Purchaser shall have no
claim against Seller or Prime and Seller and Prime shall have no liability to
Purchaser, in the event of a breach of any of Seller's and/or Prime's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to
Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property, pest control matters,
soil conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information pertaining to the Property or the
market and physical environments in which they are located. Purchaser
acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than those specifically set forth in this Agreement or in any
document to be delivered to Purchaser at the Closing made by Seller and Prime.
Purchaser further acknowledges that it has not received from or on behalf of
Seller or Prime any accounting, tax, legal, architectural, engineering, property
management or other advice
29
<PAGE>
with respect to this transaction and is relying solely upon the advice of third
party accounting, tax, legal, architectural, engineering, property management
and other advisors. Subject to the provisions of this Agreement, Purchaser shall
purchase the Property in its "as is" condition on the Closing Date.
SECTION 7. REPRESENTATIONS OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all
-------------------
necessary action to authorize the execution, delivery and performance of its
obligations under this Agreement and the Operating Lease, and upon the execution
and delivery of any document to be delivered by Purchaser on or prior to the
Closing Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the issuance, sale and
------------
delivery by Purchaser of the LP Units, the execution, delivery
30
<PAGE>
and performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or LP Agreement, as the case may be, of the
Purchaser; any indenture, mortgage, deed of trust, loan agreement, note, lease
or other agreement or instrument to which Purchaser or the REIT is a party or to
which they, either of them, any of their respective properties or other assets
is subject; or any applicable material statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to Purchaser
or the REIT.
7.6. LP Units and the Partnership. As of the date hereof
----------------------------
and as of the Closing Date, (i) AGH GP, Inc., a Nevada corporation is the sole
general partner of the Purchaser, and (ii) the LP Agreement is in full force and
effect, (iii) AGH GP, Inc. is not in default under the LP Agreement and has not
given or received any written notice or claim of default under the LP Agreement,
(iv) to Purchaser's knowledge, no other party to the LP Agreement is in default
under the LP Agreement in any material respect and, to the Purchaser's
knowledge, no other party to the LP Agreement has given or received any written
notice or claim of default under the LP Agreement. As of the Closing Date, the
LP Units issued to Seller in partial payment of the Purchase Price shall be (i)
validly authorized and issued in compliance with the LP Agreement and in
compliance in all material respects with all applicable federal and state
securities laws and (ii) free and clear of all liens, security interests,
rights, claims, pledges, mortgages, options, rights and other encumbrances.
Purchaser has furnished to Seller a true, correct and complete copy of the LP
Agreement and all modifications, amendments and supplements thereof as of the
date hereof. Except as disclosed in the SEC Documents as of the date hereof or
as issued in connection with the acquisition of, and as consideration for, real
estate assets acquired or proposed to be acquired by the Purchaser or its
Affiliates, or as set forth in the LP Agreement, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or to otherwise acquire any partnership or other
interest in, to or under Purchaser (including, without limitation, any
securities or obligations of any kind convertible into any partnership interest
or other equity interest or profit participation of any kind in Purchaser).
7.7. REIT Status. The REIT is a "qualified real estate
-----------
investment trust" as defined in Section 856 of the Code.
7.8. REIT Filings. Since the completion of the REIT's
------------
initial public offering on July 31, 1996, the REIT has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of Section 13 of the Exchange Act
(all of the foregoing filed with the SEC being hereinafter referred to as
31
<PAGE>
the "Exchange Act Documents"). As of their respective dates, the Exchange Act
----------------------
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Exchange Act Documents, and none of the Exchange Act
Documents (when read together with all exhibits included therein and financial
statement schedules thereto and documents (other than exhibits) incorporated by
reference) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.8 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original
32
<PAGE>
Agreement and continuing until the Closing Date (or as otherwise set forth
below):
(a) Upon learning of any material change in any condition
with respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate the
Property, under the Franchise Agreement, in a good and businesslike fashion
consistent with its past practices (which Seller believes to be in compliance
with the Franchise Agreement) and to cause the Property to be maintained in good
working order and condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property.
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases or the Franchise Agreement, other than those modifications,
renewals or extensions required by the terms of the applicable document, or
enter into any other leases, agreements, mortgages or other loan documents or
other commitments relating to the Property or the operation of the Hotel other
than in the normal course of business and which are by their terms terminable
without penalty upon not more than thirty (30) days notice.
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the Hotel as of the Closing Date shall remain the employees of Seller after
the Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser
from and against any and all liability, cost, damages and expenses arising from
or relating to the
33
<PAGE>
failure of Seller to comply with this Section 8.1(e). The provisions of this
--------------
Section 8.1(e) shall survive the Closing.
- --------------
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement, in a fashion
consistent with its past practice (which Seller believes to be in compliance
with such Liquor License and Franchise Agreement); (vi) maintaining supplies and
personalty consistent with the prior operations of Seller; (vii) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (viii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (viii) shall survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases the Franchise Agreement, the Liquor
License, the Contracts and the Condominium Declaration for the Hotel, and all
other applicable contractual arrangements relating to the Hotel consistent with
Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts, Space Leases, or the Condominium
Declaration, without Purchaser's prior written consent, except that the 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
34
<PAGE>
more than thirty (30) days prior notice without cost or expense. Any such new
agreement or renewal or extension of existing agreements to which Purchaser's
consent was not obtained, whether or not such consent is required under this
Section 8.1(i) shall subject the applicable agreement to Purchaser's review
- --------------
under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and any consents and
approvals necessary for the transaction contemplated by this Agreement at least
one week prior to the Closing; to continue to use reasonable, good faith efforts
to obtain such items thereafter; to promptly inform Purchaser of any issues or
problems which Seller foresees in obtaining any such items; and to deliver each
such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
8.2. Covenants of Purchaser. Purchaser hereby covenants
----------------------
with Seller:
(a) For such time in which Prime is subject to the terms of
the Lock-Up Agreement, Purchaser shall cause the REIT to maintain its status as
a "qualified real estate investment trust" as defined in Section 856 of the Code
and to comply in all
35
<PAGE>
material respects with all requirements for filings and otherwise of the
Exchange Act and the Securities Act. The provisions of this Section 8.2(a) shall
--------------
survive the Closing.
(b) Purchaser or any Person representing Purchaser on the
Board of Trustees of the Condominium Association shall at all times vote in a
manner it deems appropriate and consistent with Purchaser's interest in the
Property, provided that the Operating Lessee shall have the right to pre-approve
the vote of Purchaser or its representative, as applicable, which pre-approval
shall not be unreasonably withheld or delayed, with respect to any assessments
being considered by said Board of Trustees for items of an extraordinary nature
which would materially impact the Operating Lessee's obligations to operate and
maintain the Property under the Operating Lease. The provisions of this Section
-------
8.2(b) shall survive the Closing.
- ------
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay
-------------
its own expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any legal and accounting
fees, inspection fees, and the costs and expenses of preparing engineering and
environment reports, market studies and appraisals, whether or not the
transactions contemplated hereby are consummated. The cost of the Survey, Title
Commitment (and the policies and endorsements issued pursuant thereto), all
state and local sales, transfer, excise, value-added or other similar taxes, all
recording and filing fees that may be imposed by reason of the sale, transfer,
assignment and delivery of the Property shall be shared equally by Seller and
Purchaser. As between Purchaser and Seller, the cost of seeking consents
including, without limitation, any transfer or assumption fees incurred in
connection therewith, Franchisor Comfort Letters and Estoppel Certificates
and/or the approval of the Condominium Association shall be borne solely by
Seller.
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller or Prime shall have
-----------------
made any representation herein which shall be untrue or misleading in any
material respect (subject to the right to cure in Section 6), or if Seller or
---------
Prime (to the extent applicable) shall fail to perform any of the material
covenants and agreements contained herein to be performed by Seller and such
failure continues for a period of ten (10) days after notice thereof from
Purchaser, Purchaser, as its sole and exclusive remedy, may terminate this
Agreement, in which event the Deposit shall be returned to Purchaser and Seller
or Prime, whichever has so defaulted hereunder, shall be obligated to pay
Purchaser One Million Three Hundred Thirty-Eight Thousand Dollars ($1,338,000)
as liquidated damages and not as a penalty (the "Liquidated Damages"). Purchaser
------------------
and Seller and Prime acknowledge that the damages which may be incurred by
Purchaser in the event of
36
<PAGE>
Seller's or Prime's default are difficult to quantify as of the date of this
Agreement; the Liquidated Damages represent the parties reasonable estimate of
Purchaser's probable future damages in the event of Seller's or Prime's default
and the Liquidated Damages represent fair and reasonable compensation to
Purchaser in the event of Seller's or Prime's default. Except with respect to
the Liquidated Damages, Purchaser hereby waives any and all rights it may have
to sue Seller or Prime for money damages in connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made
--------------------
any representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller or Prime, if appropriate, an amount equal to the Liquidated Damages, as
liquidated damages and not as a penalty. The Deposit shall be retained by Seller
and offset against the Liquidated Damages. Purchaser and Seller and Prime
acknowledge that the damages which may be incurred by Seller in the event of
Purchaser's default are difficult to quantify as of the date of this Agreement;
the Liquidated Damages represent the parties reasonable estimate of Seller's or
Prime's probable future damages in the event of Purchaser's default and the
Liquidated Damages represent fair and reasonable compensation to Seller or Prime
in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.
11.1. Liquor License. Seller currently holds the Liquor
--------------
License for the Hotel and if, in compliance with all applicable laws, statutes,
rules, regulations and ordinances, Seller may continue to hold such Liquor
License following the Closing, Seller shall maintain the Liquor License and
Purchaser shall not interfere with the maintenance of the Liquor License. If
Seller may not continue to hold the Liquor License following the Closing or if
the existing Liquor License needs to be revised to reflect the Purchaser as
owner of the Property, then Seller shall apply for a new or modified Liquor
License or, if advised by local counsel to be required under local laws,
regulations or orders, Purchaser or its designee shall apply for a liquor
license for the Hotel, at Seller's sole cost and expense, promptly after
Closing. Seller and Purchaser shall cooperate to obtain a liquor license for the
Hotel or modifications to the existing Liquor License or to maintain the
existing Liquor License in effect. Until such time as such new or modified
liquor license is obtained, Seller shall take all steps reasonably necessary to
enable the current Liquor License to be used by the Hotel and to permit the
uninterrupted sale and
37
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service of alcoholic beverages at the Hotel. The provisions of this Section 11.1
------------
shall survive the Closing.
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or the consents of
the franchisor, after using commercially reasonable, good faith efforts to do so
in accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters, such
consents or otherwise in connection with the transaction contemplated by this
Purchase Agreement shall be limited to the first One Hundred Thousand Dollars
($100,000) of the collective administrative fees required by the franchisor and
by any franchisor in connection with the transactions contemplated by the Other
Agreements and one-half of all amounts in excess thereof, and Purchaser hereby
covenants and agrees to pay the other one-half of such administrative fees in
excess of One Hundred Thousand Dollars ($100,000). In no event shall the
requirement of payment of administrative fees constitute a reason for Purchaser
to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in good
faith to an adjustment of the rent payable pursuant to the Operating Lease for
the Property, based on the terms and conditions of the new franchise agreement
and its anticipated effect on Gross Revenues (as defined in the Operating
Lease).
(d) Notwithstanding anything to the contrary contained
herein (including without limitation subparagraph (b) above), if in connection
with the transaction contemplated by this Agreement or the obtaining of the
Franchisor Comfort Letters or franchisor consents, the franchisor requires any
capital improvement to be
38
<PAGE>
made at the Property (hereinafter, a "PIP"), Purchaser shall be solely
responsible for the cost and expense of the same. In no event shall the
requirement of a PIP constitute a reason for Purchaser to fail to close on the
Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause
(i) of subparagraph (a) above, the license shall automatically terminate,
without the need of notice from Seller, and Purchaser shall have no further
right to use the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS
12.1. Matters to be Adjusted or Prorated. To the extent
----------------------------------
then capable of being calculated or estimated, on the Closing Date (the
"Prorations Settlement"), and otherwise within 30 days after the Closing Date,
---------------------
the following items shall be apportioned as of the Cut-Off Time with respect to
the Property
39
<PAGE>
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based
on the rates and assessed valuation applicable in the current fiscal tax year,
or if not established for such year, the latest fiscal year for which assessed.
(In the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer,
water, gas, electricity, telephone and other utility services for which final
bills have not been rendered as of the Closing Date. Seller shall exercise
reasonable efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive
of Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on
-------------
the Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking services, revenues from any "mini-bars" located in
the Hotel rooms and all other revenues (the "Other Revenues"), provided that
--------------
Other Revenues arising from the sale of food and beverages in restaurants and
bars which do not remain open the entire Cut-Off Night shall be apportioned as
of the last hour at which the applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar
taxes (excluding in any event income, franchise and real
40
<PAGE>
property taxes) collected with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreement, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j) it is the intent of Seller
and Purchaser that all income and expenses relating to the Property shall be
prorated as provided in this Section 12 such that Seller shall have the benefit
----------
of all income and be responsible for all expenses and liabilities incurred in
connection with the Property fairly allocable to the period prior to the Closing
Date and that Operating Lessee under the Operating Lease at the Property shall
have the benefit of all income and be responsible for all expenses and
liabilities of the Property relating to the period from and after the Closing
Date. With respect to the prorations and Adjustments set forth in subparagraph
(a), of this Section 12.1, the cash portion of the Purchase Price shall be
------------
adjusted based on the prorations between Seller and Purchaser with respect to
such subparagraph.
12.2. Certiorari Proceeding. Any refunds with respect to
----------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to the current tax year or
could affect the taxes due for a subsequent tax year and Purchaser shall have
the right to participate in and approve tax settlements of such certiori
proceedings which relate to the current tax year, which settlements shall not be
effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION.
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no
41
<PAGE>
longer manages the Property (the "Restricted Period") on any and all Full
-----------------
Service Hotels owned as of the date of this Agreement or acquired or constructed
during the Restricted Period by (A) Seller or (B) any of Seller's wholly-owned
subsidiaries or any other Person for which Seller may direct the sale of such
Person's assets, whether through voting securities or by contract or otherwise
(a "Seller Subsidiary"), on the terms and conditions set forth in this Section
----------------- -------
13.1. If during the Restricted Period, Seller or a Seller Subsidiary shall
- ----
receive a bona fide offer (the "Offer") from an unaffiliated third party to
-----
purchase one or more of its Full Service Hotels and such Offer contains a price
and terms acceptable to Seller or the Seller Subsidiary, as applicable, then
Seller (x) shall notify Purchaser in writing promptly after the receipt of the
Offer, such notice to be accompanied by a copy of the Offer, and (y) as promptly
as possible, shall provide copies of, or reasonable access to, due diligence
materials in Seller's possession, custody or control relating to such Full
Service Hotels (including historical occupancy and Rev PAR information, title
policies, title commitments and copies of documents referenced therein, surveys,
environmental audits, zoning reports, engineering reports, appraisals, budgets
and other similar materials, all to the extent in Seller's possession or
control). By its delivery of such due diligence materials, Seller shall not be
warranting or guaranteeing the accuracy of such information (though Seller shall
not deliver any information which it knows to be untrue or misleading), it being
agreed that Purchaser shall be responsible for making an independent
investigation and determination with respect to such information. Within ten
(10) Business Days after the receipt of Seller's notice and the documents
referred to in clause (y) of this Section 13.1, Purchaser shall notify Seller
and the Seller Subsidiary in writing whether Purchaser desires to purchase the
applicable Full Service Hotel at the price and on the terms set forth in the
Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above, Purchaser shall be
deemed conclusively to have elected not to purchase the Full Service Hotel. In
such event or if Purchaser elects not to purchase the Full Service Hotel, Seller
or the Seller Subsidiary shall have the right to transfer the Full Service Hotel
covered by the Offer to the party making the Offer, substantially in accordance
with the terms of the Offer and without material modifications beneficial to
said third party purchaser, without any further notice to Purchaser. If,
however, Seller or the Seller Subsidiary and such third party purchaser
thereafter agree to terms for such purchase which are materially different from
those provided in the Offer and beneficial to the third party purchaser, then
Purchaser's right of first refusal under this Section 13.1 shall be renewed with
------------
respect to such Full Service Hotel, on the terms of the Offer as so modified. If
the sale of a Full Service Hotel is consummated with a third party, provided
that Seller shall have complied with the requirements of this Section 13.1, this
------------
Section 13.1 shall no
42
<PAGE>
longer be applicable with respect to such Full Service Hotel simultaneously with
the sale. The exercise or non-exercise by Purchaser of the right to purchase a
Full Service Hotel does not affect Purchaser's continuing right of first refusal
with respect to any other Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any of the Properties for which Purchaser has terminated this
Agreement or any of the Other Agreements, as applicable, or which has been
elimiated from the Group Two Sale Agreement (unless the problem which Purchaser
identified in the applicable notice of termination has been remedied in full),
and Seller may sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
------------
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St Thomas and known as "Frenchman's Reef" and Purchaser may sell that
property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
43
<PAGE>
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed,
detailed plans and specifications for the construction of the Proposed
AmeriSuites Hotel;
(ii) a schedule for the estimated costs of
construction prepared jointly by the contractor engaged to perform the work and
Seller; a construction schedule setting forth the target commencement date,
substantial completion date and final completion date for the construction of
the Projected AmeriSuites Hotel and the dates for completion of the various
phases of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months after
opening and for periods thereafter, to the extent then developed;
(iv) historical occupancy and Rev Par information
for the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed
AmeriSuites Hotel;
(viii) any environmental or engineering reports
prepared in connection with the Proposed AmeriSuites Hotel; and
44
<PAGE>
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction Costs,
if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of Acquisition
Costs, if Seller acquires an existing Proposed AmeriSuites Hotel; provided,
however, that if Seller is able to assign to Purchaser any contract of sale
between Seller and an owner of a Proposed AmeriSuites Hotel, without penalty,
consent or a requirement of Seller's continuing liability thereafter, then
Purchaser, in its sole discretion, may accept such assignment and pay to Seller
in lieu of the purchase price described in this subparagraph (i), an amount
equal to the sum of (A) any deposits made by Seller under the contract of sale,
(B) any reasonable costs or expenses incurred by Seller as of the date of the
assignment and (c) an amount equal to that which, absent the assignment to
Purchaser, would have been five percent (5%) of Acquisition Costs or
Construction Costs, as appropriate;
(ii) Within three (3) Business Days after providing
its notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of the
purchase price, which deposit, at Purchaser's election, may be in the form of a
letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites brand
------------
hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
45
<PAGE>
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit E-1;
-----------
and
(v) If Seller constructs the Proposed AmeriSuites
Hotel, the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the Proposed
AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel does not affect Purchaser's continuing rights under this
Section 13.3 with respect to any other Proposed AmeriSuites Hotels.
- ------------
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those
46
<PAGE>
certain AmeriSuites hotels located at (i) Shelton, CT, (ii) Secaucus, NJ, (iii)
Princeton, NJ and (iv) Las Vegas, NV, and Seller may own, operate and/or
construct such AmeriSuites hotels without regard to this Agreement.
13.4. Multi-Property Exception. Notwithstanding anything
------------------------
to the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
----------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding
----------
solely on Seller and Seller Subsidiaries and not on other of Seller's Affiliates
or their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
(b) When applicable pursuant to Section 13.1 or Section
------------ -------
13.3, Seller or a Seller Subsidiary, as applicable, and Purchaser or its
- ----
Affiliate, as applicable, shall use reasonable, good faith efforts to agree upon
the terms of the contract of sale which shall incorporate the terms of this
Agreement to the extent consistent with the Offer or the provisions of Section
-------
13.3, as applicable, provided that the provisions relating to payment of a
- ----
portion of the purchase price in LP Units and the provisions of this Section 13
----------
shall not be included in such a contract of sale. If Seller or a Seller
Subsidiary and Purchaser or its Affiliate shall be unable to agree on the terms
thereof within ten (10) Business Days after Seller's receipt of
47
<PAGE>
Purchaser's election to purchase, the parties shall submit such issue to binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
----------
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
(i) Notwithstanding anything to the contrary contained in
this Agreement, Seller retains the unrestricted right to continue to grant
franchise agreements for "AmeriSuites" hotels to unaffiliated third-parties. So
long as such franchisees are not Seller Affiliates, the provisions of this
Section 13 shall be inapplicable with respect thereto.
- ----------
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS.
48
<PAGE>
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases, the Declaration of Condominium
or Contracts and relating to periods prior to the Closing or (y) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with the Property or
any portion thereof at any time or times prior to the Closing or (z) all
accounts payable and sales taxes due for or on account of the period prior to
Closing, and (ii) Purchaser shall indemnify and hold harmless Seller from and
against any and all obligations, claims, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and disbursements) arising out of (x) the Contracts, the Space Leases, or
the Declaration of Condominium relating to periods on or after the Closing, or
(y) any damage to property of others or injury to or death of any person or any
claims for any debts or obligations occurring on or about the Property or any
portion thereof at any time or times on or after the Closing or (z) sales taxes
due for or on account of the period from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of
a claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this
49
<PAGE>
Section 14.1 shall survive the Closing and the termination of this Agreement.
- ------------
14.2. Brokerage Commissions. Each of the parties hereto
----------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof. The provisions of this Section 14.3 shall
------------
survive the Closing or earlier termination of this Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential,
50
<PAGE>
including without limitation any oral and written information concerning the
Seller and the Hotel (collectively, the "Due Diligence Material"), provided that
----------------------
the parties to this Agreement may disclose such information and documents to
their respective legal counsel, accountants, employees (to the extent an
employee's services are requested in connection with this Agreement), lenders
and their counsel, brokers, boards of directors, any hotel franchisors, any
marketing company employed to do feasibility studies or any investment banking,
environmental or engineering consultants retained in connection with the
proposed transaction, subject to this confidentiality provision. If the purchase
and sale contemplated by this Agreement is not consummated for any reason
whatever, each party to this Agreement shall as soon as reasonably practicable,
return all such information and documents (and any copies thereof in such
parties' possession) to the other party. Purchaser and Seller each hereby agree
to indemnify and hold harmless the other from and against any and all claims,
demands, suits, causes of action, judgments, damages, losses, fines, penalties,
costs and expenses, including without limitation reasonable attorneys' fees and
disbursements relating to the a breach by such indemnifying party (or its
directors, officers, shareholders, partners, members, agents, employees or any
independent contractors retained by it) of any of the covenants to be performed
by such party contained in this Section 14.4. Notwithstanding anything to the
------------
contrary contained in this Agreement, the provisions of this Section 14.4 shall
------------
survive the Closing for a period of two (2) years. With respect to the indemnity
obligations or any breach of this Section 14.4, the provisions of Section 10
------------ ----------
shall not apply and the indemnified party may seek damages in a court of law or
exercise any other remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands,
-------
consents, approvals, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given if in writing
and the same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar expedited
commercial carrier, addressed to the recipient of the notice, postpaid and
registered or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier).
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(b) All such notices shall be addressed,
51
<PAGE>
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(c) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant,
52
<PAGE>
representation or warranty contained herein, in any one instance, shall not
operate as or be deemed to be or construed as a further or continuing waiver of
any other breach of such term, condition, covenant, representation or warranty
or any other term, condition, covenant, representation or warranty, nor shall
any failure at any time or times to enforce or require performance of any
provision hereof operate as a waiver of or affect in any manner such party's
right at a later time to enforce or require performance of such provision or any
other provision hereof. This Agreement may not be amended, nor shall any waiver,
change, modification, consent or discharge be effected, except by an instrument
in writing executed by or on behalf of the party against whom enforcement of any
amendment, waiver, change, modification, consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as
----------------------------------
otherwise expressly set forth in this Agreement, this Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties; provided, however, that (a) Purchaser
shall have the right to designate an Affiliate(s) of Purchaser to receive record
title to the Property, (b) Seller shall have the right to designate an Affiliate
of Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
14.8. Severability. If any provision of this Agreement
------------
shall be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the
53
<PAGE>
entire agreement of the parties hereto with respect to the subject matter hereof
and shall supersede and take the place of any other instruments purporting to be
an agreement of the parties hereto relating to the subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date
----------------------------
on which performance or payment of any obligation of a party required hereunder
is other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained
--------------------------
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from
54
<PAGE>
a Mortgagee secured by a lien the Property, Purchaser shall cause the Mortgagee
to provide Operating Lessee, as lessee, with a Subordination, Nondisturbance and
Attornment Agreement. If Purchaser shall fail to provide such Subordination,
Nondisturbance and Attornment Agreement, the Operating Lease shall be superior
to the lien of said financing. The provisions of this Section 14.14 shall
-------------
survive Closing or termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
55
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
MAHWAH HOLDING CORP., a Delaware
corporation
By: /s/ RICHARD SZYMANSKI
----------------------------------
Richard Szymanski
Vice President
PURCHASER:
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership
By: AGH GP, Inc., its sole general
partner
By: /s/ BRUCE G. WILES
-----------------------------------
Bruce G. Wiles
Executive Vice President
Joining in this Agreement for purposes of
acknowledging and agreeing to the provisions
of Section 2.4(c), Section 6.19 and Section 10:
PRIME HOSPITALITY CORP., a
Delaware corporation
By: /s/ RICHARD SZYMANSKI
-------------------------------------
Richard Szymanski
Vice President
56
<PAGE>
EXHIBIT 2.6
AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
MT. ARLINGTON NEW JERSEY, LLC,
as Purchaser
January 7, 1998
Mt. Arlington, New Jersey
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS....................................................... 1
1.1. "Acquisition Costs.................................................... 1
1.2. "Adjustments" ........................................................ 2
1.3. "Affiliate" .......................................................... 2
1.4. "Agreement" .......................................................... 2
1.5. "American General..................................................... 2
1.6. "Business Day" ....................................................... 2
1.7. "Change in Control" .................................................. 2
1.8. "Closing" ............................................................ 2
1.9. "Closing Date" ....................................................... 2
1.10. "Code" ............................................................... 3
1.11. "Construction Costs" ................................................. 3
1.12. "Contracts" .......................................................... 3
1.13. "Cut-Off Time" ....................................................... 3
1.14. "Defective Property" ................................................. 3
1.15. "Deposit" ............................................................ 3
1.16. "Diligence Notice" ................................................... 4
1.17. "Documents" .......................................................... 4
1.18. "Due Diligence Material" ............................................. 4
1.19. "Environmental Laws" ................................................. 4
1.20. "Environmental Report" ............................................... 4
1.21. "Escrow Agent" ....................................................... 4
1.22. "Escrow Agreement" ................................................... 4
1.23. "Estoppel Certificate" ............................................... 4
1.24. "Exchange Act" ....................................................... 5
1.25. "Excluded Intellectual Property" ..................................... 5
1.26. "FF&E" ............................................................... 5
1.27. "FF&E Leases" ........................................................ 5
1.28. "Financial Statements" ............................................... 6
1.29. "Franchise Agreement" ................................................ 6
1.30. "Franchisor Comfort Letters" ......................................... 6
1.31. "Full Service Hotels" ................................................ 6
1.32. "Group Two Sale Agreement" ........................................... 6
1.33. "Hazardous Substance" ................................................ 6
1.34. "Hotel" .............................................................. 6
1.35. "Hotel Lease.......................................................... 6
1.36. "Improvements" ....................................................... 6
1.37. "Intangible Property" ................................................ 7
1.38. "Leased FF&E" ........................................................ 7
1.39. "Letter of Credit".................................................... 7
1.40. "Liquidated Damages" ................................................. 7
1.41. "Liquor License" ..................................................... 7
1.42. "Mortgagee" .......................................................... 7
1.43. "Offer" .............................................................. 7
1.44. "Operating Lease" .................................................... 7
1.45. "Operating Lessee" ................................................... 7
1.46. "Original Agreement" ................................................. 7
(i)
<PAGE>
1.47. "Other Agreements" ................................................... 7
1.48. "Other Revenues" ..................................................... 8
1.49. "Permitted Encumbrances............................................... 8
1.50. "Person" ............................................................. 8
1.51. "Project Plan" ....................................................... 8
1.52. "Property" ........................................................... 8
1.53. "Proposed AmeriSuites Hotel" ......................................... 8
1.54. "Prorations Settlement" .............................................. 8
1.55. "Purchase Price" ..................................................... 8
1.56. "Purchaser" .......................................................... 8
1.57. "Real Property" ...................................................... 8
1.58. "REIT" ............................................................... 9
1.59. "Restricted Period" .................................................. 9
1.60. "Room Revenues" ...................................................... 9
1.61. "SEC Documents" ...................................................... 9
1.62. "Seller" ............................................................. 9
1.63. "Seller's knowledge" ................................................. 9
1.64. "Seller Subsidiary" .................................................. 9
1.65. "Space Leases" ....................................................... 9
1.66. "Subordination, Nondisturbance and Attornment Agreement" ............. 9
1.67. "Survey" ............................................................. 9
1.68. "Survival Period" .................................................... 9
1.69. "Title Commitment" ................................................... 9
1.70. "Title Company" ..................................................... 10
1.71. "WARN Act" .......................................................... 10
SECTION 2. PURCHASE AND SALE............................................... 10
2.1. Purchase and Sale.................................................... 10
2.2. Deposit.............................................................. 10
2.3. Closing.............................................................. 10
2.4. Purchase Price....................................................... 11
2.5. Tax Free Exchange.................................................... 11
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION............................. 11
3.1. Diligence Inspections................................................ 11
3.2. Defective Properties................................................. 14
3.3. Title Matters........................................................ 15
3.4. Survey............................................................... 16
3.5. Modifications of Hotel Leases........................................ 16
3.6. Additional Termination Option........................................ 17
3.7. Adjournment of Closing............................................... 17
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.................... 18
4.1. Closing Documents.................................................... 18
4.2. Condition of the Property............................................ 20
4.3. Title Policies....................................................... 20
4.4. Opinions of Counsel.................................................. 21
4.5. Other Approvals...................................................... 21
4.6. Representations...................................................... 21
4.7. Default under Group Two Sale Agreement............................... 21
4.8. Default under Other Agreements....................................... 21
(ii)
<PAGE>
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE....................... 22
5.1. Purchase Price....................................................... 22
5.2. Closing Documents.................................................... 22
5.3. Opinion of Counsel................................................... 22
5.4. Other Approvals...................................................... 22
5.5. Representations...................................................... 23
5.6. Default under Group Two Sale Agreement............................... 23
5.7. Default under Other Agreements....................................... 23
SECTION 6. REPRESENTATIONS OF SELLER........................................ 23
6.1. Status and Authority of Seller....................................... 23
6.2. Action of Seller..................................................... 23
6.3. No Violations of Agreements.......................................... 24
6.4. Litigation........................................................... 24
6.5. Existing Leases, Agreements, Etc..................................... 24
6.6. Hotel Leases......................................................... 24
6.7. Franchise Agreements................................................. 25
6.8. Contracts............................................................ 25
6.9. Taxes................................................................ 25
6.10. Not A Foreign Person................................................. 25
6.11. Hazardous Substances................................................. 25
6.12. Insurance............................................................ 25
6.13. FF&E................................................................. 26
6.14. Employment and Union Contracts....................................... 26
6.15. Adjacent Land Leases................................................. 26
6.16. Trademarks........................................................... 26
6.17. Compliance with Laws................................................. 26
6.18. Inventory............................................................ 26
6.19. Holder of Liquor License............................................. 26
SECTION 7. REPRESENTATIONS OF PURCHASER..................................... 27
7.1. Status and Authority of Purchaser.................................... 27
7.2. Action of Purchaser.................................................. 28
7.3. No Violations of Agreements.......................................... 28
7.4. Litigation........................................................... 28
7.5. No Conflicts......................................................... 28
SECTION 8. COVENANTS OF SELLER AND PURCHASER................................ 29
8.1. Covenants of Seller.................................................. 29
SECTION 9. CLOSING COSTS.................................................... 32
9.1. Closing Costs........................................................ 32
SECTION 10. DEFAULT......................................................... 32
10.1. Default by Seller.................................................... 32
10.2. Default by Purchaser................................................. 33
SECTION 11. LIQUOR LICENSES, FRANCHISE AGREEMENTS............................ 33
11.1. Liquor License....................................................... 33
11.2. Franchise Agreement.................................................. 34
11.3. License for Excluded Intellectual Property........................... 35
(iii)
<PAGE>
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS........................... 36
12.1. Matters to be Adjusted or Prorated................................... 36
12.2. Security Deposits for Hotel Leases................................... 37
12.3. Certiorari Proceeding................................................ 37
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION.................................... 38
13.1. Right of First Refusal on Full Service Hotels........................ 38
13.2. Radius Restriction................................................... 40
13.3. AmeriSuites Hotels................................................... 40
13.4. Multi-Property Exception............................................. 43
13.5. Survival and Damages................................................. 43
13.6. General Provisions................................................... 44
SECTION 14. MISCELLANEOUS................................................... 45
14.1. Agreement to Indemnify............................................... 45
14.2. Brokerage Commissions................................................ 46
14.3. Publicity............................................................ 46
14.4. Confidentiality...................................................... 47
14.5. Notices.............................................................. 48
14.6. Waivers, Etc......................................................... 49
14.7. Assignment; Successors and Assigns................................... 49
14.8. Severability......................................................... 50
14.9. Counterparts, Etc.................................................... 50
14.10. Governing Law........................................................ 50
14.11. Performance on Business Days......................................... 51
14.12. Attorneys' Fees...................................................... 51
14.13. Section and Other Headings........................................... 51
14.14. Financing and Priority of Operating Lease............................ 51
14.15. Group Two Purchase and Sale Agreement................................ 51
14.16. Exceptions to Liquidated Damages..................................... 51
EXHIBITS*
Exhibit B Legal Description of the Property
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Lease and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment Agreement
- --------------------
* The following Exhibits have been deemed non-material for investment purposes
however, a copy of any Exhibit will be furnished to the Securities and
Exchange Commission upon request.
(iv)
<PAGE>
Exhibit O Form of Representation Letter to Accountants
Exhibit Q Form of Assignment and Assumption of Hotel Lease
Exhibit R Form of Bill of Sale and Assignment Agreement
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts (from Seller to
Operating Lessee)
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and MT. ARLINGTON NEW JERSEY, LLC, a Delaware
limited liability company ("Purchaser"), as purchaser.
W I T N E S S E T H:
WHEREAS, Seller and American General Hospitality Operating
Partnership, L.P. ("American General") entered into that certain Purchase and
----------------
Sale Agreement dated as of November 20, 1997, as amended by Amendment to
Purchase and Sale Agreement dated January 7, 1998 (the "Original Agreement"),
------------------
for the sale of certain properties, including the Property (as defined below);
and
WHEREAS, Seller and American General desire to amend and
restate the Original Agreement in the form of eight separate contracts, one
contract for each of the Properties (as defined in the Original Agreement) (such
contracts other than this Agreement being referred to herein as the "Other
-----
Agreements"); and
- ----------
WHEREAS, pursuant to the Original Agreement, American General
has designated Purchaser as the entity to receive title to the Property; and
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase Seller's interest in the Property, subject to and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the same, any architect, engineer, attorney, accountant and
other
<PAGE>
professional fees, any due diligence expenses incurred in assessing the Proposed
AmeriSuites Hotel, title and survey costs, transfer taxes and pre-opening
expenses of the hotel, including without limitation, costs incurred in the
reflagging of the hotel, promotional and advertising expenses, administrative
expenses, employee hiring and training expenses, the cost of supplies, equipment
and furniture purchased for the hotel, governmental, utility or other deposits
required for operation of the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that , directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
---------- -
as it and they may be amended from time to time as herein provided.
1.5. "American General" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.6. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.7. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
1.8. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.9. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
-2-
<PAGE>
1.10. "Code" shall mean the Internal Revenue Code of 1986,
----
as amended, and the treasury regulations promulgated thereunder.
1.11. "Construction Costs" shall mean all hard and soft
------------------
costs incurred by Seller or the Seller Subsidiary, as appropriate, in connection
with the acquisition of the site and construction and related improvements for a
Proposed AmeriSuites Hotel, including without limitation (a) the cost of funds
used for such construction, whether provided by a third party lender or by
Seller (the interest on such funds being calculated in the latter event at a
rate equal to the prime rate reported in the Money Rates column or comparable
section of The Wall Street Journal (or if The Wall Street Journal is no longer
----------------------- -----------------------
published, a different publication designated by Seller) as the rate then in
effect for corporate loans at large U.S. money center commercial banks, plus
three percent (3%) compounded monthly), (b) attorney, accountant, engineer,
architect, contractor and other professional fees; (c) any due diligence
expenses incurred in assessing a site for the Proposed AmeriSuites Hotel; (d)
title and survey costs; (e) transfer taxes; and (f) pre-opening expenses of the
hotel, including without limitation, promotional and advertising expenses,
administrative expenses, employee hiring and training expenses, the cost of
supplies, equipment and furniture ordered or purchased for the hotel,
governmental, utility or other deposits required for operation of the hotel and
similar costs.
1.12. "Contracts" shall mean all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.13. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.14. "Defective Property" shall mean the Property if and
------------------
when such Property (i) has been condemned in whole or in part, or (ii) by reason
of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore the
Property into substantially the same condition as existing prior to such damage.
1.15. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
-3-
<PAGE>
1.16. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
- ------------ ---
1.17. "Documents" shall mean, with respect to any Property,
---------
all books, records and files relating to the leasing, maintenance, management or
operation of the Property.
1.18. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.19. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.20. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.12.
------------
1.21. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.22. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.23. "Estoppel Certificate" shall mean a statement in favor
--------------------
of Purchaser and/or any Mortgagee certifying to such matters as Purchaser and/or
its Mortgagee may reasonably request, including, without limitation, the
following:
(a) when from a lessor of a Hotel Lease, that an attached
copy of the Hotel Lease is a true, correct and complete copy of such Hotel Lease
which has not been modified except as identified; to the material terms of the
Hotel Lease, including the amount of rent due thereunder and the date through
which rent has been paid, that Seller, as lessee, is not in monetary or other
default under the Hotel Lease and that no event has occurred which with the
giving of notice or the passage of time or both will become a default under the
Hotel Lease; and to any other matters which lessor is required to certify
pursuant to the terms of the Hotel Lease. When Seller holds only a subleasehold
interest in a Property, "Estoppel Certificate" also shall include a statement as
described above containing the provisions set
-4-
<PAGE>
forth in this paragraph (a) which is issued by the fee owner of the Property
with respect to such fee owner's ground lease to the lessor of the Hotel Lease.
The estoppel certificates from lessors of Hotel Leases and from such fee owners
are collectively referred to as the "Hotel Estoppel Certificates."
---------------------------
(b) when from a franchisor under a Franchise Agreement, that
an attached copy of the Franchise Agreement is a true, correct and complete copy
of such Franchise Agreement which has not been modified except as identified;
that Seller is not in monetary or other default under the Franchise Agreement
and that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise Agreement; and to any
other matters which franchisor is required to certify pursuant to the terms of
the Franchise Agreement;
each in a form reasonably acceptable to said lessor or franchisor; provided,
however, that if the Hotel Lease or Franchise Agreement (i) does not require and
the estoppel certificate is delivered without the inclusion of a statement that
no event has occurred which with the giving of notice or the passage of time or
both will become a default, or (ii) refers to any non-monetary, immaterial
defaults under the relevant document on an estoppel certificate, then in either
case the estoppel certificate shall be deemed satisfactory to fulfill Seller's
obligations under Section 4.1(i), provided Seller shall indemnify and hold
--------------
harmless Purchaser against any loss, cost, damage, claim or liability occasioned
by such immaterial default.
1.24. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.25. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.26. "FF&E" shall mean all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.27. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
-5-
<PAGE>
1.28. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.29. "Franchise Agreement" shall mean the hotel licensing
-------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.30. "Franchisor Comfort Letters" shall mean letters from
--------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.31. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.32. "Group Two Sale Agreement" shall have the meaning
------------------------
given that term in Section 14.15.
-------------
1.33. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.34. "Hotel" shall mean the hotel located at the Property.
-----
1.35. "Hotel Lease" shall mean that certain Lease dated
-----------
January 24, 1984 by and between Lenat Development Company Limited, as lessor and
Prime Management Company, Inc., predecessor to Assignor, as lessee, as amended
by (i) that certain Letter Agreement dated January 24, 1984, (ii) that certain
Letter Agreement dated September 21, 1985 and (iii) that certain Letter
Agreement dated August 22, 1985.
1.36. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
-6-
<PAGE>
1.37. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including without limitation all trademarks, trade names,
copyrights, patents or technical processes, owned and used by Seller which
pertain solely to the Property and expressly excluding the Excluded Intellectual
Property and all trademarks, trade names, copyrights, patents or technical
processes used with respect to Seller itself or Seller's Affiliates, and
expressly excluding the Contracts.
1.38. "Leased FF&E" shall have the meaning given such term
-----------
in Section 6.14.
------------
1.39. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.3.
-----------
1.40. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.41. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.42. "Mortgagee" shall mean any and all lenders who
---------
provides financing to Purchaser in connection with the Property.
1.43. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
1.44. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.45. "Operating Lessee" shall mean a wholly-owned
----------------
subsidiary of Seller as tenant, of an Operating Lease(s); which is a single-
purpose entity with the sole purpose of leasing, managing, maintaining,
operating and performing other related functions for the Hotel.
1.46. "Original Agreement" shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.47. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
-7-
<PAGE>
1.48. "Other Revenues" shall have the meaning given such
--------------
term in Section 12.1.
------------
1.49. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) the Hotel
Lease; (d) applicable zoning regulations and ordinances provided the same do not
prohibit or impair in any material respect use of the Property as a hotel as
currently operated and constructed; (e) UCC Financing Statements securing the
purchase price of FF&E under the FF&E Leases identified on Exhibit I; provided,
---------
however, that such liens shall be confined to the asset in question and the
aggregate principal amount of indebtedness secured by such liens shall not
exceed the cost of acquisition or construction of the property subject thereto;
(f) such other nonmonetary encumbrances with respect to the Property which are
not objected to by Purchaser in accordance with Section 3; and (h) such
---------
exceptions or matters, as the case may be, otherwise accepted by Purchaser
pursuant to Section 3.
---------
1.50. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.51. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.52. "Property" shall mean all of the Seller's leasehold
--------
interest in the Real Property, and Seller's interest in the FF&E, the Documents,
the Improvements and the Intangible Property relating to the Real Property.
1.53. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
1.54. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.55. "Purchase Price" shall have the meaning given such
--------------
term in Section 2.4.
-----------
1.56. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.57. "Real Property" shall mean that certain real property
-------------
described in Exhibit B, together with all easements, rights of way, privileges,
---------
licenses and appurtenances which Seller may now own with respect thereto.
-8-
<PAGE>
1.58. "REIT" shall mean American General Hospitality
----
Corporation.
1.59. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.60. "Room Revenues" shall have the meaning given such
-------------
term in Section 12.1.
------------
1.61. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.62. "Seller" shall have the meaning given such term in
------
the preamble to this Agreement
1.63. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.63 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.64. "Seller Subsidiary" shall have the meaning set forth
-----------------
in Section 13.1.
------------
1.65. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on Exhibit
-------
K.
- -
1.66. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.67. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.68. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.69. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
-9-
<PAGE>
1.70. "Title Company" shall mean, collectively, Chicago
-------------
Title Insurance Company and Commonwealth Land Title Insurance Company, each as a
50% co-insurers, or such other title insurance company or companies as shall
have been reasonably approved by Purchaser and Seller.
1.71. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
SECTION 2. PURCHASE AND SALE
2.1. Purchase and Sale. In consideration of the mutual
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covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
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the sum of Two Hundred Fifty-Four Thousand Two Hundred Fifty Dollars ($254,250)
(together with all interest accrued thereon, if any, the "Deposit") in the form
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of an unconditional, irrevocable letter of credit issued by Bank One, Texas,
N.A. (the "Letter of Credit"). The Letter of Credit shall be in the amount of
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Seven Million Five Hundred Thousand Dollars ($7,500,000), which amount shall
represent the Deposit as well as the deposits required pursuant to the Other
Agreements. The Deposit (and the Letter of Credit) shall be held pursuant to,
and disbursed according to, the terms of the Escrow Agreement. Notwithstanding
anything to the contrary contained in this Agreement, until the Deposit is
disbursed in accordance with the Escrow Agreement, this Agreement shall not
terminate and shall remain in full force and effect to the extent necessary for
such purpose.
2.3. Closing. The purchase and sale of the Property shall be
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consummated at a closing (the "Closing") to be held at the offices of Willkie
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Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 to satisfy its obligations with respect to
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that Property under Section 4, unless such obligations shall have been waived by
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Purchaser and provided that such adjournment with respect to the Property shall
not adjourn the closing with respect to any of the other Properties to be
conveyed under the Other Agreements.
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<PAGE>
2.4. Purchase Price.
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(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Four Million
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Six Hundred Ninety Thousand Dollars ($4,690,000), allocated Four Million Two
Hundred Thousand Dollars($4,200,000) to the Seller's interest in the Real
Property and Improvements and Four Hundred Ninety Thousand Dollars ($490,000) to
the personal property including, without limitation, the FF&E and the Intangible
Property.
(b) The Purchase Price (plus or minus adjustments and
prorations as set forth in Section 12 hereof) shall be payable by wire transfer
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of immediately available federal funds on the Closing Date to an account to be
designated by Seller prior to the Closing.
2.5. Tax Free Exchange.
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(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring a Section 1031 exchange with respect to the Property, if so desired
by Seller, provided that such structuring shall not materially adversely affect
Purchaser's rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
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indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
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(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of the provisions of this Section 2.5.
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(d) Any reasonable costs and expenses incurred by Purchaser in
connection with Purchaser complying with the terms of this Section 2.5 shall be
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paid by Seller.
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION.
3.1. Diligence Inspections.
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(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise
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<PAGE>
provided to Purchaser pursuant to this Agreement. Purchaser agrees and
acknowledges that it has investigated and/or received the opportunity to
investigate the Property to its satisfaction and that it is not relying on any
materials, statements, representations or warranties of any kind, other than as
specifically set forth in this Agreement, in purchasing the Property. To the
extent that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, has damaged or disturbed or does damage or
disturb any of the Real Property, Lease Property or the Improvements located
thereon, Purchaser shall return the same to substantially the same condition
which existed immediately prior to such damage or disturbance. In the event that
the transactions contemplated by this Agreement are not closed and consummated
for any reason, Purchaser shall deliver to Seller all tests, reports and
inspections of the Property made and conducted by Purchaser or for its benefit
or any other documents or information Purchaser has received pursuant to this
Agreement. Purchaser shall indemnify, defend and hold harmless Seller from and
against any and all cost, expense, liability, loss or damage which Seller may
incur as a result of any act or omission of Purchaser or its representatives,
agents or contractors in connection with such examinations and inspections,
other than to the extent that any expense, loss or damage arises from any gross
negligence or willful misconduct of Seller. The provisions of this Section
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3.1(a) shall survive the termination of this Agreement and the Closing.
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(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for the current year to date and each
of the three (3) years prior to the year of this Agreement (the "Financial
---------
Statements"), including the itemization of annual insurance premiums for each
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such year for fire, extended coverage, workers' compensation, vandalism and
malicious mischief, general liability, business interruption, rents and other
forms of insurance shown thereon; expenses incurred for water, electricity,
natural gas, sewer and other utility charges; total rents and revenues collected
from tenants and from hotel guests and other patrons of the Hotel; management
fees; maintenance, repairs and other expenses relating to the management and
operation of the Hotel; occupancy statistics for the Hotel for the current year
to date and the prior three (3) calendar years; and all capital expenditures
made during the aforementioned
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<PAGE>
periods. To the extent that the Financial Statements provided by Seller for the
current year do not include any period up to and including the Closing Date,
Seller shall, within 25 days after the Closing Date, provide Purchaser with
monthly unaudited Financial Statements applicable to such period inclusive of
the Closing Date.
(iii) All of the most recent real estate and
personal property tax statements with respect to the Hotel and, to the extent in
Seller's possession or control or readily available without expense, notices of
appraised value for the Land and Improvements;
(iv) To the extent in Seller's possession or control
or readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser shall
return such information to Seller;
(v) All Contracts;
(vi) All Space 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;
(vii) The Hotel Lease;
(viii) All notices received from governmental
authorities in connection with the Hotel;
(ix) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(x) All FF&E Leases;
(xi) The Franchise Agreement and a current
deficiency report and the two most recent inspection reports of the franchiser
of the Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xii) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to the Hotel;
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<PAGE>
(xiii) Any leases of adjacent land or facilities used
in connection with the operation of the Hotel; and
(xiv) Seller's 1997 capital and operating budgets
and all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
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notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotel, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Eschange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property being performed by Coopers & Lybrand,
L.L.P., Seller shall provide to Coopers & Lybrand, L.L.P. a signed
representation letter substantially in the form attached hereto as Exhibit O for
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the Property.
3.2. Defective Property.
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(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which causes the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
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3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property.
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<PAGE>
(b) If Purchaser timely gives notice to Seller that it
considers the Property a Defective Property, and Purchaser and Seller shall,
acting reasonably and in good faith, be unable or unwilling to agree (x) that
Seller shall, at its sole cost, attempt to remedy the applicable defect prior to
the Closing (in which event Seller shall have the right to adjourn the Closing
Date pursuant to the provisions of Section 3.7 for up to ninety (90) days for
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such purpose), (y) that Purchaser shall, notwithstanding such defect, acquire
the Defective Property subject to a reduction in the Allocable Purchase Price of
the Defective Property, as reasonably determined by Seller and Purchaser,
sufficient to compensate Purchaser for such defect, or (z) on the substitution
of another property owned by Seller for such Defective Property, this Agreement
shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
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Company a preliminary title commitment for a leasehold policy, having an
effective date after the date of the Original Agreement, for an ALTA (or such
other form reasonably approved by Purchaser) owner's policy of title insurance
with respect to the Property, together with complete and legible copies of all
instruments and documents referred to as exceptions to title (collectively, the
"Title Commitments"). Except as set forth on the Diligence Notice, Purchaser
-----------------
acknowledges and agrees that it does not have any other objections to any title
exceptions shown on the Commitment. Seller acknowledges and agrees that Seller
shall attempt to remedy the objections set forth in the Diligence Notice with
respect to the Property; Seller shall have the right to adjourn the Closing Date
pursuant to Section 3.7 for up to ninety (90) days for such purpose. If Seller
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shall be unable to remove any such title defects to which Purchaser has objected
in accordance with this Section 3.3, Purchaser may elect (i) to terminate this
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Agreement and this Agreement shall be of no further force and effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect, and time shall be of the essence with respect to
the giving of such notice by Purchaser. Failure of Purchaser to give such notice
shall be deemed an election by Purchaser to proceed in accordance with clause
(ii) above, and such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
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<PAGE>
3.4. Survey. Purchaser has received a survey with respect
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to the Property (the "Survey") by a licensed surveyor in the jurisdiction in
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which the Property is located, which (i) contains an accurate legal description
of the Property, (ii) shows the location, dimension and description (including
applicable recording information) of all utilities, easements, encroachments and
other physical matters affecting the Property, the number of striped parking
spaces located thereon and all applicable building set-back lines, (iii) states
whether the Property is located within a 100-year flood plain and (iv) is
certified to Purchaser and the Title Company and such other persons as shall
have been requested by Purchaser or Seller. Except as set forth on the Diligence
Notice, Purchaser acknowledges and agrees that it does not have any other
objections to any matter shown on the Survey. Seller acknowledges and agrees
that Seller shall attempt to remedy the objections set forth in the Diligence
Notice with respect to the Survey; Seller shall have the right to adjourn the
Closing Date pursuant to Section 3.6 for up to ninety (90) days for such
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purpose. If Seller shall be unable to remove any such survey defect to which
Purchaser has objected, Purchaser may elect (i) to terminate this Agreement, in
which event this Agreement shall be of no further force or effect, except as
otherwise expressly provided herein, or (ii) to consummate the transactions
contemplated hereby, notwithstanding such defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the earlier of
the Closing Date or the fifth Business Day after Seller's notice of its
inability to cure such defect and time shall be of the essence with respect to
the giving of such notice by Purchaser. Failure of Purchaser to give such notice
shall be deemed an election by Purchaser to proceed in accordance with clause
(ii) above and such matter shall be a Permitted Encumbrance.
3.5. Modifications of Hotel Lease, Lessor Consents and
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Hotel Estoppel Certificates. Seller shall use commercially reasonable efforts
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(which shall not, in any event, be deemed to include the payment of any sum of
money or the participation in any litigation, arbitration or other dispute
resolution process) to obtain (a) the modifications to the Hotel Lease which
Purchaser has requested [pursuant to that certain letter dated December [2],
1997] (b) the Hotel Estoppel Certificate of the lessor of the Hotel Lease and
(c) any necessary consents of the lessor of the Hotel Lease. Seller shall have
the right, but not the obligation, to adjourn the Closing Date for up to ninety
(90) days for the purpose of attempting to obtain such modifications, Hotel
Estoppel Certificate and consents. If Seller, notwithstanding its exercise of
commercially reasonable efforts as aforesaid, shall be unable to obtain, at
least ten (10) Business Days' prior to the Closing Date, any Hotel Lease
modification which Purchaser has requested in accordance with the
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<PAGE>
provisions of this Section 3.5, or any Hotel Estoppel Certificate or necessary
-----------
consent from a lessor of a Hotel Lease, Purchaser may elect (i) to terminate
this Agreement, in which event, this Agreement shall be of no further force or
effect, except as otherwise expressly provided herein, or (ii) to consummate the
transactions contemplated hereby, notwithstanding such defect, without any
abatement or reduction in the Purchase Price on account thereof. Purchaser shall
make any such election by written notice to Seller given on or prior to the
earlier of the Closing Date or the fifth (5th) Business Day after Seller's
notice of its inability to obtain such modifications, or Hotel Estoppel
Certificate or consent of the lessor of the Hotel Lease and time shall be of the
essence with respect to the giving of such notice by Purchaser. Failure of
Purchaser to give such notice shall be deemed an election by Purchaser to
proceed in accordance with clause (ii) above. Any termination of this Agreement
by Purchaser pursuant to this Section 3.5 shall not be considered for the
-----------
purpose of determining whether the termination of three or more of this
Agreement and the Other Agreements has occurred (and thus shall not be counted
toward the three terminations required before the termination options in Section
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3.6 are triggered).
- ---
3.6. Additional Termination Option.
-----------------------------
Subject to the terms of the last sentence of Section 3.5, if
-----------
Purchaser shall elect, pursuant to any provision of this Agreement or of the
Other Agreements, to terminate any three or more of the Other Agreements and/or
this Agreement, then, together with such notice of termination with respect to
this Agreement or an Other Agreement which taken by itself or together with any
prior notices of termination would result in the three or more such
terminations, Purchaser may, in such notice, or Seller may, within 10 Business
Days of receipt of such notice of termination by written notice to Purchaser,
terminate this Agreement and simultaneously terminate the Other Agreements and
the Group Two Sale Agreement, in which event the Deposit shall be returned to
Purchaser and the parties to this Agreement shall have no further obligations
under this Agreement, the Other Agreements or the Group Two Sale Agreement
except as expressly provided in this Agreement, the Other Agreements or the
Group Two Sale Agreement. Notwithstanding the foregoing, if any provision in any
Other Agreement expressly provides that a termination thereof shall not be
considered for purposes of determining with respect to this Section 3.6 whether
-----------
three such terminations have occurred, such provision of the Other Agreement
shall be controlling.
3.7. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Propety set forth in the Diligence
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<PAGE>
Notice have been cured or remedied and all deliveries required by Section 3.5 of
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this Agreement have been obtained.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(i)), Franchisor Comfort Letters (as
--------------
required by Section 4.1(k) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing, Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all other Properties to be conveyed pursuant to the Other
Agreements until such Estoppel Certificates, Franchisor Comfort Letters or
consents are obtained, provided such adjournment shall not be longer than ninety
(90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
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Purchaser:
(a) An assignment and assumption for the Hotel Lease,
substantially in the form attached hereto as Exhibit Q, with such modifications
---------
thereto as shall be customary in the jurisdiction in which the Property is
located, in proper statutory form for recording, duly executed and acknowledged
by Seller, assigning Seller's right, title and interest in the Hotel Lease, free
from all liens and encumbrances other than the Permitted Encumbrances;
(b) An original fully executed counterpart of the Hotel
Lease, to the extent the same is in Seller's possession, custody or control;
provided that if Seller is unable to produce an original fully executed
counterpart of the Hotel Lease, Seller may provide a copy of the Hotel Lease
certified by Seller to be a true and correct copy of the Hotel Lease, in lieu
thereof;
(c) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
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with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
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<PAGE>
(d) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
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with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(g) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(h) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
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acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(i) Duly executed Estoppel Certificates from the lessor under
the Hotel Lease and the franchisor under the Franchise Agreement; provided that
any such Estoppel Certificate shall be provided to Purchaser prior to Closing
promptly following receipt by Seller of the same;
(j) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(k) Franchisor Comfort Letters;
(l) Subject to the provisions of Section 3.5 of this
-----------
Agreement, modifications of the Hotel Lease requested by Purchaser pursuant to
Section 3.5;
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(m) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel.
(n) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(o) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
(p) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to
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<PAGE>
comply with the reporting requirements of Section 1099-S of the Code;
(q) If a lease or a mortgage lien superior to the Hotel Lease
exists, a non-disturbance agreement, amendment to the Hotel Lease or assurance
from the Title Company, in a form reasonably acceptable to Purchaser, to the
effect that neither a termination of such superior leasehold estate nor the
foreclosure of such superior mortgage lien shall result in a termination of the
leasehold estate to be transferred to Purchaser pursuant to this Agreement,
provided that Seller, as tenant under the Hotel Lease, is not then in default
under the Hotel Lease; and
(r) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to each state in which a Property is located and
a (i) current letter of non-applicability, (ii) a negative declaration or (iii)
a no further action letter.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
4.3. Title Policies. The Title Company shall be
---------------
prepared, subject only to payment of the applicable premium, endorsement and
related fees and delivery of all conveyance documents in recordable form, to
issue a title insurance policy to Purchaser, subject only to the Permitted
Encumbrances, in accordance with Section 3.3.
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<PAGE>
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as the Purchaser may reasonably require. Seller
and Purchaser shall agree upon local counsel for the jurisdiction in which the
Property is located to provide an appropriate jurisdiction-specific opinion, the
cost of which local counsel will be shared equally by Seller and Purchaser. An
opinion from in-house counsel to Seller shall satisfy this Section 4.4 with
-----------
respect to all matters which customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) the consent of the franchisor, if required; (c) the consents of
lessor of the Hotel Lease necessary in connection with the assignment of the
Hotel Lease; (d) the consent of the ground lessor under that certain Lease dated
June 29, 1973 (as amended, the "Armonk Lease") for premises located in Armonk,
------------
New York to the transactions contemplated by the Group Two Sale Agreement; (e) a
modification of such Armonk Lease to extend the initial term thereof such that
at the Closing of such property there shall be at least thirty (30) years of the
initial term remaining; and (f) any consents required under the terms of any
existing bond financing encumbering the Property, and an estoppel certificate in
form reasonably acceptable to Purchaser from such parties to the bond financing
as Purchaser may request.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to any Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close with respect to the Property and, at Purchaser's option, this
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<PAGE>
Agreement shall terminate; provided however, such failure of a condition shall
not be a default under this Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of which may be waived by Seller in its sole and
absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller
--------------
the Purchase Price, pursuant to Section 2.4.
-----------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner;
(c) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller or the Title Company may reasonably
require to effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for the jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all consents of franchisors, if
------------
required; (c) all consents of the lessor of the of the Hotel Lease necessary in
connection with the assignment of the Hotel Lease and (d) the consent of the
ground lessor under
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<PAGE>
the Armonk Lease to the transactions contemplated by the Group Two Sale
Agreement; (e) a modification of such Armonk Lease to extend the initial term
thereof such that at the closing of such property there shall be at least thirty
(30) years of the initial term remaining; and (f) any consents required under
the terms of any existing bond financing encumbering the Property, and an
estoppel certificate in form reasonably acceptable to Purchaser from such
parties to the bond financing as Purchaser may request.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default under Group Two Sale Agreement. Purchaser
--------------------------------------
shall not be in default, or have committed an act or failed to perform an act
which, with the giving of notice, the passage of time or both, will become a
default under, the Group Two Sale Agreement.
5.7. Default under Other Agreements. Purchaser shall not
------------------------------
be in default, or have committed an act or failed to perform an act which, with
the giving of notice, the passage of time or both, will become a default under,
any of the Other Agreements.
In the event any condition to Seller's obligation to close
set forth in this Section 5 is not satisfied, Seller shall not be obligated to
close and, at Seller's option, this Agreement shall terminate; provided however,
except with respect to the failure of the conditions set forth in Section 5.1,
-----------
Section 5.6 and Section 5.7 (which shall be a default under this Agreement),
- ----------- -----------
such failure of a condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a
------------------------------
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
----------------
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and
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<PAGE>
delivery of any document to be delivered by Seller on or prior to the Closing
Date, such document shall constitute the valid and binding obligation and
agreement of Seller, as the case may be, enforceable against Seller in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the
---------------------------
execution, delivery or performance of this Agreement or the Operating Lease by
Seller, nor compliance with the terms and provisions hereof or thereof, will
result in any breach of the terms, conditions or provisions of, or conflict with
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon the Property pursuant to the terms of any indenture, mortgage,
deed of trust, note, evidence of indebtedness or any other agreement or
instrument by which Seller is bound.
6.4. Litigation. Seller has not received any written
----------
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Operating Lease
or any action taken or to be taken pursuant hereto, (b) will result in any
material adverse change in the business, operation, affairs or condition of the
Property, (c) will result in or subject the Property to a material liability, or
(d) involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 and complete copies of said Space
Leases and, to Seller's knowledge, are valid, in full force and effect and no
party has breached any material condition or provision thereof. No tenant under
any Lease has prepaid rent or additional rent or any other items under the Space
Leases for more than one (1) month in advance and there are no security deposits
held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Hotel Leases. The Hotel Lease listed on Exhibit F is
------------ ---------
the sole Hotel Lease affecting the Property to which Seller is a party as lessee
as of the date hereof. The copy of the Hotel Lease provided or made available to
Purchaser not later than December 1, 1997 is a full and complete copy of said
Hotel
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<PAGE>
Lease and, to Seller's knowledge, is valid, in full force and effect and no
party has breached any material condition or provision thereof. Seller has not
prepaid rent or additional rent or any other items under the Hotel Lease for
more than one (1) month in advance.
6.7. Franchise Agreements. The Franchise Agreement listed
--------------------
on Exhibit D is the sole franchise agreement affecting the Property as of the
---------
date hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is true and complete copies of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.8. Contracts. The copies of the Contracts provided or
---------
made available to Purchaser not later than December 1, 1997 are true and
complete copies of said Contracts and, to Seller's knowledge, are valid, in full
force and effect and no party has breached any material condition or provision
thereof.
6.9. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.10. Not A Foreign Person. Seller is not a "foreign
--------------------
person" within the meaning of Section 1445 of the Code.
6.11. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report(s) listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.12. Insurance. Seller has not received any written
---------
notice from any insurance carrier of defects or inadequacies in the Property
which, if uncorrected, would result in a termination of insurance coverage or a
material increase in the premiums charged therefor.
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<PAGE>
6.13. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.14. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.15. Adjacent Land Leases. Seller does not lease any land or
--------------------
facilities adjacent to the Property.
6.16. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
6.17. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.18. Inventory. At Closing, each Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.19. Holder of Liquor License. The holder of the Liquor
------------------------
License for the Property is Prime Hospitality Corp., a Delaware corporation.
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.19 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written
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<PAGE>
notice of a breach thereof within the Survival Period (but in any event promptly
after learning of such breach) specifying in sufficient detail the facts
constituting such alleged breach and the loss then reasonably ascertainable as a
consequence thereof, and an opportunity to cure such breach within a reasonable
period of time after Purchaser having learned of such breach. Notwithstanding
any provision to the contrary set forth in this Agreement, Purchaser shall have
no claim against Seller and Seller shall have no liability to Purchaser, in the
event of a breach of any of Seller's representations and warranties and
statements in this Agreement in a respect which is not material and which does
not result in any loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property, pest control matters,
soil conditions, the presence, existence or absence of hazardous wastes, toxic
substances or other environmental matters, compliance with building, health,
safety, land use and zoning laws, regulations and orders, structural and other
engineering characteristics, traffic patterns, market data, economic conditions
or projections, and any other information pertaining to the Property or the
market and physical environments in which they are located. Purchaser
acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than those specifically set forth in this Agreement or in any
document to be delivered to Purchaser at the Closing made by Seller. Purchaser
further acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Property in its "as is" condition on the Closing
Date.
SECTION 7. REPRESENTATIONS OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
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<PAGE>
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement nor the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it or any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
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<PAGE>
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to cure
such breach within a reasonable period of time after Seller having learned of
such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in the Original Agreement, that commencing upon the
date of this Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition with
respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement, in a good and businesslike fashion consistent
with its past practices (which Seller believes to be in compliance with the
Franchise Agreement) and to cause the Property to be maintained in good working
order and condition in a manner consistent with its past practice.
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<PAGE>
(c) To provide to Purchaser, promptly upon reasonable request,
such unaudited financial and other information and certifications of Seller with
respect to the Property as Purchaser may from time to time reasonably request in
order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission. Without limiting the foregoing, Seller shall provide to Purchaser a
copy of each monthly profit and loss statement for the Property.
(d) Seller shall not, without the Purchaser's written consent,
enter into any modifications, renewals or extensions of the Hotel Lease, the
Space Lease or the Franchise Agreement, other than those modifications, renewals
or extensions required by the terms of the applicable document, or enter into
any other leases, agreements, mortgages or other loan documents or other
commitments relating to the Property or the operation of the Hotel other than in
the normal course of business and which are by their terms terminable without
penalty upon not more than thirty (30) days notice.
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the Hotel as of the Closing Date shall remain the employees of Seller after
the Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser
from and against any and all liability, cost, damages and expenses arising from
or relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing.
--------------
(f) To operate, manage, and maintain the Hotel consistent with
Seller's prior practice and as a reasonable and prudent operator of like-kind
hotels in the same competitive market would operate, manage, and maintain the
Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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
-30-
<PAGE>
with generally accepted accounting principles applied on a basis consistent with
the basis used in keeping its books in prior years; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement, if any, in a
fashion consistent with its past practice (which Seller believes to be in
compliance with such Liquor License and Franchise Agreement); (vi) maintaining
supplies and personalty consistent with the prior operations of Seller; (vii)
expending such amounts for advertising and promotions as are scheduled to be
expended prior to Closing pursuant to Seller's 1997 operating budget for the
Hotel; and (viii) expending such amounts for capital improvements as are
scheduled to be expended prior to Closing pursuant to Seller's 1997 capital
budget for the Hotel, provided that if any such scheduled capital improvement is
not completed prior to Closing, Seller shall complete such improvements at its
sole cost and expense in a manner consistent with Seller's past operation of the
Hotel and this subparagraph (viii) shall survive Closing;
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases, the Hotel Lease, the Franchise
Agreement, the Liquor License, and the Contracts for the Hotel, and all other
applicable contractual arrangements relating to the Hotel consistent with
Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts, Space Leases, or Hotel Lease, without
Purchaser's prior written consent, except that the 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 thirty (30) days
prior notice without cost or expense. Any such new agreement or renewal or
extension of existing agreements to which Purchaser's consent was not obtained,
whether or not such consent is required under this Section 8.1(i) shall subject
--------------
the applicable agreement to Purchaser's review under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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;
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<PAGE>
(m) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and any consents and
approvals necessary for the transaction contemplated by this Agreement at least
one week prior to the Closing; to continue to use reasonable, good faith efforts
to obtain such items thereafter; to promptly inform Purchaser of any issues or
problems which Seller foresees in obtaining any such items; and to deliver each
such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its
-------------
own expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, inspection
fees, and the costs and expenses of preparing engineering and environment
reports, market studies and appraisals, whether or not the transactions
contemplated hereby are consummated. The cost of the Survey, Title Commitment
(and the policies and endorsements issued pursuant thereto), all state and local
sales, transfer, excise, value-added or other similar taxes, all recording and
filing fees that may be imposed by reason of the sale, transfer, assignment and
delivery of the Property shall be shared equally by Seller and Purchaser. As
between Purchaser and Seller, the cost of seeking consents including, without
limitation, any transfer or assumption fees incurred in connection therewith,
Franchisor Comfort Letters and Estoppel Certificates shall be borne solely by
Seller.
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice
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<PAGE>
thereof from Purchaser, Purchaser, as its sole and exclusive remedy, may
terminate this Agreement, in which event the Deposit shall be returned to
Purchaser and Seller shall be obligated to pay Purchaser Two Hundred Fifty-Four
Thousand Two Hundred Fifty Dollars ($254,250) as liquidated damages and not as a
penalty (the "Liquidated Damages"). Purchaser and Seller acknowledge that the
------------------
damages which may be incurred by Purchaser in the event of Seller's default are
difficult to quantify as of the date of this Agreement; the Liquidated Damages
represent the parties reasonable estimate of Purchaser's probable future damages
in the event of Seller's default and the Liquidated Damages represent fair and
reasonable compensation to Purchaser in the event of Seller's default. Except
with respect to the Liquidated Damages, Purchaser hereby waives any and all
rights it may have to sue Seller for money damages in connection with this
Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of this Agreement; the Liquidated Damages represent the
parties reasonable estimate of Seller's probable future damages in the event of
Purchaser's default and the Liquidated Damages represent fair and reasonable
compensation to Seller in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSES; FRANCHISE AGREEMENTS.
11.1. Liquor License. Seller currently holds the Liquor
--------------
License for the Hotel and if, in compliance with all applicable laws, statutes,
rules, regulations and ordinances Seller may continue to hold such Liquor
License following the Closing, Seller shall maintain the Liquor License and
Purchaser shall not interfere with the maintenance of the Liquor License. If
Seller may not continue to hold the Liquor License for the Property following
the Closing or if the existing Liquor License needs to be revised to reflect the
Purchaser as owner of the Property, then Seller shall apply for a new or
modified Liquor License or, if advised by local counsel to be required under
local laws, regulations or orders, Purchaser or its designee shall apply for a
liquor license for the Hotel, at Seller's sole cost and expense, promptly after
Closing. Seller and Purchaser shall cooperate to a obtain liquor licenses for
the Hotel or modifications to the existing Liquor License or to maintain the
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<PAGE>
existing Liquor License in effect. Until such time as such new or modified
liquor license is obtained, Seller shall take all steps reasonably necessary to
enable the current Liquor License to be used by the Hotel and to permit the
uninterrupted sale and service of alcoholic beverages at the Hotel. The
provisions of this Section 11.1 shall survive the Closing.
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of the
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or consents of
franchisors, after using commercially reasonable, good faith efforts to do so in
accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters, such
consents or otherwise in connection with the transaction contemplated by this
Purchase Agreement shall be limited to the first One Hundred Thousand Dollars
($100,000) of the collective administrative fees required by the franchisor and
by any franchisor in connection with the transactions contemplated by the Other
Agreements and one-half of all amounts in excess thereof, and Purchaser hereby
covenants and agrees to pay the other one-half of such administrative fees in
excess of One Hundred Thousand Dollars ($100,000). In no event shall the
requirement of payment of administrative fees constitute a reason for Purchaser
to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in good
faith to an adjustment of the rent payable pursuant to the Operating Lease,
based on the terms and conditions of the new franchise agreement and its
anticipated effect on Gross Revenues (as defined in the Operating Lease).
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(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date until
the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not permit
the license for the Excluded Intellectual Property to be used in any manner
which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
The provisions of this Section 11.3 shall survive the Closing.
------------
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SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS.
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other than
Room Revenues, including without limitation, revenues from the sale of food,
beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking services, revenues from any "mini-bars" located in
the Hotel rooms and all other revenues (the "Other Revenues"), provided that
--------------
Other Revenues arising from the sale of food and beverages in restaurants and
bars which do not remain open the entire Cut-
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<PAGE>
Off Night shall be apportioned as of the last hour at which the applicable
restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) Rents paid by Seller under the Hotel Lease, including any
additional rent or percentage rents (if any) based on the results from the most
recently completed period (and adjusting payments shall be made as soon as
reasonably practical after the Closing Date when final results are reported).
(j) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreement, and FF&E Leases which are reasonably capable of such proration.
(k) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (h), (j) and (k), it is the
intent of Seller and Purchaser that all income and expenses relating to the
Property shall be prorated as provided in this Section 12 such that Seller shall
----------
have the benefit of all income and be responsible for all expenses and
liabilities incurred in connection with the Property fairly allocable to the
period prior to the Closing Date and that Operating Lessee under the Operating
Lease at the Property shall have the benefit of all income and be responsible
for all expenses and liabilities of the Property relating to the period from and
after the Closing Date. With respect to the prorations and Adjustments set forth
in subparagraphs (a) and (i) of this Section 12.1, the Purchase Price shall be
------------
adjusted based on the prorations between Seller and Purchaser with respect to
such subparagraphs.
12.2. Security Deposits for Hotel Lease. Seller shall assign
---------------------------------
its right, title and interest in and to all security deposits of Seller as
tenant under the Hotel Lease, if any, and Purchaser shall pay the amount of such
security deposits to Seller at Closing.
12.3. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to
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<PAGE>
the current tax year or could affect the taxes due for a subsequent tax year and
Purchaser shall have the right to participate in and approve tax settlements of
such certiori proceedings which relate to the current tax year, which
settlements shall not be effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION.
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first refusal
for a period commencing on the Closing Date and terminating on the earlier of
(i) the fifth anniversary of the Closing Date and (ii) the date upon which
Article XXXVI of the Operating Lease for the Property is effected such that
Seller no longer manages the Property (the "Restricted Period") on any and all
-----------------
Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above,
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<PAGE>
Purchaser shall be deemed conclusively to have elected not to purchase the Full
Service Hotel. In such event or if Purchaser elects not to purchase the Full
Service Hotel, Seller or the Seller Subsidiary shall have the right to transfer
the Full Service Hotel covered by the Offer to the party making the Offer,
substantially in accordance with the terms of the Offer and without material
modifications beneficial to said third party purchaser, without any further
notice to Purchaser. If, however, Seller or the Seller Subsidiary and such third
party purchaser thereafter agree to terms for such purchase which are materially
different from those provided in the Offer and beneficial to the third party
purchaser, then Purchaser's right of first refusal under this Section 13.1 shall
------------
be renewed with respect to such Full Service Hotel, on the terms of the Offer as
so modified. If the sale of a Full Service Hotel is consummated with a third
party, provided that Seller shall have complied with the requirements of this
Section 13.1, this Section 13.1 shall no longer be applicable with respect to
- ------------
such Full Service Hotel simultaneously with the sale. The exercise or non-
exercise by Purchaser of the right to purchase a Full Service Hotel does not
affect Purchaser's continuing right of first refusal with respect to any other
Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the provisions of this Section 13.1 shall not apply to the Property
------------
or to any of the Properties for which Purchaser has terminated this Agreement or
any of the Other Agreements, as applicable, or which has been eliminated from
the Group Two Sale Agreement (unless the problem which Purchaser identified in
the applicable notice of termination has been remedied in full), and Seller may
sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not apply
------------
to any Full Service Hotel which is subject to any foreclosure sale, or deed-in-
lieu thereof and upon the completion of any such foreclosure sale or deed-in-
lieu thereof, this Section 13.1 shall no longer be applicable with respect to
such Full Service Hotel, unless the purchaser at such foreclosure sale
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<PAGE>
is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in this
Agreement, this Section 13.1 shall not apply to the Full Service Hotel located
------------
in St Thomas and known as "Frenchman's Reef" and Purchaser may sell that
property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed,
detailed plans and specifications for the construction of the Proposed
AmeriSuites Hotel;
(ii) a schedule for the estimated costs of
construction prepared jointly by the contractor engaged to perform the work
and Seller; a construction schedule setting forth the target commencement
date, substantial completion date and final completion date for the
construction of the Projected AmeriSuites Hotel and the dates for completion
of the various phases of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months
after opening and for periods thereafter, to the extent then developed;
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(iv) historical occupancy and Rev Par information for
the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed
AmeriSuites Hotel;
(viii) any environmental or engineering reports
prepared in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction Costs,
if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of Acquisition
Costs, if Seller acquires an existing Proposed AmeriSuites Hotel; provided,
however, that if Seller is able to assign to Purchaser any contract of sale
between Seller and an owner of a Proposed AmeriSuites Hotel, without penalty,
consent or a requirement of Seller's continuing liability thereafter, then
Purchaser, in its sole discretion, may accept such assignment and pay to Seller
in lieu of the purchase price described in this subparagraph (i), an amount
equal to the sum of (A) any deposits made by Seller under the contract of sale,
(B) any reasonable costs or expenses incurred by Seller as of the date of the
assignment and (c) an amount equal to that which, absent the assignment to
Purchaser, would have been five percent (5%) of Acquisition Costs or
Construction Costs, as appropriate;
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<PAGE>
(ii) Within three (3) Business Days after providing
its notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of the
purchase price, which deposit, at Purchaser's election, may be in the form of a
letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites
------------
brand hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit E-1;
-----------
and
(v) If Seller constructs the Proposed AmeriSuites
Hotel, the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the Proposed
AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel
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<PAGE>
does not affect Purchaser's continuing rights under this Section 13.3 with
------------
respect to any other Proposed AmeriSuites Hotels.
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to any
------------
AmeriSuites hotels which are owned, operated or under construction by Seller or
a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Property Exception. Notwithstanding anything to
------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
----------
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
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<PAGE>
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed or otherwise to a Person in the event of a Change in Control of
Seller, and immediately after such a Change in Control, the provisions of this
Section 13 shall be deemed null, void and of no further force and effect.
- ----------
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions in this Section 13 shall not be
----------
included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
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<PAGE>
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under this Section 13 to any Person other than an
----------
Affiliate of Purchaser without Seller's prior written consent, which consent may
be withheld in Seller's sole discretion; any transfer in violation of this
Section 13.6(h) shall be void and of no force or effect.
- ---------------
(i) Notwithstanding anything to the contrary contained in this
Agreement, Seller retains the unrestricted right to continue to grant franchise
agreements for "AmeriSuites" hotels to unaffiliated third-parties. So long as
such franchisees are not Seller Affiliates, the provisions of this Section 13
----------
shall be inapplicable with respect thereto.
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS.
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to the
contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases, Hotel Lease, or Contracts
periods prior to the Closing or (y) any damage to property of others or injury
to or death of any person or any claims for any debts or obligations occurring
on or about or in connection with the Property or any portion thereof at any
time or times prior to the Closing or (z) all accounts payable and sales taxes
due for or on account of the period prior to Closing, and (ii) Purchaser shall
indemnify and hold harmless Seller from and against any and all obligations,
claims, losses, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (x) the Contracts, the Space Leases or the Hotel Lease, relating
to periods on or after the Closing, or (y) any damage to property of others or
injury to or death of any person or any claims for any debts or obligations
occurring on or about the Property or any portion thereof at any time or times
on or after the Closing or (z) sales taxes due for or on account of the period
from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the
-45-
<PAGE>
Closing, Purchaser shall be deemed to have also agreed to indemnify and hold
harmless Seller and its respective successors and assigns from and against all
claims, losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or
-46-
<PAGE>
prepared in accordance with this Agreement (including without limitation, all
due diligence materials, whether prepared by Seller or Purchaser) to any third
party without the consent of the other parties, which consent shall not be
unreasonably withheld, delayed or conditioned, except as required by law or
contractual obligations of such parties to third parties or as advised by
reputable counsel to be in accordance with law or such contractual obligation.
No party, or its employees shall trade in the securities of any parent or
affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof. The provisions of this Section 14.3 shall
------------
survive the Closing or earlier termination of this Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of action,
judgments, damages, losses, fines, penalties, costs and expenses, including
without limitation reasonable attorneys' fees and disbursements relating to the
a breach by such indemnifying party (or its directors, officers, shareholders,
partners, members, agents, employees or any independent contractors retained by
it) of any of the covenants to be performed by such party contained in this
Section 14.4. Notwithstanding anything to the contrary contained in this
- ------------
Agreement, the provisions of this Section 14.4 shall survive the Closing for a
------------
period of two (2) years. With respect to the indemnity obligations or any breach
of this Section 14.4, the provisions of Section 10 shall not apply and the
------------ ----------
indemnified party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-47-
<PAGE>
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(b) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
-48-
<PAGE>
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(c) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to time
and at any time during the term of this Agreement to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the right to designate an Affiliate of
Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
-49-
<PAGE>
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
-50-
<PAGE>
14.11. Performance on Business Days. In the event the date on
----------------------------
which performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-51-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ RICHARD SZYMANSKI
-------------------------------------
Richard Szymanski
Vice President
PURCHASER:
MT. ARLINGTON NEW JERSEY, LLC, a
Delaware limited liability company
By: AGH Upreit LLC, a Member
By: American General Hospitality
Corporation
By: /s/ BRUCE G. WILES
-----------------------------------
Bruce G. Wiles
Executive Vice President
By: American General Hospitality
Operating Partnership, L.P.
By: AGH GP, Inc., its general partner
By: /s/ BRUCE G. WILES
-----------------------------------
Bruce G. Wiles
Executive Vice President
-52-
<PAGE>
EXHIBIT 2.7
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
FAIRFIELD HOLDING CORP.,
as Seller,
and
PORTLAND/SHELTON LLC, L.P.,
as Purchaser
January 7, 1998
Portland, OR
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS........................................................ 1
1.1. "Acquisition Costs....................................................... 1
1.2. "Adjustments" ........................................................... 2
1.3. "Affiliate" ............................................................. 2
1.4. "Agreement" ............................................................. 2
1.5. "American General........................................................ 2
1.6. "Assumed Debt" .......................................................... 2
1.7. "Business Day" .......................................................... 2
1.8. "Change in Control" ..................................................... 2
1.9. "Closing" ............................................................... 3
1.10. "Closing Date" ......................................................... 3
1.11. "Code" ................................................................. 3
1.12. "Construction Costs" ................................................... 3
1.13. "Contracts" ............................................................ 3
1.14. "Cut-Off Time" ......................................................... 3
1.15. "Defective Property" ................................................... 3
1.16. "Deposit" .............................................................. 4
1.17. "Diligence Notice....................................................... 4
1.18. "Documents" ............................................................ 4
1.19. "Due Diligence Material" ............................................... 4
1.20. "Environmental Laws" ................................................... 4
1.21. "Environmental Report" ................................................. 4
1.22. "Escrow Agent" ......................................................... 4
1.23. "Escrow Agreement" ..................................................... 4
1.24. "Estoppel Certificate" ................................................. 4
1.25. "Exchange Act" ......................................................... 5
1.26. "Excluded Intellectual Property" ....................................... 5
1.27. "FF&E" ................................................................. 5
1.28. "FF&E Leases" .......................................................... 5
1.29. "Financial Statements" ................................................. 6
1.30. "Franchise Agreement" .................................................. 6
1.31. "Franchisor Comfort Letters" ........................................... 6
1.32. "Full Service Hotels" .................................................. 6
1.33. "Group Two Sale Agreement" ............................................. 6
1.34. "Hazardous Substance" .................................................. 6
1.35. "Hotel" ................................................................ 6
1.36. "Improvements" ......................................................... 6
1.37. "Intangible Property" .................................................. 6
1.38. "Leased FF&E" .......................................................... 7
1.39. "Letter of Credit....................................................... 7
1.40. "Liquidated Damages" ................................................... 7
1.41. "Liquor License" ....................................................... 7
1.42. "Mortgagee" ............................................................ 7
1.43. "Offer" ................................................................ 7
1.44. "Operating Leases" ..................................................... 7
1.45. "Operating Lessee" ..................................................... 7
1.46. "Original Agreement" ................................................... 7
1.47. "Other Agreements" ..................................................... 7
1.48. "Other Revenues" ....................................................... 7
1.49. "Permitted Encumbrances" ............................................... 7
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
1.50. "Person" ............................................................... 8
1.51. "Project Plan" ......................................................... 8
1.52. "Property" ............................................................. 8
1.53. "Proposed AmeriSuites Hotel" ........................................... 8
1.54. "Prorations Settlement" ................................................ 8
1.55. "Purchase Price" ....................................................... 8
1.56. "Purchaser" ............................................................ 8
1.57. "Real Property" ........................................................ 8
1.58. "REIT" ................................................................. 8
1.59. "Restricted Period" .................................................... 8
1.60. "Room Revenues" ........................................................ 8
1.61. "SEC Documents" ........................................................ 9
1.62. "Seller" ............................................................... 9
1.63. "Seller's knowledge" ................................................... 9
1.64. "Seller Subsidiary" .................................................... 9
1.65. "Space Leases" ......................................................... 9
1.66. "Subordination, Nondisturbance and Attornment Agreement" ............... 9
1.67. "Survey" ............................................................... 9
1.68. "Survival Period" ...................................................... 9
1.69. "Title Commitment" ..................................................... 9
1.70. "Title Company" ........................................................ 9
1.71. "WARN Act" ............................................................. 9
SECTION 2. PURCHASE AND SALE.................................................. 10
2.1. Purchase and Sale........................................................ 10
2.2. Deposit.................................................................. 10
2.3. Closing.................................................................. 10
2.4. Purchase Price........................................................... 10
2.5. Tax Free Exchange........................................................ 11
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION............................... 11
3.1. Diligence Inspections.................................................... 11
3.2. Defective Properties..................................................... 14
3.3. Title Matters............................................................ 15
3.4. Survey................................................................... 15
3.5. Additional Termination Option............................................ 16
3.6. Adjournment of Closing................................................... 17
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE...................... 17
4.1. Closing Documents........................................................ 17
4.2. Condition of the Property................................................ 19
4.3. Title Policies........................................................... 19
4.4. Opinions of Counsel...................................................... 19
4.5. Other Approvals.......................................................... 20
4.6. Representations.......................................................... 20
4.7. Default under Group Two Sale Agreement................................... 20
4.8. Default under Other Agreements........................................... 20
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE......................... 20
5.1. Purchase Price........................................................... 21
5.2. Closing Documents........................................................ 21
5.3. Opinion of Counsel....................................................... 21
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
5.4. Other Approvals.......................................................... 21
5.5. Representations.......................................................... 22
5.6. Default under Group Two Sale Agreement................................... 22
5.7. Default under Other Agreements........................................... 22
SECTION 6. REPRESENTATIONS OF SELLER.......................................... 22
6.1. Status and Authority of Seller........................................... 22
6.2. Action of Seller......................................................... 22
6.3. No Violations of Agreements.............................................. 23
6.4. Litigation............................................................... 23
6.5. Existing Leases, Agreements, Etc......................................... 23
6.6. Franchise Agreement...................................................... 23
6.7. Contracts................................................................ 23
6.8. Taxes.................................................................... 24
6.9. Not A Foreign Person..................................................... 24
6.10. Hazardous Substances.................................................... 24
6.11. Insurance............................................................... 24
6.12. FF&E.................................................................... 24
6.13. Employment and Union Contracts.......................................... 24
6.14. Adjacent Land Leases.................................................... 24
6.15. Trademarks.............................................................. 24
6.16. Compliance with Laws.................................................... 25
6.17. Inventory............................................................... 25
6.18. Holder of Liquor License................................................ 25
SECTION 7. REPRESENTATIONS OF PURCHASER....................................... 26
7.1. Status and Authority of Purchaser........................................ 26
7.2. Action of Purchaser...................................................... 26
7.3. No Violations of Agreements.............................................. 26
7.4. Litigation............................................................... 27
7.5. No Conflicts............................................................. 27
SECTION 8. COVENANTS OF SELLER AND PURCHASER.................................. 28
8.1. Covenants of Seller...................................................... 28
8.2. Covenants of Purchaser................................................... 31
SECTION 9. CLOSING COSTS...................................................... 31
9.1. Closing Costs............................................................ 31
SECTION 10. DEFAULT........................................................... 32
10.1. Default by Seller....................................................... 32
10.2. Default by Purchaser.................................................... 32
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT................................ 32
11.1. Liquor License.......................................................... 32
11.2. Franchise Agreement..................................................... 33
11.3. License for Excluded Intellectual Property.............................. 34
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS............................. 35
12.1. Matters to be Adjusted or Prorated...................................... 35
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
12.2. Reserves Held by Holders of Assumed Debt................................ 36
12.3. Certiorari Proceeding................................................... 36
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION;
AMERISUITES HOTEL PURCHASE OPTION...................................... 37
13.1. Right of First Refusal on Full Service Hotels.......................... 37
13.2. Radius Restriction..................................................... 39
13.3. AmeriSuites Hotels..................................................... 39
13.4. Multi-Property Exception............................................... 42
13.5. Survival and Damages................................................... 42
13.6. General Provisions..................................................... 42
SECTION 14. MISCELLANEOUS..................................................... 44
14.1. Agreement to Indemnify.................................................. 44
14.2. Brokerage Commissions................................................... 45
14.3. Publicity............................................................... 45
14.4. Confidentiality......................................................... 46
14.5. Notices................................................................. 46
14.6. Waivers, Etc............................................................ 48
14.7. Assignment; Successors and Assigns...................................... 48
14.8. Severability............................................................ 48
14.9. Counterparts, Etc....................................................... 49
14.10. Governing Law.......................................................... 49
14.11. Performance on Business Days........................................... 49
14.12. Attorneys' Fees........................................................ 50
14.13. Section and Other Headings............................................. 50
14.14. Financing and Priority of Operating Lease.............................. 50
14.15. Group Two Purchase and Sale Agreement.................................. 50
14.16. Exceptions to Liquidated Damages....................................... 50
</TABLE>
EXHIBITS*
Exhibit B Legal Description of the Property
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Lease and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit O Form of Representation Letter in favor of Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
- ------------------------------
* The following Exhibits have been deemed non-material for investment
purposes however, a copy of any Exhibit will be furnished to the Securities
and Exchange Commission upon request.
(iv)
<PAGE>
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between FAIRFIELD HOLDING CORP., a Delaware
corporation ("Seller"), as seller, and PORTLAND/SHELTON LLC ("Purchaser"), as
purchaser.
W I T N E S S E T H:
WHEREAS, Prime Hospitality Corp. and American General
Hospitality Operating Partnership ("American General") entered into that certain
----------------
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Prime Hospitality Corp. and American General desire
to amend and restate the Original Agreement in the form of eight separate
contracts, one contract for each of the Properties (as defined in the Original
Agreement) (such contracts other than this Agreement being referred to herein as
the "Other Agreements"); and
----------------
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, American General has designated Purchaser pursuant to
the Original Agreement to receive title to the Property; and
WHEREAS, Seller, a wholly-owned subsidiary of Prime
Hospitality Corp., is the fee owner of the Property; and
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase Seller's interest in the Property, subject to and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the
<PAGE>
same, any architect, engineer, attorney, accountant and other professional fees,
any due diligence expenses incurred in assessing the Proposed AmeriSuites Hotel,
title and survey costs, transfer taxes and pre-opening expenses of the hotel,
including without limitation, costs incurred in the reflagging of the hotel,
promotional and advertising expenses, administrative expenses, employee hiring
and training expenses, the cost of supplies, equipment and furniture purchased
for the hotel, governmental, utility or other deposits required for operation of
the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that, directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
---------- -
as it and they may be amended from time to time as herein provided.
1.5. "American General" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.6. "Assumed Debt" shall have the meaning given such term
------------
in Section 2.4.
-----------
1.7. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.8. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
-2-
<PAGE>
1.9. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.10. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.11. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the treasury regulations promulgated thereunder.
1.12. "Construction Costs" shall mean all hard and soft costs
------------------
incurred by Seller or the Seller Subsidiary, as appropriate, in connection with
the acquisition of the site and construction and related improvements for a
Proposed AmeriSuites Hotel, including without limitation (a) the cost of funds
used for such construction, whether provided by a third party lender or by
Seller (the interest on such funds being calculated in the latter event at a
rate equal to the prime rate reported in the Money Rates column or comparable
section of The Wall Street Journal (or if The Wall Street Journal is no longer
----------------------- -----------------------
published, a different publication designated by Seller) as the rate then in
effect for corporate loans at large U.S. money center commercial banks, plus
three percent (3%) compounded monthly), (b) attorney, accountant, engineer,
architect, contractor and other professional fees; (c) any due diligence
expenses incurred in assessing a site for the Proposed AmeriSuites Hotel; (d)
title and survey costs; (e) transfer taxes; and (f) pre-opening expenses of the
hotel, including without limitation, promotional and advertising expenses,
administrative expenses, employee hiring and training expenses, the cost of
supplies, equipment and furniture ordered or purchased for the hotel,
governmental, utility or other deposits required for operation of the hotel and
similar costs.
1.13. "Contracts" shall mean all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.14. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.15. "Defective Property" shall mean the Property if and
------------------
when the Property which (i) has been condemned in whole or in part, or (ii) by
reason of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order
-3-
<PAGE>
to restore the Property into substantially the same condition as existing prior
to such damage.
1.16. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.17. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
- ------------ ---
1.18. "Documents" shall mean all books, records and files
---------
relating to the leasing, maintenance, management or operation of the Property.
1.19. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.20. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.21. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.10.
------------
1.22. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.23. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.24. "Estoppel Certificate" shall mean a statement in favor
--------------------
of Purchaser and/or any Mortgagee certifying to such matters as Purchaser and/or
its Mortgagee may reasonably request, including, without limitation, the
following:
(a) when from a franchisor under a Franchise Agreement, that
an attached copy of the Franchise Agreement is a true, correct and complete copy
of such Franchise Agreement which has not been modified except as identified;
that Seller is not in monetary or other default under the Franchise Agreement
and that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise
-4-
<PAGE>
Agreement; and to any other matters which franchisor is required to certify
pursuant to the terms of the Franchise Agreement;
(b) when from the holder of any Assumed Debt, that the copies
of the loan documents evidencing and securing the Assumed Debt previously
delivered to Purchaser are the true, correct and complete copies of such loan
documents which have not been modified except as identified; to the outstanding
principal indebtedness and accrued interest of the Assumed Debt; that Seller, as
borrower, is not in monetary or other default under the Assumed Debt loan
documents and that no event has occurred which with the giving of notice or the
passage of time or both will become a default under the Assumed Debt loan
documents; and to any other matters which such holder is required to certify
pursuant to the terms of the Assumed Debt loan documents;
each in a form reasonably acceptable to said franchisor or holder of Assumed
Debt; provided, however, that if any Franchise Agreement or loan document
evidencing the Assumed Debt (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the relevant
document on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(i), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
1.25. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.26. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.27. "FF&E" shall mean all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.28. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
-5-
<PAGE>
1.29. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
--------------
1.30. "Franchise Agreement" shall mean the hotel licensing
-------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.31. "Franchisor Comfort Letters" shall mean letters from
--------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.32. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.33. "Group Two Sale Agreement" shall have the meaning given
------------------------
that term in Section 14.15.
-------------
1.34. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.35. "Hotel" shall mean the hotel located at the Property.
-----
1.36. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
1.37. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including
-6-
<PAGE>
without limitation all trademarks, trade names, copyrights, patents or technical
processes, owned and used by Seller which pertain solely to the Property and
expressly excluding the Excluded Intellectual Property and all trademarks, trade
names, copyrights, patents or technical processes used with respect to Seller
itself or Seller's Affiliates, and expressly excluding the Contracts.
1.38. "Leased FF&E" shall have the meaning given such term in
-----------
Section 6.14.
- ------------
1.39. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.40. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.41. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.42. "Mortgagee" shall mean any and all lenders who provides
---------
financing to Purchaser in connection with the Property.
1.43. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
1.44. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.45. "Operating Lessee" shall mean a wholly-owned subsidiary
----------------
of Seller as tenant, of an Operating Lease(s); which is a single-purpose entity
with the sole purpose of leasing, managing, maintaining, operating and
performing other related functions for the Hotel.
1.46. "Original Agreement" shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.47. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.48. "Other Revenues" shall have the meaning given such term
--------------
in Section 12.1.
------------
1.49. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) applicable
zoning regulations
-7-
<PAGE>
and ordinances provided the same do not prohibit or impair in any material
respect use of the Property as a hotel as currently operated and constructed;
(d) UCC Financing Statements securing the purchase price of FF&E under the FF&E
Leases identified on Exhibit I; provided, however, that such liens shall be
---------
confined to the asset in question and the aggregate principal amount of
indebtedness secured by such liens shall not exceed the cost of acquisition or
construction of the property subject thereto; (e) such other nonmonetary
encumbrances with respect to the Property which are not objected to by Purchaser
in accordance with Section 3; and (f) such exceptions or matters, as the case
---------
may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.50. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.51. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.52. "Property" shall mean collectively, all of the Seller's
--------
interest in the Real Property, and in the FF&E, the Documents, the Improvements
and the Intangible Property relating to the Real Property.
1.53. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
1.54. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.55. "Purchase Price" shall have the meaning given such term
--------------
in Section 2.4.
-----------
1.56. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.57. "Real Property" shall mean the real property described
-------------
in Exhibit B, together with all easements, rights of way, privileges, licenses
---------
and appurtenances which Seller may now own with respect thereto.
1.58. "REIT" shall mean American General Hospitality
----
Corporation.
1.59. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.60. "Room Revenues" shall have the meaning given such term
-------------
in Section 12.1.
------------
-8-
<PAGE>
1.61. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.62. "Seller" shall have the meaning given such term in the
------
preamble to this Agreement
1.63. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.63 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.64. "Seller Subsidiary" shall have the meaning set forth in
-----------------
Section 13.1.
- ------------
1.65. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on Exhibit
-------
K.
- -
1.66. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.67. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.68. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.69. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.70. "Title Company" shall mean, collectively, Chicago Title
-------------
Insurance Company and Commonwealth Land Title Insurance Company, each as a 50%
co-insurers, or such other title insurance company or companies as shall have
been reasonably approved by Purchaser and Seller.
1.71. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
-9-
<PAGE>
SECTION 2. PURCHASE AND SALE.
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
-------
the sum of One Million Three Hundred Thirty-Two Thousand Dollars ($1,332,000)
(together with all interest accrued thereon, the "Deposit") in the form of an
unconditional, irrevocable letter of credit issued by Bank One, Texas, N.A. (the
"Letter of Credit"). The Letter of Credit shall be in the amount of Seven
----------------
Million Five Hundred Thousand Dollars ($7,500,000), which amount shall represent
the Deposit as well as the deposits required pursuant to the Other Agreements.
The Deposit (and the Letter of Credit) shall be held pursuant to, and disbursed
according to, the terms of the Escrow Agreement. Notwithstanding anything to the
contrary contained in this Agreement, until the Deposit is disbursed in
accordance with the Escrow Agreement, this Agreement shall not terminate and
shall remain in full force and effect to the extent necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall
-------
be consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations with respect
---------
to that Property under Section 4, unless such obligations shall have been waived
---------
by Purchaser and provided that such adjournment with respect to the Property
shall not adjourn the Closing Date with respect to any of the other Properties
to be conveyed under the Other Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Twenty-Four
--------------
Million Five Hundred Seventy-Five Thousand Dollars ($24,575,000), allocated
Twenty-One Million Five Hundred Five Thousand Dollars ($21,505,000) to the Real
Property and Improvements and Three Million Seventy Thousand Dollars
($3,070,000) to the personal property including, without limitation, the FF&E
and the Intangible Property.
(b) A portion of the Purchase Price shall be paid by
Purchaser assuming certain debt in accordance with Section 2.4(c)
--------------
-10-
<PAGE>
and the remainder (plus or minus adjustments and prorations as set forth in
Section 12 hereof) shall be payable by wire transfer of immediately available
- ----------
federal funds on the Closing Date to an account to be designated by Seller prior
to the Closing.
(c) Purchaser shall receive a credit against the Purchase
Price for a portion of the Purchase Price equal to the sum of (i) the
outstanding principal balance and (ii) accrued interest thereon and assumption
fees for the account of Seller as Seller shall direct Purchaser to pay, by
virtue of assuming certain debt (collectively, the "Assumed Debt") in an
------------
aggregate original principal amount equal to $5,600,579, which Assumed Debt is
secured by a lien against the Property.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring a Section 1031 exchange with respect to the Property, if so desired
by Seller, provided that such structuring shall not materially adversely affect
Purchaser's rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser
in connection with Purchaser complying with the terms of this Section 2.5 shall
-----------
be paid by Seller.
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise provided to
Purchaser pursuant to this Agreement. Purchaser
-11-
<PAGE>
agrees and acknowledges that it has investigated and/or received the opportunity
to investigate the Property to its satisfaction and that it is not relying on
any materials, statements, representations or warranties of any kind, other than
as specifically set forth in this Agreement, in purchasing the Property. To the
extent that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, has damaged or disturbed or does damage or
disturb the Real Property, or the Improvements located thereon, Purchaser shall
return the same to substantially the same condition which existed immediately
prior to such damage or disturbance. In the event that the transactions
contemplated by this Agreement are not closed and consummated for any reason,
Purchaser shall deliver to Seller all tests, reports and inspections of the
Property made and conducted by Purchaser or for its benefit or any other
documents or information Purchaser has received pursuant to this Agreement.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all cost, expense, liability, loss or damage which Seller may incur as a
result of any act or omission of Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any gross negligence or
willful misconduct of Seller. The provisions of this Section 3.1(a) shall
--------------
survive the termination of this Agreement and the Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for the current year to date and
each of the three (3) years prior to the year of this Agreement (the
"Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and
other patrons of the Hotel; management fees; maintenance, repairs and other
expenses relating to the management and operation of the Hotel; occupancy
statistics for the Hotel for the current year to date and the prior three (3)
calendar years; and all capital expenditures made during the aforementioned
periods. To the extent that the Financial Statements provided by
-12-
<PAGE>
Seller for the current year do not include any period up to and including the
Closing Date, Seller shall, within 25 days after the Closing Date, provide
Purchaser with monthly unaudited Financial Statements applicable to such
period inclusive of the Closing Date.
(iii) All documents evidencing, securing or related to
the Assumed Debt;
(iv) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in
Seller's possession or control or readily available without expense, notices
of appraised value for the Real Property and Improvements;
(v) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser
shall return such information to Seller;
(vi) All Contracts;
(vii) All Space 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) All notices received from governmental
authorities in connection with the Hotel;
(ix) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(x) All FF&E Leases;
(xi) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xii) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to the Hotel;
-13-
<PAGE>
(xiii) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
(xiv) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement, by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotels, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Coopers & Lybrand, L.L.P. a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which would cause the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this Section
----------- -------
3, Purchaser may elect at its option to terminate this Agreement. Promptly upon
- -
learning of the same, Seller covenants and agrees to provide Purchaser with
prompt written notice of any casualty or condemnation affecting the Property.
(b) If Purchaser timely gives notice to Seller that it
considers the Property a Defective Property, and Purchaser and Seller shall,
acting reasonably and in good faith, be unable or
-14-
<PAGE>
unwilling to agree (x) that Seller shall, at its sole cost, attempt to remedy
the applicable defect prior to the Closing (in which event Seller shall have the
right to adjourn the Closing Date pursuant to the provisions of Section 3.7 for
-----------
up to ninety (90) days for such purpose), (y) that Purchaser shall,
notwithstanding such defect, acquire the Defective Property subject to a
reduction in the Purchase Price, as reasonably determined by Seller and
Purchaser, sufficient to compensate Purchaser for such defect, or (z) on the
substitution of another property owned by Seller for such Defective Property,
this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the effective date of the Original Agreement, for an ALTA (or such other
form reasonably approved by Purchaser) owner's policy of title insurance with
respect to the Property, together with complete and legible copies of all
instruments and documents referred to as exceptions to title (collectively, the
"Title Commitment"). Except as set forth on the Diligence Notice, Purchaser
----------------
acknowledges and agrees that it does not have any other objections to any title
exceptions shown on the Title Commitment. Seller acknowledges and agrees that
Seller shall attempt to remedy the objections set forth in the Diligence Notice
with respect to the Property; Seller shall have the right to adjourn the Closing
Date pursuant to Section 3.6 for up to ninety (90) days for such purpose. If
-----------
Seller shall be unable to remove any such title defects to which Purchaser has
objected in accordance with this Section 3.3, Purchaser may elect (i) to
-----------
terminate this Agreement with respect to the affected Properties, and this
Agreement shall be of no further force and effect, except as otherwise expressly
provided herein, or (ii) to consummate the transactions contemplated hereby,
notwithstanding such title defect, without any abatement or reduction in the
Purchase Price on account thereof. Purchaser shall make any such election by
written notice to Seller given on or prior to the earlier of the Closing Date or
the fifth Business Day after Seller's notice of its inability to cure such
defect, and time shall be of the essence with respect to the giving of such
notices by Purchaser. Failure of Purchaser to give such notice shall be deemed
an election by Purchaser to proceed in accordance with clause (ii) above, and
such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect
------
to the Real Property (the "Survey") by a licensed
------
-15-
<PAGE>
surveyor in the jurisdiction in which the Property is located, which (i)
contains an accurate legal description of the Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting the
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the Property is located
within a 100-year flood plain and (iv) is certified to Purchaser and the Title
Company and such other persons as shall have been requested by Purchaser or
Seller. Except as set forth on the Diligence Notice, Purchaser acknowledges and
agrees that it does not have any other objections to any matter shown on the
Survey. Seller acknowledges and agrees that Seller shall attempt to remedy the
objections set forth in the Diligence Notice with respect to the Survey; Seller
shall have the right to adjourn the Closing Date pursuant to Section 3.6 for up
-----------
to ninety (90) days for such purpose. If Seller shall be unable to remove any
such survey defect to which Purchaser has objected, Purchaser may elect (i) to
terminate this Agreement and this Agreement shall terminate and be of no further
force or effect except as otherwise expressly provided herein, or (ii) to
consummate the transactions contemplated hereby, notwithstanding such defect,
without any abatement or reduction in the Purchase Price on account thereof.
Purchaser shall make any such election by written notice to Seller given on or
prior to the earlier of the Closing Date or fifth Business Day after Seller's
notice of its inability to cure such defect and time shall be of the essence
with respect to the giving of such notice by Purchaser. Failure of Purchaser to
give such notice shall be deemed an election by Purchaser to proceed in
accordance with clause (ii) above and such matter shall be a Permitted
Encumbrance.
3.5. Additional Termination Option.
-----------------------------
If Purchaser shall elect, pursuant to any provision of this
Agreement or of the Other Agreements, to terminate any three or more of the
Other Agreements and/or this Agreement, then, together with such notice of
termination with respect to this Agreement or an Other Agreement which taken by
itself or together with any prior notices of termination would result in the
three or more such terminations, Purchaser may, in such notice, or Seller may,
within 10 Business Days of receipt of such notice of termination by written
notice to Purchaser, terminate this Agreement and simultaneously terminate the
Other Agreements and the Group Two Sale Agreement, in which event the Deposit
shall be returned to Purchaser and the parties to this Agreement shall have no
further obligations under this Agreement, the Other Agreements or the Group Two
Sale Agreement except as expressly provided in this Agreement, the Other
Agreements or the Group Two Sale Agreement. Notwithstanding the foregoing, if
any provision in any Other Agreement expressly provides that a termination
thereof shall not be considered for purposes of determining with respect to this
Section 3.5 whether three such terminations have
- -----------
-16-
<PAGE>
occurred, such provision of the Other Agreement shall be controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(i)), Franchisor Comfort Letters (as
--------------
required by Section 4.1(k) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the Properties to be conveyed under the Other Agreements
until such Estoppel Certificates, Franchisor Comfort Letters or consents are
obtained, provided such adjournment shall not be longer than ninety (90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the Property is located in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) An original fully executed counterpart of each document
evidencing or securing the Assumed Debt, to the extent the same is in Seller's
possession, custody or control; provided that if Seller is unable to produce an
original fully executed counterpart of any such document, Seller may provide a
copy of such document certified by Seller to be a true and correct copy thereof,
in lieu thereof;
-17-
<PAGE>
(c) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(d) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(g) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(h) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(i) Duly executed Estoppel Certificates from the franchisor
under the Franchise Agreement and the holders of the Assumed Debt; provided that
any such Estoppel Certificate shall be provided to Purchaser prior to Closing
promptly following receipt by Seller of the same;
(j) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(k) Franchisor Comfort Letters;
(l) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel;
(m) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
(n) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
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<PAGE>
(o) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(p) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to the state in which the Property is located.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the customary and reasonable assumptions and qualifications, and
such other matters with respect to the transactions contemplated by this
Agreement or the Operating Lease as the Purchaser may reasonably require. Seller
and Purchaser shall agree upon local
-19-
<PAGE>
counsel for the jurisdiction in which the Property is located to provide an
appropriate jurisdiction-specific opinion, the cost of which local counsel will
be shared equally by Seller and Purchaser. An opinion from in-house counsel to
Seller shall satisfy this Section 4.4 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) all lender consents necessary in connection with the assumption
of the Assumed Debt; (c) the consent of the franchisor, if required; (d) the
consent of the ground lessor under that certain Lease dated June 29, 1973 (as
amended, the "Armonk Lease") for premises located in Armonk, New York to the
------------
transactions contemplated by the Group Two Sale Agreement; and (e) a
modification of such Armonk Lease to extend the initial term thereof such that
at the closing of the property there shall be at least thirty (30) years of the
initial term remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be in
------------------------------
default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of which may be waived by Seller in its sole and
absolute discretion:
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<PAGE>
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner;
(c) Duly executed and acknowledged assignment and assumption
documents for the assumption of the Assumed Debt, in forms reasonably acceptable
to Purchaser and the lender;
(d) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller, the Title Company or any lender
holding all or any portion of the Assumed Debt may reasonably require to
effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for each jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all lender consents necessary
------------
or appropriate in connection with the assumption of the Assumed Debt; (c) the
consent of franchisor, if required; (d) the consent of the ground lessor under
the Armonk Lease to the transactions contemplated by the Group Two Sale
Agreement; and (e) a modification of such Armonk Lease to extend the initial
term thereof such that at the Closing of the Property there shall be at least
thirty (30) years of the initial term remaining.
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<PAGE>
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default under Group Two Sale Agreement. Purchaser
--------------------------------------
shall not be in default, or have committed an act or failed to perform an act
which, with the giving of notice, the passage of time or both, will become a
default under, the Group Two Sale Agreement.
5.7. Default under Other Agreements. Purchaser shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate; provided however,
except with respect to the failure of the conditions set forth in Section 5.1,
-----------
Section 5.6 and Section 5.7 (which shall be a default under this Agreement),
- ----------- -----------
such failure of a condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a
------------------------------
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
----------------
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by Seller on
or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller, as the case may be, enforceable
against Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors.
-22-
<PAGE>
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
6.4. Litigation. Seller has not received any written notice
----------
of and, to Seller's knowledge, no action or proceeding is pending or threatened
and no investigation looking toward such an action or proceeding has begun,
which (a) questions the validity of this Agreement or the Operating Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the Property,
(c) will result in or subject the Property to a material liability, or (d)
involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
-----------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Franchise Agreement listed on
-------------------
Exhibit D is the sole franchise agreement affecting the Property as of the date
- ---------
hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is true and complete copies of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
6.7. Contracts. The copies of the Contracts provided or
---------
made available to Purchaser not later than December 1, 1997 are true and
complete copies of said Contracts and, to
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<PAGE>
Seller's knowledge, are valid, in full force and effect and no party has
breached any material condition or provision thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign
--------------------
person" within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
-------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation of any trademark or
tradename owned by any other person or entity.
-24-
<PAGE>
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.18. Holder of Liquor License. The holder of the Liquor
------------------------
License for the Property is Prime Hospitality Corp., a Delaware corporation.
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.18 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written notice of a breach thereof within
the Survival Period (but in any event promptly after learning of such breach)
specifying in sufficient detail the facts constituting such alleged breach and
the loss then reasonably ascertainable as a consequence thereof, and an
opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting the Property, whether made by Seller, on Seller's behalf or
otherwise, including, without limitation, the physical condition of the
Property, title to or the boundaries of the Real Property,
-25-
<PAGE>
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Property or the market and physical environments in which they are located.
Purchaser acknowledges (i) that Purchaser has made and is relying upon its own
investigation or that of third parties with respect to the physical,
environmental, economic and legal condition of the Property and (ii) that
Purchaser is not relying upon any statements, representations or warranties of
any kind, other than those specifically set forth in this Agreement or in any
document to be delivered to Purchaser at the Closing made by Seller. Purchaser
further acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Property in its "as is" condition on the Closing
Date.
SECTION 7. REPRESENTATIONS OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement nor the Operating Lease by Purchaser,
nor compliance with the terms and
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provisions hereof or of the Operating Lease, will result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any
property or assets of Purchaser pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness or any other agreement
or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it, any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of such breach) specifying in
sufficient detail the facts constituting such alleged breach and the loss then
reasonably ascertainable as a consequence thereof, and an opportunity to
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cure such breach within a reasonable period of time after Seller having learned
of such breach. Notwithstanding any provision to the contrary set forth in this
Agreement, Seller shall have no claim against Purchaser and Purchaser shall have
no liability to Seller, in the event of a breach of any of Purchaser's
representations and warranties and statements in this Agreement in a respect
which is not material and which does not result in any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition
with respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement in a good and businesslike fashion consistent with
its past practices (which Seller believes to be in compliance with the Franchise
Agreement) and to cause the Property to be maintained in good working order and
condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property.
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases, the Franchise Agreement or the documents evidencing and securing
the Assumed Debt, other than those modifications, renewals or extensions
required by the terms of the applicable document, or enter into any other
leases, agreements, mortgages or other loan documents or other commitments
relating to the Property or the operation of the Hotel other than in the normal
course of business and which are
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by their terms terminable without penalty upon not more than thirty (30) days
notice.
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the Hotel as of the Closing Date shall remain the employees of Seller after
the Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser
from and against any and all liability, cost, damages and expenses arising from
or relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing.
--------------
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement, in a fashion
consistent with its past practice (which Seller believes to be in compliance
with such Liquor License and Franchise Agreement); (vi) maintaining supplies and
personalty consistent with the prior operations of Seller; (vii) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (viii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (viii) shall survive Closing;
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<PAGE>
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases the Franchise Agreement, the Liquor
License, the documents evidencing and securing the Assumed Debt and the
Contracts for the Hotel, and all other applicable contractual arrangements
relating to the Hotel consistent with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts, Space Leases, or documents evidencing the
Assumed Debt, without Purchaser's prior written consent, except that the 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 thirty (30) days prior notice without cost or expense. Any such new
agreement or renewal or extension of existing agreements to which Purchaser's
consent was not obtained, whether or not such consent is required under this
Section 8.1(i) shall subject the applicable agreement to Purchaser's review
- --------------
under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and
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<PAGE>
any consents and approvals necessary for the transaction contemplated by this
Agreement at least one week prior to the Closing; to continue to use reasonable,
good faith efforts to obtain such items thereafter; to promptly inform Purchaser
of any issues or problems which Seller foresees in obtaining any such items; and
to deliver each such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
8.2. Covenants of Purchaser. Purchaser hereby covenants
----------------------
with Seller commencing on the date of the Original Agreement and continuing
until the Closing Date, Purchaser shall exercise best efforts to cause or permit
the Purchaser to assume the Assumed Debt as payment of a portion of the Purchase
Price, in accordance with the terms of this Agreement. Without limiting the
foregoing, Purchaser agrees that it shall form special purpose entities, provide
financial and other information reasonably requested by any holder of Assumed
Debt, provide legal opinions regarding the due formation and good standing of
the assignee of the Assumed Debt and the due authorization and execution of the
documents evidencing the assumption, negotiate in good faith the assumption
documents, and perform such other acts and provide such other information as any
holder of Assumed Debt may reasonably require. Seller shall pay the reasonable
third-party costs incurred by Purchaser in complying with this Section 8.2
-----------
promptly upon receipt of invoices or other reasonable evidence of the incurrence
of such costs; the provisions of this sentence shall survive the Closing or
earlier termination of this Agreement.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay
-------------
its own expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any legal and accounting
fees, inspection fees, and the costs and expenses of preparing engineering and
environment reports, market studies and appraisals, whether or not the
transactions contemplated hereby are consummated. The cost of the Survey, Title
Commitment (and the policies and endorsements issued pursuant thereto), all
state and local sales, transfer, excise, value-added or other similar taxes, all
recording and filing fees that may be imposed by reason of the sale, transfer,
assignment and delivery of the Property shall be shared equally by Seller and
Purchaser. As between Purchaser and Seller, the cost of seeking consents
including, without limitation, any transfer or assumption fees incurred in
connection therewith, Franchisor Comfort Letters and Estoppel Certificates shall
be borne solely by Seller.
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<PAGE>
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser One Million
Three Hundred Thirty-Two Thousand Dollars ($1,332,000) as liquidated damages and
not as a penalty (the "Liquidated Damages"). Purchaser and Seller acknowledge
------------------
that the damages which may be incurred by Purchaser in the event of Seller's
default are difficult to quantify as of the date of this Agreement; the
Liquidated Damages represent the parties reasonable estimate of Purchaser's
probable future damages in the event of Seller's default and the Liquidated
Damages represent fair and reasonable compensation to Purchaser in the event of
Seller's default. Except with respect to the Liquidated Damages, Purchaser
hereby waives any and all rights it may have to sue Seller for money damages in
connection with this Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of this Agreement; the Liquidated Damages represent the
parties reasonable estimate of Seller's probable future damages in the event of
Purchaser's default and the Liquidated Damages represent fair and reasonable
compensation to Seller in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.
11.1. Liquor License. Seller currently holds a Liquor
--------------
License for the Hotel and if in compliance with all applicable laws, statutes,
rules, regulations and ordinances Seller may continue to hold such Liquor
License following the Closing, Seller shall maintain the Liquor License and
Purchaser shall not interfere with the maintenance of the Liquor License. If
Seller may not continue to hold the Liquor License following the Closing or if
the existing Liquor License needs to be revised to reflect the Purchaser as
owner of the Property, then Seller shall apply for a new or modified Liquor
License or, if advised
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<PAGE>
by local counsel to be required under local laws, regulations or orders,
Purchaser or its designee shall apply for a liquor license for the Hotel, at
Seller's sole cost and expense, promptly after Closing. Seller and Purchaser
shall cooperate to obtain a liquor license for the Hotel or modifications to the
existing Liquor License or to maintain the existing Liquor License in effect.
Until such time as such a new or modified liquor license is obtained, Seller
shall take all steps reasonably necessary to enable the current Liquor License
to be used by the Hotel and to permit the uninterrupted sale and service of
alcoholic beverages at the Hotel. The provisions of this Section 11.1 shall
------------
survive the Closing.
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or consents of
franchisors, after using commercially reasonable, good faith efforts to do so in
accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters, such
consents or otherwise in connection with the transaction contemplated by this
Purchase Agreement shall be limited to the first One Hundred Thousand Dollars
($100,000) of the collective administrative fees required by the franchisor and
by any franchisor in connection with the transactions contemplated by the Other
Agreements and one-half of all amounts in excess thereof, and Purchaser hereby
covenants and agrees to pay the other one-half of such administrative fees in
excess of One Hundred Thousand Dollars ($100,000). In no event shall the
requirement of payment of administrative fees constitute a reason for Purchaser
to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in
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good faith to an adjustment of the rent payable pursuant to the Operating Lease
for the Property, based on the terms and conditions of the new franchise
agreement and its anticipated effect on Gross Revenues (as defined in the
Operating Lease).
(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
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<PAGE>
The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS.
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking
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<PAGE>
services, revenues from any "mini-bars" located in the Hotel rooms and all other
revenues (the "Other Revenues"), provided that Other Revenues arising from the
--------------
sale of food and beverages in restaurants and bars which do not remain open the
entire Cut-Off Night shall be apportioned as of the last hour at which the
applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreements, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j) it is the intent of Seller
and Purchaser that all income and expenses relating to the Property shall be
prorated as provided in this Section 12 such that Seller shall have the benefit
----------
of all income and be responsible for all expenses and liabilities incurred in
connection with the Property fairly allocable to the period prior to the Closing
Date and that Operating Lessee under the Operating Lease at the Property shall
have the benefit of all income and be responsible for all expenses and
liabilities of the Property relating to the period from and after the Closing
Date. With respect to the prorations and Adjustments set forth in subparagraph
(a) of this Section 12.1, the Purchase Price shall be adjusted based on the
------------
prorations between Seller and Purchaser with respect to such subparagraph.
12.2. Reserves Held by Holders of Assumed Debt. In connection
----------------------------------------
with the assumption by Purchaser of the Assumed Debt, Seller shall assign to
Purchaser all of its right, title and interest in and to all reserves and
deposits held by a holder of Assumed Debt for real property taxes, insurance
premiums, FF&E, Improvements and other purposes. At the Closing, Purchaser shall
pay to Seller the aggregate amount of such reserves and deposits.
12.3. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to
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<PAGE>
the current tax year or could affect the taxes due for a subsequent tax year and
Purchaser shall have the right to participate in and approve tax settlements of
such certiori proceedings which relate to the current tax year, which
settlements shall not be effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION.
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no longer manages the Property (the "Restricted Period") on any and
-----------------
all Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above,
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<PAGE>
Purchaser shall be deemed conclusively to have elected not to purchase the Full
Service Hotel. In such event or if Purchaser elects not to purchase the Full
Service Hotel, Seller or the Seller Subsidiary shall have the right to transfer
the Full Service Hotel covered by the Offer to the party making the Offer,
substantially in accordance with the terms of the Offer and without material
modifications beneficial to said third party purchaser, without any further
notice to Purchaser. If, however, Seller or the Seller Subsidiary and such third
party purchaser thereafter agree to terms for such purchase which are materially
different from those provided in the Offer and beneficial to the third party
purchaser, then Purchaser's right of first refusal under this Section 13.1 shall
------------
be renewed with respect to such Full Service Hotel, on the terms of the Offer as
so modified. If the sale of a Full Service Hotel is consummated with a third
party, provided that Seller shall have complied with the requirements of this
Section 13.1, this Section 13.1 shall no longer be applicable with respect to
- ------------
such Full Service Hotel simultaneously with the sale. The exercise or non-
exercise by Purchaser of the right to purchase a Full Service Hotel does not
affect Purchaser's continuing right of first refusal with respect to any other
Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any other properties for which Purchaser has terminated this
Agreement or any of the Other Agreements, as applicable, or which has been
eliminated from the Group Two Sale Agreement (unless the problem which Purchaser
identified in the applicable notice of termination has been remedied in full),
and Seller may sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
------------
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale
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<PAGE>
is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St. Thomas and known as "Frenchman's Reef" and Purchaser may sell
that property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed, detailed
plans and specifications for the construction of the Proposed AmeriSuites
Hotel;
(ii) a schedule for the estimated costs of construction
prepared jointly by the contractor engaged to perform the work and Seller; a
construction schedule setting forth the target commencement date, substantial
completion date and final completion date for the construction of the
Projected AmeriSuites Hotel and the dates for completion of the various phases
of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months
after opening and for periods thereafter, to the extent then developed;
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<PAGE>
(iv) historical occupancy and Rev Par information for
the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed AmeriSuites
Hotel;
(viii) any environmental or engineering reports prepared
in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction
Costs, if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of
Acquisition Costs, if Seller acquires an existing Proposed AmeriSuites Hotel;
provided, however, that if Seller is able to assign to Purchaser any contract
of sale between Seller and an owner of a Proposed AmeriSuites Hotel, without
penalty, consent or a requirement of Seller's continuing liability thereafter,
then Purchaser, in its sole discretion, may accept such assignment and pay to
Seller in lieu of the purchase price described in this subparagraph (i), an
amount equal to the sum of (A) any deposits made by Seller under the contract
of sale, (B) any reasonable costs or expenses incurred by Seller as of the
date of the assignment and (c) an amount equal to that which, absent the
assignment to Purchaser, would have been five percent (5%) of Acquisition
Costs or Construction Costs, as appropriate;
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<PAGE>
(ii) Within three (3) Business Days after providing its
notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of
the purchase price, which deposit, at Purchaser's election, may be in the form
of a letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites
------------
brand hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit
-------
E-1; and
---
(v) If Seller constructs the Proposed AmeriSuites Hotel,
the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the
Proposed AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel
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<PAGE>
does not affect Purchaser's continuing rights under this Section 13.3 with
------------
respect to any other Proposed AmeriSuites Hotels.
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Property Exception. Notwithstanding anything to
------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
----------
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed
-42-
<PAGE>
or otherwise to a Person in the event of a Change in Control of Seller, and
immediately after such a Change in Control, the provisions of this Section 13
----------
shall be deemed null, void and of no further force and effect.
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions relating to payment of a portion of the
purchase price by assumption of debt and the provisions in this Section 13 shall
----------
not be included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under
-43-
<PAGE>
this Section 13 to any Person other than an Affiliate of Purchaser without
----------
Seller's prior written consent, which consent may be withheld in Seller's sole
discretion; any transfer in violation of this Section 13.6(h) shall be void and
---------------
of no force or effect.
(i) Notwithstanding anything to the contrary contained in
this Agreement, Seller retains the unrestricted right to continue to grant
franchise agreements for "AmeriSuites" hotels to unaffiliated third-parties. So
long as such franchisees are not Seller Affiliates, the provisions of this
Section 13 shall be inapplicable with respect thereto.
- ----------
(j) The provisions of this Section 13 shall survive the
Closing.
SECTION 14. MISCELLANEOUS.
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases, the Assumed Debt or the
Contracts and relating to periods prior to the Closing or (y) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with the Property or
any portion thereof at any time or times prior to the Closing or (z) all
accounts payable and sales taxes due for or on account of the period prior to
Closing, and (ii) Purchaser shall indemnify and hold harmless Seller from and
against any and all obligations, claims, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and disbursements) arising out of (x) the Contracts, the Space Leases or
the Assumed Debt relating to periods on or after the Closing, or (y) any damage
to property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about the Property or any portion thereof
at any time or times on or after the Closing or (z) sales taxes due for or on
account of the period from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
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<PAGE>
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade
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<PAGE>
in the securities of any parent or affiliate of Seller or of Purchaser until a
public announcement of the transactions contemplated by this Agreement has been
made. No party shall record this Agreement or any notice thereof. The provisions
of this Section 14.3 shall survive the Closing or earlier termination of this
------------
Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of action,
judgments, damages, losses, fines, penalties, costs and expenses, including
without limitation reasonable attorneys' fees and disbursements relating to the
a breach by such indemnifying party (or its directors, officers, shareholders,
partners, members, agents, employees or any independent contractors retained by
it) of any of the covenants to be performed by such party contained in this
Section 14.4. Notwithstanding anything to the contrary contained in this
- ------------
Agreement, the provisions of this Section 14.4 shall survive the Closing for a
------------
period of two (2) years. With respect to the indemnity obligations or any breach
of this Section 14.4, the provisions of Section 10 shall not apply and the
------------ ----------
indemnified party may seek damages in a court of law or exercise any other
remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice,
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<PAGE>
postpaid and registered or certified with return receipt requested (if by mail),
or with all freight charges prepaid (if by Federal Express or similar carrier).
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(b) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
-47-
<PAGE>
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(c) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the right to designate an Affiliate of
Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public
-48-
<PAGE>
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in question invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other provisions are not
themselves actually in conflict with such constitution, statute or rule of
public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or unenforceable provision
had never been contained herein and such provision reformed so that it would be
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date
----------------------------
on which performance or payment of any obligation of a party required hereunder
is other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
-49-
<PAGE>
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-50-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as a sealed instrument as of the date first above written.
SELLER:
FAIRFIELD HOLDING CORP.
By: /s/ RICHARD SZYMANSKI
------------------------------
Richard Szymanski
Vice President
PURCHASER:
PORTLAND/SHELTON LLC, a Delaware limited
liability company
By: AGH Portland/Shelton LLC, a Delaware
limited liability company, its
managing member
By: Portland/Shelton Corp.
By: /s/ BRUCE G. WILES
----------------------------
Bruce G. Wiles
Executive Vice President
-51-
<PAGE>
EXHIBIT 2.8
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
FAIRFIELD HOLDING CORP.,
as Seller,
and
PORTLAND/SHELTON LLC, L.P.,
as Purchaser
January 7, 1998
Shelton, CT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS......................................................................... 1
1.1. "Acquisition Costs........................................................................ 1
1.2. "Adjustments" ............................................................................ 2
1.3. "Affiliate" .............................................................................. 2
1.4. "Agreement" .............................................................................. 2
1.5. "American General......................................................................... 2
1.6. "Assumed Debt" ........................................................................... 2
1.7. "Business Day" ........................................................................... 2
1.8. "Change in Control" ...................................................................... 2
1.9. "Closing" ................................................................................ 3
1.10. "Closing Date" .......................................................................... 3
1.11. "Code" .................................................................................. 3
1.12. "Construction Costs" .................................................................... 3
1.13. "Contracts" ............................................................................. 3
1.14. "Cut-Off Time" .......................................................................... 3
1.15. "Defective Property" .................................................................... 3
1.16. "Deposit" ............................................................................... 4
1.17. "Diligence Notice........................................................................ 4
1.18. "Documents" ............................................................................. 4
1.19. "Due Diligence Material" ................................................................ 4
1.20. "Environmental Laws" .................................................................... 4
1.21. "Environmental Report" .................................................................. 4
1.22. "Escrow Agent" .......................................................................... 4
1.23. "Escrow Agreement" ...................................................................... 4
1.24. "Estoppel Certificate" .................................................................. 4
1.25. "Exchange Act" .......................................................................... 5
1.26. "Excluded Intellectual Property" ........................................................ 5
1.27. "FF&E" .................................................................................. 5
1.28. "FF&E Leases" ........................................................................... 5
1.29. "Financial Statements" .................................................................. 6
1.30. "Franchise Agreement" ................................................................... 6
1.31. "Franchisor Comfort Letters" ............................................................ 6
1.32. "Full Service Hotels" ................................................................... 6
1.33. "Group Two Sale Agreement" .............................................................. 6
1.34. "Hazardous Substance" ................................................................... 6
1.35. "Hotel" ................................................................................. 6
1.36. "Improvements" .......................................................................... 6
1.37. "Intangible Property" ................................................................... 6
1.38. "Leased FF&E" ........................................................................... 7
1.39. "Letter of Credit........................................................................ 7
1.40. "Liquidated Damages" .................................................................... 7
1.41. "Liquor License" ........................................................................ 7
1.42. "Mortgagee" ............................................................................. 7
1.43. "Offer" ................................................................................. 7
1.44. "Operating Leases" ...................................................................... 7
1.45. "Operating Lessee" ...................................................................... 7
1.46. "Original Agreement" .................................................................... 7
1.47. "Other Agreements" ...................................................................... 7
1.48. "Other Revenues" ........................................................................ 7
1.49. "Permitted Encumbrances" ................................................................ 7
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
1.50. "Person" ................................................................................ 8
1.51. "Project Plan" .......................................................................... 8
1.52. "Property" .............................................................................. 8
1.53. "Proposed AmeriSuites Hotel" ............................................................ 8
1.54. "Prorations Settlement" ................................................................. 8
1.55. "Purchase Price" ........................................................................ 8
1.56. "Purchaser" ............................................................................. 8
1.57. "Real Property" ......................................................................... 8
1.58. "REIT" .................................................................................. 8
1.59. "Restricted Period" ..................................................................... 8
1.60. "Room Revenues" ......................................................................... 8
1.61. "SEC Documents" ......................................................................... 9
1.62. "Seller" ................................................................................ 9
1.63. "Seller's knowledge" .................................................................... 9
1.64. "Seller Subsidiary" ..................................................................... 9
1.65. "Space Leases" .......................................................................... 9
1.66. "Subordination, Nondisturbance and Attornment Agreement" ................................ 9
1.67. "Survey" ................................................................................ 9
1.68. "Survival Period" ....................................................................... 9
1.69. "Title Commitment" ...................................................................... 9
1.70. "Title Company" ......................................................................... 9
1.71. "WARN Act" .............................................................................. 9
SECTION 2. PURCHASE AND SALE................................................................... 10
2.1. Purchase and Sale......................................................................... 10
2.2. Deposit................................................................................... 10
2.3. Closing................................................................................... 10
2.4. Purchase Price............................................................................ 10
2.5. Tax Free Exchange......................................................................... 11
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION................................................ 11
3.1. Diligence Inspections..................................................................... 11
3.2. Defective Properties...................................................................... 14
3.3. Title Matters............................................................................. 15
3.4. Survey.................................................................................... 15
3.5. Additional Termination Option............................................................. 16
3.6. Adjournment of Closing.................................................................... 17
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE....................................... 17
4.1. Closing Documents......................................................................... 17
4.2. Condition of the Property................................................................. 19
4.3. Title Policies............................................................................ 19
4.4. Opinions of Counsel....................................................................... 19
4.5. Other Approvals........................................................................... 20
4.6. Representations........................................................................... 20
4.7. Default under Group Two Sale Agreement.................................................... 20
4.8. Default under Other Agreements............................................................ 20
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.......................................... 20
5.1. Purchase Price............................................................................ 21
5.2. Closing Documents......................................................................... 21
5.3. Opinion of Counsel........................................................................ 21
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
5.4. Other Approvals........................................................................... 21
5.5. Representations........................................................................... 22
5.6. Default under Group Two Sale Agreement.................................................... 22
5.7. Default under Other Agreements............................................................ 22
SECTION 6. REPRESENTATIONS OF SELLER........................................................... 22
6.1. Status and Authority of Seller............................................................ 22
6.2. Action of Seller.......................................................................... 22
6.3. No Violations of Agreements............................................................... 23
6.4. Litigation................................................................................ 23
6.5. Existing Leases, Agreements, Etc.......................................................... 23
6.6. Franchise Agreement....................................................................... 23
6.7. Contracts................................................................................. 24
6.8. Taxes..................................................................................... 24
6.9. Not A Foreign Person...................................................................... 24
6.10. Hazardous Substances..................................................................... 24
6.11. Insurance................................................................................ 24
6.12. FF&E..................................................................................... 24
6.13. Employment and Union Contracts........................................................... 24
6.14. Adjacent Land Leases..................................................................... 24
6.15. Trademarks............................................................................... 24
6.16. Compliance with Laws..................................................................... 25
6.17. Inventory................................................................................ 25
6.18. Holder of Liquor License................................................................ 25
SECTION 7. REPRESENTATIONS OF PURCHASER........................................................ 26
7.1. Status and Authority of Purchaser......................................................... 26
7.2. Action of Purchaser....................................................................... 26
7.3. No Violations of Agreements............................................................... 27
7.4. Litigation................................................................................ 27
7.5. No Conflicts.............................................................................. 27
SECTION 8. COVENANTS OF SELLER AND PURCHASER................................................... 28
8.1. Covenants of Seller....................................................................... 28
8.2. Covenants of Purchaser.................................................................... 31
SECTION 9. CLOSING COSTS....................................................................... 31
9.1. Closing Costs............................................................................. 31
SECTION 10. DEFAULT............................................................................ 32
10.1. Default by Seller........................................................................ 32
10.2. Default by Purchaser..................................................................... 32
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT................................................. 32
11.1. Liquor License........................................................................... 32
11.2. Franchise Agreement...................................................................... 33
11.3. License for Excluded Intellectual Property............................................... 34
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS.............................................. 35
12.1. Matters to be Adjusted or Prorated....................................................... 35
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
12.2. Reserves Held by Holders of Assumed Debt................................................. 36
12.3. Certiorari Proceeding.................................................................... 36
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL PURCHASE OPTION...... 37
13.1. Right of First Refusal on Full Service Hotels............................................ 37
13.2. Radius Restriction...................................................................... 39
13.3. AmeriSuites Hotels...................................................................... 39
13.4. Multi-Property Exception................................................................ 42
13.5. Survival and Damages.................................................................... 42
13.6. General Provisions...................................................................... 42
SECTION 14. MISCELLANEOUS...................................................................... 44
14.1. Agreement to Indemnify................................................................... 44
14.2. Brokerage Commissions.................................................................... 45
14.3. Publicity................................................................................ 45
14.4. Confidentiality.......................................................................... 46
14.5. Notices.................................................................................. 46
14.6. Waivers, Etc............................................................................. 48
14.7. Assignment; Successors and Assigns....................................................... 48
14.8. Severability............................................................................. 48
14.9. Counterparts, Etc........................................................................ 49
14.10. Governing Law........................................................................... 49
14.11. Performance on Business Days............................................................ 49
14.12. Attorneys' Fees......................................................................... 50
14.13. Section and Other Headings.............................................................. 50
14.14. Financing and Priority of Operating Lease............................................... 50
14.15. Group Two Purchase and Sale Agreement................................................... 50
14.16. Exceptions to Liquidated Damages........................................................ 50
</TABLE>
EXHIBITS*
Exhibit B Legal Description of the Property
Exhibit D Franchise Agreement
Exhibit E-1 Form of Franchisor Comfort Letter in favor of Purchaser
Exhibit E-2 Form of Franchisor Comfort Letter in favor of Mortgagee
Exhibit H Form of Operating Lease
Exhibit I List of Personal Property and Equipment Subject to UCC
Financing Statements
Exhibit K List of Space Lease and Security Deposits
Exhibit L Form of Subordination, Non-Disturbance and Attornment
Agreement
Exhibit O Form of Representation Letter in favor of Accountants
Exhibit R Form of Bill of Sale and Assignment Agreement
- -------------------------------
* The following Exhibits have been deemed non-material for investment
purposes however, a copy of any Exhibit will be furnished to the Securities
and Exchange Commission upon request.
(iv)
<PAGE>
Exhibit S Form of Assignment and Assumption of Space Leases
Exhibit T List of Leased FF&E
Exhibit U List of Employment Agreements and Union Contracts
Exhibit V Exclusions to Representations Regarding Compliance with
Applicable Laws
Exhibit W Form of Assignment and Assumption of Contracts
Exhibit X Environmental Report
(v)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
7th day of January, 1998, between FAIRFIELD HOLDING CORP., a Delaware
corporation ("Seller"), as seller, and PORTLAND/SHELTON LLC ("Purchaser"), as
purchaser.
W I T N E S S E T H:
WHEREAS, Prime Hospitality Corp. and American General
Hospitality Operating Partnership ("American General") entered into that certain
----------------
Purchase and Sale Agreement dated as of November 20, 1997, as amended by
Amendment to Purchase and Sale Agreement dated January 7, 1998 (the "Original
--------
Agreement"), for the sale of certain properties, including the Property (as
- ---------
defined below); and
WHEREAS, Prime Hospitality Corp. and American General desire
to amend and restate the Original Agreement in the form of eight separate
contracts, one contract for each of the Properties (as defined in the Original
Agreement) (such contracts other than this Agreement being referred to herein as
the "Other Agreements"); and
----------------
WHEREAS, this Agreement shall constitute one of such eight
separate contracts which shall amend and restate the Original Agreement; and
WHEREAS, American General has designated Purchaser pursuant to
the Original Agreement to receive title to the Property; and
WHEREAS, Seller, a wholly-owned subsidiary of Prime
Hospitality Corp., is the fee owner of the Property; and
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase Seller's interest in the Property, subject to and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Seller and Purchaser
hereby agree that, with respect to the Property, all of the provisions of the
Original Agreement are superseded, amended and restated in their entirety to
read as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the
meanings set forth below or in the Section of this Agreement referred to below:
1.1. "Acquisition Costs" shall mean all costs and expenses
-----------------
incurred by Seller in connection with the proposed acquisition of a Proposed
AmeriSuites Hotel, including without limitation, the purchase price under any
contract of sale for the
-1-
<PAGE>
same, any architect, engineer, attorney, accountant and other professional fees,
any due diligence expenses incurred in assessing the Proposed AmeriSuites Hotel,
title and survey costs, transfer taxes and pre-opening expenses of the hotel,
including without limitation, costs incurred in the reflagging of the hotel,
promotional and advertising expenses, administrative expenses, employee hiring
and training expenses, the cost of supplies, equipment and furniture purchased
for the hotel, governmental, utility or other deposits required for operation of
the hotel and similar costs.
1.2. "Adjustments" shall have the meaning given such term in
-----------
Section 12.1.
- ------------
1.3. "Affiliate" shall mean, with respect to any entity, any
---------
entity that , directly or indirectly, controls or is controlled by or is under
common control with such entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, through the ownership
of voting securities, partnership interests or other equity interests.
1.4. "Agreement" shall mean this Amended and Restated
---------
Purchase and Sale Agreement, together with Exhibits A through X attached hereto,
---------- -
as it and they may be amended from time to time as herein provided.
1.5. "American General" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.6. "Assumed Debt" shall have the meaning given such term
------------
in Section 2.4.
-----------
1.7. "Business Day" shall mean any day other than a
------------
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.8. "Change in Control" shall mean (a) any merger or
-----------------
consolidation of Seller with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
beneficial ownership of Seller, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction any Person
is or becomes, directly or indirectly, the beneficial owner of more than fifty
percent (50%) of the shares of the total voting power of Seller; or (y) any
Person obtains the power to direct or cause the direction of the management
policies of Seller, whether through voting securities or by contract or
otherwise.
-2-
<PAGE>
1.9. "Closing" shall have the meaning given such term in
-------
Section 2.3.
- -----------
1.10. "Closing Date" shall have the meaning given such term
------------
in Section 2.3.
-----------
1.11. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the treasury regulations promulgated thereunder.
1.12. "Construction Costs" shall mean all hard and soft costs
------------------
incurred by Seller or the Seller Subsidiary, as appropriate, in connection with
the acquisition of the site and construction and related improvements for a
Proposed AmeriSuites Hotel, including without limitation (a) the cost of funds
used for such construction, whether provided by a third party lender or by
Seller (the interest on such funds being calculated in the latter event at a
rate equal to the prime rate reported in the Money Rates column or comparable
section of The Wall Street Journal (or if The Wall Street Journal is no longer
----------------------- -----------------------
published, a different publication designated by Seller) as the rate then in
effect for corporate loans at large U.S. money center commercial banks, plus
three percent (3%) compounded monthly), (b) attorney, accountant, engineer,
architect, contractor and other professional fees; (c) any due diligence
expenses incurred in assessing a site for the Proposed AmeriSuites Hotel; (d)
title and survey costs; (e) transfer taxes; and (f) pre-opening expenses of the
hotel, including without limitation, promotional and advertising expenses,
administrative expenses, employee hiring and training expenses, the cost of
supplies, equipment and furniture ordered or purchased for the hotel,
governmental, utility or other deposits required for operation of the hotel and
similar costs.
1.13. "Contracts" shall mean all hotel licensing agreements
---------
and other service contracts (including without limitation the Franchise
Agreement and the Liquor License), equipment leases, booking agreements and
other arrangements or agreements to which Seller is a party affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property, to the extent Seller's interest therein is assignable or transferable.
1.14. "Cut-Off Time" shall mean 12:01 a.m. on the Closing
------------
Date of this Agreement.
1.15. "Defective Property" shall mean the Property if and
------------------
when the Property which (i) has been condemned in whole or in part, or (ii) by
reason of damage by fire, vandalism, acts of God or other casualty or cause, has
suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order
-3-
<PAGE>
to restore the Property into substantially the same condition as existing prior
to such damage.
1.16. "Deposit" shall have the meaning given such term in
-------
Section 2.2.
- -----------
1.17. "Diligence Notice" shall mean that certain letter,
----------------
dated November 26, 1997, from Purchaser to Seller, delivered pursuant to
Sections 3.3 and/or 3.4 of the Original Agreement.
- ------------ ---
1.18. "Documents" shall mean all books, records and files
---------
relating to the leasing, maintenance, management or operation of the Property.
1.19. "Due Diligence Material" shall have the meaning set
----------------------
forth in Section 14.4.
------------
1.20. "Environmental Laws" shall mean the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq.,
the Clean Air Act, 42 U.S.C. (S) 7401, et seq., the Clean Water Act, 33 U.S.C.
(S) 1251, et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. (S) 651, et seq., as
any of the preceding have been amended prior to the date hereof, and any other
federal, state, or local law, ordinance, regulation, rule, order, decision or
permit relating to the protection of the environment or of human health from
environmental effects of Hazardous Substances and which are applicable to the
Hotel.
1.21. "Environmental Report" shall have the meaning given
--------------------
such term in Section 6.10.
------------
1.22. "Escrow Agent" shall mean Chicago Title Insurance
------------
Company.
1.23. "Escrow Agreement" shall mean that certain Escrow
----------------
Deposit Agreement dated as of even date herewith among Purchaser, Seller and
Escrow Agent.
1.24. "Estoppel Certificate" shall mean a statement in favor
--------------------
of Purchaser and/or any Mortgagee certifying to such matters as Purchaser and/or
its Mortgagee may reasonably request, including, without limitation, the
following:
(a) when from a franchisor under a Franchise Agreement, that
an attached copy of the Franchise Agreement is a true, correct and complete copy
of such Franchise Agreement which has not been modified except as identified;
that Seller is not in monetary or other default under the Franchise Agreement
and that no event has occurred which with the giving of notice or the passage of
time or both will become a default under the Franchise
-4-
<PAGE>
Agreement; and to any other matters which franchisor is required to certify
pursuant to the terms of the Franchise Agreement;
(b) when from the holder of any Assumed Debt, that the copies
of the loan documents evidencing and securing the Assumed Debt previously
delivered to Purchaser are the true, correct and complete copies of such loan
documents which have not been modified except as identified; to the outstanding
principal indebtedness and accrued interest of the Assumed Debt; that Seller, as
borrower, is not in monetary or other default under the Assumed Debt loan
documents and that no event has occurred which with the giving of notice or the
passage of time or both will become a default under the Assumed Debt loan
documents; and to any other matters which such holder is required to certify
pursuant to the terms of the Assumed Debt loan documents;
each in a form reasonably acceptable to said franchisor or holder of Assumed
Debt; provided, however, that if any Franchise Agreement or loan document
evidencing the Assumed Debt (i) does not require and the estoppel certificate is
delivered without the inclusion of a statement that no event has occurred which
with the giving of notice or the passage of time or both will become a default,
or (ii) refers to any non-monetary, immaterial defaults under the relevant
document on an estoppel certificate, then in either case the estoppel
certificate shall be deemed satisfactory to fulfill Seller's obligations under
Section 4.1(i), provided Seller shall indemnify and hold harmless Purchaser
- --------------
against any loss, cost, damage, claim or liability occasioned by such immaterial
default.
1.25. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as amended.
1.26. "Excluded Intellectual Property" shall mean all
------------------------------
trademarks, trade names, copyrights, patents or technical processes owned or
used, in whole or in part, by Seller at the Property and also used in connection
with any other property owned, leased or managed by Seller (and shall not
include such items which are used with respect to Seller itself or Seller's
Affiliates).
1.27. "FF&E" shall mean all supplies, appliances, machinery,
----
devices, fixtures, appurtenances, equipment, furniture, furnishings and articles
of tangible personal property of every kind and nature whatsoever located in or
at, or used exclusively in connection with the ownership, operation or
maintenance of the Property, excluding however (a) the Leased FF&E and (b) any
such items which are owned by tenants, subtenants, concessionaires or licenses
under the Space Leases, guests, invitees, employees, agents or independent
contractors.
1.28. "FF&E Leases" shall mean the leases for all of the
-----------
Leased FF&E.
-5-
<PAGE>
1.29. "Financial Statements" shall have the meaning given
--------------------
such term in Section 3.1(b).
1.30. "Franchise Agreement" shall mean the hotel licensing
-------------------
agreement applicable to the Hotel which is listed on Exhibit D, pursuant to
---------
which the Hotel is operated under the flag identified on Exhibit D.
---------
1.31. "Franchisor Comfort Letters" shall mean letters from
--------------------------
the franchisor under the Franchise Agreement in favor of the Purchaser (or such
designee of Purchaser as may take title to the Property, provided Purchaser
advises Seller of such designee at least thirty (30) days prior to Closing) and
any Mortgagee, substantially in the forms attached as Exhibits E-1 and E-2 or in
------------ ---
such other form as the franchisor, Purchaser or Purchaser's designee or
Mortgagee, as applicable, shall agree, provided that such other form
substantially covers the matters set forth in said Exhibits E-1 and E-2.
------------ ---
1.32. "Full Service Hotels" shall mean hotels with a
-------------------
restaurant and meeting facilities and may have some or all of the following:
conference facilities, banquet space, lounge areas, gift shops, recreational
facilities (including swimming pool), and guest services (including room
service, valet service and laundry).
1.33. "Group Two Sale Agreement" shall have the meaning given
------------------------
that term in Section 14.15.
-------------
1.34. "Hazardous Substance" shall mean any substance defined
-------------------
as a "hazardous waste," "hazardous substance," "toxic substance," "hazardous
material," pollutant, contaminant or any word of similar import under any
Environmental Laws, including, without limitation, oil, petroleum, or any
petroleum-derived substance or waste, asbestos or asbestos-containing materials,
PCBs, explosives, radioactive materials, dioxin, or urea formaldehyde
insulation.
1.35. "Hotel" shall mean the hotel located at the Property.
-----
1.36. "Improvements" shall mean all buildings, fixtures,
------------
walls, fences, landscaping and other structures and improvements situated on,
affixed or appurtenant to the Real Property.
1.37. "Intangible Property" shall mean all transferable or
-------------------
assignable permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, telephone exchange numbers identified with the Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to the Property
held by Seller, including
-6-
<PAGE>
without limitation all trademarks, trade names, copyrights, patents or technical
processes, owned and used by Seller which pertain solely to the Property and
expressly excluding the Excluded Intellectual Property and all trademarks, trade
names, copyrights, patents or technical processes used with respect to Seller
itself or Seller's Affiliates, and expressly excluding the Contracts.
1.38. "Leased FF&E" shall have the meaning given such term in
-----------
Section 6.14.
- ------------
1.39. "Letter of Credit" shall have the meaning given such
----------------
term in Section 2.2.
-----------
1.40. "Liquidated Damages" shall have the meaning given such
------------------
term in Section 10.1.
------------
1.41. "Liquor License" shall mean a license to provide
--------------
alcoholic beverages at the Hotel issued by the state in which the Hotel is
located or other applicable governmental authority.
1.42. "Mortgagee" shall mean any and all lenders who provides
---------
financing to Purchaser in connection with the Property.
1.43. "Offer" shall have the meaning given such term in
-----
Section 13.
- ----------
1.44. "Operating Lease" shall mean the lease to be entered
---------------
into between Purchaser or its designee, as landlord, and Operating Lessee, as
tenant, on the Closing Date with respect to the Property, substantially in the
form of Exhibit H.
---------
1.45. "Operating Lessee" shall mean a wholly-owned subsidiary
----------------
of Seller as tenant, of an Operating Lease(s); which is a single-purpose entity
with the sole purpose of leasing, managing, maintaining, operating and
performing other related functions for the Hotel.
1.46. "Original Agreement" shall have the meaning given such
------------------
term in the recitals to this Agreement.
1.47. "Other Agreements" shall have the meaning given such
----------------
term in the recitals to this Agreement.
1.48. "Other Revenues" shall have the meaning given such term
--------------
in Section 12.1.
------------
1.49. "Permitted Encumbrances" shall mean (a) liens for
----------------------
taxes, assessments and governmental charges with respect to the Property not yet
due and payable or due and payable but not yet delinquent or as to which
adequate reserves are provided therefor; (b) the Space Leases; (c) applicable
zoning regulations
-7-
<PAGE>
and ordinances provided the same do not prohibit or impair in any material
respect use of the Property as a hotel as currently operated and constructed;
(d) UCC Financing Statements securing the purchase price of FF&E under the FF&E
Leases identified on Exhibit I; provided, however, that such liens shall be
---------
confined to the asset in question and the aggregate principal amount of
indebtedness secured by such liens shall not exceed the cost of acquisition or
construction of the property subject thereto; (e) such other nonmonetary
encumbrances with respect to the Property which are not objected to by Purchaser
in accordance with Section 3; and (f) such exceptions or matters, as the case
may be, otherwise accepted by Purchaser pursuant to Section 3.
---------
1.50. "Person" shall mean any individual, corporation,
------
general and limited partnership, limited liability company, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other legal entity.
1.51. "Project Plan" shall have the meaning given such term
------------
in Section 13.3.
------------
1.52. "Property" shall mean collectively, all of the Seller's
--------
interest in the Real Property, and in the FF&E, the Documents, the Improvements
and the Intangible Property relating to the Real Property.
1.53. "Proposed AmeriSuites Hotel" shall have the meaning
--------------------------
given such term in Section 13.3.
------------
1.54. "Prorations Settlement" shall have the meaning given
---------------------
such term in Section 12.1.
------------
1.55. "Purchase Price" shall have the meaning given such term
--------------
in Section 2.4.
-----------
1.56. "Purchaser" shall have the meaning given such term in
---------
the preamble to this Agreement.
1.57. "Real Property" shall mean the real property described
-------------
in Exhibit B, together with all easements, rights of way, privileges, licenses
---------
and appurtenances which Seller may now own with respect thereto.
1.58. "REIT" shall mean American General Hospitality
----
Corporation.
1.59. "Restricted Period" shall have the meaning given such
-----------------
term in Section 13.
----------
1.60. "Room Revenues" shall have the meaning given such term
-------------
in Section 12.1.
------------
-8-
<PAGE>
1.61. "SEC Documents" shall mean all reports, schedules,
-------------
forms, statements and other documents filed by the REIT with the SEC pursuant to
the Securities Act and the reporting requirements of Section 13 of the Exchange
Act.
1.62. "Seller" shall have the meaning given such term in the
------
preamble to this Agreement
1.63. "Seller's knowledge" shall mean the actual knowledge,
------------------
after review of the Seller's records with respect to the matter at issue, of (a)
John M. Elwood, Executive Vice President and Chief Financial Officer, (b) David
Simon, President and Chief Executive Officer, (c) Richard Szymanski, Vice
President and Corporate Controller, (d) Joseph Bernadino, Senior Vice President,
Secretary and Corporate Counsel, (e) Linda Rials, Regional Vice President, (f)
Steve Kronick, Regional Vice President, (g) Peter Marino, Regional Vice
President and (e) the present general manager of the Property. The individuals
identified in this Section 1.63 are the individuals in the Seller who are most
------------
likely to have information concerning matters to which Seller is making a
representation or warranty in this Agreement.
1.64. "Seller Subsidiary" shall have the meaning set forth in
-----------------
Section 13.1.
- ------------
1.65. "Space Leases" shall mean, collectively, all of the
------------
leases, together with any amendments or modifications thereto, for the lease of
space within the Property with Seller as lessor which are identified on
Exhibit K.
- ---------
1.66. "Subordination, Nondisturbance and Attornment
--------------------------------------------
Agreement" shall mean if Mortgagee desires a lien superior in priority to the
- ---------
Operating Lease, an agreement substantially in the form attached hereto as
Exhibit L.
- ---------
1.67. "Survey" shall have the meaning given such term in
------
Section 3.4.
- -----------
1.68. "Survival Period" shall have the meaning given such
---------------
term in Section 6.
---------
1.69. "Title Commitment" shall have the meaning given such
----------------
term in Section 3.3.
-----------
1.70. "Title Company" shall mean, collectively, Chicago Title
-------------
Insurance Company and Commonwealth Land Title Insurance Company, each as a 50%
co-insurers, or such other title insurance company or companies as shall have
been reasonably approved by Purchaser and Seller.
1.71. "WARN Act" shall have the meaning given such term in
--------
Section 8.1(e).
- --------------
-9-
<PAGE>
SECTION 2. PURCHASE AND SALE
2.1. Purchase and Sale. In consideration of the mutual
-----------------
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Property for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited with the Escrow Agent
-------
the sum of Seven Hundred Seventy-One Thousand Dollars ($771,000) (together with
all interest accrued thereon, the "Deposit") in the form of an unconditional,
irrevocable letter of credit issued by Bank One, Texas, N.A. (the "Letter of
---------
Credit"). The Letter of Credit shall be in the amount of Seven Million Five
- ------
Hundred Thousand Dollars ($7,500,000), which amount shall represent the Deposit
as well as the deposits required pursuant to the Other Agreements. The Deposit
(and the Letter of Credit) shall be held pursuant to, and disbursed according
to, the terms of the Escrow Agreement. Notwithstanding anything to the contrary
contained in this Agreement, until the Deposit is disbursed in accordance with
the Escrow Agreement, this Agreement shall not terminate and shall remain in
full force and effect to the extent necessary for such purpose.
2.3. Closing. The purchase and sale of the Property shall be
-------
consummated at a closing (the "Closing") to be held at the offices of Willkie
-------
Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on January 9, 1998 or such earlier date as Seller and Purchaser may agree
upon (the "Closing Date"); provided, however, that Seller shall have the right,
------------
by written notice to Purchaser, to adjourn the Closing Date for up to ninety
(90) days as set forth in Section 3 or to satisfy its obligations with respect
---------
to that Property under Section 4, unless such obligations shall have been waived
---------
by Purchaser and provided that such adjournment with respect to the Property
shall not adjourn the Closing Date with respect to any of the other Properties
to be conveyed under the Other Agreements.
2.4. Purchase Price.
--------------
(a) At the Closing, Purchaser shall pay to Seller for the
Property a purchase price (the "Purchase Price") in the amount of Fourteen
--------------
Million Two Hundred Twenty-Five Thousand Dollars ($14,225,000), allocated Twelve
Million Five Hundred Ninety Thousand Dollars ($12,590,000) to the Real Property
and Improvements and One Million Six Hundred Thirty-Five Thousand Dollars
($1,635,000) to the personal property including, without limitation, the FF&E
and the Intangible Property.
(b) A portion of the Purchase Price shall be paid by
Purchaser assuming certain debt in accordance with Section 2.4(c)
--------------
-10-
<PAGE>
and the remainder (plus or minus adjustments and prorations as set forth in
Section 12 hereof) shall be payable by wire transfer of immediately available
- ----------
federal funds on the Closing Date to an account to be designated by Seller prior
to the Closing.
(c) Purchaser shall receive a credit against the Purchase
Price for a portion of the Purchase Price equal to the sum of (i) the
outstanding principal balance and (ii) accrued interest thereon and assumption
fees for the account of Seller as Seller shall direct Purchaser to pay, by
virtue of assuming certain debt (collectively, the "Assumed Debt") in an
------------
aggregate original principal amount equal to $5,600,579, which Assumed Debt is
secured by a lien against the Property.
2.5. Tax Free Exchange.
-----------------
(a) Purchaser shall use commercially reasonable efforts to
cooperate with Seller (which cooperation shall be at Seller's expense) in
structuring a Section 1031 exchange with respect to the Property, if so desired
by Seller, provided that such structuring shall not materially adversely affect
Purchaser's rights hereunder.
(b) Purchaser shall not be required to incur any additional
liability by reason of the provisions of this Section 2.5 and Seller hereby
-----------
indemnifies Purchaser from and against any and all cost, expense, loss,
liability or damage resulting from its cooperation under this Section 2.5.
-----------
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of this Section 2.5.
-----------
(d) Any reasonable costs and expenses incurred by purchaser
in connection with Purchaser complying with the terms of this Section 2.5 shall
-----------
be paid by Seller.
SECTION 3. DILIGENCE; CASUALTY AND CONDEMNATION
3.1. Diligence Inspections.
---------------------
(a) 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 and leasing of the Hotel, as
are in Seller's possession and control, and have not been otherwise provided to
Purchaser pursuant to this Agreement. Purchaser
-11-
<PAGE>
agrees and acknowledges that it has investigated and/or received the opportunity
to investigate the Property to its satisfaction and that it is not relying on
any materials, statements, representations or warranties of any kind, other than
as specifically set forth in this Agreement, in purchasing the Property. To the
extent that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, has damaged or disturbed or does damage or
disturb the Real Property or the Improvements located thereon, Purchaser shall
return the same to substantially the same condition which existed immediately
prior to such damage or disturbance. In the event that the transactions
contemplated by this Agreement are not closed and consummated for any reason,
Purchaser shall deliver to Seller all tests, reports and inspections of the
Property made and conducted by Purchaser or for its benefit or any other
documents or information Purchaser has received pursuant to this Agreement.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all cost, expense, liability, loss or damage which Seller may incur as a
result of any act or omission of Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any gross negligence or
willful misconduct of Seller. The provisions of this Section 3.1(a) shall
--------------
survive the termination of this Agreement and the Closing.
(b) Seller has delivered 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, guaranties, indemnities and claims
for the benefit of Seller relating to the Hotel or any part thereof which are
still in effect;
(ii) Financial statements prepared in accordance with
generally accepted accounting principals, balance sheets, income statements,
general ledgers and budgets for the Hotel, for the current year to date and
each of the three (3) years prior to the year of this Agreement (the
"Financial Statements"), including the itemization of 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; expenses
incurred for water, electricity, natural gas, sewer and other utility charges;
total rents and revenues collected from tenants and from hotel guests and
other patrons of the Hotel; management fees; maintenance, repairs and other
expenses relating to the management and operation of the Hotel; occupancy
statistics for the Hotel for the current year to date and the prior three (3)
calendar years; and all capital expenditures made during the aforementioned
periods. To the extent that the Financial Statements provided by
-12-
<PAGE>
Seller for the current year do not include any period up to and including the
Closing Date, Seller shall, within 25 days after the Closing Date, provide
Purchaser with monthly unaudited Financial Statements applicable to such
period inclusive of the Closing Date.
(iii) All documents evidencing, securing or related to
the Assumed Debt;
(iv) All of the most recent real estate and personal
property tax statements with respect to the Hotel and, to the extent in
Seller's possession or control or readily available without expense, notices
of appraised value for the Real Property and Improvements;
(v) To the extent in Seller's possession or control or
readily obtainable without expense, all engineering and architectural plans,
drawings and specifications relating to the Hotel, as well as copies of any
environmental reports, boundary surveys, engineering reports and subsurface
studies affecting the Hotel. If the Hotel is purchased by Purchaser, all such
documents and information shall thereupon be and become the property of
Purchaser without payment of any additional consideration therefor; provided,
however, in the event that the Closing does not actually occur, Purchaser
shall return such information to Seller;
(vi) All Contracts;
(vii) All Space 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) All notices received from governmental
authorities in connection with the Hotel;
(ix) A list of all current Hotel employees and their
salaries or wages and all employment benefits accompanied by copies of their
employment agreements and/or union contracts, if any;
(x) All FF&E Leases;
(xi) The Franchise Agreement and a current deficiency
report and the two most recent inspection reports of the franchiser of the
Hotel, together with any product improvement plan requirements previously
submitted to Seller by such franchiser or to which Seller has agreed;
(xii) A schedule of any litigation, arbitration or
administrative proceedings pending or threatened with respect to the Hotel;
-13-
<PAGE>
(xiii) Any leases of adjacent land or facilities used in
connection with the operation of the Hotel; and
(xiv) Seller's 1997 capital and operating budgets and
all materials relating to its marketing program.
At such time prior to Closing as Seller has knowledge (as defined in this
Agreement) of any material inaccuracy, misstatement or omission in any of the
information furnished to Purchaser pursuant to this Section 3.1(b), Seller shall
--------------
notify Purchaser in writing of the same and shall supply Purchaser with updated
information or schedules, as required. Upon notification to Purchaser, any
representations and warranties of Seller in this Agreement related to such
information shall be deemed modified to incorporate such information. If any of
Seller's representations or warranties is modified such that any representation
or warranty is materially and adversely different than that made upon execution
of this Agreement, then Purchaser may terminate this Agreement, by notice given
to Seller within ten (10) Business Days after Seller has provided such
information.
Purchaser's representatives shall have access to all financial and other
information relating to the Hotels, to the extent in Seller's possession and
control (and without requiring Seller to expend funds except a diminimus
amount), sufficient to enable the REIT to prepare audited financial statements
in conformity with Regulation S-X of the U.S. Securities and Exchange Commission
and to enable the REIT to satisfy its reporting obligations under the Exchange
Act or 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
completion of the audit of the Property currently being performed by Coopers &
Lybrand, L.L.P., Seller shall provide to Coopers & Lybrand, L.L.P. a signed
representation letter substantially in the form attached hereto as Exhibit O for
---------
the Property.
3.2. Defective Property.
------------------
(a) If, prior to the Closing, (i) the Property suffers a
casualty or condemnation which would cause the Property to become a Defective
Property, (ii) the Property is not, prior to the Closing, restored to a
condition substantially the same as the condition thereof immediately prior to
such casualty or condemnation, and (iii) Purchaser provides written notice of
same to Seller no later than the Closing Date, time being of the essence, then
subject to paragraph (b) of this Section 3.2 and the remainder of this
-----------
Section 3, Purchaser may elect at its option to terminate this Agreement.
- ---------
Promptly upon learning of the same, Seller covenants and agrees to provide
Purchaser with prompt written notice of any casualty or condemnation affecting
the Property.
(b) If Purchaser timely gives notice to Seller that it
considers the Property a Defective Property, and Purchaser and Seller shall,
acting reasonably and in good faith, be unable or
-14-
<PAGE>
unwilling to agree (x) that Seller shall, at its sole cost, attempt to remedy
the applicable defect prior to the Closing (in which event Seller shall have the
right to adjourn the Closing Date pursuant to the provisions of Section 3.7 for
-----------
up to ninety (90) days for such purpose), (y) that Purchaser shall,
notwithstanding such defect, acquire the Defective Property subject to a
reduction in the Purchase Price, as reasonably determined by Seller and
Purchaser, sufficient to compensate Purchaser for such defect, or (z) on the
substitution of another property owned by Seller for such Defective Property,
this Agreement shall, at Purchaser's option, terminate.
3.3. Title Matters. Purchaser has received from the Title
-------------
Company a preliminary title commitment for a fee policy having an effective date
after the effective date of the Original Agreement, for an ALTA (or such other
form reasonably approved by Purchaser) owner's policy of title insurance with
respect to the Property, together with complete and legible copies of all
instruments and documents referred to as exceptions to title (collectively, the
"Title Commitment"). Except as set forth on the Diligence Notice, Purchaser
----------------
acknowledges and agrees that it does not have any other objections to any title
exceptions shown on the Title Commitment. Seller acknowledges and agrees that
Seller shall attempt to remedy the objections set forth in the Diligence Notice
with respect to the Property; Seller shall have the right to adjourn the Closing
Date pursuant to Section 3.6 for up to ninety (90) days for such purpose. If
-----------
Seller shall be unable to remove any such title defects to which Purchaser has
objected in accordance with this Section 3.3, Purchaser may elect (i) to
-----------
terminate this Agreement with respect to the affected Properties, and this
Agreement shall be of no further force and effect, except as otherwise expressly
provided herein, or (ii) to consummate the transactions contemplated hereby,
notwithstanding such title defect, without any abatement or reduction in the
Purchase Price on account thereof. Purchaser shall make any such election by
written notice to Seller given on or prior to the earlier of the Closing Date or
the fifth Business Day after Seller's notice of its inability to cure such
defect, and time shall be of the essence with respect to the giving of such
notices by Purchaser. Failure of Purchaser to give such notice shall be deemed
an election by Purchaser to proceed in accordance with clause (ii) above, and
such exception shall be a Permitted Encumbrance.
Notwithstanding the foregoing, Seller shall be obligated to
take any and all actions necessary to remove as a title exception (and shall not
have the aforesaid option to not cure) any mortgages, deeds of trust, judgments
and other liens of a monetary nature, as well as any liens or encumbrances
created, permitted or suffered by Seller from and after the date of the
Diligence Notice.
3.4. Survey. Purchaser has received a survey with respect to
------
the Real Property (the "Survey") by a licensed
------
-15-
<PAGE>
surveyor in the jurisdiction in which the Property is located, which (i)
contains an accurate legal description of the Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting the
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the Property is located
within a 100-year flood plain and (iv) is certified to Purchaser and the Title
Company and such other persons as shall have been requested by Purchaser or
Seller. Except as set forth on the Diligence Notice, Purchaser acknowledges and
agrees that it does not have any other objections to any matter shown on the
Survey. Seller acknowledges and agrees that Seller shall attempt to remedy the
objections set forth in the Diligence Notice with respect to the Survey; Seller
shall have the right to adjourn the Closing Date pursuant to Section 3.6 for up
-----------
to ninety (90) days for such purpose. If Seller shall be unable to remove any
such survey defect to which Purchaser has objected, Purchaser may elect (i) to
terminate this Agreement and this Agreement shall terminate and be of no further
force or effect except as otherwise expressly provided herein, or (ii) to
consummate the transactions contemplated hereby, notwithstanding such defect,
without any abatement or reduction in the Purchase Price on account thereof.
Purchaser shall make any such election by written notice to Seller given on or
prior to the earlier of the Closing Date or fifth Business Day after Seller's
notice of its inability to cure such defect and time shall be of the essence
with respect to the giving of such notice by Purchaser. Failure of Purchaser to
give such notice shall be deemed an election by Purchaser to proceed in
accordance with clause (ii) above and such matter shall be a Permitted
Encumbrance.
3.5. Additional Termination Option.
-----------------------------
If Purchaser shall elect, pursuant to any provision of this
Agreement or of the Other Agreements, to terminate any three or more of the
Other Agreements and/or this Agreement, then, together with such notice of
termination with respect to this Agreement or an Other Agreement which taken by
itself or together with any prior notices of termination would result in the
three or more such terminations, Purchaser may, in such notice, or Seller may,
within 10 Business Days of receipt of such notice of termination by written
notice to Purchaser, terminate this Agreement and simultaneously terminate the
Other Agreements and the Group Two Sale Agreement, in which event the Deposit
shall be returned to Purchaser and the parties to this Agreement shall have no
further obligations under this Agreement, the Other Agreements or the Group Two
Sale Agreement except as expressly provided in this Agreement, the Other
Agreements or the Group Two Sale Agreement. Notwithstanding the foregoing, if
any provision in any Other Agreement expressly provides that a termination
thereof shall not be considered for purposes of determining with respect to this
Section 3.5 whether three such terminations have
- -----------
-16-
<PAGE>
occurred, such provision of the Other Agreement shall be controlling.
3.6. Adjournment of Closing.
----------------------
(a) At the request of either Purchaser or Seller, the Closing
shall be adjourned for up to ninety (90) days until all objections with respect
to the Property set forth in the Diligence Notice have been cured or remedied.
(b) At Closing, if Seller is unable to deliver any Estoppel
Certificates (as required by Section 4.1(i)), Franchisor Comfort Letters (as
---------------
required by Section 4.1(k) or any necessary consents and approvals (as required
--------------
by Section 4.5)), then unless such requirement is waived by Purchaser in its
-----------
sole and absolute discretion, Seller shall have the right to adjourn the Closing
for up to ninety (90) days. If at Closing Seller is unable to deliver any
required Estoppel Certificates, Franchisor Comfort Letters or any necessary
consents and approvals for three or more Properties under any of the Other
Agreements and/or this Agreement, then unless the parties shall otherwise
mutually agree (or unless such requirement is waived by Purchaser in its sole
and absolute discretion), the Closing shall be adjourned with respect to the
Property and all of the Properties to be conveyed under the Other Agreements
until such Estoppel Certificates, Franchisor Comfort Letters or consents are
obtained, provided such adjournment shall not be longer than ninety (90) days.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser to acquire the Property on the Closing Date shall be
subject to the satisfaction of the following conditions precedent on and as of
the Closing Date, any or all of which may be waived by Purchaser in its sole and
absolute discretion:
4.1. Closing Documents. Seller shall have delivered to
-----------------
Purchaser:
(a) A good and sufficient special warranty deed in form as
shall be customary in the jurisdiction in which the Property is located in
proper statutory form for recording, duly executed and acknowledged by Seller,
conveying fee simple title to the Property, free from all liens and encumbrances
other than the Permitted Encumbrances;
(b) An original fully executed counterpart of each document
evidencing or securing the Assumed Debt, to the extent the same is in Seller's
possession, custody or control; provided that if Seller is unable to produce an
original fully executed counterpart of any such document, Seller may provide a
copy of
-17-
<PAGE>
such document certified by Seller to be a true and correct copy thereof, in lieu
thereof;
(c) A bill of sale and assignment agreement, substantially in
the form attached hereto as Exhibit R, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
FF&E, the Documents and the Intangible Property with respect to the Property;
(d) An assignment and assumption agreement, substantially in
the form attached hereto as Exhibit S, duly executed and acknowledged by Seller,
---------
with respect to all of Seller's right, title and interest in, to and under the
Space Leases with respect to the Property;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) To the extent the same are in Seller's possession, fully
executed copies of all Contracts pertaining to the Property;
(g) A duly executed original counterpart of the Operating
Lease for the Hotel and all other documents and sums required to be delivered by
Seller pursuant thereto (including without limitation any Subordination,
Nondisturbance and Attornment Agreement, if any, between Seller, as tenant, and
any Mortgagee);
(h) If necessary, an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit W, duly executed and
---------
acknowledged by Seller and Operating Lessee, with respect to all of Seller's
right, title and interest in, to and under the Contracts;
(i) Duly executed Estoppel Certificates from the franchisor
under the Franchise Agreement and the holders of the Assumed Debt; provided that
any such Estoppel Certificate shall be provided to Purchaser prior to Closing
promptly following receipt by Seller of the same;
(j) Certificates of title for any motor vehicles constituting
a portion of the FF&E;
(k) Franchisor Comfort Letters;
(l) Subject to the provisions of Section 11.1, copies of the
------------
Liquor License for the Hotel;
(m) All original Documents, to the extent in Seller's
possession and control, including without limitation all keys, access cards and
access combinations for the Hotel;
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<PAGE>
(n) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller;
(o) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(p) Such other conveyance documents, certificates, deeds,
affidavits, and other instruments as Purchaser or the Title Company may
reasonably require to omit standard exceptions to title and to effectuate the
transactions contemplated hereunder, including without limitation GAP
undertakings, or as customarily given by sellers in connection with real or
personal property with respect to the state in which the Property is located.
4.2. Condition of the Property.
-------------------------
(a) The Property shall, except as otherwise provided in
Section 3.2, be in substantially the same physical condition (including without
- -----------
limitation, with respect to the environmental condition of the Property) as on
the date of this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Property in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Property which would render the Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Property shall be
in full force and effect in all material respects, including without limitation
the Liquor License and Franchise Agreement.
4.3. Title Policies. The Title Company shall be prepared,
--------------
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue a title
insurance policy to Purchaser, subject only to the Permitted Encumbrances, in
accordance with Section 3.3.
-----------
4.4. Opinions of Counsel. Purchaser shall have received a
-------------------
written opinion from counsel to Seller regarding the organization and authority
of Seller, the due execution and delivery of this Agreement and the Operating
Lease, having the
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<PAGE>
customary and reasonable assumptions and qualifications, and such other matters
with respect to the transactions contemplated by this Agreement or the Operating
Lease as the Purchaser may reasonably require. Seller and Purchaser shall agree
upon local counsel for the jurisdiction in which the Property is located to
provide an appropriate jurisdiction-specific opinion, the cost of which local
counsel will be shared equally by Seller and Purchaser. An opinion from in-house
counsel to Seller shall satisfy this Section 4.4 with respect to all matters
-----------
which customarily do not require a local counsel opinion.
4.5. Other Approvals. Seller shall have obtained and
---------------
delivered to Purchaser, in form and substance reasonably satisfactory to Seller
and Purchaser, (a) all required governmental approvals and waivers as may be
necessary or appropriate to consummate the transactions contemplated by this
Agreement; (b) all lender consents necessary in connection with the assumption
of the Assumed Debt; (c) the consent of the franchisor, if required; (d) the
consent of the ground lessor under that certain Lease dated June 29, 1973 (as
amended, the "Armonk Lease") for premises located in Armonk, New York to the
------------
transactions contemplated by the Group Two Sale Agreement; and (e) a
modification of such Armonk Lease to extend the initial term thereof such that
at the closing of the property there shall be at least thirty (30) years of the
initial term remaining.
4.6. Representations. All representations and warranties
---------------
made herein by Seller shall be true and correct in all material respects.
4.7. Default under Group Two Sale Agreement. Seller shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
4.8. Default under Other Agreements. Seller shall not be in
------------------------------
default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Purchaser's obligation to close
set forth in this Section 4 is not satisfied with respect to the Property by the
---------
Closing Date (as adjourned, if applicable), Purchaser shall not be obligated to
close and, at Purchaser's option, this Agreement shall terminate; provided
however, such failure of a condition shall not be a default under this
Agreement.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
The obligation of Seller to convey the Property on the Closing Date to Purchaser
is subject to the satisfaction of the following conditions precedent on and as
of the Closing Date, any or all of
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<PAGE>
which may be waived by Seller in its sole and absolute discretion:
5.1. Purchase Price. Purchaser shall deliver to Seller the
--------------
Purchase Price, pursuant to Section 2.4.
-----------
5.2. Closing Documents. Purchaser shall have delivered to
-----------------
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 where applicable;
-----------
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner;
(c) Duly executed and acknowledged assignment and assumption
documents for the assumption of the Assumed Debt, in forms reasonably acceptable
to Purchaser and the lender;
(d) Such other conveyance documents, certificates, deeds,
affidavits and other instruments as Seller, the Title Company or any lender
holding all or any portion of the Assumed Debt may reasonably require to
effectuate the transactions contemplated hereunder.
5.3. Opinion of Counsel. Seller shall have received a
------------------
written opinion from counsel to Purchaser regarding the organization and
authority of Purchaser, the due execution and delivery of this Agreement and the
Operating Lease, having the customary and reasonable assumptions and
qualifications, and such other matters with respect to the transactions
contemplated by this Agreement or the Operating Lease as Seller may reasonably
require. As set forth in Section 4.3, Seller and Purchaser shall agree upon
-----------
local counsel for each jurisdiction in which the Property is located to provide
an appropriate jurisdiction-specific opinion, the cost of which local counsel
will be shared equally by Seller and Purchaser. An opinion from in-house counsel
to Purchaser shall satisfy this Section 5.3 with respect to all matters which
-----------
customarily do not require a local counsel opinion.
5.4. Other Approvals. Seller and Purchaser shall have
---------------
received, in form and substance reasonably satisfactory to Seller and Purchaser,
(a) all required governmental approvals and waivers as may be necessary or
appropriate to consummate the transactions contemplated by this Agreement, other
than as expressly set forth in Section 11.1; (b) all lender consents necessary
------------
or appropriate in connection with the assumption of the Assumed Debt; (c) the
consent of franchisor, if required; (d) the consent of the ground lessor under
the Armonk Lease to the transactions contemplated by the Group Two Sale
Agreement; and (e) a modification of such Armonk Lease to extend the initial
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<PAGE>
term thereof such that at the Closing of the Property there shall be at least
thirty (30) years of the initial term remaining.
5.5. Representations. All representations and warranties
---------------
made herein by Purchaser shall be true and correct in all material respects.
5.6. Default under Group Two Sale Agreement. Purchaser shall
--------------------------------------
not be in default, or have committed an act or failed to perform an act which,
with the giving of notice, the passage of time or both, will become a default
under, the Group Two Sale Agreement.
5.7. Default under Other Agreements. Purchaser shall not be
------------------------------
in default, or have committed an act or failed to perform an act which, with the
giving of notice, the passage of time or both, will become a default under, any
of the Other Agreements.
In the event any condition to Seller's obligation to close set
forth in this Section 5 is not satisfied, Seller shall not be obligated to close
and, at Seller's option, this Agreement shall terminate; provided however,
except with respect to the failure of the conditions set forth in Section 5.1,
-----------
Section 5.6 and Section 5.7 (which shall be a default under this Agreement),
- ----------- -----------
such failure of a condition shall not be a default under this Agreement.
SECTION 6. REPRESENTATIONS OF SELLER
To induce Purchaser to enter into this Agreement, Seller represents to Purchaser
as follows:
6.1. Status and Authority of Seller. Seller is a corporation
------------------------------
duly organized, validly existing and in corporate good standing under the laws
of its state of incorporation, and has all requisite power and authority under
the laws of such state and its respective charter documents to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. Seller has duly qualified to transact business in each
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where failure to do so could not reasonably be expected to
have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action
----------------
to authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller on or prior
to the Closing Date, such document shall constitute the valid and binding
obligation and agreement of Seller, as the case may be, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency,
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<PAGE>
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement or the Operating Lease by Seller, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon the Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller is bound.
6.4. Litigation. Seller has not received any written notice
----------
of and, to Seller's knowledge, no action or proceeding is pending or threatened
and no investigation looking toward such an action or proceeding has begun,
which (a) questions the validity of this Agreement or the Operating Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the Property,
(c) will result in or subject the Property to a material liability, or (d)
involves condemnation or eminent domain proceedings against any part of the
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
--------------------------------
agreements provided to Purchaser not later than December 15, 1997, there are no
other material agreements for the use or occupancy of the Property which will be
binding on Purchaser subsequent to the Closing Date, which Purchaser cannot
terminate. The list of Space Leases attached hereto as Exhibit K is a current,
---------
complete and accurate listing of all leases affecting the Property as of the
date hereof. The copies of the Space Leases provided or made available to
Purchaser not later than December 15, 1997 are full and complete copies of said
Space Leases and, to Seller's knowledge, are valid, in full force and effect and
no party has breached any material condition or provision thereof. No tenant
under any Lease has prepaid rent or additional rent or any other items under the
Space Leases for more than one (1) month in advance and there are no security
deposits held by Seller under any of the Space Leases other than as set forth on
Exhibit K.
- ---------
6.6. Franchise Agreement. The Franchise Agreement listed on
-------------------
Exhibit D is the sole franchise agreement affecting the Property as of the date
- ---------
hereof. The copy of the Franchise Agreement provided or made available to
Purchaser not later than December 1, 1997 is true and complete copies of said
Franchise Agreement and, to Seller's knowledge, is valid, in full force and
effect and no party has breached any material condition or provision thereof.
-23-
<PAGE>
6.7. Contracts. The copies of the Contracts provided or made
---------
available to Purchaser not later than December 1, 1997 are true and complete
copies of said Contracts and, to Seller's knowledge, are valid, in full force
and effect and no party has breached any material condition or provision
thereof.
6.8. Taxes. To Seller's knowledge, other than the amounts
-----
disclosed by tax bills, no taxes or special assessments of any kind (special,
bond or otherwise) are or have been levied with respect to the Property, or any
portion thereof, which are outstanding or unpaid, other than amounts not yet due
and payable or, if due and payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign person"
--------------------
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. To the best of Sellers'
--------------------
knowledge, and except for the conditions specifically described in the
environmental report listed on Exhibit X (the "Environmental Report"), (i) no
--------- --------------------
Hazardous Substances are located on or have been released or disposed of in, on,
under or from the Hotel so as to impose liability or require remediation under
any Environmental Laws and (ii) no liability under or violation of any
Environmental Laws or condition that could give rise to such liability or
violation exists with respect to the Hotel, including without limitation
liabilities relating to offsite disposal of waste in connection with the Hotel.
To the best of Seller's knowledge, there are no pending or threatened claims by
any person arising out of any alleged violation of Environmental Laws or any
release or threatened release of Hazardous Substances arising out of the
ownership or operation of the Hotel.
6.11. Insurance. Seller has not received any written notice
---------
from any insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. FF&E. All FF&E is owned by Seller (other than such
----
items listed on Exhibit T (the "Leased FF&E") and any such items which are owned
--------- -----------
by tenants, subtenants, concessionaires or licensees under the Space Leases,
guests, invitees, employees, agents or independent contractors).
6.13. Employment and Union Contracts. Exhibit U to this
------------------------------ ---------
Agreement is a true and complete list of all employment agreements and union
contracts or other labor agreements with respect to the Property.
6.14. Adjacent Land Leases. Seller does not lease any land
--------------------
or facilities adjacent to the Property.
6.15. Trademarks. Seller has received no written notice that
----------
the use of any trademark or tradename is in violation
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<PAGE>
of any trademark or tradename owned by any other person or entity.
6.16. Compliance with Laws. To Seller's knowledge, the
--------------------
Property is in compliance with all laws of governmental authorities which are
applicable to the Property or the use or operation of the Property, except as
set forth on Exhibit V.
---------
6.17. Inventory. At Closing, the Property shall contain
---------
sufficient supplies and personalty to operate the Property in a manner
consistent with the operation of the Property immediately prior to the Closing
by Seller.
6.18. Holder of Liquor License. The holder of the Liquor
------------------------
License for the Property is Prime Hospitality Corp., a Delaware corporation.
The representations made in this Agreement by Seller shall be deemed remade by
Seller as of the Closing Date with the same force and effect as if made on, and
as of, such date; provided, however, that, Seller shall have the right, from
time to time prior to the Closing Date, to modify the representations as
necessary to conform to factual changes by notice to Purchaser. If a Seller
representation or warranty thereby is modified to an extent that the
representation or warranty is materially and adversely different than that made
upon execution of this Agreement, then Purchaser may terminate this Agreement,
provided notice of such termination is given to Seller within ten (10) Business
Days after Seller has provided notice of the modification.
The representations made in Section 6.1 and Section 6.2 shall survive the
----------- -----------
Closing indefinitely. The representations made in Section 6.3 through and
-----------
including Section 6.18 shall survive Closing for a period of one (1) year (the
------------
"Survival Period") and, upon termination of the Survival Period, shall terminate
---------------
absolutely will full and final discharge of liability except to the extent that
Purchaser shall have given to Seller written notice of a breach thereof within
the Survival Period (but in any event promptly after learning of such breach)
specifying in sufficient detail the facts constituting such alleged breach and
the loss then reasonably ascertainable as a consequence thereof, and an
opportunity to cure such breach within a reasonable period of time after
Purchaser having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Purchaser shall have no claim against
Seller and Seller shall have no liability to Purchaser, in the event of a breach
of any of Seller's representations and warranties and statements in this
Agreement in a respect which is not material and which does not result in any
loss or damage to Purchaser.
Except as otherwise expressly provided in this Agreement or any documents to be
delivered to Purchaser at the Closing, Seller disclaims the making of any
representations or warranties, express or implied, regarding the Property or
matters affecting
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<PAGE>
the Property, whether made by Seller, on Seller's behalf or otherwise,
including, without limitation, the physical condition of the Property, title to
or the boundaries of the Real Property, pest control matters, soil conditions,
the presence, existence or absence of hazardous wastes, toxic substances or
other environmental matters, compliance with building, health, safety, land use
and zoning laws, regulations and orders, structural and other engineering
characteristics, traffic patterns, market data, economic conditions or
projections, and any other information pertaining to the Property or the market
and physical environments in which they are located. Purchaser acknowledges (i)
that Purchaser has made and is relying upon its own investigation or that of
third parties with respect to the physical, environmental, economic and legal
condition of the Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Purchaser further acknowledges that it
has not received from or on behalf of Seller any accounting, tax, legal,
architectural, engineering, property management or other advice with respect to
this transaction and is relying solely upon the advice of third party
accounting, tax, legal, architectural, engineering, property management and
other advisors. Subject to the provisions of this Agreement, Purchaser shall
purchase the Property in its "as is" condition on the Closing Date.
SECTION 7. REPRESENTATIONS OF PURCHASER
To induce Seller to enter into this Agreement, Purchaser represents to Seller as
follows:
7.1. Status and Authority of Purchaser. Purchaser is a
---------------------------------
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Delaware and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a trust or unincorporated business association in each jurisdiction
in which the nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary
-------------------
action to authorize the execution, delivery and performance of its obligations
under this Agreement and the Operating Lease, and upon the execution and
delivery of any document to be delivered by Purchaser on or prior to the Closing
Date such document shall constitute the valid and binding obligation and
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors.
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<PAGE>
7.3. No Violations of Agreements. Neither the execution,
---------------------------
delivery or performance of this Agreement nor the Operating Lease by Purchaser,
nor compliance with the terms and provisions hereof or of the Operating Lease,
will result in any breach of the terms, conditions or provisions of, or conflict
with or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any property or assets of Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness
or any other agreement or instrument by which Purchaser is bound.
7.4. Litigation. Purchaser has not received any written
----------
notice of, and, to Purchaser's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun which questions the validity of this Agreement or the Operating Lease or
any action taken or to be taken pursuant hereto or pursuant to the Operating
Lease.
7.5. No Conflicts. Neither the execution, delivery and
------------
performance of this Agreement or the consummation of the transactions
contemplated hereby by Purchaser will conflict with or result in a material
breach or violation of, or constitute a default under the charter, bylaws,
certificate of limited partnership or limited partnership agreement, as the case
may be, of the Purchaser; any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which Purchaser is a
party or to which it, any of its properties or other assets is subject; or any
applicable material statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to Purchaser.
The representations made in this Agreement by Purchaser shall
be deemed remade by Purchaser as of the Closing Date with the same force and
effect as if made on, and as of, such date; provided, however, that, Purchaser
shall have the right, from time to time prior to the Closing Date, to modify the
representations as necessary to conform to factual changes by notice to Seller.
If a Purchaser representation or warranty thereby is modified to an extent that
the representation or warranty is materially and adversely different than that
made upon execution of this Agreement, then Seller may terminate this Agreement,
provided notice of such termination is given to Purchaser within ten (10)
Business Days after Seller has provided notice of the modification.
The representations made in Section 7.1 and Section 7.2 shall
----------- -----------
survive the Closing indefinitely. The representations made in Section 7.3
-----------
through and including Section 7.5 shall survive Closing for the Survival Period
-----------
and, upon termination of the Survival Period, shall terminate absolutely will
full and final discharge of liability except to the extent that Seller shall
have given to Purchaser written notice of a breach thereof within the Survival
Period (but in any event promptly after learning of
-27-
<PAGE>
such breach) specifying in sufficient detail the facts constituting such alleged
breach and the loss then reasonably ascertainable as a consequence thereof, and
an opportunity to cure such breach within a reasonable period of time after
Seller having learned of such breach. Notwithstanding any provision to the
contrary set forth in this Agreement, Seller shall have no claim against
Purchaser and Purchaser shall have no liability to Seller, in the event of a
breach of any of Purchaser's representations and warranties and statements in
this Agreement in a respect which is not material and which does not result in
any loss or damage to Seller.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
-------------------
Purchaser, which covenants shall be performed at Seller's sole cost and expense
unless otherwise set forth in this Agreement, that commencing upon the date of
the Original Agreement and continuing until the Closing Date (or as otherwise
set forth below):
(a) Upon learning of any material change in any condition
with respect to the Property or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate the Property,
under the Franchise Agreement in a good and businesslike fashion consistent with
its past practices (which Seller believes to be in compliance with the Franchise
Agreement) and to cause the Property to be maintained in good working order and
condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Property as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission. Without limiting the foregoing, Seller shall provide to
Purchaser a copy of each monthly profit and loss statement for the Property.
(d) Seller shall not, without the Purchaser's written
consent, enter into any modifications, renewals or extensions of any of the
Space Leases, the Franchise Agreement or the documents evidencing and securing
the Assumed Debt, other than those modifications, renewals or extensions
required by the terms of the applicable document, or enter into any other
leases,
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<PAGE>
agreements, mortgages or other loan documents or other commitments relating to
the Property or the operation of the Hotel other than in the normal course of
business and which are by their terms terminable without penalty upon not more
than thirty (30) days notice.
(e) From and after the Closing Date, to employ substantially
all of the present employees of the Hotel, in at least the number and positions
as are required in order to avoid triggering any notification requirements under
the Worker Adjustment Retraining and Notification Act ("WARN Act"), without
--------
limiting Seller's ability to discharge any or all of such employees thereafter
(provided, however, that no such discharge will trigger a WARN Act notification
or otherwise impose any obligations on Seller). Any employees of Seller working
at the Hotel as of the Closing Date shall remain the employees of Seller after
the Closing Date. Seller hereby agrees to indemnify and hold harmless Purchaser
from and against any and all liability, cost, damages and expenses arising from
or relating to the failure of Seller to comply with this Section 8.1(e). The
--------------
provisions of this Section 8.1(e) shall survive the Closing.
--------------
(f) To operate, manage, and maintain the Hotel consistent
with Seller's prior practice and as a reasonable and prudent operator of like-
kind hotels in the same competitive market would operate, manage, and maintain
the Hotel, including, without limitation, (i) using reasonable efforts to keep
available the services of its present employees at the Improvements and to
preserve its relations with guests, suppliers and other parties doing business
with Seller with respect to the Hotel, (ii) accepting booking contracts for the
use of the Hotel facilities on terms not less favorable than the terms typically
arranged by Seller as of the date of this Agreement and 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; (v) continuing to operate
the Property under the Liquor License and Franchise Agreement, in a fashion
consistent with its past practice (which Seller believes to be in compliance
with such Liquor License and Franchise Agreement); (vi) maintaining supplies and
personalty consistent with the prior operations of Seller; (vii) expending such
amounts for advertising and promotions as are scheduled to be expended prior to
Closing pursuant to Seller's 1997 operating budget for the Hotel; and (viii)
expending such amounts for capital improvements as are scheduled to be expended
prior to Closing pursuant to Seller's 1997 capital budget for the Hotel,
provided that if any such scheduled capital improvement is not completed prior
to Closing, Seller shall complete such improvements at its sole cost and expense
in a manner consistent with Seller's past operation of the Hotel and this
subparagraph (viii) shall survive Closing;
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<PAGE>
(g) To keep and maintain the Hotel in a state of repair and
condition consistent with the requirements of clause (f) above;
(h) To keep, observe, and perform all its obligations in all
material respects under the Space Leases the Franchise Agreement, the Liquor
License, the documents evidencing and securing the Assumed Debt and the
Contracts for the Hotel, and all other applicable contractual arrangements
relating to the Hotel consistent with Seller's past practice;
(i) To not enter into any new agreements of the nature of
Contracts or Space Leases or any amendments, modifications, renewals or
extensions of any existing Contracts, Space Leases, or documents evidencing the
Assumed Debt, without Purchaser's prior written consent, except that the 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 thirty (30) days prior notice without cost or expense. Any such new
agreement or renewal or extension of existing agreements to which Purchaser's
consent was not obtained, whether or not such consent is required under this
Section 8.1(i) shall subject the applicable agreement to Purchaser's review
- --------------
under Section 3;
---------
(j) To 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;
(k) To comply with all federal, state, and municipal laws,
ordinances, regulations, and orders relating to the Hotel;
(l) To 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) To 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 Seller's past practices and
the practices of a reasonable and prudent operator of a like-kind hotels in the
same competitive market, and to continue to book contracts and reservations
consistent with prior practices;
(n) To 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 due;
(o) To use reasonable, good faith efforts to obtain the
Estoppel Certificates, the Franchisor Comfort Letters, and
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<PAGE>
any consents and approvals necessary for the transaction contemplated by this
Agreement at least one week prior to the Closing; to continue to use reasonable,
good faith efforts to obtain such items thereafter; to promptly inform Purchaser
of any issues or problems which Seller foresees in obtaining any such items; and
to deliver each such item to Purchaser promptly after receipt thereof; and
(p) To keep the existing insurance coverage for the Hotel in
full force and effect.
8.2. Covenants of Purchaser. Purchaser hereby covenants with
----------------------
Seller commencing on the date of the Original Agreement and continuing until the
Closing Date, Purchaser shall exercise best efforts to cause or permit the
Purchaser to assume the Assumed Debt as payment of a portion of the Purchase
Price, in accordance with the terms of this Agreement. Without limiting the
foregoing, Purchaser agrees that it shall form special purpose entities, provide
financial and other information reasonably requested by any holder of Assumed
Debt, provide legal opinions regarding the due formation and good standing of
the assignee of the Assumed Debt and the due authorization and execution of the
documents evidencing the assumption, negotiate in good faith the assumption
documents, and perform such other acts and provide such other information as any
holder of Assumed Debt may reasonably require. Seller shall pay the reasonable
third-party costs incurred by Purchaser in complying with this Section 8.2
-----------
promptly upon receipt of invoices or other reasonable evidence of the incurrence
of such costs; the provisions of this sentence shall survive the Closing or
earlier termination of this Agreement.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its
-------------
own expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, inspection
fees, and the costs and expenses of preparing engineering and environment
reports, market studies and appraisals, whether or not the transactions
contemplated hereby are consummated. The cost of the Survey, Title Commitment
(and the policies and endorsements issued pursuant thereto), all state and local
sales, transfer, excise, value-added or other similar taxes, all recording and
filing fees that may be imposed by reason of the sale, transfer, assignment and
delivery of the Property shall be shared equally by Seller and Purchaser. As
between Purchaser and Seller, the cost of seeking consents including, without
limitation, any transfer or assumption fees incurred in connection therewith,
Franchisor Comfort Letters and Estoppel Certificates shall be borne solely by
Seller.
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<PAGE>
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
-----------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 6), or if Seller shall fail to
---------
perform any of the material covenants and agreements contained herein to be
performed by Seller and such failure continues for a period of ten (10) days
after notice thereof from Purchaser, Purchaser, as its sole and exclusive
remedy, may terminate this Agreement, in which event the Deposit shall be
returned to Purchaser and Seller shall be obligated to pay Purchaser Seven
Hundred Seventy-One Thousand Dollars ($771,000) as liquidated damages and not as
a penalty (the "Liquidated Damages"). Purchaser and Seller acknowledge that the
------------------
damages which may be incurred by Purchaser in the event of Seller's default are
difficult to quantify as of the date of this Agreement; the Liquidated Damages
represent the parties reasonable estimate of Purchaser's probable future damages
in the event of Seller's default and the Liquidated Damages represent fair and
reasonable compensation to Purchaser in the event of Seller's default. Except
with respect to the Liquidated Damages, Purchaser hereby waives any and all
rights it may have to sue Seller for money damages in connection with this
Agreement.
10.2. Default by Purchaser. If Purchaser shall have made any
--------------------
representation herein which shall be untrue or misleading in any material
respect (subject to the right to cure in Section 7), or if Purchaser shall fail
---------
to perform any of the covenants and agreements contained herein to be performed
by it and such failure shall continue for a period of ten (10) days after notice
thereof from Seller, Seller may, as its sole and exclusive remedy at law and in
equity, terminate this Agreement, whereupon Purchaser shall be obligated to pay
Seller an amount equal to the Liquidated Damages, as liquidated damages and not
as a penalty. The Deposit shall be retained by Seller and offset against the
Liquidated Damages. Purchaser and Seller acknowledge that the damages which may
be incurred by Seller in the event of Purchaser's default are difficult to
quantify as of the date of this Agreement; the Liquidated Damages represent the
parties reasonable estimate of Seller's probable future damages in the event of
Purchaser's default and the Liquidated Damages represent fair and reasonable
compensation to Seller in the event of Purchaser's default.
SECTION 11. LIQUOR LICENSE; FRANCHISE AGREEMENT.
11.1. Liquor License. Seller currently holds a Liquor License
--------------
for the Hotel and if in compliance with all applicable laws, statutes, rules,
regulations and ordinances Seller may continue to hold such Liquor License
following the Closing, Seller shall maintain the Liquor License and Purchaser
shall not interfere with the maintenance of the Liquor License. If Seller may
not continue to hold the Liquor License following the Closing or if the existing
Liquor License needs to be revised to reflect the Purchaser as owner of the
Property, then Seller shall apply for a new or modified Liquor License or, if
advised
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<PAGE>
by local counsel to be required under local laws, regulations or orders,
Purchaser or its designee shall apply for a liquor license for the Hotel, at
Seller's sole cost and expense, promptly after Closing. Seller and Purchaser
shall cooperate to obtain a liquor license for the Hotel or modifications to the
existing Liquor License or to maintain the existing Liquor License in effect.
Until such time as such a new or modified liquor license is obtained, Seller
shall take all steps reasonably necessary to enable the current Liquor License
to be used by the Hotel and to permit the uninterrupted sale and service of
alcoholic beverages at the Hotel. The provisions of this Section 11.1 shall
------------
survive the Closing.
11.2. Franchise Agreement.
-------------------
(a) Purchaser may instruct Seller to terminate the Franchise
Agreement with such termination to be effective as of the Closing Date, in
Purchaser's sole discretion, provided that in such event Purchaser shall be
solely responsible for the payment of liquidated damages, termination fees,
costs or other liabilities arising from or related to the termination of such
Franchise Agreement and shall indemnify and hold harmless Seller therefrom. The
preceding provisions of this Section 11.2 shall survive the Closing or earlier
------------
termination of this Agreement.
(b) As between Seller and Purchaser, Seller shall be solely
responsible for obtaining, at its sole cost and expense, the Franchisor Comfort
Letters and the consent of the franchisor, if required pursuant to the Franchise
Agreement, to the transactions described in this Agreement; provided that the
failure of Seller to obtain such Franchisor Comfort Letters or consents of
franchisors, after using commercially reasonable, good faith efforts to do so in
accordance with Section 8.1(o), shall not be a default under this Agreement;
--------------
provided further that Seller's obligation and liability to pay administrative
fees imposed by the franchisor for such Franchisor Comfort Letters, such
consents or otherwise in connection with the transaction contemplated by this
Purchase Agreement shall be limited to the first One Hundred Thousand Dollars
($100,000) of the collective administrative fees required by the franchisor and
by any franchisor in connection with the transactions contemplated by the Other
Agreements and one-half of all amounts in excess thereof, and Purchaser hereby
covenants and agrees to pay the other one-half of such administrative fees in
excess of One Hundred Thousand Dollars ($100,000). In no event shall the
requirement of payment of administrative fees constitute a reason for Purchaser
to fail to close on the Property.
(c) In the event Purchaser directs Seller to terminate the
Franchise Agreement pursuant to this Section 11.2 and intends to cause Operating
------------
Lessee, as lessee, to enter into a new franchise agreement at the Closing and
has a binding commitment from the new franchisor for the same (subject to
reasonable conditions), Seller and Purchaser hereby agree to negotiate in
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good faith to an adjustment of the rent payable pursuant to the Operating Lease
for the Property, based on the terms and conditions of the new franchise
agreement and its anticipated effect on Gross Revenues (as defined in the
Operating Lease).
(d) Notwithstanding anything to the contrary contained herein
(including without limitation subparagraph (b) above), if in connection with the
transaction contemplated by this Agreement or the obtaining of the Franchisor
Comfort Letters or franchisor consents, the franchisor requires any capital
improvement to be made at the Property (hereinafter, a "PIP"), Purchaser shall
be solely responsible for the cost and expense of the same. In no event shall
the requirement of a PIP constitute a reason for Purchaser to fail to close on
the Property. In lieu of agreeing to any PIP requirement, Purchaser may direct
Seller to terminate the Franchise Agreement as provided in Section 11.2(a). If
---------------
any such PIP requirement is imposed solely as a result of Purchaser's request
for a Franchisor Comfort Letter, Purchaser may waive the delivery of such
Franchisor Comfort Letter as a condition to Closing.
11.3. License for Excluded Intellectual Property. At the
------------------------------------------
Closing, as part of the bill of sale and assignment agreement, Seller shall
grant to Purchaser a nonexclusive license to use the Excluded Intellectual
Property pursuant to the following terms and conditions:
(a) the license shall be effective from the Closing Date
until the earlier of (i) the tenth anniversary of the Closing Date; or (ii) a
termination pursuant to the provisions of Section 11.3(d) below;
---------------
(b) upon the expiration of the license pursuant to clause (i)
of subparagraph (a) above, the license shall automatically terminate, without
the need of notice from Seller, and Purchaser shall have no further right to use
the Excluded Intellectual Property in connection with the Property;
(c) Purchaser covenants that it shall not and shall not
permit the license for the Excluded Intellectual Property to be used in any
manner which could impair the value of the Excluded Intellectual Property or the
reputation of Seller or Seller's Affiliates or of any of the properties owned by
Seller sharing the Excluded Intellectual Property with the Property; Purchaser
shall indemnify and hold harmless Seller from and against any losses, costs or
damages incurred by Seller as a result of Purchaser's failure to perform the
covenant set forth in this subparagraph (c); and
(d) in the event Purchaser fails to perform the covenant set
forth in subparagraph (c) above, Seller shall have the right to terminate the
license upon written notice to Purchaser, and Purchaser shall have no further
right to use the Excluded Intellectual Property.
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<PAGE>
The provisions of this Section 11.3 shall survive the Closing.
------------
SECTION 12. ADJUSTMENTS, PRORATIONS, AND DEPOSITS
12.1. Matters to be Adjusted or Prorated. To the extent then
----------------------------------
capable of being calculated or estimated, on the Closing Date (the "Prorations
----------
Settlement"), and otherwise within 30 days after the Closing Date, the following
- ----------
items shall be apportioned as of the Cut-Off Time with respect to the Property
and appropriate payments made as described in this Agreement in respect thereof
(collectively, the "Adjustments"):
-----------
(a) Real estate and ad valorem taxes and assessments based on
the rates and assessed valuation applicable in the current fiscal tax year, or
if not established for such year, the latest fiscal year for which assessed. (In
the latter case, an appropriate correction in the adjustment shall be made
within one year after the Closing Date when the current year's assessments are
established.)
(b) All rates, rents, charges, and payments for sewer, water,
gas, electricity, telephone and other utility services for which final bills
have not been rendered as of the Closing Date. Seller shall exercise reasonable
efforts to cause meters to be read as of the Closing Date.
(c) Compensation for all employees, including all accrued
wages, fringe benefits, including pension and similar benefits, vacation and
sick pay, unemployment compensation, social security and other payroll taxes,
and disability and workers' compensation insurance.
(d) Any taxes accrued and/or payable to the various local
governments by any business entity operating the Hotel and its related
businesses, including business and occupation taxes, retail sales taxes, gross
receipts taxes, and other special lodging or hotel taxes, but excluding income
taxes and franchise taxes of Seller.
(e) Rents collected under the Space Leases, including
percentage rents (if any) based on the results from the most recently completed
period (and adjusting payments shall be made as soon as reasonably practical
after the Closing Date when final results are reported).
(f) All revenues from the rental of Hotel rooms (exclusive of
Other Revenues) ("Room Revenues") for the night that includes 12:01 a.m. on the
-------------
Closing Date, which shall be divided equally between Purchaser and Seller.
(g) All revenues earned from operation of the Hotel other
than Room Revenues, including without limitation, revenues from the sale of
food, beverages, rental of meeting and banquet rooms, telephone sales, vending
machines, valet and parking
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<PAGE>
services, revenues from any "mini-bars" located in the Hotel rooms and all other
revenues (the "Other Revenues"), provided that Other Revenues arising from the
--------------
sale of food and beverages in restaurants and bars which do not remain open the
entire Cut-Off Night shall be apportioned as of the last hour at which the
applicable restaurant or bar is open.
(h) All sales, excise, hotel occupancy or other similar taxes
(excluding in any event income, franchise and real property taxes) collected
with respect to the Room Revenues and Other Revenues.
(i) All costs and expenses of operating the Hotel, including
without limitation, amounts paid or payable under the Contracts, Franchise
Agreements, and FF&E Leases which are reasonably capable of such proration.
(j) Seller's active guest ledger, cash drawers and house
account, which shall be purchased at par.
Seller shall pay all accounts payable at the Hotel relating to services
or goods provided prior to Closing.
With respect to subparagraph (b) through (j) it is the intent of Seller
and Purchaser that all income and expenses relating to the Property shall be
prorated as provided in this Section 12 such that Seller shall have the benefit
----------
of all income and be responsible for all expenses and liabilities incurred in
connection with the Property fairly allocable to the period prior to the Closing
Date and that Operating Lessee under the Operating Lease at the Property shall
have the benefit of all income and be responsible for all expenses and
liabilities of the Property relating to the period from and after the Closing
Date. With respect to the prorations and Adjustments set forth in subparagraph
(a) of this Section 12.1, the Purchase Price shall be adjusted based on the
------------
prorations between Seller and Purchaser with respect to such subparagraph.
12.2. Reserves Held by Holders of Assumed Debt. In connection
----------------------------------------
with the assumption by Purchaser of the Assumed Debt, Seller shall assign to
Purchaser all of its right, title and interest in and to all reserves and
deposits held by a holder of Assumed Debt for real property taxes, insurance
premiums, FF&E, Improvements and other purposes. At the Closing, Purchaser shall
pay to Seller the aggregate amount of such reserves and deposits.
12.3. Certiorari Proceeding. Any refunds with respect to
---------------------
certiorari proceedings for tax years prior to and including the current tax year
shall belong to Seller and Seller may continue with and control such
proceedings, provided that if any portion of a refund is received by Seller
which relates to any period after the Closing, such portion shall be delivered
to Purchaser. After the Review Period, Seller shall keep Purchaser advised of
the status of any certiori proceedings which relate to
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<PAGE>
the current tax year or could affect the taxes due for a subsequent tax year and
Purchaser shall have the right to participate in and approve tax settlements of
such certiori proceedings which relate to the current tax year, which
settlements shall not be effective without Purchaser's prior written approval.
SECTION 13. RIGHT OF FIRST REFUSAL; RADIUS RESTRICTION; AMERISUITES HOTEL
PURCHASE OPTION
13.1. Right of First Refusal on Full Service Hotels.
---------------------------------------------
(a) Seller hereby grants to Purchaser a right of first
refusal for a period commencing on the Closing Date and terminating on the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the date upon
which Article XXXVI of the Operating Lease for the Property is effected such
that Seller no longer manages the Property (the "Restricted Period") on any and
-----------------
all Full Service Hotels owned as of the date of this Agreement or acquired or
constructed during the Restricted Period by (A) Seller or (B) any of Seller's
wholly-owned subsidiaries or any other Person for which Seller may direct the
sale of such Person's assets, whether through voting securities or by contract
or otherwise (a "Seller Subsidiary"), on the terms and conditions set forth in
-----------------
this Section 13.1. If during the Restricted Period, Seller or a Seller
------------
Subsidiary shall receive a bona fide offer (the "Offer") from an unaffiliated
-----
third party to purchase one or more of its Full Service Hotels and such Offer
contains a price and terms acceptable to Seller or the Seller Subsidiary, as
applicable, then Seller (x) shall notify Purchaser in writing promptly after the
receipt of the Offer, such notice to be accompanied by a copy of the Offer, and
(y) as promptly as possible, shall provide copies of, or reasonable access to,
due diligence materials in Seller's possession, custody or control relating to
the such Full Service Hotels (including historical occupancy and Rev PAR
information, title policies, title commitments and copies of documents
referenced therein, surveys, environmental audits, zoning reports, engineering
reports, appraisals, budgets and other similar materials, all to the extent in
Seller's possession or control). By its delivery of such due diligence
materials, Seller shall not be warranting or guaranteeing the accuracy of such
information (though Seller shall not deliver any information which it knows to
be untrue or misleading), it being agreed that Purchaser shall be responsible
for making an independent investigation and determination with respect to such
information. Within ten (10) Business Days after the receipt of Seller's notice
and the documents referred to in clause (y) of this Section 13.1, Purchaser
shall notify Seller and the Seller Subsidiary in writing whether Purchaser
desires to purchase the applicable Full Service Hotel at the price and on the
terms set forth in the Offer.
(b) If Purchaser shall fail to respond within the ten (10)
Business Day period referenced in subparagraph (a) above,
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<PAGE>
Purchaser shall be deemed conclusively to have elected not to purchase the Full
Service Hotel. In such event or if Purchaser elects not to purchase the Full
Service Hotel, Seller or the Seller Subsidiary shall have the right to transfer
the Full Service Hotel covered by the Offer to the party making the Offer,
substantially in accordance with the terms of the Offer and without material
modifications beneficial to said third party purchaser, without any further
notice to Purchaser. If, however, Seller or the Seller Subsidiary and such third
party purchaser thereafter agree to terms for such purchase which are materially
different from those provided in the Offer and beneficial to the third party
purchaser, then Purchaser's right of first refusal under this Section 13.1 shall
------------
be renewed with respect to such Full Service Hotel, on the terms of the Offer as
so modified. If the sale of a Full Service Hotel is consummated with a third
party, provided that Seller shall have complied with the requirements of this
Section 13.1, this Section 13.1 shall no longer be applicable with respect to
- ------------
such Full Service Hotel simultaneously with the sale. The exercise or non-
exercise by Purchaser of the right to purchase a Full Service Hotel does not
affect Purchaser's continuing right of first refusal with respect to any other
Full Service Hotels.
(c) If Purchaser elects to purchase the Full Service Hotel
pursuant to the Offer, then within ten (10) Business Days after Seller's receipt
of Purchaser's election to purchase, Seller or a Seller Subsidiary, as
applicable, and Purchaser shall execute and deliver a contract of sale relating
to such Full Service Hotel, containing the terms and conditions set forth in the
Offer. Within three (3) Business Days after execution of such contract of sale,
Purchaser shall pay the "Deposit" amount required thereunder to be held in
escrow pursuant to the terms of the contract of sale. Purchaser agrees that the
deposit required by any contract of sale to which Purchaser is a party for a
Full Service Hotel shall be five percent (5%) of the purchase price for the Full
Service Hotel.
(d) Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 13.1 shall not apply to the
------------
Property or to any other properties for which Purchaser has terminated this
Agreement or any of the Other Agreements, as applicable, or which has been
eliminated from the Group Two Sale Agreement (unless the problem which Purchaser
identified in the applicable notice of termination has been remedied in full),
and Seller may sell such Properties without regard to this Section 13.1.
------------
(e) Purchaser's rights under this Section 13.1 shall not
apply to any Full Service Hotel which is subject to any foreclosure sale, or
deed-in-lieu thereof and upon the completion of any such foreclosure sale or
deed-in-lieu thereof, this Section 13.1 shall no longer be applicable with
respect to such Full Service Hotel, unless the purchaser at such foreclosure
sale
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<PAGE>
is the Seller or a Seller Subsidiary. No further instrument or confirmation
shall be required with respect to such termination.
(f) Notwithstanding anything to the contrary contained in
this Agreement, this Section 13.1 shall not apply to the Full Service Hotel
------------
located in St. Thomas and known as "Frenchman's Reef" and Purchaser may sell
that property without regard to this Section 13.1.
------------
13.2. Radius Restriction. Subject to the provisions of
------------------
Section 13.4 below, during the Restricted Period, neither Seller nor any Seller
- ------------
Subsidiary shall own, lease, acquire, construct or manage any Full Service Hotel
located within a three (3) mile radius of the Hotel.
13.3. AmeriSuites Hotels.
------------------
(a) In the event that Seller or any Seller Subsidiary shall
seek to acquire and/or construct a new "AmeriSuites" brand hotel within a radius
of three (3) miles of the Property (each a "Proposed AmeriSuites Hotel") at any
--------------------------
time during the Restricted Period, Purchaser or any of its Affiliates shall have
the right and option to purchase said Proposed AmeriSuites Hotel (or Seller's
interest therein) pursuant to the terms and conditions set forth below.
(b) With respect to each Proposed AmeriSuites Hotel, to the
extent in Seller's possession and control and (to the extent applicable to the
Proposed AmeriSuites Hotel) Seller shall submit in writing to Purchaser (or
shall provide Purchaser with notice of and reasonable access to) the items set
forth in clauses (i) through (ix) below (collectively, a "Project Plan") as soon
------------
as such information is readily available and, with respect to any Proposed
AmeriSuites Hotel which Seller seeks to construct, no later than 210 days prior
to the anticipated completion date for construction set forth in the Project
Plan. The Project Plan shall be comprised of the following:
(i) to the extent then available or completed, detailed
plans and specifications for the construction of the Proposed AmeriSuites
Hotel;
(ii) a schedule for the estimated costs of construction
prepared jointly by the contractor engaged to perform the work and Seller; a
construction schedule setting forth the target commencement date, substantial
completion date and final completion date for the construction of the
Projected AmeriSuites Hotel and the dates for completion of the various phases
of construction, if applicable;
(iii) estimated operating expenses and cash flow,
occupancy projections and Rev PAR information for the first twelve months
after opening and for periods thereafter, to the extent then developed;
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<PAGE>
(iv) historical occupancy and Rev Par information for
the preceding three years;
(v) estimated costs for reflagging the Proposed
AmeriSuites Hotel;
(vi) a title insurance commitment issued in Seller's
name relating to the site of the Proposed AmeriSuites Hotel, together with
copies of all documents referenced therein;
(vii) a survey of the site for the Proposed AmeriSuites
Hotel;
(viii) any environmental or engineering reports prepared
in connection with the Proposed AmeriSuites Hotel; and
(ix) such other information (including without
limitation market information) with respect to a Proposed AmeriSuites Hotel as
may be reasonably necessary to permit a purchaser to adequately evaluate the
same, provided such information has been developed and is in the possession of
Seller or may be obtained at a nominal cost.
By its delivery of the Project Plan as provided in this Section 13.3(b), Seller
---------------
shall not be warranting or guaranteeing the accuracy of such information (though
Seller shall not deliver any information which it knows to be untrue or
misleading), it being agreed that Purchaser shall be responsible for making an
independent investigation and determination with respect to such information.
(c) No later than the date which is 30 days after Seller has
provided the Project Plan to Purchaser, Purchaser shall notify Seller whether it
will acquire the Proposed AmeriSuites Hotel on the following terms and
conditions:
(i) The purchase price for the Proposed AmeriSuites
Hotel shall be either (X) one hundred five percent (105%) of Construction
Costs, if Seller constructs the Proposed AmeriSuites Hotel or (Y) 105% of
Acquisition Costs, if Seller acquires an existing Proposed AmeriSuites Hotel;
provided, however, that if Seller is able to assign to Purchaser any contract
of sale between Seller and an owner of a Proposed AmeriSuites Hotel, without
penalty, consent or a requirement of Seller's continuing liability thereafter,
then Purchaser, in its sole discretion, may accept such assignment and pay to
Seller in lieu of the purchase price described in this subparagraph (i), an
amount equal to the sum of (A) any deposits made by Seller under the contract
of sale, (B) any reasonable costs or expenses incurred by Seller as of the
date of the assignment and (c) an amount equal to that which, absent the
assignment to Purchaser, would have been five percent (5%) of Acquisition
Costs or Construction Costs, as appropriate;
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<PAGE>
(ii) Within three (3) Business Days after providing its
notice of intent to purchase the Proposed AmeriSuites Hotel, Purchaser shall
provide to an escrow agent reasonably acceptable to Seller and Purchaser a
deposit toward the purchase price in an amount equal to five percent (5%) of
the purchase price, which deposit, at Purchaser's election, may be in the form
of a letter of credit issued by a bank or other lending institution reasonably
approved by Seller;
(iii) Any hotel which Purchaser or its Affiliates
acquires pursuant to this Section 13.3 shall be operated as an AmeriSuites
------------
brand hotel pursuant to a franchise agreement entered into by Purchaser or its
Affiliate, as franchisee, and Seller, as franchisor, which franchise agreement
shall have a minimum term of ten (10) years and be in Seller's then-standard
form of franchise agreement at such time;
(iv) At the Closing, in the event Purchaser or its
Affiliate simultaneously enters into an operating lease with an Affiliate of
Purchaser for the operation of the Proposed AmeriSuites Hotel and directs that
the such entity be the franchisee, Seller, as franchisor, shall provide a
"comfort letter" in favor of Purchaser substantially in the form of Exhibit
-------
E-1; and
---
(v) If Seller constructs the Proposed AmeriSuites Hotel,
the obligation of Purchaser to close on the acquisition thereof shall be
conditioned on receipt of a temporary certificate of occupancy for the
Proposed AmeriSuites Hotel.
(d) If Purchaser elects to acquire the Proposed AmeriSuites
Hotel, then within ten (10) Business Days after Seller's receipt of Purchaser's
election to purchase, Seller or a Seller Subsidiary, as applicable, and
Purchaser shall execute and deliver a contract of sale relating to such Proposed
AmeriSuites Hotel, containing (among other terms) the terms and conditions set
forth in this Section 13.3.
------------
(e) If Purchaser fails to exercise its option to purchase by
providing written notice to Seller within the time period set forth in
subparagraph (c), Purchaser shall be deemed conclusively to have rejected its
option to purchase the Proposed AmeriSuites Hotel. In such event or if Purchaser
rejects its option to purchase a Proposed AmeriSuites Hotel, this Agreement
immediately shall terminate and be of no further force and effect with respect
to such Proposed AmeriSuites Hotel. Notwithstanding the foregoing, Seller shall
be obligated to re-offer such Proposed AmeriSuites Hotel to Purchaser in
accordance with this Section 13.3 if the size of the Proposed AmeriSuites Hotel
------------
is changed substantially or any projection of total costs and expenses for such
Proposed AmeriSuites Hotel shows total costs and expenses which are
substantially less than those contained in the Project Plan. The exercise or
non-exercise by Purchaser of the right to purchase a particular Proposed
AmeriSuites Hotel
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<PAGE>
does not affect Purchaser's continuing rights under this Section 13.3 with
------------
respect to any other Proposed AmeriSuites Hotels.
(f) Except as provided by subsection (g) below, the
obligations of Seller under this Section 13.3 shall apply to any "AmeriSuites"
------------
hotels which Seller or any Seller Subsidiary owns or which Seller or any Seller
Subsidiary has the right to sell, and Seller shall cause such Seller
Subsidiaries desiring to sell any "AmeriSuites" or similar hotel to comply with
this Section 13.3 on the same terms as Seller. Reference to "sell" in this
------------
Section 13.3 shall refer to sale of fee simple title, ground lease, joint
- ------------
venture or similar arrangements.
(g) The provisions of this Section 13.3 shall not apply to
------------
any AmeriSuites hotels which are owned, operated or under construction by Seller
or a Seller Subsidiary as of the date of this Agreement, including without
limitation those certain AmeriSuites hotels located at (i) Shelton, CT, (ii)
Secaucus, NJ, (iii) Princeton, NJ and (iv) Las Vegas, NV, and Seller may own,
operate and/or construct such AmeriSuites hotels without regard to this
Agreement.
13.4. Multi-Property Exception. Notwithstanding anything to
------------------------
the contrary contained herein, if Seller at any time (including during the
Restricted Period), (i) has the opportunity to own, lease, acquire, construct or
manage five (5) or more Full Service Hotels (other than the Hotel and the hotels
subject to the Other Agreements or the Group Two Sale Agreement) as a result of
a single transaction and (ii) twenty-five percent (25%) or less of such Full
Service Hotels would violate the restrictions set forth in Section 13.2 above,
------------
then Seller, in its sole discretion, may own, lease, acquire, construct or
manage such Full Service Hotels, which Full Service Hotels shall not be subject
to the provisions of Section 13.2 and there shall be no default of this
------------
Agreement by reason of Seller owning, leasing, acquiring, developing or managing
such Full Service Hotels.
13.5. Survival and Damages. Notwithstanding any contrary
--------------------
limitations contained elsewhere in this Agreement, the provisions of this
Section 13 shall survive the Closing for the duration of the Restricted Period.
- ----------
In the event that Seller or a Seller Subsidiary shall breach any of the
covenants and provisions contained in this Section 13, Purchaser shall be
----------
entitled to enforce the terms of this section by specific performance or seek
damages in a court of law and the provisions of Section 10 shall not apply.
----------
13.6. General Provisions.
------------------
(a) The provisions of this Section 13 shall be binding solely
----------
on Seller and Seller Subsidiaries and not on other of Seller's Affiliates or
their respective directors, officers, shareholders or employees. Furthermore,
the provisions of this Section 13 shall not apply to transfers by operation of
----------
law, deed
-42-
<PAGE>
or otherwise to a Person in the event of a Change in Control of Seller, and
immediately after such a Change in Control, the provisions of this Section 13
----------
shall be deemed null, void and of no further force and effect.
(b) When applicable pursuant to Section 13.1 or Section 13.3,
------------ ------------
Seller or a Seller Subsidiary, as applicable, and Purchaser or its Affiliate, as
applicable, shall use reasonable, good faith efforts to agree upon the terms of
the contract of sale which shall incorporate the terms of this Agreement to the
extent consistent with the Offer or the provisions of Section 13.3, as
------------
applicable, provided that the provisions relating to payment of a portion of the
purchase price by assumption of debt and the provisions in this Section 13 shall
----------
not be included in such a contract of sale. If Seller or a Seller Subsidiary and
Purchaser or its Affiliate shall be unable to agree on the terms thereof within
ten (10) Business Days after Seller's receipt of Purchaser's election to
purchase, the parties shall submit such issue to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or any successor organization thereto.
(c) Time shall be of the essence as to all periods set forth
in this Section 13.
----------
(d) If Purchaser shall at any time materially breach its
agreement to purchase any Full Service Hotel or any Proposed AmeriSuites Hotel
or materially default under any contract of sale entered into with respect
thereto (subject to any applicable notice and cure periods), Purchaser
thereafter shall have no further rights to purchase hotel properties pursuant to
Section 13.1 and/or Section 13.3 and Seller shall have no further obligations
- ------------ ------------
under said Sections. This provision shall be in addition to any and all other
remedies, including liquidated damages provisions, which Seller may have under
said contracts of sale.
(e) As a condition to receiving the due diligence materials
and Project Plans contemplated in Section 13.1 and Section 13.3, Purchaser shall
------------ ------------
sign a confidentiality agreement in form reasonably acceptable to Seller, which
confidentiality agreement shall contain substantially the same provisions as
Section 14.4.
- ------------
(f) None of the rights created or granted pursuant to this
Section 13 shall constitute a lien on any property.
- ----------
(g) Neither party hereto shall record this Agreement or any
memorandum thereof without the written consent of the other party.
(h) The provisions of this Section 13 shall be personal to
----------
Purchaser and its Affiliates. In no event shall Purchaser assign, transfer or
otherwise convey its rights under
-43-
<PAGE>
this Section 13 to any Person other than an Affiliate of Purchaser without
----------
Seller's prior written consent, which consent may be withheld in Seller's sole
discretion; any transfer in violation of this Section 13.6(h) shall be void and
---------------
of no force or effect.
(i) Notwithstanding anything to the contrary contained in
this Agreement, Seller retains the unrestricted right to continue to grant
franchise agreements for "AmeriSuites" hotels to unaffiliated third-parties. So
long as such franchisees are not Seller Affiliates, the provisions of this
Section 13 shall be inapplicable with respect thereto.
- ----------
(j) The provisions of this Section 13 shall survive the
----------
Closing.
SECTION 14. MISCELLANEOUS
14.1. Agreement to Indemnify.
----------------------
(a) Subject to any express provisions of this Agreement to
the contrary, (i) Seller shall indemnify and hold harmless Purchaser and its
permitted (under this Agreement) successors and assigns from and against any and
all obligations, claims, losses, damages, liabilities, and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements) arising out of (x) Space Leases, the Assumed Debt or the
Contracts and relating to periods prior to the Closing or (y) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with the Property or
any portion thereof at any time or times prior to the Closing or (z) all
accounts payable and sales taxes due for or on account of the period prior to
Closing, and (ii) Purchaser shall indemnify and hold harmless Seller from and
against any and all obligations, claims, losses, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and disbursements) arising out of (x) the Contracts, the Space Leases or
the Assumed Debt relating to periods on or after the Closing, or (Y) any damage
to property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about the Property or any portion thereof
at any time or times on or after the Closing or (z) sales taxes due for or on
account of the period from and after the Closing.
(b) Whenever it is provided in this Agreement that an
obligation of Seller will be assumed by Purchaser on or after the Closing,
Purchaser shall be deemed to have also agreed to indemnify and hold harmless
Seller and its respective successors and assigns from and against all claims,
losses, damages, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) arising
from any failure of Purchaser to perform the obligation so assumed on or after
the Closing.
-44-
<PAGE>
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
(d) At the request of either party, the provisions of this
Section 14.1 shall be included in any or all of the Closing documents
- ------------
contemplated by this Agreement. The provisions of this Section 14.1 shall
------------
survive the Closing and the termination of this Agreement.
14.2. Brokerage Commissions. Each of the parties hereto
---------------------
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby,
other than NationsBanc Montgomery Securities, Inc.. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
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 NationsBanc
Montgomery Securities, Inc. or any other broker, finder or like agent claiming
by or through Seller. Purchaser shall be solely responsible for and shall
indemnify and hold harmless Seller and its respective legal representatives,
heirs, successors and assigns from and against 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 any broker, finder or like agent claiming
by or through Purchaser. The provisions of this Section 14.2 shall survive the
------------
Closing and any termination of this Agreement.
14.3. Publicity. The parties agree that no party shall
---------
contact or conduct negotiations with public officials, make any public
pronouncements, issue press releases or otherwise furnish information regarding
this Agreement, the transactions contemplated by this Agreement or any materials
provided or prepared in accordance with this Agreement (including without
limitation, all due diligence materials, whether prepared by Seller or
Purchaser) to any third party without the consent of the other parties, which
consent shall not be unreasonably withheld, delayed or conditioned, except as
required by law or contractual obligations of such parties to third parties or
as advised by reputable counsel to be in accordance with law or such contractual
obligation. No party, or its employees shall trade
-45-
<PAGE>
in the securities of any parent or affiliate of Seller or of Purchaser until a
public announcement of the transactions contemplated by this Agreement has been
made. No party shall record this Agreement or any notice thereof. The provisions
of this Section 14.3 shall survive the Closing or earlier termination of this
------------
Agreement.
14.4. Confidentiality. Except to the extent otherwise
---------------
provided herein, required by law or advised by counsel to be in accordance with
law or as contemplated by Section 14.3, until the consummation of the
------------
transactions contemplated by this Agreement, Seller and Purchaser shall hold and
shall cause the Seller Subsidiaries and the Purchaser's Affiliates,
respectively, to hold all information and documents obtained in connection with
the transactions contemplated by this Agreement confidential, including without
limitation any oral and written information concerning the Seller and the Hotel
(collectively, the "Due Diligence Material"), provided that the parties to this
----------------------
Agreement may disclose such information and documents to their respective legal
counsel, accountants, employees (to the extent an employee's services are
requested in connection with this Agreement), lenders and their counsel,
brokers, boards of directors, any hotel franchisors, any marketing company
employed to do feasibility studies or any investment banking, environmental or
engineering consultants retained in connection with the proposed transaction,
subject to this confidentiality provision. If the purchase and sale contemplated
by this Agreement is not consummated for any reason whatever, each party to this
Agreement shall as soon as reasonably practicable, return all such information
and documents (and any copies thereof in such parties' possession) to the other
party. Purchaser and Seller each hereby agree to indemnify and hold harmless the
other from and against any and all claims, demands, suits, causes of action,
judgments, damages, losses, fines, penalties, costs and expenses, including
without limitation reasonable attorneys' fees and disbursements relating to the
a breach by such indemnifying party (or its directors, officers, shareholders,
partners, members, agents, employees or any independent contractors retained by
it) of any of the covenants to be performed by such party contained in this
Section 14.4. Notwithstanding anything to the contrary contained in this
- ------------
Agreement, the provisions of this Section 14.4 shall survive the Closing for a
------------
period of two (2) years. With respect to the indemnity obligations or any breach
of this Section 14.4, the provisions of Section 10 shall not apply and the
------------ ----------
indemnified party may seek damages in a court of law or exercise any other
remedies available at law or equity.
14.5. Notices. (a) Any and all notices, demands, consents,
-------
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice,
-46-
<PAGE>
postpaid and registered or certified with return receipt requested (if by mail),
or with all freight charges prepaid (if by Federal Express or similar carrier).
(a) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Agreement a notice is either received on a day which is not a Business Day
or is required to be delivered on or before a specific day which is not a
Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(b) All such notices shall be addressed,
If to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
American General Hospitality
Operating Partnership, L.P.
5605 MacArthur Blvd., Suite 1200
Irving, Texas 75038
Attn: Steven D. Jorns and/or Bruce G. Wiles
[Telecopier No. (972) 550-6895]
-47-
<PAGE>
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Douglas A. Raelson, Esq.
[Telecopier No. (212) 856-7806]
(c) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
and each shall have the right to specify as its address any other address within
the United States of America.
14.6. Waivers, Etc. Any waiver of any term or condition of
------------
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
14.7. Assignment; Successors and Assigns. Except as otherwise
----------------------------------
expressly set forth in this Agreement, this Agreement and all rights and
obligations hereunder shall not be assignable by any party without the written
consent of the other parties; provided, however, that (a) Purchaser shall have
the right to designate an Affiliate(s) of Purchaser to receive record title to
the Property, (b) Seller shall have the right to designate an Affiliate of
Seller to be the Operating Lessee under the Operating Lease. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
14.8. Severability. If any provision of this Agreement shall
------------
be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public
-48-
<PAGE>
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in question invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or circumstance or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other provisions are not
themselves actually in conflict with such constitution, statute or rule of
public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or unenforceable provision
had never been contained herein and such provision reformed so that it would be
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
14.9. Counterparts, Etc. This Agreement may be executed in
-----------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
14.10. Governing Law. This Agreement shall be interpreted,
-------------
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
14.11. Performance on Business Days. In the event the date on
----------------------------
which performance or payment of any obligation of a party required hereunder is
other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
-49-
<PAGE>
14.12. Attorneys' Fees. If any lawsuit or arbitration or
---------------
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
14.13. Section and Other Headings. The headings contained in
--------------------------
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
14.14. Financing and Priority of Operating Lease. If
-----------------------------------------
Purchaser, in connection with the Closing or thereafter during the term of the
Operating Lease, desires to obtain financing from a Mortgagee secured by a lien
on the Property, Purchaser shall cause the Mortgagee to provide Operating
Lessee, as lessee, with a Subordination, Nondisturbance and Attornment
Agreement. If Purchaser shall fail to provide such Subordination, Nondisturbance
and Attornment Agreement, the Operating Lease shall be superior to the lien of
said financing. The provisions of this Section 14.14 shall survive Closing or
-------------
termination of this Agreement.
14.15. Group Two Purchase and Sale Agreement.
-------------------------------------
Contemporaneously with entering into the Original Agreement, Purchaser and
Seller entered into that certain Purchase and Sale Agreement for the sale of an
additional eleven properties (or leasehold interests therein) (the "Group Two
---------
Sale Agreement"), the closing of which sale is not contemplated to occur prior
- --------------
to September 30, 1998. The parties agree that any default or termination of this
Agreement automatically shall be a default or termination, as applicable, of the
Group Two Sale Agreement.
14.16. Exceptions to Liquidated Damages. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, the provisions of Section
-------
10 shall not apply to any rights or obligations of Seller or Purchaser which
- --
survive the Closing and in connection with such matters which survive the
Closing, a party may seek damages in a court of law or exercise any other
remedies available at law or equity.
-50-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as a sealed instrument as of the date first above written.
SELLER:
FAIRFIELD HOLDING CORP.
By: /s/ RICHARD SZYMANSKI
-----------------------------
Richard Szymanski
Vice President
PURCHASER:
PORTLAND/SHELTON LLC, a Delaware
limited liability company
By: AGH Portland/Shelton LLC, a
Delaware limited liability
company, its managing member
By: Portland/Shelton Corp.
By: /s/ BRUCE G. WILES
------------------------
Bruce G. Wiles
Executive Vice President
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<PAGE>
EXHIBIT 2.9
EXHIBIT H
FORM OF OPERATING LEASE
LEASE AGREEMENT
DATED AS OF JANUARY 7, 1998
BETWEEN
_________________________________________
AS LESSOR
AND
_________________________________________
AS LESSEE
[NAME AND LOCATION OF HOTEL]
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
ARTICLE I................................................................... 1
1.1 Leased Property.................................................. 1
1.2 Term............................................................. 2
1.3 [Intentionally Omitted.]......................................... 2
ARTICLE II.................................................................. 2
Definitions............................................................ 2
ARTICLE III................................................................. 16
3.1 Rent............................................................. 16
3.2 Confirmation of Participating Rent............................... 21
3.3 Additional Charges............................................... 23
3.4 No Set Off....................................................... 23
3.5 Annual Budget.................................................... 23
3.6 Books and Records................................................ 26
3.7 [Intentionally omitted.]......................................... 26
3.8 Hotel Operations................................................. 26
3.9 Allocation of Revenues........................................... 27
3.10 Performance Standard............................................. 28
ARTICLE IV.................................................................. 29
4.1 Payment of Impositions........................................... 29
4.2 Notice and Accrual of Impositions................................ 30
4.3 Adjustment of Impositions........................................ 31
4.4 Utility Charges.................................................. 31
4.5 Franchise Fees................................................... 31
4.6 Ground Rent...................................................... 31
ARTICLE V................................................................... 31
5.1 No Termination, Abatement, etc................................... 31
ARTICLE VI.................................................................. 32
6.1 Ownership of the Leased Property................................. 32
6.2 Lessee's Personal Property....................................... 32
ARTICLE VII................................................................. 33
7.1 Condition of the Leased Property................................. 33
7.2 Use of the Leased Property....................................... 34
7.3 Lessor to Grant Easements, etc................................... 35
ARTICLE VIII................................................................ 35
8.1 Compliance with Legal and Insurance Requirements,
etc............................................................ 35
8.2 Legal Requirements Covenants..................................... 36
8.3 Environmental Covenants.......................................... 37
<PAGE>
ARTICLE IX.................................................................. 39
9.1 Maintenance and Repair........................................... 39
ARTICLE X................................................................... 42
10.1 Alterations...................................................... 42
10.2 Salvage.......................................................... 42
10.3 Lessor Alterations............................................... 42
ARTICLE XI.................................................................. 43
Liens.................................................................. 43
ARTICLE XII................................................................. 43
Permitted Contests..................................................... 43
ARTICLE XIII................................................................ 44
13.1 General Insurance Requirements................................... 44
13.2 Replacement Cost................................................. 47
13.3 [Intentionally omitted........................................... 47
13.4 Waiver of Subrogation............................................ 47
13.5 Form Satisfactory, etc........................................... 47
13.6 Increase in Limits............................................... 48
13.7 Blanket Policy................................................... 48
13.8 Separate Insurance............................................... 48
13.9 Reports on Insurance Claims...................................... 48
ARTICLE XIV................................................................. 49
14.1 Insurance Proceeds............................................... 49
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance....................................................... 49
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance.................................................... 50
14.4 Lessee's Property and Business Interruption
Insurance....................................................... 50
14.5 Abatement of Rent................................................ 50
14.6 Damage Near End of Term.......................................... 51
ARTICLE XV.................................................................. 51
15.1 Definitions...................................................... 51
15.2 Parties' Rights and Obligations.................................. 51
15.3 Total Taking..................................................... 51
15.4 Allocation of Award.............................................. 52
15.5 Partial Taking................................................... 52
15.6 Temporary Taking................................................. 53
ARTICLE XVI................................................................. 54
16.1 Events of Default................................................ 54
16.2 Remedies......................................................... 56
16.3 [Intentionally omitted.]......................................... 57
16.4 Waiver........................................................... 57
16.5 Application of Funds............................................. 58
-ii-
<PAGE>
ARTICLE XVII................................................................ 58
Lessor's Right to Cure Lessee's Default................................ 58
ARTICLE XVIII............................................................... 58
18.1 Personal Property Limitation..................................... 58
18.2 Sublease Rent Limitation......................................... 59
18.3 Sublease Lessee Limitation....................................... 59
18.4 Lessee Ownership Limitation...................................... 59
18.5 Lessee Net Worth................................................. 59
18.6 No Other Business................................................ 60
ARTICLE XIX................................................................. 61
Holding Over........................................................... 61
ARTICLE XX.................................................................. 61
Indemnification........................................................ 61
ARTICLE XXI................................................................. 62
21.1 Subletting and Assignment........................................ 62
21.2 Attornment....................................................... 63
ARTICLE XXII................................................................ 64
Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants....................................... 64
ARTICLE XXIII............................................................... 66
Lessor's Right to Inspect.............................................. 66
ARTICLE XXIV................................................................ 67
No Waiver.............................................................. 67
ARTICLE XXV................................................................. 67
Remedies Cumulative.................................................... 67
ARTICLE XXVI................................................................ 67
Acceptance of Surrender................................................ 67
ARTICLE XXVII............................................................... 67
No Merger of Title..................................................... 67
ARTICLE XXVIII.............................................................. 68
28.1 Conveyance by Lessor............................................. 68
28.2 Other Interests.................................................. 68
ARTICLE XXIX............................................................... 70
Quiet Enjoyment........................................................ 70
ARTICLE XXX................................................................. 71
Notices................................................................ 71
-iii-
<PAGE>
ARTICLE XXXI................................................................ 72
Appraisers............................................................. 72
ARTICLE XXXII............................................................... 73
Security - Assignment of Agreements.................................... 73
ARTICLE XXXIII............................................................. 73
33.1 Miscellaneous.................................................... 73
33.2 Transition Procedures............................................ 74
33.3 Standard of Discretion........................................... 75
33.4 Action for Damages............................................... 75
33.5 Limitation on Liability.......................................... 75
33.6 ***[FOR CROSSROADS, MAHWAH, NEW JERSEY ONLY Condominium
Association Voting Rights........................................ 75
ARTICLE XXXIV.............................................................. 76
Memorandum of Lease.................................................... 76
ARTICLE XXXV................................................................ 76
[Intentionally omitted.]............................................... 76
ARTICLE XXXVI............................................................... 76
36.1 Option to Terminate Lease - Appointment of
Manager......................................................... 76
ARTICLE XXXVII.............................................................. 79
37.1 Compliance with Franchise Agreement.............................. 79
37.2 Compliance with Management Agreement............................. 80
ARTICLE XXXVIII............................................................. 80
38.1 Capital Expenditures............................................. 80
38.2 Major Renovation................................................. 82
ARTICLE XXXIX............................................................... 83
39.1 Lessor's Default................................................. 83
39.2 Limitation of Lessor's Liability................................. 84
ARTICLE XL - ARBITRATION.................................................... 84
40.1 Arbitration...................................................... 84
40.2 Alternative Arbitration.......................................... 84
40.3 Arbitration Procedures........................................... 84
Exhibit A: Other Properties
Exhibit B: Land
Exhibit C: Base Rent; Calculation of Participating Rent and Portion of Rent
Attributable to Franchise
Exhibit D: Description of Capital Improvements in Accordance with GAAP
-iv-
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the ___
day of January, 1998, by and between ***[AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership]*** (hereinafter called
"Lessor"), and _____________________., a Delaware corporation hereinafter
called "Lessee"), provides as follows:
W I T N E S S E T H:
-------------------
Lessor owns the Leased Property. Contemporaneously herewith Lessor
and/or Affiliates of Lessor are acquiring (directly or indirectly) from Lessee
and/or Affiliates of Lessee, certain Other Properties, and Lessor and such
Affiliates are entering into the Other Leases with Lessee and/or Affiliates of
Lessee.
In furtherance of such series of transactions, Lessor and Lessee wish
to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by
Lessee to Lessor, the covenants and agreements to be performed by Lessee, and
upon the terms and conditions hereinafter stated, does hereby rent and lease
unto Lessee, and Lessee does hereby rent and lease from Lessor, the Leased
Property.
ARTICLE I
---------
1.1 Leased Property. The leased property (the "Leased Property") is
---------------
comprised of Lessor's interest in the following:
(a) the land described in Exhibit "B" attached hereto and by reference
-----------
incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land and
Leased Improvements;
(d) all appliances, equipment, machinery, devices, fixtures, and other
items of property required for or incidental to the use of the Leased
Improvements as a hotel, including all components thereof, now and hereafter
permanently affixed to or
<PAGE>
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and Lessee's Personal Property) located on, and
used in connection with, the operation of the Leased Improvements as a hotel,
together with all replacements, modifications, alterations and additions
thereto;
(f) all existing leases of the Leased Property (including any security
deposits or collateral held by Lessor pursuant thereto); and
(g) the rights of Lessor in the Franchise Agreement with respect to
the Facility.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS AND MATTERS WHICH WOULD BE DISCLOSED
BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY THEREOF.
1.2 Term. The term of the Lease (the "Term") shall commence on the
----
date hereof (the "Commencement Date") and shall end on the tenth (10th)
anniversary of the last day of the month prior to the month in which the
Commencement Date occurs, unless sooner terminated in accordance with the
provisions hereof.
1.3 [Intentionally Omitted.]
ARTICLE II
----------
Definitions: For all purposes of this Lease, except as otherwise
-----------
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP, (c) all references in this Lease to designated "Articles,"
-2-
<PAGE>
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease and (d) the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Lease as a whole and
not to any particular Article, Section or other subdivision.
Additional Charges: As defined in Section 3.3.
------------------
Affiliate: As used in this Lease the term "Affiliate" of a Person
---------
shall mean any Person that, directly or indirectly, controls or is controlled by
or is under common control with such Person. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests, by contract or otherwise.
Annual Budget: As used in this Lease, the term "Annual Budget" shall
-------------
mean the Operating Budget and a Capital Budget prepared by Lessee and approved
by Lessor in accordance with Section 3.5.
Award: As defined in Section 15.1(c).
-----
Base Rate: The prime rate (or base rate) reported in the Money Rates
---------
column or comparable section of The Wall Street Journal as the rate then in
-----------------------
effect for corporate loans at large U.S. money center commercial banks, whether
or not such rate has actually been charged by any such bank. If no such rate is
reported in The Wall Street Journal or if such rate is discontinued, then Base
-----------------------
Rate shall mean such other successor or comparable rate as Lessor may reasonably
designate.
Base Rent: As defined in Section 3.1(a).
---------
Beverage Sales: Shall mean gross revenues from (i) the sale of wine,
--------------
beer, liquor or other alcoholic beverages, whether sold in a bar or lounge,
delivered to or available in a guest room, sold at meetings or banquets or at
any other location at the Leased Property and (ii) non-alcoholic beverages sold
in a bar or lounge. Such revenue shall include sales by Lessee and its permitted
subtenants, licensees and concessionaires, but as to subleases, licenses or
similar arrangements for alcoholic beverage sales which are entered into by
Lessor or any prior owner of the Leased Property with parties who are not
Affiliates of Lessee and which were existing as of the date of this Lease, such
revenue shall only include rents received under such existing subleases,
licenses or similar arrangements. Such
-3-
<PAGE>
revenue shall be determined in a manner consistent with the Uniform System and
shall not include the following:
(a) Any gratuity or service charge added to a customer's bill or
statement in lieu of a gratuity which is paid directly to an employee to the
extent actually paid to employees;
(b) Credits, rebates or refunds; and
(c) Sales taxes or taxes of any other kind imposed on the sale of
alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
that is not a day on which national banks in New York City or in the
municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 3.5.
--------------
Capital Expenditures: Amounts advanced to pay the costs of Capital
--------------------
Improvements pursuant to an approved Capital Budget.
Capital Expenditures Reserve: As defined in Article XXXVIII.
----------------------------
Capital Impositions: Taxes, assessments or similar charges imposed
-------------------
upon or levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers, drainage facilities, and similar improvements.
Capital Improvements: Improvements to the Leased Property and
--------------------
replacement or refurbishing of Fixtures and of Furniture and Equipment that
constitute portions of the Leased Property in connection with its Primary
Intended Use, all as designated as capital improvements by and determined in
accordance with GAAP, and as more fully described on Exhibit D attached.
CERCLA: The Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as amended.
Change in Operations: As defined in Section 3.8.
--------------------
COBRA: The Consolidated Omnibus Budget Reconciliation Act of 1985, as
-----
amended.
Code: The Internal Revenue Code of 1986, as amended.
----
Commencement Date: As defined in Section 1.2.
-----------------
-4-
<PAGE>
Company: American General Hospitality Corporation.
-------
Condemnation, Condemnor: As defined in Section 15.1.
-----------------------
Consolidated Financials: For any fiscal year or other accounting
-----------------------
period for Lessee and its consolidated Subsidiaries, statements of operations,
partners' capital and cash flow (or, in the case of a corporation, statements of
operations, retained earnings and cash flow) for such period and for the period
from the beginning of the respective fiscal year to the end of such period and
the related balance sheet as at the end of such period, together with the notes
to any such yearly statement, all in such detail as may be required by the SEC
with respect to filings made by the Company or Lessor, and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with GAAP and such statements
shall, at Lessor's sole cost and expense, be audited annually (and quarterly if
required by the SEC) by Coopers & Lybrand LLP or another so-called "Big Six"
firm of independent certified public accountants designated by Lessor.
Consolidated Financials shall be prepared on the basis of a December 31 fiscal
year of Lessee.
Consumer Price Index: The "Consumer Price Index" published by the
--------------------
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984 =
100).
Date of Taking: As defined in Section 15.1(b).
--------------
Emergency Expenditures: Expenditures required to take necessary or
----------------------
appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, any other casualty, or any other events,
--------------------
circumstances or conditions which threaten the safety or physical well-being of
the Facility's guests or employees or which involve the risk of material
property damage or material loss to the Facility.
Environmental Authority: Any department, agency or other body or
-----------------------
component of any Government that exercises any form of jurisdiction or authority
under any Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
---------------------------
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign
------------------
laws and regulations relating to pollution of the environment (including without
limitation, ambient air,
-5-
<PAGE>
surface water, ground water, land surface or subsurface strata), including
without limitation laws and regulations relating to emissions, discharges,
Releases or threatened Releases of Hazardous Materials or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials. Environmental Laws include but are
not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.
Environmental Liabilities: Any and all actual or potential
-------------------------
obligations to pay the amount of any judgment or settlement, the cost of
complying with any settlement, judgment or order for injunctive or other
equitable relief, the cost of compliance or corrective action in response to any
notice, demand or request from an Environmental Authority, the amount of any
civil penalty or criminal fine, and any court costs and reasonable amounts for
attorney's fees, fees for witnesses and experts, and costs of investigation and
preparation for defense of any claim or any Proceeding, regardless of whether
such Proceeding is threatened, pending or completed, that may be or have been
asserted against or imposed upon Lessor, Lessee, any Predecessor, the Leased
Property or any property used therein and arising out of:
(a) Failure to comply at any time with all Environmental Laws
applicable to the Leased Property;
(b) Presence of any Hazardous Materials on, in, under, at or in any
way affecting the Leased Property, except to the extent used in the ordinary
course of business at the Leased Property;
(c) A Release or threatened Release of any Hazardous Materials on, in,
at, under or in any way affecting the Leased Property;
(d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any other Environmental Law;
(e) Presence at any time of any above-ground and/or underground
storage tanks, as defined in RCRA or in any applicable Environmental Law on, in,
at or under the Leased Property or any adjacent site or facility; or
(f) Any and all claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating or located at the
Leased Property, or resulting from operation thereof including, without
limitation, claims resulting from such Hazardous Materials migrating to an
adjoining property.
Event of Default: As defined in Section 16.1.
----------------
-6-
<PAGE>
Facility: The hotel and/or other facility offering lodging and other
--------
services or amenities being operated or proposed to be operated on the Leased
Property.
Fair Market Value: The fair market value of the Leased Property (or
-----------------
any portion thereof) means an amount equal to the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for such
Leased Property, (a) assuming the same is unencumbered by this Lease, (b)
determined in accordance with the appraisal procedures set forth in Article XXXI
or in such other manner as shall be mutually acceptable to Lessor and Lessee,
(c) assuming that such seller must pay customary closing costs and title
premiums, and (d) taking into account the positive or negative effect on the
value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment penalty and other terms and conditions of
any encumbrance that is assumed by the transferee or subject to which the Leased
Property is transferred. In addition, in determining the Fair Market Value with
respect to damaged or destroyed Leased Property such value shall be determined
as if such Leased Property had not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
-----
amended.
Fixtures: As defined in Section 1.1.
--------
Food Sales: Shall mean (i) gross revenues from the sale of food and
----------
non-alcoholic beverages that are sold or delivered on or off the Facility by
Lessee, its permitted subtenants, licensees or concessionaires, whether for cash
or for credit, including in respect of guest rooms, banquet rooms, meeting rooms
and other similar rooms, and (ii) gross revenue from the rental of banquet,
meeting and other similar rooms. Such revenue shall include sales by Lessee and
its permitted subtenants, licensees and concessionaires, but as to subleases,
licenses or similar arrangements for food and non-alcoholic beverage sales which
were entered into by Lessor or any prior owner of the Leased Property with
parties who are not Affiliates of Lessee and which are existing as of the date
of this Lease, such revenue shall only include rents received under such
existing subleases, licenses or similar arrangements. Such revenue shall be
determined in a manner consistent with the Uniform System and shall not include
the following:
(a) Vending machine sales;
(b) Any gratuities or service charges added to a customer's bill or
statement in lieu of a gratuity which is paid directly to an employee to the
extent actually paid to employees;
-7-
<PAGE>
(c) Non-alcoholic beverages sold from a bar or lounge;
(d) Credits, rebates or refunds;
(e) Sales taxes or taxes of any other kind imposed on the sale of food
or non-alcoholic beverages; and
(f) Amounts representing the value or cost of food or non-alcoholic
beverages furnished on a complimentary basis to on-site employees of the Hotel.
Franchise Agreement: Any hotel franchise agreement or license
-------------------
agreement obtained by Lessor under which the Facility is operated.
Furniture and Equipment: For purposes of this Lease, the terms
-----------------------
"furniture and equipment" shall mean collectively all furniture, furnishings,
wall coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Facility, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens, bars and restaurants, if any, laundry
and dry cleaning facilities, (ii) office equipment, (iii) dining room wagons,
materials handling equipment, cleaning and engineering equipment, (iv) telephone
and computerized accounting systems, and (v) vehicles.
GAAP: Generally accepted accounting principles as are at the time
----
applicable and otherwise consistently applied.
General Partner: AGH GP, Inc., the general partner of Lessor.
---------------
***[REVISE IF LESSOR IS A SPECIAL PURPOSE ENTITY.]***
Government: The United States of America, any state, district or
----------
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.
Gross Revenues: All revenues, receipts, and income of any kind
--------------
derived directly or indirectly by Lessee from or in connection with the Facility
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with GAAP and the Uniform
System, including, but not limited to, Room Revenues, Food Sales, Beverage Sales
and Other Income, excluding, however: (i) funds furnished by Lessor, (ii)
federal, state and municipal excise, sales, occupancy and use taxes collected
directly from patrons and guests or as a part of the sales price of any goods,
services or displays, such as gross receipts, admissions, cabaret
-8-
<PAGE>
or similar or equivalent taxes and paid over to federal, state or municipal
governments, (iii) gratuities actually paid to employees, (iv) proceeds of
insurance and condemnation, (v) proceeds from sales other than sales in the
ordinary course of business (vi) all loan proceeds from financing or
refinancings of the Facility or interests therein or components thereof, (vii)
judgments and awards, except any portion thereof arising from normal business
operations of the hotel, (viii) such other items as are excluded from the
definitions of Food Sales, Beverage Sales and Room Revenues, (ix) Real Estate
Tax refunds pertaining to the Leased Premises, and (x) items constituting
"allowances" under the Uniform System.
Hazardous Materials: All chemicals, pollutants, contaminants, wastes
-------------------
and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any Environmental
Law;
(c) Toxic substances, as defined in TSCA or in any Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined in FIFRA or
in any Environmental Law;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde;
(f) Asbestos or asbestos containing materials;
(g) Urea formaldehyde foam insulation; and
(h) Radon gas.
Holder: Any holder of a Mortgage, any purchaser of the Leased
------
Property or any portion thereof at a foreclosure sale or any sale in lieu
thereof, or any designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without limitation,
-----------
all ad valorem, sales and use, occupancy, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date hereof and whether or not to be
-9-
<PAGE>
completed within the Term), water, sewer or other rents and charges, excises,
tax inspection, authorization and similar fees and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time during or
with respect to the Term hereof may be assessed or imposed on or with respect to
or be a lien upon (a) Lessor's interest in the Leased Property, (b) the Leased
Property, or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on or in connection with the Leased Property
by Lessee, or the leasing or use of the Leased Property or any part thereof by
Lessee. Nothing contained in this definition of Impositions shall be construed
to require Lessee to pay (1) any tax based on net income (whether denominated as
a franchise or capital stock or other tax) imposed on Lessor or any other
person, or (2) any net revenue tax of Lessor or any other person, or (3) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of any
Leased Property or the proceeds thereof, or (4) any single business, gross
receipts (other than a tax on any rent received by Lessor from Lessee),
transaction, privilege or similar taxes as the same relate to or are imposed
upon Lessor except to the extent that any tax, assessment, tax levy or charge
that Lessee is obligated to pay pursuant to the first sentence of this
definition and that is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
-----------------
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
------------------
Party pursuant to any provision of this Lease.
Insurance Requirements: All terms of any insurance policy required by
----------------------
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
---------
Supplies" as defined in the Uniform System, including, but not limited to,
linens, china, silver, glassware and other non-depreciable personal property,
and any property of the type described in Section 1221(1) of the Code.
Land: As defined in Article I.
----
Lease: This Lease.
-----
-10-
<PAGE>
Lease Year: Any 12-month period from January 1 to December 31 during
----------
the Term, or any shorter period at the beginning or the end of the Term.
Leased Improvements; Leased Property: Each as defined in Article I.
------------------------------------
Legal Requirements: All federal, state, county, municipal and other
------------------
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use, operation or alteration thereof (whether by Lessee or
otherwise), whether or not hereafter enacted and in force, including (a) all
laws, rules or regulations pertaining to the environment, occupational health
and safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof, and (c) all permits, licenses and authorizations necessary or
appropriate to operate the Leased Property for its Primary Intended Use,
including, but not limited to, any licenses required for the sale and service of
alcoholic beverages, and (d) all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to Lessee
(other than encumbrances hereafter created by Lessor without the consent of
Lessee), at any time in force affecting the Leased Property.
Lessee: The Lessee designated on this Lease and its respective
------
permitted successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
------------------------
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest in Lessee, the officers,
directors, stockholders, members, partners, employees, agents and
representatives of Lessee and any corporate stockholder, agent or representative
of Lessee, and the respective heirs, personal representatives, successors and
assigns of any such officer, director, stockholder, members, partners, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
--------------------------
Lessor: The Lessor designated on this Lease and its respective
------
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, including
------------------------
the Company and the General Partner, any other Person against whom any claim for
indemnification may be asserted hereunder as a result of a direct or indirect
ownership interest in Lessor, the officers, directors, stockholders, partners,
-11-
<PAGE>
members, employees, agents and representatives of any of the foregoing Persons
and of any stockholder, partner, member, agent, or representative of any of the
foregoing Persons, and the respective heirs, personal representatives,
successors and assigns of any such officers, directors, partners, stockholders,
members, employees, agents or representatives.
Lessor's Audit: An audit by Lessor's independent certified public
--------------
accountants of the operation of the Leased Property during any Lease Year, which
audit shall be at Lessor's sole cost and expense and may, at Lessor's election,
be either a complete audit of the Leased Property's operations or an audit of
Room Revenues, Food Sales, Beverage Sales and Other Income realized from the
operation of the Leased Property during such Lease Year.
***[FOR CROWNE PLAZA LAS VEGAS PROPERTY ONLY: Management Agreement: That
--------------------
certain Hotel Management Agreement between Lessee and Prime Hospitality Corp.
dated the date hereof relating to the management of the Leased Property, a copy
of which has been delivered to Lessor. NOTE: MANAGEMENT AGREEMENT FOR 10 YEAR
TERM TO BE NON-ASSIGNABLE, TO PROVIDE FOR AUTOMATIC TERMINATION UPON TERMINATION
OF LEASE AND ANY MANAGMENT FEE PAYABLE THEREUNDER TO BE SUBORDINATE TO THE
LEASE]***.
Manager: Prime Hospitality Corp., a Delaware corporation.
-------
Mortgage: As defined in Section 28.2.
--------
Net Worth: The excess of total assets over total liabilities, total
---------
assets and total liabilities each to be determined in accordance with GAAP,
excluding, however, from the determination of total assets: (a) goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, and other similar intangibles;
(b) all deferred charges that are not required to be capitalized in accordance
with GAAP or unamortized debt discounts and expenses; (c) treasury stock; (d)
securities which are not readily marketable; (e) any write-up in the book value
of any asset resulting from a revaluation thereof; (f) this Lease and the Other
Leases; and (g) any items not included in clauses (a) through (f) above that are
treated as intangibles in conformity with GAAP. All marketable securities will
be valued at their current market value.
New Management Agreement: Any hotel management agreement entered into
------------------------
between Lessee and AGHI (as defined in Section 36.1 hereof) or any experienced
hotel management company, which is not an Affiliate of Lessee, pursuant to the
terms of
-12-
<PAGE>
Article XXXVI hereof on terms satisfactory to Lessor, Lessee and AGHI or such
third party management company, as the case may be.
No Sale Period: A period of three (3) years from the date hereof.
--------------
Notice: A notice given pursuant to Article XXX.
------
Officer's Certificate: A certificate of Lessee reasonably acceptable
---------------------
to Lessor, signed by the chief financial officer or another officer duly
authorized so to sign by Lessee or a general partner of Lessee, or any other
person whose power and authority to act has been authorized by delegation in
writing by any such officer.
Operating Budget: As defined in Section 3.5.
----------------
Other Income: All revenues, receipts, and income of any kind derived
------------
directly or indirectly from or in connection with the Facility and included in
Gross Revenues other than Room Revenues, Food Sales or Beverage Sales.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
------------
annum, but in no event greater than the maximum nonusurious rate then permitted
under applicable law.
Other Leases: The leases of the Other Properties between Lessor
------------
and/or its Affiliates and Lessee and/or its Affiliates.
Other Properties: The properties described on Exhibit "A" attached
----------------
hereto.
Payment Date: Any due date for the payment of any installment of
------------
Rent.
Participating Rent: As defined in Sections 3.1(b), 3.1(c) and 3.1(d).
------------------
Person: The term "Person" means and includes individuals,
------
corporations, general and limited partnerships, limited liability companies,
stock companies or associations, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts, or other legal
entities and governments and agencies and political subdivisions thereof.
Personal Property Taxes: All personal property taxes imposed on the
-----------------------
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacements, modifications, alterations and additions thereto.
-13-
<PAGE>
Predecessor: Any Person whose liabilities arising under any
-----------
Environmental Law have or may have been retained or assumed by Lessor or Lessee
pursuant to the provisions of this Lease.
Primary Intended Use: As defined in Section 7.2(b).
--------------------
Proceeding: Any judicial action, suit or proceeding (whether civil or
----------
criminal), any administrative proceeding (whether formal or informal) any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
----
Real Estate Taxes: All real estate taxes, including general and
-----------------
special assessments, if any, which are imposed upon the Land and any
improvements thereon.
Release: A "Release" as defined in CERCLA or in any Environmental
-------
Law, unless such Release has been properly authorized and permitted in writing
by all applicable Environmental Authorities or is allowed by such Environmental
Law without authorizations or permits.
Rent: Collectively, the Base Rent, Participating Rent, and Additional
----
Charges.
RevPAR Decline: A decline of the RevPAR Yield Index of the Facility
--------------
below 90.
RevPAR Yield Index: The percentage amount obtained by dividing the
------------------
RevPAR of the Leased Property by the RevPAR of the Leased Property's Competitive
Set, with the terms "RevPAR" and "Competitive Set" having the meanings ascribed
to them in Smith Travel Research Reports ("STR Reports"), calculated in
accordance with the STR Reports which contains a full calendar year calculation
thereof for the Leased Property (or if STR Reports are no longer published or do
not contain sufficient information to make such calculation, the RevPAR Yield
Index shall instead be calculated using the methodology presently used by STR
Reports from information contained in any other publication reasonably selected
by Lessor and recognized by the hotel industry as being an authoritative source
of such information or, if no such publication exists, from an analysis
conducted at the joint expense of Lessor and Lessee by a nationally recognized
accounting firm with a hospitality division chosen by Lessor and Lessee).
-14-
<PAGE>
Room Revenues: Gross revenue from the rental of guest rooms, whether
-------------
to individuals, groups or transients, at the Facility, determined in a manner
consistent with the Uniform System and excluding the following:
(a) The amount of all credits, rebates or refunds to customers, guests
or patrons;
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms; and
(c) Any fees collected for amenities including, but not limited to,
telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
----
amended.
SEC: The U.S. Securities and Exchange Commission or any successor
---
agency.
State: The State or Commonwealth of the United States in which the
-----
Leased Property is located.
Subsidiaries: Corporations or other entities in which Lessee or
------------
Lessor, as applicable, owns, directly or indirectly, more than 50% of the voting
rights or control, as applicable (individually, a "Subsidiary").
Taking: A permanent or temporary taking or voluntary conveyance
------
during the Term hereof of all or part of the Leased Property, or any interest
therein or right accruing thereto or use thereof, as the result of, or in
settlement of, any Condemnation or other eminent domain proceeding affecting the
Leased Property.
Tax Law Change: A change in the Code (including, without limitation,
--------------
a change in the Treasury regulations promulgated thereunder) or in the judicial
or administrative interpretations of the Code, which in Lessor's determination
will permit Lessor or an Affiliate thereof to operate the Facility as a hotel
without adversely affecting the Company's qualification for taxation as a real
estate investment trust under the applicable provisions of the Code.
Term: As defined in Section 1.2.
----
TSCA: The Toxic Substances Control Act, as amended.
----
Unavoidable Delay: Delay due to strikes, lock-outs, labor unrest,
-----------------
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes
-15-
<PAGE>
beyond the reasonable control of the party responsible for performing an
obligation hereunder, provided that lack of funds shall not be deemed a cause
beyond the reasonable control of either party hereto unless such lack of funds
is caused by the breach of the other party's obligation to perform any
obligations of such other party under this Lease.
Unavoidable Occurrence: The occurrence of strikes, lock-outs, labor
----------------------
unrest, inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes beyond the reasonable control of Lessee,
provided that any such occurrence is an extraordinary (as opposed to a routine
or cyclical) material event that was not reasonably foreseeable when the then
applicable Annual Budget was prepared.
Uneconomic for its Primary Intended Use: A state or condition of the
---------------------------------------
Facility such that in the reasonable, good faith judgment of Lessor the Facility
cannot be operated on a commercially practicable basis for its Primary Intended
Use, such that Lessor intends to, and shall, complete the cessation of
operations from the Leased Facility.
Uniform System: Shall mean the Uniform System of Accounts for Hotels
--------------
(8th Revised Edition, 1986) as published by the Hotel Association of New York
City, Inc., as same may hereafter be revised, and as the same has been
interpreted and applied by Coopers & Lybrand LLP in connection with the audit of
the Leased Property prepared for the Company in connection with its initial
public offering.
Unsuitable for its Primary Intended Use: A state or condition of the
---------------------------------------
Facility such that in the reasonable, good faith judgment of Lessor the Facility
cannot function as an integrated hotel facility consistent with standards
applicable to a well maintained and operated hotel comparable in quality and
function to that of the Facility prior to the damage or loss.
WARN: Work Adjustment and Retraining Notification Act, as amended.
----
ARTICLE III
-----------
3.1 Rent. Lessee will pay to Lessor by wire transfer of immediately
----
available funds or such other transfer as Lessor may require, to the account of
Lessor or to the account of such other Person, as Lessor from time to time may
designate in a Notice, without set-off or deduction at any time, all Base Rent,
Participating Rent and Additional Charges, during the Term, as follows:
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<PAGE>
(a) Base Rent: The fixed annual sum set forth on Exhibit C (subject
---------
to adjustment and increase as set forth in this Subparagraph (a) and in
Subparagraph (d) hereof, the "Base Rent"), payable in advance in consecutive
monthly installments, the first of which shall be payable on the Commencement
Date and continuing thereafter each subsequent calendar month of the Term, each
such monthly payment to be paid on the first day of each such calendar month of
the Term; provided, however, that (i) Base Rent shall be prorated as to any
partial Lease Year, (ii) the first and last monthly payments of Base Rent shall
be prorated as to any partial month, and (iii) payments of Base Rent shall be
subject to abatement where and only where and to the extent expressly provided
in this Lease. The Base Rent payable for each month shall equal one-twelfth
(1/12th) of the annual sum set forth on Exhibit C. If the term of this Lease
commences or ends other than on the first or last day of a month, the Base Rent
due for such month shall equal the monthly Base Rent (computed as provided in
the preceding sentence) multiplied by a fraction having as its numerator the
number of days in said partial month and having as its denominator the number of
days in the entire month.
(b) Participating Rent: For each calendar month during the Term,
------------------
Lessee shall pay percentage rent ("Participating Rent") in arrears in an amount
calculated by the following formula (the "Revenues Computation"):
For any month, Participating Rent shall equal:
The amount equal to the Monthly Revenue Computation (defined
below)
less
an amount equal to the Base Rent paid for the Lease Year to date
less
an amount equal to the Participating Rent paid for the Lease Year
to date.
The Participating Rent due for each calendar month during the Term shall be paid
on or before the twenty-first (21st) day of the succeeding month. In no event
shall Participating Rent be less than zero.
For purposes of defining the Monthly Revenues Computation:
(i) "Cumulative Monthly Portion" shall mean a fraction having as its
numerator the aggregate Budgeted Receipts for the calendar months in a Lease
Year which have elapsed including the month for which the calculation is being
made and having as its denominator the aggregate Budgeted Receipts for the Lease
Year. "Budgeted Receipts" shall mean the Gross Revenues projected in the
Operating Budget for such Lease Year (or portion
-17-
<PAGE>
thereof). The Cumulative Monthly Portion for the December 31 Participating Rent
payment (due January 21 of the next Lease Year) will be 100%, assuming that the
Lease Year in question is a full Lease Year. If the term of this Lease commences
or ends on other than the first or last day of a month, then when calculating
the Cumulative Monthly Portion beginning or ending during such calendar month,
the Cumulative Monthly Portion for such partial calendar month shall be the
product of (i) a fraction having as its numerator the Budgeted Receipts for said
month and having as its denominator the Budgeted Receipts for the entire
calendar year, multiplied by (ii) another fraction having as its numerator the
actual Gross Revenues received during said partial month and having as its
denominator the actual Gross Revenues received during the entire month./(1)/
(ii) "First Tier Room Revenue Percentage," "Second Tier Room Revenue
Percentage," "Third Tier Room Revenue Percentage," "First Tier Food Sales
Percentage," "Second Tier Food Sales Percentage," and "Other Income Percentage"
shall mean the percentages corresponding to each of such terms as set forth on
Exhibit C.
(iii) "Annual Room Revenues First Break Point" and "Annual Room
Revenues Second Break Point" shall mean the amount of annual Room Revenues
corresponding to each of such terms as set forth on Exhibit C.
(iv) "Annual Food Sales Break Point" shall mean the amount of annual
Food Sales and Beverage Sales corresponding to such term as set forth on Exhibit
C.
The Monthly Revenues Computation shall be the amount obtained by
adding, for the applicable Lease Year, (i) an amount equal to the First Tier
Room Revenue Percentage of all year to date Room Revenues up to (but not
exceeding) the Cumulative Monthly Portion of the Annual Room Revenues First
Break Point, (ii) an amount equal to the Second Tier Room Revenue Percentage of
all year to date Room Revenues in excess of the Cumulative Monthly Portion of
the Annual Room Revenues First Break Point up to (but not exceeding) the
Cumulative Monthly Portion of the Annual Room Revenues Second Break Point, (iii)
an amount equal to the Third Tier Room Revenue Percentage of all year to date
Room Revenues in excess of the Cumulative Monthly Portion of the Annual Room
Revenues Second Break Point, (iv) an amount equal to the First Tier Food Sales
Percentage of the Cumulative Monthly
- --------------------
/(1)/ If the Closing shall occur on a day other than the first day of a calendar
month, the Rent payable under each Operating Lease for the balance of the month
in which the Closing occurs shall be based upon the per diem amount applicable
to each of the Group One Properties as set forth on Schedule A attached hereto.
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<PAGE>
Portion of all year to date Food Sales and Beverage Sales up to (but not
exceeding) the Cumulative Monthly Portion of the Annual Food Sales Break Point,
(v) an amount equal to the Second Tier Food Sales Percentage of all year to date
Food Sales and Beverage Sales in excess of the Cumulative Monthly Portion of the
Annual Food Sales Break Point, and (vi) an amount equal to the Other Income
Percentage of year to date revenues from Other Income.
(c) Officer's Certificates. Within 21 days after each of the first
----------------------
three quarters of each Lease Year (or part thereof) in the Term, Lessee shall
deliver to Lessor an Officer's Certificate reasonably acceptable to Lessor,
setting forth the calculation of the Participating Rent payment for the three
(3) months comprising such quarter, based on the formulas set forth in Section
3.1(b). There shall be no reduction in the Base Rent regardless of the result
of the Revenues Computation.
In addition, on or before forty-five days after the end of each year,
commencing with, February 14, 1999, Lessee shall deliver to Lessor an Officer's
Certificate reasonably acceptable to Lessor setting forth the computation of the
actual Participating Rent that accrued for each month of the Lease Year that
ended on the immediately preceding December 31. Additionally, if the annual
Participating Rent due and payable for any Lease Year (as shown in the
applicable Officer's Certificate) exceeds the amount actually paid as
Participating Rent by Lessee for such year, Lessee also shall pay such excess to
Lessor at the time such certificate is delivered. If the Participating Rent
actually due and payable for such Lease Year is shown by such certificate to be
less than the amount actually paid as Participating Rent for the applicable
Lease Year, at the option of Lessee, Lessor shall reimburse such amount to
Lessee or credit such amount against subsequent months' Base Rent and, to the
extent necessary, subsequent months' Participating Rent payments, or, if none,
then such amounts shall be paid to Lessee. Any such credit to Base Rent shall
not be applied for purposes of calculating Participating Rent payable for any
subsequent month.
Any difference between the annual Participating Rent due and payable
for any Lease Year (as shown in the applicable Officer's Certificate or as
adjusted pursuant to Section 3.1(d)) and the total amount actually paid by
Lessee as Participating Rent for such Lease Year, whether in favor of Lessor or
Lessee, shall bear interest at the Base Rate, which interest shall accrue from
the due date of the last monthly Participating Rent payment for the Lease Year
until the amount of such difference shall be paid or otherwise discharged. Any
such interest payable to Lessor shall be deemed to be and shall be payable as
Additional Charges.
The obligation to pay Participating Rent shall survive the expiration
or earlier termination of the Term, and a final
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<PAGE>
reconciliation, taking into account, among other relevant adjustments, any
adjustments which are accrued after such expiration or termination date but
which related to Participating Rent accrued prior to such termination date,
shall be made not later than ninety (90) days after such expiration or
termination date.
(d) CPI Adjustments. For each Lease Year during the Term beginning
---------------
with the Lease Year commencing January 1, 1999, the Base Rent then in effect,
the Annual Room Revenues First Break Point and the Annual Room Revenues Second
Break Point (together, the "Annual Room Revenues Break Points"), and the Annual
Food Sales Break Point then included in the Revenues Computation set forth in
Section 3.1(b), shall be increased as follows:
(i) For the Lease Year commencing January 1, 1999 and for each
Lease Year thereafter during the Term, the Consumer Price Index for the day
before the day that the new Lease Year commences (the "Measurement Date") shall
be divided by the Consumer Price Index for the day that is twelve months
preceding the Measurement Date;
(ii) The new Base Rent for the then current Lease Year shall be the
product of the Base Rent in effect in the most recently ended Lease Year and the
quotient obtained under subparagraph (1) above;
(iii) The new Annual Room Revenues Break Points in the Revenues
Computation described in Section 3.1(b) above for the Lease Year commencing
January 1, 1999 shall be the product of the Annual Room Revenues Break Points in
effect in the Lease Year ending December 31, 1998 and the quotient obtained in
subparagraph (1) above, and the new Annual Room Revenues Break Points in the
Revenues Computation for the Lease Year beginning with the Lease Year commencing
January 1, 1999 and for each Lease Year thereafter during the Term, shall be the
product of (a) the Annual Room Revenues Break Points in effect in the most
recently ended Lease Year and (b) the quotient obtained in subparagraph (1)
above plus seventy-five one hundredths percent (.75%), ***[when applicable as
shown on the Smith Barney, Inc. model LANGUAGE TO BE PROVIDED FOR EACH LEASE
BASED ON THE SMITH BARNEY, INC. MODEL]***; and
(iv) The new Annual Food Sales Break Point in the Revenues
Computation described in Section 3.1(b) above for the Lease Year commencing
January 1, 1999 shall be the product of the Annual Food Sales Break Point in
effect in the Lease Year ending December 31, 1998 and the quotient obtained in
subparagraph (1) above, and the new Annual Food Sales Break Point in the
Revenues Computation for the Lease Year beginning with the Lease Year
-20-
<PAGE>
commencing January 1, 1999 and for each Lease Year thereafter during the Term,
shall be the product of (a) the Annual Food Sales Break Point in effect in the
most recently ended Lease Year and (b) the quotient obtained in subparagraph (1)
above plus seventy-five one hundredths percent (.75%)***[when applicable as
shown on the Smith Barney, Inc. model LANGUAGE TO BE PROVIDED FOR EACH LEASE
BASED ON THE SMITH BARNEY, INC. MODEL]***.
In no event shall the Base Rent, the Annual Room Revenues Break Points
or the Annual Food Sales Break Point be reduced as a result of any changes in
the Consumer Price Index.
Adjustments calculated as set forth above in the Base Rent, the Annual
Room Revenues Break Points and the Annual Food Sales Break Point shall be
effective on the first day of each calendar Lease Year to which such adjusted
amounts apply. If Rent is paid prior to the determination of the amount of any
adjustment to Base Rent, the Annual Room Revenues Break Points or the Annual
Food Sales Break Point applicable for such period, whether because of a delay in
the publication of the Consumer Price Index for the Measurement Date or because
of any other reason, payment adjustments for any shortfall in or overpayment of
Rent paid shall be made with the first Base Rent and Participating Rent payments
due after the amount of the adjustments are determined.
If (1) a significant change is made in the number or nature (or both)
of items used in determining the Consumer Price Index, or (2) the Consumer Price
Index shall be discontinued for any reason, the Bureau of Labor Statistics shall
be requested to furnish a new index comparable to the Consumer Price Index,
together with information which will make possible a conversion to the new index
in computing the adjusted Base Rent, Annual Room Revenues Break Points, and
Annual Food Sales Break Point hereunder. If for any reason the Bureau of Labor
Statistics does not furnish such an index and such information, the parties will
instead mutually select, accept and use such other index or comparable
statistics on the cost of living in various U.S. cities that is computed and
published by an agency of the United States or a responsible financial
periodical of recognized authority.
The portion of the aggregate of Base Rent and Participating Rent
designated on Exhibit C payable for each Lease Year shall be attributed to the
rights to the Franchise Agreement granted by Lessor to Lessee pursuant to
Section 1.1(g).
3.2 Confirmation of Participating Rent. Lessee shall utilize, or
----------------------------------
cause to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary practices, and in accordance with GAAP and the
Uniform System,
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<PAGE>
that will accurately record all data necessary to compute Participating Rent,
and Lessee shall retain, for at least five (5) years after the expiration of
each Lease Year, reasonably adequate records conforming to such accounting
system showing all data necessary to conduct Lessor's Audit and to compute
Participating Rent for the applicable Lease Years. Lessor shall have the right
from time to time by its accountants or representatives to audit such
information in connection with Lessor's Audit, and to examine all Lessee's
records (including supporting data and sales and excise tax returns) reasonably
required to complete Lessor's Audit and to verify Participating Rent, subject to
any prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any Lessor's Audit discloses a deficiency in the payment of
Participating Rent, and either Lessee agrees with the result of Lessor's Audit
or the matter is otherwise determined or compromised, then promptly after such
agreement or determination Lessee shall pay to Lessor the amount of the
deficiency, together with interest at the Overdue Rate from the date when said
payment should have been made to the date of payment thereof; provided, however,
that as to any Lessor's Audit that is commenced more than one (1) year after the
end of any Lease Year, the deficiency, if any, with respect to such
Participating Rent shall bear interest at the Overdue Rate only from the date
such determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Lessee, in which case
interest at the Overdue Rate will accrue from the date such payment should have
been made to the date of payment thereof. If any Lessor's Audit discloses a
deficiency in the payment of Participating Rent which, as finally agreed or
determined exceeds 4%, Lessee shall pay the costs of the portion of Lessor's
Audit allocable to the determination of Gross Revenues (the "Revenue Audit"). In
no event shall Lessor undertake a Lessor's Audit more than three (3) years after
the last day of the Lease Year for which such audit is requested. If any
Lessor's Audit discloses an excess in the payment of Participating Rent, Lessor,
at its option, shall reimburse such amount to Lessee or credit such amount
against subsequent weeks' Base Rent, and, to the extent necessary, subsequent
quarters' Participating Rent payments, or, if none, then such amount shall be
paid to Lessee. Any credit to Base Rent shall not be applied for purposes of
calculating Participating Rent payable for any subsequent quarter. Any
proprietary information obtained by Lessor pursuant to the provisions of this
Section shall be treated as confidential, except that such information may be
used, subject to appropriate confidentiality safeguards, in any arbitration or
litigation between the parties and except further that Lessor may disclose such
information to prospective lenders and investors and to any other persons to
whom disclosure is necessary to comply with applicable laws, regulations and
government requirements. The obligations of Lessee contained in this Section
shall survive the expiration or earlier termination of this Lease. Any dispute
as
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<PAGE>
to the existence or amount of any deficiency in the payment of Participating
Rent as disclosed by Lessor's Audit shall, if not otherwise settled by the
parties, be submitted to arbitration pursuant to the provisions of Section 40.2.
3.3 Additional Charges. In addition to the Base Rent and
------------------
Participating Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions that Lessee
assumes or agrees to pay under this Lease, including, without limitation any
fees, charges and assessments required to be paid pursuant to any
[CONDOMINIUM]/(2)/ association or other like agreement pursuant to which charges
or fees may be assessed against the Leased Property, and (b) in the event of any
failure on the part of Lessee to pay any of those items referred to in clause
(a) of this Section 3.3, Lessee also will promptly pay and discharge every fine,
penalty, interest and cost that may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) of this Section 3.3
being additional rent hereunder and being referred to herein collectively as the
"Additional Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Base Rent. If any installment of Base Rent,
Participating Rent or Additional Charges (but only as to those Additional
Charges that are payable directly to Lessor) shall not be paid on its due date,
Lessee will pay Lessor within ten (10) days of demand, as Additional Charges, a
late charge (to the extent not in violation of any usury statutes and otherwise
permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay same from monies received from Lessee.
3.4 No Set Off. Except as provided in this Section 3.4, Rent shall
----------
be paid to Lessor without set off, deduction or counterclaim, subject to any
other provisions of this Lease that expressly provide for adjustment or
abatement of or set offs against Rent or other charges, and further subject to
Lessee's right to assert any claim or mandatory counterclaim in any action
brought by either party under this Lease.
3.5 Annual Budget. Lessee shall prepare and submit to Lessor, by
-------------
not later than ninety (90) days prior to the
- -------------------
/(2)/ Only include as to (Crossroads) Mahwah, New Jersey Lease.
-23-
<PAGE>
commencement of each Lease Year a capital budget (the "Capital Budget") and an
estimate of Gross Revenues, and by not later than thirty (30) days prior to the
commencement of each Lease Year, an operating budget (the "Operating Budget"),
each of which shall be prepared in accordance with the requirements of this
Section 3.5. The Operating Budget and the Capital Budget (together, the "Annual
Budget") shall be prepared in accordance with the Uniform System to the extent
applicable and show by month and quarter and for the year as a whole in the
degree of detail specified by the Uniform System for monthly statements, and in
accordance with the detail level of monthly financial statements, the following:
(a) Lessee's reasonable estimate of Gross Revenues (including room
rates and Room Revenues) for the forthcoming Lease Year itemized on schedules on
a monthly and quarterly basis as approved by Lessor and Lessee, together with
the assumptions, in narrative form, forming the basis of such schedules.
(b) An estimate of any amounts Lessor will be requested to provide for
Capital Improvements during the current and the next Lease Year, subject to the
limitations set forth in Article XXXVIII, including a reasonably detailed
breakdown of all hard and soft costs for each Capital Improvement.
(c) A cash flow projection.
(d) A narrative description of the program for advertising and
marketing the Facility for the forthcoming Lease Year containing a detailed
budget itemization of the proposed advertising expenditures by category and the
assumptions, in narrative form, forming the basis of such budget itemization.
(e) Lessee's reasonable estimate for each quarter of the Lease Year of
Participating Rent including Room Revenues, Food Sales, Beverage Sales and Other
Income.
Lessor shall have thirty (30) days after the date on which it receives
the Capital Budget to review, approve, disapprove or change the entries and
information appearing in the Capital Budget. If the parties are not able to
reach agreement on the Capital Budget for any Lease Year during Lessor's thirty
(30) day review period, the parties shall attempt in good faith during the
subsequent thirty (30) day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one (1) meeting of executive-
level officers of Lessor and Lessee. The Capital Budget shall be finalized at
least thirty (30) days prior to the commencement of each Lease Year, provided
that in the event the parties are still not able to reach agreement on the
Capital Budget for any particular Lease Year after complying with the foregoing
requirements of this Section 3.5, the parties shall adopt such portions of the
Capital Budget as they may have agreed upon, and any matters not agreed
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<PAGE>
upon shall be referred to arbitration as provided for in Section 40.2 hereof.
Notwithstanding the foregoing, if Lessor believes that the amount budgeted for
any particular Capital Improvement is in excess of the actual total cost for
which such Capital Improvement could be built or installed, Lessor, in its sole
discretion, may insist that the amount allocated for such Capital Improvement in
the Capital Budget be reduced to the amount for which Lessor believes it can be
built or installed and Lessor shall be responsible for supervising the design,
installation and/or construction of such Capital Improvement, for which it shall
be reimbursed in accordance with Article XXXVIII below. Pending the results of
any arbitration or the earlier agreement of the parties, if the Capital Budget
has not been agreed upon, no Capital Expenditures shall be made unless the same
are set forth in a previously approved Capital Budget, are specifically required
by Lessor or are otherwise required to comply with Legal Requirements, to make
Emergency Expenditures or to comply with the Franchise Agreement. Lessee shall
provide Lessor with copies of any revisions to the Annual Budget which it may
desire or otherwise deem appropriate to make from time to time during any Lease
Year, but no such revision shall require Lessor's approval or constitute a
change in the Annual Budget for the purposes of any provisions of this Lease.
The Capital Budget, once approved and as approved, shall form the basis on which
expenditures for Capital Improvements shall be made. Subject to the terms and
provisions of Article XXXVIII hereof, Lessor will be obligated to make all
Capital Expenditures which are reflected on a Capital Budget which has been
approved. Unless such expenditures are otherwise permitted in writing by Lessor
or are Emergency Expenditures or are required by the Franchise Agreement, Lessee
agrees not to cause or permit any such expenditures for a Lease Year in excess
of those set forth in the Capital Budget. Lessee shall promptly report to Lessor
in writing any actual or anticipated deviation from the Capital Budget of any
material or long-term consequence. Representatives of Lessee and Lessor shall
meet as requested by Lessor but not less frequently than monthly to review and
discuss the previous and future quarters' operating statements, Gross Revenues,
Capital Expenditures and the general concerns of Lessee and Lessor. In the event
that Lessee fails to make expenditures for Capital Improvements in accordance
with the provisions of the Capital Budget as set forth in this Section 3.5, then
Lessor, in addition to its other rights and remedies under this Lease and under
applicable law, shall have the right to submit the matter to arbitration under
Section 40.1 hereof.
Lessor shall have thirty (30) days after the date on which it receives
the Operating Budget to review the same and notify Lessee of its approval or
disapproval. Any Notice of disapproval of the Operating Budget shall state with
particularity the line items appearing therein to which Lessor disapproves and
the amount Lessor is willing to approve for each
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<PAGE>
such line item in Lessor's reasonable judgement. The Operating Budget shall be
finalized by the commencement of each Lease Year. If the parties are not able to
reach agreement as to an entry for any line item in the Operating Budget for any
particular Lease Year during Lessor's thirty (30) day review period, the parties
shall use the amount applicable to each such line item in the approved Operating
Budget of the immediately preceding year and with respect to all other line
items contained in the Operating Budget for the particular Lease Year in
question which have not been disapproved with particularity by Lessor, the
parties shall use the amounts set forth in such Operating Budget. Lessor and
Lessee shall attempt in good faith during the subsequent sixty(60) day period to
resolve any disputes, which attempt shall include, if requested by either party,
at least one (1) meeting of executive-level officers of Lessor and Lessee,
provided that in the event the parties are still not able to reach agreement on
the Operating Budget for any particular Lease Year after complying with the
foregoing requirements of this Section 3.5, the parties shall submit the matter
to arbitration under Section 40.2 hereof.
3.6 Books and Records. Lessee shall keep full and adequate books of
-----------------
account and other records reflecting the results of operation of the Facility on
an accrual basis, all in accordance with the Uniform System and GAAP and the
obligations of Lessee under this Lease. The books of account and all other
records relating to or reflecting the operation of the Facility shall be kept
either at the Facility or at Lessee's offices in Fairfield, New Jersey and shall
be available to Lessor and its representatives and its auditors or accountants,
at all reasonable times for examination, audit, inspection, and transcription.
All of such books and records pertaining to the Facility including, without
limitation, books of account, guest records and front office records, at all
times shall be the property of Lessor and shall not be removed from the Facility
or Lessee's offices without Lessor's prior written approval. Lessee shall be
entitled to make copies of any or all such books and records for its own files.
Lessee's obligations under this Section 3.6 shall survive termination of this
Lease for any reason.
3.7 [Intentionally omitted.]
3.8 Hotel Operations.
----------------
(a) Lessee covenants to operate the Facility as a "full service
hotel". A full service hotel is a hotel that operates a restaurant and meeting
facilities and may have some or all of the following: conference facilities,
banquet space, lounge areas, gift shops, recreational facilities (including
swimming pool), and guest services (including room service, valet service and
laundry). If, during the Term, Lessee desires to
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<PAGE>
provide food and beverage operations at the Facility (other than those that are
presently provided at the Facility and complimentary continental breakfast) or
to discontinue any such operations which are presently provided (any such
action, a "Change in Operations"), Lessee shall give notice of such desire to
Lessor. Lessor and Lessee shall then commence negotiations to adjust Rent to
reflect the proposed change to the operation of the Facility, each acting
reasonably and in good faith. All other terms of this Lease will remain
substantially the same. During negotiations, which shall not extend beyond 60
days, Lessee shall not implement the proposed Change in Operations and shall
continue fulfilling its obligations under the existing terms of this Lease. If
no agreement is reached after such 60-day period, (i) if Lessee in its
reasonable judgment believes the failure to accomplish the proposed Change in
Operations will have an adverse economic impact on Lessee's operation of the
Facility, Lessee may submit the adjustment to Rent to arbitration in accordance
with Section 40.1, otherwise, (ii) Lessee shall withdraw such notice and shall
not be entitled to implement the proposed Change in Operations, and this Lease
shall continue in full force. Lessee further covenants and agrees that at all
times during the Term of this Lease when Manager is managing the Leased
Property, Manager shall manage the Leased Property without compensation (except
for reimbursement of its actual out-of-pocket expenses incurred on behalf of
Lessee), and that Lessee shall not ***[ALL LEASES EXCEPT CROWNE PLAZA LAS VEGAS
enter into any management agreement or other similar agreement]*** ***[CROWNE
PLAZA LAS VEGAS LEASE ONLY voluntarily terminate the Management Agreement with
Manager or terminate such agreement pursuant to a right to terminate therein,
subject to Section 36.1 hereof]*** or otherwise engage any Person or Affiliate
to act as manager of the Leased Property, without Lessor's prior written
consent. Lessee hereby agrees that Lessee shall not have the right to terminate
any manager of the Leased Property, including Manager, during the Term of this
Lease without Lessor's prior written consent.
(b) Notwithstanding anything to the contrary contained herein, no
adjustment of Rent pursuant to a Change in Operations described above shall be
implemented without the receipt by Lessor of an opinion from its tax counsel,
satisfactory to Lessor in form and substance, that such adjustment will not
adversely affect the Company's ability to qualify as a real estate investment
trust under the applicable provisions of the Code.
3.9 Allocation of Revenues. In the event that individuals or groups
----------------------
purchase rooms, food and beverage and/or the use of other hotel facilities or
services together or as part of a package, Lessee agrees that revenues shall be
allocated among Room Revenues, Food Sales, Beverage Sales and/or other
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revenue categories, as applicable, in a reasonable manner consistent with the
historical allocation of such revenues.
3.10 Performance Standard. (a) Within thirty (30) days after
--------------------
Lessor's receipt of documentation or other evidence of the occurrence of a
RevPAR Decline for a Lease Year, Lessor shall have the option to terminate this
Lease, upon 30 days' prior written Notice to Lessee thereof, unless such failure
is caused by Unavoidable Occurrences or Lessor's failure to make Capital
Expenditures to maintain the RevPAR Yield Index of the Leased Property or occurs
during any Lease Year of the Term that the new Manager is responsible for
managing and operating the Leased Property pursuant to Article XXXVI hereof.
Notwithstanding the foregoing, in the event Lessee shall receive such Notice
from Lessor and on or before the termination date set forth in such Notice
Lessee pays to Lessor as additional Base Rent an amount (reasonably calculated
by Lessor and specified in such notice) equal to the sum Lessor would have
received had this Lease met the minimum criteria to avoid such RevPAR Decline
(the "Shortfall Cure Amount"), then this Lease shall continue in full force and
effect notwithstanding such Notice. Upon the occurrence of a RevPAR Decline at
the Leased Property for three (3) consecutive Lease Years, except to the extent
such failure is caused by an Unavoidable Occurrence or Lessor's failure to make
Capital Expenditures to maintain the RevPAR Yield Index of the Leased Property
or during any Lease Year of the Term that the new Manager is responsible for
managing and operating the Leased Property pursuant to Article XXXVI hereof,
then, notwithstanding any payments by Lessee of the Shortfall Cure Amount during
such period, Lessor shall have the right to terminate this Lease by Notice to
Lessee, and upon the date set forth in Lessor's Notice, this Lease shall
automatically terminate and neither party shall have any further obligations or
liabilities to the other hereunder, except as expressly stated in this Lease to
survive such termination.
(b) Prior to the commencement of each Lease Year, Lessor and Lessee
shall work in good faith to determine any additions and deletions, if any, to
the Competitive Set for the Leased Property. Any adjustments made to the
Competitive Set shall be finalized on or before December 15th of each Lease
Year, with such adjusted Competitive Set for the Leased Property to be
applicable to the following Leased Year. In the event Lessor and Lessee are
unable to agree to the Leased Property's Competitive Set, such matter shall be
determined by a nationally recognized accounting firm with a hospitality
division chosen by Lessor and Lessee.
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ARTICLE IV
---------
4.1 Payment of Impositions. Subject to the right of Lessor to
----------------------
contest the same, Lessor shall pay all Real Estate Taxes, Personal Property
Taxes, and Capital Impositions before any fine, penalty, interest or cost may be
added for non-payment, to the extent the failure to do so materially and
adversely affects the rights of the Lessee under this Lease, such payments to be
made directly to the taxing or other authorities where feasible. Subject to
Article XII relating to permitted contests, Lessee will pay, or cause to be
paid, all Impositions (other than Capital Impositions, Real Estate Taxes and
Personal Property Taxes) before any fine, penalty, interest or cost may be added
for nonpayment, such payments to be made directly to the taxing or other
authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.
Lessee's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof subject to Lessee's right to contest pursuant to Article XII. If
any such Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and in such
event, shall pay such installments and any unpaid balance of such Impositions
prior to the expiration or earlier termination of the Term hereof (subject to
Lessee's right of contest pursuant to the provisions of Article 12) as the same
respectively come due and before any fine, penalty, premium, further interest or
cost may be added thereto. Lessor, at its expense, shall, to the extent required
or permitted by applicable law, prepare and file all tax returns in respect of
Lessor's net income, gross receipts, sales and use, single business, transaction
privilege, rent, ad valorem, franchise taxes, Real Estate Taxes, Personal
Property Taxes and taxes on its capital stock, and Lessee, at its expense,
shall, to the extent required or permitted by applicable laws and regulations,
prepare and file all other tax returns and reports in respect of any Imposition
as may be required by governmental authorities. If any refund shall be due from
any taxing authority in respect of any Imposition paid by Lessee, the same shall
be paid over to or retained by Lessee if no Event of Default shall have occurred
hereunder and be continuing. If an Event of Default shall have been declared by
Lessor and be continuing, any such refund shall be paid over to or retained by
Lessor. Any such funds retained by Lessor due to an Event of Default shall be
applied as provided in Article XVI. Lessor and Lessee shall, upon request of
the other, cooperate with the other party and otherwise provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports.
Notwithstanding the foregoing provisions of this
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Section, Lessee shall file all Personal Property Tax returns in such
jurisdictions where it is legally required to so file. Lessor, to the extent it
possesses the same, and Lessee, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property classified as personal property.
Where Lessor is legally required to file Personal Property Tax returns, Lessee
shall provide Lessor with copies of assessment notices in sufficient time for
Lessor to file a protest. Lessor, may, upon notice to Lessee, at Lessor's option
and at Lessor's sole expense, protest, appeal, or institute such other
proceedings (in its or Lessee's name) as Lessor may deem appropriate to effect a
reduction of real estate or personal property assessments for those Impositions
to be paid by Lessor, and Lessee, at Lessor's expense as aforesaid, shall fully
cooperate with Lessor in such protest, appeal, or other action. Lessor hereby
agrees to indemnify, defend, and hold harmless Lessee from and against any
claims, obligations, and liabilities against or incurred by Lessee in connection
with such cooperation. Lessee may, upon notice to Lessor, at Lessor's option and
at Lessee's sole expense, protest, appeal or institute such other proceedings
(in its or Lessor's name) as Lessee may deem appropriate to effect a reduction
of Impositions to be paid by Lessee, and Lessor, at Lessee's expense, shall
fully cooperate with Lessee in such protest, appeal or other action. Lessee
hereby agrees to indemnify, defend and hold harmless Lessor from and against any
claims, obligations and liabilities against or incurred by Lessor in connection
with such cooperation. Billings for reimbursement of Personal Property Taxes by
Lessee to Lessor shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property with respect to which such payments
are made. Lessor, however, reserves the right to effect any such protest, appeal
or other action and, upon notice to Lessee, shall control any such activity,
which shall then go forward at Lessor's sole expense. Upon such notice, Lessee,
at Lessor's expense, shall cooperate fully with such activities. To the extent
received by it, Lessee shall furnish Lessor with copies of all assessment
notices for Real Estate Taxes and Personal Property Taxes in sufficient time for
Lessor to file a protest and pay such taxes without penalty. Lessor shall within
thirty (30) days after making such payment furnish Lessee with evidence of
payment of Capital Impositions, Real Estate Taxes and Personal Property Taxes.
4.2 Notice and Accrual of Impositions. Lessor shall give prompt
---------------------------------
Notice to Lessee of all Impositions payable by Lessee hereunder of which Lessor
at any time has knowledge, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions, but if Lessee did not otherwise have knowledge of such Imposition
sufficient to permit it to pay same, such failure shall obviate any default
hereunder for a reasonable time after Lessee receives
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<PAGE>
Notice of any Imposition which it is obligated to pay during the first taxing
period applicable thereto, and Lessor will reimburse Lessee for any fine,
penalty or interest arising from such delay. If requested by Lessor or required
by the holder of a Mortgage, Lessee shall accrue and set aside on a monthly
basis a portion (as Lessor or such holder shall designate) of Rent for the
payment of those Impositions that are payable by Lessor, and such accruals shall
be deposited with such holder, if so required by it, or as otherwise approved by
Lessor.
4.3 Adjustment of Impositions. Impositions payable by Lessee which
-------------------------
are imposed in respect of the tax-fiscal period during which the Term terminates
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Imposition is imposed before or after such termination, and Lessee's obligation
to pay its prorated share thereof after termination shall survive such
termination.
4.4 Utility Charges. Lessee will be solely responsible for obtaining
---------------
and maintaining utility services to the Leased Property and will pay or cause to
be paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.
4.5 Franchise Fees. Lessee will pay or cause to be paid all fees and
--------------
other charges payable pursuant to the Franchise Agreement with respect to the
Facility.
4.6 Ground Rent. In the event that Lessor's interest in the Land is
-----------
pursuant to a ground lease or a sublease, Lessor shall be solely responsible for
payment of any ground rent or subrent, as the case may be, due with respect to
the Leased Property.
ARTICLE V
---------
5.1 No Termination, Abatement, etc. Except as otherwise
-------------------------------
specifically provided in this Lease, Lessee, to the extent permitted by law,
shall remain bound by this Lease in accordance with its terms and shall neither
take any action without the written consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or setoff against the Rent, nor shall the
obligations of Lessee be otherwise affected by reason of (a) any damage to, or
destruction of, any Leased Property or any portion thereof from whatever cause
or any Taking of the Leased Property or any portion thereof, (b) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (c) for any other cause whether similar or dissimilar
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<PAGE>
to any of the foregoing other than a discharge of Lessee from any such
obligations as a matter of law. Lessee hereby specifically waives all rights,
arising from any default under this Lease by Lessor which may now or hereafter
be conferred upon it by law to (1) modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof, or (2) entitle
Lessee to any abatement, reduction, suspension or deferment of or set off
against the Rent or other sums payable by Lessee hereunder, except to the extent
that Lessor's action constitutes constructive eviction and except as otherwise
specifically provided in this Lease. The obligations of Lessee hereunder shall
be separate and independent covenants and agreements and the Rent and all other
sums payable by Lessee hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated, abated or modified
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
ARTICLE VI
-----------
6.1 Ownership of the Leased Property. Lessee acknowledges that the
--------------------------------
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2 Lessee's Personal Property.
--------------------------
(a) Upon commencement of the Term, Lessor shall make available at no
charge to Lessee, for Lessee's use in connection with the operation and
management of the Facility, all Inventory located at the Facility on the
Commencement Date (the "Initial Inventory"). The parties acknowledge and agree
that as of the date of this Lease the amount of Initial Inventory at the
Facility is consistent with the amount of Inventory customarily maintained in a
hotel of the type and character of the Facility and as otherwise is required to
operate the Leased Property in the manner contemplated by this Lease and in
compliance with the Franchise Agreement and all Legal Requirements. Throughout
the Term, Lessee shall maintain a full stock of Inventory at the Facility at the
levels substantially similar to or greater than those existing on the date
hereof. As the Initial Inventory is depleted, Lessee shall purchase, at its
sole cost and expense, any replacement Inventory which may be required. The
Inventory, including any additions and/or replacements thereof, shall be and
remain the property of Lessee. Lessee may (and shall as provided hereinbelow),
at its expense, install, affix or assemble or place on any parcels of the Land
or in any of the Leased Improvements, any items of personal property (including
Inventory, Furniture and Equipment) owned by Lessee (collectively, the "Lessee's
Personal Property"). All of Lessee's Personal Property, other than Inventory,
not removed by Lessee within thirty (30) days
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following the expiration or earlier termination of the Term shall be considered
abandoned by Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving Notice thereof to Lessee without any
payment to Lessee and without any obligation to account therefor. Lessee will,
at its expense, restore the Leased Property to the condition required by Section
9.1(d), including repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by Lessee or Lessor.
(b) Upon the expiration or earlier termination of the Term for any
reason, Lessee shall surrender the Inventory to Lessor in the amounts and at the
levels existing on the date of this Lease. In the event that the amount of
Inventory at the time of such expiration or termination is less than that
provided by Lessor on the date hereof (an "Inventory Deficiency"), Lessee shall
promptly pay to Lessor the amount equal to the Fair Market Value of the
Inventory Deficiency.
(c) If, during the Term, as a result of additions, modifications or
improvements to the Leased Property, the ratio (expressed as a percentage) of
(x) the adjusted basis for Federal income tax purposes of that portion of the
Leased Property consisting of personal property, to (y) the adjusted basis for
such purposes of the Leased Property, shall exceed 15%, Lessor, at its option,
may sell to Lessee (and Lessee shall purchase from Lessor) a sufficient quantity
of such personal property as shall be necessary so that the aforesaid percentage
does not exceed 15%. The aforesaid sale shall be at Fair Market Value for the
items sold and shall otherwise be in accordance with the provisions of Section
18.1 below (including a contemporaneous equitable reduction of the Rent payable
under Section 3.1).
ARTICLE VII
-----------
7.1 Condition of the Leased Property. Lessee acknowledges receipt
--------------------------------
and delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is", "with all faults", and in its present condition.
Except as otherwise specifically provided herein, Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
Lessor
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<PAGE>
shall have the right to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property, and
Lessor shall, if requested by Lessee, assign any such right to Lessee if and to
the extent Lessor determines not to exercise such right. If either party
determines to exercise such right, the other party shall fully cooperate in the
prosecution of any such claim, in Lessor's or Lessee's name, all at the cost and
expense of the prosecuting party, who hereby agrees to indemnify, defend and
hold harmless the other party from and against any claims, obligations and
liabilities against or incurred by such other party in connection with such
cooperation, and who further agrees to apply all amounts realized from the
prosecution of such claim, less its expenses in connection therewith, to remedy
such breach or cure such defect.
7.2 Use of the Leased Property.
--------------------------
(a) Lessee covenants that it will proceed with all due diligence and
will exercise its best efforts to obtain and to maintain all approvals needed to
use and operate the Leased Property and the Facility under applicable local,
state and federal law.
(b) Lessee shall use or cause to be used the Leased Property only as a
hotel facility, and for such other uses as may be necessary or incidental to
such use, or such other use as otherwise approved by Lessor (the "Primary
Intended Use"). Lessee shall not use the Leased Property or any portion thereof
for any other use without the prior written consent of Lessor. No use shall be
made or permitted to be made of the Leased Property, and no acts shall be done,
which will cause the cancellation of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy satisfactory to
Lessor is available and Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased Property any article
which is prohibited by law or fire underwriter's regulations. Lessee shall
comply with all of the requirements pertaining to the Leased Property of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Lessee's Personal Property, which compliance shall be performed at Lessee's sole
cost except to the extent that such compliance requires the performance of a
Capital Improvement or the payment of a Capital Imposition which are Lessor's
responsibilities.
(c) Subject to the provisions of Articles XIV and XV, Lessee covenants
and agrees that during the Term it will either directly or through an approved
manager (1) operate continuously (subject to Unavoidable Occurrences) the Leased
Property as a hotel facility, (2) keep in full force and effect and comply in
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all material respects with all the provisions of the Franchise Agreement, except
Lessee shall have no obligation to complete any Capital Improvements required by
Franchisor as set forth in Article XXXVII hereof, (3) not terminate or amend in
any respect the Franchise Agreement without the consent of Lessor, (4) maintain
appropriate certifications and licenses for such use and (5) keep Lessor advised
of the status of any material litigation affecting the Leased Property.
(d) Lessee shall not commit any waste on the Leased Property, or in
the Facility nor shall Lessee cause or permit any nuisance thereon.
(e) Lessee shall neither use nor permit the Leased Property or any
portion thereof, or Lessee's Personal Property, to be used in such a manner as
(1) would impair Lessor's (or Lessee's, as the case may be) title thereto or to
any portion thereof, or (2) would support a claim or claims of adverse usage or
adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to
-------------------------------
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the approval
of Lessor, which approval may be granted or denied in Lessor's sole discretion),
(a) grant easements and other rights in the nature of easements with respect to
the Leased Property to third parties, (b) release existing easements or other
rights in the nature of easements which are for the benefit of the Leased
Property, (c) dedicate or transfer unimproved portions of the Leased Property
for road, highway or other public purposes, (d) execute petitions to have the
Leased Property annexed to any municipal corporation or utility district, (e)
execute amendments to any covenants and restrictions affecting the Leased
Property and (f) execute and deliver to any person any instrument appropriate to
confirm or effect such grants, releases, dedications, transfers, petitions and
amendments (to the extent of its interests in the Leased Property), but only
upon delivery to Lessor of an Officer's Certificate stating that such grant,
release, dedication, transfer, petition or amendment does not interfere with the
proper conduct of the business of Lessee on the Leased Property and does not
materially reduce the value of the Leased Property.
ARTICLE VIII
------------
8.1 Compliance with Legal and Insurance Requirements, etc. Subject
-----------------------------------------------------
to Sections 8.2, 8.3(b) and Article XII or any other provision of this Agreement
relating to permitted contests, Lessee, at its expense, will promptly (a) comply
with all applicable Legal Requirements and Insurance Requirements in
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respect of the use, operation, maintenance, repair and restoration of the Leased
Property, subject however to the provisions of Section 9.1(b), and (b) procure,
maintain and comply with all appropriate licenses and other authorizations
required for any use of the Leased Property and Lessee's Personal Property then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part thereof. Notwithstanding the foregoing, in
the event the parties are unable to agree as to whether (i) a Legal Requirement
requires an expenditure which is an obligation of Lessee hereunder or
constitutes a Capital Improvement (it being agreed that Lessee has no obligation
to make such a Capital Improvement notwithstanding anything to the contrary
contained herein), and/or (ii) a Capital Improvement should be made to comply
with a certain Legal Requirement (any such Capital Improvement to be made by
Lessor, subject to Section 40.2 hereof), then Lessee shall have the right to
terminate this Lease upon thirty (30) days prior written notice to Lessor
whereupon, this Lease shall terminate and neither party shall have any further
obligations hereunder except for (i) Lessee's obligation to pay all Rent accrued
through the termination date and (ii) any other obligations or indemnities
herein expressly stated to survive the termination hereof.
8.2 Legal Requirements Covenants. Subject to Section 8.3(b) below,
----------------------------
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and that Lessee shall not
permit or suffer to exist any unlawful use of the Leased Property by others.
Lessee shall acquire and maintain all appropriate licenses, certifications,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use, and any other
lawful use conducted on the Leased Property as may be permitted from time to
time hereunder including, but not limited to, the sale and service of alcoholic
beverages (provided that Lessor shall cooperate at Lessee's sole cost and
expense, in obtaining liquor licenses to the extent necessary). Lessee further
covenants and agrees that Lessee's use of the Leased Property and maintenance,
alteration, and operation of the same, and all parts thereof, shall at all times
conform to and comply with all Legal Requirements, unless the same are finally
determined by a court of competent jurisdiction to be unlawful (and Lessee shall
cause all such sub-tenants, invitees or others to so comply with all Legal
Requirements). Lessee may, however, upon prior notice to Lessor, contest the
legality or applicability of any such Legal Requirement or any licensure or
certification decision if Lessee maintains such action in good faith, with due
diligence, without prejudice to Lessor's rights hereunder and at Lessee's sole
expense. If compliance with a Legal Requirement pending the prosecution of any
such proceeding may legally be delayed without the incurrence of any lien,
charge or liability of any kind
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<PAGE>
against the Facility and without subjecting Lessee or Lessor to any liability
for failure to so comply therewith, Lessee may delay compliance therewith until
final determination of such proceeding. If any lien, charge or liability would
be incurred by reason of any such delay, Lessee, on the prior written consent of
Lessor (which consent shall not be unreasonably withheld) and the Holder of any
Mortgage, may nonetheless contest and delay as aforesaid, provided that such
contest or delay would not subject Lessor to criminal liability and Lessee both
(a) furnishes to Lessor security reasonably satisfactory to Lessor against any
loss or injury by reason of such contest or delay, and (b) prosecutes the
contest with due diligence and good faith.
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and
-----------------------
not in diminution of, Lessee's covenants and undertakings in Sections 8.1 and
8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until Lessee completely vacates the Leased
Property and surrenders possession of the same to Lessor, Lessee shall fully
comply with all Environmental Laws applicable to the Leased Property and the
operations thereon, except to the extent that such compliance would require the
remediation of Environmental Liabilities for which Lessee has no indemnity
obligations under Section 8.3(b). Lessee agrees to give Lessor prompt written
notice of (1) all Environmental Liabilities; (2) all pending, threatened or
anticipated Proceedings, and all notices, demands, requests or investigations,
relating to any Environmental Liability or relating to the issuance, revocation
or change in any Environmental Authorization required for operation of the
Leased Property; (3) all Releases at, on, in, under or in any way affecting the
Leased Property, or any Release known by Lessee at, on, in or under any property
adjacent to the Leased Property; and (4) all facts, events or conditions that
could reasonably lead to the occurrence of any of the above-referenced matters.
(b) Lessee hereby agrees to defend, indemnify and save harmless any
and all Lessor Indemnified Parties from and against any and all Environmental
Liabilities which relate to events or occurrences which occurred during the Term
of this Lease EXCEPT TO THE EXTENT THAT THE SAME (I) ARE CAUSED BY LESSOR OR
LESSOR'S AGENTS, EMPLOYEES OR CONTRACTORS, OR (II) RESULT FROM CONDITIONS
EXISTING AT THE LEASED PROPERTY AT THE DATE OF THIS LEASE (AN "EXISTING
CONDITION") OR FROM RELEASES OR OTHER VIOLATIONS OF ENVIRONMENTAL LAWS
ORIGINATING ON ADJACENT PROPERTY BUT AFFECTING THE LEASED PROPERTY (A
"MIGRATION"), provided that in either case such exclusions shall not apply to
the extent that the Existing Condition or the Migration has been exacerbated by
Lessee's intentional act, negligent act or negligent failure to act.
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<PAGE>
(c) Lessor hereby agrees to defend, indemnify and save harmless any
and all Lessee Indemnified Parties from and against any and all Environmental
Liabilities to the extent that the same arise from an Existing Condition or
Migration (except as provided in Section 8.3(b) above), were caused by Lessor or
Lessor's agents, employees or contractors or relate to occurrences after the
expiration of the Term.
(d) If any Proceeding is brought against any Indemnified Party in
respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnifying Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding made without its consent, which shall
not be unreasonably withheld, but if settled with the consent of the
Indemnifying Party, or if settled without its consent (if its consent shall be
unreasonably withheld), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall indemnify
and hold harmless the Indemnified Parties from and against any liabilities
incurred by such Indemnified Parties by reason of such settlement or judgment.
(e) If at any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee or Lessor, as appropriate,
stating such Indemnified Party's basis for such belief, an Indemnified Party
shall be given immediate access to the Leased Property (including, but not
limited to, the right to enter upon, investigate, drill wells, take soil
borings, excavate, monitor, test, cap and use available land for the testing of
remedial technologies), Lessee's employees, and to all relevant documents and
records regarding the matter as to which a responsibility, liability or
obligation is asserted or which is the subject of any Proceeding; provided that
such access may be conditioned or restricted as may be reasonably necessary to
ensure compliance with law and the safety
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of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable. In addition
to the aforesaid access, Lessor shall also have similar access upon prior
written notice to Lessee in the event that Lessor requires such access in
connection with a proposed sale or mortgage of the Leased Property or for any
other reasonable purpose. Lessor hereby agrees to indemnify and hold harmless
Lessee from and against any and all liabilities, costs, damages, charges, fees
or expenses arising from or related to the access to or use of the Leased
Property by a Lessor Indemnified Party pursuant to this subparagraph (e).
(f) The indemnification rights and obligations provided for in this
Article VIII shall be in addition to any indemnification rights and obligations
provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in this
Article VIII shall survive the termination of this Agreement.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees
to use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the
case may be, any claims or rights it may have against any third party which
would materially reduce the amount of damages otherwise incurred by such
Indemnified Party.
ARTICLE IX
----------
9.1 Maintenance and Repair.
----------------------
(a) Except as provided in Section 9.1(b), Lessee will keep the Leased
Property and all private roadways, sidewalks and curbs appurtenant thereto that
are under Lessee's control, including windows and plate glass, parking lots,
HVAC, mechanical, electrical and plumbing systems and equipment (including
conduit and ductware), and non-load bearing interior
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walls, in good order and repair, except for ordinary wear and tear (whether or
not the need for such repairs occurred as a result of Lessee's use, any prior
use, the elements or the age of the Leased Property, or any portion thereof but
subject to the obligation to make necessary and appropriate repairs and
replacements as provided in this Section 9.1(a)), and, except as otherwise
provided in Section 9.1(b), Article XIV, Article XV or Article XXXVIII, with
reasonable promptness, make all necessary and appropriate repairs, replacements
and improvements thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease, or
required by any governmental agency having jurisdiction over the Leased
Property. Lessee, however, shall be permitted to prosecute claims against
Lessor's predecessors in title for breach of any representation or warranty or
for any latent defects in the Leased Property to be maintained by Lessee unless
Lessor is already diligently pursuing such a claim. All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the original
work. Lessee will not take or omit to take any action, the taking or omission of
which might materially impair the value or the usefulness of the Leased Property
or any part thereof for its Primary Intended Use (except to the extent such
actions are the responsibility of Lessor pursuant to Section 9.1(b), Article
XIV, Article XV or Article XXXVIII). If Lessee fails to make any required
repairs or replacements after fifteen (15) days' notice from Lessor, or after
such longer period as may be reasonably required provided that Lessee at all
times diligently proceeds with such repair or replacement, then Lessor shall
have the right, but shall not be obligated, to make such repairs or replacements
on behalf of and for the account of Lessee. In such event, such work shall be
paid for in full by Lessee as Additional Charges.
(b) Notwithstanding Lessee's obligations under Section 9.1(a) above
but subject to the limitations on Lessor's obligations for Capital Expenditures
set forth in Article XXXVIII, unless caused by Lessee's negligence or willful
misconduct or that of its employees, contractors or agents, Lessor shall be
required to make all Capital Expenditures. Except as set forth in the preceding
sentence, Lessor shall not under any circumstances be required to build or
rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the Leased Property, whether ordinary or extraordinary, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, or to maintain the Leased Property in any way.
Lessee hereby waives, to the extent permitted by law, the right to make repairs
at the expense of Lessor pursuant to any law in effect at the time of the
execution of this Lease or hereafter enacted. Lessor shall have the right to
give, record and post, as appropriate,
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notices of non-responsibility under any mechanic's lien laws now or hereafter
existing.
If Lessor fails to make any required Capital Expenditures after the
expiration of all applicable notice and cure periods set forth in Article XXXIX,
then Lessee shall have the right, but not the obligation, to make such Capital
Expenditures on behalf of and for the account of Lessor, whereupon Lessor shall
reimburse Lessee therefor promptly upon receipt of all documentation evidencing
such Capital Expenditure. Notwithstanding the foregoing, if Lessor shall fail
to make any Emergency Expenditure after the expiration of all applicable notice
and cure periods, Lessee shall have the right to terminate this Lease upon
thirty(30) days' prior notice to Lessor, whereupon this Lease shall terminate
and neither party shall have any further rights or obligations hereunder except
for (i) Lessee's obligation to pay all Rent accrued through the termination date
and (ii) any other obligations or indemnities herein expressly stated to survive
the termination hereof.
(c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (1) constituting the request of Lessor, expressed
or implied, to any contractor, subcontractor, laborer, materialman or vendor to
or for the performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration, addition, repair
or demolition of or to the Leased Property or any part thereof, or (2) giving
Lessee any right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against Lessor in respect
thereof or to make any agreement that may create, or in any way be the basis for
any right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of the Term,
vacate and surrender the Leased Property to Lessor in the condition in which the
Leased Property was originally received from Lessor, except as repaired,
rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair in
accordance with Section 9.1(a) above, or damage by casualty or Condemnation
(subject to the obligation of Lessee or Lessor, as applicable, to restore or
repair as set forth in this Lease).
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ARTICLE X
---------
10.1 Alterations. Subject to first obtaining the written approval of
-----------
Lessor, which shall not be unreasonably withheld, Lessee shall have the right,
but not the obligation, to make such additions, modifications or improvements to
the Leased Property from time to time as Lessee deems desirable for its
permitted uses and purposes, provided that such action will not alter the
character or purposes of the Leased Property or detract from the value or
operating efficiency thereof and will not impair the revenue-producing
capability of the Leased Property or adversely affect the ability of the Lessee
to comply with the provisions of this Lease. All such work shall be performed
in a first class manner in accordance with all applicable governmental rules and
regulations and after receipt of all required permits and licenses. If
reasonably required by Lessor all such work shall be covered by performance
bonds issued by bonding companies reasonably acceptable to Lessor. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor. Subject to the terms and provisions of Article
XXXVIII, nothing in this Section 10.1 shall abrogate or limit Lessor's
obligation to make the Capital Expenditures set forth in the approved Capital
Budget.
10.2 Salvage. All materials which are scrapped or removed in
-------
connection with the making of repairs pursuant to Article IX or X shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing of such work.
10.3 Lessor Alterations. Lessor shall have the right, without
------------------
Lessee's consent, to make or cause to be made alterations to the Leased Property
required in connection with (i) Emergency Situations, (ii) Legal Requirements,
(iii) maintenance of the Franchise Agreement, (iv) any Mortgage (v) any Capital
Improvement which Lessor has elected to build or install itself, as provided in
Section 3.5 hereof, or (vi) the performance by Lessor of its obligations under
this Lease. Lessor shall further have the right, but not the obligation, to
make such other additions to the Leased Property as it may reasonably deem
appropriate during the term of the Lease, subject to Lessee's approval which
shall not be unreasonably withheld. All such work unless necessitated by
Lessee's acts or omissions or unless otherwise required to be performed by
Lessee under this Lease (in which event work shall be paid for by Lessee) shall
be performed at Lessor's expense and shall be done after reasonable notice to
and coordination with Lessee, so as to minimize any disruptions or interference
with the operation of the Facility. In the event
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such work materially interferes with the operation of the Facility, Base Rent
shall be equitably abated. If Lessee withholds its consent to any additions or
other work which Lessor has the right, but not the obligation, to make pursuant
to the foregoing provisions of this Section 10.3, or if the extent of abatement
of Rent cannot be agreed upon, the matter shall be referred to arbitration
pursuant to the provisions of Article XL.
ARTICLE XI
----------
Liens. Subject to the provision of Article XII relating to permitted
-----
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property resulting from the action
or inaction of Lessee, or any attachment, levy, claim or encumbrance in respect
of the Rent, excluding, however, (a) this Lease, (b) the matters, if any,
included as exceptions or insured against in the title policy insuring Lessor's
interest in the Leased Property, (c) restrictions, liens and other encumbrances
which are consented to in writing by Lessor, (d) liens for those taxes which
Lessee is not required to pay hereunder, (e) subleases permitted by Article XXI
hereof, (f) liens for Impositions or for sums resulting from noncompliance with
Legal Requirements to the extent Lessee is responsible hereunder for such
compliance so long as (1) the same are not yet delinquent or (2) such liens are
in the process of being contested as permitted by Article XII, (g) liens of
mechanics, laborers, suppliers or vendors for sums either disputed or not yet
due provided that any such liens for disputed sums are in the process of being
contested as permitted by Article XII hereof, and (h) liens and encumbrances
created by Lessor.
ARTICLE XII
-----------
Permitted Contests. Lessee shall have the right to contest the amount
------------------
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
any lien, attachment, levy, encumbrance, charge or claim (any such Imposition,
Legal Requirement, lien, attachment, levy, encumbrance, charge or claim herein
referred to as "Claims") not otherwise permitted by Article XI, by appropriate
legal proceedings in good faith and with due diligence (but this shall not be
deemed or construed in any way to relieve, modify or extend Lessee's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or loss of any portion of the Leased Property, or
any part thereof, or cause Lessor or Lessee to be in default under any
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Mortgage. Upon the request of Lessor, as security for the payment of such
claims, Lessee shall either (a) provide a bond or other assurance reasonably
satisfactory to Lessor (and to any Holder, if approval thereof is required by
such Holder's Mortgage) that all Claims which may be assessed against the Leased
Property together with interest and penalties, if any, thereon and legal fees
anticipated to be incurred in connection therewith will be paid, or (b) deposit
within the time otherwise required for payment with a bank or trust company as
trustee upon terms reasonably satisfactory to Lessor or with any Holder upon
terms satisfactory to such Holder, money in an amount sufficient to pay the
same, together with interest and penalties thereon and legal fees anticipated to
be incurred in connection therewith, as to all Claims which may be assessed
against or become a Claim on the Leased Property, or any part thereof, in said
legal proceedings. Lessee shall furnish Lessor and any Holder with reasonable
evidence of such deposit within five days of the same. Lessor agrees to join in
any such proceedings if the same be required to legally prosecute such contest
of the validity of such Claims; provided, however, that Lessor shall not thereby
be subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee shall
be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten days advance Notice to Lessee, pay such charges together with any interest
and penalties and the same shall be repayable by Lessee to Lessor as Additional
Charges at the next Payment Date provided for in this Lease. Lessor reserves the
right to contest any of the Claims not pursued by Lessee at Lessor's expense.
Lessor and Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE XIII
------------
13.1 General Insurance Requirements.
------------------------------
(a) Coverages. During the Term of this Lease, the Leased Property
---------
shall at all times be insured with the kinds and amounts of insurance described
below. This insurance shall be written by companies authorized to issue
insurance in the State. The policies must name the party obtaining the policy
as the insured and the other party as an additional named insured, and the
Manager shall also be named as an additional
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insured under the coverages described in Sections 13.1(a)(iii) through (xi). The
Holder of any Mortgage shall be named as an additional insured and loss payee,
to the extent required under the terms of the Mortgage. Losses shall be payable,
for the benefit of the respective insureds, to Lessor or Lessee as provided in
this Lease (subject to the rights of the Holder of any Mortgage). Any loss
adjustment for coverage insuring multiple parties shall require the written
consent of each of them, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall at all times satisfy the requirements of the Franchise Agreement and of
any Mortgage (so long as Lessee has been furnished with a copy of such
Mortgage), affecting the Leased Property and at a minimum shall include:
(i) Building insurance on the "Special Form" (formerly "All Risk"
form) (including earthquake, flood and sink hole in reasonable amounts if and as
determined by Lessor) in an amount not less than 100% of the then full
replacement cost thereof (as defined in Section 13.2) or such other amount which
is acceptable to Lessor, and personal property insurance on the "Special Form"
in the full amount of the replacement cost thereof;
(ii) Insurance for loss and damage (direct and indirect) from steam
boilers, pressure vessels or similar apparatus, air conditioning systems, piping
and machinery, and sprinklers, if any, now or hereafter installed in the
Facility, in the minimum amount of $5,000,000 or in such greater amounts as are
then customary;
(iii) Loss of income insurance on the "Special Form", in the amount of
one year of the greater of Base Rent or Participating Rent (based on the last
Lease Year of operation or, to the extent the Leased Property has not been
operated for an entire 12-month Lease Year, based on prorated Participating
Rent) for the benefit of Lessor, and business interruption insurance on the
"Special Form" in the amount of one year of gross profit, for the benefit of
Lessee;
(iv) Commercial general liability insurance, with amounts not less
than $1,000,000 combined single limit for each occurrence and $2,000,000 for the
aggregate of all occurrences within each policy year, as well as excess
liability (umbrella) insurance with limits of at least $25,000,000 per
occurrence, covering each of the following: bodily injury, death, or property
damage liability per occurrence, personal and advertising injury, general
aggregate, products and completed operations, with respect to Lessor, Lessee and
Manager, and "all risk legal liability" (including liquor law or "dram shop"
liability, if liquor or alcoholic beverages are served on the Leased Property)
with respect to Lessor, Lessee and Manager;
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(v) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Lessor, covering Lessee's or
Manager's employees in job classifications normally bonded under prudent hotel
management practices in the United States or otherwise required by law;
(vi) Workers' compensation insurance to the extent necessary to
protect Lessor, Lessee and Manager and the Leased Property against Lessee's or
Manager's worker's compensation claims to the extent required by applicable
state laws;
(vii) Comprehensive form vehicle liability insurance for owned, non-
owned and hired vehicles, in the amount of $1,000,000;
(viii) Garagekeeper's legal liability insurance covering both
comprehensive and collision-type losses with a limit of liability in keeping
with prudent hotel management practice;
(ix) Innkeeper's legal liability insurance covering property of
guests while on the Leased Property for which Lessor is legally responsible
(other than property in a safe deposit box), with a limit of not less than
$5,000 for any one occurrence or $25,000 in the aggregate;
(x) Safe deposit box legal liability insurance covering property of
guests while in a safe deposit box on the Leased Property for which Lessor is
legally responsible, with a limit of not less than $100,000 for any one
occurrence; and
(xi) Insurance covering such other liabilities or hazards (such as
plate glass or other common risks) and in such amounts as may be (A) required by
a Holder or (B) customary for comparable properties in the area of the Leased
Property and is available from insurance companies, insurance pools or other
appropriate companies authorized to do business in the State at rates which are
economically practicable in relation to the risks covered as may be reasonably
determined by Lessor.
(b) Responsibility for Insurance. Lessee shall obtain the insurance
----------------------------
and pay the premiums for the coverages described in Sections 13.1(a)(iii)
through (x), and Lessor shall obtain the insurance and pay the premiums for the
coverage described in Sections 13.1(a)(i) and (ii), provided that Lessee shall
reimburse Lessor immediately after demand therefor for any premiums paid by
Lessor for the coverages required under Sections 13.1(a)(i) and (ii) to the
extent that the premiums relate to coverages for property owned by Lessee or
coverages which benefit Lessee or Manager. Insurance required by Section
13.1(a)(xi) shall be obtained and paid for by Lessor to the extent that it
relates to risks of the type covered by the
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insurance obtained pursuant to Section 13.1(a)(i) through (ii), and obtained and
paid for by Lessee if it relates to risks of the type covered by the insurance
obtained pursuant to Sections 13.1(a)(iv) through (x). The party responsible for
the premium for any insurance coverage shall also be responsible for any and all
deductibles and self-insured retentions in connection with such coverages. In
the event that either party can obtain comparable insurance coverage required to
be carried by the other party from comparable insurers and at a cost
significantly less than that at which such other party can obtain such coverage,
the parties shall cooperate in good faith to obtain such coverage at the lower
cost and shall allocate the premiums therefor in accordance with the provisions
of the first sentence of this Section 13.1(b).
13.2 Replacement Cost. The term "full replacement cost" as used
----------------
herein shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost has increased or decreased at any time
during the Lease Term, it shall have the right to have such full replacement
cost redetermined.
13.3 [Intentionally omitted.]
13.4 Waiver of Subrogation. All insurance policies carried by
---------------------
Lessor or Lessee covering the Leased Property, the Fixtures, the Facility or
Lessee's Personal Property, including, without limitation, contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the part
of the insurer against the other party and Manager to the extent available
without additional cost, provided, however, if there is an additional cost, the
other party may, but shall not be obligated to, pay the same.
13.5 Form Satisfactory, etc. All of the policies of insurance
----------------------
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies satisfactory to Lessor and Lessee and shall satisfy
the requirements of any ground lease, Mortgage, and the Franchise Agreement.
The party responsible for obtaining any policy shall pay all of the premiums
therefor, and deliver copies of such policies or certificates thereof to the
other party prior to their effective date (and, with respect to any renewal
policy, 10 days prior to the expiration of the existing policy), and in the
event of the failure of the responsible party either to effect such insurance as
herein called for or to pay the premiums therefor, or to deliver such policies
or certificates thereof to the other party at the times required, such other
party shall be entitled, but shall have no obligation, after 10 days' Notice to
the responsible party, to effect such insurance and pay the premiums
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therefor, and to be reimbursed for any such premiums upon written demand
therefor. Each insurer mentioned in this Article XIII shall agree, by
endorsement to the policy or policies issued by it, or by independent instrument
furnished to the party not responsible hereunder for obtaining such policy, that
it will give to such party 10 days' Notice before the policy or policies in
question shall be materially altered, allowed to expire or canceled.
13.6 Increase in Limits. If either Lessor or Lessee at any time
------------------
deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such insurance
shall thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section. If the parties fail to agree on
such limits, the matter shall be referred to arbitration as provided for in
Article XL. In no event, however, shall such limits fail to satisfy the
requirements of the Franchise Agreement and of any ground lease or Mortgage.
13.7 Blanket Policy. Notwithstanding anything to the contrary
--------------
contained in this Article XIII, Lessee or Lessor may bring the insurance
provided for herein within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee or Lessor; provided,
however, that the coverage afforded to Lessor, Lessee and Manager will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this Article XIII are otherwise satisfied.
13.8 Separate Insurance. Neither Lessor nor Lessee shall on its own
------------------
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article XIII to be furnished, or increase the amount
of any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor, are included therein as
additional insureds, and the loss is payable under such additional separate
insurance in the same manner as losses are payable under this Lease. Each party
shall immediately notify the other party that it has obtained any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance.
13.9 Reports on Insurance Claims. Lessee shall promptly investigate
---------------------------
and make a complete and timely written
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report to the appropriate insurance company as to all accidents, all claims for
damage relating to the ownership, operation, and maintenance of the Facility,
and any damage or destruction to the Facility and the estimated cost of repair
thereof and shall prepare any and all reports required by any insurance company
in connection therewith. All such reports shall be timely filed with the
insurance company as required under the terms of the insurance policy involved,
and a copy of all such reports shall be furnished to Lessor. Lessee shall not
adjust, settle or compromise any insurance loss, or execute proofs of such loss,
without Lessor's prior written consent in each instance, except that such
consent shall not be required with respect to any single casualty or other event
which does not exceed the aggregate amount of $5,000. Notwithstanding anything
to the contrary set forth in this Section 13.9, with respect to any insurance
loss under liability policies relating to any single liability claim, Lessee may
adjust, settle or compromise any such loss without Lessor's consent so long as
Lessee shall deliver to Lessor a release relinquishing Lessor from all liability
under such claim.
ARTICLE XIV
-----------
14.1 Insurance Proceeds. All proceeds of the insurance contemplated
------------------
by Sections 13.1(a)(i) and (ii) payable by reason of any loss or damage to the
Leased Property, or any portion thereof, and insured under any policy of
insurance required by Article XIII of this Lease shall, subject to the terms of
any Mortgage and/or ground lease, be paid to Lessor and held in trust by Lessor
in an interest-bearing account, and made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property or any portion thereof, and, if applicable, shall be paid
out by Lessor from time to time for the reasonable costs of such reconstruction
or repair upon satisfaction of reasonable terms and conditions specified by
Lessor. Any excess proceeds of insurance remaining after the completion of the
restoration or reconstruction of the Leased Property shall be paid to Lessor.
If neither Lessor nor Lessee is required or elects to repair and restore, and
the Lease is terminated as described in Section 14.2, all such insurance
proceeds shall be retained by Lessor except for any amount thereof paid with
respect to Lessee's Personal Property. All salvage resulting from any risk
covered by insurance shall belong to Lessor, except to the extent of salvage
relating to Lessee's Personal Property.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
---------------------------------------------------------------
Insurance. Except as provided in Section 14.6, if during the Term the Leased
- ---------
Property is totally or partially destroyed by a risk covered by the insurance,
and the limits thereof, described in Article XIII and the Facility
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thereby is not rendered Unsuitable for its Primary Intended Use, Lessor shall
restore the Facility to substantially the same condition as existed immediately
before the damage or destruction and otherwise in accordance with the terms of
this Lease. Except as provided in Section 14.6, if during the Term the Leased
Property is totally or partially destroyed by a risk covered by the insurance,
and the limits thereof, described in Article XIII and the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessor may, at Lessor's
option, either (1) restore the Facility to substantially the same condition as
existed immediately before the damage or destruction and otherwise in accordance
with the terms of this Lease, or (2), terminate this Lease. If Lessor terminates
the Lessee as aforesaid, Lessor shall be entitled to retain all insurance
proceeds.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
----------------------------------------------------------------
by Insurance. Except as provided in Section 14.6, if during the Term the
- ------------
Facility is totally or partially damaged or destroyed by a risk not covered by
the insurance described in Article XIII, whether or not such damage or
destruction renders the Facility Unsuitable for its Primary Intended Use, Lessor
may at its option either, (a) at Lessor's sole cost and expense, restore the
Facility to substantially the same condition it was in immediately before such
damage or destruction and such damage or destruction shall not terminate this
Lease, or (b) terminate this Lease. Notwithstanding the foregoing, if such
damage or destruction is not material, Lessor shall, at Lessor's sole cost and
expense, restore the Facility to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of the Lease, and such damage or destruction shall not terminate the
Lease.
14.4 Lessee's Property and Business Interruption Insurance. All
-----------------------------------------------------
insurance proceeds payable by reason of any loss of or damage to any of Lessee's
Personal Property and the business interruption insurance maintained for the
benefit of Lessee shall be paid to Lessee; provided, however, no such payments
shall diminish or reduce the insurance payments otherwise payable to or for the
benefit of Lessor hereunder.
14.5 Abatement of Rent. Any damage or destruction due to casualty
-----------------
notwithstanding, this Lease shall remain in full force and effect but Lessee's
obligation to make rental payments and to pay all other charges required by this
Lease shall abate during any period required for the applicable repair and
restoration to the extent the Facility is Unsuitable for its Primary Intended
Use (unless such damage was caused by Lessee's negligence or wilful misconduct
and then only to the extent such rental payments and charges are not paid to
Lessor from proceeds of insurance).
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14.6 Damage Near End of Term. Notwithstanding any provisions of
-----------------------
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Facility rendering it Unsuitable for its Primary Intended Use occurs during
the last 24 months of the Term, then Lessee shall have the right to terminate
this Lease by giving Notice to Lessor within 30 days after the date of damage or
destruction, whereupon all accrued Rent shall be paid immediately, and this
Lease shall automatically terminate five (5) days after the date of such notice
and the parties shall have no further liabilities or obligations hereunder,
except as expressly stated in this Lease to survive such termination.
ARTICLE XV
----------
15.1 Definitions.
-----------
(a) "Condemnation" means a Taking resulting from (1) the exercise of
any governmental power, whether by legal proceedings or otherwise, by a
Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there is
-------------------------------
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV, subject to the provisions of any Mortgage.
15.3 Total Taking. If title to the fee of the whole of the Leased
------------
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of the Taking by the Condemnor. If title to the fee of less than
the whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, then either Lessee or Lessor shall have the option, by notice to the other,
at any time prior to the Date of Taking, to terminate this Lease as of the Date
of Taking. Upon such date, if such Notice has been given, this Lease shall
thereupon cease and terminate. All Base Rent, Participating Rent
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and Additional Charges paid or payable by Lessee hereunder shall be apportioned
as of the Date of Taking, and Lessee and Lessor shall promptly pay the other any
amounts due thereby.
15.4 Allocation of Award. The total Award made with respect to the
-------------------
Leased Property or for loss of rent, or for Lessor's loss of business beyond the
Term, shall be solely the property of and payable to Lessor. Any Award made for
loss of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In
any Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective cost. Neither Lessor nor Lessee shall
initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to the other, except that Lessor and Lessee
shall equitably apportion their respective Awards to the extent that they can
not comply with the provisions of this Section.
15.5 Partial Taking. If title to less than the whole of the Leased
--------------
Property is condemned, and the Leased Property is still suitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at its cost shall with all reasonable dispatch, but only to
the extent of any condemnation awards made available to Lessee and other sums
advanced by Lessor pursuant to the next sentence, restore the untaken portion of
any Leased Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to the Condemnation. If the condemnation awards are not
adequate to restore the Facility as aforesaid, each of the Lessor and Lessee
shall have the right to terminate this Lease, without in any way affecting any
Other Leases for Other Properties then in effect between Lessor and Lessee, by
giving Notice to the other; provided, however, that if such termination is by
Lessee, Lessor shall have the right, in Lessor's sole discretion, to keep this
Lease in full force and effect by providing, within thirty (30) days after
Lessee's Notice of termination, a Notice to Lessee of Lessor's unconditional,
legally binding obligation to be responsible for all restoration costs in excess
of the condemnation awards. Lessor shall in good faith seek a fair and
equitable allocation of any Award among restoration, taken Leasehold
Improvements and other elements. Lessor shall contribute to the cost of
restoration that part of its Award specifically allocated to such restoration,
together with severance and other damages awarded for the taken Leased
Improvements; provided, however, that the amount of such contribution shall not
exceed such cost. In the event of a
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partial taking after which this Lease shall not be terminated, the Base Rent
shall be abated in the manner and to the extent that is fair, just and equitable
to both Lessee and Lessor, taking into consideration, among other relevant
factors, the number of usable rooms, or the revenues affected by such partial
taking. If Lessor and Lessee are unable to agree upon the amount of such
abatement within thirty (30) days after such partial taking, the matter may be
submitted by either party to arbitration in accordance with Section 40.1 below
for resolution.
15.6 Temporary Taking. If the whole or any part of the Leased
----------------
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the times herein
specified, the full amounts of Base Rent and Additional Charges, but only to the
extent of the net (i.e. after deduction of all costs, expenses, and other
obligations attendant to such Condemnation have been paid) Award made to Lessee
for such Condemnation allocable to the term of this Lease. In addition, to the
extent of the remaining balance, if any, of the net Award made for such
Condemnation allowable to the term of this Lease (after payment of Base Rent and
Additional Charges), Lessee shall pay Participating Rent at a rate equal to the
average Participating Rent during the last three preceding Lease Years (or if
three Lease Years shall not have elapsed, the average during the preceding Lease
Years). Except only to the extent that Lessee may be prevented from so doing
pursuant to the terms of the order of the Condemnor, Lessee shall continue to
perform and observe all of the other terms, covenants, conditions and
obligations hereof on the part of the Lessee to be performed and observed, as
though such Condemnation had not occurred. In the event of any Condemnation as
in this Section 15.6 described, the entire amount of any Award made for such
Condemnation allocable to the Term of this Lease, whether paid by way of
damages, rent or otherwise, shall be paid to Lessee. Lessee covenants that upon
the termination of any such period of temporary use or occupancy it will, to the
extent that its Award is sufficient therefor and subject to Lessor's
contribution as set forth below, restore the Leased Property as nearly as may be
reasonably possible to the condition in which the same was immediately prior to
such Condemnation, unless such period of temporary use or occupancy extends
beyond the expiration of the Term, in which case Lessee shall not be required to
make such restoration. If restoration is required hereunder, Lessor shall,
having sought a fair and equitable allocation as provided in Section 15.5 above,
contribute to the cost of such restoration that portion of its entire Award that
is specifically allocated to such restoration in the judgment or order of the
court, if any.
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ARTICLE XVI
-----------
16.1 Events of Default. Any one or more of the following events
-----------------
shall constitute an Event of Default hereunder:
(a) if Lessee fails to make any payment of Base Rent, Participating
Rent or Additional Charges within ten (10) days after receipt by the Lessee of
Notice from Lessor that the same has become due and payable; or
(b) if Lessee fails to observe or perform any other term, covenant or
condition of this Lease and such failure is not curable, or if curable is not
cured by Lessee within a period of 30 days after receipt by the Lessee of Notice
thereof from Lessor, unless such failure is curable but cannot with due
diligence be cured within a period of 30 days, in which case it shall not be
deemed an Event of Default if (i) Lessee, within such 30 day period, proceeds
with due diligence to commence to cure the failure and thereafter diligently
completes the curing thereof within 180 days, and (ii) the failure does not
result in a notice or declaration of default under any material contract or
agreement to which Lessor, the Company, or any Affiliate of either of them is a
party or by which any of their assets are bound; or
(c) if Lessee shall (i) be generally not paying its debts as they
become due, (ii) file, or consent by answer or otherwise to the filing against
it of, 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, (iii) make a general assignment for the
benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its assets, (v) be adjudicated insolvent
or (vi) take corporate action for the purpose of any of the foregoing; or if a
court or governmental authority of competent jurisdiction shall enter an order
appointing, without consent by Lessee, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its assets, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Lessee, or if any petition for any
such relief shall be filed against Lessee and such order or petition shall not
be rescinded or dismissed within 120 days; or
(d) if Lessee is liquidated or dissolved, or commences proceedings
toward such liquidation or dissolution, or, in any
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manner, ceases to do business or permits the sale or divestiture of all or
substantially all of its assets; or
(e) if the estate or interest of Lessee in the Leased Property or any
part thereof is voluntarily or involuntarily transferred, assigned, conveyed,
levied upon or attached in any Proceeding, except (i) where Lessee is contesting
and is diligently prosecuting the contest of such lien or attachment in good
faith in accordance with the terms of this Agreement, (ii) the transfer of the
ownership interest of the Lessee in the case of a merger, consolidation or sale
of all of the assets of Prime Hospitality Corp., subject to the provisions of
Section 36.1, and ; or (iii) as otherwise expressly permitted in this Agreement.
(f) if, except as a result of and to the extent required by damage,
destruction, Condemnation or Unavoidable Delay, Lessee voluntarily ceases
operations on the Leased Property for a period in excess of three (3) days; or
(g) if notice of a default or an event of default has been given by
the franchisor under the Franchise Agreement with respect to the Facility on the
Leased Property as a result of any action or failure to act by the Lessee or any
Person with whom the Lessee contracts for management services approved by Lessor
at the Facility (including any Manager) which default or event of default is not
cured within applicable cure periods and does not arise from Lessor's breach of
any of its obligations under this Lease which are required to maintain the
Franchise Agreement in effect; provided that if Lessee is in good faith
disputing an assertion of default by the franchisor or is proceeding diligently
to cure such default, there shall be no default or event of default pursuant to
this subsection (g) for such reasonable period of time as Lessee continues to
dispute in good faith or diligently proceeds to cure and so long as the Facility
continues to be operated under the Franchise Agreement.
(h) if an Event of Default occurs under any of the Other Leases.
An Event of Default under this Section 16.1 shall constitute an Event
of Default hereunder and under all of the Other Leases.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (b) during any time the curing of a
failure described in clause (b) is prevented by an Unavoidable Delay, provided
that upon the cessation of such Unavoidable Delay, Lessee proceeds to remedy
such failure as provided in clause (b) without further delay.
If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation
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shall receive, in addition to its damages incurred, such sum as the court shall
determine as its reasonable attorneys' fees, and all costs and expenses incurred
in connection therewith.
16.2 Remedies. Upon the occurrence of an Event of Default, Lessor
--------
shall have the right, at Lessor's option, to elect to do any one or more of the
following without further notice or demand to Lessee: (a) terminate this Lease,
in which event Lessee shall immediately surrender the Leased Property and the
Inventory to Lessor, and, if Lessee fails to so surrender, Lessor shall have the
right, without notice, to enter upon and take possession of the Leased Property
and the Inventory and to expel or remove Lessee and its effects without being
liable for prosecution or any claim for damages therefor, to the extent
permitted by applicable law; and Lessee shall, and hereby agrees to, indemnify
Lessor for all loss and damage which Lessor suffers by reason of such
termination, including without limitation, damages in an amount equal to the
total of (1) the reasonable costs of recovering the Leased Property and the
Inventory in the event that Lessee does not promptly surrender the same, and all
other reasonable expenses incurred by Lessor in connection with Lessee's
default, including without limitation the following: (i) expenses for cleaning,
repairing or restoring the Leased Property; (ii) expenses for removing,
transporting, and storing any of Lessee's property left at the Leased Property
(although Lessor shall have no obligation to remove, transport, or store any
such property); (iii) expenses of reletting the Leased Property including
without limitation, brokerage commissions and reasonable attorneys' fees; (iv)
reasonable attorneys' fees and court costs; and (v) costs of carrying the Leased
Property such as repairs, maintenance, taxes and insurance premiums, utilities
and security precautions (if any); (2) the worth at the time of award of the
unpaid Rent which had been earned at the time of termination; (3) the worth at
the time of award of the amount by which the Rent which would have been earned
after termination until the time of award exceeds the amount of such rental loss
that Lessee proves could have been reasonably avoided; (4) the worth at the time
of award (computed by discounting at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent) of the amount by
which the Rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Lessee proves could be reasonably avoided; and
(5) all other sums of money and damages owing by Lessee to Lessor; or (b) enter
upon and take possession of the Leased Property without terminating this Lease
and without being liable to prosecution or any claim for damages therefor, to
the extent permitted by applicable law, and, if Lessor elects, relet the Leased
Property on such terms as Lessor deems advisable, in which event Lessee shall
pay to Lessor on demand the reasonable cost of repossessing the Leased Property
and any deficiency between the Rent payable hereunder (including Participating
Rent as determined below) and the rent paid under such reletting;
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provided, however, that Lessee shall not be entitled to any excess payments
received by Lessor from such reletting. Lessor's failure to relet the Leased
Property shall not release or affect Lessee's liability for Rent or for damages;
or (c) enter the Leased Property without terminating this Lease and without
being liable for prosecution or any claim for damages therefor, and maintain the
Leased Property and repair or replace any damage thereto or do anything for
which Lessee is responsible hereunder. Lessee shall reimburse Lessor immediately
upon demand for any expense which Lessor incurs in thus effecting Lessee's
compliance under this Lease, and Lessor shall not be liable to Lessee for any
damages with respect thereto. Notwithstanding anything herein to the contrary,
Lessee shall not be liable to Lessor for consequential, punitive or exemplary
damages.
The rights granted to Lessor in this Section 16.2 shall be cumulative
of every other right or remedy provided in this Lease or which Lessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Rent or damages accruing to Lessor by reason of any Event of Default
under this Lease.
Participating Rent for the purposes of this Section 16.2 shall be a
sum equal to (i) the average of the annual amounts of the Participating Rent for
the three 12-month Lease Years immediately preceding the Lease Year in which the
termination, re-entry or repossession takes place, or (ii) if three 12-month
Lease Years shall not have elapsed, the average of the Participating Rent during
the preceding 12-month Lease Years during which the Lease was in effect, or
(iii) if one 12-month Lease Year has not elapsed, the amount derived by
annualizing the Participating Rent from the effective date of this Lease.
16.3 [Intentionally omitted.]
16.4 Waiver. Lessee waives, to the extent permitted by applicable
------
law, any rights of redemption available to Lessee upon the occurrence of an
Event of Default. Each party waives, to the extent permitted by applicable law,
any right to a trial by jury in any proceedings brought by either party to
enforce the provisions of this Lease, including, without limitation, proceedings
to enforce the remedies set forth in this Article XVI. Lessee waives, to the
extent permitted by applicable law, the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt, and Lessor waives,
to the extent permitted by applicable law, any right to assert an "alter ego" of
Lessee or its partners or to "pierce the corporate veil" of Lessee or its
partners other than to the extent funds shall have been inappropriately paid
following a default
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resulting in an Event of Default to any Person directly or indirectly having an
ownership interest in Lessee.
16.5 Application of Funds. Any payments received by Lessor under
--------------------
any of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State.
ARTICLE XVII
------------
Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
----------------------------------------
payment or to perform any act required to be made or performed under this Lease
including, without limitation, Lessee's failure to comply with the terms of any
Franchise Agreement, and fails to cure the same within the relevant time
periods, if any, provided in Section 16.1, Lessor, without waiving or releasing
any obligation or default, may (but shall be under no obligation to) at any time
thereafter upon Notice to Lessee make such payment or perform such act for the
account and at the expense of Lessee, and may, to the extent permitted by law,
enter upon the Leased Property for such purpose and, subject to Section 16.2,
take all such action thereon as, in Lessor's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Lessee. All
sums so paid by Lessor and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, in each case to the extent
permitted by law) so incurred, together with a late charge thereon (to the
extent permitted by law) at the Overdue Rate from the date on which such sums or
expenses are paid or incurred by Lessor, shall be paid by Lessee to Lessor on
demand. The obligations of Lessee and rights of Lessor contained in this
Article shall survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
-------------
18.1 Personal Property Limitation. Anything contained in this Lease
----------------------------
to the contrary notwithstanding, the average of the adjusted tax bases of the
items of Lessor's personal property that are leased to the Lessee under this
Lease at the beginning and at the end of any Lease Year shall not exceed 15% of
the average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Lease Year (the "Personal Property
Limitation"). Lessor and Lessee shall at all times cooperate in good faith and
use their best efforts to permit Lessor to comply with the Personal Property
Limitation, which compliance may include, by way of example only and not by way
of limitation, the purchase by Lessee at Fair Market Value of personal property
in excess of the Personal Property Limitation
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and an equitable reduction of the Rent payable by Lessee. All such compliance
shall be effected in a manner which has no material net economic detriment to
Lessee and will not jeopardize the Company's status as a real estate investment
trust under the applicable provisions of the Code. This Section 18.1 is intended
to ensure that the Rent qualifies as "rents from real property," within the
meaning of Section 856(d) of the Code, or any similar or successor provisions
thereto, and shall be interpreted in a manner consistent with such intent.
18.2 Sublease Rent Limitation. Anything contained in this Lease to
------------------------
the contrary notwithstanding, Lessee shall not sublet the Leased Property or
enter into any similar arrangement on any basis such that the rental or other
amounts to be paid by the sublessee thereunder would be based, in whole or in
part, on either (a) the net income or profits derived by the business activities
of the sublessee, or (b) any other formula such that any portion of the Rent
would fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto.
18.3 Sublease Lessee Limitation. Anything contained in this Lease
--------------------------
to the contrary notwithstanding, Lessee shall not sublease the Leased Property
to, or enter into any similar arrangement with, any Person in which the Company
owns, directly or indirectly, a 10% or more interest, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or successor provisions
thereto.
18.4 Lessee Ownership Limitation. Anything contained in this Lease
---------------------------
to the contrary notwithstanding, Lessor shall not take, or permit an Affiliate
of Lessor to take, any action that would cause the Company to own, directly or
indirectly, a 10% or more interest in the Lessee within the meaning of Section
856(d)(2)(B) of the Code, including applicable attribution rules provide in
Sections 856(d) and 318(a) of the Code, or any similar or successor provision
thereto. Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not take, or permit an Affiliate of Lessee to take, any action that
would cause the Company to own, directly or indirectly, a 10% or more interest
in the Lessee within the meaning of Section 856(d)(2)(B) of the Code, including
applicable attribution rules provide in Sections 856(d) and 318(a) of the Code,
or any similar or successor provision thereto.
18.5 Lessee Net Worth. At all times during the Term of this Lease,
----------------
Lessee shall maintain a Net Worth equal to or greater than the following: (i)
from the Commencement Date through December 31, 1998, $3,400,000, and (ii) from
January 1, 1999 through the end of the Term, an amount equal to seventeen and
one-half percent (17.5%) of the Rent paid or payable under this Lease and the
Other Leases on account of the prior Lease
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Year. Such Net Worth shall be in the form of cash or marketable securities or an
irrevocable, unconditional letter of credit payable to Lessor (the "LC"),or any
combination thereof. In the event that all or any portion of the foregoing Net
Worth requirement is maintained by an LC, such LC shall be in a form reasonably
acceptable to Lessor and Lessee and issued by a bank rated AA or better by a
recognized financial institution rating service such as Moodys or Standard &
Poor's and otherwise reasonably acceptable to Lessor. Lessee shall deposit any
LC with an escrow agent reasonably acceptable to Lessor and Lessee (the "Escrow
Agent") pursuant to an escrow agreement reasonably acceptable to Lessor and
Lessee (the "Escrow Agreement"). The LC shall permit partial draws. The Escrow
Agreement shall provide, among other things, (i) that the Escrow Agent shall
release the LC to Lessor or a partial draw, as applicable, at such time as
Lessor has obtained a final non-appealable judgment against Lessee for an amount
certain, (ii) that the Escrow Agent shall notify the parties to the Escrow
Agreement not less than thirty (30) nor more than sixty (60) days prior to the
expiration of the LC of the scheduled expiration date of the LC, (iii) that if
an extension of the LC or a replacement LC with an expiration date not less than
one (1) year after the expiration date of the existing LC is not delivered to
Escrow Agent within ten (10) business days prior to the expiration date of the
existing LC, the existing LC shall be drawn down by Escrow Agent and the
proceeds received therefrom held in escrow pursuant to the Escrow Agreement,
(iv) that the amount of the LC shall be increased or decreased in accordance
with the Net Worth requirements of this Section 18.5, and (v) such other
reasonable terms and provisions as to which the parties shall agree in good
faith. Upon the execution of a New Management Agreement (as defined in Section
36.1) pursuant to Section 36.1 of this Lease, Lessee's Net Worth requirement may
be satisfied by way of a demand note from Prime Hospitality Corp in the required
amount payable upon an unsatisfied final non-appealable judgement and in such
case, Escrow Agent shall release the LC to Lessee promptly upon receipt by
Escrow Agent of evidence of such demand note. ***[FOR LEASES IN WHICH MAHWAH
HOLDING CORP. OR FAIRFIELD HOLDING CORP. IS THE LESSEE. Notwithstanding the
foregoing, Lessee's Net Worth requirements under this Section 18.5 will be
satisfied by delivering to Lessor a guaranty of the Lessee's obligations
hereunder in the form attached hereto(the "Guaranty") made by its Affiliate,
Clifton Holding Corp.("Clifton"), provided Clifton has satisfied such Net Worth
requirements. Any LC posted by Clifton pursuant to the provisions of the Other
Leases to which it is a party shall also secure Clifton's obligations under any
such Guaranty.
18.6 No Other Business. It is a material inducement to Lessor that
-----------------
Lessee covenant and agree, and Lessee hereby covenants and agrees, that at all
times during the Term of this
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Lease, Lessee will not engage, participate in, or otherwise enter into any
business of any kind, nature or description, individually or with others, other
than the leasing and operation of the Leased Property and the Other Properties.
ARTICLE XIX
-----------
Holding Over. If Lessee for any reason remains in possession of the
------------
Leased Property after the expiration or earlier termination of the Term, such
possession shall be as a tenant at sufferance during which time Lessee shall pay
as rental each month two times the aggregate of (a) one-twelfth of the aggregate
Base Rent and Participating Rent payable with respect to the last Lease Year of
the Term, (b) all Additional Charges accruing during the applicable month and
(c) all other sums, if any, payable by Lessee under this Lease with respect to
the Leased Property. During such period, Lessee shall be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but shall
have no rights hereunder other than the right to the extent given by law to
tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
ARTICLE XX
----------
Indemnification. Lessee will protect, indemnify, hold harmless and
---------------
defend Lessor Indemnified Parties from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) to the extent
permitted by law, EXCLUDING THOSE RESULTING FROM A LESSOR INDEMNIFIED PARTY'S
NEGLIGENCE OR WILLFUL MISCONDUCT, imposed upon or incurred by or asserted
against Lessor Indemnified Parties by reason of: (a) any accident, injury to or
death of persons or loss of or damage to property occurring on or about the
Leased Property or adjoining sidewalks during the Term, including without
limitation any claims under liquor liability, "dram shop" or similar laws, (b)
any present or future use, misuse, non-use, condition, management, maintenance
or repair by Lessee or any of its agents, employees or invitees of the Leased
Property or Lessee's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified Party
is made a party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of
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Condemnation proceedings and save and except any capital improvements mandated
by law which shall be the responsibility of Lessor), (c) any Impositions that
are the obligations of Lessee pursuant to the applicable provisions of this
Lease, (d) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease on the part of Lessee to be performed or complied with,
and (e) the nonperformance of any of the terms and provisions of any and all
existing and future subleases of the Leased Property to be performed by the
landlord thereunder.
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of (a) the negligence or
willful misconduct of a Lessor Indemnified Party arising in connection with this
Lease or (b) any failure on the part of the Lessor to perform or comply with any
of the terms of this Lease or (c) any events occurring subsequent to the
expiration or earlier termination of this Lease.
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten days after liability therefor on the part of
the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the date of payment. Any
such amounts shall be reduced by insurance proceeds received and any other
recovery (net of costs) obtained by the Indemnified Party. An Indemnifying
Party, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against the Indemnified Party. The
Indemnified Party, at its expense, shall be entitled to participate in any such
claim, action, or proceeding, and the Indemnifying Party, at its expense, shall
be entitled to participate in any such claim, action, or proceeding, and the
Indemnifying Party may not compromise or otherwise dispose of the same without
the consent of the Indemnified Party, which may not be unreasonably withheld.
Nothing herein shall be construed as indemnifying a Lessor Indemnified Party
against its own negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXI
-----------
21.1 Subletting and Assignment. Subject to the provisions of
-------------------------
Article XVIII, Section 21.2 and any other express consents, conditions,
limitations or other provisions set forth
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herein, Lessee shall not, either directly or indirectly, assign this Lease or
hereafter sublease all or any part of the Leased Property, or mortgage, pledge
or encumber this Lease, or the Lessee's leasehold estate in and to the Land or
the Leased Improvements or any portion thereof, without first obtaining the
prior written consent of Lessor, which consent may be granted or withheld in
Lessor's sole and absolute discretion. Notwithstanding the foregoing consents,
Lessor's consent shall not be unreasonably withheld for any sublease of a retail
portion (excluding a restaurant portion) of the Leased Improvements provided
that (i) the annual rent to be derived from such sublease does not equal or
exceed 5% of Gross Revenues for the preceding Lease Year, and (ii) in Lessor's
judgment reasonably exercised, such sublease will not materially and adversely
change the character of the Facility. For the purposes of the foregoing, the
transfer of a majority equity interest in Lessee or the transfer of control of
Lessee shall be deemed an assignment of this Lease. In the case of a permitted
subletting, the sublease shall comply with the provisions of Section 21.2, and
in the case of a permitted assignment, the assignee shall assume in writing and
agree to keep and perform all of the terms of this Lease on the part of Lessee
to be kept and performed and shall be, and become, jointly and severally liable
with Lessee for the performance thereof. In case of either an assignment or
subletting made during the Term, Lessee shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Lessee hereunder. An original counterpart of any such sublease or
assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor. Notwithstanding anything contained in
this Lease to the contrary, Lessee shall not enter into any sublease which
sublease would have the effect of producing income for the Lessor that is not
"rents from real property" as such term is defined in Section 856(d) of the
Code.
21.2 Attornment. Lessee shall insert in each future sublease
----------
permitted under Section 21.1 provisions to the effect that (a) such sublease is
subject and subordinate to all of the terms and provisions of this Lease and to
the rights of Lessor hereunder, (b) if this Lease terminates before the
expiration of such sublease, the sublessee thereunder will, at Lessor's option,
attorn to Lessor and waive any right the sublessee may have to terminate the
sublease or to surrender possession thereunder as a result of the termination of
this Lease, and (c) if the sublessee receives a written Notice from Lessor or
Lessor's assignees, if any, stating that an uncured Event of Default exists
under this Lease, the sublessee shall thereafter be obligated to pay all rentals
accruing under said sublease directly to the party giving such Notice, or as
such party may direct. All rentals received
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from the sublessee by Lessor or Lessor's assignees, if any, as the case may be,
shall be credited against the amounts owing by Lessee under this Lease.
ARTICLE XXII
------------
Officer's Certificates; Financial Statements; Lessor's Estoppel
---------------------------------------------------------------
Certificates and Covenants.
- ---------------------------
(a) At any time and from time to time upon not less than 10 days
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be
relied upon by Lessor, any lender, any underwriter and any prospective purchaser
of the Leased Property.
(b) Lessee will furnish the following statements and operating
information to Lessor:
(1) the most recent Consolidated Financials of Lessee within 20
days after each quarter of any fiscal year (or, in the case of the final quarter
in any fiscal year, the most recent audited Consolidated Financial of Lessee
within 45 days);
(2) with reasonable promptness, such other information respecting
the financial condition, operations and affairs of Lessee and the Leased
Property (A) as Lessor or the Company may be required or may deem desirable in
its reasonable discretion to file with or provide to the SEC or any other
governmental agency or any other Person, all in the form, and either audited or
unaudited, as Lessor may request in Lessor's reasonable discretion and all to be
prepared at Lessor's expense to the extent that such information is not
otherwise maintained by Lessee in the normal course of its business.
(3) on the second business day after the 7th 14th, 21st and the
last day of each month a weekly report of revenues, by department for the then
current month which shall compare actual revenues to the prior year period. Such
weekly revenue report shall contain the adjusted daily rate, occupancy, RevPAR,
the total Food and Beverage Sales and Room Revenues of the Leased Property. Such
weekly revenue report shall also contain the revenue budget for the month and a
new revenue forecast for the month. Such forecast shall be updated with the
weekly revenue report due on the second business day after the
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14th of the month. In addition, Lessee will inform Lessor of any material
changes to the revenue budget for the two months immediately following the then
current month.
(4) on the tenth (10th) day of each month, a monthly lease
calculation of the then current month, prepared in the format required by Lessor
and forwarded to Lessor via e-mail or facsimile, reflecting the revenues at the
Facility, by department, and the actual lease calculation for the month and year
to date.
(5) on the tenth (10th) Business Day of each month, complete
financial reporting statements shall be forwarded to Lessor. The financial
reporting statements shall include, but shall not be limited to, an income
statement, balance sheet and statistical reports.
(6) on the 20th day of each month, a balance sheet, and detailed
profit and loss and cash flow statements showing the financial position of the
Facility as at the end of the preceding month (including the average daily rate
and occupancy of the Facility), and the results of operation of the Facility for
such preceding month and the Lease Year to date (including a comparison to the
Operating Budget as approved); and
(7) at the end of each of March, June and September of each year,
Lessee shall engage Coopers & Lybrand or other nationally recognized accounting
firm, approved by Lessor, at Lessor's expense, to review the revenues of the
Facility and the monthly Lease calculations. Such review shall be completed by
the 20th day following the end of each of March, June and September of each year
and Lessee shall cause such auditor's to provide Lessor with a letter stating
that the review has been completed and such letter shall also state whether any
material errors were found and the nature of such errors. The quarterly
operating statements reviewed at such dates prepared by the Manager, shall be
accompanied by explanations of any variances, which explanations shall be in a
form suitable for use in the Security Exchange Commission ("SEC") required
disclosure analysis.
(8) in January of each year, Lessee shall engage Coopers & Lybrand
or other nationally recognized accounting firm, approved by Lessor, at Lessor's
expense, to review the revenues of the Facility and the monthly Lease
calculations. Such review shall be completed by the 20th day of January of each
year and Lessee shall cause such auditor's to provide Lessor with a letter
stating that the review has been completed and such letter shall also state
whether any material errors were found and the nature of such errors. A complete
audit financial package must be provided to Lessor by the tenth (10th) Business
day of February of each year. The quarterly operating statement reviewed at such
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date, prepared by Manager, shall be accompanied by explanations of any
variances, which explanations shall be in a form suitable for use in the SEC
required disclosure analysis.
(9) within ten (10) days of Lessee's receipt thereof, any
inspection reports or notices of default received from the franchisor under the
Franchise Agreement.
(c) Lessee shall at all times during the term of this Lease, at no
cost or expense to Lessee, cooperate with Lessor's accountants and provide them
with access to all financial and other information relating to Lessee and the
Leased Property, and access to Lessee's accountants, work papers and to
otherwise assist in minimizing the cost of the audit, sufficient to enable the
Company to prepare audited financial statements in conformity with Regulation S-
X of the SEC and to enable the Company to satisfy its reporting obligations
under the Securities Exchange Act of 1934, as amended, or to prepare a
registration statement, report or disclosure statement for filing with the SEC
on behalf of the Company and/or its Affiliates and Lessee shall execute any
representation letters reasonably requested by Lessor's accountants in
connection with the foregoing.
(d) At any time and from time to time upon not less than 10 days
notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee. Any such certificate furnished pursuant to this
section may be relied upon by Lessee, any lender, any underwriter and any
purchaser of the assets of Lessee.
ARTICLE XXIII
-------------
Lessor's Right to Inspect. Lessee shall permit Lessor and its
-------------------------
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
notice, subject only to any business confidentiality requirements reasonably
requested by Lessee. In conducting such inspections Lessor shall not
unreasonably interfere with the conduct of Lessee's business. Lessee will
provide customary gratuitous accommodations, services and amenities at the
Leased Property to Lessor and its authorized representatives in connection with
such inspections.
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ARTICLE XXIV
------------
No Waiver. No failure by Lessor or Lessee to insist upon the strict
---------
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE XXV
-----------
Remedies Cumulative. To the extent permitted by law but subject to
-------------------
Article XXXIX and any other provisions of this Lease expressly limiting the
rights, powers and remedies of either Lessor or Lessee, each legal, equitable or
contractual right, power and remedy of Lessor or Lessee now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor or Lessee of any one or more
of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other rights,
powers and remedies.
ARTICLE XXVI
------------
Acceptance of Surrender. No surrender to Lessor of this Lease or of
-----------------------
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVII
-------------
No Merger of Title. There shall be no merger of this Lease or of the
------------------
leasehold estate created hereby by reason of the fact that the same person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
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ARTICLE XXVIII
--------------
28.1 Conveyance by Lessor. Lessor shall have the unrestricted
--------------------
right to mortgage or otherwise convey the Leased Property to a Holder. If
Lessor conveys the Leased Property in accordance with the terms hereof other
than to a Holder, and the grantee or transferee of the Leased Property expressly
assumes all obligations of Lessor hereunder arising or accruing from and after
the date of such conveyance or transfer, Lessor shall thereupon be released from
all future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner. If Lessee is not reasonably satisfied that the
new owner is a capable, reliable and qualified Person of good reputation and
character, Lessee may terminate this Lease upon sixty (60) days' Notice to
Lessor given within thirty (30) days after Lessee receives Notice of such
conveyance. Notwithstanding any of the foregoing to the contrary, Lessor shall
not, without the prior written consent of Lessee, convey the Leased Property to
anyone other than a Subsidiary of Lessor or a Holder during the No Sale Period.
28.2 Other Interests. Without the consent of Lessee, Lessor may
---------------
from time to time, directly or indirectly, create or otherwise cause to exist
deeds to secure debt, deeds of trust, mortgages, heretofore or hereafter granted
by Lessor or which otherwise encumber or affect the Leased Property and to any
and all advances to be made thereunder and to all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof (all of
which are herein called the "Mortgage"). This Lease and Lessee's interest
hereunder shall at all times be subject and subordinate to the lien and security
title of any Mortgage, provided, however, that such subordination is conditioned
upon delivery to Lessee of a subordination, nondisturbance and attornment
agreement, in form and substance reasonably satisfactory to Lessee and Holder,
which agreement shall provide, among other things, that, provided an Event of
Default is not then continuing under this Lease, Lessee (i) shall be entitled to
receive all Gross Revenues of the Facility, and (ii) shall not be disturbed in
its possession of the Leased Property hereunder following a foreclosure of such
Mortgage. In confirmation of such subordination Lessee shall, at Lessor's
request, promptly execute, acknowledge and deliver any instrument which may be
required to evidence subordination to any Mortgage and to the holder thereof.
In the event of Lessee's failure to deliver such subordination and if the
Mortgage does not change any term of this Lease, Lessor may, in addition to any
other remedies for breach of covenant hereunder, execute, acknowledge, and
deliver the instrument as the agent or attorney-in-fact of Lessee, and Lessee
hereby irrevocably constitutes Lessor its
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attorney-in-fact for such purpose, Lessee acknowledging that the appointment is
coupled with an interest and is irrevocable.
Lessee shall, upon the request of Lessor or any existing or future
Holder, (i) provide Holder with copies of all licenses, permits, occupancy
agreements, operating agreements, leases, contracts and similar agreements
reasonably requested in connection with any existing or proposed financing of
the Leased Property, and (ii) execute, or cause the Manager or other appropriate
party to execute, such estoppel agreements and collateral assignments with
respect to the Facility's liquor license and any of the other aforementioned
agreements as Holder may reasonably request in connection with any such
financing, provided that no such estoppel agreement or collateral assignment
shall in any way affect the Term or affect adversely in any material respect any
rights of Lessee under this Lease.
No act or failure to act on the part of Lessor which would entitle
Lessee under the terms of this Lease, or by law, to be relieved of any of
Lessee's obligations hereunder (including, without limitation, its obligation to
pay Rent) or to terminate this Lease, shall result in a release or termination
of such obligations of Lessee or a termination of this Lease unless, subject to
the provisions of the next succeeding paragraph: (i) Lessee shall have first
given written notice of Lessor's act or failure to act to the Holder, specifying
the act or failure to act on the part of Lessor which would give basis to
Lessee's rights; and (ii) the Holder, after receipt of such notice, shall have
failed or refused to correct or cure the condition complained of within a
reasonable time thereafter (in no event more than sixty (60) days), provided
that such cure period shall include a reasonable time for such Holder to obtain
possession of the Leased Property, if possession is reasonably necessary for the
Holder to correct or cure the condition, or to foreclose such Mortgage, if the
Holder notifies the Lessee of its intention to take possession of the Leased
Property or to foreclosure such Mortgage commences necessary foreclosure actions
within said sixty (60) days, unconditionally commits to correct or cure such
condition, and diligently pursues such cure to completion. If such Holder is
prohibited by any process or injunction issued by any court or by reason of any
action by any court having jurisdiction or any bankruptcy, debtor rehabilitation
or insolvency proceedings involving Lessor from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, provided
however, that the Lease shall continue to be in full force and effect, the times
for commencing or prosecuting such foreclosure or other proceedings shall be
extended for the period of such prohibition.
Lessee shall deliver by notice delivered in the manner provided in
Article XXX to any Holder who gives Lessee written notice of its status as a
Holder, at such Holder's address stated
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in the Holder's written notice or at such other address as the Holder may
designate by later written notice to Lessee, a duplicate copy of any and all
notices regarding any default which Lessee may from time to time give or serve
upon Lessor pursuant to the provisions of this Lease. Copies of such notices
given by Lessee to Lessor shall be delivered to such Holder simultaneously with
delivery to Lessor. No such notice by Lessee to Lessor hereunder shall be deemed
to have been given unless and until a copy thereof has been mailed to such
Holder.
At any time, and from time to time, upon not less than ten (10) days'
notice by a Holder to Lessee, Lessee shall deliver to such Holder an estoppel
certificate certifying as to the information required in paragraph (a) of
Article XXII, and such other information as may be reasonably requested by such
Holder. Any such certificate may be relied upon by such Holder.
Lessee shall cooperate in all reasonable respects, and, as generally
described in Section 33.2 of this Lease, with any transfer of the Leased
Property to a Holder that succeeds to the interest of Lessor in the Leased
Property (including, without limitation, in connection with the transfer of any
franchise, license, lease, permit, contract, agreement, or similar item to such
Holder or such Holder's designee necessary or appropriate to operate the Leased
Property), provided that all costs and expenses associated with such transfer
shall be the responsibility of Lessor or Holder, as they shall choose. Lessor
and Lessee shall cooperate in (i) including in this Lease by suitable amendment
from time to time any provision which may be requested by any proposed lender,
or may otherwise be reasonably necessary, to implement the provisions of this
Article and (ii) entering into any further agreement with or at the request of
any Holder which may be reasonably requested or required by such Holder in
furtherance or confirmation of the provisions of this Article; provided,
however, that any such amendment or agreement shall not in any way affect the
Term nor affect adversely in any material respect any rights of Lessor or Lessee
under this Lease.
Lessee acknowledges and agrees that Lessor may assign to a Holder, as
further security for the obligations secured by its Mortgage, the rights, titles
and interests assigned to Lessor by Lessee as security for this Lease, pursuant
to Article XXXII.
ARTICLE XXIX
-------------
Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
---------------
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace and/or cure
periods, if any, Lessee shall peaceably and quietly have, hold and enjoy the
Leased Property for the Term hereof, free of any claim or other action by Lessor
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or anyone claiming by, through or under Lessor and not claiming by, through or
under Lessee, but subject to all liens and encumbrances subject to which the
Leased Property was conveyed to Lessor or hereafter consented to by Lessee or
provided for herein. Lessee shall have the right by separate and independent
action to pursue any claim it may have against Lessor as a result of a breach by
Lessor of the covenant of quiet enjoyment contained in this Section.
ARTICLE XXX
-----------
Notices. All notices, demands, requests, consents approvals and other
-------
communications ("Notice" or "Notices") hereunder shall be in writing and shall
be delivered by express mail, overnight courier or commercial overnight mail
service, or registered or certified mail, return receipt requested and postage
prepaid, addressed as follows:
(i) if to Lessor at:
5605 MacArthur Blvd.
Suite 1200
Irving, Texas 75038
Attention: Steven D. Jorns and
Bruce G. Wiles
(ii) if to Lessee at:
700 Route 46 East
P.O. Box 2700
Fairfield, New Jersey 07007
Attention: General Counsel
or to such other address or addresses as either party may hereafter designate.
Notice given by express mail, overnight courier or overnight mail service shall
be effective on the day of timely delivery of such Notice to such company, and
Notice given by registered or certified mail shall be complete at the time of
deposit in the U.S. Mail system, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by registered or
certified mail shall be extended five days.
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ARTICLE XXXI
------------
Appraisers. If it becomes necessary to determine the fair market
----------
value or fair market rental of the Leased Property for any purpose of this
Lease, then, except as otherwise expressly provided in this Lease, the party
required or permitted to give Notice of such required determination shall
include in the Notice the name of a person selected to act as appraiser on its
behalf. Within 10 days after Notice, Lessor (or Lessee, as the case may be)
shall by Notice to Lessee (or Lessor, as the case may be) appoint a second
person as appraiser on its behalf. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto) with at least five years experience in the State
appraising property similar to the Leased Property, shall, within 10 days after
the date of the Notice appointing the second appraiser, proceed to appraise the
Leased Property to determine the fair market value or fair market rental thereof
as of the relevant date (giving effect to the impact, if any, of inflation from
the date of their decision to the relevant date); provided, however, that if
only one appraiser shall have been so appointed, then the determination of such
appraiser shall be final and binding upon the parties. If two appraisers are
appointed and if the difference between the amounts so determined does not
exceed 5% of the lesser of such amounts, then the fair market value or fair
market rental shall be an amount equal to 50% of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds 5% of
the lesser of such amounts, then such two appraisers shall have 10 days to
appoint a third appraiser. If no such appraiser shall have been appointed
within such 10 days or within 60 days of the original request for a
determination of fair market value or fair market rental, whichever is earlier,
either Lessor or Lessee may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the fair market
value or fair market rental within 30 days after appointment of such appraiser.
The determination of the appraiser which differs most in the terms of dollar
amount from the determinations of the other two appraisers shall be excluded,
and 50% of the sum of the remaining two determinations shall be final and
binding upon Lessor and Lessee as the fair market value or fair market rental of
the Leased Property, as the case may be. This provision for determining by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
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ARTICLE XXXII
-------------
Security - Assignment of Agreements. As security for Lessee's
-----------------------------------
performance of the terms and provisions of this Lease, Lessee shall, to the
extent permitted by law and which will not result in a default under the
Franchise Agreement, assign to Lessor and grant to Lessor a perfected first lien
security interest in all interests, agreements, contracts and other assets of
Lessee related to the Leased Property including, without limitation, (i) all
management, franchise, concession and license agreements (including the
management or agency agreement with Manager, if any, and the Franchise
Agreement, (ii) all of Lessee's right, title and interest in and to the rents,
issues, profits, revenues, rights and benefits from the Leased Property and all
leases affecting the Leased Property and the guaranties thereof and security
deposits thereunder, and (iii) all of Lessee's right, title and interest in and
to funds on deposit, accounts receivable, and income and revenues generated by
the Leased Property or arising from the use or enjoyment of the Leased Property.
The aforesaid assignments shall be by such instruments as Lessor may reasonably
request.
ARTICLE XXXIII
---------------
33.1 Miscellaneous. Anything contained in this Lease to the
-------------
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease is
based upon a rate in excess of the maximum rate permitted by applicable law, the
parties agree that such charges shall be fixed at and limited to the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument signed by Lessor
and Lessee. All the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. The headings in this Lease are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules. Lessor shall not become or be deemed a
partner or joint venturer with Lessee by reason of the provisions of this Lease.
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33.2 Transition Procedures. Upon the expiration or termination of
---------------------
the Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 33.2 shall survive the expiration
or termination of this Lease until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
Facility. Nothing contained herein shall limit Lessor's rights and remedies
under this Lease if such termination occurs as the result of an Event of
Default.
(a) Transfer of Licenses. Upon the expiration or earlier termination
--------------------
of the Term, Lessee shall use its best efforts (i) to transfer to Lessor or
Lessor's nominee all licenses, operating permits and other governmental
authorizations and all contracts, including contracts with governmental or
quasi-governmental entities, that may be necessary for the operation of the
Facility (collectively, "Licenses"), or (ii) if such transfer is prohibited by
law or Lessor otherwise elects, to cooperate with Lessor or Lessor's nominee in
connection with the processing by Lessor or Lessor's nominee of any applications
for all Licenses, including Lessee continuing to operate the liquor operations
under its licenses (in which case Lessor hereby agrees to indemnify and hold
Lessee harmless as a result thereof, except for the negligence or willful
misconduct of Lessee); provided, in either case, that the costs and expense of
any such transfer or the processing of any such application shall be paid by
Lessor or Lessor's nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
----------------------
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume, all leases, contracts, concessions agreements and
agreements in effect with respect to the Facility then in Lessee's name;
provided, however, that Lessor need not assume any contract whose term will
expire more than one year after the date of the assignment by Lessee unless (i)
Lessor has previously consented to the provisions of such contract (which
consent shall not be unreasonably withheld), or (ii) this Agreement shall have
been terminated by Lessor pursuant to the provisions of Article XXXVI.
(c) Books and Records. To the extent that Lessor has not already
-----------------
made or received copies thereof, all books and records (including computer
records) for the Facility kept by Lessee pursuant to Section 3.6 shall be
promptly made available to Lessor or Lessor's nominee for photocopying or other
duplication.
(d) Receivables and Payables, etc. Lessee shall be entitled to
------------------------------
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility
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and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date, and any such operating
expenses relating to periods both prior to and after the termination date shall
be prorated. Lessee shall surrender the Leased Property with the amount of
Inventory required by Section 6.2(b), or otherwise pay Lessor for the amount of
the Inventory Deficiency as provided in that Section.
(e) Hotel Employees. Upon the expiration or termination of this
----------------
Lease, Lessee shall pay or cause to be paid, with respect to all of the
employees working at the Facility (the "Hotel Employees"), all sums due or
payable to them, for the period up to an including the termination date, all
accrued (whether or not earned) wages, salaries, bonuses, vacation, sick,
bereavement, personal and other similar days or benefits, workers' compensation,
welfare benefits, deferred compensation, savings, pension, profit-sharing, 401K
and other retirement plan payments, and similar payments, reimbursements or
benefits, and Lessee expressly indemnifies Lessor and any successor employer of
any or all of the Hotel Employees from and against any and all liability
therefor.
33.3 Standard of Discretion. In any provision of this Lease
----------------------
requiring or permitting the exercise by Lessor or Lessee of such party's
approval, election, decision, consent, judgment, determination or words of
similar import (collectively, an "Approval"), such Approval may, unless
otherwise expressly specified in such provision, be given or withheld in such
party's reasonable discretion. Any Approval which by the terms of this Lease
may not be unreasonably withheld shall also not be unreasonably delayed.
33.4 Action for Damages. In any suit or other claim brought by
------------------
either party seeking damages against the other party for breach of its
obligations under this Lease, the party against whom such claim is made shall be
liable to the other party only for actual damages and not for consequential,
punitive or exemplary damages.
33.5 Limitation on Liability. Notwithstanding any provision to
-----------------------
the contrary contained in this Lease, none of the directors, officers,
shareholders, partners, employees or agents of Lessee or Lessor shall have any
personal liability with respect to this Lease and the matters covered by this
Lease.
33.6 ***[FOR CROSSROADS, MAHWAH, NEW JERSEY ONLY Condominium
---------------------------------------------------
Association Voting Rights. It is agreed and understood that Lessor or any
- -------------------------
Person representing Lessor on the Board of Trustees of the Crossroads
Condominium Association, Inc.
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shall at all times vote in a manner it deems appropriate and consistent with
Lessor's interest in the Leased Property, provided that Lessee shall have the
right to pre-approve the vote of Lessor or its representative, as applicable,
which pre-approval shall not be unreasonably withheld or delayed, with respect
to any assessments being considered by said Board of Trustees for items of an
extraordinary nature which would materially impact the Lessee's obligations to
operate and maintain the Leased Property under this Lease.]***
ARTICLE XXXIV
--------------
Memorandum of Lease. Lessor and Lessee shall promptly upon the
-------------------
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State in which reference to this
Lease, and all options contained herein, shall be made. The party requesting
the short form memorandum shall pay all costs and expenses of recording such
memorandum of this Lease.
ARTICLE XXXV
------------
[Intentionally omitted.]
ARTICLE XXXVI
-------------
36.1 Option to Terminate Lease - Appointment of Manager. (a)
--------------------------------------------------
Lessor may terminate this Lease for any reason or no reason, in its sole and
absolute discretion, by giving not less than 60 days prior Notice to Lessee of
Lessor's election to terminate this Lease; provided that such termination shall
not occur prior to the earlier of (i) the third (3rd) anniversary of the date of
this Agreement or (ii) December 31, 2000. In addition, in the event that there
is a change of control (as defined below) in Lessee or Manager at any time,
Lessor shall have the right to terminate this Lease on not less than 60 days
Notice to Lessee. Effective as of the date set forth in any such Notice (which
date shall not be less than 60 days after the giving of such Notice), this Lease
shall terminate and be of no further force and effect except as to any
obligations of the parties existing as of such date that survive termination of
this Lease, and all Rent shall be adjusted as of the termination date.
Notwithstanding the foregoing, in the event Lessee shall receive Notice from
Lessor of an election to terminate this Lease pursuant to this Section 36.1,
Lessee shall have the right to keep this Lease in full force and effect by
appointing American General Hospitality, Inc ("AGHI") as the Manager of the
Leased Property and (prior to the stated termination date) entering into
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a New Management Agreement with AGHI, for the remainder of the Term of this
Lease, commencing on the termination date set forth in such Notice. In the event
that AGHI refuses or is otherwise unwilling to accept such appointment, Lessee
shall then have the right to keep this Lease in full force and effect by
appointing as Manager of the Leased Property any experienced hotel management
company (which is not an Affiliate of Lessee), subject to Lessor's reasonable
approval, and Lessee and such new Manager shall enter into a New Management
Agreement on terms satisfactory to Lessor, Lessee and such new Manager by not
later than the termination date set forth in Lessor's Notice of termination. Any
New Management Agreement entered into pursuant to this Article XXXVI shall
include, inter alia, an indemnification of Lessee against any and
----- ----
all liability, damage, cost, or expense (including reasonable attorneys' fees
and disbursements) as a result of any claims arising from or related to the
Leased Property or any contractual obligation related to the management, repair,
maintenance or operation of the Leased Property from and after the commencement
date thereof .
Any New Management Agreement entered into pursuant to this Section
36.1 shall provide that as compensation for such management services, the new
manager shall be entitled to a management fee equal to 95% of Lessee's Profit
under this Lease (defined as Lessee's Gross Revenues minus (i) all expenses for
which Lessee is liable under this Lease and (ii) all Rent). The new Manager
shall pay all operating expenses at the Leased Property and shall remit the Rent
and the balance of Lessee's Profit directly to Lessee. In the event that Lessee
does not generate a Lessee's Profit, as defined above, no management fee will be
paid to the new Manager. Upon transfer of the management of the Leased Property
to the new Manager, the Franchise Agreement will be transferred to the new
Manager, at no cost or expense to Lessee (other than Lessee's obligation to pay
all charges incurred thereunder through the date of such transfer), and all of
Lessee's obligations under the Lease will be assumed by the new Manager with the
exception of Lessee's obligation to pay Rent under Section 3.1 and Lessee's
obligation to maintain the Net Worth required under Section 18.5 hereof and
except for this Article XXXVI and Article XXXVII hereof, Lessor and the new
manager shall have the right to amend the terms of this Lease, including the
Rent payable hereunder, in their sole discretion, and Lessee agrees to promptly
execute any such amendment to this Lease pursuant to this Article XXXVI. The
new Manager shall indemnify Lessee, in a form reasonably satisfactory to Lessee
and such new Manager, from and against any and all liability, damage, cost or
expense (including reasonable attorneys' fees and disbursements) resulting from
such Manager's failure to perform and observe all of the Lessee's obligations
assumed by such new Manager. Without limiting the foregoing, Lessee may require
that the new Manager maintain a Net Worth as required by Section 18.5 of this
Lease as of the date hereof in cash, marketable
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securities or an LC (as defined in Section 18.5) or any combination thereof, as
such Net Worth may be increased or decreased pursuant to such Section.
For purposes of this Section, the term "change of control" shall mean:
(x) any merger or consolidation of Lessee or Manager or the parent of either of
them (each an "Entity"), as the case may be, with or into any Person, or any
sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the beneficial ownership of Entity, in one transaction or a
series of related transactions, if, immediately after giving effect to such
transaction any Person, is or becomes, directly or indirectly the beneficial
owner of more than fifty percent (50%) of the shares of the total voting power
of the Entity; or (y) any Person obtains the power to direct or cause the
direction of the management policies of the Entity, whether through voting
securities or by contract or otherwise.
(b) As compensation for the transfer of management services or the
early termination of this Lease under this Article XXXVI, as applicable, Lessor
shall pay to Lessee an amount equal to (i) two and one-half (2.5) times the
Lessee's Profit for the preceding 12 months, minus (ii) five percent (5%) of
Lessee's Profit under this Lease estimated for the remainder of the Term of this
Lease, discounted to present value using a discount rate equal to the Base Rate
plus two (2%) percent.
(c) In the event that AGHI (or if AGHI is unwilling to manage the
Leased Property, such other new Manager designated by Lessee and approved by
Lessor), enters into the New Management Agreement pursuant to the provisions of
this Article XXXVI, the parties agree that, on and after the effective date of
such New Management Agreement, Hotel Employees employed by Lessee or Manager
immediately prior to the effective date will either be employed by the new
manager, or the new manager will take such other action with respect to their
employment, which may include notification of the prospective termination of
their employment, so as, in any case, to insure that Lessee does not incur any
liability pursuant to the WARN Act. Lessor hereby agrees to defend, indemnify
and hold harmless Lessee from and against any and all manner of claims, actions,
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liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) relating to or arising from the new manager's
breach of this covenant, including, without limitation, any liability, costs and
expenses arising out of asserted or actual violation of the requirements of the
WARN Act. Further, the new manager shall assume all severance pay, accrued
vacation or personal leave, COBRA and similar liabilities and obligations to the
Hotel Employees, which Lessee and Manager shall or may incur in connection with
the New Management Agreement, and Lessor hereby agrees to defend, indemnify and
hold harmless Lessee and Manager from and against any and all manner of claims,
actions, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) relating to or resulting from
Lessor's breach of the foregoing covenant, including, without limitation, any
liability, costs and expenses arising out of asserted or actual violation of the
requirements of the COBRA legislation; provided, however, that Lessee or Manager
shall pay to such Hotel Employees all sums due or payable to them for the period
prior to the date of the commencement of the New Management Agreement as
provided in Section 33.2 above. Upon Lessor's written request to Lessee, Lessee
shall take all action prudent and proper as Lessee, to notify, advise and
cooperate with Lessor in order to assist Lessor to comply with the WARN Act or
COBRA legislation and to mitigate Lessor's expense or liability with respect to
the WARN Act and COBRA legislation. In the event that a new Manager is appointed
for the management of the Lease Property pursuant to this Section 36.1, Lessee
shall be released from all obligations and liabilities accruing pursuant to this
Lease from and after the date of such transfer of management, other than the
obligation to pay Rent and the maintenance of Net Worth under Section 18.5
hereof, and Lessor acknowledges that, in enforcing its rights hereunder or in
satisfaction of any judgment obtained for any matter other than non-payment of
Rent or the maintenance of the Net Worth requirement, Lessor shall proceed
solely against such new Manager and in no event shall proceed against Lessee,
its directors, officers, shareholders, agents, employees or successors.
(d) At any time during the Term of this Lease after the appointment of
the new Manager, if Lessor notifies Lessee of a default hereunder, Lessee shall
promptly terminate the New Management Agreement, appoint a replacement Manager
and enter into a management agreement with such replacement Manager, all subject
to Lessor's reasonable approval and all in accordance with the provisions and
within the time periods set forth in this Article XXXVI. Notwithstanding the
foregoing, during the period after the termination of the New Management
Agreement but prior to the execution of the replacement management agreement,
Lessee agrees to operate and manage the Leased Property in accordance with the
terms of this Lease.
ARTICLE XXXVII
--------------
37.1 Compliance with Franchise Agreement. To the extent any of
-----------------------------------
the provisions of the Franchise Agreement impose a greater obligation on Lessee
than the corresponding provisions of this Lease, Lessee shall be obligated to
comply with, and to take all reasonable actions necessary to prevent breaches or
defaults under the provisions of the Franchise Agreement, except to the extent
that Lessee is prevented from complying with the Franchise Agreement because of
Lessor's acts such as its breach of its obligations pursuant to Article XXXVIII.
In the event Lessor's
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failure to fund any Capital Expenditure and/or to fulfill any PIP requirements
of the franchisor under the Franchise Agreement, required to comply with the
Franchise Agreement shall result in a termination thereof, Lessee shall not be
deemed in default hereunder and Lessor shall pay all termination fees and
penalties incurred in connection therewith. It is the intent of the parties
hereto that Lessee shall comply in every respect with the provisions of the
Franchise Agreement so as to avoid any default thereunder during the term of
this Agreement. Lessee shall not terminate or enter into any modification of the
Franchise Agreement without in each instance first obtaining Lessor's written
consent. Lessor and Lessee agree to cooperate fully with each other in the event
it becomes necessary (in the sole determination of Lessor) to obtain, at
Lessor's sole cost and expense, a franchise extension or modification or a new
franchise for the Leased Property, and in any transfer, at Lessor's sole cost
and expense, of the Franchise Agreement to Lessor or any Affiliate thereof or
any other successor to Lessee upon the termination of this Lease.
Notwithstanding anything contained in this Article XXXVII, at any time after the
Commencement Date, Lessor may, in Lessor's sole and absolute discretion,
terminate (or direct Lessee to terminate) the Franchise Agreement and enter (or
direct Lessee to enter) into a new franchise for the Leased Property, provided
that Lessor shall pay all termination fees and penalties including, but not
limited to, liquidated damages, if any, arising from or related to such
termination and any application fees, costs or expenses payable in connection
with any new franchise of the Leased Property obtained by Lessor.
37.2 FOR CROWNE PLAZA LAS VEGAS ONLY Compliance with Management
--------------------------
Agreement. Lessee shall comply with the provisions of the Management Agreement
- ---------
with Manager so as to avoid any default thereunder during the term of this
Agreement, except to the extent that Lessee is prevented from complying with
such Management Agreement because of Lessor's acts such as its breach of its
obligations pursuant to Article XXXVIII. Lessee shall not terminate the
Management Agreement without first obtaining Lessor's written consent. Lessor
and Lessee agree to cooperate fully with each other in the event it becomes
necessary to obtain a modification of such Management Agreement.
ARTICLE XXXVIII
---------------
38.1 Capital Expenditures.
--------------------
(a) Lessor shall be obligated to set up and maintain a reserve (the
"Capital Expenditures Reserve") in an amount equal to 4% of Gross Revenues from
the Facility during each Lease Year for Capital Expenditures at the Facility
and/or the Other Properties during such Lease Year. Upon written request by
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Lessee to Lessor stating the specific use to be made and subject to the
reasonable approval thereof by Lessor, such funds shall be made available by
Lessor for Capital Expenditures set forth in the Capital Budget; provided,
however, that no Capital Expenditures shall be used to purchase property (other
than "real property" within the meaning of Treasury Regulations Section 1.856-
3(d)), to the extent that doing so would cause the Lessor to recognize income
other than "rents from real property" as defined in Section 856(d) of the Code.
Lessor's obligation to fund the Capital Expenditures Reserve shall be
cumulative, but not compounded, and any amounts that have accrued hereunder
shall be payable in future periods for such uses and in accordance with the
procedure set forth herein. Lessee shall have no interest in any accrued
obligation of Lessor hereunder after the termination of this Lease. All Capital
Improvements shall be owned by Lessor subject to the provisions of this Lease.
(b) Lessor's obligation for Capital Expenditures and for compliance
with the provisions of this Lease which may require the availability of funds
for Capital Improvements shall be limited to amounts available in the Capital
Expenditures Reserve and such additional amounts as Lessor may agree to make
available to Lessee in Lessor's sole discretion; provided, however, that if
additional Capital Expenditures are required to meet Emergency Situations,
Lessor shall make such amounts available to Lessee and receive a pro rata credit
therefor against amounts which Lessor is obligated to contribute to the Capital
Expenditures Reserve during the ensuing five (5) Lease Years. No arbitration
resulting from the failure of Lessor and Lessee to agree on the Capital Budget
shall increase Lessor's obligation for Capital Expenditures beyond the amount
set forth in the immediately preceding sentence. In the event there is a
Capital Improvement in the Capital Budget which exceeds the amounts Lessor is
obligated to provide under this Article XXXVIII and Lessor declines to make such
Capital Improvement, if Lessee shall disagree with such decision, the matter may
be submitted to arbitration pursuant to Section 40.2 hereof. To the extent that
Lessee's obligations under this Lease (including, without limitation, the
obligations set forth in Sections 7.2, 8.1 and 9.1 and in Article XXXVII) are
dependent upon the availability of amounts for Capital Expenditures which exceed
the amounts that Lessor is obligated to provide pursuant to this Article
XXXVIII, such obligations of Lessee shall be correspondingly diminished.
(c) Prior to the final three (3) Lease Years of the Term, the
implementation of all Capital Improvements made pursuant to the requirements of
the Capital Budget shall be subject to the approval of Lessor and Lessee. Such
approval shall extend both to the plans and specifications (including matters of
design and decor) and to the contracting and purchasing of all labor, services
and materials. In the event that Lessor and Lessee are unable to agree on any
aspect of the
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implementation of a Capital Improvement to be made pursuant to the Capital
Budget prior to the final three (3) Lease Years, such matter shall be referred
to arbitration as provided in Section 40.2. During the final three (3) Lease
Years, Lessor shall have sole authority with regard to the implementation of all
such Capital Improvements but shall consult Lessee in connection therewith.
(d) If requested by Lessor, Lessee (or Manager, if Lessee so directs)
shall be responsible for supervising the design, installation and construction
of all Capital Improvements. Lessor shall reimburse Lessee for Lessee's (or
Manager's) actual reasonable expenses incurred in performing these services,
provided that any such reimbursement shall be in an approved Capital Budget,
shall be paid as a Capital Expenditure and shall be subject to the limitations
of the provisions of subsection (b)and Section 3.5(e) hereof. These
reimbursements shall include a reasonable allocation (as determined in good
faith by Lessee) of the salaries, bonuses, benefits, travel, and related
expenses incurred by Lessee's (or Manager's) personnel in the performance of
these services.
38.2 Major Renovation. If in any Lease Year during the Term of
----------------
this Lease, a renovation of the Facility is required, either pursuant to (i) the
agreed upon Capital Budget, or (ii) as otherwise agreed to by Lessor, and the
total cost of such renovation (including, but not limited to, any termination
fees and penalties, including liquidated damages, if such renovation is incurred
in connection with a change of the existing franchise), is or will be equal to
or greater than eight percent (8%) of actual or projected Gross Revenues derived
or to be derived from the Leased Property for such Lease Year (a "Major
Renovation"), Lessor and Lessee hereby agree that the Rent payable under Section
3.1 hereof shall be adjusted, based upon the following formula: First, an
amount equal to the sum of 4% of the actual Gross Revenues derived from the
Leased Property for each Lease Year of the Term for the period commencing from
January, 1998 to and including the then current Lease Year, based upon 4% of the
actual or projected Gross Revenues for such Lease Year in which the Major
Renovation shall occur (the "Cumulative Capital Expenditure Reserve") shall be
compared to the total amount of Capital Expenditures actually paid by Lessor for
the Leased Property during such period (the "Cumulative Capital Expenditures").
If the Cumulative Capital Expenditure Reserve exceeds the Cumulative Capital
Expenditures, the excess amount shall be subtracted from the total cost of the
Major Renovation, and the Rent shall be
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increased by an amount equal to 7% of the difference from and after the date on
which such Major Renovation has been substantially completed (the "Completion
Date"). If the Cumulative Capital Expenditures exceed the Cumulative Capital
Expenditure Reserve, the excess amount shall be added to the total cost of the
Major Renovation, and the Rent shall be increased by an amount equal to 7% of
the sum from and after the Completion Date. In the event that Lessor and Lessee
are unable to agree to the Rent adjustment or the Completion Date pursuant to
this Section, after using good faith efforts to do so, the matter shall be
submitted to arbitration under Section 40.2 hereof.
ARTICLE XXIX
------------
39.1 Lessor's Default. It shall be a breach of this Lease if Lessor
----------------
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed and such failure continues for a period of 30 days after
Notice thereof from Lessee, unless such failure cannot with due diligence be
cured within a period of 30 days, in which case such failure shall not be deemed
a breach if Lessor proceeds within such 30-day period, with due diligence, to
commence to cure the failure and thereafter diligently completes the curing
thereof. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay. If Lessor does not cure any such failure within the
applicable time period as aforesaid, Lessee may declare the existence of a
"Lessor Default" by a second Notice to Lessor. Thereafter, subject to the
provisions of the following paragraph, Lessee may forthwith cure the same.
Except as otherwise expressly provided in this Lease or in the event of a
constructive eviction by Lessor, Lessee shall have no right to terminate this
Lease for any Lessor Default and no right, for any such Lessor Default, to
offset or counterclaim against any Rent or other charges due hereunder.
If Lessor shall in good faith dispute the occurrence of any Lessor
Default and Lessor, before the expiration of the applicable cure period, shall
give Notice thereof to Lessee, setting forth, in reasonable detail, the basis
therefor, no Lessor Default shall be deemed to have occurred and Lessor shall
have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, however, that in
-------- -------
the event of any such adverse determination, Lessor shall pay to Lessee interest
on any disputed funds at the Overdue Rate, from the date demand for such funds
was made by Lessee until paid. If Lessee and Lessor shall fail, in good faith,
to resolve any such dispute within ten (10) days after Lessor's Notice of
dispute, either may submit the matter for determination by arbitration, but only
if such matter is required to be submitted to arbitration pursuant to any
provision of this Lease, or otherwise by a court of competent jurisdiction.
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39.2 Limitation of Lessor's Liability. Notwithstanding any provision
--------------------------------
to the contrary contained in this Lease, Lessee acknowledges that, in enforcing
its rights hereunder or in satisfaction of any judgment obtained against Lessor,
Lessee's sole recourse shall be the right, title and interest of Lessor in and
to the Leased Property.
ARTICLE XL - ARBITRATION
------------------------
40.1 Arbitration. Except as set forth in Section 40.2, in each case
-----------
specified in this Lease in which it shall become necessary to resort to
arbitration, such arbitration shall be determined as provided in this Section
40.1. The party desiring such arbitration shall give Notice to that effect to
the other party, and an arbitrator shall be selected by mutual agreement of the
parties, or if they cannot agree within thirty (30) days of such notice, by
appointment made by the American Arbitration Association ("AAA") from among the
members of its panels who are qualified and who have experience in resolving
matters of a nature similar to the matter to be resolved by arbitration.
40.2 Alternative Arbitration. In each case specified in this Lease
-----------------------
for a matter to be submitted to arbitration pursuant to the provisions of this
Section 40.2, Lessor and Lessee shall designate any nationally recognized
accounting firm with a hospitality division to serve as arbitrator of such
dispute within fifteen (15) days after written demand for arbitration is
received or sent by a party. In the event the parties shall fail to make such
designation within such fifteen (15) day period, or no nationally recognized
accounting firm satisfying such qualifications is available and willing to serve
as arbitrator, the arbitration shall instead be administered as set forth in
Section 40.1.
40.3 Arbitration Procedures. In any arbitration commenced pursuant
----------------------
to Section 40.1 or 40.2, a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all parties
and shall not be subject to further review or appeal except as otherwise allowed
by applicable law. Upon the failure of either party (the "non-complying party")
to comply with his decision, the arbitrator shall be empowered, at the request
of the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party's obligation
to comply with the arbitrator's decision, all at the expense of the non-
complying party. To the maximum extent practicable, the arbitrator and the
parties, and the AAA if applicable, shall take any action necessary to insure
that the arbitration shall be concluded within ninety (90) days of the filing of
such dispute. The fees and expenses of the arbitrator
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shall be shared equally by Lessor and Lessee except as otherwise specified in
this Section 40.3. Unless otherwise agreed in writing by the parties or required
by the arbitrator or AAA, if applicable, arbitration proceedings hereunder shall
be conducted in the State. Notwithstanding formal rules of evidence, each party
may submit such evidence as each party deems appropriate to support its position
and the arbitrator shall have access to and right to examine all books and
records of Lessee and Lessor regarding the Facility during the arbitration.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized representatives as of the date first above written.
LESSOR
------
LESSEE
------
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<PAGE>
ADDENDUM TO LEASE AGREEMENT
GUARANTY
In order to induce Lessor to lease the Leased Property to Lessee,
notwithstanding the Lessee's failure to satisfy the Net Worth requirements set
forth in Section 18.5 of the Lease, Clifton Holding Corp., a Delaware
corporation ("Clifton"), an affiliate of Lessee and the lessee under certain of
the Other Leases referred to in the Lease, hereby guarantees to Lessor, and
Lessor's successors and assigns, the full and timely performance of all of the
obligations of Lessee under the Lease (the "Lessee's Obligations"). This
Guaranty is a primary obligation of Clifton, joint and several with that of
Lessee, and Clifton acknowledges that this Guaranty and its obligations under
this Guaranty are and shall at all times be absolute and unconditional in all
respects, and is and shall at all times be valid and enforceable irrespective of
any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to this Guaranty and the obligations of the
undersigned under this Guaranty or the obligations of Lessee relating to this
Guaranty or otherwise with respect to the Lessee's Obligations. Clifton agrees
that, with or without notice or demand; provided that if and to the extent any
such notice is required under the applicable provision of the Lease Lessor
agrees to provide the same, Clifton will promptly reimburse Lessor for all costs
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements) incurred by Lessor in connection with any action or proceeding
brought by Lessor to enforce the obligations of the undersigned under this
Guaranty. The undersigned hereby irrevocably and unconditionally waives any and
all right to trial by jury in any action, suit or counterclaim arising in
connection with, out of or otherwise relating to this Guaranty.
In Witness Whereof, the undersigned has set forth its hand and seal this __
day of January, 1998.
WITNESS CLIFTON HOLDING CORP., a
Delaware corporation
________________
________________
By:______________________
Name:
Title:
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EXHIBIT A - Other Properties
----------------------------
Sheraton
15 Howard Blvd.
Mt. Arlington, NJ 07445
St. Tropez Hotel
455 East Harmon Avenue
Las Vegas, NV 89109
Crowne Plaza
4255 Paradise Road
Las Vegas, NV 89109-7111
Ramada Inn
275 Research Parkway
Meriden, CT 06450
Sheraton Crossroads
Crossroads Corporate Center
Mahwah, NJ 07495
Ramada Inn
180 Route 17 South
Mahwah, NJ 07430
Crowne Plaza
14811 Kruse Oaks Blvd.
Portland (Lake Oswego), OR 97035
Ramada Plaza Hotel
780 Bridgeport Avenue
Shelton, CT 06484
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EXHIBIT B
---------
[See attached legal description]
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<PAGE>
EXHIBIT C
---------
Effective ________________, ____, the following applies:
Base Rent -
First Tier Room Revenue Percentage -
Second Tier Room Revenue Percentage -
Third Tier Room Revenue Percentage -
Annual Room Revenue First Break Point -
Annual Room Revenue Second Break Point -
First Tier Food Sales Percentage -
Second Tier Food Sales Percentage -
Annual Food Sales Break Point -
Other Income Percentage -
Effective ________________, ____, the preceding parameters shall be
replaced by the following:
Base Rent -
First Tier Room Revenue Percentage -
Second Tier Room Revenue Percentage -
Third Tier Room Revenue Percentage -
Annual Room Revenue First Break Point -
Annual Room Revenue Second Break Point -
First Tier Food Sales Percentage -
Second Tier Food Sales Percentage -
Annual Food Sales Break Point -
Other Income Percentage -
There will be an additional adjustment to the room department Participating Rent
thresholds of _____ in ____ and ____in ____.
-90-
<PAGE>
The portion of Base Rent and Participating Rent attributable to the Franchise
Agreement is ________%.
-91-
<PAGE>
LEASE MODIFICATION LETTER
-------------------------
January ____, 1998
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
Dear Gentlemen:
American General Hospitality Operating Partnership, L.P. and certain
affiliates, as Lessor, and certain affiliates of Prime Hospitality Corp., as
Lessee, are entering into various Lease Agreements dated the date hereof
relating to the hotels identified on the schedule annexed hereto (the "Leases").
The parties to the Leases hereby agree to modify the Leases in the following
manner:
1. Section 3.1(a) of the Leases shall be modified to provide that
Base Rent will be paid in equal monthly installments (except for partial months,
which shall be prorated as provided therein).
2. Notwithstanding the provisions of Section 13.1(b) to the
contrary, Lessor shall obtain the insurance and pay the premiums for the
insurance coverage described in Section 13.1(a)(iii), the cost of which shall be
reimbursed to Lessor by Lessee on a monthly basis.
3. Supplementing the provisions of Article XXII of the Leases,
Lessee acknowledges that Lessor will engage Coopers & Lybrand, or other
nationally recognized accounting firm approved by Lessor, at Lessor's expense,
to audit the financial statements of the Lessee and those financial statements
will be included in forms filed with the SEC by the Lessor.
<PAGE>
Prime Hospitality Corp.
January ____, 1998
Page 2
If the foregoing reflects our agreement regarding these matters,
please execute the lower portion of this letter on behalf of yourself and your
various affiliates.
Sincerely,
American General Hospitality
Operating Partnership, L.P.
By: AGH GP, Inc. its general partner
By: _________________________
Bruce G. Wiles
Executive Vice President
Read, agreed and accepted by
Prime Hospitality Corp.
_______________________
Richard Szymanski
Vice President
<PAGE>
EXHIBIT 10.1
CONFIDENTIAL
------------
January 15, 1998
American General Hospitality Operating Partnership, L.P.
5605 MacArthur Boulevard
Suite 1200
Irving, Texas 75038
Attn: Mr. Kenneth E. Barr
American General Hospitality Corporation
5605 MacArthur Boulevard
Suite 1200
Irving, Texas 75038
Attn: Mr. Kenneth E. Barr
Ladies and Gentlemen:
Societe Generale, Southwest Agency ("SocGen"), Bank One, Texas, N.A. ("BOT"),
The Bank of Nova Scotia ("BNS") and Wells Fargo Bank, National Association
("Wells") (collectively, the "Facilitators") are pleased to advise you that each
such institution is willing, subject to the terms and conditions contained in
this Commitment Letter and in the attached Summary of Terms and Conditions (the
"Term Sheet"), to each individually commit a portion (as hereinafter provided)
of a commitment (the "Commitment") toward a $500,000,000 Senior Unsecured
Revolving Credit Facility (the "Senior Facility") and a $100,000,000 Unsecured,
Delayed-Draw Subordinated Non-Revolving Credit Facility (the "Subordinate
Facility"; the Senior Facility and the Subordinate Facility being referred to
herein as the "Facility") in favor of American General Hospitality Operating
Partnership, L.P., a Delaware limited partnership ("Borrower"), a subsidiary of
American General Hospitality Corporation ("Company"), a Delaware corporation,
for the purpose of providing a portion of the purchase price for acquiring
hotels, renovating hotels, refinancing existing indebtedness for acquired
hotels, providing for general corporate purposes and to pay related fees and
expenses of Borrower and Company. Each Facilitator's portion of the Commitment
is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
$500,000,000 $100,000,000
Senior Facility Subordinate Facility
--------------- --------------------
SocGen $150,000,000 $ 28,333,334
BOT $150,000,000 $ 28,333,333
BNS $100,000,000 $ 15,000,000
Wells $100,000,000 $ 28,333,333
</TABLE>
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 2
Upon your acceptance of this Commitment Letter, the Facilitators will form a
group of financial institutions (together with the Facilitators, the "Banks")
acceptable to the Facilitators and reasonably acceptable to Borrower and
Company, for which SocGen will act as Arranger, Syndication Agent and
Documentation Agent; BOT will serve as Administration Agent; and BNS and Wells
will serve as Managing Agents. The Administration Agent and the Documentation
Agent are hereinafter referred to as the "Agents". No other titles may be
awarded without the mutual consent of the Agents and Borrower.
The various fees payable to the Facilitators and to the Agents in connection
with the Facility are set forth in a separate fee letter of even date herewith
pertaining to the Facility (the "Fee Letter").
The Term Sheet attached hereto and incorporated herein by this reference, sets
forth certain terms and conditions which will govern the Facility. This
Commitment Letter and the Term Sheet are not meant to be and shall not be
construed as an attempt to define all of the terms and conditions of the
Facility which shall be set forth in the definitive financing agreements.
You agree to reasonably assist and cooperate with the Facilitators in their
syndication effort of the Facility, including, but not limited to promptly
preparing and providing upon their request all information reasonably deemed
necessary by them to complete successfully the syndication of the Facility,
including but not limited to information and projections prepared by you or on
your behalf relating to the transactions contemplated hereby. The Agents
reserve the right to allocate the Commitments offered by the Banks; provided,
however, that if the Agents have reduced their respective Commitments for the
Senior Facility to $125,000,000 and the Agents desire to further allocate
Commitments for the Senior Facility, then any such allocation shall include an
allocation of the Commitments for the Senior Facility of BNS and Wells of not
less than BNS' and Wells' prorata share of the Facilitators' Commitments for the
Senior Facility (after taking into account the Agents previous Commitment
reduction to $125,000,000).
In addition to the conditions to funding or closing set forth in the Term Sheet,
the Commitment is subject to, among other conditions, (i) the negotiation and
execution of a definitive bank credit agreements, security documentation, and
other related documentation for the Facility satisfactory to the Facilitators,
Borrower and Company, (ii) there being from the date of the financial statements
(the "Financial Statements") most recently provided prior to the date hereof no
material adverse change in the reasonable opinion of the Agents in the financial
condition, business, operations, properties or prospects of Borrower or Company,
or the hotels (the "Future Hotels") that the parties currently anticipate will
be acquired by Borrower with a portion of the proceeds from the Facility, and
(iii) at the time of the
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 3
proposed initial funding of the Facility, no injunction or other restraining
order shall have been issued or filed, or a hearing therefor be pending or
noticed with respect to the transactions contemplated hereby.
As you know, we have submitted this Commitment Letter prior to conducting
certain due diligence, including, but not limited to, property inspections of
the Future Hotels to be acquired. Our Commitment is subject to the satisfactory
completion of our due diligence, including but not limited to property
inspections of Future Hotels. In the event that the results of our continuing
due diligence inquiries are, in our reasonable opinion, unsatisfactory, the
Facilitators may, in their sole discretion, suggest alternative financing
structures that insure adequate protection for the Banks. The Facilitators
acknowledge that their due diligence prior to the date of this Commitment Letter
has not revealed any fact or issue which would cause the Facilitators to
terminate their respective Commitments or suggest alternative financing
structures.
Whether or not the transactions contemplated hereby are consummated, Borrower
and Company jointly and severally hereby agree to indemnify and hold harmless
each of the Facilitators and the Agents, and their respective directors,
officers, employees and affiliates (each, an "indemnified person") from and
against any and all losses, claims, damages, liabilities (or actions or other
proceedings commenced or threatened in respect thereof) and expenses that arise
out of, result from or in any way relate to this Commitment Letter, or the
providing or syndication of the Facility, and to reimburse each indemnified
person, upon its demand, for any legal or other expenses incurred in connection
with investigation, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (whether or not such indemnified person
is a party to any action or proceeding out of which any such expenses arise),
other than any of the foregoing claimed by any indemnified person to the extent
incurred by reason of the gross negligence or willful misconduct of such person.
Neither the Facilitators nor the Agents, nor any of their affiliates, shall be
responsible or liable to Borrower, Company, or any other person for any
consequential damages which may be alleged. The obligations contained in this
paragraph will survive the closing of the Facility.
In addition, the Borrower and Company jointly and severally hereby agree to
reimburse the Facilitators and the Agents from time to time upon demand for (a)
the reasonable out-of-pocket costs and expenses of Bracewell & Patterson,
L.L.P., special counsel to SocGen and the Agents, (b) the reasonable out-of-
pocket costs and expenses of Donohoe, Jameson & Carroll, P.C., special counsel
to BOT, in connection with the Facility, (c) the reasonable syndication costs
(including travel expenses) of the Agents which for SocGen shall not exceed
$40,000 and for BOT shall not exceed $25,000, and (d) the Agent's reasonable
out-of-pocket costs and expenses of the appraisers, hotel consultants, insurance
consultants, environmental consultants and property inspection consultants
engaged by or
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 4
for the Agents in connection with the Future Properties, with all of the costs
and expenses set forth in the clauses (a)-(d) being paid regardless of whether
the credit agreement is executed or the Facility closes.
The terms contained in this Commitment Letter, the Fee Letter and the Term Sheet
are confidential and, except for disclosure to your Board of Directors, officers
and employees, professional advisors retained by you in connection with this
transaction, or as may be required by law, may not be disclosed in whole or in
part to any other person or entity without our prior written consent, except
that, following your acceptance hereof, you may make public disclosure of this
Commitment Letter and may file a copy of this Commitment Letter and the Term
Sheet in any public record in which it is required to be filed, based upon the
advice of your counsel.
Termination. This offer will terminate at 5:00 P.M. Central Time on January 16,
- -----------
1998 unless on or before that date you sign and return an enclosed counterpart
of this Commitment Letter and the Fee Letter, and it will expire on the date
which is the earlier of (a) May 1, 1998 or (b) the date 60 days following the
acquisition by Company, Borrower or any of their affiliates of the Future Hotels
which are part of the FSA portfolio if the date of execution of the definitive
documentation for the Facility ("Initial Credit Extension Date") has not
occurred on or before that date. Furthermore, the Facilitators may terminate
this Commitment Letter and their obligations hereunder to provide the Facility
if prior to the Initial Credit Extension Date (a) Borrower or Company shall fail
or refuse to comply in any material respect in a timely manner with any of the
terms or conditions set forth herein, (b) any material adverse change since the
date of this Commitment Letter shall occur with respect to the pool of Future
Hotels, or the business, assets, condition (financial or otherwise) or
operations of Borrower or Company at any time prior to the closing of the
transactions contemplated hereby, (c) Borrower or Company shall be insolvent or
involved as debtor in any arrangement, bankruptcy, reorganization or insolvency
proceeding, or (d) the Facilitators determine that the funding of the Facility
or performance of Borrower's or Company's duties or obligations under this
Commitment Letter (including the Term Sheet), the Fee Letter, or the documents
evidencing or securing the Facility would violate, or be prohibited by,
applicable Federal, State or local law, including usury limitations, or any
applicable rule, order, statute, judgment or decree of any legislative body,
board, court, tribunal, commission, or governmental authority or agency having
jurisdiction over the Facilitators. Furthermore, this Commitment Letter has
been issued to Borrower on the basis of (i) certain information and materials
provided by Borrower or Company to the Facilitators, (ii) all representations,
information, exhibits, data and other material submitted with and in support of
the loan application for the Facility, and (iii) the agreement of Borrower and
Company that hereafter the Agents shall be permitted to conduct due diligence in
a manner satisfactory to the Agents. The Facilitators may terminate this
Commitment Letter and the obligations of the Facilitators hereunder to provide
the Facility if, (i) in the reasonable opinion of the Facilitators, any
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 5
information or documentation submitted to the Facilitators proves to be
inaccurate, incomplete or misleading in any material respect, (ii) Borrower or
Company withholds any information which, in the reasonable opinion of the
Facilitators, is material to the decisions of the Facilitators to provide the
Facility to Borrower, (iii) any of the fees or expenses required to be paid by
Company and Borrower hereunder are not paid when due, or (iv) the ability of the
Facilitators to conduct due diligence in a manner satisfactory to the
Facilitators is, in the reasonable opinion of the Facilitators, hampered in any
material respect. Notwithstanding any termination of this Commitment Letter, the
compensation, reimbursement and indemnification provisions hereof shall survive
any termination hereof.
Borrower and Company hereby represent to the Facilitators that all information,
exhibits, data and other materials submitted with and in support of the
requested Facility or any existing facility are true, correct and complete in
all material respects as of the date hereof. Borrower and Company shall
immediately notify the Agents in the event any information or document provided
to the Agents becomes inaccurate or misleading in any material respect.
The Commitment Letter, the Fee Letter, and the Term Sheet shall be governed by,
and construed in accordance with, the internal laws of the State of Texas
without reference to principles of conflict of law. ALL PARTIES TO THIS
COMMITMENT LETTER AGREEMENT IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING ARISING OUT OF THIS COMMITMENT LETTER, THE FEE LETTER AND
THE TERM SHEET OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IN THE EVENT
OF LITIGATION, THIS COMMITMENT LETTER MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
This Commitment Letter, the Fee Letter and the Term Sheet shall not be
assignable by any party hereto without the prior written consent of the other
parties hereto except for the syndication of the Facility to the Banks and may
not be amended or any provision hereof or thereof waived or modified except by
an instrument in writing signed by each of the parties hereto.
This Commitment Letter, the Fee Letter, and the Term Sheet constitute the entire
agreement among the parties pertaining to the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements, understandings,
representations or other arrangements, whether express or implied, written or
oral, of the parties in connection therewith, including without limitation the
Work Letter dated January 8, 1998, by and between the same parties hereto,
except to the extent expressly incorporated or specifically referred to herein
or therein.
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 6
Please indicate your acceptance of this Commitment Letter by signing and
returning the five duplicate copies hereof, whereupon this Commitment Letter
will constitute a binding agreement between the parties hereto. Upon your
delivery to us of the signed copies of this Commitment Letter and the Fee Letter
and payment of the initial installment of the fees as set forth in the Fee
Letter, this Commitment Letter shall become a binding agreement under laws of
the State of Texas as of the date so accepted. This Commitment Letter and the
Fee Letter may be executed in multiple counterparts, each of which shall be an
original, but all of which shall constitute but one Commitment Letter and Fee
Letter.
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 7
We are pleased to have this opportunity and look forward to working with you.
Very truly yours,
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ THOMAS K. DAY
---------------------------------------------------
Thomas K. Day
Vice President
BANK ONE, TEXAS, N.A.
By: /s/ EDDIE HODGES
---------------------------------------------------
Eddie Hodges
Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ PAUL STIPLOSEK
---------------------------------------------------
Paul Stiplosek
Relationship Manager
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/ DAVID MCNEIL
---------------------------------------------------
David McNeil
Vice President
<PAGE>
American General Hospitality Operating Partnership,L.P.
American General Hospitality Corporation
January 15, 1998
Page 8
Accepted and Agreed to:
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
By: AGH GP, Inc., its general partner
By: /s/ KENNETH E. BARR
------------------------------------------
Kenneth E. Barr
Executive Vice President
AMERICAN GENERAL HOSPITALITY CORPORATION
By: /s/ KENNETH E. BARR
-------------------------------------
Kenneth E. Barr
Executive Vice President
<PAGE>
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
$100 MILLION UNSECURED, DELAYED-DRAW
SUBORDINATED DEBT FACILITY ("SUB DEBT")
Borrower: American General Hospitality Operating
Partnership, L.P.
Term: The maturity date shall be 90 days following
the maturity date of the $500 million facility
("Facility").
Other Indebtedness: So long as the Company's leverage exceeds 50%,
any portion of the Sub Debt is outstanding or
should the Lenders be committed to fund under
the Sub Debt, the Borrower may not incur any
other indebtedness except for the Facility, the
Sub Debt and individual property indebtedness
not to exceed $70 million in aggregate.
Interest Rate: The Interest Rate shall be determined based
upon the Senior Unsecured Debt Facility pricing
grid. However, in no event shall the Sub Debt
Interest Rate be less than the ABR Spread +
37.5 bps or the Libor Spread + 187.5 bps.
Funding Termination Date: The Borrower shall not be eligible to draw
under the Sub Debt after September 30, 1998.
Repayment Provisions: So long as the Borrower is in full compliance
with the Facility, the Borrower will be
required to use all proceeds obtained from
equity offerings and asset sales to reduce any
associated debt and the Senior Unsecured debt .
The Borrower may not use asset sale proceeds to
acquire any assets other than those which the
Borrower has publicly announced (as of
12/31/97) and the Olivier House located in New
Orleans, LA. Any reductions of the Sub-Debt
shall be deemed permanent reductions of the
Sub-Debt.
Other Terms and Conditions: With the exception of the Borrowing Base and
those terms outlined herein, the terms and
conditions of the Facility and the Sub Debt
shall be consistent.
<PAGE>
AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.
$500 Million
SENIOR UNSECURED DEBT FACILITY (THE "FACILITY")
Borrower: American General Hospitality Operating
Partnership, L.P. (the "Borrower").
Arranger, Documentation Societe Generale, Southwest Agency ("SG").
Agent and Syndication
Agent:
Administrative Agent: Bank One, Texas, NA ("BOT").
Lenders: A syndicate of lending institutions in addition
to SG and BOT.
Requisite Lenders: Lenders comprising 51% of the Facility Amount.
Facility Amount: $500 million revolving credit facility (the
"Facility") which will include a letter of
credit sub-limit of up to $60 million. The Co-
Lenders will have risk participations in any
letters of credit provided by BOT in accordance
with their pro rata portions of the Facility.
Purpose: To fund investments in existing and additional
acquisition hotel properties and for general
working capital purposes.
Interest Rate: The interest rate on the principal balance
outstanding shall be 30-day, 60-day, or 90-day
LIBOR or Adjusted Base Rate ("ABR") (at the
Borrower's option) plus the applicable rate of
interest as summarized below, payable monthly
in arrears.
-----------------------------------------------
Leverage Ratio ABR LIBOR Unused
Spread Spread Commit.
(bps) (bps) Fee (bps)
-----------------------------------------------
<25% 0 140.0 20
-----------------------------------------------
>25% <35% 0 150.0 20
-----------------------------------------------
>35% <40% 12.5 162.5 25
-----------------------------------------------
>40% <50% 25.0 175.0 30
-----------------------------------------------
>50% <55% 37.5 187.5 30
-----------------------------------------------
>55% <60% 50.0 200.0 30
-----------------------------------------------
The Leverage Ratio shall be calculated as Total
Liabilities (as further defined herein) divided
by (Aggregate Value of the Company's hotels)
(as further defined herein) and will be
recalculated as of the end of each calendar
quarter with any corresponding change in
interest rate options becoming effective on the
45th day following the end of the calendar
quarter.
Should American General Hospitality
Corporation's (the "Company's") Leverage Ratio
be below 50% and its senior unsecured debt
ratings with either Standard & Poor's ("S&P")
or Moody's correspond to any of the ratings
described below, the interest rate options that
correspond to such rating shall apply in lieu
of the interest rate options described above.
2
<PAGE>
-----------------------------------------------
S&P Rating Moody's ABR LIBOR Unused Comm.
Rating Spread Spread Fee (bps)
(bps) (bps)
-----------------------------------------------
A- or A3 or 0.0 100.0 12.5
higher higher
-----------------------------------------------
BBB+ Baa1 0.0 112.5 15.0
-----------------------------------------------
BBB Baa2 0.0 125.0 15.0
-----------------------------------------------
BBB- Baa3 0.0 137.5 20.0
-----------------------------------------------
The interest rate and Unused Commitment Fee
will be based on the actual ratings or written
preliminary or "shadow" ratings of S&P and
Moody's and will be adjusted from time to time
to reflect any change in the ratings. If the
ratings are not equivalent, the higher rating
will apply. If the ratings are two or more
levels apart, the interest rate and Unused
Commitment Fee will be based on the rating
which is one level below the higher rating.
ABR will be the higher of (i) the Prime
commercial lending rate (the "Prime Rate") as
publicly announced by BOT to be in effect from
time to time and (ii) the Federal Funds Rate
(as published by the Federal Reserve Bank of
New York) plus 0.50%.
Letter of Credit Fees: 1.50% per annum payable monthly in advance
which will be paid to the Co-Lenders in
accordance with their pro rata portions of the
Letter of Credit and a $500.00 per Letter of
Credit issuance fee payable to BOT. Letter of
Credit Fees shall be based on a 360-day year.
Interest Calculation: Interest on LIBOR borrowings will be calculated
on the basis of the actual number of days
elapsed over a 360-day year. Interest on ABR
borrowings will be calculated on the basis of
the actual number of days elapsed over a 365-
day year.
Term: A three-year facility.
Recourse Obligation and Borrower's obligation in respect of the
Guaranty of Payment: Facility shall constitute the full personal
recourse obligations of Borrower. In addition,
the Company and each subsidiary of the Borrower
(except for those entities which only own
properties which secure permitted Secured
Recourse Indebtedness and Secured Non-Recourse
Indebtedness) will provide a joint and several
guarantee of payment for all obligations under
the Facility and the landlord's obligations
under the Percentage Lease Agreements. Any
subsidiary entity which has secured debt cannot
own unencumbered assets.
Any partner of the Borrower shall have the
right to severally assume any portion of the
Facility indebtedness by executing and
delivering to the Lenders an assumption of
liability agreement reasonably acceptable to
the Lenders.
Environmental Indemnification: Borrower and Company will provide a joint and
several indemnification agreement.
3
<PAGE>
Advances: Advances under the Facility are permitted
provided that:
(a) No defaults exist under the Facility as
evidenced by a compliance certificate and
current calculation of the Borrowing Base;
(b) All affirmative and negative covenants and
representations and warranties shall be
complied with both before and after the making
of each advance under the Facility; and
(c) The Borrower is limited to five LIBOR
tranches and advances are limited to three
times per month, with an exception for advances
made for acquisition purposes.
Optional Loan Prepayments: Paydowns of the Facility shall be in the
minimum amount of $1,000,000 and in increments
of $100,000. All prepayments of LIBOR
borrowings will be subject to payment by the
Borrower of LIBOR contract breakage costs.
Borrowing Base: The availability under the Facility shall be
subject to a Borrowing Base. Such Borrowing
Base shall consist solely of unencumbered hotel
properties. Each hotel property within the
Borrowing Base, shall, at all times, meet all
of the following criteria:
(a) No associated mortgage or other liens
(including springing liens), material
subleases, stock pledges, negative pledges, or
pledges of ownership interests;
(b)100%-owned by the Borrower (or a 99% owned
subsidiary) or owned by an entity in which the
Borrower has at least a 90% equity interest and
is the managing general partner or equivalent
for the entity ("Joint Venture Properties") and
leased to AGH Leasing, L.P., Twin Towers
Leasing, L.P., Prime Hospitality, Corp. (or one
of its affiliates) or a third-party lessee. No
more than 20% of the Aggregate Value of the
Borrowing Base may be attributable to Joint
Venture Properties. The Aggregate Value of
Joint Venture Properties shall be based upon
the Borrower's percentage ownership therein.
Any third-party lessee except as provided above
shall also be subject to approval by the Agents
pursuant to a lease agreement acceptable to the
Agents;
(c) Free from all material structural and title
defects and environmentally hazardous
materials, all as verified by current
structural, title, and environmental reports
acceptable to the Agents;
(d) Fully operational or undergoing active
renovation/remodeling (subject to the
limitation on the maximum number of out-of-
service rooms as provided in item (ii) on the
following page);
(e) Located in the United States of America and
not more than 20% of the Borrowing Base hotels
shall be located in any one state; with the
exception of Florida for which not more than
35% of the Borrowing Base hotels shall be
located.
(f) No more than 20% of the Borrowing Base
hotels may be limited service or extended stay;
4
<PAGE>
(g) With the exception of the Radisson Twin
Towers -Orlando, Florida; Crowne Plaza -
Hasbrook, New Jersey; Doubletree - Clearwater,
Florida; Courtyard by Marriott - Lake Buena
Vista, Florida; and the Holiday Inn O'Hare -
Rosemont, Illinois, no investment (acquisition
cost plus capital improvements) in any single
property may exceed $50,000,000 unless
otherwise approved by the Requisite Lenders in
their sole and absolute discretion; and
(h) Except for Ramada Inn - Danbury, CT, the
Ramada Inn - Elmsford, NY and as further
provided for herein, subject to a franchise
agreement from a national hotel franchise
company approved by the Agents in their
reasonable discretion; for new properties, as
hereinafter defined, the Borrower shall have a
period of twelve months from the date of
acquisition to commence the operation of the
property under a franchise agreement that is
permitted hereunder, and during said twelve
month period the property shall not be excluded
from the Borrowing Base because of the
provisions of this paragraph (h).
(i) Further, the Borrowing Base, in the
aggregate, shall at times meet all of the
following criteria:
(i) For any property located within the
State of California, or in any other
location deemed by an appropriate agency
of the United States Government to have
above average seismic risk activity,
earthquake insurance must be provided in
an amount not less than the amount of
the maximum probable loss pursuant to a
seismic engineer's maximum probable loss
report deemed satisfactory to the
Agents. The aggregate amount of coverage
and the deductibles may be modified at
the request of the Borrower based upon
industry standards, subject to the
approval of the Agents;
(ii) Not more than 15% of the total
number of rooms within the properties
comprising the Borrowing Base shall be
out of service at any one time;
(iii) Properties under ground leases may
not comprise more than 22.5% of the
Borrower's Hotel Investments at Cost or
22.5% of the Borrower's total room count
of those properties within the Borrowing
Base.
5
<PAGE>
The Borrower shall furnish the Lenders notice
that it intends to designate a hotel property
as a qualifying unencumbered property. Such
notice shall include a current title report,
applicable structural (including ADA) and
environmental reports, a brief description of
the property (to include its age, location,
occupancy statistics, and, as they may be
available, an operating statement and REVPar
analysis for the last fiscal year (and prior
fiscal year if available) and most recently
completed fiscal quarter period). The Borrower
shall also furnish a certification to the
Lenders that such property individually, and
the Borrowing Base in its entirety, complies
with all of the Borrowing Base provisions set
forth as paragraphs (a) through (i) in the
section of this Summary of Terms and Conditions
titled Borrowing Base.
Qualifying properties shall be permitted to be
added or deleted from the Borrowing Base on a
monthly basis with prior notice provided to the
Administrative Agent not less than 10 business
days prior to such addition or deletion and a
new Borrowing Base availability calculation may
be performed and submitted by the Borrower. In
connection with a permitted deletion, the
applicable subsidiary shall be released from
its guaranty in connection with such subsidiary
property being pledged to secure permitted
Secured Indebtedness. If such calculation
results in a reduction to Maximum Availability,
the then Maximum Availability calculation shall
be immediately effective.
The Lenders shall reserve the right to remove
such property, following reasonable discretion
and notice, from the Borrowing Base at any time
upon their determination that such property
does not satisfy the Borrowing Base criteria.
Availability: The maximum availability ("Maximum
Availability") under the Facility shall be
equal to the lesser of the following amounts:
THE FACILITY AMOUNT:
(a) $500,000,000
THE LEVERAGE TEST AMOUNT:
(b) An amount equal to 50% of the Aggregate
Value of the Borrowing Base pool, less all
other consolidated unsecured indebtedness of
the Company. However, subordinate unsecured
indebtedness in an amount up to $125 million
("Sub Debt") shall not be deducted from the
Aggregate Value of the Borrowing Base until
December 31, 1998 so long as the Sub Debt is
expressly subordinate to the Facility.
Aggregate Value is defined and computed as
follows:
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(i) For Borrowing Base properties owned by the
Borrower and/or its subsidiaries/affiliates for
at least four consecutive fiscal quarters
("Seasoned Properties"), Aggregate Value shall
equal the sums of the trailing four quarter NOI
less a capital expenditure reserve equal to 4%
of gross room revenues ("Adjusted EBITDA"),
divided by a capitalization rate of 10.00%,
plus
(ii) For Borrowing Base properties owned by the
Borrower and/or its subsidiaries/affiliates for
less than four consecutive fiscal quarters
("New Properties"), Aggregate Value shall be
equal to the Borrower's investment in each
hotel property at its cost, provided, however,
that if the Borrower commences renovation of a
New Property within 180 days of its acquisition
thereof and completes such renovation with 18
months of its acquisition thereof, such
property shall constitute a New Property until
the end of the sixth fiscal quarter from the
date of acquisition, and
THE CASH FLOW TEST AMOUNT:
(c) An amount equal to the Borrowing Base
Adjusted EBITDA multiplied by a factor of 5,
less all other consolidated unsecured
indebtedness of the Borrower. However,
subordinate unsecured indebtedness in an amount
up to $125 million ("Sub Debt") shall not be
deducted from the Aggregate Value of the
Borrowing Base until December 31, 1998 so long
as the Sub Debt is expressly subordinate to the
Facility and the outstanding Facility amount
plus the outstanding Sub Debt amount shall not
exceed $625 million. Borrowing Base Adjusted
EBITDA shall equal the sum of the following:
(i) For Seasoned Properties, the sum of the
trailing four quarter Adjusted EBITDA; plus
(ii) For New Properties, the sum of the most
recent four quarter Adjusted EBITDA; provided,
however, that for the quarterly period(s) when
each New Property was not owned by the
Borrower, the actual net operating income less
4% of gross room revenues, shall be used in
lieu of Adjusted EBITDA. Unless otherwise
required, Maximum Availability may be
calculated prior to each advance under the
Facility and, in any case, on a quarterly
basis. If, at any time, the outstanding balance
under the Facility (including outstanding
Letters of Credit) exceeds the Maximum
Availability ("Imbalance"), the Borrower,
shall, within five business days (or 30 days if
the Imbalance resulted from an event other than
(i) the sale or disposition of a property, or
(ii) any other removal of a property from the
Borrowing Base pool), add additional qualifying
properties to the Borrowing Base or repay a
portion of the Facility sufficient to maintain
or reduce the outstanding balance (including
outstanding Letters of Credit) to not greater
than the Maximum Availability. Failure to repay
the amount owed within such required period
shall be deemed an event of default.
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Covenants: Company covenants shall include but not be
limited to the following:
(A) MINIMUM TANGIBLE NET WORTH
Tangible Net Worth, as defined below, shall at
all times equal or exceed $450 million
("Minimum Net Worth"). Minimum Net Worth shall
be adjusted upwards by 75% of the net cash
proceeds or value derived from the subsequent
issuance of equity securities, or 75% of the
value of any operating partnership units issued
to acquire properties.
Tangible Net Worth is defined as the tangible
net worth of the Company as calculated on a
GAAP basis plus Minority Interest.
(B) LIMITATION ON TOTAL LIABILITIES
At no time shall the Total Liabilities (as
defined below) of the Company exceed the lesser
of:
(i) the sum of
(a) for Seasoned Properties, 6.0 times the sum
of the trailing four quarter Adjusted EBITDA
for the quarters ended March 31, 1998, June 30,
1998, September 30, 1998 and 5.0 for each
quarter thereafter; plus
(b) for New Properties, 60% of the Company's
(or its subsidiary's)investment in such hotel
properties at its cost for the quarters ended
March 31, 1998, June 30, 1998, September 30,
1998 and 50% for each quarter thereafter, or
(ii) 60% of the Company's (or its subsidiary's)
hotel investments at cost (as defined below)
for the quarters ended March 31, 1998, and June
30, 1998, September 30, 1998 and 50% for each
quarter thereafter.
Total Liabilities shall be defined as recourse
and non-recourse mortgage debt, letters of
credit, unsecured debt, capitalized lease
obligations (excluding ground leases),
guarantees on indebtedness, subordinated debt,
and unfunded direct obligations of the Company
or any of its subsidiaries. Total Liabilities
shall include, without duplication, (i) 100% of
the consolidated recourse liability of the
Company under (a) guarantees of indebtedness,
or (b) loans where the Company or any of its
subsidiaries is liable for debt as general
partner and (ii) the Company's share of non-
recourse debt in unconsolidated affiliates.
Total liabilities shall exclude ordinary trade
payables and accruals and minority interests.
Hotel Investments at Cost shall be defined as
investments in hotel properties as presented on
the financial statements of the Company prior
to accumulated depreciation plus $10,420,273
(representing the value of operating
partnership units issued to primary
contributors at the initial public offering
plus such additional similar amounts relating
to the purchase of the Courtyard by Marriott -
Durham, North Carolina and the Holiday Inn -
Madison, Wisconsin).
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<PAGE>
(C) CASH FLOW COVERAGE
On a quarterly basis, the Company shall
maintain a minimum ratio of actual Adjusted
EBITDA to actual Interest Expense of not less
than 2.15 for the quarters ended during 1998
and 2.50:1.00 for each quarter thereafter.
Interest Expense is defined to have the meaning
of actual interest expense incurred by the
Company on all debt whether it is accrued,
paid, or capitalized.
On a quarterly basis, the Company shall also
maintain a minimum ratio of actual Adjusted
EBITDA to Debt Service of not less than
2.00:1.00. Debt Service is defined to have the
meaning of the sum of (i) actual consolidated
Interest Expense plus (ii) scheduled principal
amortization on all debt obligations of the
Company, excluding any balloon payments.
The Cash Flow Coverage covenants shall be
subject to adjustment as provided within the
Conversion to Secured Facility provisions
described herein.
(D) DISTRIBUTIONS
Distributions shall not exceed 90% of funds
from operations ("FFO") or 100% of Free Cash
Flow (adjusted FFO less a capital expenditure
reserve equal to 4% of gross room revenues),
calculated quarterly based on the immediately
preceding completed four quarters, or an amount
required to maintain the general partner's
status as a real estate investment trust under
the provisions of the Internal Revenue Code.
FFO shall be defined as the Company's net
income (or loss) calculated in accordance with
GAAP, excluding gains (or losses) from debt
restructuring and sales of property, plus
depreciation and amortization of real estate
assets and after adjustments for unconsolidated
partnerships and joint ventures.
(E) LIMITATION ON OTHER UNSECURED DEBT
The Company or any of its subsidiaries shall
not be permitted to incur any other unsecured
borrowings in excess of the subject Facility
(excluding accounts payables) in excess of
$30,000,000 in the aggregate. However, the
Borrower may incur Sub Debt consistent with the
provisions herein so long as the Sub Debt is
expressly subordinate to the Facility. and the
outstanding Facility amount plus the
outstanding Sub Debt amount shall not exceed
$625 million.
(F) LIMITATION ON SECURED INDEBTEDNESS
Provided the Company is otherwise in compliance
with its covenants:
(i) Secured Recourse Indebtedness
Consolidated Secured Recourse Indebtedness of
the Company shall not exceed the lesser of:
(A) The sum of
9
<PAGE>
(1) for Seasoned Properties, 2.00
times the sum of trailing four
quarter Adjusted EBITDA; plus,
(2) for New Properties, 20% of the
Company's investment in such hotel
properties, at its cost, or
(B) 15% of the Company's Hotel
Investments at Cost.
(ii) Secured Non-Recourse Indebtedness
Consolidated Secured Non-Recourse Indebtedness
of the Company shall not exceed the lesser of:
(A) The sum of
(1) for Seasoned Properties, 3.00
times the sum of trailing four
quarter Adjusted EBITDA; plus,
(2) for New Properties, 30% of the
Company's investment in such hotel
properties, at its cost, or
(B) 30% of the Company's Hotel
Investments at Cost.
Consolidated Secured Recourse Indebtedness
and Consolidated Secured Non-Recourse
Indebtedness shall not exceed 30% of the
Company's Hotel Investments at cost.
Furthermore, the Company shall use
reasonable efforts to structure its non-
recourse financings with a single purpose
entity which only owns that hotel securing
such financing which such single-purpose
entity to be wholly-owned by the Borrower,
Company or Joint Venture Properties.
(G) PERMITTED INVESTMENTS
The Borrower shall at all times continue to
operate as an owner and lessor of hotel
properties that meet the criteria described in
the Borrowing Base provisions subject to the
Borrower's ability to incur permitted
Indebtedness. Any other business activities
shall be strictly incidental thereto and shall
be further limited as follows:
Investment, loan and advance limitations.
Specifically, unimproved land holdings
(excluding land that is either under
development or planned for commencement of
development within twelve months from the date
it was acquired), stock holdings, mortgages,
investments in unconsolidated partnerships and
joint ventures, and non-hotel assets will be
limited to the levels described below. This
paragraph (g), shall not limit the Company's
investments in cash and cash equivalents,
investments in United Stated Treasury or Agency
obligations, and other similar investments.
Land Holdings: Not more than $20,000,000
(at any one time) in the
aggregate based on cost.
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<PAGE>
Stock Holdings: None, except as received in
settlement of liabilities
created in the ordinary
course of business plus
investments not to exceed
$25,000,000 in total. The
Borrower will be ineligible
from purchasing any
securities should the
Company's Leverage Ratio
exceed 50%.
Mortgages: None, other than loans
encumbering properties
previously owned or to be
acquired, provided that the
aggregate amount of such
loans shall not exceed 5% of
Hotel Investments at Cost
(such properties shall also
be excluded from admission
into the Borrowing Base).
Partnership/JV's: Any partnership or joint
venture interests in excess
of an aggregate $50,000,000
shall require Requisite
Lender approval
Non-Hotel With the exception of the
Property Assets: office portion of the
Houston Marriott, not more
than 5% of total assets
(other than properties that
the Borrower intends to
convert into hotel
properties where (i) the
Borrower notifies the
Administrative Agent of such
intent within 90 days after
the Borrower's acquisition
of such properties, and (ii)
the Borrower commences
construction of such
conversion within 12 months
after the Borrower's
acquisition of such
properties).
Development: The Borrower may engage in
room expansion of existing
hotels or development of new
hotels so long as the total
cost of such expansion and
new development does not
exceed $75,000,000 for the
combined room expansion and
new development hotels at
any one time.
(h) Adjusted EBITDA generated by the office
portion of the Marriott (Houston, TX) mixed-use
property and the retail portion of the St.
Tropez (Las Vegas, NV) property shall be
treated as Adjusted EBITDA.
(i) No more than 15% of the Company's Hotel
Investments at Cost will be comprised of non-
franchised hotels.
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<PAGE>
(j) The management agreement(s) and hotel lease
agreement(s) shall be subject to Agents' review
and approval, subordinate to the subject
Facility, structured with the intent that the
combined maximum fees may not exceed 6% based
upon the acquisition pro forma EBITDA
projection and cancelable at no cost upon 30
days notice at any point following a monetary
default. The Prime Hospitality Corp. leases,
however, shall not be subordinate to the
Facility nor cancelable following a monetary
default under the Facility.
(k) Other covenants and defaults which would be
customary for a transaction of this nature and
size.
Other Covenants: (a) Acquired hotels must be located in the
United States and under a franchise commitment
from an acceptable national chain or must
convert to a franchise agreement within 12
months of acquisition and be consistent with
the criteria as set forth within the Borrowing
Base provisions. Ramada-branded properties
contained within the Prime portfolio (excluding
Ramada Inn - Danbury, CT and Ramada Inn -
Elmsford, NY) must be converted to an
Acceptable Brand (in accordance with approved
brands pursuant to the Existing $300 million
Facility) within 18 months from the date of
acquisition and the Company may have up to $100
million (based upon acquisition cost) in other
hotels at any one time which must be rebranded
within 18 months.
(b) Properties under ground leases may not
comprise more than 22.5% of the Company's Hotel
Investments at Cost (as defined herein) or
22.5% of the Company's total room count.
(c) Limitations on mergers, consolidations,
sales of assets and acquisitions.
(d) Insurance coverages at a level and provided
by a carrier satisfactory to the Agents.
(e) No property owned by the Borrower may be
leased to any other entity other than AGH
Leasing, L.P., Twin Towers Leasing, L.P., Prime
Hospitality Corp. (or one of its affiliates) or
a third-party lessee acceptable to the Agents.
(f) No asset owned by the Borrower may be
separately financed if:
(i) Such financing would cause a breach of
any of the above covenants, or
(ii) The loan-to-cost ratio for such
financing exceeds 70% on a property or
aggregate pool basis with respect to non-
recourse financing, and not more than 65%
with respect to recourse financing.
(g) So long as the Borrower is in compliance
with all terms and conditions of the Facility,
it may use proceeds from equity offerings and
asset sales to reduce the Sub Debt.
Financial Reporting: The Borrower shall be obligated to provide to
the Administrative Agent the following:
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(a) Delivery of the Company's annual (within 95
days of fiscal year end) and quarterly
financial statements (within 50 days of fiscal
quarter end with the exception of fiscal year
end) and reports including an officer's
certificate to demonstrate compliance with the
covenants of the Facility and the covenants of
the Company's public debt issue(s), if any.
(b) A detailed listing of assets and book
values on a quarterly basis and identified as
to unencumbered pool properties and other
properties.
(c) A certificate of compliance on a quarterly
basis which details the specific assets,
including historical cost, which make up the
pool of unencumbered assets.
(d) Along with the quarterly and annual
financial statements, the Borrower shall
provide a summary report on the unencumbered
asset pool properties that details Adjusted
EBITDA for the trailing four quarters by
quarter and in sum total.
(e) Prior to the commencement of a fiscal year,
the Company shall provide a projected operating
budget for the next fiscal year. Concurrent
with the delivery of the quarterly financial
statements and the annual financial statements,
the Borrower shall notify the Administrative
Agent of any material changes (excluding
changes resulting from the acquisition of new
hotels) that have been made to the operating
budget of the then current fiscal year.
(f) Copies of any filing with the Securities
and Exchange Commission within 10 business days
of such filing.
(g) Copies of any written information provided
to shareholders.
(h) Such other information as the Agents shall
reasonably require.
Management/Ownership Steve Jorns shall be required at all times to
Restrictions: be the president/chief executive officer of
American General Hospitality Corporation and
Kenneth Barr shall be required at all times to
be the chief financial officer of American
General Hospitality Corporation. Minimum stock
ownership requirements for Mr. Jorns and Mr.
Barr.
Representations and & Usual and customary for this type of Facility,
Warranties: including but not limited to the following:
(a) Valid existence and qualification,
including REIT qualification and tax status;
(b) Governmental authorization;
(c) No contravention of laws or contracts;
(d) Financial information is true and correct;
(e) No material environmental matters;
13
<PAGE>
(f) Compliance with laws and regulations,
including zoning, fire safety and building
requirements, ERISA, ADA, environmental and
REIT laws;
(g) Maintenance of required licenses and
permits with respect to the properties;
(h) No material litigation, casualty or
condemnation proceedings pending;
(i) Payment of taxes when due;
(j) Full disclosure; good title; no other
liens;
(k) Properties are in good condition and
repair, no deferred maintenance which is not
being timely addressed; and
(l) No defaults or Event of Default (defined
herein) under the Facility or franchise
agreements.
Events of Default: Usual and customary for credit facilities for
this size, type and purpose, including, without
limitation:
(a) Non-payment when due of any payment of
principal in respect of any of the loans;
(b) Non-payment within five days of the due
date of any interest payable under the Facility
documents provided that such late payment
within five days shall not occur more than
twice per year;
(c) Default in the performance or observance of
any covenants for more than 30 days after
notice;
(d) If the Company shall not qualify for tax
treatment under Sections 856-860, inclusive, of
the Internal Revenue Code;
(e) Restrictions on mergers, acquisitions,
distributions, joint ventures, etc.; and
(f) Restrictions on change of control at either
the Company or the Borrower. Steve Jorns and
Ken Barr shall at all times be required to be
the president/chief executive officer and chief
financial officer, respectively, of American
General Hospitality, Inc. and any affiliated
tenants. Minimum stock ownership requirements
in American General Hospitality, Inc. and any
affiliated tenants to be established for Mr.
Jorns and Bruce Wiles.
Other Conditions: (a) Limitations on recourse and non-recourse
indebtedness of not more than $0 and
$20,000,000, respectively, as to the
acceleration of any maturity date, and
$1,000,000 and $20,000,000, respectively, as to
the occurrence of any default or event of
default.
(b) Located in the United States of America and
not more than 20% of the Company hotels shall
be located in any one state with the exception
of Florida for which no more than 35% of the
Company hotels may be located.
(c) No more than 20% of the Company hotels may
be limited service or extended stay;
Governing Law: The law of the State of Texas for the credit
agreement and other Facility documents; for
collateral documents local law will apply.
14
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Waiver of Jury Trial and Required.
Consent to Texas
Jurisdiction:
This DISCUSSION TERM SHEET is being provided solely for discussion purposes and
is exclusively intended to communicate the general business terms and financing
parameters being considered by the Agents. Neither this outline nor the
participation in discussions is to be construed to be a commitment to enter into
or approve any financing, or a commitment to grant or extend any financing
accommodations. The Agents may terminate financing discussions at any time, in
its sole discretion, without notice and liability of any kind.
15
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm and to the incorporation by reference in
the Registration Statements on Form S-3 (File Nos. 333-33007 and 333-36127) and
on Form S-8 (File Nos. 333-08845 and 333-08841) of American General Hospitality
Corporation as amended of our reports (i) dated December 19, 1997, of our audit
of the combined financial statements of Prime Portfolio Acquisition Hotels
except for Note 7 as to which the date is January 9, 1998; (ii) dated October
22, 1997, of our audit of the financial statements of Holiday Inn O'Hare
International Hotel; (iii) dated January 15, 1998, of our audit of the combined
financial statements of FSA Portfolio Acquisition Hotels; and (iv) dated
November 3, 1997 of our audit of the combined financial statements of Potomac
Portfolio Acquisition Hotels.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
January 23, 1998
