Commission File Number 0-22745
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
JANUS AMERICAN GROUP, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 13-2572712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 CORPORATE BLVD., N.W.
SUITE 232
BOCA RATON, FLORIDA 33431-8596
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (561) 994-4800
CHECK WHETHER ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES |X| NO |_|
Number of shares of Common Stock outstanding as of August 10, 1998: 8,694,088
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES |_| NO |X|
<PAGE>
JANUS AMERICAN GROUP, INC.
FORM 10-QSB
FOR QUARTERLY PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and 31
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 38
SIGNATURE PAGE
</TABLE>
2
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
HISTORICAL FINANCIAL STATEMENTS:
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 4
JUNE 30, 1998 AND DECEMBER 31, 1997
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS 5
OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1997
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF 6
STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS 7
OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1997
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL 8
STATEMENTS
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED 26
CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT 27
OF OPERATIONS ADJUSTED FOR DISCONTINUED OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT 28
OF OPERATIONS ADJUSTED FOR DISCONTINUED OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
NOTES TO ADJUSTED UNAUDITED PRO FORMA CONDENSED 29
CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
JANUS AMERICAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
June30, December31,
1998 1997
---------------------------
<S> <C> <C>
Current asset:
Cash and cash equivalents $11,045,237 $11,150,243
Restricted cash for preferred stock of sub. and real estate taxes $218,342 $373,605
Accounts receivable $578,766 $554,882
Current portion of notes receivable $186,588 $171,632
Other current assets $119,817 $386,231
---------------------------
Total current assets $12,148,751 $12,636,593
Property and equipment, net of accumulated depreciation
and amortization $34,293,917 $34,803,291
Notes receivable $612,361 $126,390
Mortgage notes receivable $5,493,292 $5,558,755
Goodwill, net of accumulated amotization $6,622,251 $6,707,506
Other assets $2,135,650 $1,571,591
---------------------------
Total $61,306,222 $61,404,126
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable for redemption of preferred stock $41,238 $41,238
Current portion of long-term debt $2,148,110 $2,112,215
Accounts payable $1,082,237 $903,234
Accrued expenses $474,270 $786,167
Dividends payable $195,974 $197,583
---------------------------
Total current liabilities $3,941,829 $4,040,437
Long-term debt, net of current portion $17,538,990 $17,866,318
Deferred tax liabilities $1,190,000 $1,190,000
---------------------------
Total liabilities $22,670,819 $23,096,755
Minority interest $1,690,065 $1,688,969
---------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Series A; par value $.01 per share; 5,000,000 shares
authorized; none issued
Series B; par value $.01 per share; 12,000 shares
authorized; 10,451.88 shares issued and outstanding $105 $105
Common stock, par value $.01 per share; 15,000,000
shares authorized; 11,880,867 shares issued $118,809 $118,809
Additional paid-in capital $43,172,142 $43,163,320
Accumulated deficit ($5,029,420) ($5,347,533)
Treasury stock- 3,189,132 shares, at cost ($1,316,299) ($1,316,299)
---------------------------
Total stockholders' equity $36,945,337 $36,618,402
---------------------------
Total $61,306,222 $61,404,126
===========================
</TABLE>
4
<PAGE>
JANUS AMERICAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
-------------------------
<S> <C> <C>
Revenues:
Hotel revenues:
Room and related services $4,964,447 $2,197,760
Food and beverage $792,853 $322,962
Management fees $816,033 $202,047
Other $134,824 $57,263
-------------------------
Total hotel revenues $6,708,157 $2,780,032
Sales $0 $731,229
-------------------------
Total revenues $6,708,157 $3,511,261
-------------------------
Cost and expenses:
Direct hotel operating expenses:
Room and related services $1,236,178 $451,548
Food and beverage $666,202 $258,335
Selling and general expenses $295,477 $79,978
-------------------------
Total direct hotel operating expense $2,197,857 $789,861
Occupancy and other operating expene $882,988 $843,256
Selling, general and administrative expenses $2,094,008 $1,019,965
Depreciation of property and equipment $698,471 $274,009
Amortization of intangible assets $96,346 $53,574
-------------------------
Total costs and expenses $5,969,667 $2,980,665
-------------------------
Operating income (loss) $738,490 $530,596
Other income (expense)
Interest income $638,043 $174,615
Other income $19,640
Interest expense ($924,987) ($322,670)
-------------------------
Income (loss) before state income taxes and
minority interest $451,545 $402,181
Credit for prior years federal income tax refunds $261,215
Credit for prior year state income tax refunds $76,257
-------------------------
Income (loss) before minority interest $712,760 $478,438
Minority interest $1,095 $31,847
-------------------------
Net income (loss) $711,665 $446,591
Less preferred dividend requirements $393,558 $130,649
-------------------------
Net income (loss) applicable to common stock $318,108 $315,942
Net income (loss) per common share-Basic 0.04 0.05
=========================
Net income (loss) per common share-Assuming dilution 0.04 0.05
=========================
Weighted average common shares outstanding 8,691,735 6,357,577
=========================
</TABLE>
5
<PAGE>
<TABLE>
JANUS AMERICAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<CAPTION>
Preferred Stock Common Stock Treasury Stock
--------------- ------------------ ---------------------
Number Number Additional Number
of of Paid-in Accumulated of
Shares Amount Shares Amount Capital Deficit Shares Amount Total
--------------- ------------------- ------------------------------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January 1 1998 10,451.88 $105 11,880,867 $118,809 $43,163,320 ($5,347,535) 3,189,132 ($1,316,299) $36,618,400
Hat income $711,665 $711,665
Contribution to capital from
United States Lines, Inc.
and United States Lines (S.A.),
Inc. Reorganization Trust $0
Shares Issued to acquire
hospitality business $0
Repurchase of common stock $0
Conversion of warrants $8,823 $8,823
Preferred Stock Dividends ($393,558) ($393,558)
--------------- ------------------- ------------------------------------------------ -----------
Balance at June 30, 1998 10,451.88 $105 11,880,867 $118,809 $43,172,143 ($5,029,427) 3,189,132 ($1,316,299) $36,945,331
</TABLE>
6
<PAGE>
<TABLE>
JANUS AMERICAN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
----------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 711,665 $ 446,591
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization $ 698,471 $ 274,009
Amortization of intangible assets $ 96,346 $ 53,574
Minority Interest $ 1,095 $ 31,847
Operating loss from discontinued operations ($ 73,948) ($ 4,180)
Changes in operating assets and liabilities:
Accounts receivable ($ 23,884) ($ 290,657)
Other current assets $ 266,414 $ 11,944
Other asset ($ 575,150) ($ 103,937)
Accounts payable and accrued expenses ($ 132,894) $ 134,345
----------------------------------
Net cash provided by (used in) operating
activities $ 968,115 $ 553,536
----------------------------------
Investing activities:
Acquisition of hospitality business, net of
noncash consideration and cash required ($ 1,325,129)
Increase in Notes Receivable ($ 4,276)
Purchases of property and equipment ($ 645,034) ($ 202,053)
Gain on sale of subsidiary's net assets $ 14,161 $ 13,000
Collections of notes receivable $ 84,536 $ 33,922
----------------------------------
Net cash used in investing activities ($ 550,613) ($ 1,480,260)
----------------------------------
Financing activities:
Dividends Paid (4th Qtr. 1997-$197,583 & 1st Qtr. 1998-$197,583) ($ 395,166)
Decrease in restricted cash $ 631,830
Repurchase of common stock ($ 441,569)
Repurchase of warrants ($ 102,638)
Conversion of warrants to common stock $ 8,823
Reduction of payable for redemption of pre-
ferred stock of subsidiary ($ 631,830)
Contributions to capital from United States
Lines, Inc. and United States Lines (S.A.),
Inc. Reorganization Trust, including $8,628
to minority interest in 1997 $ 755,000
Proceeds from long-term borrowings $ 26,136
Repayments of long-term borrowings ($ 291,425) ($ 82,900)
----------------------------------
Net cash provided by financing activities ($ 677,768) ($ 154,029)
----------------------------------
Increase (decrease) in cash and cash equivalents ($ 260,266) ($ 772,695)
Cash and cash equivalents, beginning of period $ 11,523,848 $ 6,580,836
----------------------------------
Cash and cash equivalents, end of period $ 11,263,582 $ 5,808,141
==================================
Supplemental disclosure of cash flow data:
Interest paid $ 924,987 $ 311,681
==================================
</TABLE>
7
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1-Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
of normal recurring accruals, necessary to present fairly the financial
position of Janus American Group, Inc. (formerly Janus Industries,
Inc.) and subsidiaries (the "Company" or "Janus") as of June 30, 1998,
its results of operations and cash flows for the six months ended June
30, 1998 and 1997 and its changes in stockholders' equity for the six
months ended June 30, 1998. Certain terms used herein are defined in
the audited consolidated financial statements of the Company as of
December 31, 1997 and 1996 and for the years then ended (the "Audited
Janus Financial Statements") included in the Company's Form 10-KSB
previously filed with the Securities and Exchange Commission.
Accordingly, these unaudited condensed consolidated financial
statements should be read in conjunction with the Audited Janus
Financial Statements and the other financial statements included in the
Form 10-KSB.
The results of operations for the six months ended June 30, 1998 are
not necessarily indicative of the results of operations for the full
year ending December 31, 1998.
Note 2-Organization:
As of June 30, 1998, the continuing operations of Janus, which until
September 29, 1997 had been named Janus Industries, Inc., were
comprised primarily of the operations of seven hotels (of which six are
wholly-owned and one is 85%-owned) and a hotel management company.
The Company's owned and managed hotels are located primarily in the
Midwestern and Southeastern parts of the United States. As further
described in Note 4, the hotel operations and two mortgage notes
receivable were acquired, effectively, as of April 30, 1997 in a
transaction that was accounted for as a purchase. Accordingly, the
accompanying unaudited consolidated financial statements reflect the
accounts for the hotel operations for the six months ended June 30,
1998 and the financial statements for periods prior to that date are
not comparable.
As further described in Note 10, management decided during December
1997 to discontinue and dispose of all of the Company's operations
related to the provision of engineering and wireline logging services
to companies in the oil and gas industry (the "oil and gas services
operations").
8
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 2-Organization (continued):
As further described in Note 4 those operations were acquired on July
15, 1996 in a transaction that was accounted for as a purchase.
From February 1990, when it emerged from the reorganization proceedings
described below, until July 15,1996, the Company did not actively
engage in any trade or business. Income consisted primarily of interest
on temporary investments. Expenses consisted primarily of professional
fees and other costs incurred in connection with the Company's efforts
to acquire businesses, and record retention and other administrative
expenses incurred to satisfy existing financial reporting requirements.
In November 1986, the Company's predecessors, United States Lines, Inc.
("USL") and United States Lines (S.A.) Inc. ("USL-SA"), together with
two related companies, filed petitions under Chapter 11 of the United
States Bankruptcy Code. In May 1989, the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court")
confirmed a plan of reorganization with respect to such companies,
which was later amended and modified pursuant to an order of the
Bankruptcy Court entered in February 1990 (the "Plan").
Pursuant to the Plan and the order of the Bankruptcy Court confirming
the Plan:
a. USL and USL-SA changed their names to Janus Industries, Inc.
and JI Subsidiary, Inc. ("JIS"), respectively;
b. The United States Lines, Inc. and United States Lines (S.A.)
Inc. Reorganization Trust (the "Reorganization Trust") was
established for the purpose of administering the Plan and
liquidating and paying claims of former creditors of USL and
USL-SA; it will also make contributions of cash to Janus and
JIS from time to time of amounts in excess of its projected
liabilities and administrative requirements;
c. All claims of former creditors of USL and USL-SA were
discharged; as a result, such former creditors may look only
to the Reorganization Trust (and not to Janus or JIS) for
payment of amounts in respect of their discharged claims;
9
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 2-Organization (continued):
d. The interests of all holders of shares of the capital stock of
USL and USL-SA were extinguished and the former creditors of
USL and USL-SA became entitled to receive all of the shares of
capital stock issuable by Janus and JIS, except for shares
issuable to Janus and a subsidiary of Dyson-Kissner-Moran
("DKM"), a new Investor; shares of capital stock issuable to
such former creditors were initially issued to the
Reorganization Trust as recordholder for reissuance to such
creditors; and
e. The Reorganization Trust contributed $3,000,000 of USL and
USL-SA cash to capitalize Janus and JIS on February 23, 1990
and provided Janus and JIS with certain books and records, and
all tax attributes and tax benefits, of USL and USL-SA; it
also made cash contributions of approximately $7,491,000 and
$7,622,000 to the capital of Janus and JIS in 1997 and 1996,
respectively.
At the time the Plan was approved, Janus and JIS had no commercial
operations. However, they had substantial Federal net operating loss
carryforwards (see Note 11). Under the Plan, DKM purchased
approximately 36% of the Company's common stock and a warrant to
purchase an additional 9% of the Company's common stock for $3,000,000.
In addition, DKM was to control the Board of Directors of Janus and was
required to seek and assist the Company in the consummation of the
acquisition of one or more operating businesses while preserving the
Federal income tax attributes of Janus and JIS. However, DKM was not
able to assist the Company in consummating any acquisitions and, as a
result, the Company repurchased and redeemed all of DKM's interests in
Janus and JIS.
The Company obtained new management during 1995 and consummated the
acquisition of the oil and gas services operations in 1996 and the
hotel operations in 1997.
Note 3 -Summary of significant accounting policies:
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
10
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 3-Summary of significant accounting policies (continued):
Fresh-start accounting:
The Company adopted fresh-start accounting at the time of its
reorganization in February 1990 (see Note 2). The Company's
opening balance sheet consisted of $6,000,000 in cash and
capital stock. Accordingly, the reorganization value of the
Company approximated book value.
Principles of consolidation:
The unaudited consolidated financial statements include the
accounts of Janus and its majority-owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Cash equivalents:
Cash equivalents generally consist of highly liquid
investments with maturities of six months or less when
acquired.
Property and equipment:
Property and equipment is stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets.
Goodwill:
Goodwill, which represents the excess of the costs of acquired
businesses over the fair value of the net assets acquired at
the respective dates of acquisition, is amortized using the
straight-line method over the estimated useful lives of the
assets.
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of ("SFAS 121"). Under SFAS 121, impairment losses
on long-lived assets, such as property and equipment and
goodwill, are recognized when events or changes in
circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their
carrying value and, accordingly, all or a portion of such
carrying value may not be recoverable. Impairment losses are
then measured by comparing the fair value of assets to their
carrying amounts.
11
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 3-Summary of significant accounting policies (continued):
Deferred loan costs:
Costs incurred to obtain long-term financing are deferred and
amortized using the straight-line method (which approximates
the interest method) over the terms of the loans.
Revenue recognition:
The Company recognizes revenues from room and related services
and management fees on an accrual basis as earned. Food and
beverage revenues are recognized when goods are sold. Revenues
from discontinued engineering and wireline logging services
were also recognized on an accrual basis as earned.
Advertising costs:
The costs of advertising and promotion are expensed as
incurred.
Income taxes:
The Company accounts for income taxes pursuant to the asset
and liability method which requires deferred tax assets and
liabilities to be computed annually for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts
in the future based on enacted tax laws and rates applicable
to the periods in which the temporary differences are expected
to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount
expected to be realized. The income tax provision or credit is
the tax payable or refundable for the period plus or minus the
change during the period in deferred tax assets and
liabilities. Income tax credits attributable to benefits from
net operating loss carryforwards or other temporary
differences that existed at the time the Company adopted
fresh-start accounting are reflected as a contribution to
stockholders' equity in the period in which the tax benefits
are realized.
As explained in Note 2, the assets and liabilities of USL and
USL-SA were initially transferred to the Reorganization Trust
in February 1990. The Reorganization Trust is considered to be
a grantor trust for income tax purposes. Accordingly, any
taxable income or loss associated with the disposition of
assets and the settlement of liabilities by the Reorganization
Trust are recorded in the Federal and state income tax returns
of the Company; however, such assets and liabilities are not
presented in these consolidated financial statements.
12
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 3-Summary of significant accounting policies (continued):
Stock options:
In accordance with the provisions of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to
Employees, the Company will recognize compensation costs as a
result of the issuance of stock options based on the excess,
if any, of the fair value of the underlying stock at the date
of grant or award (or at an appropriate subsequent measurement
date) over the amount the employee must pay to acquire the
stock. Therefore, the Company will not be required to
recognize compensation expense as a result of any grants of
stock options at an exercise price that is equivalent to or
greater than fair value. The Company will also make pro forma
disclosures, as required by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation
("SFAS 123"), of net income or loss as if a fair value based
method of accounting for stock options had been applied, if
such amounts differ materially from the historical amounts.
Income (loss) per common share:
Effective December 31, 1997, the Company adopted the
provisions of Statement of Financial Accounting Standards No.
128, Earnings per Share ("SFAS 128"), which replaces the
presentation of "primary" and "fully-diluted" income (loss)
per common share required under previously promulgated
accounting standards with the presentation of "basic" and
"assuming dilution" income (loss) per common share.
Basic net income (loss) per common share is calculated by
dividing net income or loss, as adjusted for required
preferred stock dividends, by the weighted average number of
common shares outstanding during the period. The calculation
of diluted net income (loss) per common share is similar to
that of basic net income (loss) per common share, except that
the denominator is increased to include the number of
additional common shares that would have been outstanding if
all potentially dilutive common shares, principally those
issuable upon the exercise of stock options and warrants, were
issued during the period.
The Company's reported net income represents its net income
available to common shareholders for purposes of computing
both measures. The following reconciles shares outstanding at
the beginning of the year to average shares outstanding used
to compute both income per share measures:
13
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Shares outstanding at beginning of year 8,691,735 6,357,577
Average shares outstanding - basic 8,691,735 6,357,577
Effect of dilutive securities
Dilutive shares contingently
issuable upon the exercise of stock
options and warrants 223,600 500,000
------- -------
Average shares outstanding--assuming dilution 8,915,335 6,857,577
</TABLE>
Other recent accounting pronouncements:
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), and Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"), which could
require the Company to make additional disclosures in its
financial statements no later than for the year ending
December 31, 1998. SFAS 130 defines comprehensive income,
which includes items in addition to those reported in the
statement of operations, and requires disclosures about its
components. Management believes that the adoption of SFAS 130
will not have a material impact on the Company's disclosures.
SFAS 131 requires disclosures for each segment of a business
and the determination of segments based on its internal
management structure. Management is in the process of
evaluating whether SFAS 131 will require the Company to make
any additional disclosures.
Note 4-Acquisitions:
On April 24, 1997, the Company entered the hospitality business by
acquiring the following from affiliates of Louis S. Beck and Harry
Yeaggy (the "Sellers"): (i) seven hotels (of which six are wholly-owned
and one is owned by an 85%-owned partnership), (ii) a hotel management
company and substantially all of the assets thereof other than seven
management contracts and (iii) financial participations in the form of
mortgages on one additional hotel and a campground (the "Mortgages").
The hotels, the management company and the Mortgages are also referred
to herein as the "Hotel Group." The Sellers also own controlling
interests in other hotels, certain of which are managed by the
management company. Each
14
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 4-Acquisitions (Continued):
of the Sellers became an executive officer of the Company as of the
date of acquisition.
The consideration exchanged by the Company for the assets and
liabilities of the Hotel Group and the other direct acquisition costs
were comprised as follows:
<TABLE>
<CAPTION>
<S> <C>
Issuance of
10,451.88 shares of Series B preferred stock with a
liquidation preference and estimated fair value of $1,000
per share $10,451,880
3,799,999 shares of Janus common stock with an estimated
- - fair value of $3.25 per share 12,349,997
-----------
TOTAL VALUE OF SHARES ISSUED $22,801,877
Cash paid to the Sellers to repay short-term loans 793,803
Legal, accounting and other costs related to the purchase 1,007,424
-----------
Total purchase price to be allocated $24,603,104
-----------
</TABLE>
The acquisition was accounted for as a purchase and,
accordingly, the results of the Hotel Group have been included
in the accompanying unaudited consolidated statements of
operations subsequent to April 30, 1997 (the effective date of
the acquisition for accounting purposes). In addition, total
acquisition costs were allocated to the assets acquired and
liabilities assumed based on their estimated fair values on
the date of acquisition, with the excess of cost over such
fair values allocated to goodwill, as shown below:
15
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 4-Acquisitions (Continued):
<TABLE>
<CAPTION>
<S> <C>
Cash $79,994
Accounts receivable 230,011
Other current assets 217,024
Property and equipment 34,400,000
Mortgage notes receivable 5,758,282
Goodwill 6,820,406
Other assets 1,256,672
Accounts payable (579,115)
Other current liabilities (519,595)
Long-term debt (20,333,575)
Deferred tax liabilities (1,190,000)
Minority interest in the 85%-owned hotel Partnership (1,537,000)
-----------
Total purchase price allocated $24,603,104
-----------
</TABLE>
Although the Company has a substantial amount of estimated
available net operating loss carryforwards for Federal income
tax and alternative minimum tax purposes, the deferred tax
assets potentially available from such carryforwards have been
reduced by a valuation allowance due to uncertainties related
to their future realization. Accordingly, the amounts
allocated to goodwill and deferred tax liabilities shown above
in connection with the acquisition of the Hotel Group have
each been reduced by approximately $8,134,000, which is
equivalent to the reduction in the valuation allowance
attributable to the portion of the net operating loss
carryforwards that management estimates will be offset by
temporary differences attributable to the acquired net assets
of the Hotel Group.
The goodwill attributable to the acquisition of the Hotel
Group is being amortized based on an estimated useful life of
40 years.
16
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 4-Acquisitions (continued)
The following unaudited information shows the actual results
of continuing operations of the Company for the six months
ended June 30, 1998 and pro forma results of operations for
the six months ended June 30, 1997 as though the Hotel Group
had been acquired as of January 1, 1997. In each case, the
results of the discontinued oil and gas services operations
are excluded.
<TABLE>
<CAPTION>
June 30, 1998 Adjusted Pro Forma
June 30, 1997
-------------------------------------------------------
<S> <C> <C>
Revenues:
Hotel revenues:
Room and related services $4,964,447 $4,952,302
Food and beverage 792,853 751,575
Management fees 816,033 556,440
Other 134,824 106,272
-------------------------------------------------------
Total hotel revenues 6,708,157 6,366,589
Sales 0
-------------------------------------------------------
Total revenues 6,708,157 6,366,589
-------------------------------------------------------
Cost and expenses:
Direct hotel operating expenses
Room and related services 1,236,178 1,196,351
Food and beverage 666,202 617,638
Selling and general expenses 295,477 264,969
-------------------------------------------------------
Total direct hotel operating expense 2,197,857 2,078,958
Occupancy and other operating expenses 882,985 843,948
Selling, general and admin. expenses 2,094,008 2,007,522
Depreciation of property and equipment 698,471 605,165
Amortization of intangible assets 96,346 71,587
-------------------------------------------------------
Total costs and expenses 5,969,667 5,607,180
-------------------------------------------------------
Operating income (loss) 738,490 759,409
Other income (expense)
Interest income 638,043 327,425
Interest expense (924,987) (933,685)
-------------------------------------------------------
Income (loss) before income taxes 451,545 153,149
and minority interest
</TABLE>
17
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Credit for prior year state income tax refunds 0 57,257
Credit for prior year federal income tax refunds 261,215 0
Income (loss) before minority interest 712,760 210,406
Minority interest 1,095 (9,147)
-------------------------------------------------------
Net income (loss) 711,665 219,553
Less preferred dividend requirements 393,558 391,946
-------------------------------------------------------
Net income (loss) applicable to common stock 318,108 (172,393)
Net income (loss) per common share 0.04 -0.02
-------------------------------------------------------
Weighted average common shares outstanding 8,691,735 8,876,913
=======================================================
</TABLE>
In addition to combining the historical results of operations of the
Company (which did not have any active operations prior to the Hotel
Group acquisition other than the discontinued oil and gas services
operations not included above) and the historical pre-acquisition
results of operations of the Hotel Group, the pro forma results of
operations include adjustments that, among other things,
Reflect:
-- The elimination of the net revenues derived from management
contracts of the Hotel Group that were not acquired by the
Company;
-- Depreciation of property and equipment based on the fair values
of assets acquired;
-- Amortization of the additional goodwill arising from the Hotel
Group acquisition;
-- The net effects of changes to compensation and related expenses
based on revised lease agreements and expense sharing arrangements
with a related party and revised employment agreements;
18
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 4-Acquisitions (continued)
-- The provision for income taxes is based upon pro forma income from
continuing operations and the statutory Federal and state rates. Any
actual income tax credits attributable to benefits from net operating
loss carryforwards that existed at the time the Company adopted
fresh-start accounting will be reflected as a contribution to
stockholders' equity in the period in which the tax benefits are
realized; and
-- The effects of the issuance of shares of preferred and common stock as
part of the consideration for the acquisition on preferred stock
dividends and weighted average common shares
The unaudited pro forma results of operations shown above do not
purport to represent what the combined results of operations actually
would have been if the acquisition of the Hotel Group had occurred as
of January 1, l997 instead of the actual date of consummation or what
the results of operations would be for any future periods
On July 15, 1996, the Company commenced oil and gas services operations
when it acquired certain assets and liabilities of Pre-Tek Wireline
Service Company, Inc. ("PTWSC") and its wholly-owned subsidiary, K.F.E.
Wireline, Inc. ("KFE"), for consideration comprised of cash, common
stock and warrants. PTWSC and KFE are referred to collectively herein
as "Pre-Tek." The oil and gas services operations were discontinued in
December 1997.
The consideration exchanged by the Company for such assets and
liabilities and the other direct acquisition costs were comprised as
follows:
<TABLE>
<CAPTION>
<S> <C>
Cash payments to certain creditors and
former stockholders of Pre-Tek $605,413
Issuance of 268,368 shares of Janus common stock, with a fair value
per share of $2.75, and 500,000 warrants to purchase Janus common
stock, to stockholders and former stockholders of Pre-Tek
738,012
Return of 37,350 shares of Janus common
stock as a result of post-closing adjustments (102,713)
Other acquisition costs 182,092
----------
TOTAL $1,422,804
----------
19
</TABLE>
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 4-Acquisitions (continued):
The acquisition was accounted for as a purchase and, accordingly, the
results of Pre-Tek's operations have been included as discontinued
operations.
Unaudited pro forma information showing the results of operations for
the three months ended June 30, 1998 and 1997 of the oil and gas
services operations are not presented because such operations have been
discontinued.
Note 5-Mortgage notes receivable:
The Mortgages, which were acquired on April 24, 1997 in connection with
acquisition of the Company's hotel operations, are secured by a hotel
in Juno Beach, Florida and a campground in Kissimmee, Florida, both of
which are owned by entities controlled by the Sellers. The Sellers have
also personally guaranteed the Mortgages. The balances receivable at
June 30, 1998 consisted of the following:
Note secured by hotel property, with interest at
.5% above specified prime rate (an effective
rate of 9.0% at December 31, 1997) $2,164,240
Note secured by campground, with interest at 8% 3,457,306
Total long-term debt 5,621,546
Less current portion 128,254
----------
LONG-TERM PORTION, NET OF CURRENT PORTION $5,493,292
----------
The Mortgages are payable in monthly installments of principal and
interest through April 2003 and final installments of all remaining
principal and interest in May 2003.
Principal payments on the Mortgages in each of the five years
subsequent to December 31, 1997 are:
Year Ending
December 31 Amount
----------- ------
1998 $123,022
1999 133,708
2000 145,326
2001 157,958
2002 171,690
20
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 5-Mortgage notes receivable (continued):
The Company derived interest income of $237,160 from the Mortgages
during the period from January 1, 1997 to June 30, 1998.
Note 6-Property and equipment:
Property and equipment at June 30, 1998 and 1997 consisted of the
following:
Years of June 30, December 31,
Useful Life 1998 1997
----------- ---- ----
Land $6,035,000 $6,035,000
Hotels 30 26,942,000 26,942,000
Hotel furniture and fixtures 5 2,879,217 2,232,941
Equipment and vehicles 5 0 648,147
Other 5 10,483 11,724
--------------------------------
$35,866,700 $35,869,812
Less accumulated
depreciation and amortization
1,572,781 1,066,521
--------------------------------
Totals $34,293,919 $34,803,291
--------------------------------
Note 7-Long-term debt:
Long-term debt at June 30, 1998 consisted of the following:
Fixed rate mortgage notes payable in monthly
installments, including interest at rates ranging from
8.875% to 10%;
The mortgage notes mature from August 2000 through $10,590,904
January 2016
Variable rate mortgage notes payable in monthly installments,
including interest at rates varying with the prime commercial
Lending rate, rates on U.S. Treasury securities and other
defined indexes (the effective rates at December 31, 1997 ranged
from 8.73% to 9.5%); the mortgage notes mature from
August 1998 through April 2006 8,951,237
21
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Equipment notes with various maturities through December
2001 and interest at rates ranging from 8.98% to 15% 144,959
-----------
Total long-term debt 19,687,100
Less current portion 2,148,110
Long-term debt, net of current portion $17,538,990
-----------
Note 7-Long-term debt (continued):
Long-term debt is secured by the Company's property and equipment.
Principal payments in years subsequent to December 31, 1997 are as
follows:
Year Ending
December 31 Amount
----------- ------
1998 $2,112,215
1999 570,665
2000 620,790
2001 1,502,792
2002 2,717,123
Note 8-Commitments and contingencies:
Employment agreements:
During 1997, the Company entered into employment agreements
whereby it will be obligated to pay minimum salaries to four
of its executive officers, including each of the Sellers,
aggregating $760,000 during 1998 and 1999 and $250,000 in
2000.
Concentration of credit risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash in
banks, accounts receivable and the Mortgages.
22
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 8-Commitments and Contingencies (continued):
The Company maintains its cash balances in bank deposit
accounts which, at times, may exceed the Federal Deposit
Insurance Corporation coverage limits thereby exposing the
Company to credit risk. The Company reduces its exposure to
credit risk by maintaining such deposits with financial
institutions which management believes are high quality.
Exposure to credit risk with respect to trade receivables is
limited by the short payment terms and, generally, the low
balances applicable to such instruments and the Company's
routine assessment of the financial strength of its customers.
Exposure to credit risk with respect to the Mortgages is
limited because they are secured by real estate with an
estimated market value in excess of the mortgage balance.
Litigation:
The Company is a party to various legal proceedings. In the
opinion of management, these actions are routine in nature and
will not have a material adverse effects on the Company's
consolidated financial statements in subsequent years.
Note 9-Income taxes:
For financial statement purposes, there was no net provision for
Federal income taxes at June 30, 1998 and 1997 because all of the tax
loss attributes referred to above have been fully reserved through a
valuation allowance rather than reflected as deferred tax as deferred
tax assets due to the lack of a historical taxable income stream and
the uncertainties referred to above. Future benefits, if any, to be
realized from the utilization of the net operating loss carryforwards
generated prior to the Company's reorganization in February 1990 will
be reported as an increase in additional paid-in capital and not as a
credit to results of operations.
Additionally, Section 382 of the Internal Revenue Code limits the
amounts of net operating loss carryforwards usable by a corporation
following a change of more than 50% in the ownership of the corporation
during a three-year period. As of June 30, 1998 management believes
that such a change in ownership has not occurred.
During the period ended June 30, 1998, the Company received $261,215 in
refunds from the Internal Revenue Service (the "Service") attributable
to amended returns filed for previous years, plus interest of $154,280.
The Company recorded such refunds as income upon receipt as such
amended returns had been reviewed by the Service and accepted.
23
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 10-Discontinued operations:
In December 1997, the Company adopted a plan to discontinue and dispose
of the oil and gas services operations that it had acquired in July
1996 (see Note 4). Accordingly, the results of the oil and gas services
operations through December 31, 1997 and the estimated loss to be
incurred in connection with the disposal have been classified as
separate components of discontinued operations. See audited
consolidated financial statements filed as part of Form 10-KSB for the
year ended December 31, 1997. Management has completed the disposal
through the sale of the stock of PTWSC as of March 31, 1998.
Pre-Tek operating losses from January 1 to March 31, 1998 totaled
$42,787. The gain from the sale of stock totaled $14,161. The net
effect of the operating loss and gain on sale of stock totaling $18,626
reduced the accrual from discontinued operations at March 31, 1998 to
$136,186.
Note 11-Fair value of financial instruments:
The Company's financial instruments at June 30, 1998 and 1997 consisted
of cash, accounts receivable, mortgage notes receivable, accounts
payable and fixed and variable rate mortgage and equipment notes
payable. In the opinion of management, (i) cash, accounts receivable
and accounts payable were carried at values that approximated their
fair values because of their short-term maturities and (ii) mortgage
notes receivable and mortgage and equipment notes payable were carried
at values that approximated their fair values because they had interest
rates equivalent to those currently prevailing for financial
instruments with similar characteristics.
Note 12-Minority interest:
The Company owns an interest of approximately 90% in JIS and an
interest of 85% in a hotel partnership that it acquired as part of the
acquisition of the Hotel Group during 1997 (see Note 4). The balance of
the minority interest in these consolidated subsidiaries at June 30,
1998 and the changes in the minority interest are set forth below:
JIS HOTEL PARTNERSHIP TOTAL
------------------ -------------------- ----------------
Balance 1/1/98 $91,114 $1,597,856 $1,688,970
Net Income (loss) -0- 1,095 1,095
------------------ -------------------- ----------------
Balance at 3/31/98 $91,114 $1,598,951 $1,690,065
24
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 13-Subsequent Event:
On August 14, 1998, the Company, through four limited liability
companies, acquired four hotels located in Ohio, as follows:
(i) Holiday Inn, Independence is a 364-room full-service hotel located
near downtown Cleveland and the Hopkins International Airport at the
intersection of Interstate Highway 77 and State Route 480. The purchase
price was $21,807,000.
(ii) Holiday Inn, Hudson is a 289-room full-service hotel located off
Exit 189 of the Ohio Turnpike between Cleveland and Akron and about 15
miles from Sea World, a visitor attraction. The purchase price was
$13,369,350.
(iii) Holiday Inn, North Canton is a 194-room full-service hotel
located three miles from downtown Canton off Interstate Highway 77. The
purchase price was $5,454,250.
(iv) Comfort Inn, West Montrose is a 132-room limited feature hotel
located north of Akron off Exit 137 of Interstate 77. The purchase
price was $3,479,900.
The selling entities were commonly controlled. The total acquisition
price was $44,110,500 in cash and was financed by borrowings from
Amresco Capital L.P. in substantially the total amount of the
acquisition prices, secured by the acquired properties. The four loans
are cross-defaulted and cross-collateralized, but otherwise of limited
recourse to the Company. The financing is for a term of ten years,
based upon a 25-year amortization schedule, at a fixed interest rate
of 8.09% per annum.
25
<PAGE>
JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April 24, 1997, Janus American Group, Inc. ("Janus") consummated the
acquisition of a 100% equity interest in six hotels and an 85% equity interest
in a seventh hotel (the "Hotels"), a 100% equity interest in a hotel management
company (the "Management Company") and substantially all of the assets thereof
other than seven management contracts and 100% interests in mortgages (the
"Mortgages") on one additional hotel and a campground, all of which were owned
by corporations and partnerships that were, effectively, wholly-owned or
controlled by Louis S. Beck and Harry Yeaggy (the "Sellers") during the year
ended December 31, 1996 and the period from January 1, 1997 through the date of
acquisition. The Hotels, the Management Company and the Mortgages are referred
to herein as the "Beck-Yeaggy Group." On July 15, 1996, the Company acquired the
oil and industry services business of Pre-Tek Wireline Service Company, Inc. and
its wholly-owned subsidiary ("Pre-Tek"). Janus has accounted for the
acquisitions of the Beck-Yeaggy Group and Pre-Tek pursuant to the purchase
method of accounting in its historical financial statements based on effective
acquisition dates of April 30, 1997 and July 15, 1996, respectively. It was
determined by management to discontinue and dispose of the oil and gas services
operations at December 31, 1997. The estimated loss was accrued. Based upon the
above, the pro forma was adjusted to eliminate the effect of Pre-Tek from
operations.
The accompanying adjusted unaudited pro forma condensed statement of operations
for the three months ended June 30, 1997 combines the historical consolidated
statement of operations of Janus and its subsidiaries for the three months ended
June 30, 1997 (including the Beck-Yeaggy Group for the period from January 1,
1997 to June 30, 1997 as if the acquisition was consummated as of January 1,
1997, and the elimination of Pre-Tek for the entire period).
The accompanying unaudited pro forma condensed combined financial statements are
based on the assumptions and adjustments described in the accompanying notes
which management believes are reasonable. The unaudited pro forma condensed
consolidated financial statements do not purport to represent what the combined
results of operations actually would have been if the acquisition of Beck
Yeaggy-Group referred to above had occurred as of January 1, 1997 instead of the
actual date of consummation or what the financial position and results of
operations would be for any future periods. The unaudited pro forma condensed
combined financial statements and the accompanying notes should be read in
conjunction with the audited and unaudited historical financial statements of
Janus and its subsidiaries, the Beck-Yeaggy Group and Pre-Tek included elsewhere
herein and in the Form 10-KSB for the year ended December 31, 1997.
26
<PAGE>
<TABLE>
JANUS AMERICAN GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTED FOR DISCONTINUED OPERATIONS
FOR SIX MONTHS ENDED JUNE 30.1998 AND JUNE 30, 1997
<CAPTION>
Adjusted Pro Forma Pro Forma Pre-tek Janus Pro Forma
June 30, June 30, June 30, Consolidated Hotel Operations
1998 1997 1997 June 30,1997 at June 30,1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Hotel revenues:
Room and related services $4,964,447 $4,952,302 $4,952,302 $4,952,302
Food and beverage $792,853 $751,575 $751,575 $751,575
Management fees $816,033 $556,440 $556,440 556,440
Other $134,824 $106,272 $106,272 $106,272
-------------------------------------------------------------------------
Total hotel revenues $6,708,157 $6,366,589 $6,366,589 $0 $6,366,589
Sales $0 $731,229 $731,229 $0
-------------------------------------------------------------------------
Total revenues $6,708,157 $6,366,589 $7,097,818 $731,229 $6,366,589
-------------------------------------------------------------------------
Cost and expenses:
Direct hotel operating expenses:
Room and related services $1,236,178 $1,196,351 $1,196,351 $1,196,351
Food and beverage $666,202 $617,638 $617,638 $617,638
Selling and general expenses $295,477 $264,969 $264,969 $264,969
-------------------------------------------------------------------------
Total direct hotel operating expense $2,197,857 $2,078,958 $2,078,958 $2,078,958
Occupancy and other operating expense $882,985 $843,948 $1,417,947 $573,999 $843,948
Selling, general and administrative expenses $2,094,008 $2,007,522 $2,209,922 $202,400 $2,007,522
Depreciation of property and equipment $698,471 $605,165 $668,231 $63,066 $605,165
Amortization of intangible assets $96,346 $71,587 $101,299 $29,712 $71,587
-------------------------------------------------------------------------
Total costs and expenses $5,969,667 $5,607,180 $6,476,357 $869,177 $5,607,180
-------------------------------------------------------------------------
Operating income (loss) $738,490 $759,409 $621,461 ($137,948) $759,409
Other income (expense)
Interest income $638,043 $327,425 $343,895 $16,470 $327,425
Other income $0
Interest expense ($924,987) ($933,685) ($935,420) ($1,735) ($933,685)
$0
Income (loss) before state income taxes and
minority interest $451,545 $153,149 $29,936 ($123,213) $153,149
Credit for prior year federal income tax refunds $261,215
Credit for prior year state income tax refunds $57,257 $57,257 $57,257
-------------------------------------------------------------------------
$0
lncome (loss) before minority interest $712,760 $210,406 $87,193 ($123,213) $210,406
$0
Minority interest $1,095 ($9,147) ($9,147) ($9,147)
-------------------------------------------------------------------------
Net income (loss) $711,665 $219,553 $96,340 ($123,213) $219,553
$0
Less preferred dividend requirements $393,558 $391,946 $391,946 $391,946
-------------------------------------------------------------------------
$0
Net income (loss) applicable to common stock $318,108 ($172,393) ($295,606) ($123,213) ($172,393)
Net income (loss) per common share-Basic 0.04 -0.02 -0.03 -0.02
=========================================== ===========
Net income (loss) per common share-Assuming dilution 0.04 -0.02 -0.03
===========================================
Weighted average common shares outstanding 8,691,735 8,876,913 8,876,913 8,876,913
=========================================== ===========
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
JANUS AMERICAN GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTED FOR DISCONTINUED OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Adjusted Pro Forma
3 months ended 3 months ended
June 30, 1998 June 30, 1997
------------------------------------
<S> <C> <C>
Revenues:
Hotel revenues:
Room and related services $3,127,780 $3,032,604
Food and beverage $499,807 $456,796
Management fees $440,902 $282,131
Other $104,296 $72,206
------------------------------------
Total hotel revenues $4,172,785 $3,843,737
Sales $0 $0
------------------------------------
Total revenues $4,172,785 $3,843,737
------------------------------------
Cost and expenses:
Direct hotel operating expenses:
Room and related services $712,996 $678,536
Food and beverage $414,022 $347,676
Selling and general expenses $168,327 $135,023
------------------------------------
Total direct hotel operating expense $1,295,345 $1,161,235
Occupancy and other operating expenes $461,637 $432,959
Selling, general and administrative expenses $1,174,672 $1,036,445
Depreciation of property and equipment $356,747 $309,132
Amortization of intangible assets $45,364 $37,753
------------------------------------
Total costs and expenses $3,333,765 $2,977,524
------------------------------------
Operating income (loss) $839,020 $866,213
Other income (expense)
Interest income $391,594 $149,240
Other income $ 0
Interest expense ($466,565) ($482,806)
------------------------------------
Income (loss) before state income taxes and
minority interest $764,048 $532,647
Credit for prior year federal income tax refunds $261,215
Credit for prior year state income tax refunds $0 $57,257
------------------------------------
Income (loss) before minority interest $1,025,263 $589,904
Minority interest $40,846 $27,663
------------------------------------
Net income (loss) $984,417 $562,241
Less preferred dividend requirements $195,975 $195,973
------------------------------------
Net income (loss) applicable to common stock $788,443 $366,268
Net income (loss) per common share-Basic 0.09 0.04
====================================
Net income (loss) per common share-Assuming dilution 0.09 0.04
====================================
Weighted average common shares outstanding 8,691,735 8,876,913
====================================
</TABLE>
28
<PAGE>
Purchases of the Beck-Yeaggy Group and Pre-Tek:
Information with respect to the cost incurred by Janus to purchase the
Beck-Yeaggy Group on April 30, 1997 (the effective date of the acquisition used
for accounting purposes) and the allocation of such costs in accordance with the
purchase method of accounting is set forth in Note 4 of the notes to the
unaudited condensed consolidated financial statements of Janus included
elsewhere herein.
Information with respect to the cost incurred by Janus to purchase Pre-Tek on
July 15, 1996 is set forth in Note 4 of the notes to the unaudited condensed
consolidated financial statements of Janus included elsewhere herein.
Pro Forma Adjustments to the Unaudited Condensed Consolidated Statements of
Operations for the three months ended June 30, 1997.
(a) To eliminate the net revenues derived from management contracts of the
Beck-Yeaggy Group that were not acquired by Janus.
(b) To record the additional cost to be incurred as a result of the revisions
to the agreement with Hospitality Employee Leasing Program, Inc. that
became effective upon the consummation of the acquisition of the
Beck-Yeaggy Group.
(c) To record the net effects of changes to compensation and related expenses
based on revised employment and lease agreements that became effective upon
the consummation of the acquisition of the Beck-Yeaggy Group and the
elimination of the costs of consultants who will no longer be employed and
certain other nonrecurring costs.
(d) To record the effects arising from the allocation of the purchase price for
the acquisition of the Beck-Yeaggy Group on historical depreciation and
amortization of property and equipment based on the fair values and
estimated useful lives of the assets required.
(e) To record the effects arising from the allocation of the purchase price for
the acquisition of the Beck-Yeaggy Group on historical amortization of
goodwill based on a minimum estimated benefit period for goodwill arising
from the acquisition of the Beck-Yeaggy Group of 40 years.
(f) To adjust state income tax provisions and credits based on the pro forma
income or loss before income taxes and related carryforwards applicable to
each state. No provisions or credits for Federal income taxes have been
recorded on the pro forma net income or loss before income taxes based on
the availability of net operating loss carryforwards due to the
uncertainties related to their future use (see Note 5 of the notes to the
condensed consolidated financial statements herein).
(g) To record the minority interest in the net income (loss) of the 85%-owned
hotel.
29
<PAGE>
(h) To record the dividends attributable to the shares of Series B preferred
stock issued as part of the consideration paid to the Sellers.
30
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion of the Company's historical results of
operations, changes in liquidity and capital resources and liquidity and capital
resources as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 should be read in conjunction with the Unaudited Condensed Consolidated
Financial Statements of the Company and the notes thereto and the Unaudited Pro
Forma Condensed Consolidated Financial Statements Adjusted for Discontinued
Operations, of Janus American Group, Inc. and Subsidiaries and the notes thereto
included elsewhere herein. The term "Company" means Janus American Group, Inc.
("Janus") collectively with its subsidiaries JI Subsidiary, Inc. ("JIS"),
Pre-Tek Wireline Service Company, Inc. ("Wireline") and KFE Wireline, Inc.
("KFE"). References to the operations of "Pre-Tek" in this discussion are to the
combined operations of Wireline and Wireline's subsidiary, KFE.
Janus and JIS are the successors to United States Lines, Inc. ("U.S.
Lines") and United States Lines (S.A.), Inc. ("U.S. Lines (S.A)"), which emerged
from a Chapter 11 bankruptcy in 1990. The Plan of Reorganization, which was
approved by the creditors of U.S. Lines and U.S. Lines (S.A.) and the United
States Bankruptcy Court for the Southern District of New York, contemplated that
Janus and JIS would seek out acquisition opportunities for each of the
reorganized companies in order to utilize their respective anticipated available
net operating loss carryforwards ("NOLs") for Federal income tax purposes.
The Company acquired the business of Pre-Tek, an oil and gas
engineering services and wireline logging company based in Bakersfield,
California, in July 1996. On April 24, 1997, the Company acquired, from
affiliates of Louis S. Beck ("Beck") and Harry Yeaggy ("Yeaggy"), certain assets
relating to the hospitality business comprised of (i) six hotels and an 85%
partnership interest in a partnership which owns a hotel (collectively, the
"Owned Hotels"), (ii) a hotel management company, with 21 hotels under
management inclusive of the Owned Hotels (hereinafter the hotels which are
managed, but not owned by the Company, are referred to as the "Managed Hotels"
and the Owned Hotels and the Managed Hotels are collectively referred to as the
"Hotels"), (iii) a management fee sharing arrangement with Summit Hotel
Management Company and (iv) two loans, one of which is secured by a first
mortgage on a hotel and the other of which is secured by a first mortgage on a
campground and both of which are personally guaranteed by Messrs. Beck and
Yeaggy (the acquired businesses and assets are collectively the "Beck-Yeaggy
Group"). Management is diligently pursuing a program for additional acquisitions
through the use of a combination of cash, capital stock and, when necessary,
borrowing.
In December 1997, the Company adopted a plan to discontinue and dispose
of the oil and gas services operations that it had acquired in July 1996. See
Note 4 to the Unaudited Condensed Consolidated Financial Statements included
elsewhere herein. Accordingly, the results of the oil and gas services
operations through December 31, 1997 and the estimated loss to be incurred in
31
<PAGE>
connection with the disposal were classified as separate components of
discontinued operations at December 31, 1997. See Consolidated Statements of
Operations included in the Company's Report on Form 10-KSB for the year ended
December 31, 1997. Management has completed the disposal through the sale of the
stock of Pre-Tek to management of Pre-Tek as of March 31, 1998.
HISTORICAL AND PRO FORMA RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30,
1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
The acquisition of the Beck-Yeaggy Group and Pre-Tek were accounted for
as purchases and, accordingly, the Company's historical results of operations
for the six months ended June 30, 1998 and 1997 include the results of
operations of the Beck-Yeaggy Group for the six months ended June 30, 1998 and
subsequent to April 30, 1997 (the effective date of acquisition for accounting
purposes) and Pre-Tek for the six months ended June 30, 1997 subject to the
effect of discontinued operations as estimated at December 31, 1997. See Note 10
to the Unaudited Condensed Consolidated Financial Statements included elsewhere
herein. Accordingly, the Company's historical results of operations for the six
months ended June 30, 1998 are not directly comparable to those for the six
months ended June 30, 1997.
To present more comparable information, adjusted unaudited pro forma
combined results of operations for the six months ended June 30, 1998 and 1997
are set forth herein. The adjusted unaudited pro forma results of operations
sets forth the actual results of continuing operations of the Company for the
six months ended June 30, 1998 as compared to pro forma results of operations
for the six months ended June 30, 1997, as though the Beck-Yeaggy Group had been
acquired as of January 1, 1997. In each case, the results of the discontinued
oil and gas services operations are excluded.
The pro forma combined net income of the Company was $318,198 for the
six months ended June 30, 1998 as compared to a net loss of $172,393 during the
same period of 1997. The difference was primarily the result of increases in
interest income and management fee income in addition to federal income tax
refunds totaling $261,215.
Room revenue remained stable in the six months ended June 30, 1998 as
compared to the six month period in the prior year. However, an average rate
increase of $1.70 from $45.26 in 1997 to $49.96 for 1998 was offset by an
occupancy percentage decrease of 1.59% in 1998 to 60.20%, from 61.79% in 1997.
Management fee income increased from $556,440 in 1997 to $816,033 in
1998 attributable to: (i) an increase in room revenue at the Managed Hotels
where the management fees are calculated as a percentage of room revenues; (ii)
additional management contracts over the same period in the prior year; and
(iii) the Company's receipt of payment of incentive management fees upon the
sale of certain Managed Hotels by such hotels' owners.
32
<PAGE>
Other hotel related revenues increased to $134,824 in 1998 from
$106,727 in 1997 as a result of additional ticket sales for the Kings Dominion
Amusement Park at Best Western Kings Quarters.
Direct hotel operating expenses increased by $118,899 from $2,078,958
in 1997 to $2,197,857 in 1998. Direct room and related services costs increased
as labor costs increased. Food and beverage costs increased as a result of
increased food and beverage sales which led to higher labor costs partially
offset by lower food costs.
Selling and general expenses increased by $30,508 from $264,969 in 1997
to $295,477 in 1998 because of increased outdoor advertising.
Occupancy and other operating expenses increased to $882,985 in 1998
from $843,949 in 1997. The increase was the result of payroll expense increases
due to renovation programs commenced in the second quarter.
Selling, general and administrative expenses increased $86,486 to
$2,094,008 in 1998 from $2,007,522 in 1997 as a result of increased compensation
expenses and professional fees for legal and accounting services.
Depreciation and amortization expense increased by $93,306 in 1998 from
$605,165 in 1997 as a result of depreciation expense on 1997 and 1998
improvements.
Interest and other income increased $571,833 to $899,258 in 1998 from
$327,425 in 1997 as the amount of funds invested increased over the same period
in the prior year as a result of federal income tax refund and interest thereon.
Interest expense decreased from $933,685 in 1997 to $924,987. The
decrease was a combination of interest rate increases on variable debt and the
offsetting interest expense deduction as a result of normal amortization.
The charges to operations for minority interest increased by $10,242 to
$1,095 in 1998 from ($9,147) in 1997 as a result of increased profits from Best
Western Kings Quarters.
HISTORICAL AND PRO FORMA RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30,
1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
The pro forma combined net income of the Company was $788,443 for the
three months ended June 30, 1998 as compared to $366,268 during the same period
of 1997. The increase in net income was primarily the result of increases in
interest and management fee income and federal income tax refunds from prior
years totaling $261,215.
Room revenue increased by $95,176 in the three months ended June 30,
1998 as compared to the three-month period in the prior year. However, an
average rate decrease of
33
<PAGE>
.19% from $51.15 in 1997 to $50.96 in 1998 was offset by an occupancy percentage
increase of 2.4% in 1997 to 71.1% in 1998.
Management fee income increased from $282,131 in the three months ended
June 30, 1997 to $440,902 in the three months ended June 30, 1998 attributable
to: (i) an increase in room revenues at the Managed Hotels where the management
fees are calculated as a percentage of room revenues, (ii) additional management
contracts over the same period in the prior year and (iii) the Company's receipt
of payment of incentive management fees upon the sale of certain managed hotels
by such hotels' owners.
Other hotel related revenues increased to $104,296 from $72,206 in 1997
as a result of additional ticket sales for the Kings Dominion Amusement Park.
Direct hotel operating expenses increased by $134,110 from $1,161,235
for the three months ended June 30, 1997 to $1,295,345 for the three months
ended June 30, 1998. Direct room and related services costs increased as labor
costs increased. Food and beverage costs increased as a result of increased food
and beverage sales which led to higher labor costs partially offset by lower
food costs. Selling and general expenses increased because of increased outdoor
advertising.
Occupancy and other operating expense increased to $461,637 in 1998
from $432,959 in 1997. The increase was the result of payroll expense increases
due to renovation programs commenced during the three months ended June 30,
1998.
Selling, general and administrative expenses increased $138,227 to
$1,174,672 for the three months ended June 30, 1998 from $1,036,445 for the
three months ended June 30, 1997, as a result of increased compensation expenses
and professional fees for legal and accounting services.
Depreciation and amortization expense increased by $47,615 as a result
of depreciation expense on 1997 and 1998 improvements.
Interest income increased $242,354 to $391,594 in the three months
ended June 30, 1998 from $149,240 for the three months ended June 30, 1997 as
the amount of funds invested increased and interest income was received on the
federal income tax refund.
Interest expense decreased by $16,241 as the effect of principal
amortization more than offset interest rates increases on variable rate debt.
Minority interest increased by $13,183 from $27,663 for the three
months ended June 30, 1997 to $40,846 for the three months ended June 30, 1998,
as a result of increased profits from Best Western Kings Quarters.
34
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES AT JUNE 30, 1998
The following discussion reflects the liquidity and capital resources
of the Company. The Company's principal sources of liquidity are cash on hand
(including escrow deposits and replacements reserve), cash from operations,
earnings on invested cash and, when required, principally in connection with
acquisitions, borrowings (consisting primarily of loans secured by mortgages on
real property owned or to be acquired by the Company). The Company's continuing
operations are funded through cash generated from its hotel operations.
Acquisitions of hotels are expected to be financed through a combination of cash
on hand, internally generated cash, issuance of equity securities of Janus and
borrowings, some of which is likely to be secured by assets of the Company. The
Company has no committed lines of credit and there can be no assurance that
credit will be available to the Company or if available that such credit will be
available on terms and in amounts satisfactory to the Company. The ability of
the Company to issue its common or preferred stock is materially restricted by
the requirements of the Internal Revenue Code of 1986, as amended, if the
Company wishes to preserve its net operating loss carryforwards.
At June 30, 1998, the Company had $11,263,579 in cash and cash
equivalents. Included in the total is restricted cash of $218,342 consisting of
$41,238 for the redemption of preferred stock of JIS and $177,104 for real
estate tax escrow accounts.
During the six months ended June 30, 1998, the Company invested
approximately $645,000 in capital improvements in connection with the Owned
Hotels. The Company plans to spend an additional $870,000 on such capital
improvements over the remaining six months of 1998.
Capital for improvements to Owned Hotels has been and is expected to be
provided by a combination of internally generated cash and, if necessary and
available, borrowings. The Company expects to spend annually approximately 4% to
5% of revenues from Owned Hotels for ongoing capital expenditures in each year.
The Company believes, based on its operating experience, that these types of
capital investments will enhance the competitive position of the Owned Hotels
and thereby enhance the Company's competitive position. Changes in the
competitive environment for a specific Owned Hotel may dictate higher or lower
capital expenditures.
The Company maintains a number of commercial banking relationships but
does not currently have committed lines of credit. It is in active negotiations
with lending institutions which might extend credit facilities to the Company
for capital purposes including capital that might be required for the
acquisition of additional hotels or management contracts. There can be no
assurance such negotiations will be successful.
The Company anticipates that it will be able to secure the capital
required to pursue its acquisition program through a combination of borrowing,
internally generated cash and utilization of its common and/or preferred stock
to the extent such utilization does not jeopardize the Company's NOLs. There can
be no assurance however that the Company will be able to
35
<PAGE>
negotiate sufficient borrowings to accomplish its acquisition program on terms
and conditions acceptable to the Company, or at all. Further, any such
borrowings may contain covenants that impose limitations on the Company which
could constrain or prohibit the Company from making additional acquisitions as
well as its ability to pay dividends or to make other distributions, incur
additional indebtedness or obligations or to enter into other transactions which
the Company may deem beneficial. Additionally, factors outside of the Company's
control could affect its ability to secure additional funds on terms acceptable
to the Company. Those factors include, without limitation, any increase in the
rate of inflation and/or interest rates, localized or general economic
dislocations, an economic down-turn and regulatory changes constricting the
availability of credit.
The Company has benefited and management believes that the Company will
continue to benefit as the recipient of moneys disbursed by the Reorganization
Trust as the Reorganization Trust has funds in excess of its reasonably required
reserves and projected operating expenses. There is no objective formula to
determine the extent to which Reorganization Trust assets exceed projected
liabilities and administrative requirements thereby making additional cash
available for contribution to the Company. However, it is management's belief
that there will be further contributions is based upon the decrease of the
Reorganization Trust's administrative expenses through reductions in personnel
and office space, which is related to the decreasing volume of unsettled claims
of former unsecured creditors of U.S. Lines and U.S. Lines (S.A.). The amount of
excess cash available for contribution to the Company will also be dependent
upon the remaining duration of Reorganization Trust activity necessary to
resolve outstanding claims, particularly the asbestos and other late-manifesting
personal injury claims, and the amount of professional fees associated with this
activity. Accordingly, no assurance can be given as to the amount or timing of
additional contributions from the Reorganization Trust, if in fact there are any
additional contributions.
The Company's long-term debt at June 30, 1998 totals $19,687,100.
Mortgage debt totals $19,542,141, which consists of $10,590,904 in fixed rate,
fully self-amortizing mortgage loans and $8,951,237 in adjustable rate (3-5 year
adjustment period) mortgage loans. Such adjustable rate loans have maturity
dates at various dates through April 2006. Interest rates on mortgage debt range
from 8.875% to 10.00% with a weighted average interest rate of 9.3% effective at
June 30, 1998. The approximate scheduled repayments of principal on the
long-term debt of the Company are: from June 30, 1998 through December 31, 1998
- -- $1,820,790; 1999 -- $570,665; 2000 -- $620,790; and 2001 -- $1,502,792.
Management of the Company currently believes that the cash flow from the
Company's hotel operations will be sufficient to make the required amortization
payments. Balloon payments required to be made at the maturity of the
non-self-amortizing loans are expected to be made from cash on hand at the time
or from the proceeds of refinancing. There can be no assurance that the Company
will be able to obtain financing, or financing on terms satisfactory to it.
Seasonality. Demand at many of the hotels is affected by seasonal
patterns. Demand for hotel rooms in the industry generally tends to be lower
during the first and fourth quarters and higher in the second and third
quarters. Accordingly, the Company's revenues reflect this seasonality.
36
<PAGE>
YEAR 2000 ISSUES
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and has initiated an
implementation plan to resolve the issue. The Year 2000 problem is the result of
computer programs being written using the two digits rather than four to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations. The Company
presently believes that, with modifications to existing software and converting
to new software, the Year 2000 problem will not pose significant operational
problems for the Company's computer systems as so modified and converted. The
Company also relies on computer-based services provided by third parties, such
as hotel reservations systems maintained by hotel franchisors. The Company is in
the process of determining whether these third parties have implemented Year
2000 plans. At present, the Company does not expect the Year 2000 problem to
have a material effect on its financial position or results of operations.
However, if the Company's own modifications and conversions , or those by third
parties, are not completed timely, the Year 2000 problem may have a material
impact on the financial position or operations of the Company.
FORWARD LOOKING STATEMENTS
When used in this and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will likely result," "expects," "plans," "will
continue," "is anticipated," "estimated," "project" or "outlook" or similar
expressions (including confirmations by an authorized executive officer of the
Company of any such expressions made by a third party with respect to the
Company) are intended to identify forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, each of which speak only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company has no obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
37
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
10.20 Consulting Agreement by and between Janus American
Group, Inc. and The Cornerstone Company
10.21 Purchase and Sale Agreement between Galburton Inn,
Inc. and Janus American Group, Inc.
10.22 Purchase and Sale Agreement between West Montrose
Properties and Janus American Group, Inc.
10.23 Purchase and Sale Agreement between North Canton
Operating Corp., Canton North Properties and Janus
American Group, Inc.
10.24 Purchase and Sale Agreement between Rockside Road
Operating Corp., Rockside Road Properties and Janus
American Group, Inc.
27.2 Financial Data Schedule
(B) Reports on Form 8-K:
SIGNATURE
April 16, 1998--Reporting a change in the Company's certifying
accountant.
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: August 14, 1998 JANUS AMERICAN GROUP, INC.
By: /s/ James E. Bishop
-------------------------------------
James E. Bishop, President
/s/ Richard A. Tonges
-------------------------------------
Richard A. Tonges, Treasurer and
Vice President of Finance (Principal
Financial and Accounting Officer)
38
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is entered into this ____ day
of July, 1998, by and between JANUS AMERICAN GROUP, INC., a Delaware corporation
("Janus"), and THE CORNERSTONE COMPANY, DEVELOPERS AND OPERATORS OF INNS, HOTELS
AND RESORTS, an Ohio corporation ("Cornerstone").
RECITALS
A. Janus has this day entered into a series of Purchase and Sale Agreements
(the "Affiliated Sale Agreements") with various affiliates of Cornerstone (the
"Affiliates") which, among other things, provide for the acquisition by Janus of
the assets of such Affiliates comprising four (4) separate and discreet hotel
properties (the "Hotels").
B. Cornerstone is and has been responsible for the direction of the
management and affairs of the Affiliates and of the Hotels.
C. Janus desires to retain the continuing services of Cornerstone following
its acquisition of the assets comprising the Hotels, and to also retain the
benefit of Cornerstone's community, labor and governmental relations to aid in
the transition of ownership of the Hotels from the Affiliates to Janus.
D. Janus and Cornerstone desire to enter into a consulting arrangement on
the terms and conditions as hereinafter set forth, and as is required by the
Affiliated Sale Agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
1. Term of Consultation. The term of this Agreement shall commence on the
date hereof, and shall terminate forty-eight (48) months from and after the date
hereof (the "Term of Consultation").
2. Obligations of Cornerstone. Cornerstone's obligations hereunder shall be
to serve Janus in a consulting capacity on an as-needed basis as determined and
requested by the Board of Directors of Janus, or their designee during the Term
of Consultation, with regard to employee, labor and community relations and
governmental affairs related to the transition of ownership of the Hotels to
Janus, and the successful continuation of the business of the Hotels.
Cornerstone shall not be required to render any consulting services hereunder
outside the presently existing service areas of the Hotels. Cornerstone shall
not take any action against the best interests of Janus during the Term of
Consultation. At no time during the Term of Consultation shall Cornerstone hold
himself out as being employed by or otherwise affiliated
<PAGE>
with Janus or any of its subsidiaries or affiliates, except in his capacity as a
consultant pursuant hereto.
Consulting Fee.
(a) For Cornerstone's advisory and consulting services hereunder,
Janus shall pay him a consulting fee on the last day of each month during
the Term of Consultation in the amount of Twenty Thousand Eight Hundred
Thirty-three and 34/100 Dollars ($20,833.34) (the "Consulting Fee").
(b) It is understood that the inability of Cornerstone to render the
services contemplated herein to Janus by reason of temporary or permanent
illness, disability or incapacity of its employees, directors or officers
will not be considered a failure to perform Cornerstone's services
hereunder or constitute a breach or default of Cornerstone's agreement as
set out herein.
4. Independent Contractor. Cornerstone and its officers, directors and
employees shall be independent contractors for purposes of this Agreement and in
connection therewith Cornerstone: (a) shall determine and establish the work
hours and determine the work location of it and its employees; (b) shall not be
required to follow specific instructions in rendering consulting services, but
shall utilize its employees' own knowledge, skill and technical know-how; (c)
shall pay any business and travel expenses incurred by its officers, directors
and employees; and (d) shall be free to enter into employment or consulting
agreements with third parties, but only to the extent such agreements do not
cause Cornerstone to violate or breach any other term of this Agreement or other
executory agreements between Cornerstone and Janus and/or any of its
subsidiaries or affiliates.
5. Non-Waiver. The failure of either party to insist in any one or more
instances upon performance of any of the terms or conditions of this Agreement
shall not be construed as a waiver or a relinquishment of any right granted
hereunder, or the future performance of any such term, covenant or condition,
but the obligations of either party with respect thereto shall continue in full
force and effect.
6. Successors and Assigns. The rights, benefits, duties and obligations
under this Agreement shall inure to and be binding upon Janus and its successors
and upon Cornerstone and his legal representatives, legatees and heirs. It is
specifically understood, however, that this Agreement constitutes a personal
service contract which may not be transferred or assigned by Cornerstone or
Janus; provided, however, the rights and obligations of Janus hereunder shall
succeed to a successor or surviving corporation resulting from a merger,
consolidation, sale of assets or stock, or other corporate reorganization, on
condition that such survivor shall assume all of the Janus' obligations
hereunder; and it is agreed that such successor or surviving corporation shall
continue to be obligated to perform the provisions of this Agreement.
<PAGE>
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and written, between
the parties with respect thereto.
8. Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
if delivered by hand or mailed first class, postage prepaid, by registered or
certified mail, return receipt requested (mailed notices shall be deemed to have
been given on the date sent) as follows:
a. If to Cornerstone, as follows:
The Cornerstone Company
2857 Riviera Dr.
Akron, Ohio 44333-3415
Attention: Michael Gallucci, Jr.
b. If to Janus, as follows:
2300 Corporate Blvd., NW, Suite 232
Boca Raton, FL 33431
Attention: James E. Bishop
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Paragraph 8 by any of the parties hereto to the
other parties hereto.
9. Modification. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing specifically
referring hereto and signed by both parties.
10. Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
JANUS AMERICAN GROUP, INC.
By:
--------------------------------
JAMES E. BISHOP, PRESIDENT
<PAGE>
THE CORNERSTONE COMPANY, DEVELOPERS AND
OPERATORS OF INNS, HOTELS AND RESORTS
By:
------------------------------------
MICHAEL GALLUCCI, JR., PRESIDENT
PURCHASE AND SALE AGREEMENT
between
GALBURTON INN, INC.,
an Ohio corporation,
as Seller
and
JANUS AMERICAN GROUP, INC.,
A Delaware corporation
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
1 Definitions
(a) "Affiliated Sale Agreements" 4
(b) "Agreement" 4
(c) "Assets" 4
(d) "Closing" 4
(e) "Closing Date" 4
(f) "Concurrent Escrows" 4
(g) "Contracts" 5
(h) "Documents" 5
(i) "Earnest Money" 5
(j) "Escrow" 5
(k) "Escrow Agent" 5
(l) "Feasibility Expiration Date" 5
(m) "Federal Code" 5
(n) "Food and Beverage Inventory" 5
(o) "Franchise Agreement" 5
(p) "Franchisor" 5
(q) "Hotel" 5
(r) "Improvements" 5
(s) "Intangible Property" 5
(t) "Latent Defects" 6
(u) "Laws" 6
(v) "Managing Partner" 6
(w) "Operating Equipment" 6
(x) "Operating Supplies" 6
(y) "Person" 6
(z) "Permitted Title Exceptions" 6
(aa) "Permitted Transferee" 6
(ab) "Personalty" 6
(ac) "Purchase Price" 6
(ad) "Real Property" 6
(ae) "Title Agent" 7
2 Agreement of Purchase and Sale 7
3 Purchase Price 7
(a) Earnest Money 7
(b) Liquidated Damages 7
(c) Cash at Closing 7
4 Allocation of Purchase Price 8
<PAGE>
5. Buyer's Contingencies 8
(a) Due Diligence 8
(b) Conditions to Buyer's Obligations 9
6. Seller's Contingencies and Covenants 10
(a) Seller's Contingencies 10
(i) Buyer's Covenants 10
(ii) Closing of Concurrent Escrows 10
(iii) Truth of Representations 11
(iv) Franchisor Consent 11
(v) Release 11
(vi) Consulting Agreement 11
(b) Covenants 11
(i) Maintenance of the Assets 11
(ii) Permits and Approvals 11
(iii) Notification to Existing Employees 11
(iv) Seller's Obligations Concerning Its Employees 11
(v) Franchise Transfer 12
7. Inspections 13
(a) Entry and Investigation 13
(b) No Interference 13
8. Title Insurance Policy 13
9. The Escrow and Closing 14
(a) Escrow Instructions 14
(b) Closing 14
(c) Action at the Closing by Seller 14
(d) Action at the Closing by Buyer 15
(e) Closing Costs 16
(f) Pre-Closing Settlement Statement 17
(g) Transfer of Guest Property in Safe Keeping 17
10. Apportionments 17
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs 17
(b) Utility and Maintenance Charges 19
(c) Adjustments to Prorations 19
11. Indemnification 20
12. Possession 21
13. Transfer of Liquor License 21
14. Representations and Warranties 21
(a) Buyer 21
(b) Partnership 21
15. Notices 23
16. Seller's Remedies 24
17. Buyer's Remedies 24
18. Casualty; Condemnation 25
<PAGE>
19. Commissions 25
20. Disclaimer 25
21. Confidentiality and Return of Documents 26
22. Waiver 26
23. Time Periods 27
24. Survival of Covenants, Agreements, Representations and Warranties 27
25. Modification of Agreement 27
26. Further Instruments 27
27. Entire Agreement 27
28. Inurement 27
29. Applicable Law 27
30. Descriptive Headings 27
31. Time of the Essence 27
32. Assignment 27
33. Construction 28
34. Interpretation 28
35. Exhibits and Schedules 28
36. Counterparts 28
37. Recordation 28
38. Exclusive Negotiations 28
39. IRS Real Estate Sales Reporting 28
40. Bulk Sales Waiver 29
SCHEDULES
Affiliated Sales Agreements
Contracts
Franchise Agreement
Personalty
Real Property
Allocation of Purchase Price
Disclosure Statement
EXHIBITS
Management Agreement
Consulting Agreement
Limited Warranty Deed
Affidavit of Non-Foreign Person
Assignment and Assumption
Assignment of Intangible Property
Bill of Sale
Assignment and Assumption of the Franchise Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made effective as of the
31st day of July, 1998, by and between GALBURTON INN, INC., an Ohio corporation
("Seller") and JANUS AMERICAN GROUP, INC., a Delaware corporation and/or its
Permitted Transferee (hereinafter collectively referred to as "Buyer").
Background of Agreement
A. Seller is the owner of certain real property located in Hudson, Ohio, having
located thereon a 290-room hotel known as the Hudson Holiday Inn and a 18,000
square foot training center located adjacent thereto.
B. Buyer desires to purchase such real property and related assets, and Seller
desires to sell to Buyer such real property and related assets, subject to and
in accordance with the terms, covenants and conditions of this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the terms, conditions and
covenants contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the terms below shall have the
following meanings unless the context requires otherwise.
(a) "Affiliated Sale Agreements". The various purchase and sale agreements
described on Schedule "A" hereto.
(b) "Agreement". This Purchase and Sale Agreement, as amended or
supplemented from time to time.
(c) "Assets". The Contracts, the Documents, the Improvements, the
Intangible Property, the Personalty, and the Real Property now owned, or
hereafter acquired, by Seller in connection with or relating to the Hotel.
(d) "Closing". The event at which the transaction contemplated hereby will
be consummated and when Buyer acquires title to the Assets.
(e) "Closing Date". The date designated by Buyer in a written notice
delivered to Seller at least five (5) business days in advance; however, in no
event shall the Closing Date occur later than the date provided in subparagraph
9(b) hereof.
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(f) "Concurrent Escrows". The escrows, established with Escrow Agent
pertaining to the purchase by Buyer of certain other hotel properties and
related assets pursuant to the Affiliated Sale Agreements.
(g) "Contracts". All 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 Hotel that will remain in effect after Closing, all of which are
described on Schedule "B" hereto.
(h) "Documents". All books, records and files relating to the leasing,
maintenance, management or operation of the Hotel in Seller's possession or in
the possession of any management company currently managing any portion of the
Hotel.
(i) "Earnest Money". The deposit required to be paid by Buyer to Escrow
Agent pursuant to subparagraph 3(a), together with all interest earned thereon.
(j) "Escrow". The Escrow established with Escrow Agent to facilitate the
transaction contemplated hereby, bearing Escrow No. .
(k) "Escrow Agent". American Title Company, 6029 Belt Line Road, Suite 250,
Dallas, Texas 75240.
(l) "Feasibility Expiration Date". July 25, 1998.
(m) "Federal Code". The United States Internal Revenue Code of 1986, as
amended.
(n) "Food and Beverage Inventory". All inventory of food and beverages,
including alcoholic beverages, owned by Seller located at the Hotel, and used in
the operation of any restaurant, cafe, bar or other food service operation
within the Hotel.
(o) "Franchise Agreement". The agreement and/or agreements referenced on
Schedule "C" attached hereto.
(p) "Franchisor". Holiday Inns Franchising, Inc., a Delaware corporation.
(q) "Hotel". The 290-room hotel located on the Real Property known as the
Cleveland-Hudson Holiday Inn.
(r) "Improvements". All buildings, fixtures, walls, fences, landscaping and
other structures and improvements situated on, affixed or appurtenant to the
Real Property.
(s) "Intangible Property". All transferable or assignable permits, building
plans and specifications, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates, licenses, including,
without limitation, liquor licenses, warranties and guarantees, rights to
deposits, rebates and refunds, trade names, service marks, appraisals,
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engineering, soils, pest control and other reports relating to the Hotel, the
Contracts, customer or tenant lists, correspondence with present or prospective
tenants, customers or suppliers, advertising materials, telephone exchange
numbers identified with the Hotel, and all other transferable intangible
property, miscellaneous rights, benefits or privileges of any kind or character
with respect to the Hotel.
(t) "Latent Defect". Any defect in the Hotel which could not have been
discovered through a reasonable due diligence inspection of the Hotel by Buyer.
(u) "Laws". All present and future laws, statutes, codes, ordinances,
orders, awards, judgments, decrees, injunctions, approvals, permits,
requirements, regulations and licenses of every governmental or
quasi-governmental authority or agency.
(v) "Managing Partner". Michael Gallucci
(w) "Operating Equipment". All chinaware, glassware, linens, silverware,
tools, kitchen utensils, uniforms, engineering and housekeeping tools, vans,
automobiles, and other equipment and utensils owned by Seller and used in the
operation of the Hotel.
(x) "Operating Supplies". All fuel, soap, toilet paper, tissues,
toiletries, towels, light bulbs, mechanical stores, cleaning supplies and
materials, pool maintenance supplies and materials, matches, stationery, paper
supplies, laundry supplies, housekeeping supplies, accounting supplies, goods
and merchandise used for retail sale and other immediately consumable items,
owned by Seller and used in the operation of the Hotel.
(y) "Person". Any individual, firm, corporation, partnership, limited
liability company, trust or other entity.
(z) "Permitted Title Exceptions". The various matters affecting title to
the Assets that are approved by Buyer pursuant to subparagraph 5(a) below.
(aa) "Permitted Transferee". Buyer or JAGI Cleveland-Hudson, L.L.C., a
Delaware limited liability company.
(ab) "Personalty". All furniture (including television sets, except where
leased), furnishings, fixtures, equipment (including, without limitation, office
equipment and the Operating Equipment), machinery, tools, pool maintenance
equipment, inventory, drapes, carpeting, rugs, artwork, the Operating Supplies,
the Food and Beverage Inventory, and other items of personal property owned by
Seller and found or used exclusively at the Hotel, including, without
limitation, the items described on Schedule "D" hereto.
(ac) "Purchase Price". The purchase price for the Assets as set forth in
Paragraph 3 hereof.
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(ad) "Real Property". The real property more particularly described on
Schedule "E" attached hereto, together with all easements, rights of ways,
privileges, licenses and appurtenances which Seller may now own or hereafter
acquire with respect to such real property.
(ae) "Title Agent". Chicago Title Insurance Company.
2. AGREEMENT OF PURCHASE AND SALE . At the Closing, subject to the terms,
covenants and conditions of this Agreement, Seller shall sell to Buyer and Buyer
shall purchase from Seller the Assets.
3. PURCHASE PRICE. The Purchase Price to be paid for the Assets shall be
Thirteen Million Three Hundred Sixty-Nine Thousand Three Hundred Fifty Dollars
($13,369,350.00) payable by Buyer as follows:
(a) Earnest Money. Promptly following the execution of this Agreement,
Buyer shall deposit with Escrow Agent, Eight-Seven Thousand Eight Hundred Four
Dollars and No/100 Dollars ($87,804.00) as Earnest Money to be held in the
Escrow in accordance with the terms and conditions of this Agreement. Escrow
Agent is hereby authorized and directed to invest all funds deposited by Buyer
into Escrow as directed by Buyer. Interest on the Earnest Money shall accrue for
the benefit of and be payable to the party otherwise entitled to such sums upon
the Closing or earlier termination of this Agreement. If the sale of the Assets
contemplated hereunder is consummated, the Earnest Money (inclusive of all
interest earned thereon) shall be paid to Seller at the Closing and applied as a
credit against Buyer's payment of the Purchase Price.
(b) Cash at Closing. On or before the Closing Date, Buyer shall deliver to
Escrow Agent, for the benefit of Seller, the remaining balance of the Purchase
Price (reduced by any credits due Buyer hereunder) by wire transfer of
immediately available funds to the account of Escrow Agent.
4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated as set
forth in Schedule "F" hereto. Buyer and Seller agree that the allocations set
forth in Schedule "F" were determined in good faith and at arms length, and
represent the parties' best good faith estimate of the fair market value, as of
the Closing Date, of each component of the Assets described on Schedule "F".
Buyer and Seller shall each report the transactions contemplated by this
Agreement for income tax purposes in accordance with the agreed upon allocations
set forth on Schedule "F" and will not take or assert a position inconsistent
therewith.
5. BUYER'S CONTINGENCIES. The following are conditions precedent to Buyer's
obligation to purchase the Assets:
(a) Due Diligence. Buyer shall have until the Feasibility Expiration Date
within which to perform such physical inspections and other reasonable due
diligence pertaining to the Assets as Buyer deems necessary, and to decide, in
Buyer's sole discretion, whether the Assets
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are in all respects satisfactory to Buyer. Such due diligence shall include,
without limitation, the following:
(i) Title. Buyer's review and approval of title to the Property, as
follows. Seller shall, as soon as possible after executing this Agreement,
deliver to Buyer at Seller's sole cost and expense:
(A) a current extended coverage preliminary title report on the
Real Property, issued by Title Agent, and accompanied by copies of all
documents referred to in the report;
(B) copies of all existing and proposed easements, covenants,
restrictions, agreements or other documents which affect the Property
and which are not disclosed by the preliminary title report, or, if no
such documents exist, a certification of Seller to that effect;
(C) an ALTA/ACSM "as-built" survey of the Real Property and
Improvements prepared by a licensed surveyor or engineer (the
"Survey"). The Survey shall be acceptable and certified by the
surveyor to Buyer and in sufficient detail to provide the basis for
the Title Policy (as defined below) without boundary, encroachment or
survey exceptions, and shall show the location of all easements and
Improvements (including underground improvements) and any and all
other pertinent information with respect to the Property. The Survey
shall also indicate any encroachments of Improvements onto easements
or onto adjacent properties or certify to their absence, the presence
of improvements and easements on property adjoining the Real Property
if located within five (5) feet of the boundaries of the Real
Property, the number and location of all parking spaces on the
Property, and the square footage of the Real Property and the
Improvements. Prior to Closing, the Survey shall be certified to Buyer
and to the company issuing the Title Policy; and
(D) copies of the most recent property tax bills for the Property
and any filings, notices or correspondence regarding any challenges or
appeals to the applicable taxes, and copies of any improvement
assessments and any other bonds and assessments affecting the
Property.
Buyer shall advise Seller, within ten (10) days after actual receipt of all such
materials, what exceptions to title, if any, are objectionable to Buyer. Any
exceptions not objected to shall be deemed accepted by Buyer (the "Permitted
Exceptions"). Seller shall have ten (10) days after receipt of Buyer's
objections to give Buyer notice: (1) that Seller will remove any objectionable
exceptions from title and provide Buyer with evidence satisfactory to Buyer of
such removal, or provide Buyer with evidence satisfactory to Buyer that said
exceptions will be removed on or before the Closing, or (2) that Seller elects
not to cause such exceptions to be removed. Seller's failure to notify Buyer
within such ten (10) day period shall be deemed an election by Seller not to
remove the objectionable exceptions as provided in clause (2) above. If Seller
elects not to cure under clause (2), notwithstanding that the Feasibility
Expiration Date shall have passed, Buyer shall have ten (10) days to elect
whether to proceed with the purchase and take the Real
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Property subject to such exceptions, or to terminate this Agreement. If Buyer
shall fail to give Seller notice of its election within said ten (10) days,
Buyer shall be deemed to have elected not to proceed with this Agreement.
(ii) Physical Characteristics. Buyer's review and approval of the
structural, mechanical, electrical and other physical characteristics of
the Hotel.
(iii) Reports. Buyer's receipt and approval of satisfactory
architectural, engineering, soils and environmental reports. Pursuant to
the terms of Paragraph 7 of this Agreement, Seller shall provide Buyer the
opportunity to conduct, at Buyer's expense, an environmental site
assessment by a qualified engineer to determine the extent, if any, that
the Hotel contains any asbestos, underground storage tanks, or any other
toxic or hazardous substance or materials, or other environmental hazards
as defined by applicable Laws.
If Buyer is not satisfied, for any reason determined in its sole discretion,
with the results of its due diligence investigation, or if for no reason, Buyer
may terminate this Agreement by written notice to Seller and Escrow Agent
delivered on or before the Feasibility Expiration Date. Buyer's failure to
timely deliver written notice of termination on or before the Feasibility
Expiration Date shall be deemed Buyer's election to proceed with this Agreement.
Upon such termination Buyer shall be entitled to the return of the Earnest Money
and thereafter, except as provided in Paragraphs 7 and 21, neither party shall
have any further rights or obligations hereunder. Buyer's right to conduct any
inspection of the Assets shall be governed by the provisions of Paragraph 7
below.
(b) Conditions to Buyer's Obligations. Buyer's obligation to purchase the
Assets shall be subject to the following further conditions precedent:
(i) Buyer's Mortgage. A first mortgage loan with respect to all of the
Affiliated Sales Agreements aggregating not less than Thirty-Six Million
Dollars ($36,000,000) under terms and conditions acceptable to Purchaser;
(ii) Appraisals. Appraisals on the Hotels and those hotels subject of
the Affiliated Sales Agreements aggregating not less than Forty-Two Million
Five Hundred Thousand Dollars ($42,500,000);
(iii) PIP Reports. "PIP" reports approved by Holiday Inn and Comfort
Inn acceptable to Buyer in an aggregate amount for the Hotel and those
hotels subject to the Affiliated Sales Agreements not to exceed Two Million
Five Hundred Thousand Dollars ($2,500,000);
(iv) Franchisor Approval. Approval of Buyer as a franchisee by
Franchisor;
(v) Title Insurance. Receipt by Buyer of an ALTA Owner's Title
Insurance Policy together with any agreed endorsements;
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(vi) Management Agreement. Execution of a management agreement between
Buyer and Sellers (or affiliates of Sellers) in the form of Exhibit "A"
hereto (the "Management Agreement") which will facilitate the prompt
transfer of liquor permits and related operating licenses and which will
provide for the uninterrupted operation of the Hotels' food and beverage
business while and until the necessary licenses and permits are secured by
Buyer; and
(vii) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(viii) Closing of Concurrent Escrows. The purchase and sale
transactions that are the subject of the Concurrent Escrows shall be
consummated in accordance with the respective terms and conditions thereof
on the Closing Date concurrently with the closing of the Escrow and
consummation of the transaction contemplated by this Agreement.
6. SELLER'S CONTINGENCIES AND COVENANTS.
(a) Seller's Contingencies. The following are conditions precedent to
Seller's obligation to sell the Assets:
(i) Buyer's Covenants . All covenants of Buyer shall have been
fulfilled by Buyer in timely fashion or waived by Seller;
(ii) Closing of Concurrent Escrows. The purchase and sale transactions
that are the subject of the Concurrent Escrows shall be consummated in
accordance with the respective terms and conditions thereof on the Closing
Date concurrently with the closing of the Escrow and consummation of the
transaction contemplated by this Agreement;
(iii) Truth of Representations. All of Buyer's representations and
warranties contained in or made pursuant to this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing
Date;
(iv) Franchisor Consent. Consent to the consummation of the
transaction contemplated by this Agreement shall have been obtained from
Franchisor; and
(v) Release. Release of Sellers, by Franchisor, of any future
responsibility or liability to the Franchisor for termination or transfer
fees, or for actions or events occurring after the Closing Date (the
"Franchisor Release"); provided, however, Seller shall remain liable for
all amounts due and owing to Franchisor for activities of Seller prior to
the Closing Date.
(vi) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(b) Covenants.
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(i) Maintenance of the Assets. From and after the date hereof to the
Closing Date, Seller shall: (A) cause the Hotel to be maintained and
operated in compliance with all Laws, in accordance with its current
standards and consistent with its past operating procedures for the Hotel,
shall maintain present services, shall maintain sufficient Food and
Beverage Inventory, and Operating Supplies for the proper management,
maintenance, operation and servicing of the Hotel and shall continue to
market the Hotel and to accept reservations and group bookings at its
currently established rates therefor; (B) not sell or otherwise dispose of
any significant items of Personalty (other than Food and Beverage Inventory
and Operating Supplies in connection with the ordinary course operation or
maintenance of the Property) unless replaced with an item of like value,
quality and utility; (C) not enter into any service, maintenance,
landscaping, operating, repair, equipment lease, employment, management,
leasing or other similar contract or agreement relating to the operation or
maintenance of the Hotel, except for those entered into in the ordinary
course of business and which are cancelable upon not more than thirty (30)
days prior notice or in the event of a sale of the Hotel; and (D) maintain
in full force and effect all liability and casualty insurance currently in
effect. The insurance currently in effect is described in Exhibit F. Seller
shall timely perform all its obligations under all Contracts (including,
without limitation, the Franchise Agreement), including, without
limitation, the payment of all bills, charges, invoices, salaries,
benefits, and other expenses arising in connection with the Hotel prior to
the Closing Date.
(ii) Permits and Approvals. Seller shall cooperate with Buyer in
obtaining all Permits and Approvals required for Buyer's intended use and
operation of the Hotel and shall not seek or acquiesce in any amendment to
any of the existing Permits and Approvals or any change in the present
zoning classification of the Real Property which would alter the present
permitted uses of the Real Property.
(iii) Notification to Existing Employees. Prior to Closing, Seller
will notify its employees and the labor organization representing its
employees at the Hotel of the pending sale in writing, the date the sale
will be effective and the fact that Seller, as owner of the liquor license
at the Hotel, will continue to be the employer at the Hotel until the
liquor license for the Hotel transfers to Buyer's Permitted Transferee or
its Agent or Buyer's Permitted Transferee or its Agent obtains its own
liquor permit, whichever first occurs. Such notice shall further inform the
employees that, upon the transfer of the liquor license or Buyer's
Permitted Transferee's or its Agent's receipt of its own liquor license,
whichever first occurs, said employees will be offered an opportunity to
submit applications for employment to Buyer's Permitted Transferee or its
Agent, and that Buyer's Permitted Transferee or its Agent shall employ
those individuals who meet certain employment criteria to be determined at
the sole discretion of Buyer's Permitted Transferee or its Agent. Buyer's
Permitted Transferee or its Agent agrees that, after all applications and
requests for continued employment are considered and the staffing decisions
incident to the transfer of the liquor license or receipt of a new liquor
license are final, Buyer's Permitted Transferee or its Agent will negotiate
with any union that was in place prior to the sale of the Hotel to the
extent required by law.
Prior to accepting applications for employment, Buyer's Permitted
Transferee or its Agent agrees to contact the labor organization
representing the employees at the Hotel to arrange
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a meeting to discuss the relationship that will exist between Buyer's
Permitted Transferee or its Agent and the labor organization when Seller
ceases to be the employer and Buyer's Permitted Transferee or its Agent
becomes the employer.
(iv) Seller's Obligations Concerning Its Employees. On the earlier of
the date of transfer of the liquor license or Buyer's Permitted
Transferee's or its Agent's receipt of its own liquor license, or as soon
thereafter as required by law, Seller shall pay to all employees receiving
notice of the sale under Section 6(b)(iii) above the full amount of wages
earned and other benefits accrued as of such date (including the entire
amount of all vacation accruals) or the last day an employee worked if
employee is no longer employed on the date set forth above and shall remain
fully liable for any related payroll expenses, severance pay, unfair labor
practice claims, employment discrimination charges and other employee
claims relating to any period prior to the transfer of the liquor license
or Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license, whichever first occurs. After the occurrence of the earlier of the
events set forth above in this Subsection (iv), Seller shall transfer to
Buyer's Permitted Transferee or its Agent, the records of all employees who
submit applications or otherwise request to continue their employment
relationship with the Hotel if each such employee making application has
first executed a Release/Consent to Transfer Records form which has been
provided to Seller.
(v) Franchise Transfer. Promptly following the date of this Agreement,
Seller shall notify Franchisor of the sale contemplated by this Agreement.
Seller shall use its best efforts to ascertain, and provide written notice
thereof to Buyer prior to the Feasibility Expiration Date, the specific
requirements (including the PIP) of Franchisor to obtaining its consent to
the sale contemplated hereby and allowing the Franchise Agreement to be
assigned to Buyer. It is contemplated that Buyer's inspection and the PIP
requirements will result in no more than $2,500,000 of improvements being
required to be made to the Hotel and those hotels which are the subject of
the Affiliated Sale Agreements (the "PIP Requirements").
The parties acknowledge that in order to obtain from the Franchisor a Franchise
Agreement for the Hotel, a Franchise Fee of $145,000 shall be due and owing to
the Franchisor, which Franchise Fee Seller agrees to pay.
The parties agree that the cost to satisfy the PIP Requirements for this Hotel
is estimated to be $1,129,000, which cost Seller agrees to pay, but only on the
condition to the extent that, at the time of Closing of this sale transaction, a
separate escrow account is established from Seller's gross sales proceeds in
such amount (the "PIP Escrow"). The PIP Escrow funds shall be used solely and
exclusively for the purpose of paying the costs of completing the PIP
Requirements, and Seller shall have absolutely no right to claim any right,
title or interest to the PIP Escrow other than for the purpose of paying for the
cost of completing PIP Requirements. It is agreed that responsibility for taking
all actions required in order to complete the PIP Requirements shall be as set
forth in the Franchise Agreement, and in order to comply with the terms of
Buyer's mortgage financing, Amresco Capital, L.P. ("Amresco") will hold the PIP
Escrow in a non-interest bearing account. Release of funds from the PIP Escrow
shall be subject to the requirements and consent of Amresco and shall be pledged
to Amresco as security for the Buyer's Mortgage loan to Amresco and to insure
completion of the PIP Requirements. If funds
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remain in the PIP Escrow after completion of the PIP Requirements (which is not
anticipated), such excess funds shall be paid to Amresco as a principal payment
on the Buyer's mortgage loan. If the PIP Escrow is insufficient to complete the
PIP Requirements, Seller shall have absolutely no responsibility to fund such
deficit. Because third parties shall control and supervise the completion of the
PIP Requirements, Seller shall have no liability or responsibility therefor, and
makes no representation or warranty that the PIP Requirements shall be completed
in a workmanlike manner, or otherwise, and/or can be completed at a cost equal
to the amount of the PIP Escrow.
7. INSPECTIONS.
(a) Entry and Investigation. Between the date hereof and the Feasibility
Expiration Date, Seller grants to Buyer and its employees, agents, contractors
and consultants (collectively, "Consultants"), a license to enter the Hotel at
reasonable times for the purpose of performing certain inspections on or
concerning the Hotel, which inspections may include: (i) research regarding the
Property and surrounding parcels as is generally conducted in a Level I or Phase
I environmental audit, surveying the Real Property, and conducting other
inspections of the Real Property and the physical condition of the Improvements
and any furniture, fixtures, equipment and machinery located therein; (ii) the
performance of engineering or structural investigations and tests of the Hotel
and any improvements thereon as may be approved by Seller; (iii) reviewing the
books and records of the Hotel; and (iv) meeting with and interviewing
Franchisor and other persons involved in property management of the Hotel
(collectively, the "Investigation"). The Investigation and all related
activities or events shall be limited and conducted as herein required, all at
Buyer's sole risk, cost and expense. Seller shall incur no cost or expense in
connection with the Investigation or any related activities or events.
(b) No Interference. The Investigation shall be diligently performed and
prosecuted to completion so as to minimize interference with the operation or
use of the Hotel by Seller and its employees, agents and contractors and any
hotel guests or other invitees and licensees. Any entry and any Investigation by
Buyer or its Consultants shall be subject to and conducted in accordance with
all Contracts and the Franchise Agreement. Because of Seller's concern with any
interference with the operation of the Hotel, Seller reserves the right to
impose reasonable restrictions on time and frequency of Buyer's entry, provided
such restrictions shall not interfere with Buyer's ability to complete the
Investigation prior to the Feasibility Expiration Date. All persons who enter
the Hotel shall do so at their own risk. Buyer acknowledges and agrees that
Buyer and its Consultants shall cooperate with and comply with all directions of
Seller and its Consultants.
8. TITLE INSURANCE POLICY. At the Closing, and as a condition to Buyer's
obligation to close, Escrow Agent shall deliver to Buyer an extended coverage
owner's policy of title insurance (ALTA Form) issued by Title Agent, or the
unconditional commitment of Title Agent, to issue such policy, insuring Buyer in
the amount of the portion of the Purchase Price allocated to the Real Property
as set forth on Schedule "F" that title to the Real Property has vested in Buyer
free and clear of all liens and encumbrances other than the Permitted Title
Exceptions and such other matters as are approved by Buyer in writing, together
with such endorsements and
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such reinsurance (with direct access) as is requested by Buyer (the "Title
Policy"). The Title Policy shall provide full coverage against mechanics' and
materialmen's liens arising out of the construction, repair or alteration of any
of the Improvements. Buyer and Seller shall each be responsible for one-half of
the title insurance premium. Buyer shall be responsible for the cost of any
endorsements and reinsurance requested by Buyer.
9. THE ESCROW AND CLOSING.
(a) Escrow Instructions. Buyer and Seller shall establish the Escrow with
Escrow Agent to facilitate the consummation of the transactions contemplated by
this Agreement. Buyer and Seller shall provide Escrow Agent with instructions
consistent with this Agreement and each agrees to execute such additional
instructions as may be reasonably requested by Escrow Agent in connection
herewith. If any conflict or inconsistency exists between the provisions of any
instructions provided to Escrow Agent and this Agreement or any deed, instrument
or document executed or delivered in connection with the transaction
contemplated hereby, the provisions of this Agreement, or such deed, instrument
or document shall control in resolving such conflict or inconsistency. No
provision of any such instructions shall excuse any performance by either party
at the times provided in this Agreement, extend the Closing Date provided for
herein or provide either party hereto with any grace period not provided in this
Agreement, and any such provision in such instructions shall be deleted.
(b) Closing. The Closing shall occur through the Escrow and shall take
place on the Closing Date at Escrow Agent's office at 10:00 a.m., or such other
place or time as the parties may mutually agree in writing. Subject to the
conditions and contingencies set forth herein, the Closing shall take place not
later than thirty (30) days after the Feasibility Expiration Date, provided that
the Closing Date may be extended, at the Buyer's option, by up to two (2)
extensions of thirty (30) days each upon deposit by the Purchaser into the
Escrow of additional non-refundable deposits in the amount of Twenty-Nine
Thousand Three Hundred Twenty-Six and No/100 Dollars ($29,326.00) each. Any such
additional deposits into the Escrow shall be paid to Seller at the Closing and
applied as a credit against Buyer's payment of the Purchase Price. Interest on
such additional deposits shall accrue for the benefit of and be payable as the
Earnest Money.
(c) Action at the Closing by Seller. At or prior to the Closing, Seller
shall deliver or cause to be delivered to Buyer, or to Escrow Agent for the
account of Buyer, all of the following, and with respect to any instruments
referred to below, all such instruments shall be dated as of the Closing Date,
fully and duly executed by Seller and, if appropriate, acknowledged:
(i) Deed. A Statutory Form Limited Warranty Deed from Seller conveying
the Real Property to Buyer in the form of Exhibit "C" hereto;
(ii) Affidavit. An Affidavit of Non-Foreign Person from Seller as
contemplated by Federal Code Section 1445, in the form of Exhibit "D"
hereto;
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(iii) Assignment and Assumption. An Assignment and Assumption of
Contracts from Seller (excluding the Franchise Agreement) in the form of
Exhibit "E" hereto with respect to those Contracts to which Buyer has
elected to accept;
(iv) Assignment of Intangible Property. An Assignment of the
Intangible Property from Seller in the form of Exhibit "F" hereto;
(v) Bill of Sale. A Bill of Sale from Corporation relating to the
Personalty in the form of Exhibit "G" hereto;
(vi) Assignment and Assumption of Franchise Agreement. An Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H";
(vii) Certificate of Good Standing. A Certificate of Good Standing of
the Seller issued by the Secretary of State of Ohio dated no more than
thirty (30) days prior to the Closing Date.
(viii) Keys. All keys and/or means to operate all locks and alarms for
the Property;
(ix) Contracts. The originals of the Contracts and the Documents to
the extent in Seller's possession and not previously delivered to Buyer.
(x) The Management Agreement. The Management Agreement.
(xi) The Consulting Agreement. The Consulting Agreement.
(xii) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Seller, and the individual
signing on behalf of Seller, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(xiii) Seller's Acknowledgment. A written acknowledgment of Seller's
approval of Escrow Agent's final settlement statement setting forth all
prorations, and adjustments made in accordance with the provisions of this
Agreement;
(xiv) Lien Releases. Such documentation as is reasonably satisfactory
to Buyer and Escrow Agent to cause all of the Assets to be released from
any lien, financing statement, or other encumbrance which is not a
Permitted Exception; and
(xv) Further Documentation. Such other instruments or documents as are
reasonably necessary to fulfill the covenants and obligations to be
performed by Seller pursuant to this Agreement, specifically including,
without limitation, all properly endorsed certificates of title necessary
to transfer all motor vehicles and such other documents necessary to
transfer all other licenses and permits.
<PAGE>
(d) Action at the Closing by Buyer. At or prior to the Closing, Buyer shall
deliver or cause to be delivered to Buyer, or to Escrow Agent for the account of
Seller all of the following, and with respect to any instruments or documents
referred to below, all such items shall be dated as of the Closing Date, fully
and duly executed by Buyer and, if appropriate, acknowledged:
(i) Purchase Price. All funds necessary to pay the Purchase Price
together with all closing costs and applicable prorations payable by Buyer
as required by the provisions of this Agreement;
(ii) Assignment and Assumption. The Assignment and Assumption of
Contracts from Seller and the Assignment (excluding the Franchise
Agreement) in the form of Exhibit "E" hereto;
(iii) Assignment and Assumption of Franchise Agreement. The Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H" hereto;
(iv) The Management Agreement. The Management Agreement; The
Consulting Agreement. The Consulting Agreement; Buyer's Certificate.
[INTENTIONALLY OMITTED]
(vi) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Buyer, and the individual
signing on behalf of Buyer, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(vii) Buyer's Acknowledgment. A written acknowledgment of Buyer's
approval of Escrow Agent's final settlement statement setting forth all
prorations and adjustments made in accordance with the provisions of this
Agreement; and
(viii) Further Documentation. Such other funds, instruments, or
documents as are reasonably necessary to fulfill the covenants and
obligations to be performed by Buyer pursuant to this Agreement.
(e) Closing Costs. Buyer and Seller shall each be responsible for its own
legal fees and the costs of its respective legal counsel. All documentary
stamps, transfer taxes, sales taxes and all other similar taxes, together with
the cost of the Survey shall be paid by Seller. The Escrow fee payable to Escrow
Agent in respect of the conveyance and transfer of the Assets to Buyer shall be
shared equally by the parties. All other fees, recording costs, charges or
expenses incidental to the sale, transfer and assignment of the Assets to Buyer
shall, except as otherwise
<PAGE>
herein expressly provided, be paid according to the standard custom and practice
pertaining to real estate transactions consummated in Summit County, Ohio.
(f) Pre-Closing Settlement Statement. At least three (3) business days
prior to the Closing, Buyer and Seller shall provide to Escrow Agent as much
information as is then available to enable Escrow Agent to prepare a pre-audit
settlement statement setting forth in detail all prorations and adjustments
contemplated by this Agreement based on the information available to Escrow
Agent. Escrow Agent shall provide such pre-audit settlement statement to Buyer
and Seller and their respective legal counsel no later than two (2) business
days prior to the Closing and shall include therewith an indication of any
specific information remaining to be provided to Escrow Agent by Buyer and
Seller to enable Escrow Agent to show all final prorations and adjustments
calculated by Buyer and Seller, and required by this Agreement. Such statement
shall be approved by both Buyer and Seller in writing prior to Closing, such
approval to be indicated by the parties signatures thereon.
(g) Transfer of Guest Property in Safe Keeping.
(i) Baggage. All baggage or other property of guests of the Property
which has been checked with or left in the care of Seller and remains in
Seller's care on the Closing Date shall be inventoried and tagged jointly
by Seller and Buyer.
(ii) Safe Deposit Boxes. As of the Closing Date, Seller and Buyer
shall prepare a list of all guests of the Property maintaining items in
safe deposit boxes. Buyer shall not be liable or responsible for any items
contained in any safe deposit box not specified on such list or specified
on such list and not included in safe deposit boxes, and Seller agrees to
indemnify and hold harmless Buyer from and against any such liability or
responsibility.
10. APPORTIONMENTS.
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs.
(i) Taxes. Real estate taxes, personal property taxes and any general
or special assessments in respect of the Assets shall be prorated as of the
Closing Date such that Seller shall be responsible for all taxes and
assessments that are allocable to any period prior to the Closing Date and
Buyer shall be responsible for all taxes and assessments that are allocable
to any period from and after the Closing Date. If the actual amount of
taxes, assessments or other amounts to be prorated for the year in which
the Closing occurs is not known as of the Closing Date, the proration shall
be based on the parties' reasonable estimates of such taxes, assessments
and other amounts. Notwithstanding any other provision of this Agreement to
the contrary, if Buyer shall become liable after the Closing for payment of
any taxes or assessments assessed against the Assets for any period of time
prior to the Closing Date, Seller shall immediately pay to Buyer on demand
an amount equal to such tax assessment in accordance with subparagraph
10(c) below.
<PAGE>
(ii) Deposits. At the Closing, Buyer shall be charged for all house
banks and all security or other deposits paid by Seller to third parties
for which the right to the return of any such sums is transferred to Buyer
at the Closing.
Inventory and Supplies.
[INTENTIONALLY OMITTED]
(iv) Other Items. The following additional prorations and adjustments
shall occur as of the Closing and, prior to the Closing Date, Seller shall
provide all information to Buyer required to calculate such prorations and
adjustments; representatives of Buyer and Seller shall together make such
calculations and provide Escrow Agent with the results of such prorations
and adjustments.
(A) All petty cash and cash in cash registers and vending
machines as of 11:59 p.m. on the day preceding the Closing Date shall
remain the property of Seller, and if not paid to Seller at or before
the Closing shall be charged to Buyer.
(B) All receipts from guest room rentals and Hotel services prior
to the Closing Date shall belong to Seller. One half of the guest room
rentals and Hotel services, whether in cash or accounts receivable,
arising from occupancy for the entire night beginning on the day
preceding the Closing Date shall be credited to each of Buyer and
Seller. All receipts thereafter shall belong to Buyer. All prepaid
rentals, room rental deposits and all other deposits for advance
registration, banquets, or future services paid to Seller prior to the
Closing Date shall be credited to Buyer.
(C) All receipts and expenses from restaurant and bar operations
concluded prior to 11:59 p.m. on the day preceding the Closing Date
shall belong to, and be paid by, Seller.
(D) All accounts receivable and credit card claims for goods and
services furnished prior to 11:59 p.m. on the day preceding the
Closing Date shall remain the property of Seller and, to the extent
Buyer receives any payments on account thereof after Closing, Buyer
shall immediately remit such amount to Seller.
(E) All accounts payable owing for goods and services furnished
prior to 11:59 p.m. on the day preceding the Closing Date shall be
paid by Seller. Buyer shall assume, and after the Closing, pay, all
accounts payable relating to goods and services (including
advertising) for which orders have been placed, but as of 11:59 p.m.
on the day preceding the Closing Date, such goods and services have
not yet been delivered or provided so long as such goods and services
are of the type, quality and quantity used by Seller in the ordinary
course of operating the Hotel. Prior to the Closing, Seller shall
provide to Buyer a list of all accounts payable for which the goods
and services have not yet been delivered or provided, and Buyer and
Seller shall determine whether any such accounts payable should remain
the obligation of Seller, and for which Buyer shall receive a credit
at the Closing in the amount of all such payables
<PAGE>
which do not relate to goods and services provided to Seller in the
ordinary course of operating the Hotel.
(v) Employee Wages and Benefits. All employee benefits, wages and
other compensation shall be the sole responsibility of Seller. Seller shall
make all such payments and/or post such bonds as are required by law or
necessary to ensure that all such liabilities will be satisfied.
(vi) Remittance. Buyer and Seller each agree to promptly remit to the
other any monies received by such party which is due to the other in
accordance with this Agreement. All prorations shall be based on the actual
number of days in the calendar month in which the Closing occurs.
(b) Utility and Maintenance Charges. Seller shall pay or cause to be paid
(i) all unpaid charges for water, electricity, gas, trash removal, sewer,
telephone or other utility services which are furnished to or in connection with
the Hotel prior to the Closing Date and (ii) all unpaid charges for landscaping
and all other maintenance services which are furnished to or in connection with
the Hotel prior to the Closing Date. Not less than three (3) days prior to
Closing, Seller and Buyer shall notify and instruct the suppliers of the
foregoing utility services to read the meters for such services as of the day
prior to the Closing Date and to render to Seller a final statement for all
charges for utility services furnished to the Property prior to the Closing
Date. If the final meter readings cannot be obtained, Buyer and Seller shall
prorate such charges based upon the particular utility company's billing for the
immediately preceding billing period determined on a per diem basis based on the
actual number of days in the billing period. Buyer shall receive a credit for
the allocated amount of such charges applicable to the period to and including
the day preceding the Closing Date and, following the Closing, Buyer shall be
responsible for, and shall pay, all billings received from the utility company
for the current and future billing periods.
(c) Adjustments to Prorations. After the Closing, the parties shall from
time to time, as soon as is practicable after accurate information becomes
available, recalculate and reapportion any of the items subject to proration or
apportionment under this Paragraph 10: (i) which were not prorated and
apportioned at the Closing because of the unavailability of the information
necessary to compute such proration, or (ii) which were prorated or apportioned
at the Closing based upon estimated or incomplete information, or (iii) for
which any errors or omissions in computing prorations at the Closing are
discovered subsequent thereto, and thereafter the proper party shall be
reimbursed based on the results of such recalculation and reapportionment.
Unless otherwise specified herein, all such reimbursements shall be made on or
before thirty (30) days after receipt of notice of the amount due. Any such
reimbursements not timely paid shall bear interest at a per annum rate equal to
ten percent (10%) from the due date until all such unpaid sums together with all
interest accrued thereon is paid if payment is not made within ten (10) days
after receipt of a bill therefor.
11. INDEMNIFICATION.
<PAGE>
(a) Buyer shall indemnify, defend and hold harmless Seller, its officers,
directors, agents, employees, partners and/or shareholders for, from and against
any and all claims, liabilities, damages, losses, causes of action, and
obligations and expenses (including reasonable attorneys' fees) incurred as a
result of, or arising in connection with: (i) physical damage to the Assets or
personal injury arising out of any tests, inspections, and studies of the Assets
performed by Buyer, its agents, employees or contractors, or the entry of Buyer
or its agents, employees or contractors onto the Real Property for any reason
prior to the Closing Date; (ii) any acts or omissions of Buyer and its agents,
employees or contractors pertaining to the Hotel occurring or arising out of
events occurring on or after the Closing Date or any liability or obligation
required to be assumed by Buyer hereunder or which accrues on or after the
Closing Date; and (iii) any misrepresentation or breach of any warranty or
covenant made herein or in any document, certificate or exhibit given or
delivered pursuant hereto.
(b) Notwithstanding any other provision of this Agreement, Buyer shall
further indemnify, defend and hold harmless Seller, its directors, officers,
employees, partners and/or shareholders from and against any claim asserted
against, resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from:
(i) any claim brought, by or on behalf of Hotel, Motel and Restaurant
Employees and Bartenders Union or its Local #118 and/or any bargaining unit
employee of Seller as of the date of transfer of the liquor license or
Buyers' Permitted Transferee's or its Agent's receipt of its own liquor
license alleging a violation by Seller of its collective bargaining
agreements because of Buyer's Permitted Transferee's or its Agent's failure
to negotiate new Collective Bargaining Agreements, if required under the
Agreements and/or any claim alleging a violation of Article XXV-Changes in
Ownership or Operators of the Collective Bargaining Agreement covering
Maids and Housemen.
(ii) any claim brought by or on behalf of Hotel, Motel and Restaurant
Employees and Bartenders Union or its Local #118 and/or any employee of
Seller at the Hotel as of the date of transfer of the liquor license or
Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license and/or any unit of local government (as defined in 29 U.S.C. ss.
2101(a)(7)) alleging a violation by Seller of the Worker Adjustment and
Retraining Notification Act (WARN) 29 U.S.C. ss.ss. 2101 et seq.
(c) Seller shall indemnify, defend, and hold harmless Buyer, its owners,
officers, directors, agents, employees, partners and/or shareholders for, from
and against any and all claims, liabilities, damages, losses, causes of action,
and obligations and expenses (including reasonable attorneys' fees) incurred as
a result of, or arising in connection with: (i) any acts or omissions of Seller
and its agents, employees and contractors pertaining to the Assets occurring or
arising out of events occurring prior to the Closing Date or any liability or
obligation of Seller which Buyer is not required to assume hereunder or which
accrues prior to the Closing, and (ii) any misrepresentation or breach of any
warranty or covenant made herein or in any document, certificate or exhibit
given or delivered pursuant hereto. The obligation set forth in this paragraph
shall survive the Closing and shall be a continuing obligation of Seller and its
successors and assigns.
<PAGE>
12. POSSESSION. Seller shall deliver possession of the Assets to Buyer at the
Closing, subject to the Permitted Title Exceptions, provided, however, that
Seller shall afford authorized representatives of Buyer reasonable access to the
Hotel, subject to Paragraph 7 above, for the purposes of satisfying Buyer with
respect to the representations, warranties, and covenants of Seller contained
herein and with respect to satisfaction of any conditions precedent to the
Closing contained herein.
13. TRANSFER OF LIQUOR LICENSE. At the Closing, Buyer's designee (the
"Operator") and Seller shall enter into and deliver a management agreement (the
"Management Agreement") in form of Exhibit "A" hereto providing for the
Operator's operation of the Hotel as Seller's agent under Seller's liquor
permit. The term of such management agreement shall be until Operator has
obtained a liquor permit for the operation of the Hotel from the State of Ohio
or transferred Seller's liquor license to Operator. During such term, the
Operator shall pay to the Seller all employee's wages, including the employer's
portion of payroll taxes thereon and union benefit contributions, and all sales
tax obligations with respect to the operation of the Hotel during such term. The
Seller shall process the Hotel payroll and pay the employees thereof under its
workers compensation account number. The Seller shall also file all sales tax
returns under the Seller's vendors license number. In consideration of Seller's
processing of such payments as aforesaid, Operator shall pay Seller a fee of
$250.00 per month during the term of such management agreement.
14. REPRESENTATIONS AND WARRANTIES.
(a) Buyer. Buyer acknowledges, covenants, represents and warrants to Seller
that the following are true as of the date of this Agreement and, in entering
into this Agreement, Seller is relying upon the following:
(i) Existence. Buyer is a validly existing corporation under the law
of the state of its formation and in good standing under the law of the
State of Delaware, and Buyer has the full right, authority and power to
enter into this Agreement, to consummate the transactions contemplated
herein and to perform its obligations hereunder and under those documents
and instruments to be executed by it at the Closing, and each of the
individuals executing this Agreement on behalf of Buyer is authorized to do
so, and this Agreement constitutes a valid and legally binding obligation
of Buyer enforceable against Buyer in accordance with its terms.
(ii) Due Authorization. Buyer's execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of Buyer's obligations under the instruments required to be
delivered by Buyer at the Closing, do not and will not result in any
violation of, or default under, any term or provision of any agreement,
instrument, mortgage, loan agreement or similar document to which Buyer is
a party or by which Buyer is bound.
(iii) Threatened Proceedings. There is no litigation, investigation or
proceeding pending or, to the best of Buyer's knowledge, contemplated or
threatened against
<PAGE>
Buyer which would impair or adversely affect Buyer's ability to perform its
obligations under this Agreement or any other instrument or document
related hereto.
(b) Seller. Seller represents and warrants to Buyer that the following are
true as of the date of this Agreement, and in entering into this Agreement Buyer
is relying upon the following:
(i) Existence. Seller is a duly formed and validly existing
corporation under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Seller has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations hereunder
and under those documents and instruments to be executed by it at the
Closing, and each of the individuals executing this Agreement on behalf of
Seller is authorized to do so, and this Agreement constitutes a valid and
legally binding obligation of Seller enforceable against Seller in
accordance with its terms.
(ii) Due Authorization. Seller's execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
the performance of Seller's obligations under the instruments required to
be delivered by Seller at the Closing, do not and will not result in any
violation of, or default under, any term or provision of any agreement,
instrument, mortgage, loan agreement or similar document to which Seller is
a party or by which Seller is bound.
(iii) Threatened Proceedings. Other than as set forth in Schedule "G"
hereto, there is no pending or, to the best of Seller's knowledge,
threatened judicial, municipal or administrative proceedings affecting the
Hotel or in which Seller is or will be a party by reason of Seller's
ownership of the Hotel or any portion thereof, including, without
limitation, proceedings for or involving alleged building code violations,
or personal injuries or property damage alleged to have occurred on the
Hotel or by reason of the condition or use of the Hotel. The Disclosure
Statement contains an accurate summary of the status of all matters shown
thereon. If any proceeding of the character described in this subparagraph
is initiated prior to Closing, Seller shall promptly advise Buyer in
writing.
(iv) Liquor Permit. The liquor permit issued by the State of Ohio for
the Hotel is in good standing, and all taxes related thereto have been
fully paid or adequately reserved by the Seller.
(v) Liabilities. That except for: (a) debts, liabilities and
obligations for which provision is made herein for proration or other
adjustments as of the Closing Date; (b) debts and obligations incurred by
Seller in the ordinary course of business which Seller agrees to pay on or
before the Closing Date except as provided herein; (c) debts, liabilities
and obligations to be assumed by Purchaser provided for herein; (d) debts
and obligations for goods which are purchased prior to the Closing Date but
remain the property of Purchaser thereafter, there will be no debts,
liabilities or obligations of Seller with respect to the Hotels or the
Property.
<PAGE>
(vi) Foreign Person. Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1954 as
amended.
(vii) Compliance With Laws. The Hotel properties are all in material
compliance with all Federal, State, Local (including local sewage district)
laws, rules, regulations ordinances, codes and orders governing,
establishing, limiting or otherwise affecting the discharge or disposal of
air pollutants, water pollutants, process wastewater or solid and hazardous
wastes. There are no pending or to Seller's knowledge threatened actions or
proceedings by the local municipality, sewage districts, state agencies
having jurisdiction over such matters, the U.S. Environmental Protection
Agency or any other governmental entity and to Seller's knowledge there is
no basis for any such action or proceedings. Seller has never disposed of
any noxious, toxic, solid or hazardous waste on the Real Property. Further,
Seller warrants and represents, to the best of its knowledge, that the Real
Property has not been used as a landfill, dump site, waste disposal area or
for any similar usage, and no underground storage tanks, petroleum products
or solid hazardous or toxic materials, as such terms are used and defined
under applicable local, state and federal environmental regulations, exist
on the surface or under the subsurface of the four properties or in any
surface or ground waters on or under the four properties.
(viii) Inventory Levels. As of the Closing Date, the inventory of
Operating Equipment and Operating Supplies will be in amounts which are at
least equal to the normal and customary levels of such inventories
historically maintained by the Hotel during the month in which the Closing
occurs, and all rooms will be consistently furnished and equipped with
items in good condition and repair (ordinary wear and tear expected).
(ix) Known Latent Defects. That to the actual knowledge of the
managing partner of the Seller, there are no material latent defects
affecting the Hotel.
15. NOTICES. All notices or other communications required or provided to be sent
by either party or Escrow Agent shall be in writing and shall be sent by United
States Postal Service, postage prepaid or certified mail, return receipt
requested, or by any nationally known overnight delivery service, or by courier,
or in person (including by way of facsimile transmission). All notices shall be
deemed to have been given forty-eight (48) hours following deposit in the United
States Postal Service or upon personal delivery if sent by overnight delivery
service, courier or personally delivered. All notices shall be addressed to the
party at the address below:
If to Seller:
Galburton Inn, Inc.
c/o The Cornerstone Company
2857 Riviera Drive
Akron Ohio 44333-3415
Attention: Mr. Michael Gallucci, Jr. President
Fax No. (216) 867-2772
<PAGE>
With a copy to:
Stark & Knoll Co., LP.A.
1512 Ohio Edison Bldg.
76 S. Main Street
Akron, Ohio 44308
Attention: Thomas G. Knoll, Esq.
Fax No. (216) 376-6237
If to Buyer:
Janus American Group, Inc.
2300 Corporate Blvd., NW, Suite 232
Boca Raton, FL 33431
Attention: James E. Bishop
Fax No.: (516) 997-5331
With a copy to:
Janus American Group, Inc.
8534 East Kemper Road
Cincinnati, OH 45249-1709
Attention: Charles Thornton, Esq.
Fax No.: (513) 489-1955
Any address or name specified above may be changed by notice given to the
addressee by the other party in accordance with this Paragraph 15 The inability
to deliver because of a changed address of which no notice was given, or
rejection or other refusal to accept any notice, shall be deemed to be the
receipt of the notice as of the date of such inability to deliver or rejection
or refusal to accept. Any notice to be given by any party hereto may be given by
the counsel for such party. Any notice to be given to Escrow Agent shall be sent
to the address set forth in subparagraph 1(l) above.
16. SELLER'S REMEDIES. If Buyer shall breach any of the terms or provisions of
this Agreement or otherwise default hereunder after the Feasibility Expiration
Date, and as a result of such breach or default Buyer is unable to perform its
obligations at Closing and provided Seller has performed or tendered performance
of all its obligations hereunder, Seller's exclusive remedy shall be to retain
the Earnest Money as liquidated damages as provided in subparagraph 3(b) above.
Nothing contained in this paragraph shall limit or prevent Seller from enforcing
Buyer's obligations and liabilities which expressly survive a termination of
this Agreement.
17. BUYER'S REMEDIES. If Seller breaches any of the terms or provisions of this
Agreement or otherwise defaults hereunder, in addition to all other rights and
remedies available at law or in equity, Buyer may (i) terminate this Agreement
and the Escrow by written notice to Seller and Escrow Agent, whereupon the
Earnest Money shall be immediately returned to Buyer;
<PAGE>
(ii) waive such default and consummate the transaction contemplated hereby in
accordance with the terms hereof; or (iii) specifically enforce this Agreement.
Nothing contained in this paragraph shall limit or prevent Buyer from enforcing
Seller's obligations and liabilities which survive a termination of this
Agreement.
18. CASUALTY; CONDEMNATION. Seller shall notify Buyer immediately of the
occurrence of any damage to or destruction of the Hotel, or any portion thereof,
or the institution or maintenance of any condemnation or similar proceedings
with respect to the Real Property or any portion thereof. In the event of any
damage to or destruction of any portion of the Hotel for which the cost to
repair exceeds $250,000, or if any such condemnation or other proceedings are
instituted or maintained, Buyer at its option either (i) may terminate this
Agreement, in which case the Earnest Money shall be returned to Buyer and
neither party shall have any further rights or obligations hereunder except as
provided in Paragraphs 7 and 21 or (ii) may consummate the purchase evidenced by
this Agreement. In all other events or if Buyer elects to consummate the
purchase pursuant to clause (ii) above, Buyer shall receive a credit at Closing
in an amount equal to (A) all insurance or condemnation proceeds collected by
Seller prior to the Closing, plus (B) Seller's deductible or self-insurance
limit or such lesser amount as is equal to the estimated cost to repair or
reconstruct those portions of the Property damaged or destroyed, and all rights
to all other insurance or condemnation proceeds arising out of such damage or
destruction or proceedings and not collected prior to the Closing, including any
business interruption and rental loss proceeds for any period after the Closing,
shall be assigned by Seller to Buyer as of the Closing.
19. COMMISSIONS. Seller has committed to pay a business brokerage fee to Ken F.
Seminatore of $70,350 for his services in connection with the transactions
represented by this Agreement and the Affiliated Sales Agreements. Buyer
warrants and represents to Seller that no other real estate sales or brokerage
commissions or like commissions are or may be due in connection with this
transaction as a result of Buyer's acts. Seller shall be solely responsible for
all commissions or like fees owing in connection with this transaction as a
result of its acts. Each party agrees to indemnify, defend and hold harmless the
other party from and against any claims by third parties made by or through the
acts of such party, for real estate or brokerage commissions, or a finders fee,
in connection with the transaction provided for herein, and all costs and
expenses incurred by the indemnitee in connection therewith including, but not
limited to, reasonable attorneys' fees. The indemnity provided for in this
paragraph shall survive the Closing or any earlier termination of this
Agreement.
20. DISCLAIMER. Other than as expressly set forth herein, Seller hereby
specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to, or concerning (i) the nature and
condition of the Assets, including, without limitation, the water, soil and
geology or any other matter affecting the stability or integrity of the Real
Property or Improvements, and the suitability thereof and of the Assets for any
and all activities and uses which Buyer may elect to conduct thereon, and the
existence of any environmental hazards or conditions thereon (including the
presence of asbestos) or compliance with applicable Laws; (ii) the condition of
title to the Assets or the nature and extent of any right-of-way, lease,
possession, lien, encumbrance, license, reservation, condition or otherwise;
(iii) the compliance of the Assets
<PAGE>
or its operation with any covenants, conditions, restrictions, or Laws; (iv) the
profitability or losses or expenses relating to the Assets and the businesses
conducted in connection therewith; (v) the existence, quality, nature, adequacy
or physical condition of any utility serving the Project; (vi) the zoning or
other legal status of the Project; (vii) the quality of any labor or materials
relating in any way to the Assets; (viii) the legal or tax consequences of this
Agreement or its underlying transaction; and (ix) the transferability of the
Seller's rights under the Contracts. Buyer acknowledges that prior to the
Feasibility Expiration Date Seller will afford Buyer the opportunity for full
and complete investigations, examinations and inspections of the Assets and all
information to be delivered by Seller pursuant to this Agreement and, other than
as expressly set forth herein, Buyer is relying solely on its own investigation
and inspection of the Assets. Other than as expressly set forth herein, or in
subparagraph 14(b)(viii) hereof, the sale of the Assets as provided for herein
is made on an "AS IS" and "WHERE IS" basis, and Buyer expressly acknowledges
that, in consideration of the agreements of Seller herein, other than as
expressly set forth herein, Seller makes no warranty or representation, express
or implied, or arising by operation of law, including, but not limited to, any
warranty of condition, habitability, merchantability, suitability or fitness for
a particular use or purpose, in respect of all or any of the Assets.
21. CONFIDENTIALITY AND RETURN OF DOCUMENTS. Buyer agrees that, until after the
Closing, all documentation or information delivered to Buyer or its
representatives or agents by Seller or Seller's representatives or agents
pertaining to the Assets shall be kept strictly confidential and will not be
used by Buyer or its representatives or agents, directly or indirectly, for any
purpose other than evaluating the Assets. Neither party shall release, or cause
or permit to be released any press notices, publicity (oral or written) or
advertising or otherwise announce or disclose, or cause or permit to be
announced or disclosed, in any manner whatsoever, except as may be required by
applicable law or regulation, the terms, conditions or substance of the
transaction contemplated herein without first obtaining the express written
consent of the other party hereto. It is understood that the foregoing shall
not, however, preclude Buyer from discussing the substance or any relevant
details of the transaction contemplated in this Agreement, nor disclosing the
terms of this Agreement, or the existence thereof, to Buyer's accountants,
attorneys and Consultants engaged in connection with this transaction, or such
other persons or entities to which disclosure is required by Law. If the sale of
the Assets contemplated herein is not consummated, each party shall promptly
return to the other party all information, documents, and other items received
from such other party in connection herewith. This provision shall survive the
Closing or any termination of this Agreement.
22. WAIVER. The exercise or waiver of the performance by a party of any
obligation of the other party under this Agreement shall only be effective if
evidenced by a written statement signed by the party so exercising. No delay in
exercising any right or remedy shall constitute a waiver thereof and no waiver
by Seller or Buyer of the breach of any covenant of this Agreement shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Agreement.
<PAGE>
23. TIME PERIODS. If the time for performance of any obligation hereunder
expires on a Saturday, Sunday or legal holiday, the time for performance shall
be extended to the next day which is not a Saturday, Sunday or legal holiday.
24. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations and warranties set forth in this
Agreement shall survive the Closing and shall not merge into the deed or other
instrument executed or delivered in connection with the transaction contemplated
hereby. The representations and warranties of Partnership contained in Paragraph
14.(b) and of Seller contained in Paragraph 14.(c) shall survive the Closing
until the date which is one (1) year following the Closing Date except for
matters disclosed or actually known to Buyer prior to the Closing.
25. MODIFICATION OF AGREEMENT. No modification of this Agreement shall be deemed
effective unless in writing and signed by the parties hereto.
26. FURTHER INSTRUMENTS. Each party, promptly upon the request of the other,
shall execute and have acknowledged and delivered to the other or to Escrow
Agent, as may be appropriate, any and all further instruments reasonably
requested or appropriate to evidence or give effect to the provisions of this
Agreement and which are consistent with the provisions hereof.
27. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the
parties with regards to the purchase and sale of the Assets. All terms and
conditions contained in any other writings previously executed by the parties
(including the letter of intent dated May 21, 1998) and all other discussions,
understandings or agreements regarding the Assets and the subject matter hereof
shall be deemed to be superseded hereby.
28. INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the permitted successors and assigns, if any, of the respective parties hereto.
29. APPLICABLE LAW. This Agreement, and all questions and disputes arising in
connection with it, shall be governed by and construed in accordance with the
laws of the State of Ohio.
30. DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any provisions hereof.
31. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
32. ASSIGNMENT. Other than to a Permitted Transferee, Buyer may not assign its
rights hereunder without the prior written consent of Seller, which consent may
be unreasonably withheld. No assignment proposed by Buyer, even if to a
Permitted Transferee, shall be valid and effective until the delivery to Seller
of written notice of such assignment together with an
<PAGE>
executed copy of the documents pursuant to which such assignee assumes all of
Buyer's covenants, indemnities, obligations and agreements under this Agreement
and agrees to be bound by all of the terms, conditions and provisions hereof and
thereof. Notwithstanding any assignment to a Permitted Transferee, Buyer shall
not be released from all obligations and liabilities hereunder.
33. CONSTRUCTION. The parties agree that each party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement or any amendments or exhibits
hereto.
34. INTERPRETATION. In this Agreement, the neuter gender includes the feminine
and masculine, and the singular number includes the plural, and the words
"person" and "party" include sellers, partnerships, individuals, firms, trusts,
or associations wherever the context so requires.
35. EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto and
referred to in this Agreement are incorporated herein by this reference and are
part of this Agreement.
36. COUNTERPARTS. This Agreement may be executed simultaneously or in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
37. RECORDATION. This Agreement shall not be recorded, but Buyer may record a
Memorandum of the Agreement upon obtaining Seller's prior written approval.
38. EXCLUSIVE NEGOTIATIONS. As an inducement to Buyer to investigate and analyze
the Assets, and to encourage Buyer to satisfy or waive the contingencies
referenced in Paragraph 6 above as soon as possible, Seller shall not, prior to
the Feasibility Expiration Date (and then only if Buyer fails to remove the
contingencies set forth in Paragraph 6.(a) or otherwise terminates this
Agreement), either seek or solicit any purchase offer or financing with respect
to the Assets, and Seller shall deal exclusively with Buyer toward consummating
the transaction contemplated by this Agreement in accordance with the terms and
conditions of this Agreement.
39. IRS REAL ESTATE SALES REPORTING. Buyer and Seller shall appoint Escrow Agent
as, and Escrow Agent shall agree to act as, "the person responsible for closing"
the transaction which is the subject of this Agreement pursuant to Internal
Revenue Code Section 6045(e). Buyer and Seller shall confirm such appointment in
the separate instructions given to Escrow Agent and shall instruct Escrow Agent
to prepare and file all informational returns, including without limitation, IRS
Form 1099-S and to otherwise comply with the provisions of Internal Revenue Code
Section 6045(e).
<PAGE>
40. BULK SALES WAIVER. Seller waives any requirement of Buyer to comply with any
applicable notice requirements pertaining to bulk sales or other similar laws.
Seller shall indemnify, defend and hold Buyer harmless for, from and against any
liability resulting from such waiver.
SELLER: BUYER:
GALBURTON INN, INC, JANUS AMERICAN GROUP, INC.
an Ohio corporation
By: By:
Name: Michael Gallucci, Jr. Name: James E. Bishop
Its: President Its: President
<PAGE>
SCHEDULE "A"
Affiliated Sales Agreements
1. Purchase and Sale Agreement dated July 31, 1998 between North Canton
Operating Corp., Canton North Properties and Janus American Group, Inc.
2. Purchase and Sale Agreement dated July 31, 1998 between Rockside and Road
Operating Corp., Rockside Road Properties and Janus American Group, Inc.
3. Purchase and Sale Agreement dated July 31, 1998 between West Montrose
Properties and Janus American Group, Inc.
<PAGE>
SCHEDULE "B"
Contracts
<PAGE>
SCHEDULE "C"
Franchise Agreement
Holiday Inn License Agreement dated as of May 31, 1985, between Holiday
Inns, Inc., a Tennessee corporation, and Galburton Inn, Inc., an Ohio
corporation.
<PAGE>
SCHEDULE "D"
Personalty
[See Attached]
<PAGE>
SCHEDULE "E"
Real Property Description
[See Attached]
<PAGE>
SCHEDULE "F"
Allocation of Purchase Price
$800,000 - Land
$9,825,000 - Building
$1,400,000 - Chattels
$12,025,000 - Total Purchase Price
<PAGE>
SCHEDULE "G"
Disclosure Statement
<PAGE>
EXHIBIT "A"
Management Agreement
[See Attached]
<PAGE>
EXHIBIT "B"
Consulting Agreement
[See Attached]
<PAGE>
EXHIBIT "C"
Limited Warranty Deed
[See Attached]
<PAGE>
EXHIBIT "D"
Affidavit of Non-Foreign Person
[See Attached]
<PAGE>
EXHIBIT "E"
Assignment and Assumption of Contracts
[See Attached]
<PAGE>
EXHIBIT "F"
Assignment of Intangible Property
[See Attached]
<PAGE>
EXHIBIT "G"
Bill of Sale
[See Attached]
<PAGE>
EXHIBIT "H"
Assignment and Assumption of
Franchise Agreement
[Not Required]
PURCHASE AND SALE AGREEMENT
between
WEST MONTROSE PROPERTIES,
an Ohio limited partnership
as Seller,
and
JANUS AMERICAN GROUP, INC.,
A Delaware corporation
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
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1. Definitions
(a) "Affiliated Sale Agreements" 4
(b) "Agreement" 4
(c) "Assets" 4
(d) "Closing" 4
(e) "Closing Date" 4
(f) "Concurrent Escrows" 4
(g) "Contracts" 5
(h) "Documents" 5
(i) "Earnest Money" 5
(j) "Escrow" 5
(k) "Escrow Agent" 5
(l) "Feasibility Expiration Date" 5
(m) "Federal Code" 5
(n) "Food and Beverage Inventory" 5
(o) "Franchise Agreement" 5
(p) "Franchisor" 5
(q) "Hotel" 5
(r) "Improvements" 5
(s) "Intangible Property" 5
(t) "Latent Defects" 6
(u) "Laws" 6
(v) "Managing Partner" 6
(w) "Operating Equipment" 6
(x) "Operating Supplies" 6
(y) "Person" 6
(z) "Permitted Title Exceptions" 6
(aa) "Permitted Transferee" 6
(ab) "Personalty" 6
(ac) "Purchase Price" 6
(ad) "Real Property" 6
(ae) "Title Agent" 7
2. Agreement of Purchase and Sale 7
3. Purchase Price 7
(a) Earnest Money 7
(b) Liquidated Damages 7
(c) Cash at Closing 7
4. Allocation of Purchase Price 8
<PAGE>
5. Buyer's Contingencies 8
(a) Due Diligence 8
(b) Conditions to Buyer's Obligations 9
6. Seller's Contingencies and Covenants 10
(a) Seller's Contingencies 10
(i) Buyer's Covenants 10
(ii) Closing of Concurrent Escrows 10
(iii) Truth of Representations 10
(iv) Franchisor Consent 10
(v) Release 11
(vi) Consulting Agreement 11
(b) Covenants 11
(i) Maintenance of the Assets 11
(ii) Permits and Approvals 11
(iii) Notification to Existing Employees 11
(iv) Seller's Obligations Concerning Its Employees 12
(v) Franchise Transfer 12
7. Inspections 12
(a) Entry and Investigation 12
(b) No Interference 12
8. Title Insurance Policy 13
9. The Escrow and Closing 13
(a) Escrow Instructions 13
(b) Closing 13
(c) Action at the Closing by Seller 13
(d) Action at the Closing by Buyer 15
(e) Closing Costs 15
(f) Pre-Closing Settlement Statement 16
(g) Transfer of Guest Property in Safe Keeping 16
10. Apportionments 16
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs 16
(b) Utility and Maintenance Charges 18
(c) Adjustments to Prorations 18
11. Indemnification 19
12. Possession 19
13. Representations and Warranties 20
(a) Buyer 20
(b) Seller 20
14. Notices 22
15. Seller's Remedies 23
16. Buyer's Remedies 23
17. Casualty; Condemnation 23
18. Commissions 23
<PAGE>
19. Disclaimer 24
20. Confidentiality and Return of Documents 24
21. Waiver 25
22. Time Periods 25
23. Survival of Covenants, Agreements, Representations and Warranties 25
24. Modification of Agreement 25
25. Further Instruments 25
26. Entire Agreement 25
27. Inurement 26
28. Applicable Law 26
29. Descriptive Headings 26
30. Time of the Essence 26
31. Assignment 26
32. Construction 26
33. Interpretation 26
34. Exhibits and Schedules 26
35. Counterparts 26
36. Recordation 26
37. Exclusive Negotiations 26
38. IRS Real Estate Sales Reporting 27
39. Bulk Sales Waiver 27
SCHEDULES
Affiliated Sales Agreements
Contracts
Franchise Agreement
Personalty
Real Property
Allocation of Purchase Price
Disclosure Statement
EXHIBITS
Consulting Agreement
Limited Warranty Deed
Affidavit of Non-Foreign Person
Assignment and Assumption
Assignment of Intangible Property
Bill of Sale
Assignment and Assumption of the Franchise Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made effective as of the
31st day of July, 1998, by and between WEST MONTROSE PROPERTIES., an Ohio
limited partnership ("Seller"), and JANUS AMERICAN GROUP, INC., a Delaware
corporation and/or its Permitted Transferee (hereinafter collectively referred
to as "Buyer").
Background of Agreement
A. Seller is the owner of certain real property located in Akron, Ohio, having
located thereon a 136-room hotel known as the Montrose West Comfort Inn.
B. Buyer desires to purchase such real property and related assets, and Seller
desires to sell to Buyer such real property and related assets, subject to and
in accordance with the terms, covenants and conditions of this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the terms, conditions and
covenants contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the terms below shall have the
following meanings unless the context requires otherwise.
(a) "Affiliated Sale Agreements". The various purchase and sale agreements
described on Schedule "A" hereto.
(b) "Agreement". This Purchase and Sale Agreement, as amended or
supplemented from time to time.
(c) "Assets". The Contracts, the Documents, the Improvements, the
Intangible Property, the Personalty, and the Real Property now owned, or
hereafter acquired, by Seller in connection with or relating to the Hotel.
(d) "Closing". The event at which the transaction contemplated hereby will
be consummated and when Buyer acquires title to the Assets.
(e) "Closing Date". The date designated by Buyer in a written notice
delivered to Seller at least five (5) business days in advance; however, in no
event shall the Closing Date occur later than the date provided in subparagraph
9(b) hereof.
(f) "Concurrent Escrows". The escrows, established with Escrow Agent
pertaining to the purchase by Buyer of certain other hotel properties and
related assets pursuant to the Affiliated Sale Agreements.
<PAGE>
(g) "Contracts". All 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 Hotel that will remain in effect after Closing, all of which are
described on Schedule "B" hereto.
(h) "Documents". All books, records and files relating to the leasing,
maintenance, management or operation of the Hotel in Seller's possession or in
the possession of any management company currently managing any portion of the
Hotel.
(i) "Earnest Money". The deposit required to be paid by Buyer to Escrow
Agent pursuant to subparagraph 3(a), together with all interest earned thereon.
(j) "Escrow". The Escrow established with Escrow Agent to facilitate the
transaction contemplated hereby, bearing Escrow No. .
(k) "Escrow Agent". American Title Company, 6029 Belt Line Road, Suite 250,
Dallas, Texas 75240.
(l) "Feasibility Expiration Date". July 25, 1998.
(m) "Federal Code". The United States Internal Revenue Code of 1986, as
amended.
(n) "Food and Beverage Inventory". All inventory of food and beverages,
including alcoholic beverages, owned by Seller located at the Hotel, and used in
the operation of any restaurant, cafe, bar or other food service operation
within the Hotel.
(o) "Franchise Agreement". The agreement and/or agreements referenced on
Schedule "C" attached hereto.
(p) "Franchisor". Comfort Inn Franchising, Inc., a Delaware corporation.
(q) "Hotel". The 136-room hotel located on the Real Property known as the
Montrose West Inn.
(r) "Improvements". All buildings, fixtures, walls, fences, landscaping and
other structures and improvements situated on, affixed or appurtenant to the
Real Property.
(s) "Intangible Property". All transferable or assignable permits, building
plans and specifications, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates, licenses, including,
without limitation, liquor licenses, warranties and guarantees, rights to
deposits, rebates and refunds, trade names, service marks, appraisals,
engineering, soils, pest control and other reports relating to the Hotel, the
Contracts, customer or tenant lists, correspondence with present or prospective
tenants, customers or
<PAGE>
suppliers, advertising materials, telephone exchange numbers identified with the
Hotel, and all other transferable intangible property, miscellaneous rights,
benefits or privileges of any kind or character with respect to the Hotel.
(t) "Latent Defect". Any defect in the Hotel which could not have been
discovered through a reasonable due diligence inspection of the Hotel by Buyer.
(u) "Laws". All present and future laws, statutes, codes, ordinances,
orders, awards, judgments, decrees, injunctions, approvals, permits,
requirements, regulations and licenses of every governmental or
quasi-governmental authority or agency.
(v) "Managing Partner". Michael Gallucci
(w) "Operating Equipment". All chinaware, glassware, linens, silverware,
tools, kitchen utensils, uniforms, engineering and housekeeping tools, vans,
automobiles, and other equipment and utensils owned by Seller and used in the
operation of the Hotel.
(x) "Operating Supplies". All fuel, soap, toilet paper, tissues,
toiletries, towels, light bulbs, mechanical stores, cleaning supplies and
materials, pool maintenance supplies and materials, matches, stationery, paper
supplies, laundry supplies, housekeeping supplies, accounting supplies, goods
and merchandise used for retail sale and other immediately consumable items,
owned by Seller and used in the operation of the Hotel.
(y) "Person". Any individual, firm, corporation, partnership, limited
liability company, trust or other entity.
(z) "Permitted Title Exceptions". The various matters affecting title to
the Assets that are approved by Buyer pursuant to subparagraph 5(a) below.
(aa) "Permitted Transferee". Buyer or JAGI Montrose West, L.L.C., a
Delaware limited liability company.
(ab) "Personalty". All furniture (including television sets, except where
leased), furnishings, fixtures, equipment (including, without limitation, office
equipment and the Operating Equipment), machinery, tools, pool maintenance
equipment, inventory, drapes, carpeting, rugs, artwork, the Operating Supplies,
the Food and Beverage Inventory, and other items of personal property owned by
Seller and found or used exclusively at the Hotel, including, without
limitation, the items described on Schedule "D" hereto.
(ac) "Purchase Price". The purchase price for the Assets as set forth in
Paragraph 3 hereof.
(ad) "Real Property". The real property more particularly described on
Schedule "E" attached hereto, together with all easements, rights of ways,
privileges, licenses and appurtenances which Seller may now own or hereafter
acquire with respect to such real property.
<PAGE>
(ae) "Title Agent". Chicago Title Insurance Company.
2. AGREEMENT OF PURCHASE AND SALE . At the Closing, subject to the terms,
covenants and conditions of this Agreement, Seller shall sell to Buyer and Buyer
shall purchase from Seller the Assets.
3. PURCHASE PRICE. The Purchase Price to be paid for the Assets shall be Three
Million Four Hundred Seventy-Nine Thousand Nine Hundred Dollars ($3,479,900.00)
payable by Buyer as follows:
(a) Earnest Money. Promptly following the execution of this Agreement,
Buyer shall deposit with Escrow Agent, Twenty-Four Thousand Eight Hundred
Seventy-Nine Dollars and No/100 Dollars ($24,879.00) as Earnest Money to be held
in the Escrow in accordance with the terms and conditions of this Agreement.
Escrow Agent is hereby authorized and directed to invest all funds deposited by
Buyer into Escrow as directed by Buyer. Interest on the Earnest Money shall
accrue for the benefit of and be payable to the party otherwise entitled to such
sums upon the Closing or earlier termination of this Agreement. If the sale of
the Assets contemplated hereunder is consummated, the Earnest Money (inclusive
of all interest earned thereon) shall be paid to Seller at the Closing and
applied as a credit against Buyer's payment of the Purchase Price.
(b) Cash at Closing. On or before the Closing Date, Buyer shall deliver to
Escrow Agent, for the benefit of Seller, the remaining balance of the Purchase
Price (reduced by any credits due Buyer hereunder) by wire transfer of
immediately available funds to the account of Escrow Agent.
4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated as set
forth in Schedule "F" hereto. Buyer and Seller agree that the allocations set
forth in Schedule "F" were determined in good faith and at arms length, and
represent the parties' best good faith estimate of the fair market value, as of
the Closing Date, of each component of the Assets described on Schedule "F".
Buyer and Seller shall each report the transactions contemplated by this
Agreement for income tax purposes in accordance with the agreed upon allocations
set forth on Schedule "F" and will not take or assert a position inconsistent
therewith.
5. BUYER'S CONTINGENCIES. The following are conditions precedent to Buyer's
obligation to purchase the Assets:
(a) Due Diligence. Buyer shall have until the Feasibility Expiration Date
within which to perform such physical inspections and other reasonable due
diligence pertaining to the Assets as Buyer deems necessary, and to decide, in
Buyer's sole discretion, whether the Assets are in all respects satisfactory to
Buyer. Such due diligence shall include, without limitation, the following:
<PAGE>
(i) Title. Buyer's review and approval of title to the Property, as
follows. Seller shall, as soon as possible after executing this Agreement,
deliver to Buyer at Seller's sole cost and expense:
(A) a current extended coverage preliminary title report on the
Real Property, issued by Title Agent, and accompanied by copies of all
documents referred to in the report;
(B) copies of all existing and proposed easements, covenants,
restrictions, agreements or other documents which affect the Property
and which are not disclosed by the preliminary title report, or, if no
such documents exist, a certification of Seller to that effect;
(C) an ALTA/ACSM "as-built" survey of the Real Property and
Improvements prepared by a licensed surveyor or engineer (the
"Survey"). The Survey shall be acceptable and certified by the
surveyor to Buyer and in sufficient detail to provide the basis for
the Title Policy (as defined below) without boundary, encroachment or
survey exceptions, and shall show the location of all easements and
Improvements (including underground improvements) and any and all
other pertinent information with respect to the Property. The Survey
shall also indicate any encroachments of Improvements onto easements
or onto adjacent properties or certify to their absence, the presence
of improvements and easements on property adjoining the Real Property
if located within five (5) feet of the boundaries of the Real
Property, the number and location of all parking spaces on the
Property, and the square footage of the Real Property and the
Improvements. Prior to Closing, the Survey shall be certified to Buyer
and to the company issuing the Title Policy; and
(D) copies of the most recent property tax bills for the Property
and any filings, notices or correspondence regarding any challenges or
appeals to the applicable taxes, and copies of any improvement
assessments and any other bonds and assessments affecting the
Property.
Buyer shall advise Seller, within ten (10) days after actual receipt of all such
materials, what exceptions to title, if any, are objectionable to Buyer. Any
exceptions not objected to shall be deemed accepted by Buyer (the "Permitted
Exceptions"). Seller shall have ten (10) days after receipt of Buyer's
objections to give Buyer notice: (1) that Seller will remove any objectionable
exceptions from title and provide Buyer with evidence satisfactory to Buyer of
such removal, or provide Buyer with evidence satisfactory to Buyer that said
exceptions will be removed on or before the Closing, or (2) that Seller elects
not to cause such exceptions to be removed. Seller's failure to notify Buyer
within such ten (10) day period shall be deemed an election by Seller not to
remove the objectionable exceptions as provided in clause (2) above. If Seller
elects not to cure under clause (2), notwithstanding that the Feasibility
Expiration Date shall have passed, Buyer shall have ten (10) days to elect
whether to proceed with the purchase and take the Real Property subject to such
exceptions, or to terminate this Agreement. If Buyer shall fail to give Seller
notice of its election within said ten (10) days, Buyer shall be deemed to have
elected not to proceed with this Agreement.
<PAGE>
(ii) Physical Characteristics. Buyer's review and approval of the
structural, mechanical, electrical and other physical characteristics of
the Hotel.
(iii) Reports. Buyer's receipt and approval of satisfactory
architectural, engineering, soils and environmental reports. Pursuant to
the terms of Paragraph 7 of this Agreement, Seller shall provide Buyer the
opportunity to conduct, at Buyer's expense, an environmental site
assessment by a qualified engineer to determine the extent, if any, that
the Hotel contains any asbestos, underground storage tanks, or any other
toxic or hazardous substance or materials, or other environmental hazards
as defined by applicable Laws.
If Buyer is not satisfied, for any reason determined in its sole discretion,
with the results of its due diligence investigation, or if for no reason, Buyer
may terminate this Agreement by written notice to Seller and Escrow Agent
delivered on or before the Feasibility Expiration Date. Buyer's failure to
timely deliver written notice of termination on or before the Feasibility
Expiration Date shall be deemed Buyer's election to proceed with this Agreement.
Upon such termination Buyer shall be entitled to the return of the Earnest Money
and thereafter, except as provided in Paragraphs 7 and 21, neither party shall
have any further rights or obligations hereunder. Buyer's right to conduct any
inspection of the Assets shall be governed by the provisions of Paragraph 7
below.
(b) Conditions to Buyer's Obligations. Buyer's obligation to purchase the
Assets shall be subject to the following further conditions precedent:
(i) Buyer's Mortgage. A first mortgage loan with respect to all of the
Affiliated Sales Agreements aggregating not less than Thirty-Six Million
Dollars ($36,000,000) under terms and conditions acceptable to Purchaser;
(ii) Appraisals. Appraisals on the Hotels and those hotels subject of
the Affiliated Sales Agreements aggregating not less than Forty-Two Million
Five Hundred Thousand Dollars ($42,500,000);
(iii) PIP Reports. "PIP" reports approved by Holiday Inn and Comfort
Inn acceptable to Buyer in an aggregate amount for the Hotel and those
hotels subject to the Affiliated Sales Agreements not to exceed Two Million
Five Hundred Thousand Dollars ($2,500,000);
(iv) Franchisor Approval. Approval of Buyer as a franchisee by
Franchisor;
(v) Title Insurance. Receipt by Buyer of an ALTA Owner's Title
Insurance Policy together with any agreed endorsements;
(vi) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "A" hereto (the
"Consulting Agreement").
<PAGE>
(vii) Closing of Concurrent Escrows. The purchase and sale
transactions that are the subject of the Concurrent Escrows shall be
consummated in accordance with the respective terms and conditions thereof
on the Closing Date concurrently with the closing of the Escrow and
consummation of the transaction contemplated by this Agreement.
6. SELLER'S CONTINGENCIES AND COVENANTS.
(a) Seller's Contingencies. The following are conditions precedent to
Seller's obligation to sell the Assets:
(i) Buyer's Covenants . All covenants of Buyer shall have been
fulfilled by Buyer in timely fashion or waived by Seller;
(ii) Closing of Concurrent Escrows. The purchase and sale transactions
that are the subject of the Concurrent Escrows shall be consummated in
accordance with the respective terms and conditions thereof on the Closing
Date concurrently with the closing of the Escrow and consummation of the
transaction contemplated by this Agreement;
(iii) Truth of Representations. All of Buyer's representations and
warranties contained in or made pursuant to this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing
Date;
(iv) Franchisor Consent. Consent to the consummation of the
transaction contemplated by this Agreement shall have been obtained from
Franchisor; and
(v) Release. Release of Sellers, by Franchisor, of any future
responsibility or liability to the Franchisor for termination or transfer
fees, or for actions or events occurring after the Closing Date (the
"Franchisor Release"); provided, however, Seller shall remain liable for
all amounts due and owing to Franchisor for activities of Seller prior to
the Closing Date.
(vi) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "A" hereto (the
"Consulting Agreement").
(b) Covenants.
(i) Maintenance of the Assets. From and after the date hereof to the
Closing Date, Seller shall: (A) cause the Hotel to be maintained and
operated in compliance with all Laws, in accordance with its current
standards and consistent with its past operating procedures for the Hotel,
shall maintain present services, shall maintain sufficient Food and
Beverage Inventory, and Operating Supplies for the proper management,
maintenance, operation and servicing of the Hotel and shall continue to
market the Hotel and to accept reservations and group bookings at its
currently established rates therefor; (B) not sell or otherwise dispose of
any significant items of Personalty (other than Food and Beverage Inventory
and Operating Supplies in connection with the ordinary course operation or
maintenance of the Property) unless replaced with an item of like value,
quality and utility; (C) not enter into any service, maintenance,
<PAGE>
landscaping, operating, repair, equipment lease, employment, management,
leasing or other similar contract or agreement relating to the operation or
maintenance of the Hotel, except for those entered into in the ordinary
course of business and which are cancelable upon not more than thirty (30)
days prior notice or in the event of a sale of the Hotel; and (D) maintain
in full force and effect all liability and casualty insurance currently in
effect. The insurance currently in effect is described in Exhibit F. Seller
shall timely perform all its obligations under all Contracts (including,
without limitation, the Franchise Agreement), including, without
limitation, the payment of all bills, charges, invoices, salaries,
benefits, and other expenses arising in connection with the Hotel prior to
the Closing Date.
(ii) Permits and Approvals. Seller shall cooperate with Buyer in
obtaining all Permits and Approvals required for Buyer's intended use and
operation of the Hotel and shall not seek or acquiesce in any amendment to
any of the existing Permits and Approvals or any change in the present
zoning classification of the Real Property which would alter the present
permitted uses of the Real Property.
Notification to Existing Employees. Prior to Closing, Seller will notify
its employees at the Hotel of the pending sale in writing and the date the
sale will be effective. Such notice shall further inform the employees that
they will be offered an opportunity to submit applications for employment
to Buyer or its Agent, and that Buyer or its Agent shall continue to employ
those individuals who meet certain employment criteria to be determined at
the sole discretion of Buyer or its Agent.
(iv) Seller's Obligations Concerning Its Employees. Within ten (10)
days of the closing of this transaction, or as soon thereafter as required
by law, Seller shall pay to all employees receiving notice of the sale
under Section 6(b)(iii) above the full amount of wages earned and other
benefits accrued as of such date (including the entire amount of all
vacation accruals) or the last day an employee worked if employee is no
longer employed on the date set forth above and shall remain fully liable
for any related payroll expenses, severance pay, unfair labor practice
claims, employment discrimination charges and other employee claims
relating to any period prior to the closing. After the closing, Seller
shall transfer to Buyer or its Agent, the records of all employees who
submit applications or otherwise request to continue their employment
relationship with the Hotel if each such employee making application has
first executed a Release/Consent to Transfer Records form which has been
provided to Seller.
(v) Franchise Transfer. Promptly following the date of this Agreement,
Seller shall notify Franchisor of the sale contemplated by this Agreement.
Seller shall use its best efforts to ascertain, and provide written notice
thereof to Buyer prior to the Feasibility Expiration Date, the specific
requirements (including the PIP) of Franchisor to obtaining its consent to
the sale contemplated hereby and allowing the Franchise Agreement to be
assigned to Buyer. It is contemplated that Buyer's inspection and the PIP
requirements will result in no more than $2,500,000 of improvements being
required to be made to the Hotel and those hotels which are the subject of
the Affiliated Sale Agreements (the "PIP Requirements").
<PAGE>
The parties acknowledge that in order to obtain from the Franchisor a Franchise
Agreement for the Hotel, a Franchise Fee of $40,000 shall be due and owing to
the Franchisor, which Franchise Fee Seller agrees to pay.
The parties agree that the cost to satisfy the PIP Requirements for this Hotel
is estimated to be $20,000, which cost Seller agrees to pay, but only on the
condition to the extent that, at the time of Closing of this sale transaction, a
separate escrow account is established from Seller's gross sales proceeds in
such amount (the "PIP Escrow"). The PIP Escrow funds shall be used solely and
exclusively for the purpose of paying the costs of completing the PIP
Requirements, and Seller shall have absolutely no right to claim any right,
title or interest to the PIP Escrow other than for the purpose of paying for the
cost of completing PIP Requirements. It is agreed that responsibility for taking
all actions required in order to complete the PIP Requirements shall be as set
forth in the Franchise Agreement, and in order to comply with the terms of
Buyer's mortgage financing, Amresco Capital, L.P. ("Amresco") will hold the PIP
Escrow in a non-interest bearing account. Release of funds from the PIP Escrow
shall be subject to the requirements and consent of Amresco and shall be pledged
to Amresco as security for the Buyer's Mortgage loan to Amresco and to insure
completion of the PIP Requirements. If funds remain in the PIP Escrow after
completion of the PIP Requirements (which is not anticipated), such excess funds
shall be paid to Amresco as a principal payment on the Buyer's mortgage loan. If
the PIP Escrow is insufficient to complete the PIP Requirements, Seller shall
have absolutely no responsibility to fund such deficit. Because third parties
shall control and supervise the completion of the PIP Requirements, Seller shall
have no liability or responsibility therefor, and makes no representation or
warranty that the PIP Requirements shall be completed in a workmanlike manner,
or otherwise, and/or can be completed at a cost equal to the amount of the PIP
Escrow.
7. INSPECTIONS.
(a) Entry and Investigation. Between the date hereof and the Feasibility
Expiration Date, Seller grants to Buyer and its employees, agents, contractors
and consultants (collectively, "Consultants"), a license to enter the Hotel at
reasonable times for the purpose of performing certain inspections on or
concerning the Hotel, which inspections may include: (i) research regarding the
Property and surrounding parcels as is generally conducted in a Level I or Phase
I environmental audit, surveying the Real Property, and conducting other
inspections of the Real Property and the physical condition of the Improvements
and any furniture, fixtures, equipment and machinery located therein; (ii) the
performance of engineering or structural investigations and tests of the Hotel
and any improvements thereon as may be approved by Seller; (iii) reviewing the
books and records of the Hotel; and (iv) meeting with and interviewing
Franchisor and other persons involved in property management of the Hotel
(collectively, the "Investigation"). The Investigation and all related
activities or events shall be limited and conducted as herein required, all at
Buyer's sole risk, cost and expense. Seller shall incur no cost or expense in
connection with the Investigation or any related activities or events.
(b) No Interference. The Investigation shall be diligently performed and
prosecuted to completion so as to minimize interference with the operation or
use of the Hotel by Seller and
<PAGE>
its employees, agents and contractors and any hotel guests or other invitees and
licensees. Any entry and any Investigation by Buyer or its Consultants shall be
subject to and conducted in accordance with all Contracts and the Franchise
Agreement. Because of Seller's concern with any interference with the operation
of the Hotel, Seller reserves the right to impose reasonable restrictions on
time and frequency of Buyer's entry, provided such restrictions shall not
interfere with Buyer's ability to complete the Investigation prior to the
Feasibility Expiration Date. All persons who enter the Hotel shall do so at
their own risk. Buyer acknowledges and agrees that Buyer and its Consultants
shall cooperate with and comply with all directions of Seller and its
Consultants.
8. TITLE INSURANCE POLICY. At the Closing, and as a condition to Buyer's
obligation to close, Escrow Agent shall deliver to Buyer an extended coverage
owner's policy of title insurance (ALTA Form) issued by Title Agent, or the
unconditional commitment of Title Agent, to issue such policy, insuring Buyer in
the amount of the portion of the Purchase Price allocated to the Real Property
as set forth on Schedule "F" that title to the Real Property has vested in Buyer
free and clear of all liens and encumbrances other than the Permitted Title
Exceptions and such other matters as are approved by Buyer in writing, together
with such endorsements and such reinsurance (with direct access) as is requested
by Buyer (the "Title Policy"). The Title Policy shall provide full coverage
against mechanics' and materialmen's liens arising out of the construction,
repair or alteration of any of the Improvements. Buyer and Seller shall each be
responsible for one-half of the title insurance premium. Buyer shall be
responsible for the cost of any endorsements and reinsurance requested by Buyer.
9. THE ESCROW AND CLOSING.
(a) Escrow Instructions. Buyer and Seller shall establish the Escrow with
Escrow Agent to facilitate the consummation of the transactions contemplated by
this Agreement. Buyer and Seller shall provide Escrow Agent with instructions
consistent with this Agreement and each agrees to execute such additional
instructions as may be reasonably requested by Escrow Agent in connection
herewith. If any conflict or inconsistency exists between the provisions of any
instructions provided to Escrow Agent and this Agreement or any deed, instrument
or document executed or delivered in connection with the transaction
contemplated hereby, the provisions of this Agreement, or such deed, instrument
or document shall control in resolving such conflict or inconsistency. No
provision of any such instructions shall excuse any performance by either party
at the times provided in this Agreement, extend the Closing Date provided for
herein or provide either party hereto with any grace period not provided in this
Agreement, and any such provision in such instructions shall be deleted.
(b) Closing. The Closing shall occur through the Escrow and shall take
place on the Closing Date at Escrow Agent's office at 10:00 a.m., or such other
place or time as the parties may mutually agree in writing. Subject to the
conditions and contingencies set forth herein, the Closing shall take place not
later than thirty (30) days after the Feasibility Expiration Date, provided that
the Closing Date may be extended, at the Buyer's option, by up to two (2)
extensions of thirty (30) days each upon deposit by the Purchaser into the
Escrow of additional non-refundable deposits in the amount of Eight Thousand Two
Hundred Fifty-Eight and No/100
<PAGE>
Dollars ($8,258.00) each. Any such additional deposits into the Escrow shall be
paid to Seller at the Closing and applied as a credit against Buyer's payment of
the Purchase Price. Interest on such additional deposits shall accrue for the
benefit of and be payable as the Earnest Money.
(c) Action at the Closing by Seller. At or prior to the Closing, Seller
shall each, as applicable, deliver or cause to be delivered to Buyer, or to
Escrow Agent for the account of Buyer, all of the following, and with respect to
any instruments referred to below, all such instruments shall be dated as of the
Closing Date, fully and duly executed by Seller and, if appropriate,
acknowledged:
(i) Deed. A Statutory Form Limited Warranty Deed from Seller conveying
the Real Property to Buyer in the form of Exhibit "B" hereto;
(ii) Affidavit. An Affidavit of Non-Foreign Person from Seller as
contemplated by Federal Code Section 1445, in the form of Exhibit "C"
hereto;
(iii) Assignment and Assumption. An Assignment and Assumption of
Contracts from Seller (excluding the Franchise Agreement) in the form of
Exhibit "D" hereto with respect to those Contracts to which Buyer has
elected to accept;
(iv) Assignment of Intangible Property. An Assignment of the
Intangible Property from Seller in the form of Exhibit "E" hereto;
(v) Bill of Sale. A Bill of Sale from Seller relating to the
Personalty in the form of Exhibit "F" hereto;
(vi) Assignment and Assumption of Franchise Agreement. An Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "G";
(vii) Keys. All keys and/or means to operate all locks and alarms for
the Property;
(viii) Contracts. The originals of the Contracts and the Documents to
the extent in Seller's possession and not previously delivered to Buyer.
(ix) The Consulting Agreement. The Consulting Agreement
(x) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Seller, and the individual
signing on behalf of Seller, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(xi) Seller's Acknowledgment. A written acknowledgment of Seller's
approval of Escrow Agent's final settlement statement setting forth all
prorations, and adjustments made in accordance with the provisions of this
Agreement;
<PAGE>
(xii) Lien Releases. Such documentation as is reasonably satisfactory
to Buyer and Escrow Agent to cause all of the Assets to be released from
any lien, financing statement, or other encumbrance which is not a
Permitted Exception; and
(xiii) Further Documentation. Such other instruments or documents as
are reasonably necessary to fulfill the covenants and obligations to be
performed by Seller pursuant to this Agreement, specifically including,
without limitation, all properly endorsed certificates of title necessary
to transfer all motor vehicles and such other documents necessary to
transfer all other licenses and permits.
(d) Action at the Closing by Buyer. At or prior to the Closing, Buyer shall
deliver or cause to be delivered to Buyer, or to Escrow Agent for the account of
Seller all of the following, and with respect to any instruments or documents
referred to below, all such items shall be dated as of the Closing Date, fully
and duly executed by Buyer and, if appropriate, acknowledged:
(i) Purchase Price. All funds necessary to pay the Purchase Price
together with all closing costs and applicable prorations payable by Buyer
as required by the provisions of this Agreement;
(ii) Assignment and Assumption. The Assignment and Assumption of
Contracts from Seller and the Assignment (excluding the Franchise
Agreement) in the form of Exhibit "D" hereto;
(iii) Assignment and Assumption of Franchise Agreement. The Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "G" hereto;
(iv) The Consulting Agreement. The Consulting Agreement;
(v) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Buyer, and the individual
signing on behalf of Buyer, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(vi) Buyer's Acknowledgment. A written acknowledgment of Buyer's
approval of Escrow Agent's final settlement statement setting forth all
prorations and adjustments made in accordance with the provisions of this
Agreement; and
(vii) Further Documentation. Such other funds, instruments, or
documents as are reasonably necessary to fulfill the covenants and
obligations to be performed by Buyer pursuant to this Agreement.
(e) Closing Costs. Buyer and Seller shall each be responsible for its own
legal fees and the costs of its respective legal counsel. All documentary
stamps, transfer taxes, sales taxes and all other similar taxes, together with
the cost of the Survey shall be paid by Seller. The
<PAGE>
Escrow fee payable to Escrow Agent in respect of the conveyance and transfer of
the Assets to Buyer shall be shared equally by the parties. All other fees,
recording costs, charges or expenses incidental to the sale, transfer and
assignment of the Assets to Buyer shall, except as otherwise herein expressly
provided, be paid according to the standard custom and practice pertaining to
real estate transactions consummated in Summit County, Ohio.
(f) Pre-Closing Settlement Statement. At least three (3) business days
prior to the Closing, Buyer and Seller shall provide to Escrow Agent as much
information as is then available to enable Escrow Agent to prepare a pre-audit
settlement statement setting forth in detail all prorations and adjustments
contemplated by this Agreement based on the information available to Escrow
Agent. Escrow Agent shall provide such pre-audit settlement statement to Buyer
and Seller and their respective legal counsel no later than two (2) business
days prior to the Closing and shall include therewith an indication of any
specific information remaining to be provided to Escrow Agent by Buyer and
Seller to enable Escrow Agent to show all final prorations and adjustments
calculated by Buyer and Seller, and required by this Agreement. Such statement
shall be approved by both Buyer and Seller in writing prior to Closing, such
approval to be indicated by the parties signatures thereon.
(g) Transfer of Guest Property in Safe Keeping.
(i) Baggage. All baggage or other property of guests of the Property
which has been checked with or left in the care of Seller and remains in
Seller's care on the Closing Date shall be inventoried and tagged jointly
by Seller and Buyer.
(ii) Safe Deposit Boxes. As of the Closing Date, Seller and Buyer
shall prepare a list of all guests of the Property maintaining items in
safe deposit boxes. Buyer shall not be liable or responsible for any items
contained in any safe deposit box not specified on such list or specified
on such list and not included in safe deposit boxes, and Seller agrees to
indemnify and hold harmless Buyer from and against any such liability or
responsibility.
10. APPORTIONMENTS.
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs.
(i) Taxes. Real estate taxes, personal property taxes and any general
or special assessments in respect of the Assets shall be prorated as of the
Closing Date such that Seller shall be responsible for all taxes and
assessments that are allocable to any period prior to the Closing Date and
Buyer shall be responsible for all taxes and assessments that are allocable
to any period from and after the Closing Date. If the actual amount of
taxes, assessments or other amounts to be prorated for the year in which
the Closing occurs is not known as of the Closing Date, the proration shall
be based on the parties' reasonable estimates of such taxes, assessments
and other amounts. Notwithstanding any other provision of this Agreement to
the contrary, if Buyer shall become liable after the Closing for payment of
any taxes or assessments assessed against the Assets for any period of time
prior to the Closing Date, Seller shall immediately pay
<PAGE>
to Buyer on demand an amount equal to such tax assessment in accordance
with subparagraph 10(c) below.
(ii) Deposits. At the Closing, Buyer shall be charged for all house
banks and all security or other deposits paid by Seller to third parties
for which the right to the return of any such sums is transferred to Buyer
at the Closing.
Inventory and Supplies.
[INTENTIONALLY OMITTED]
(iv) Other Items. The following additional prorations and adjustments
shall occur as of the Closing and, prior to the Closing Date, Seller shall
provide all information to Buyer required to calculate such prorations and
adjustments; representatives of Buyer and Seller shall together make such
calculations and provide Escrow Agent with the results of such prorations
and adjustments.
(A) All petty cash and cash in cash registers and vending
machines as of 11:59 p.m. on the day preceding the Closing Date shall
remain the property of Seller, and if not paid to Seller at or before
the Closing shall be charged to Buyer.
(B) All receipts from guest room rentals and Hotel services prior
to the Closing Date shall belong to Seller. One half of the guest room
rentals and Hotel services, whether in cash or accounts receivable,
arising from occupancy for the entire night beginning on the day
preceding the Closing Date shall be credited to each of Buyer and
Seller. All receipts thereafter shall belong to Buyer. All prepaid
rentals, room rental deposits and all other deposits for advance
registration, banquets, or future services paid to Seller prior to the
Closing Date shall be credited to Buyer.
(C) All receipts and expenses from restaurant and bar operations
concluded prior to 11:59 p.m. on the day preceding the Closing Date
shall belong to, and be paid by, Seller.
(D) All accounts receivable and credit card claims for goods and
services furnished prior to 11:59 p.m. on the day preceding the
Closing Date shall remain the property of Seller and, to the extent
Buyer receives any payments on account thereof after Closing, Buyer
shall immediately remit such amount to Seller.
(E) All accounts payable owing for goods and services furnished
prior to 11:59 p.m. on the day preceding the Closing Date shall be
paid by Seller. Buyer shall assume, and after the Closing, pay, all
accounts payable relating to goods and services (including
advertising) for which orders have been placed, but as of 11:59 p.m.
on the day preceding the Closing Date, such goods and services have
not yet been delivered or provided so long as such goods and services
are of the type, quality and quantity used by Seller in the ordinary
course of operating the Hotel. Prior to the Closing, Seller shall
provide to Buyer a list of all accounts
<PAGE>
payable for which the goods and services have not yet been delivered
or provided, and Buyer and Seller shall determine whether any such
accounts payable should remain the obligation of Seller, and for which
Buyer shall receive a credit at the Closing in the amount of all such
payables which do not relate to goods and services provided to Seller
in the ordinary course of operating the Hotel.
(v) Employee Wages and Benefits. All employee benefits, wages and
other compensation shall be the sole responsibility of Seller. Seller
shall make all such payments and/or post such bonds as are required by
law or necessary to ensure that all such liabilities will be
satisfied.
(vi) Remittance. Buyer and Seller each agree to promptly remit to
the other any monies received by such party which is due to the other
in accordance with this Agreement. All prorations shall be based on
the actual number of days in the calendar month in which the Closing
occurs.
(b) Utility and Maintenance Charges. Seller shall pay or cause to be paid
(i) all unpaid charges for water, electricity, gas, trash removal, sewer,
telephone or other utility services which are furnished to or in connection with
the Hotel prior to the Closing Date and (ii) all unpaid charges for landscaping
and all other maintenance services which are furnished to or in connection with
the Hotel prior to the Closing Date. Not less than three (3) days prior to
Closing, Seller and Buyer shall notify and instruct the suppliers of the
foregoing utility services to read the meters for such services as of the day
prior to the Closing Date and to render to Seller a final statement for all
charges for utility services furnished to the Property prior to the Closing
Date. If the final meter readings cannot be obtained, Buyer and Seller shall
prorate such charges based upon the particular utility company's billing for the
immediately preceding billing period determined on a per diem basis based on the
actual number of days in the billing period. Buyer shall receive a credit for
the allocated amount of such charges applicable to the period to and including
the day preceding the Closing Date and, following the Closing, Buyer shall be
responsible for, and shall pay, all billings received from the utility company
for the current and future billing periods.
(c) Adjustments to Prorations. After the Closing, the parties shall from
time to time, as soon as is practicable after accurate information becomes
available, recalculate and reapportion any of the items subject to proration or
apportionment under this Paragraph 10: (i) which were not prorated and
apportioned at the Closing because of the unavailability of the information
necessary to compute such proration, or (ii) which were prorated or apportioned
at the Closing based upon estimated or incomplete information, or (iii) for
which any errors or omissions in computing prorations at the Closing are
discovered subsequent thereto, and thereafter the proper party shall be
reimbursed based on the results of such recalculation and reapportionment.
Unless otherwise specified herein, all such reimbursements shall be made on or
before thirty (30) days after receipt of notice of the amount due. Any such
reimbursements not timely paid shall bear interest at a per annum rate equal to
ten percent (10%) from the due date until all such unpaid sums together with all
interest accrued thereon is paid if payment is not made within ten (10) days
after receipt of a bill therefor.
<PAGE>
11. INDEMNIFICATION.
(a) Buyer shall indemnify, defend and hold harmless Seller, its officers,
directors, agents, employees, partners and/or shareholders for, from and against
any and all claims, liabilities, damages, losses, causes of action, and
obligations and expenses (including reasonable attorneys' fees) incurred as a
result of, or arising in connection with: (i) physical damage to the Assets or
personal injury arising out of any tests, inspections, and studies of the Assets
performed by Buyer, its agents, employees or contractors, or the entry of Buyer
or its agents, employees or contractors onto the Real Property for any reason
prior to the Closing Date; (ii) any acts or omissions of Buyer and its agents,
employees or contractors pertaining to the Hotel occurring or arising out of
events occurring on or after the Closing Date or any liability or obligation
required to be assumed by Buyer hereunder or which accrues on or after the
Closing Date; and (iii) any misrepresentation or breach of any warranty or
covenant made herein or in any document, certificate or exhibit given or
delivered pursuant hereto.
(b) Notwithstanding any other provisions of this Agreement, Buyer shall
indemnify, defend and hold harmless Seller, its directors, officers, employees,
partners and/or shareholders from and against any Claim asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from any claim brought by any employee of
Seller at the Hotel as of the date of closing of this transaction and/or any
unit of local government (as defined in 29 U.S.C. ss. 2101(a)(7)) alleging a
violation by Seller of the Worker Adjustment and Retraining Notification Act
(WARN) 29 U.S.C. ss.ss. 2101 et seq.
(c) Seller shall indemnify, defend, and hold harmless Buyer, its owners,
officers, directors, agents, employees, partners and/or shareholders for, from
and against any and all claims, liabilities, damages, losses, causes of action,
and obligations and expenses (including reasonable attorneys' fees) incurred as
a result of, or arising in connection with: (i) any acts or omissions of Seller
and its agents, employees and contractors pertaining to the Assets occurring or
arising out of events occurring prior to the Closing Date or any liability or
obligation of Seller which Buyer is not required to assume hereunder or which
accrues prior to the Closing, and (ii) any misrepresentation or breach of any
warranty or covenant made herein or in any document, certificate or exhibit
given or delivered pursuant hereto. The obligation set forth in this paragraph
shall survive the Closing and shall be a continuing obligation of Seller and its
successors and assigns.
12. POSSESSION. Seller shall deliver possession of the Assets to Buyer at the
Closing, subject to the Permitted Title Exceptions, provided, however, that
Seller shall afford authorized representatives of Buyer reasonable access to the
Hotel, subject to Paragraph 7 above, for the purposes of satisfying Buyer with
respect to the representations, warranties, and covenants of Seller contained
herein and with respect to satisfaction of any conditions precedent to the
Closing contained herein.
<PAGE>
13. REPRESENTATIONS AND WARRANTIES.
(a) Buyer. Buyer acknowledges, covenants, represents and warrants to Seller
that the following are true as of the date of this Agreement and, in entering
into this Agreement, Seller is relying upon the following:
(i) Existence. Buyer is a validly existing corporation under the
law of the state of its formation and in good standing under the law
of the State of Delaware, and Buyer has the full right, authority and
power to enter into this Agreement, to consummate the transactions
contemplated herein and to perform its obligations hereunder and under
those documents and instruments to be executed by it at the Closing,
and each of the individuals executing this Agreement on behalf of
Buyer is authorized to do so, and this Agreement constitutes a valid
and legally binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
(ii) Due Authorization. Buyer's execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby
and the performance of Buyer's obligations under the instruments
required to be delivered by Buyer at the Closing, do not and will not
result in any violation of, or default under, any term or provision of
any agreement, instrument, mortgage, loan agreement or similar
document to which Buyer is a party or by which Buyer is bound.
(iii) Threatened Proceedings. There is no litigation,
investigation or proceeding pending or, to the best of Buyer's
knowledge, contemplated or threatened against Buyer which would impair
or adversely affect Buyer's ability to perform its obligations under
this Agreement or any other instrument or document related hereto.
(b) Seller. Seller represents and warrants to Buyer that the following are
true as of the date of this Agreement, and in entering into this Agreement Buyer
is relying upon the following:
(i) Existence. Seller is a duly formed and validly existing
partnership under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Seller has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations
hereunder and under those documents and instruments to be executed by
it at the Closing, and each of the individuals executing this
Agreement on behalf of Seller is authorized to do so, and this
Agreement constitutes a valid and legally binding obligation of Seller
enforceable against Seller in accordance with its terms.
(ii) Due Authorization. Seller's execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby and the performance of Seller's obligations under the
instruments required to be delivered by Seller at the Closing, do not
and will not result in any violation of or default under, any term or
provision of any agreement, instrument, mortgage, loan agreement or
similar document to which Seller is a party or by which Seller is
bound.
<PAGE>
(iii) Threatened Proceedings. Other than as set forth in Schedule
"G" hereto (the "Disclosure Statement"), there is no pending or, to
the best of Seller's knowledge, threatened judicial, municipal or
administrative proceedings affecting the Hotel or in which Seller is
or will be a party by reason of Seller's ownership of the Hotel or any
portion thereof, including, without limitation, proceedings for or
involving alleged building code violations, or personal injuries or
property damage alleged to have occurred on the Hotel or by reason of
the condition or use of the Hotel. The Disclosure Statement contains
an accurate summary of the status of all matters shown thereon. If any
proceeding of the character described in this subparagraph is
initiated prior to closing, Seller shall promptly advise Buyer in
writing.
(iv) Liabilities. That except for: (a) debts, liabilities and
obligations for which provision is made herein for proration or other
adjustments as of the Closing Date; (b) debts and obligations incurred
by Seller in the ordinary course of business which Seller agrees to
pay on or before the Closing Date except as provided herein; (c)
debts, liabilities and obligations to be assumed by Purchaser provided
for herein; (d) debts and obligations for goods which are purchased
prior to the Closing Date but remain the property of Purchaser
thereafter, there will be no debts, liabilities or obligations of
Seller with respect to the Hotels or the Property.
(v) Foreign Person. Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1954 as
amended.
(vi) Compliance With Laws. The Hotel properties are all in
material compliance with all Federal, State, Local (including local
sewage district) laws, rules, regulations ordinances, codes and orders
governing, establishing, limiting or otherwise affecting the discharge
or disposal of air pollutants, water pollutants, process wastewater or
solid and hazardous wastes. There are no pending or to Seller's
knowledge threatened actions or proceedings by the local municipality,
sewage districts, state agencies having jurisdiction over such
matters, the U.S. Environmental Protection Agency or any other
governmental entity and to Seller's knowledge there is no basis for
any such action or proceedings. Seller has never disposed of any
noxious, toxic, solid or hazardous waste on the Real Property.
Further, Seller warrants and represents, to the best of its knowledge,
that the Real Property has not been used as a landfill, dump site,
waste disposal area or for any similar usage, and no underground
storage tanks, petroleum products or solid hazardous or toxic
materials, as such terms are used and defined under applicable local,
state and federal environmental regulations, exist on the surface or
under the subsurface of the four properties or in any surface or
ground waters on or under the four properties.
(vii) Inventory Levels. As of the Closing Date, the inventory of
Operating Equipment and Operating Supplies will be in amounts which
are at least equal to the normal and customary levels of such
inventories historically maintained by the Hotel during the month in
which the Closing occurs, and all rooms will be consistently furnished
and equipped with items in good condition and repair (ordinary wear
and tear expected).
<PAGE>
(viii) Known Latent Defects. That to the actual knowledge of the
managing partner of the Seller, there are no material latent defects
affecting the Hotel.
14. NOTICES. All notices or other communications required or provided to be sent
by either party or Escrow Agent shall be in writing and shall be sent by United
States Postal Service, postage prepaid or certified mail, return receipt
requested, or by any nationally known overnight delivery service, or by courier,
or in person (including by way of facsimile transmission). All notices shall be
deemed to have been given forty-eight (48) hours following deposit in the United
States Postal Service or upon personal delivery if sent by overnight delivery
service, courier or personally delivered. All notices shall be addressed to the
party at the address below:
If to Seller:
West Montrose Properties
c/o The Cornerstone Company
2857 Riviera Drive
Akron Ohio 44333-3415
Attention: Mr. Michael Gallucci, Jr. President
Fax No. (216) 867-2772
With a copy to:
Stark & Knoll Co., LP.A.
1512 Ohio Edison Bldg.
76 S. Main Street
Akron, Ohio 44308
Attention: Thomas G. Knoll, Esq.
Fax No. (216) 376-6237
If to Buyer:
Janus American Group, Inc.
2300 Corporate Blvd., NW, Suite 232
Boca Raton, FL 33431
Attention: James E. Bishop
Fax No.: (516) 997-5331
With a copy to:
Janus American Group, Inc.
8534 East Kemper Road
Cincinnati, OH 45249-1709
Attention: Charles Thornton, Esq.
Fax No.: (513) 489-1955
<PAGE>
Any address or name specified above may be changed by notice given to the
addressee by the other party in accordance with this Paragraph 14 The inability
to deliver because of a changed address of which no notice was given, or
rejection or other refusal to accept any notice, shall be deemed to be the
receipt of the notice as of the date of such inability to deliver or rejection
or refusal to accept. Any notice to be given by any party hereto may be given by
the counsel for such party. Any notice to be given to Escrow Agent shall be sent
to the address set forth in subparagraph 1(l) above.
15. SELLER'S REMEDIES. If Buyer shall breach any of the terms or provisions of
this Agreement or otherwise default hereunder after the Feasibility Expiration
Date, and as a result of such breach or default Buyer is unable to perform its
obligations at Closing and provided Seller has performed or tendered performance
of all its obligations hereunder, Seller's exclusive remedy shall be to retain
the Earnest Money as liquidated damages as provided in subparagraph 3(b) above.
Nothing contained in this paragraph shall limit or prevent Seller from enforcing
Buyer's obligations and liabilities which expressly survive a termination of
this Agreement.
16. BUYER'S REMEDIES. If Seller breaches any of the terms or provisions of this
Agreement or otherwise defaults hereunder, in addition to all other rights and
remedies available at law or in equity, Buyer may (i) terminate this Agreement
and the Escrow by written notice to Seller and Escrow Agent, whereupon the
Earnest Money shall be immediately returned to Buyer; (ii) waive such default
and consummate the transaction contemplated hereby in accordance with the terms
hereof; or (iii) specifically enforce this Agreement. Nothing contained in this
paragraph shall limit or prevent Buyer from enforcing Seller's obligations and
liabilities which survive a termination of this Agreement.
17. CASUALTY; CONDEMNATION. Seller shall notify Buyer immediately of the
occurrence of any damage to or destruction of the Hotel, or any portion thereof,
or the institution or maintenance of any condemnation or similar proceedings
with respect to the Real Property or any portion thereof. In the event of any
damage to or destruction of any portion of the Hotel for which the cost to
repair exceeds $250,000, or if any such condemnation or other proceedings are
instituted or maintained, Buyer at its option either (i) may terminate this
Agreement, in which case the Earnest Money shall be returned to Buyer and
neither party shall have any further rights or obligations hereunder except as
provided in Paragraphs 7 and 20 or (ii) may consummate the purchase evidenced by
this Agreement. In all other events or if Buyer elects to consummate the
purchase pursuant to clause (ii) above, Buyer shall receive a credit at Closing
in an amount equal to (A) all insurance or condemnation proceeds collected by
Seller prior to the Closing, plus (B) Seller's deductible or self-insurance
limit or such lesser amount as is equal to the estimated cost to repair or
reconstruct those portions of the Property damaged or destroyed, and all rights
to all other insurance or condemnation proceeds arising out of such damage or
destruction or proceedings and not collected prior to the Closing, including any
business interruption and rental loss proceeds for any period after the Closing,
shall be assigned by Seller to Buyer as of the Closing.
18. COMMISSIONS. Seller has committed to pay a business brokerage fee to Ken F.
Seminatore of $19,900 for his services in connection with the transactions
represented by this
<PAGE>
Agreement and the Affiliated Sales Agreements. Buyer warrants and represents to
Seller that no other real estate sales or brokerage commissions or like
commissions are or may be due in connection with this transaction as a result of
Buyer's acts. Seller shall be solely responsible for all commissions or like
fees owing in connection with this transaction as a result of its acts. Each
party agrees to indemnify, defend and hold harmless the other party from and
against any claims by third parties made by or through the acts of such party,
for real estate or brokerage commissions, or a finders fee, in connection with
the transaction provided for herein, and all costs and expenses incurred by the
indemnitee in connection therewith including, but not limited to, reasonable
attorneys' fees. The indemnity provided for in this paragraph shall survive the
Closing or any earlier termination of this Agreement.
19. DISCLAIMER. Other than as expressly set forth herein, Seller hereby
specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to, or concerning (i) the nature and
condition of the Assets, including, without limitation, the water, soil and
geology or any other matter affecting the stability or integrity of the Real
Property or Improvements, and the suitability thereof and of the Assets for any
and all activities and uses which Buyer may elect to conduct thereon, and the
existence of any environmental hazards or conditions thereon (including the
presence of asbestos) or compliance with applicable Laws; (ii) the condition of
title to the Assets or the nature and extent of any right-of-way, lease,
possession, lien, encumbrance, license, reservation, condition or otherwise;
(iii) the compliance of the Assets or its operation with any covenants,
conditions, restrictions, or Laws; (iv) the profitability or losses or expenses
relating to the Assets and the businesses conducted in connection therewith; (v)
the existence, quality, nature, adequacy or physical condition of any utility
serving the Project; (vi) the zoning or other legal status of the Project; (vii)
the quality of any labor or materials relating in any way to the Assets; (viii)
the legal or tax consequences of this Agreement or its underlying transaction;
and (ix) the transferability of the Seller's rights under the Contracts. Buyer
acknowledges that prior to the Feasibility Expiration Date Seller will afford
Buyer the opportunity for full and complete investigations, examinations and
inspections of the Assets and all information to be delivered by Seller pursuant
to this Agreement and, other than as expressly set forth herein, Buyer is
relying solely on its own investigation and inspection of the Assets. Other than
as expressly set forth herein, or in subparagraph 14(b)(viii) hereof, the sale
of the Assets as provided for herein is made on an "AS IS" and "WHERE IS" basis,
and Buyer expressly acknowledges that, in consideration of the agreements of
Seller herein, other than as expressly set forth herein, Seller makes no
warranty or representation, express or implied, or arising by operation of law,
including, but not limited to, any warranty of condition, habitability,
merchantability, suitability or fitness for a particular use or purpose, in
respect of all or any of the Assets.
20. CONFIDENTIALITY AND RETURN OF DOCUMENTS. Buyer agrees that, until after the
Closing, all documentation or information delivered to Buyer or its
representatives or agents by Seller or Seller's representatives or agents
pertaining to the Assets shall be kept strictly confidential and will not be
used by Buyer or its representatives or agents, directly or indirectly, for any
purpose other than evaluating the Assets. Neither party shall release, or cause
or permit to be released any press notices, publicity (oral or written) or
advertising or otherwise announce or disclose, or cause or permit to be
announced or disclosed, in any manner whatsoever, except as
<PAGE>
may be required by applicable law or regulation, the terms, conditions or
substance of the transaction contemplated herein without first obtaining the
express written consent of the other party hereto. It is understood that the
foregoing shall not, however, preclude Buyer from discussing the substance or
any relevant details of the transaction contemplated in this Agreement, nor
disclosing the terms of this Agreement, or the existence thereof, to Buyer's
accountants, attorneys and Consultants engaged in connection with this
transaction, or such other persons or entities to which disclosure is required
by Law. If the sale of the Assets contemplated herein is not consummated, each
party shall promptly return to the other party all information, documents, and
other items received from such other party in connection herewith. This
provision shall survive the Closing or any termination of this Agreement.
21. WAIVER. The exercise or waiver of the performance by a party of any
obligation of the other party under this Agreement shall only be effective if
evidenced by a written statement signed by the party so exercising. No delay in
exercising any right or remedy shall constitute a waiver thereof and no waiver
by Seller or Buyer of the breach of any covenant of this Agreement shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Agreement.
22. TIME PERIODS. If the time for performance of any obligation hereunder
expires on a Saturday, Sunday or legal holiday, the time for performance shall
be extended to the next day which is not a Saturday, Sunday or legal holiday.
23. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations and warranties set forth in this
Agreement shall survive the Closing and shall not merge into the deed or other
instrument executed or delivered in connection with the transaction contemplated
hereby. The representations and warranties of Seller contained in Paragraph
14.(b) and of Seller contained in Paragraph 14.(c) shall survive the Closing
until the date which is one (1) year following the Closing Date except for
matters disclosed or actually known to Buyer prior to the Closing.
24. MODIFICATION OF AGREEMENT. No modification of this Agreement shall be deemed
effective unless in writing and signed by the parties hereto.
25. FURTHER INSTRUMENTS. Each party, promptly upon the request of the other,
shall execute and have acknowledged and delivered to the other or to Escrow
Agent, as may be appropriate, any and all further instruments reasonably
requested or appropriate to evidence or give effect to the provisions of this
Agreement and which are consistent with the provisions hereof.
26. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the
parties with regards to the purchase and sale of the Assets. All terms and
conditions contained in any other writings previously executed by the parties
(including the letter of intent dated May 21, 1998) and all other discussions,
understandings or agreements regarding the Assets and the subject matter hereof
shall be deemed to be superseded hereby.
<PAGE>
27. INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the permitted successors and assigns, if any, of the respective parties hereto.
28. APPLICABLE LAW. This Agreement, and all questions and disputes arising in
connection with it, shall be governed by and construed in accordance with the
laws of the State of Ohio.
29. DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any provisions hereof.
30. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
31. ASSIGNMENT. Other than to a Permitted Transferee, Buyer may not assign its
rights hereunder without the prior written consent of Seller, which consent may
be unreasonably withheld. No assignment proposed by Buyer, even if to a
Permitted Transferee, shall be valid and effective until the delivery to Seller
of written notice of such assignment together with an executed copy of the
documents pursuant to which such assignee assumes all of Buyer's covenants,
indemnities, obligations and agreements under this Agreement and agrees to be
bound by all of the terms, conditions and provisions hereof and thereof.
Notwithstanding any assignment to a Permitted Transferee, Buyer shall not be
released from all obligations and liabilities hereunder.
32. CONSTRUCTION. The parties agree that each party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement or any amendments or exhibits
hereto.
33. INTERPRETATION. In this Agreement, the neuter gender includes the feminine
and masculine, and the singular number includes the plural, and the words
"person" and "party" include corporations, partnerships, individuals, firms,
trusts, or associations wherever the context so requires.
34. EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto and
referred to in this Agreement are incorporated herein by this reference and are
part of this Agreement.
35. COUNTERPARTS. This Agreement may be executed simultaneously or in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
36. RECORDATION. This Agreement shall not be recorded, but Buyer may record a
Memorandum of the Agreement upon obtaining Seller's prior written approval.
EXCLUSIVE NEGOTIATIONS. As an inducement to Buyer to investigate and analyze the
Assets, and to encourage Buyer to satisfy or waive the contingencies
<PAGE>
[LEFT INTENTIONALLY BLANK]
<PAGE>
referenced in Paragraph 6 above as soon as possible, Seller shall not, prior to
the Feasibility Expiration Date (and then only if Buyer fails to remove the
contingencies set forth in Paragraph 6.(a) or otherwise terminates this
Agreement), either seek or solicit any purchase offer or financing with respect
to the Assets, and Seller shall deal exclusively with Buyer toward consummating
the transaction contemplated by this Agreement in accordance with the terms and
conditions of this Agreement.
38. IRS REAL ESTATE SALES REPORTING. Buyer and Seller shall appoint Escrow Agent
as, and Escrow Agent shall agree to act as, "the person responsible for closing"
the transaction which is the subject of this Agreement pursuant to Internal
Revenue Code Section 6045(e). Buyer and Seller shall confirm such appointment in
the separate instructions given to Escrow Agent and shall instruct Escrow Agent
to prepare and file all informational returns, including without limitation, IRS
Form 1099-S and to otherwise comply with the provisions of Internal Revenue Code
Section 6045(e).
39. BULK SALES WAIVER. Seller waives any requirement of Buyer to comply with any
applicable notice requirements pertaining to bulk sales or other similar laws.
Seller shall indemnify, defend and hold Buyer harmless for, from and against any
liability resulting from such waiver.
SELLER: BUYER:
WEST MONTROSE PROPERTIES, JANUS AMERICAN GROUP, INC.
an Ohio limited partnership
By The Cornerstone Company, Developers
and Operators of Inns, Hotels and Resorts, Its
General Partner
By: By:
Name: Michael Gallucci, Jr. Name: James E. Bishop
Its: President Its: President
<PAGE>
SCHEDULE "A"
Affiliated Sales Agreements
1. Purchase and Sale Agreement dated July 31, 1998 between North Canton
Operating Corp., Canton North Properties and Janus American Group, Inc.
2. Purchase and Sale Agreement dated July 31, 1998 between Rockside Road
Operating Corp., Rockside Road Properties and Janus American Group, Inc.
3. Purchase and Sale Agreement dated July 31, 1998 between Galburton Inn, Inc.
and Janus American Group, Inc.
<PAGE>
SCHEDULE "B"
Contracts
<PAGE>
SCHEDULE "C"
Franchise Agreement
Quality Inns International, Inc. Franchise Agreement dated January 17,
1989, between Quality Inns, Inc., a Delaware corporation and Motel Management,
Inc., an Ohio corporation.
<PAGE>
SCHEDULE "D"
Personalty
[See Attached]
<PAGE>
SCHEDULE "E"
Real Property Description
[See Attached]
<PAGE>
SCHEDULE "F"
Allocation of Purchase Price
$ 500,000 - Land
$2,500,000 - Building
$ 400,000 - Chattels
$3,400,000 - Total Purchase Price
<PAGE>
SCHEDULE "G"
Disclosure Statement
<PAGE>
EXHIBIT "A"
Consulting Agreement
[See Attached]
<PAGE>
EXHIBIT "B"
Limited Warranty Deed
[See Attached]
<PAGE>
EXHIBIT "C"
Affidavit of Non-Foreign Person
[See Attached]
<PAGE>
EXHIBIT "D"
Assignment and Assumption of Contracts
[See Attached]
<PAGE>
EXHIBIT "E"
Assignment of Intangible Property
[See Attached]
<PAGE>
EXHIBIT "F"
Bill of Sale
[See Attached]
<PAGE>
EXHIBIT "G"
Assignment and Assumption of
Franchise Agreement
[Not Required]
PURCHASE AND SALE AGREEMENT
between
NORTH CANTON OPERATING CORP.,
an Ohio corporation,
and
CANTON NORTH PROPERTIES,
an Ohio general partnership
collectively as Seller,
and
JANUS AMERICAN GROUP, INC.,
A Delaware corporation
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions
"Affiliated Sale Agreements" 4
"Agreement" 4
(c) "Assets" 4
(d) "Closing" 4
(e) "Closing Date" 4
(f) "Concurrent Escrows" 5
(g) "Contracts" 5
(h) "Documents" 5
(i) "Earnest Money" 5
(j) "Escrow" 5
(k) "Escrow Agent" 5
(l) "Feasibility Expiration Date" 5
(m) "Federal Code" 5
(n) "Food and Beverage Inventory" 5
(o) "Franchise Agreement" 5
(p) "Franchisor" 5
(q) "Hotel" 5
(r) "Improvements" 5
"Intangible Property" 5
"Latent Defects" 6
"Laws" 6
"Managing Partner" 6
(w) "Operating Equipment" 6
(x) "Operating Supplies" 6
(y) "Person" 6
(z) "Permitted Title Exceptions" 6
(aa) "Permitted Transferee" 6
(ab) "Personalty" 6
(ac) "Purchase Price" 6
(ad) "Real Property" 7
(ae) "Title Agent" 7
2. Agreement of Purchase and Sale 7
3. Purchase Price 7
(a) Earnest Money 7
(b) Liquidated Damages 7
(c) Cash at Closing 8
4. Allocation of Purchase Price 8
<PAGE>
5. Buyer's Contingencies 8
(a) Due Diligence 8
(b) Conditions to Buyer's Obligations 9
6. Seller's Contingencies and Covenants 10
(a) Seller's Contingencies 10
(i) Buyer's Covenants 10
(ii) Closing of Concurrent Escrows 11
(iii) Truth of Representations 11
(iv) Franchisor Consent 11
(v) Release 11
(vi) Consulting Agreement 11
(b) Covenants 11
(i) Maintenance of the Assets 11
(ii) Permits and Approvals 12
(iii) Notification to Existing Employees 12
(iv) Seller's Obligations Concerning Its Employees 12
(v) Franchise Transfer 13
7. Inspections 13
(a) Entry and Investigation 13
(b) No Interference 13
8. Title Insurance Policy 13
9. The Escrow and Closing 14
(a) Escrow Instructions 14
(b) Closing 14
(c) Action at the Closing by Seller 14
(d) Action at the Closing by Buyer 16
(e) Closing Costs 16
(f) Pre-Closing Settlement Statement 17
(g) Transfer of Guest Property in Safe Keeping 17
10. Apportionments 17
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs 17
(b) Utility and Maintenance Charges 19
(c) Adjustments to Prorations 19
11. Indemnification 20
12. Possession 21
13. Transfer of Liquor License 21
14. Representations and Warranties 21
(a) Buyer 21
(b) Partnership 22
(c) Corporation 23
15. Notices 24
16. Seller's Remedies 25
17. Buyer's Remedies 25
<PAGE>
18. Casualty; Condemnation 25
19. Commissions 26
20. Disclaimer 26
21. Confidentiality and Return of Documents 27
22. Waiver 27
23. Time Periods 27
24. Survival of Covenants, Agreements, Representations and Warranties 27
25. Modification of Agreement 27
26. Further Instruments 28
27. Entire Agreement 28
28. Inurement 28
29. Applicable Law 28
30. Descriptive Headings 28
31. Time of the Essence 28
32. Assignment 28
33. Construction 28
34. Interpretation 28
35. Exhibits and Schedules 29
36. Counterparts 29
37. Recordation 29
38. Exclusive Negotiations 29
39. IRS Real Estate Sales Reporting 29
40. Bulk Sales Waiver 29
SCHEDULES
Affiliated Sales Agreements
Contracts
Franchise Agreement
Personalty
Real Property
Allocation of Purchase Price
Disclosure Statement
EXHIBITS
Management Agreement
Consulting Agreement
Limited Warranty Deed
Affidavit of Non-Foreign Person
Assignment and Assumption
Assignment of Intangible Property
Bill of Sale
Assignment and Assumption of the Franchise Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made effective as of the
31st day of July, 1998, by and between NORTH CANTON OPERATING CORP., an Ohio
corporation ("Corporation"), and CANTON NORTH PROPERTIES, an Ohio general
partnership ("Partnership") (Corporation and Partnership being hereinafter
collectively referred to as "Seller"), and JANUS AMERICAN GROUP, INC., a
Delaware corporation and/or its Permitted Transferee ("hereinafter collectively
referred to as "Buyer").
Background of Agreement
A. Seller is the owner of certain real property located in North Canton, Ohio,
having located thereon a 196-room hotel known as the North Canton Holiday Inn.
B. Buyer desires to purchase such real property and related assets, and Seller
desires to sell to Buyer such real property and related assets, subject to and
in accordance with the terms, covenants and conditions of this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the terms, conditions and
covenants contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the terms below shall have the
following meanings unless the context requires otherwise.
(a) "Affiliated Sale Agreements". The various purchase and sale agreements
described on Schedule "A" hereto.
(b) "Agreement". This Purchase and Sale Agreement, as amended or
supplemented from time to time.
(c) "Assets". The Contracts, the Documents, the Improvements, the
Intangible Property, the Personalty, and the Real Property now owned, or
hereafter acquired, by Seller in connection with or relating to the Hotel.
(d) "Closing". The event at which the transaction contemplated hereby will
be consummated and when Buyer acquires title to the Assets.
(e) "Closing Date". The date designated by Buyer in a written notice
delivered to Seller at least five (5) business days in advance; however, in no
event shall the Closing Date occur later than the date provided in subparagraph
9(b) hereof.
<PAGE>
(f) "Concurrent Escrows". The escrows, established with Escrow Agent
pertaining to the purchase by Buyer of certain other hotel properties and
related assets pursuant to the Affiliated Sale Agreements.
(g) "Contracts". All 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 Hotel that will remain in effect after Closing, all of which are
described on Schedule "B" hereto.
(h) "Documents". All books, records and files relating to the leasing,
maintenance, management or operation of the Hotel in Seller's possession or in
the possession of any management company currently managing any portion of the
Hotel.
(i) "Earnest Money". The deposit required to be paid by Buyer to Escrow
Agent pursuant to subparagraph 3(a), together with all interest earned thereon.
(j) "Escrow". The Escrow established with Escrow Agent to facilitate the
transaction contemplated hereby, bearing Escrow No. .
(k) "Escrow Agent". American Title Company, 6029 Belt Line Road, Suite 250,
Dallas, Texas 75240.
(l) "Feasibility Expiration Date". July 25, 1998.
(m) "Federal Code". The United States Internal Revenue Code of 1986, as
amended.
(n) "Food and Beverage Inventory". All inventory of food and beverages,
including alcoholic beverages, owned by Seller located at the Hotel, and used in
the operation of any restaurant, cafe, bar or other food service operation
within the Hotel.
(o) "Franchise Agreement". The agreement and/or agreements referenced on
Schedule "C" attached hereto.
(p) "Franchisor". Holiday Inns Franchising, Inc., a Delaware corporation.
(q) "Hotel". The 196-room hotel located on the Real Property known as the
North Canton Holiday Inn.
(r) "Improvements". All buildings, fixtures, walls, fences, landscaping and
other structures and improvements situated on, affixed or appurtenant to the
Real Property.
(s) "Intangible Property". All transferable or assignable permits, building
plans and specifications, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates, licenses, including,
without limitation, liquor licenses, warranties and guarantees, rights to
deposits, rebates and refunds, trade names, service marks, appraisals,
<PAGE>
engineering, soils, pest control and other reports relating to the Hotel, the
Contracts, customer or tenant lists, correspondence with present or prospective
tenants, customers or suppliers, advertising materials, telephone exchange
numbers identified with the Hotel, and all other transferable intangible
property, miscellaneous rights, benefits or privileges of any kind or character
with respect to the Hotel.
(t) "Latent Defect". Any defect in the Hotel which could not have been
discovered through a reasonable due diligence inspection of the Hotel by Buyer.
(u) "Laws". All present and future laws, statutes, codes, ordinances,
orders, awards, judgments, decrees, injunctions, approvals, permits,
requirements, regulations and licenses of every governmental or
quasi-governmental authority or agency.
(v) "Managing Partner". Michael Gallucci
(w) "Operating Equipment". All chinaware, glassware, linens, silverware,
tools, kitchen utensils, uniforms, engineering and housekeeping tools, vans,
automobiles, and other equipment and utensils owned by Seller and used in the
operation of the Hotel.
(x) "Operating Supplies". All fuel, soap, toilet paper, tissues,
toiletries, towels, light bulbs, mechanical stores, cleaning supplies and
materials, pool maintenance supplies and materials, matches, stationery, paper
supplies, laundry supplies, housekeeping supplies, accounting supplies, goods
and merchandise used for retail sale and other immediately consumable items,
owned by Seller and used in the operation of the Hotel.
(y) "Person". Any individual, firm, corporation, partnership, limited
liability company, trust or other entity.
(z) "Permitted Title Exceptions". The various matters affecting title to
the Assets that are approved by Buyer pursuant to subparagraph 5(a) below.
(aa) "Permitted Transferee". Buyer or JAGI North Canton, L.L.C., a Delaware
limited liability company.
(ab) "Personalty". All furniture (including television sets, except where
leased), furnishings, fixtures, equipment (including, without limitation, office
equipment and the Operating Equipment), machinery, tools, pool maintenance
equipment, inventory, drapes, carpeting, rugs, artwork, the Operating Supplies,
the Food and Beverage Inventory, and other items of personal property owned by
Seller and found or used exclusively at the Hotel, including, without
limitation, the items described on Schedule "D" hereto.
(ac) "Purchase Price". The purchase price for the Assets as set forth in
Paragraph 3 hereof.
<PAGE>
(ad) "Real Property". The real property more particularly described on
Schedule "E" attached hereto, together with all easements, rights of ways,
privileges, licenses and appurtenances which Seller may now own or hereafter
acquire with respect to such real property.
(ae) "Title Agent". Chicago Title Insurance Company.
2. AGREEMENT OF PURCHASE AND SALE . At the Closing, subject to the terms,
covenants and conditions of this Agreement, Seller shall sell to Buyer and Buyer
shall purchase from Seller the Assets.
3. PURCHASE PRICE. The Purchase Price to be paid for the Assets shall be Five
Million Four Hundred Fifty-Four Thousand Two Hundred Fifty Dollars ($5,454,250)
payable by Buyer as follows:
(a) Earnest Money. Promptly following the execution of this Agreement,
Buyer shall deposit with Escrow Agent, Thirty-Six Thousand Five Hundred
Eighty-Five and No/100 Dollars ($36,585.00) as Earnest Money to be held in the
Escrow in accordance with the terms and conditions of this Agreement. Escrow
Agent is hereby authorized and directed to invest all funds deposited by Buyer
into Escrow as directed by Buyer. Interest on the Earnest Money shall accrue for
the benefit of and be payable to the party otherwise entitled to such sums upon
the Closing or earlier termination of this Agreement. If the sale of the Assets
contemplated hereunder is consummated, the Earnest Money (inclusive of all
interest earned thereon) shall be paid to Seller at the Closing and applied as a
credit against Buyer's payment of the Purchase Price.
(b) Cash at Closing. On or before the Closing Date, Buyer shall deliver to
Escrow Agent, for the benefit of Seller, the remaining balance of the Purchase
Price (reduced by any credits due Buyer hereunder) by wire transfer of
immediately available funds to the account of Escrow Agent.
4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated as set
forth in Schedule "F" hereto. Buyer and Seller agree that the allocations set
forth in Schedule "F" were determined in good faith and at arms length, and
represent the parties' best good faith estimate of the fair market value, as of
the Closing Date, of each component of the Assets described on Schedule "F".
Buyer and Seller shall each report the transactions contemplated by this
Agreement for income tax purposes in accordance with the agreed upon allocations
set forth on Schedule "F" and will not take or assert a position inconsistent
therewith.
5. BUYER'S CONTINGENCIES. The following are conditions precedent to Buyer's
obligation to purchase the Assets:
(a) Due Diligence. Buyer shall have until the Feasibility Expiration Date
within which to perform such physical inspections and other reasonable due
diligence pertaining to the Assets as Buyer deems necessary, and to decide, in
Buyer's sole discretion, whether the Assets are in all respects satisfactory to
Buyer. Such due diligence shall include, without limitation, the following:
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(i) Title. Buyer's review and approval of title to the Property, as
follows. Seller shall, as soon as possible after executing this Agreement,
deliver to Buyer at Seller's sole cost and expense:
(A) a current extended coverage preliminary title report on the
Real Property, issued by Title Agent, and accompanied by copies of all
documents referred to in the report;
(B) copies of all existing and proposed easements, covenants,
restrictions, agreements or other documents which affect the Property
and which are not disclosed by the preliminary title report, or, if no
such documents exist, a certification of Seller to that effect;
(C) an ALTA/ACSM "as-built" survey of the Real Property and
Improvements prepared by a licensed surveyor or engineer (the
"Survey"). The Survey shall be acceptable and certified by the
surveyor to Buyer and in sufficient detail to provide the basis for
the Title Policy (as defined below) without boundary, encroachment or
survey exceptions, and shall show the location of all easements and
Improvements (including underground improvements) and any and all
other pertinent information with respect to the Property. The Survey
shall also indicate any encroachments of Improvements onto easements
or onto adjacent properties or certify to their absence, the presence
of improvements and easements on property adjoining the Real Property
if located within five (5) feet of the boundaries of the Real
Property, the number and location of all parking spaces on the
Property, and the square footage of the Real Property and the
Improvements. Prior to Closing, the Survey shall be certified to Buyer
and to the company issuing the Title Policy; and
(D) copies of the most recent property tax bills for the Property
and any filings, notices or correspondence regarding any challenges or
appeals to the applicable taxes, and copies of any improvement
assessments and any other bonds and assessments affecting the
Property.
Buyer shall advise Seller, within ten (10) days after actual receipt of all such
materials, what exceptions to title, if any, are objectionable to Buyer. Any
exceptions not objected to shall be deemed accepted by Buyer (the "Permitted
Exceptions"). Seller shall have ten (10) days after receipt of Buyer's
objections to give Buyer notice: (1) that Seller will remove any objectionable
exceptions from title and provide Buyer with evidence satisfactory to Buyer of
such removal, or provide Buyer with evidence satisfactory to Buyer that said
exceptions will be removed on or before the Closing, or (2) that Seller elects
not to cause such exceptions to be removed. Seller's failure to notify Buyer
within such ten (10) day period shall be deemed an election by Seller not to
remove the objectionable exceptions as provided in clause (2) above. If Seller
elects not to cure under clause (2), notwithstanding that the Feasibility
Expiration Date shall have passed, Buyer shall have ten (10) days to elect
whether to proceed with the purchase and take the Real Property subject to such
exceptions, or to terminate this Agreement. If Buyer shall fail to give
<PAGE>
Seller notice of its election within said ten (10) days, Buyer shall be deemed
to have elected not to proceed with this Agreement.
(ii) Physical Characteristics. Buyer's review and approval of the
structural, mechanical, electrical and other physical characteristics of
the Hotel.
(iii) Reports. Buyer's receipt and approval of satisfactory
architectural, engineering, soils and environmental reports. Pursuant to
the terms of Paragraph 7 of this Agreement, Seller shall provide Buyer the
opportunity to conduct, at Buyer's expense, an environmental site
assessment by a qualified engineer to determine the extent, if any, that
the Hotel contains any asbestos, underground storage tanks, or any other
toxic or hazardous substance or materials, or other environmental hazards
as defined by applicable Laws.
If Buyer is not satisfied, for any reason determined in its sole discretion,
with the results of its due diligence investigation, or if for no reason, Buyer
may terminate this Agreement by written notice to Seller and Escrow Agent
delivered on or before the Feasibility Expiration Date. Buyer's failure to
timely deliver written notice of termination on or before the Feasibility
Expiration Date shall be deemed Buyer's election to proceed with this Agreement.
Upon such termination Buyer shall be entitled to the return of the Earnest Money
and thereafter, except as provided in Paragraphs 7 and 21, neither party shall
have any further rights or obligations hereunder. Buyer's right to conduct any
inspection of the Assets shall be governed by the provisions of Paragraph 7
below.
(b) Conditions to Buyer's Obligations. Buyer's obligation to purchase the
Assets shall be subject to the following further conditions precedent:
(i) Buyer's Mortgage. A first mortgage loan with respect to all of the
Affiliated Sales Agreements aggregating not less than Thirty-Six Million
Dollars ($36,000,000) under terms and conditions acceptable to Purchaser;
(ii) Appraisals. Appraisals on the Hotels and those hotels subject of
the Affiliated Sales Agreements aggregating not less than Forty-Two Million
Five Hundred Thousand Dollars ($42,500,000);
(iii) PIP Reports. "PIP" reports approved by Holiday Inn and Comfort
Inn acceptable to Buyer in an aggregate amount for the Hotel and those
hotels subject of the Affiliated Sales Agreements not to exceed Two Million
Five Hundred Thousand Dollars ($2,500,000);
(iv) Franchisor Approval. Approval of Buyer as a franchisee by
Franchisor;
(v) Title Insurance. Receipt by Buyer of an ALTA Owner's Title
Insurance Policy together with any agreed endorsements;
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(vi) Management Agreement. Execution of a management agreement between
Buyer and Seller (or affiliates of Seller) in the form of Exhibit "A"
hereto (the "Management Agreement") which will facilitate the prompt
transfer of liquor permits and related operating licenses and which will
provide for the uninterrupted operation of the Hotels' food and beverage
business while and until the necessary licenses and permits are secured by
Buyer; and
(vii) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(viii) Closing of Concurrent Escrows. The purchase and sale
transactions that are the subject of the Concurrent Escrows shall be
consummated in accordance with the respective terms and conditions thereof
on the Closing Date concurrently with the closing of the Escrow and
consummation of the transaction contemplated by this Agreement.
6. SELLER'S CONTINGENCIES AND COVENANTS.
(a) Seller's Contingencies. The following are conditions precedent to
Seller's obligation to sell the Assets:
(i) Buyer's Covenants . All covenants of Buyer shall have been
fulfilled by Buyer in timely fashion or waived by Seller;
(ii) Closing of Concurrent Escrows. The purchase and sale transactions
that are the subject of the Concurrent Escrows shall be consummated in
accordance with the respective terms and conditions thereof on the Closing
Date concurrently with the closing of the Escrow and consummation of the
transaction contemplated by this Agreement;
(iii) Truth of Representations. All of Buyer's representations and
warranties contained in or made pursuant to this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing
Date;
(iv) Franchisor Consent. Consent to the consummation of the
transaction contemplated by this Agreement shall have been obtained from
Franchisor; and
(v) Release. Release of Sellers, by Franchisor, of any future
responsibility or liability to the Franchisor for termination or transfer
fees, or for actions or events occurring after the Closing Date (the
"Franchisor Release"); provided, however, Seller shall remain liable for
all amounts due and owing to Franchisor for activities of Seller prior to
the Closing Date.
(vi) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(b) Covenants.
<PAGE>
(i) Maintenance of the Assets. From and after the date hereof to the
Closing Date, Seller shall: (A) cause the Hotel to be maintained and
operated in compliance with all Laws, in accordance with its current
standards and consistent with its past operating procedures for the Hotel,
shall maintain present services, shall maintain sufficient Food and
Beverage Inventory, and Operating Supplies for the proper management,
maintenance, operation and servicing of the Hotel and shall continue to
market the Hotel and to accept reservations and group bookings at its
currently established rates therefor; (B) not sell or otherwise dispose of
any significant items of Personalty (other than Food and Beverage
Inventory, and Operating Supplies in connection with the ordinary course
operation or maintenance of the Property) unless replaced with an item of
like value, quality and utility; (C) not enter into any service,
maintenance, landscaping, operating, repair, equipment lease, employment,
management, leasing or other similar contract or agreement relating to the
operation or maintenance of the Hotel, except for those entered into in the
ordinary course of business and which are cancelable upon not more than
thirty (30) days prior notice or in the event of a sale of the Hotel; and
(D) maintain in full force and effect all liability and casualty insurance
currently in effect. The insurance currently in effect is described in
Exhibit F. Seller shall timely perform all its obligations under all
Contracts (including, without limitation, the Franchise Agreement),
including, without limitation, the payment of all bills, charges, invoices,
salaries, benefits, and other expenses arising in connection with the Hotel
prior to the Closing Date.
(ii) Permits and Approvals. Seller shall cooperate with Buyer in
obtaining all Permits and Approvals required for Buyer's intended use and
operation of the Hotel and shall not seek or acquiesce in any amendment to
any of the existing Permits and Approvals or any change in the present
zoning classification of the Real Property which would alter the present
permitted uses of the Real Property.
(iii) Notification to Existing Employees. Prior to Closing, Seller
will notify its employees and the labor organization representing its
employees at the Hotel of the pending sale in writing, the date the sale
will be effective and the fact that Seller, as owner of the liquor license
at the Hotel, will continue to be the employer at the Hotel until the
liquor license for the Hotel transfers to Buyer's Permitted Transferee or
its Agent or Buyer's Permitted Transferee or its Agent obtains its own
liquor permit, whichever first occurs. Such notice shall further inform the
employees that, upon the transfer of the liquor license or Buyer's
Permitted Transferee's or its Agent's receipt of its own liquor license,
whichever first occurs, said employees will be offered an opportunity to
submit applications for employment to Buyer's Permitted Transferee or its
Agent, and that Buyer's Permitted Transferee or its Agent shall employ
those individuals who meet certain employment criteria to be determined at
the sole discretion of Buyer's Permitted Transferee or its Agent. Buyer's
Permitted Transferee or its Agent agrees that, after all applications and
requests for continued employment are considered and the staffing decisions
incident to the transfer of the liquor license or receipt of a new liquor
license are final, Buyer's Permitted Transferee or its Agent will negotiate
with any union that was in place prior to the sale of the Hotel to the
extent required by law.
Prior to accepting applications for employment, Buyer's Permitted
Transferee or its Agent agrees to contact the labor organization representing
the employees at the Hotel to arrange
<PAGE>
a meeting to discuss the relationship that will exist between Buyer's Permitted
Transferee or its Agent and the labor organization when Seller ceases to be the
employer and Buyer's Permitted Transferee or its Agent becomes the employer.
(iv) Seller's Obligations Concerning Its Employees. On the earlier of
the date of transfer of the liquor license or Buyer's Permitted
Transferee's or its Agent's receipt of its own liquor license, or as soon
thereafter as required by law, Seller shall pay to all employees receiving
notice of the sale under Section 6(b)(iii) above the full amount of wages
earned and other benefits accrued as of such date (including the entire
amount of all vacation accruals) or the last day an employee worked if
employee is no longer employed on the date set forth above and shall remain
fully liable for any related payroll expenses, severance pay, unfair labor
practice claims, employment discrimination charges and other employee
claims relating to any period prior to the transfer of the liquor license
or Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license, whichever first occurs. After the occurrence of the earlier of the
events set forth above in this Subsection (iv), Seller shall transfer to
Buyer's Permitted Transferee or its Agent, the records of all employees who
submit applications or otherwise request to continue their employment
relationship with the Hotel if each such employee making application has
first executed a Release/Consent to Transfer Records form which has been
provided to Seller.
(v) Franchise Transfer. Promptly following the date of this Agreement,
Seller shall notify Franchisor of the sale contemplated by this Agreement.
Seller shall use its best efforts to ascertain, and provide written notice
thereof to Buyer prior to the Feasibility Expiration Date, the specific
requirements (including the PIP) of Franchisor to obtaining its consent to
the sale contemplated hereby and allowing the Franchise Agreement to be
assigned to Buyer. It is contemplated that Buyer's inspection and the PIP
requirements will result in no more than $2,500,000 of improvements being
required to be made to the Hotel and those hotels which are the subject of
the Affiliated Sale Agreements (the "PIP Requirements").
The parties acknowledge that in order to obtain from the Franchisor a Franchise
Agreement for the Hotel, a Franchise Fee of $98,000 shall be due and owing to
the Franchisor, which Franchise Fee Seller agrees to pay.
The parties agree that the cost to satisfy the PIP Requirements for this Hotel
is estimated to be $32,700, which cost Seller agrees to pay, but only on the
condition that, at the time of Closing of this sale transaction, a separate
escrow account is established from Seller's gross sales proceeds in such amount
(the "PIP Escrow"). The PIP Escrow funds shall be used solely and exclusively
for the purpose of paying the costs of completing the PIP Requirements, and
Seller shall have absolutely no right to claim any right, title or interest to
the PIP Escrow other than for the purpose of paying for the cost of completing
PIP Requirements. It is agreed that responsibility for taking all actions
required in order to complete the PIP Requirements shall be as set forth in the
Franchise Agreement, and in order to comply with the terms of Buyer's mortgage
financing, Amresco Capital, L.P. ("Amresco") will hold the PIP Escrow in a
non-interest bearing account. Release of funds from the PIP Escrow shall be
subject to the requirements and consent of Amresco and shall be pledged to
Amresco as security for the Buyer's Mortgage loan to Amresco and to insure
completion of the PIP Requirements. If funds remain in the PIP Escrow after
<PAGE>
completion of the PIP Requirements (which is not anticipated), such excess funds
shall be paid to Amresco as a principal payment on the Buyer's mortgage loan. If
the PIP Escrow is insufficient to complete the PIP Requirements, Seller shall
have absolutely no responsibility to fund such deficit. Because third parties
shall control and supervise the completion of the PIP Requirements, Seller shall
have no liability or responsibility therefor, and makes no representation or
warranty that the PIP Requirements shall be completed in a workmanlike manner,
or otherwise, and/or can be completed at a cost equal to the amount of the PIP
Escrow.
7. INSPECTIONS.
(a) Entry and Investigation. Between the date hereof and the Feasibility
Expiration Date, Seller grants to Buyer and its employees, agents, contractors
and consultants (collectively, "Consultants"), a license to enter the Hotel at
reasonable times for the purpose of performing certain inspections on or
concerning the Hotel, which inspections may include: (i) research regarding the
Property and surrounding parcels as is generally conducted in a Level I or Phase
I environmental audit, surveying the Real Property, and conducting other
inspections of the Real Property and the physical condition of the Improvements
and any furniture, fixtures, equipment and machinery located therein; (ii) the
performance of engineering or structural investigations and tests of the Hotel
and any improvements thereon as may be approved by Seller; (iii) reviewing the
books and records of the Hotel; and (iv) meeting with and interviewing
Franchisor and other persons involved in property management of the Hotel
(collectively, the "Investigation"). The Investigation and all related
activities or events shall be limited and conducted as herein required, all at
Buyer's sole risk, cost and expense. Seller shall incur no cost or expense in
connection with the Investigation or any related activities or events.
(b) No Interference. The Investigation shall be diligently performed and
prosecuted to completion so as to minimize interference with the operation or
use of the Hotel by Seller and its employees, agents and contractors and any
hotel guests or other invitees and licensees. Any entry and any Investigation by
Buyer or its Consultants shall be subject to and conducted in accordance with
all Contracts and the Franchise Agreement. Because of Seller's concern with any
interference with the operation of the Hotel, Seller reserves the right to
impose reasonable restrictions on time and frequency of Buyer's entry, provided
such restrictions shall not interfere with Buyer's ability to complete the
Investigation prior to the Feasibility Expiration Date. All persons who enter
the Hotel shall do so at their own risk. Buyer acknowledges and agrees that
Buyer and its Consultants shall cooperate with and comply with all directions of
Seller and its Consultants.
8. TITLE INSURANCE POLICY. At the Closing, and as a condition to Buyer's
obligation to close, Escrow Agent shall deliver to Buyer an extended coverage
owner's policy of title insurance (ALTA Form) issued by Title Agent, or the
unconditional commitment of Title Agent, to issue such policy, insuring Buyer in
the amount of the portion of the Purchase Price allocated to the Real Property
as set forth on Schedule "F" that title to the Real Property has vested in Buyer
free and clear of all liens and encumbrances other than the Permitted Title
Exceptions and such other matters as are approved by Buyer in writing, together
with such endorsements and such reinsurance (with direct access) as is requested
by Buyer (the "Title Policy"). The Title
<PAGE>
Policy shall provide full coverage against mechanics' and materialmen's liens
arising out of the construction, repair or alteration of any of the
Improvements. Buyer and Seller shall each be responsible for one-half of the
title insurance premium. Buyer shall be responsible for the cost of any
endorsements and reinsurance requested by Buyer.
9. THE ESCROW AND CLOSING.
(a) Escrow Instructions. Buyer and Seller shall establish the Escrow with
Escrow Agent to facilitate the consummation of the transactions contemplated by
this Agreement. Buyer and Seller shall provide Escrow Agent with instructions
consistent with this Agreement and each agrees to execute such additional
instructions as may be reasonably requested by Escrow Agent in connection
herewith. If any conflict or inconsistency exists between the provisions of any
instructions provided to Escrow Agent and this Agreement or any deed, instrument
or document executed or delivered in connection with the transaction
contemplated hereby, the provisions of this Agreement, or such deed, instrument
or document shall control in resolving such conflict or inconsistency. No
provision of any such instructions shall excuse any performance by either party
at the times provided in this Agreement, extend the Closing Date provided for
herein or provide either party hereto with any grace period not provided in this
Agreement, and any such provision in such instructions shall be deleted.
(b) Closing. The Closing shall occur through the Escrow and shall take
place on the Closing Date at Escrow Agent's office at 10:00 a.m., or such other
place or time as the parties may mutually agree in writing. Subject to the
conditions and contingencies set forth herein, the Closing shall take place not
later than thirty (30) days after the Feasibility Expiration Date, provided that
the Closing Date may be extended, at the Buyer's option, by up to two (2)
extensions of thirty (30) days each upon deposit by the Purchaser into the
Escrow of additional non-refundable deposits in the amount of Twelve Thousand
One Hundred Eighty-Eight and No/100 Dollars ($12,188.00) each. Any such
additional deposits into the Escrow shall be paid to Seller at the Closing and
applied as a credit against Buyer's payment of the Purchase Price. Interest on
such additional deposits shall accrue for the benefit of and be payable as the
Earnest Money.
(c) Action at the Closing by Seller. At or prior to the Closing,
Corporation and Partnership shall each, as applicable, deliver or cause to be
delivered to Buyer, or to Escrow Agent for the account of Buyer, all of the
following, and with respect to any instruments referred to below, all such
instruments shall be dated as of the Closing Date, fully and duly executed by
Seller and, if appropriate, acknowledged:
(i) Deed. A Statutory Form Limited Warranty Deed from Partnership
conveying the Real Property to Buyer in the form of Exhibit "C" hereto;
(ii) Affidavit. An Affidavit of Non-Foreign Person from Partnership as
contemplated by Federal Code Section 1445, in the form of Exhibit "D"
hereto;
<PAGE>
(iii) Assignment and Assumption. An Assignment and Assumption of
Contracts from Corporation and Partnership (excluding the Franchise
Agreement) in the form of Exhibit "E" hereto with respect to those
Contracts to which Buyer has elected to accept;
(iv) Assignment of Intangible Property. An Assignment of the
Intangible Property from Corporation and Partnership in the form of Exhibit
"F" hereto;
(v) Bill of Sale. A Bill of Sale from Corporation relating to the
Personalty in the form of Exhibit "G" hereto;
(vi) Assignment and Assumption of Franchise Agreement. An Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H";
(vii) Certificate of Good Standing. A Certificate of Good Standing of
the Corporation issued by the Secretary of State of Ohio dated no more than
thirty (30) days prior to the Closing Date.
(viii) Keys. All keys and/or means to operate all locks and alarms for
the Property;
(ix) Contracts. The originals of the Contracts and the Documents to
the extent in Seller's possession and not previously delivered to Buyer.
(x) The Management Agreement. The Management Agreement.
(xi) The Consulting Agreement. The Consulting Agreement.
(xii) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Seller, and the individual
signing on behalf of Seller, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(xiii) Seller's Acknowledgment. A written acknowledgment of Seller's
approval of Escrow Agent's final settlement statement setting forth all
prorations, and adjustments made in accordance with the provisions of this
Agreement;
(xiv) Lien Releases. Such documentation as is reasonably satisfactory
to Buyer and Escrow Agent to cause all of the Assets to be released from
any lien, financing statement, or other encumbrance which is not a
Permitted Exception; and
(xv) Further Documentation. Such other instruments or documents as are
reasonably necessary to fulfill the covenants and obligations to be
performed by Seller pursuant to this Agreement, specifically including,
without limitation, all properly endorsed certificates of title necessary
to transfer all motor vehicles and such other documents necessary to
transfer all other licenses and permits.
<PAGE>
(d) Action at the Closing by Buyer. At or prior to the Closing, Buyer shall
deliver or cause to be delivered to Buyer, or to Escrow Agent for the account of
Seller, all of the following, and with respect to any instruments or documents
referred to below, all such items shall be dated as of the Closing Date, fully
and duly executed by Buyer and, if appropriate, acknowledged:
(i) Purchase Price. All funds necessary to pay the Purchase Price
together with all closing costs and applicable prorations payable by Buyer
as required by the provisions of this Agreement;
(ii) Assignment and Assumption. The Assignment and Assumption of
Contracts from Corporation and Partnership and the Assignment (excluding
the Franchise Agreement) in the form of Exhibit "E" hereto;
(iii) Assignment and Assumption of Franchise Agreement. The Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H" hereto;
(iv) The Management Agreement. The Management Agreement;
(v) The Consulting Agreement. The Consulting Agreement;
(vi) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Buyer, and the individual
signing on behalf of Buyer, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(vii) Buyer's Acknowledgment. A written acknowledgment of Buyer's
approval of Escrow Agent's final settlement statement setting forth all
prorations and adjustments made in accordance with the provisions of this
Agreement; and
(viii) Further Documentation. Such other funds, instruments, or
documents as are reasonably necessary to fulfill the covenants and
obligations to be performed by Buyer pursuant to this Agreement.
(e) Closing Costs. Buyer and Seller shall each be responsible for its own
legal fees and the costs of its respective legal counsel. All documentary
stamps, transfer taxes, sales taxes and all other similar taxes, together with
the cost of the Survey shall be paid by Seller. The Escrow fee payable to Escrow
Agent in respect of the conveyance and transfer of the Assets to Buyer shall be
shared equally by the parties. All other fees, recording costs, charges or
expenses incidental to the sale, transfer and assignment of the Assets to Buyer
shall, except as otherwise herein expressly provided, be paid according to the
standard custom and practice pertaining to real estate transactions consummated
in Summit County, Ohio.
(f) Pre-Closing Settlement Statement. At least three (3) business days
prior to the Closing, Buyer and Seller shall provide to Escrow Agent as much
information as is then
<PAGE>
available to enable Escrow Agent to prepare a pre-audit settlement statement
setting forth in detail all prorations and adjustments contemplated by this
Agreement based on the information available to Escrow Agent. Escrow Agent shall
provide such pre-audit settlement statement to Buyer and Seller and their
respective legal counsel no later than two (2) business days prior to the
Closing and shall include therewith an indication of any specific information
remaining to be provided to Escrow Agent by Buyer and Seller to enable Escrow
Agent to show all final prorations and adjustments calculated by Buyer and
Seller, and required by this Agreement. Such statement shall be approved by both
Buyer and Seller in writing prior to Closing, such approval to be indicated by
the parties signatures thereon.
(g) Transfer of Guest Property in Safe Keeping.
(i) Baggage. All baggage or other property of guests of the Property
which has been checked with or left in the care of Seller and remains in
Seller's care on the Closing Date shall be inventoried and tagged jointly
by Seller and Buyer.
(ii) Safe Deposit Boxes. As of the Closing Date, Seller and Buyer
shall prepare a list of all guests of the Property maintaining items in
safe deposit boxes. Buyer shall not be liable or responsible for any items
contained in any safe deposit box not specified on such list or specified
on such list and not included in safe deposit boxes, and Seller agrees to
indemnify and hold harmless Buyer from and against any such liability or
responsibility.
10. APPORTIONMENTS.
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs.
(i) Taxes. Real estate taxes, personal property taxes and any general
or special assessments in respect of the Assets shall be prorated as of the
Closing Date such that Seller shall be responsible for all taxes and
assessments that are allocable to any period prior to the Closing Date and
Buyer shall be responsible for all taxes and assessments that are allocable
to any period from and after the Closing Date. If the actual amount of
taxes, assessments or other amounts to be prorated for the year in which
the Closing occurs is not known as of the Closing Date, the proration shall
be based on the parties' reasonable estimates of such taxes, assessments
and other amounts. Notwithstanding any other provision of this Agreement to
the contrary, if Buyer shall become liable after the Closing for payment of
any taxes or assessments assessed against the Assets for any period of time
prior to the Closing Date, Seller shall immediately pay to Buyer on demand
an amount equal to such tax assessment in accordance with subparagraph
10(c) below.
(ii) Deposits. At the Closing, Buyer shall be charged for all house
banks and all security or other deposits paid by Seller to third parties
for which the right to the return of any such sums is transferred to Buyer
at the Closing.
Inventory and Supplies.
<PAGE>
[INTENTIONALLY OMITTED]
(iv) Other Items. The following additional prorations and adjustments
shall occur as of the Closing and, prior to the Closing Date, Seller shall
provide all information to Buyer required to calculate such prorations and
adjustments; representatives of Buyer and Seller shall together make such
calculations and provide Escrow Agent with the results of such prorations
and adjustments.
(A) All petty cash and cash in cash registers and vending
machines as of 11:59 p.m. on the day preceding the Closing Date shall
remain the property of Seller, and if not paid to Seller at or before
the Closing shall be charged to Buyer.
(B) All receipts from guest room rentals and Hotel services prior
to the Closing Date shall belong to Seller. One half of the guest room
rentals and Hotel services, whether in cash or accounts receivable,
arising from occupancy for the entire night beginning on the day
preceding the Closing Date shall be credited to each of Buyer and
Seller. All receipts thereafter shall belong to Buyer. All prepaid
rentals, room rental deposits and all other deposits for advance
registration, banquets, or future services paid to Seller prior to the
Closing Date shall be credited to Buyer.
(C) All receipts and expenses from restaurant and bar operations
concluded prior to 11:59 p.m. on the day preceding the Closing Date
shall belong to, and be paid by, Seller.
(D) All accounts receivable and credit card claims for goods and
services furnished prior to 11:59 p.m. on the day preceding the
Closing Date shall remain the property of Seller and, to the extent
Buyer receives any payments on account thereof after Closing, Buyer
shall immediately remit such amount to Seller.
(E) All accounts payable owing for goods and services furnished
prior to 11:59 p.m. on the day preceding the Closing Date shall be
paid by Seller. Buyer shall assume, and after the Closing, pay, all
accounts payable relating to goods and services (including
advertising) for which orders have been placed, but as of 11:59 p.m.
on the day preceding the Closing Date, such goods and services have
not yet been delivered or provided so long as such goods and services
are of the type, quality and quantity used by Seller in the ordinary
course of operating the Hotel. Prior to the Closing, Seller shall
provide to Buyer a list of all accounts payable for which the goods
and services have not yet been delivered or provided, and Buyer and
Seller shall determine whether any such accounts payable should remain
the obligation of Seller, and for which Buyer shall receive a credit
at the Closing in the amount of all such payables which do not relate
to goods and services provided to Seller in the ordinary course of
operating the Hotel.
(v) Employee Wages and Benefits. All employee benefits, wages and
other compensation shall be the sole responsibility of Seller. Seller shall
make all such payments
<PAGE>
and/or post such bonds as are required by law or necessary to ensure that
all such liabilities will be satisfied.
(vi) Remittance. Buyer and Seller each agree to promptly remit to the
other any monies received by such party which is due to the other in
accordance with this Agreement. All prorations shall be based on the actual
number of days in the calendar month in which the Closing occurs.
(b) Utility and Maintenance Charges. Seller shall pay or cause to be paid
(i) all unpaid charges for water, electricity, gas, trash removal, sewer,
telephone or other utility services which are furnished to or in connection with
the Hotel prior to the Closing Date and (ii) all unpaid charges for landscaping
and all other maintenance services which are furnished to or in connection with
the Hotel prior to the Closing Date. Not less than three (3) days prior to
Closing, Seller and Buyer shall notify and instruct the suppliers of the
foregoing utility services to read the meters for such services as of the day
prior to the Closing Date and to render to Seller a final statement for all
charges for utility services furnished to the Property prior to the Closing
Date. If the final meter readings cannot be obtained, Buyer and Seller shall
prorate such charges based upon the particular utility company's billing for the
immediately preceding billing period determined on a per diem basis based on the
actual number of days in the billing period. Buyer shall receive a credit for
the allocated amount of such charges applicable to the period to and including
the day preceding the Closing Date and, following the Closing, Buyer shall be
responsible for, and shall pay, all billings received from the utility company
for the current and future billing periods.
(c) Adjustments to Prorations. After the Closing, the parties shall from
time to time, as soon as is practicable after accurate information becomes
available, recalculate and reapportion any of the items subject to proration or
apportionment under this Paragraph 10: (i) which were not prorated and
apportioned at the Closing because of the unavailability of the information
necessary to compute such proration, or (ii) which were prorated or apportioned
at the Closing based upon estimated or incomplete information, or (iii) for
which any errors or omissions in computing prorations at the Closing are
discovered subsequent thereto, and thereafter the proper party shall be
reimbursed based on the results of such recalculation and reapportionment.
Unless otherwise specified herein, all such reimbursements shall be made on or
before thirty (30) days after receipt of notice of the amount due. Any such
reimbursements not timely paid shall bear interest at a per annum rate equal to
ten percent (10%) from the due date until all such unpaid sums together with all
interest accrued thereon is paid if payment is not made within ten (10) days
after receipt of a bill therefor.
<PAGE>
11. INDEMNIFICATION.
(a) Buyer shall indemnify, defend and hold harmless Seller, its officers,
directors, agents, employees, partners and/or shareholders for, from and against
any and all claims, liabilities, damages, losses, causes of action, and
obligations and expenses (including reasonable attorneys' fees) incurred as a
result of, or arising in connection with: (i) physical damage to the Assets or
personal injury arising out of any tests, inspections, and studies of the Assets
performed by Buyer, its agents, employees or contractors, or the entry of Buyer
or its agents, employees or contractors onto the Real Property for any reason
prior to the Closing Date; (ii) any acts or omissions of Buyer and its agents,
employees or contractors pertaining to the Hotel occurring or arising out of
events occurring on or after the Closing Date or any liability or obligation
required to be assumed by Buyer hereunder or which accrues on or after the
Closing Date; and (iii) any misrepresentation or breach of any warranty or
covenant made herein or in any document, certificate or exhibit given or
delivered pursuant hereto.
(b) Notwithstanding any other provision of this Agreement, Buyer shall
indemnify, defend and hold harmless Seller, its directors, officers, employees,
partners and/or shareholders from and against any Claim asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from:
(i) any claim brought, by or on behalf of Hotel, Motel and Restaurant
Employees and Bartenders Union or its Local #118 and/or any bargaining unit
employee of Seller as of the date of transfer of the liquor license or
Buyers' Permitted Transferee's or its Agent's receipt of its own liquor
license alleging a violation by Seller of its collective bargaining
agreement because of Buyer's Permitted Transferee's or its Agent's failure
to negotiate a new Collective Bargaining Agreement, if required under the
Agreement.
(ii) any claim brought by or on behalf of Hotel, Motel and Restaurant
Employees and Bartenders Union or its Local #118 and/or any employee of
Seller at the Hotel as of the date of transfer of the liquor license or
Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license and/or any unit of local government (as defined in 29 U.S.C. ss.
2101(a)(7)) alleging a violation by Seller of the Worker Adjustment and
Retraining Notification Act (WARN) 29 U.S.C. ss.ss. 2101 et seq.
(c) Seller shall indemnify, defend, and hold harmless Buyer, its owners,
officers, directors, agents, employees, partners and/or shareholders for, from
and against any and all claims, liabilities, damages, losses, causes of action,
and obligations and expenses (including reasonable attorneys' fees) incurred as
a result of, or arising in connection with: (i) any acts or omissions of Seller
and its agents, employees and contractors pertaining to the Assets occurring or
arising out of events occurring prior to the Closing Date or any liability or
obligation of Seller which Buyer is not required to assume hereunder or which
accrues prior to the Closing, and (ii) any misrepresentation or breach of any
warranty or covenant made herein or in any document, certificate or exhibit
given or delivered pursuant hereto. The obligation set forth in this paragraph
<PAGE>
shall survive the Closing and shall be a continuing obligation of Seller and its
successors and assigns.
12. POSSESSION. Seller shall deliver possession of the Assets to Buyer at the
Closing, subject to the Permitted Title Exceptions, provided, however, that
Seller shall afford authorized representatives of Buyer reasonable access to the
Hotel, subject to Paragraph 7 above, for the purposes of satisfying Buyer with
respect to the representations, warranties, and covenants of Seller contained
herein and with respect to satisfaction of any conditions precedent to the
Closing contained herein.
13. TRANSFER OF LIQUOR LICENSE. At the Closing, Buyer's designee (the
"Operator") and Seller shall enter into and deliver a management agreement (the
"Management Agreement") in form of Exhibit "A" hereto providing for the
Operator's operation of the Hotel as Seller's agent under Seller's liquor
permit. The term of such management agreement shall be until Operator has
obtained a liquor permit for the operation of the Hotel from the State of Ohio
or transferred Seller's liquor license to Operator. During such term, the
Operator shall pay to the Seller all employee's wages, including the employer's
portion of payroll taxes thereon and union benefit contributions, and all sales
tax obligations with respect to the operation of the Hotel during such term. The
Seller shall process the Hotel payroll and pay the employees thereof under its
workers compensation account number. The Seller shall also file all sales tax
returns under the Seller's vendors license number. In consideration of Seller's
processing of such payments as aforesaid, Operator shall pay Seller a fee of
$250.00 per month during the term of such management agreement.
14. REPRESENTATIONS AND WARRANTIES.
(a) Buyer. Buyer acknowledges, covenants, represents and warrants to Seller
that the following are true as of the date of this Agreement and, in entering
into this Agreement, Seller is relying upon the following:
(i) Existence. Buyer is a validly existing corporation under the law
of the state of its formation and in good standing under the law of the
State of Delaware, and Buyer has the full right, authority and power to
enter into this Agreement, to consummate the transactions contemplated
herein and to perform its obligations hereunder and under those documents
and instruments to be executed by it at the Closing, and each of the
individuals executing this Agreement on behalf of Buyer is authorized to do
so, and this Agreement constitutes a valid and legally binding obligation
of Buyer enforceable against Buyer in accordance with its terms.
(ii) Due Authorization. Buyer's execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of Buyer's obligations under the instruments required to be
delivered by Buyer at the Closing, do not and will not result in any
violation of, or default under, any term or provision of any agreement,
instrument, mortgage, loan agreement or similar document to which Buyer is
a party or by which Buyer is bound.
<PAGE>
(iii) Threatened Proceedings. There is no litigation, investigation or
proceeding pending or, to the best of Buyer's knowledge, contemplated or
threatened against Buyer which would impair or adversely affect Buyer's
ability to perform its obligations under this Agreement or any other
instrument or document related hereto.
(b) Partnership. Partnership represents and warrants to Buyer that the
following are true as of the date of this Agreement, and in entering into this
Agreement Buyer is relying upon the following:
(i) Existence. Partnership is a duly formed and validly existing
partnership under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Partnership has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations hereunder
and under those documents and instruments to be executed by it at the
Closing, and each of the individuals executing this Agreement on behalf of
Partnership is authorized to do so, and this Agreement constitutes a valid
and legally binding obligation of Partnership enforceable against
Partnership in accordance with its terms.
(ii) Due Authorization. Partnership's execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
the performance of Partnership's obligations under the instruments required
to be delivered by Partnership at the Closing, do not and will not result
in any violation of or default under, any term or provision of any
agreement, instrument, mortgage, loan agreement or similar document to
which Partnership is a party or by which Partnership is bound.
(iii) Threatened Proceedings. Other than as set forth in Schedule "G"
hereto (the "Disclosure Statement"), there is no pending or, to the best of
Partnership's knowledge, threatened judicial, municipal or administrative
proceedings affecting the Hotel or in which Partnership is or will be a
party by reason of Partnership's ownership of the Hotel or any portion
thereof, including, without limitation, proceedings for or involving
alleged building code violations, or personal injuries or property damage
alleged to have occurred on the Hotel or by reason of the condition or use
of the Hotel. The Disclosure Statement contains an accurate summary of the
status of all matters shown thereon. If any proceeding of the character
described in this subparagraph is initiated prior to closing, Partnership
shall promptly advise Buyer in writing.
(iv) Liabilities. That except for: (a) debts, liabilities and
obligations for which provision is made herein for proration or other
adjustments as of the Closing Date; (b) debts and obligations incurred by
Seller in the ordinary course of business which Seller agrees to pay on or
before the Closing Date except as provided herein; (c) debts, liabilities
and obligations to be assumed by Purchaser provided for herein; (d) debts
and obligations for goods which are purchased prior to the Closing Date but
remain the property of Purchaser thereafter, there will be no debts,
liabilities or obligations of Seller with respect to the Hotels or the
Property.
<PAGE>
(v) Foreign Person. Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1954 as
amended.
(vi) Compliance With Laws. The Hotel properties are all in material
compliance with all Federal, State, Local (including local sewage district)
laws, rules, regulations ordinances, codes and orders governing,
establishing, limiting or otherwise affecting the discharge or disposal of
air pollutants, water pollutants, process wastewater or solid and hazardous
wastes. There are no pending or to Seller's knowledge threatened actions or
proceedings by the local municipality, sewage districts, state agencies
having jurisdiction over such matters, the U.S. Environmental Protection
Agency or any other governmental entity and to Seller's knowledge there is
no basis for any such action or proceedings. Seller has never disposed of
any noxious, toxic, solid or hazardous waste on the Real Property. Further,
Seller warrants and represents, to the best of its knowledge, that the Real
Property has not been used as a landfill, dump site, waste disposal area or
for any similar usage, and no underground storage tanks, petroleum products
or solid hazardous or toxic materials, as such terms are used and defined
under applicable local, state and federal environmental regulations, exist
on the surface or under the subsurface of the four properties or in any
surface or ground waters on or under the four properties.
(vii) Inventory Levels. As of the Closing Date, the inventory of
Operating Equipment and Operating Supplies will be in amounts which are at
least equal to the normal and customary levels of such inventories
historically maintained by the Hotel during the month in which the Closing
occurs, and all rooms will be consistently furnished and equipped with
items in good condition and repair (ordinary wear and tear expected).
(viii) Known Latent Defects. That to the actual knowledge of the
managing partner of the Partnership, there are no material latent defects
affecting the Hotel.
(c) Corporation. Corporation represents and warrants to Buyer that the
following are true as of the date of this Agreement, and in entering into this
Agreement Buyer is relying upon the following:
(i) Existence. Corporation is a duly formed and validly existing
corporation under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Corporation has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations hereunder
and under those documents and instruments to be executed by it at the
Closing, and each of the individuals executing this Agreement on behalf of
Corporation is authorized to do so, and this Agreement constitutes a valid
and legally binding obligation of Corporation enforceable against
Corporation in accordance with its terms.
(ii) Due Authorization. Corporation's execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
the performance of Corporation's obligations under the instruments required
to be delivered by Corporation at the Closing, do not and will not result
in any violation of, or default under, any term or provision of
<PAGE>
any agreement, instrument, mortgage, loan agreement or similar document to
which Corporation is a party or by which Corporation is bound.
(iii) Threatened Proceedings. Other than as set forth in Exhibit "G"
hereto, there is no pending or, to the best of Corporation's knowledge,
threatened judicial, municipal or administrative proceedings affecting the
Hotel or in which Corporation is or will be a party by reason of
Corporation's ownership of the Hotel or any portion thereof, including,
without limitation, proceedings for or involving alleged building code
violations, or personal injuries or property damage alleged to have
occurred on the Hotel or by reason of the condition or use of the Hotel.
The Disclosure Statement contains an accurate summary of the status of all
matters shown thereon. If any proceeding of the character described in this
subparagraph is initiated prior to Closing, Corporation shall promptly
advise Buyer in writing.
(iv) Liquor Permit. The liquor permit issued by the State of Ohio for
the Hotel is in good standing, and all taxes related thereto have been
fully paid or adequately reserved by the Seller.
15. NOTICES. All notices or other communications required or provided to be sent
by either party or Escrow Agent shall be in writing and shall be sent by United
States Postal Service, postage prepaid or certified mail, return receipt
requested, or by any nationally known overnight delivery service, or by courier,
or in person (including by way of facsimile transmission). All notices shall be
deemed to have been given forty-eight (48) hours following deposit in the United
States Postal Service or upon personal delivery if sent by overnight delivery
service, courier or personally delivered. All notices shall be addressed to the
party at the address below:
If to Seller:
North Canton Operating Corp.
c/o The Cornerstone Company
2857 Riviera Drive
Akron Ohio 44333-3415
Attention: Mr. Michael Gallucci, Jr. President
Fax No. (216) 867-2772
With a copy to:
Stark & Knoll Co., LP.A.
1512 Ohio Edison Bldg.
76 S. Main Street
Akron, Ohio 44308
Attention: Thomas G. Knoll, Esq.
Fax No. (216) 376-6237
<PAGE>
If to Buyer:
Janus American Group, Inc.
2300 Corporate Blvd., NW, Suite 232
Boca Raton, FL 33431
Attention: James E. Bishop
Fax No.: (516) 997-5331
With a copy to:
Janus American Group, Inc.
8534 East Kemper Road
Cincinnati, OH 45249-1709
Attention: Charles Thornton, Esq.
Fax No.: (513) 489-1955
Any address or name specified above may be changed by notice given to the
addressee by the other party in accordance with this Paragraph 15 The inability
to deliver because of a changed address of which no notice was given, or
rejection or other refusal to accept any notice, shall be deemed to be the
receipt of the notice as of the date of such inability to deliver or rejection
or refusal to accept. Any notice to be given by any party hereto may be given by
the counsel for such party. Any notice to be given to Escrow Agent shall be sent
to the address set forth in subparagraph 1(l) above.
16. SELLER'S REMEDIES. If Buyer shall breach any of the terms or provisions of
this Agreement or otherwise default hereunder after the Feasibility Expiration
Date, and as a result of such breach or default Buyer is unable to perform its
obligations at Closing and provided Seller has performed or tendered performance
of all its obligations hereunder, Seller's exclusive remedy shall be to retain
the Earnest Money as liquidated damages as provided in subparagraph 3(b) above.
Nothing contained in this paragraph shall limit or prevent Seller from enforcing
Buyer's obligations and liabilities which expressly survive a termination of
this Agreement.
17. BUYER'S REMEDIES. If Seller breaches any of the terms or provisions of this
Agreement or otherwise defaults hereunder, in addition to all other rights and
remedies available at law or in equity, Buyer may (i) terminate this Agreement
and the Escrow by written notice to Seller and Escrow Agent, whereupon the
Earnest Money shall be immediately returned to Buyer; (ii) waive such default
and consummate the transaction contemplated hereby in accordance with the terms
hereof; or (iii) specifically enforce this Agreement. Nothing contained in this
paragraph shall limit or prevent Buyer from enforcing Seller's obligations and
liabilities which survive a termination of this Agreement.
18. CASUALTY; CONDEMNATION. Seller shall notify Buyer immediately of the
occurrence of any damage to or destruction of the Hotel, or any portion thereof,
or the institution or maintenance of any condemnation or similar proceedings
with respect to the Real Property or any portion thereof. In the event of any
damage to or destruction of any portion of the Hotel for
<PAGE>
which the cost to repair exceeds $250,000, or if any such condemnation or other
proceedings are instituted or maintained, Buyer at its option either (i) may
terminate this Agreement, in which case the Earnest Money shall be returned to
Buyer and neither party shall have any further rights or obligations hereunder
except as provided in Paragraphs 7 and 21 or (ii) may consummate the purchase
evidenced by this Agreement. In all other events or if Buyer elects to
consummate the purchase pursuant to clause (ii) above, Buyer shall receive a
credit at Closing in an amount equal to (A) all insurance or condemnation
proceeds collected by Seller prior to the Closing, plus (B) Seller's deductible
or self-insurance limit or such lesser amount as is equal to the estimated cost
to repair or reconstruct those portions of the Property damaged or destroyed,
and all rights to all other insurance or condemnation proceeds arising out of
such damage or destruction or proceedings and not collected prior to the
Closing, including any business interruption and rental loss proceeds for any
period after the Closing, shall be assigned by Seller to Buyer as of the
Closing.
19. COMMISSIONS. Seller has committed to pay a business brokerage fee to Ken F.
Seminatore of $29,250 for his services in connection with the transactions
represented by this Agreement and the Affiliated Sales Agreements. Buyer
warrants and represents to Seller that no other real estate sales or brokerage
commissions or like commissions are or may be due in connection with this
transaction as a result of Buyer's acts. Seller shall be solely responsible for
all commissions or like fees owing in connection with this transaction as a
result of its acts. Each party agrees to indemnify, defend and hold harmless the
other party from and against any claims by third parties made by or through the
acts of such party, for real estate or brokerage commissions, or a finders fee,
in connection with the transaction provided for herein, and all costs and
expenses incurred by the indemnitee in connection therewith including, but not
limited to, reasonable attorneys' fees. The indemnity provided for in this
paragraph shall survive the Closing or any earlier termination of this
Agreement.
20. DISCLAIMER. Other than as expressly set forth herein, Seller hereby
specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to, or concerning (i) the nature and
condition of the Assets, including, without limitation, the water, soil and
geology or any other matter affecting the stability or integrity of the Real
Property or Improvements, and the suitability thereof and of the Assets for any
and all activities and uses which Buyer may elect to conduct thereon, and the
existence of any environmental hazards or conditions thereon (including the
presence of asbestos) or compliance with applicable Laws; (ii) the condition of
title to the Assets or the nature and extent of any right-of-way, lease,
possession, lien, encumbrance, license, reservation, condition or otherwise;
(iii) the compliance of the Assets or its operation with any covenants,
conditions, restrictions, or Laws; (iv) the profitability or losses or expenses
relating to the Assets and the businesses conducted in connection therewith; (v)
the existence, quality, nature, adequacy or physical condition of any utility
serving the Project; (vi) the zoning or other legal status of the Project; (vii)
the quality of any labor or materials relating in any way to the Assets; (viii)
the legal or tax consequences of this Agreement or its underlying transaction;
and (ix) the transferability of the Seller's rights under the Contracts. Buyer
acknowledges that prior to the Feasibility Expiration Date Seller will afford
Buyer the opportunity for full and complete investigations, examinations and
inspections of the Assets and all information to be delivered by Seller pursuant
to this Agreement and, other than as expressly
<PAGE>
set forth herein, Buyer is relying solely on its own investigation and
inspection of the Assets. Other than as expressly set forth herein, or in
subparagraph 14(b)(viii) hereof, the sale of the Assets as provided for herein
is made on an "AS IS" and "WHERE IS" basis, and Buyer expressly acknowledges
that, in consideration of the agreements of Seller herein, other than as
expressly set forth herein, Seller makes no warranty or representation, express
or implied, or arising by operation of law, including, but not limited to, any
warranty of condition, habitability, merchantability, suitability or fitness for
a particular use or purpose, in respect of all or any of the Assets.
21. CONFIDENTIALITY AND RETURN OF DOCUMENTS. Buyer agrees that, until after the
Closing, all documentation or information delivered to Buyer or its
representatives or agents by Seller or Seller's representatives or agents
pertaining to the Assets shall be kept strictly confidential and will not be
used by Buyer or its representatives or agents, directly or indirectly, for any
purpose other than evaluating the Assets. Neither party shall release, or cause
or permit to be released any press notices, publicity (oral or written) or
advertising or otherwise announce or disclose, or cause or permit to be
announced or disclosed, in any manner whatsoever, except as may be required by
applicable law or regulation, the terms, conditions or substance of the
transaction contemplated herein without first obtaining the express written
consent of the other party hereto. It is understood that the foregoing shall
not, however, preclude Buyer from discussing the substance or any relevant
details of the transaction contemplated in this Agreement, nor disclosing the
terms of this Agreement, or the existence thereof, to Buyer's accountants,
attorneys and Consultants engaged in connection with this transaction, or such
other persons or entities to which disclosure is required by Law. If the sale of
the Assets contemplated herein is not consummated, each party shall promptly
return to the other party all information, documents, and other items received
from such other party in connection herewith. This provision shall survive the
Closing or any termination of this Agreement.
22. WAIVER. The exercise or waiver of the performance by a party of any
obligation of the other party under this Agreement shall only be effective if
evidenced by a written statement signed by the party so exercising. No delay in
exercising any right or remedy shall constitute a waiver thereof and no waiver
by Seller or Buyer of the breach of any covenant of this Agreement shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Agreement.
23. TIME PERIODS. If the time for performance of any obligation hereunder
expires on a Saturday, Sunday or legal holiday, the time for performance shall
be extended to the next day which is not a Saturday, Sunday or legal holiday.
24. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations and warranties set forth in this
Agreement shall survive the Closing and shall not merge into the deed or other
instrument executed or delivered in connection with the transaction contemplated
hereby. The representations and warranties of Partnership contained in Paragraph
14.(b) and of Corporation contained in Paragraph 14.(c) shall survive the
Closing until the date which is one (1) year
<PAGE>
following the Closing Date except for matters disclosed or actually known to
Buyer prior to the Closing.
25. MODIFICATION OF AGREEMENT. No modification of this Agreement shall be deemed
effective unless in writing and signed by the parties hereto.
26. FURTHER INSTRUMENTS. Each party, promptly upon the request of the other,
shall execute and have acknowledged and delivered to the other or to Escrow
Agent, as may be appropriate, any and all further instruments reasonably
requested or appropriate to evidence or give effect to the provisions of this
Agreement and which are consistent with the provisions hereof.
27. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the
parties with regards to the purchase and sale of the Assets. All terms and
conditions contained in any other writings previously executed by the parties
(including the letter of intent dated May 21, 1998) and all other discussions,
understandings or agreements regarding the Assets and the subject matter hereof
shall be deemed to be superseded hereby.
28. INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the permitted successors and assigns, if any, of the respective parties hereto.
29. APPLICABLE LAW. This Agreement, and all questions and disputes arising in
connection with it, shall be governed by and construed in accordance with the
laws of the State of Ohio.
30. DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any provisions hereof.
31. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
32. ASSIGNMENT. Other than to a Permitted Transferee, Buyer may not assign its
rights hereunder without the prior written consent of Seller, which consent may
be unreasonably withheld. No assignment proposed by Buyer, even if to a
Permitted Transferee, shall be valid and effective until the delivery to Seller
of written notice of such assignment together with an executed copy of the
documents pursuant to which such assignee assumes all of Buyer's covenants,
indemnities, obligations and agreements under this Agreement and agrees to be
bound by all of the terms, conditions and provisions hereof and thereof.
Notwithstanding any assignment to a Permitted Transferee, Buyer shall not be
released from all obligations and liabilities hereunder.
33. CONSTRUCTION. The parties agree that each party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement or any amendments or exhibits
hereto.
<PAGE>
34. INTERPRETATION. In this Agreement, the neuter gender includes the feminine
and masculine, and the singular number includes the plural, and the words
"person" and "party" include corporations, partnerships, individuals, firms,
trusts, or associations wherever the context so requires.
35. EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto and
referred to in this Agreement are incorporated herein by this reference and are
part of this Agreement.
36. COUNTERPARTS. This Agreement may be executed simultaneously or in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
37. RECORDATION. This Agreement shall not be recorded, but Buyer may record a
Memorandum of the Agreement upon obtaining Seller's prior written approval.
38. EXCLUSIVE NEGOTIATIONS. As an inducement to Buyer to investigate and analyze
the Assets, and to encourage Buyer to satisfy or waive the contingencies
referenced in Paragraph 6 above as soon as possible, Seller shall not, prior to
the Feasibility Expiration Date (and then only if Buyer fails to remove the
contingencies set forth in Paragraph 6.(a) or otherwise terminates this
Agreement), either seek or solicit any purchase offer or financing with respect
to the Assets, and Seller shall deal exclusively with Buyer toward consummating
the transaction contemplated by this Agreement in accordance with the terms and
conditions of this Agreement.
39. IRS REAL ESTATE SALES REPORTING. Buyer and Seller shall appoint Escrow Agent
as, and Escrow Agent shall agree to act as, "the person responsible for closing"
the transaction which is the subject of this Agreement pursuant to Internal
Revenue Code Section 6045(e). Buyer and Seller shall confirm such appointment in
the separate instructions given to Escrow Agent and shall instruct Escrow Agent
to prepare and file all informational returns, including without limitation, IRS
Form 1099-S and to otherwise comply with the provisions of Internal Revenue Code
Section 6045(e).
<PAGE>
40. BULK SALES WAIVER. Seller waives any requirement of Buyer to comply with any
applicable notice requirements pertaining to bulk sales or other similar laws.
Seller shall indemnify, defend and hold Buyer harmless for, from and against any
liability resulting from such waiver.
SELLER: BUYER:
NORTH CANTON OPERATING JANUS AMERICAN GROUP, INC.
CORP., an Ohio corporation
By: By:
Name: Michael Gallucci, Jr. Name: James E. Bishop
Its: President Its: President
CANTON NORTH PROPERTIES, an
Ohio general partnership
By:
Name: Michael Gallucci, Jr.
Its: Managing General Partner
<PAGE>
SCHEDULE "A"
Affiliated Sales Agreements
1. Purchase and Sale Agreement dated July 31, 1998 between Rockside Road
Operating Corp., Rockside Road Properties and Janus American Group.
2. Purchase and Sale Agreement dated July 31, 1998 between Galburton Inn, Inc.
and Janus American Group.
3. Purchase and Sale Agreement dated July 31, 1998 between West Montrose
Properties and Janus American Group.
<PAGE>
SCHEDULE "B"
Contracts
<PAGE>
SCHEDULE "C"
Franchise Agreement
Holiday Inn License Agreement dated as of June 28, 1985 between Holiday
Inns, Inc., a Tennessee corporation, and Canton North Properties, an Ohio
general partnership.
<PAGE>
SCHEDULE "D"
Personalty
[See Attached]
<PAGE>
SCHEDULE "E"
Real Property Description
[See Attached]
<PAGE>
SCHEDULE "F"
Allocation of Purchase Price
$ 800,000 - Land
$3,000,000 - Building
$1,200,000 - Chattels
$5,000,000 - Total Purchase Price
<PAGE>
SCHEDULE "G"
Disclosure Statement
<PAGE>
EXHIBIT "A"
Management Agreement
[See Attached]
<PAGE>
EXHIBIT "B"
Consulting Agreement
[See Attached]
<PAGE>
EXHIBIT "C"
Limited Warranty Deed
[See Attached]
<PAGE>
EXHIBIT "D"
Affidavit of Non-Foreign Person
[See Attached]
<PAGE>
EXHIBIT "E"
Assignment and Assumption of Contracts
[See Attached]
<PAGE>
EXHIBIT "F"
Assignment of Intangible Property
[See Attached]
<PAGE>
EXHIBIT "G"
Bill of Sale
[See Attached]
<PAGE>
EXHIBIT "H"
Assignment and Assumption of
Franchise Agreement
[Not Required]
PURCHASE AND SALE AGREEMENT
between
ROCKSIDE ROAD OPERATING CORP.,
an Ohio corporation,
and
ROCKSIDE ROAD PROPERTIES,
an Ohio general partnership
collectively as Seller,
and
JANUS AMERICAN GROUP, INC.,
A Delaware corporation
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions
(a) "Affiliated Sale Agreements" 4
(b) "Agreement" 4
(c) "Assets" 4
(d) "Closing" 4
(e) "Closing Date" 4
(f) "Concurrent Escrows" 5
(g) "Contracts" 5
(h) "Documents" 5
(i) "Earnest Money" 5
(j) "Escrow" 5
(k) "Escrow Agent" 5
(l) "Feasibility Expiration Date" 5
(m) "Federal Code" 5
(n) "Food and Beverage Inventory" 5
(o) "Franchise Agreement" 5
(p) "Franchisor" 5
(q) "Hotel" 5
(r) "Improvements" 5
(s) "Intangible Property" 5
(t) "Latent Defects" 6
(u) "Laws" 6
(v) "Managing Partner" 6
(w) "Operating Equipment" 6
(x) "Operating Supplies" 6
(y) "Person" 6
(z) "Permitted Title Exceptions" 6
(aa) "Permitted Transferee" 6
(ab) "Personalty" 6
(ac) "Purchase Price" 6
(ad) "Real Property" 7
(ae) "Title Agent" 7
2. Agreement of Purchase and Sale 7
3. Purchase Price 7
(a) Earnest Money 7
(b) Liquidated Damages 7
(c) Cash at Closing 8
4. Allocation of Purchase Price 8
5. Buyer's Contingencies 8
<PAGE>
(a) Due Diligence 8
(b) Conditions to Buyer's Obligations 9
6. Seller's Contingencies and Covenants 10
(a) Seller's Contingencies 10
(i) Buyer's Covenants 10
(ii) Closing of Concurrent Escrows 11
(iii) Truth of Representations 11
(iv) Franchisor Consent 11
(v) Release 11
(vi) Consulting Agreement 11
(b) Covenants 11
(i) Maintenance of the Assets 11
(ii) Permits and Approvals 12
(iii) Notification to Existing Employees 12
(iv) Seller's Obligations Concerning Its Employees 12
(v) Franchise Transfer 12
7. Inspections 13
(a) Entry and Investigation 13
(b) No Interference 13
8. Title Insurance Policy 13
9. The Escrow and Closing 13
(a) Escrow Instructions 13
(b) Closing 14
(c) Action at the Closing by Seller 14
(d) Action at the Closing by Buyer 15
(e) Closing Costs 16
(f) Pre-Closing Settlement Statement 16
(g) Transfer of Guest Property in Safe Keeping 17
10. Apportionments 17
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs 17
(b) Utility and Maintenance Charges 19
(c) Adjustments to Prorations 19
11. Indemnification 19
12. Possession 20
13. Transfer of Liquor License 20
14. Representations and Warranties 21
(a) Buyer 21
(b) Partnership 21
(c) Corporation 23
15. Notices 23
16. Seller's Remedies 24
17. Buyer's Remedies 25
18. Casualty; Condemnation 25
19. Commissions 25
20. Disclaimer 26
<PAGE>
21. Confidentiality and Return of Documents 26
22. Waiver 27
23. Time Periods 27
24. Survival of Covenants, Agreements, Representations and Warranties 27
25. Modification of Agreement 27
26. Further Instruments 27
27. Entire Agreement 27
28. Inurement 27
29. Applicable Law 27
30. Descriptive Headings 28
31. Time of the Essence 28
32. Assignment 28
33. Construction 28
34. Interpretation 28
35. Exhibits and Schedules 28
36. Counterparts 28
37. Recordation 28
38. Exclusive Negotiations 28
39. IRS Real Estate Sales Reporting 29
40. Bulk Sales Waiver 29
SCHEDULES
Affiliated Sales Agreements
Contracts
Franchise Agreement
Personalty
Real Property
Allocation of Purchase Price
Disclosure Statement
EXHIBITS
Management Agreement
Consulting Agreement
Limited Warranty Deed
Affidavit of Non-Foreign Person
Assignment and Assumption
Assignment of Intangible Property
Bill of Sale
Assignment and Assumption of the Franchise Agreement
<PAGE>
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made effective as of the
31st day of July, 1998, by and between ROCKSIDE ROAD OPERATING CORP., an Ohio
corporation ("Corporation"), and ROCKSIDE ROAD PROPERTIES, an Ohio general
partnership ("Partnership") (Corporation and Partnership being hereinafter
collectively referred to as "Seller"), and JANUS AMERICAN GROUP, INC., a
Delaware corporation and/or its Permitted Transferee (hereinafter collectively
referred to as "Buyer").
Background of Agreement
A. Seller is the owner of certain real property located in Independence, Ohio,
having located thereon a 365-room hotel known as the Rockside Road Holiday Inn.
B. Buyer desires to purchase such real property and related assets, and Seller
desires to sell to Buyer such real property and related assets, subject to and
in accordance with the terms, covenants and conditions of this Agreement.
Agreement
NOW, THEREFORE, in consideration of the premises, the terms, conditions and
covenants contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the terms below shall have the
following meanings unless the context requires otherwise.
(a) "Affiliated Sale Agreements". The various purchase and sale agreements
described on Schedule "A" hereto.
(b) "Agreement". This Purchase and Sale Agreement, as amended or supplemented
from time to time.
(c) "Assets". The Contracts, the Documents, the Improvements, the Intangible
Property, the Personalty, and the Real Property now owned, or hereafter
acquired, by Seller in connection with or relating to the Hotel.
(d) "Closing". The event at which the transaction contemplated hereby will be
consummated and when Buyer acquires title to the Assets.
(e) "Closing Date". The date designated by Buyer in a written notice delivered
to Seller at least five (5) business days in advance; however, in no event shall
the Closing Date occur later than the date provided in subparagraph 9(b) hereof.
<PAGE>
(f) "Concurrent Escrows". The escrows, established with Escrow Agent pertaining
to the purchase by Buyer of certain other hotel properties and related assets
pursuant to the Affiliated Sale Agreements.
(g) "Contracts". All 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 Hotel
that will remain in effect after Closing, all of which are described on Schedule
"B" hereto.
(h) "Documents". All books, records and files relating to the leasing,
maintenance, management or operation of the Hotel in Seller's possession or in
the possession of any management company currently managing any portion of the
Hotel.
(i) "Earnest Money". The deposit required to be paid by Buyer to Escrow Agent
pursuant to subparagraph 3(a), together with all interest earned thereon.
(j) "Escrow". The Escrow established with Escrow Agent to facilitate the
transaction contemplated hereby, bearing Escrow No. .
(k) "Escrow Agent". American Title Company, 6029 Belt Line Road, Suite 250,
Dallas, Texas 75240.
(l) "Feasibility Expiration Date". July 25, 1998.
(m) "Federal Code". The United States Internal Revenue Code of 1986, as amended.
(n) "Food and Beverage Inventory". All inventory of food and beverages,
including alcoholic beverages, owned by Seller located at the Hotel, and used in
the operation of any restaurant, cafe, bar or other food service operation
within the Hotel.
(o) "Franchise Agreement". The agreement and/or agreements referenced on
Schedule "C" attached hereto.
(p) "Franchisor". Holiday Inns Franchising, Inc., a Delaware corporation.
(q) "Hotel". The 365-room hotel located on the Real Property known as the
Cleveland-Independence Holiday Inn.
(r) "Improvements". All buildings, fixtures, walls, fences, landscaping and
other structures and improvements situated on, affixed or appurtenant to the
Real Property.
(s) "Intangible Property". All transferable or assignable permits, building
plans and specifications, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates, licenses, including,
without limitation, liquor licenses, warranties and guarantees, rights to
deposits, rebates and refunds, trade names, service marks, appraisals,
<PAGE>
engineering, soils, pest control and other reports relating to the Hotel, the
Contracts, customer or tenant lists, correspondence with present or prospective
tenants, customers or suppliers, advertising materials, telephone exchange
numbers identified with the Hotel, and all other transferable intangible
property, miscellaneous rights, benefits or privileges of any kind or character
with respect to the Hotel.
(t) "Latent Defect". Any defect in the Hotel which could not have been
discovered through a reasonable due diligence inspection of the Hotel by Buyer.
(u) "Laws". All present and future laws, statutes, codes, ordinances, orders,
awards, judgments, decrees, injunctions, approvals, permits, requirements,
regulations and licenses of every governmental or quasi-governmental authority
or agency.
(v) "Managing Partner". Michael Gallucci
(w) "Operating Equipment". All chinaware, glassware, linens, silverware, tools,
kitchen utensils, uniforms, engineering and housekeeping tools, vans,
automobiles, and other equipment and utensils owned by Seller and used in the
operation of the Hotel.
(x) "Operating Supplies". All fuel, soap, toilet paper, tissues, toiletries,
towels, light bulbs, mechanical stores, cleaning supplies and materials, pool
maintenance supplies and materials, matches, stationery, paper supplies, laundry
supplies, housekeeping supplies, accounting supplies, goods and merchandise used
for retail sale and other immediately consumable items, owned by Seller and used
in the operation of the Hotel.
(y) "Person". Any individual, firm, corporation, partnership, limited liability
company, trust or other entity.
(z) "Permitted Title Exceptions". The various matters affecting title to the
Assets that are approved by Buyer pursuant to subparagraph 5(a) below.
(aa) "Permitted Transferee". Buyer or JAGI Cleveland-Independence, L.L.C., a
Delaware limited liability company.
(ab) "Personalty". All furniture (including television sets, except where
leased), furnishings, fixtures, equipment (including, without limitation, office
equipment and the Operating Equipment), machinery, tools, pool maintenance
equipment, inventory, drapes, carpeting, rugs, artwork, the Operating Supplies,
the Food and Beverage Inventory, and other items of personal property owned by
Seller and found or used exclusively at the Hotel, including, without
limitation, the items described on Schedule "D" hereto.
(ac) "Purchase Price". The purchase price for the Assets as set forth in
Paragraph 3 hereof.
<PAGE>
(ad) "Real Property". The real property more particularly described on Schedule
"E" attached hereto, together with all easements, rights of ways, privileges,
licenses and appurtenances which Seller may now own or hereafter acquire with
respect to such real property.
(ae) "Title Agent". Chicago Title Insurance Company.
2. AGREEMENT OF PURCHASE AND SALE . At the Closing, subject to the terms,
covenants and conditions of this Agreement, Seller shall sell to Buyer and Buyer
shall purchase from Seller the Assets.
3. PURCHASE PRICE. The Purchase Price to be paid for the Assets shall be Twenty
One Million Eight Hundred Seven Thousand Dollars ($21,807,000.00) payable by
Buyer as follows:
(a) Earnest Money. Promptly following the execution of this Agreement,
Buyer shall deposit with Escrow Agent, One Hundred Fifty Thousand Seven Hundred
Thirty-Two Dollars and No/100 Dollars ($150,732.00) as Earnest Money to be held
in the Escrow in accordance with the terms and conditions of this Agreement.
Escrow Agent is hereby authorized and directed to invest all funds deposited by
Buyer into Escrow as directed by Buyer. Interest on the Earnest Money shall
accrue for the benefit of and be payable to the party otherwise entitled to such
sums upon the Closing or earlier termination of this Agreement. If the sale of
the Assets contemplated hereunder is consummated, the Earnest Money (inclusive
of all interest earned thereon) shall be paid to Seller at the Closing and
applied as a credit against Buyer's payment of the Purchase Price.
(b) Cash at Closing. On or before the Closing Date, Buyer shall deliver to
Escrow Agent, for the benefit of Seller, the remaining balance of the Purchase
Price (reduced by any credits due Buyer hereunder) by wire transfer of
immediately available funds to the account of Escrow Agent.
4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated as set
forth in Schedule "F" hereto. Buyer and Seller agree that the allocations set
forth in Schedule "F" were determined in good faith and at arms length, and
represent the parties' best good faith estimate of the fair market value, as of
the Closing Date, of each component of the Assets described on Schedule "F".
Buyer and Seller shall each report the transactions contemplated by this
Agreement for income tax purposes in accordance with the agreed upon allocations
set forth on Schedule "F" and will not take or assert a position inconsistent
therewith.
5. BUYER'S CONTINGENCIES. The following are conditions precedent to Buyer's
obligation to purchase the Assets:
(a) Due Diligence. Buyer shall have until the Feasibility Expiration Date
within which to perform such physical inspections and other reasonable due
diligence pertaining to the Assets as Buyer deems necessary, and to decide, in
Buyer's sole discretion, whether the Assets are in all respects satisfactory to
Buyer. Such due diligence shall include, without limitation, the following:
<PAGE>
(i) Title. Buyer's review and approval of title to the Property, as
follows. Seller shall, as soon as possible after executing this Agreement,
deliver to Buyer at Seller's sole cost and expense:
(A) a current extended coverage preliminary title report on the
Real Property, issued by Title Agent, and accompanied by copies of all
documents referred to in the report;
(B) copies of all existing and proposed easements, covenants,
restrictions, agreements or other documents which affect the Property
and which are not disclosed by the preliminary title report, or, if no
such documents exist, a certification of Seller to that effect;
(C) an ALTA/ACSM "as-built" survey of the Real Property and
Improvements prepared by a licensed surveyor or engineer (the
"Survey"). The Survey shall be acceptable and certified by the
surveyor to Buyer and in sufficient detail to provide the basis for
the Title Policy (as defined below) without boundary, encroachment or
survey exceptions, and shall show the location of all easements and
Improvements (including underground improvements) and any and all
other pertinent information with respect to the Property. The Survey
shall also indicate any encroachments of Improvements onto easements
or onto adjacent properties or certify to their absence, the presence
of improvements and easements on property adjoining the Real Property
if located within five (5) feet of the boundaries of the Real
Property, the number and location of all parking spaces on the
Property, and the square footage of the Real Property and the
Improvements. Prior to Closing, the Survey shall be certified to Buyer
and to the company issuing the Title Policy; and
(D) copies of the most recent property tax bills for the Property
and any filings, notices or correspondence regarding any challenges or
appeals to the applicable taxes, and copies of any improvement
assessments and any other bonds and assessments affecting the
Property.
Buyer shall advise Seller, within ten (10) days after actual receipt of all such
materials, what exceptions to title, if any, are objectionable to Buyer. Any
exceptions not objected to shall be deemed accepted by Buyer (the "Permitted
Exceptions"). Seller shall have ten (10) days after receipt of Buyer's
objections to give Buyer notice: (1) that Seller will remove any objectionable
exceptions from title and provide Buyer with evidence satisfactory to Buyer of
such removal, or provide Buyer with evidence satisfactory to Buyer that said
exceptions will be removed on or before the Closing, or (2) that Seller elects
not to cause such exceptions to be removed. Seller's failure to notify Buyer
within such ten (10) day period shall be deemed an election by Seller not to
remove the objectionable exceptions as provided in clause (2) above. If Seller
elects not to cure under clause (2), notwithstanding that the Feasibility
Expiration Date shall have passed, Buyer shall have ten (10) days to elect
whether to proceed with the purchase and take the Real Property subject to such
exceptions, or to terminate this Agreement. If Buyer shall fail to give
<PAGE>
Seller notice of its election within said ten (10) days, Buyer shall be deemed
to have elected not to proceed with this Agreement.
(ii) Physical Characteristics. Buyer's review and approval of the
structural, mechanical, electrical and other physical characteristics of
the Hotel.
(iii) Reports. Buyer's receipt and approval of satisfactory
architectural, engineering, soils and environmental reports. Pursuant to
the terms of Paragraph 7 of this Agreement, Seller shall provide Buyer the
opportunity to conduct, at Buyer's expense, an environmental site
assessment by a qualified engineer to determine the extent, if any, that
the Hotel contains any asbestos, underground storage tanks, or any other
toxic or hazardous substance or materials, or other environmental hazards
as defined by applicable Laws.
If Buyer is not satisfied, for any reason determined in its sole discretion,
with the results of its due diligence investigation, or if for no reason, Buyer
may terminate this Agreement by written notice to Seller and Escrow Agent
delivered on or before the Feasibility Expiration Date. Buyer's failure to
timely deliver written notice of termination on or before the Feasibility
Expiration Date shall be deemed Buyer's election to proceed with this Agreement.
Upon such termination Buyer shall be entitled to the return of the Earnest Money
and thereafter, except as provided in Paragraphs 7 and 21, neither party shall
have any further rights or obligations hereunder. Buyer's right to conduct any
inspection of the Assets shall be governed by the provisions of Paragraph 7
below.
(b) Conditions to Buyer's Obligations. Buyer's obligation to purchase the
Assets shall be subject to the following further conditions precedent:
(i) Buyer's Mortgage. A first mortgage loan with respect to all of the
Affiliated Sales Agreements aggregating not less than Thirty-Six Million
Dollars ($36,000,000) under terms and conditions acceptable to Purchaser;
(ii) Appraisals. Appraisals on the Hotels and those hotels subject of
the Affiliated Sales Agreements aggregating not less than Forty-Two Million
Five Hundred Thousand Dollars ($42,500,000);
(iii) PIP Reports. "PIP" reports approved by Holiday Inn and Comfort
Inn acceptable to Buyer in an aggregate amount for the Hotel and those
hotels subject to the Affiliated Sales Agreements not to exceed Two Million
Five Hundred Thousand Dollars ($2,500,000);
(iv) Franchisor Approval. Approval of Buyer as a franchisee by
Franchisor;
(v) Title Insurance. Receipt by Buyer of an ALTA Owner's Title
Insurance Policy together with any agreed endorsements;
<PAGE>
(vi) Management Agreement. Execution of a management agreement between
Buyer and Sellers (or affiliates of Sellers) in the form of Exhibit "A"
hereto (the "Management Agreement") which will facilitate the prompt
transfer of liquor permits and related operating licenses and which will
provide for the uninterrupted operation of the Hotels' food and beverage
business while and until the necessary licenses and permits are secured by
Buyer; and
(vii) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(viii) Closing of Concurrent Escrows. The purchase and sale
transactions that are the subject of the Concurrent Escrows shall be
consummated in accordance with the respective terms and conditions thereof
on the Closing Date concurrently with the closing of the Escrow and
consummation of the transaction contemplated by this Agreement.
6. SELLER'S CONTINGENCIES AND COVENANTS.
(a) Seller's Contingencies. The following are conditions precedent to
Seller's obligation to sell the Assets:
(i) Buyer's Covenants . All covenants of Buyer shall have been
fulfilled by Buyer in timely fashion or waived by Seller;
(ii) Closing of Concurrent Escrows. The purchase and sale transactions
that are the subject of the Concurrent Escrows shall be consummated in
accordance with the respective terms and conditions thereof on the Closing
Date concurrently with the closing of the Escrow and consummation of the
transaction contemplated by this Agreement;
(iii) Truth of Representations. All of Buyer's representations and
warranties contained in or made pursuant to this Agreement shall have been
true and correct when made and shall be true and correct as of the Closing
Date;
(iv) Franchisor Consent. Consent to the consummation of the
transaction contemplated by this Agreement shall have been obtained from
Franchisor; and
(v) Release. Release of Sellers, by Franchisor, of any future
responsibility or liability to the Franchisor for termination or transfer
fees, or for actions or events occurring after the Closing Date (the
"Franchisor Release"); provided, however, Seller shall remain liable for
all amounts due and owing to Franchisor for activities of Seller prior to
the Closing Date.
(vi) Consulting Agreement. Buyer entering into a consulting agreement
with The Cornerstone Company, in the form of Exhibit "B" hereto (the
"Consulting Agreement").
(b) Covenants.
<PAGE>
(i) Maintenance of the Assets. From and after the date hereof to the
Closing Date, Seller shall: (A) cause the Hotel to be maintained and
operated in compliance with all Laws, in accordance with its current
standards and consistent with its past operating procedures for the Hotel,
shall maintain present services, shall maintain sufficient Food and
Beverage Inventory, and Operating Supplies for the proper management,
maintenance, operation and servicing of the Hotel and shall continue to
market the Hotel and to accept reservations and group bookings at its
currently established rates therefor; (B) not sell or otherwise dispose of
any significant items of Personalty (other than Food and Beverage Inventory
and Operating Supplies in connection with the ordinary course operation or
maintenance of the Property) unless replaced with an item of like value,
quality and utility; (C) not enter into any service, maintenance,
landscaping, operating, repair, equipment lease, employment, management,
leasing or other similar contract or agreement relating to the operation or
maintenance of the Hotel, except for those entered into in the ordinary
course of business and which are cancelable upon not more than thirty (30)
days prior notice or in the event of a sale of the Hotel; and (D) maintain
in full force and effect all liability and casualty insurance currently in
effect. The insurance currently in effect is described in Exhibit F. Seller
shall timely perform all its obligations under all Contracts (including,
without limitation, the Franchise Agreement), including, without
limitation, the payment of all bills, charges, invoices, salaries,
benefits, and other expenses arising in connection with the Hotel prior to
the Closing Date.
(ii) Permits and Approvals. Seller shall cooperate with Buyer in
obtaining all Permits and Approvals required for Buyer's intended use and
operation of the Hotel and shall not seek or acquiesce in any amendment to
any of the existing Permits and Approvals or any change in the present
zoning classification of the Real Property which would alter the present
permitted uses of the Real Property.
(iii) Notification To Existing Employees. Prior to Closing, Seller
will notify its employees at the Hotel of the pending sale in writing, the
date the sale will be effective and the fact that Seller, as owner of the
liquor license at the Hotel, will continue to be the employer at the Hotel
until the liquor license for the Hotel transfers to Buyer's Permitted
Transferee or its Agent or Buyer's Permitted Transferee or its Agent
obtains its own liquor permit, whichever first occurs. Such notice shall
further inform the employees that, upon the transfer of the liquor license
or Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license, whichever first occurs, said employees will be offered an
opportunity to submit applications for employment to Buyer's Permitted
Transferee or its Agent, and that Buyer's Permitted Transferee or its Agent
shall employ those individuals who meet certain employment criteria to be
determined at the sole discretion of Buyer's Permitted Transferee or its
Agent.
(iv) Seller's Obligations Concerning Its Employees. On the earlier of
the date of transfer of the liquor license or Buyer's Permitted
Transferee's or its Agent's receipt of its own liquor license, or as soon
thereafter as required by law, Seller shall pay to all employees receiving
notice of the sale under Section 6(b)(iii) above the full amount of wages
earned and other benefits accrued as of such date (including the entire
amount of all vacation accruals) or the last day an employee worked if
employee is no longer employed on the date set forth above and shall remain
fully liable for any related payroll expenses, severance pay, unfair labor
practice
<PAGE>
claims, employment discrimination charges and other employee claims
relating to any period prior to the transfer of the liquor license or
Buyer's Permitted Transferee's or its Agent's receipt of its own liquor
license, whichever first occurs. After the occurrence of the earlier of the
events set forth above in this Subsection (iv), Seller shall transfer to
Buyer's Permitted Transferee or its Agent, the records of all employees who
submit applications or otherwise request to continue their employment
relationship with the Hotel if each such employee making application has
first executed a Release/Consent to Transfer Records form which has been
provided to Seller.
(v) Franchise Transfer. Promptly following the date of this Agreement,
Seller shall notify Franchisor of the sale contemplated by this Agreement.
Seller shall use its best efforts to ascertain, and provide written notice
thereof to Buyer prior to the Feasibility Expiration Date, the specific
requirements (including the PIP) of Franchisor to obtaining its consent to
the sale contemplated hereby and allowing the Franchise Agreement to be
assigned to Buyer. It is contemplated that Buyer's inspection and the PIP
requirements will result in no more than $2,500,000 of improvements being
required to be made to the Hotel and those hotels which are the subject of
the Affiliated Sale Agreements (the "PIP Requirements").
The parties acknowledge that in order to obtain from the Franchisor a Franchise
Agreement for the Hotel, a Franchise Fee of $182,500 shall be due and owing to
the Franchisor, which Franchise Fee Seller agrees to pay.
The parties agree that the cost to satisfy the PIP Requirements for this Hotel
is estimated to be $904,000, which cost Seller agrees to pay, but only on the
condition to the extent that, at the time of Closing of this sale transaction, a
separate escrow account is established from Seller's gross sales proceeds in
such amount (the "PIP Escrow"). The PIP Escrow funds shall be used solely and
exclusively for the purpose of paying the costs of completing the PIP
Requirements, and Seller shall have absolutely no right to claim any right,
title or interest to the PIP Escrow other than for the purpose of paying for the
cost of completing PIP Requirements. It is agreed that responsibility for taking
all actions required in order to complete the PIP Requirements shall be as set
forth in the Franchise Agreement, and in order to comply with the terms of
Buyer's mortgage financing, Amresco Capital, L.P. ("Amresco") will hold the PIP
Escrow in a non-interest bearing account. Release of funds from the PIP Escrow
shall be subject to the requirements and consent of Amresco and shall be pledged
to Amresco as security for the Buyer's Mortgage loan to Amresco and to insure
completion of the PIP Requirements. If funds remain in the PIP Escrow after
completion of the PIP Requirements (which is not anticipated), such excess funds
shall be paid to Amresco as a principal payment on the Buyer's mortgage loan. If
the PIP Escrow is insufficient to complete the PIP Requirements, Seller shall
have absolutely no responsibility to fund such deficit. Because third parties
shall control and supervise the completion of the PIP Requirements, Seller shall
have no liability or responsibility therefor, and makes no representation or
warranty that the PIP Requirements shall be completed in a workmanlike manner,
or otherwise, and/or can be completed at a cost equal to the amount of the PIP
Escrow.
<PAGE>
7. INSPECTIONS.
(a) Entry and Investigation. Between the date hereof and the Feasibility
Expiration Date, Seller grants to Buyer and its employees, agents, contractors
and consultants (collectively, "Consultants"), a license to enter the Hotel at
reasonable times for the purpose of performing certain inspections on or
concerning the Hotel, which inspections may include: (i) research regarding the
Property and surrounding parcels as is generally conducted in a Level I or Phase
I environmental audit, surveying the Real Property, and conducting other
inspections of the Real Property and the physical condition of the Improvements
and any furniture, fixtures, equipment and machinery located therein; (ii) the
performance of engineering or structural investigations and tests of the Hotel
and any improvements thereon as may be approved by Seller; (iii) reviewing the
books and records of the Hotel; and (iv) meeting with and interviewing
Franchisor and other persons involved in property management of the Hotel
(collectively, the "Investigation"). The Investigation and all related
activities or events shall be limited and conducted as herein required, all at
Buyer's sole risk, cost and expense. Seller shall incur no cost or expense in
connection with the Investigation or any related activities or events.
(b) No Interference. The Investigation shall be diligently performed and
prosecuted to completion so as to minimize interference with the operation or
use of the Hotel by Seller and its employees, agents and contractors and any
hotel guests or other invitees and licensees. Any entry and any Investigation by
Buyer or its Consultants shall be subject to and conducted in accordance with
all Contracts and the Franchise Agreement. Because of Seller's concern with any
interference with the operation of the Hotel, Seller reserves the right to
impose reasonable restrictions on time and frequency of Buyer's entry, provided
such restrictions shall not interfere with Buyer's ability to complete the
Investigation prior to the Feasibility Expiration Date. All persons who enter
the Hotel shall do so at their own risk. Buyer acknowledges and agrees that
Buyer and its Consultants shall cooperate with and comply with all directions of
Seller and its Consultants.
8. TITLE INSURANCE POLICY. At the Closing, and as a condition to Buyer's
obligation to close, Escrow Agent shall deliver to Buyer an extended coverage
owner's policy of title insurance (ALTA Form) issued by Title Agent, or the
unconditional commitment of Title Agent, to issue such policy, insuring Buyer in
the amount of the portion of the Purchase Price allocated to the Real Property
as set forth on Schedule "F" that title to the Real Property has vested in Buyer
free and clear of all liens and encumbrances other than the Permitted Title
Exceptions and such other matters as are approved by Buyer in writing, together
with such endorsements and such reinsurance (with direct access) as is requested
by Buyer (the "Title Policy"). The Title Policy shall provide full coverage
against mechanics' and materialmen's liens arising out of the construction,
repair or alteration of any of the Improvements. Buyer and Seller shall each be
responsible for one-half of the title insurance premium. Buyer shall be
responsible for the cost of any endorsements and reinsurance requested by Buyer.
<PAGE>
9. THE ESCROW AND CLOSING.
(a) Escrow Instructions. Buyer and Seller shall establish the Escrow with
Escrow Agent to facilitate the consummation of the transactions contemplated by
this Agreement. Buyer and Seller shall provide Escrow Agent with instructions
consistent with this Agreement and each agrees to execute such additional
instructions as may be reasonably requested by Escrow Agent in connection
herewith. If any conflict or inconsistency exists between the provisions of any
instructions provided to Escrow Agent and this Agreement or any deed, instrument
or document executed or delivered in connection with the transaction
contemplated hereby, the provisions of this Agreement, or such deed, instrument
or document shall control in resolving such conflict or inconsistency. No
provision of any such instructions shall excuse any performance by either party
at the times provided in this Agreement, extend the Closing Date provided for
herein or provide either party hereto with any grace period not provided in this
Agreement, and any such provision in such instructions shall be deleted.
(b) Closing. The Closing shall occur through the Escrow and shall take
place on the Closing Date at Escrow Agent's office at 10:00 a.m., or such other
place or time as the parties may mutually agree in writing. Subject to the
conditions and contingencies set forth herein, the Closing shall take place not
later than thirty (30) days after the Feasibility Expiration Date, provided that
the Closing Date may be extended, at the Buyer's option, by up to two (2)
extensions of thirty (30) days each upon deposit by the Purchaser into the
Escrow of additional non-refundable deposits in the amount of Fifty Thousand Two
Hundred Fifty-One and No/100 Dollars ($52,251.00) each. Any such additional
deposits into the Escrow shall be paid to Seller at the Closing and applied as a
credit against Buyer's payment of the Purchase Price. Interest on such
additional deposits shall accrue for the benefit of and be payable as the
Earnest Money.
(c) Action at the Closing by Seller. At or prior to the Closing,
Corporation and Partnership shall each, as applicable, deliver or cause to be
delivered to Buyer, or to Escrow Agent for the account of Buyer, all of the
following, and with respect to any instruments referred to below, all such
instruments shall be dated as of the Closing Date, fully and duly executed by
Seller and, if appropriate, acknowledged:
(i) Deed. A Statutory Form Limited Warranty Deed from Partnership
conveying the Real Property to Buyer in the form of Exhibit "C" hereto;
(ii) Affidavit. An Affidavit of Non-Foreign Person from Partnership as
contemplated by Federal Code Section 1445, in the form of Exhibit "D"
hereto;
(iii) Assignment and Assumption. An Assignment and Assumption of
Contracts from Corporation and Partnership (excluding the Franchise
Agreement) in the form of Exhibit "E" hereto with respect to those
Contracts to which Buyer has elected to accept;
(iv) Assignment of Intangible Property. An Assignment of the
Intangible Property from Corporation and Partnership in the form of Exhibit
"F" hereto;
<PAGE>
(v) Bill of Sale. A Bill of Sale from Corporation and partnership
relating to the Personalty in the form of Exhibit "G" hereto;
(vi) Assignment and Assumption of Franchise Agreement. An Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H";
(vii) Certificate of Good Standing. A Certificate of Good Standing of
the Corporation issued by the Secretary of State of Ohio dated no more than
thirty (30) days prior to the Closing Date.
(viii) Keys. All keys and/or means to operate all locks and alarms for
the Property;
(ix) Contracts. The originals of the Contracts and the Documents to
the extent in Seller's possession and not previously delivered to Buyer.
(x) The Management Agreement. The Management Agreement.
(xi) The Consulting Agreement. The Consulting Agreement.
(xii) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Seller, and the individual
signing on behalf of Seller, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(xiii) Seller's Acknowledgment. A written acknowledgment of Seller's
approval of Escrow Agent's final settlement statement setting forth all
prorations, and adjustments made in accordance with the provisions of this
Agreement;
(xiv) Lien Releases. Such documentation as is reasonably satisfactory
to Buyer and Escrow Agent to cause all of the Assets to be released from
any lien, financing statement, or other encumbrance which is not a
Permitted Exception; and
(xv) Further Documentation. Such other instruments or documents as are
reasonably necessary to fulfill the covenants and obligations to be
performed by Seller pursuant to this Agreement, specifically including,
without limitation, all properly endorsed certificates of title necessary
to transfer all motor vehicles and such other documents necessary to
transfer all other licenses and permits.
(d) Action at the Closing by Buyer. At or prior to the Closing, Buyer shall
deliver or cause to be delivered to Buyer, or to Escrow Agent for the account of
Seller all of the following, and with respect to any instruments or documents
referred to below, all such items shall be dated as of the Closing Date, fully
and duly executed by Buyer and, if appropriate, acknowledged:
<PAGE>
(i) Purchase Price. All funds necessary to pay the Purchase Price
together with all closing costs and applicable prorations payable by Buyer
as required by the provisions of this Agreement;
(ii) Assignment and Assumption. The Assignment and Assumption of
Contracts from Corporation and Partnership and the Assignment (excluding
the Franchise Agreement) in the form of Exhibit "E" hereto;
(iii) Assignment and Assumption of Franchise Agreement. The Assignment
and Assumption of the Franchise Agreement (if required) in the form of
Exhibit "H" hereto;
(iv) The Management Agreement. The Management Agreement;
(v) The Consulting Agreement. The Consulting Agreement;
(vi) Due Authorization. Such documentation as is reasonably
satisfactory to Escrow Agent evidencing that Buyer, and the individual
signing on behalf of Buyer, has the power and authority to execute and
deliver this Agreement and all documents and instruments required or
contemplated hereby;
(vii) Buyer's Acknowledgment. A written acknowledgment of Buyer's
approval of Escrow Agent's final settlement statement setting forth all
prorations and adjustments made in accordance with the provisions of this
Agreement; and
(viii) Further Documentation. Such other funds, instruments, or
documents as are reasonably necessary to fulfill the covenants and
obligations to be performed by Buyer pursuant to this Agreement.
(e) Closing Costs. Buyer and Seller shall each be responsible for its own
legal fees and the costs of its respective legal counsel. All documentary
stamps, transfer taxes, sales taxes and all other similar taxes, together with
the cost of the Survey shall be paid by Seller. The Escrow fee payable to Escrow
Agent in respect of the conveyance and transfer of the Assets to Buyer shall be
shared equally by the parties. All other fees, recording costs, charges or
expenses incidental to the sale, transfer and assignment of the Assets to Buyer
shall, except as otherwise herein expressly provided, be paid according to the
standard custom and practice pertaining to real estate transactions consummated
in Summit County, Ohio.
(f) Pre-Closing Settlement Statement. At least three (3) business days
prior to the Closing, Buyer and Seller shall provide to Escrow Agent as much
information as is then available to enable Escrow Agent to prepare a pre-audit
settlement statement setting forth in detail all prorations and adjustments
contemplated by this Agreement based on the information available to Escrow
Agent. Escrow Agent shall provide such pre-audit settlement statement to Buyer
and Seller and their respective legal counsel no later than two (2) business
days prior to the Closing and shall include therewith an indication of any
specific information remaining to be provided to Escrow Agent by Buyer and
Seller to enable Escrow Agent to show all final
<PAGE>
prorations and adjustments calculated by Buyer and Seller, and required by this
Agreement. Such statement shall be approved by both Buyer and Seller in writing
prior to Closing, such approval to be indicated by the parties signatures
thereon.
(g) Transfer of Guest Property in Safe Keeping.
(i) Baggage. All baggage or other property of guests of the Property
which has been checked with or left in the care of Seller and remains in
Seller's care on the Closing Date shall be inventoried and tagged jointly
by Seller and Buyer.
(ii) Safe Deposit Boxes. As of the Closing Date, Seller and Buyer
shall prepare a list of all guests of the Property maintaining items in
safe deposit boxes. Buyer shall not be liable or responsible for any items
contained in any safe deposit box not specified on such list or specified
on such list and not included in safe deposit boxes, and Seller agrees to
indemnify and hold harmless Buyer from and against any such liability or
responsibility.
10. APPORTIONMENTS.
(a) Closing Adjustments and Proration of Taxes, Rents, and Other Costs.
(i) Taxes. Real estate taxes, personal property taxes and any general
or special assessments in respect of the Assets shall be prorated as of the
Closing Date such that Seller shall be responsible for all taxes and
assessments that are allocable to any period prior to the Closing Date and
Buyer shall be responsible for all taxes and assessments that are allocable
to any period from and after the Closing Date. If the actual amount of
taxes, assessments or other amounts to be prorated for the year in which
the Closing occurs is not known as of the Closing Date, the proration shall
be based on the parties' reasonable estimates of such taxes, assessments
and other amounts. Notwithstanding any other provision of this Agreement to
the contrary, if Buyer shall become liable after the Closing for payment of
any taxes or assessments assessed against the Assets for any period of time
prior to the Closing Date, Seller shall immediately pay to Buyer on demand
an amount equal to such tax assessment in accordance with subparagraph
10(c) below.
(ii) Deposits. At the Closing, Buyer shall be charged for all house
banks and all security or other deposits paid by Seller to third parties
for which the right to the return of any such sums is transferred to Buyer
at the Closing.
Inventory and Supplies.
[INTENTIONALLY OMITTED]
(iv) Other Items. The following additional prorations and adjustments
shall occur as of the Closing and, prior to the Closing Date, Seller shall
provide all information to Buyer required to calculate such prorations and
adjustments; representatives of Buyer and Seller
<PAGE>
shall together make such calculations and provide Escrow Agent with the
results of such prorations and adjustments.
(A) All petty cash and cash in cash registers and vending
machines as of 11:59 p.m. on the day preceding the Closing Date shall
remain the property of Seller, and if not paid to Seller at or before
the Closing shall be charged to Buyer.
(B) All receipts from guest room rentals and Hotel services prior
to the Closing Date shall belong to Seller. One half of the guest room
rentals and Hotel services, whether in cash or accounts receivable,
arising from occupancy for the entire night beginning on the day
preceding the Closing Date shall be credited to each of Buyer and
Seller. All receipts thereafter shall belong to Buyer. All prepaid
rentals, room rental deposits and all other deposits for advance
registration, banquets, or future services paid to Seller prior to the
Closing Date shall be credited to Buyer.
(C) All receipts and expenses from restaurant and bar operations
concluded prior to 11:59 p.m. on the day preceding the Closing Date
shall belong to, and be paid by, Seller.
(D) All accounts receivable and credit card claims for goods and
services furnished prior to 11:59 p.m. on the day preceding the
Closing Date shall remain the property of Seller and, to the extent
Buyer receives any payments on account thereof after Closing, Buyer
shall immediately remit such amount to Seller.
(E) All accounts payable owing for goods and services furnished
prior to 11:59 p.m. on the day preceding the Closing Date shall be
paid by Seller. Buyer shall assume, and after the Closing, pay, all
accounts payable relating to goods and services (including
advertising) for which orders have been placed, but as of 11:59 p.m.
on the day preceding the Closing Date, such goods and services have
not yet been delivered or provided so long as such goods and services
are of the type, quality and quantity used by Seller in the ordinary
course of operating the Hotel. Prior to the Closing, Seller shall
provide to Buyer a list of all accounts payable for which the goods
and services have not yet been delivered or provided, and Buyer and
Seller shall determine whether any such accounts payable should remain
the obligation of Seller, and for which Buyer shall receive a credit
at the Closing in the amount of all such payables which do not relate
to goods and services provided to Seller in the ordinary course of
operating the Hotel.
(v) Employee Wages and Benefits. All employee benefits, wages and
other compensation shall be the sole responsibility of Seller. Seller shall
make all such payments and/or post such bonds as are required by law or
necessary to ensure that all such liabilities will be satisfied.
(vi) Remittance. Buyer and Seller each agree to promptly remit to the
other any monies received by such party which is due to the other in
accordance with this Agreement.
<PAGE>
All prorations shall be based on the actual number of days in the calendar
month in which the Closing occurs.
(b) Utility and Maintenance Charges. Seller shall pay or cause to be paid
(i) all unpaid charges for water, electricity, gas, trash removal, sewer,
telephone or other utility services which are furnished to or in connection with
the Hotel prior to the Closing Date and (ii) all unpaid charges for landscaping
and all other maintenance services which are furnished to or in connection with
the Hotel prior to the Closing Date. Not less than three (3) days prior to
Closing, Seller and Buyer shall notify and instruct the suppliers of the
foregoing utility services to read the meters for such services as of the day
prior to the Closing Date and to render to Seller a final statement for all
charges for utility services furnished to the Property prior to the Closing
Date. If the final meter readings cannot be obtained, Buyer and Seller shall
prorate such charges based upon the particular utility company's billing for the
immediately preceding billing period determined on a per diem basis based on the
actual number of days in the billing period. Buyer shall receive a credit for
the allocated amount of such charges applicable to the period to and including
the day preceding the Closing Date and, following the Closing, Buyer shall be
responsible for, and shall pay, all billings received from the utility company
for the current and future billing periods.
(c) Adjustments to Prorations. After the Closing, the parties shall from
time to time, as soon as is practicable after accurate information becomes
available, recalculate and reapportion any of the items subject to proration or
apportionment under this Paragraph 10: (i) which were not prorated and
apportioned at the Closing because of the unavailability of the information
necessary to compute such proration, or (ii) which were prorated or apportioned
at the Closing based upon estimated or incomplete information, or (iii) for
which any errors or omissions in computing prorations at the Closing are
discovered subsequent thereto, and thereafter the proper party shall be
reimbursed based on the results of such recalculation and reapportionment.
Unless otherwise specified herein, all such reimbursements shall be made on or
before thirty (30) days after receipt of notice of the amount due. Any such
reimbursements not timely paid shall bear interest at a per annum rate equal to
ten percent (10%) from the due date until all such unpaid sums together with all
interest accrued thereon is paid if payment is not made within ten (10) days
after receipt of a bill therefor.
11. INDEMNIFICATION.
(a) Buyer shall indemnify, defend and hold harmless Seller, its officers,
directors, agents, employees, partners and/or shareholders for, from and against
any and all claims, liabilities, damages, losses, causes of action, and
obligations and expenses (including reasonable attorneys' fees) incurred as a
result of, or arising in connection with: (i) physical damage to the Assets or
personal injury arising out of any tests, inspections, and studies of the Assets
performed by Buyer, its agents, employees or contractors, or the entry of Buyer
or its agents, employees or contractors onto the Real Property for any reason
prior to the Closing Date; (ii) any acts or omissions of Buyer and its agents,
employees or contractors pertaining to the Hotel occurring or arising out of
events occurring on or after the Closing Date or any liability or obligation
required to be assumed by Buyer hereunder or which accrues on or after the
Closing
<PAGE>
Date; and (iii) any misrepresentation or breach of any warranty or covenant made
herein or in any document, certificate or exhibit given or delivered pursuant
hereto.
(b) Notwithstanding any other provision of this Agreement, Buyer shall
indemnify, defend and hold harmless Seller, its directors, officers, employees,
partners and/or shareholders from and against any Claim asserted against,
resulting to, imposed upon or incurred by any such person, directly or
indirectly, by reason of or resulting from any claim brought by any employee of
Seller at the Hotel as of the date of transfer of the liquor license or Buyer's
Permitted Transferee's or its Agent's receipt of its own liquor license and/or
any unit of local government (as defined in 29 U.S.C. ss. 2101(a)(7)) alleging a
violation by Seller of the Worker Adjustment and Retraining Notification Act
(WARN) 29 U.S.C. ss.ss. 2101 et seq.
(c) Seller shall indemnify, defend, and hold harmless Buyer, its owners,
officers, directors, agents, employees, partners and/or shareholders for, from
and against any and all claims, liabilities, damages, losses, causes of action,
and obligations and expenses (including reasonable attorneys' fees) incurred as
a result of, or arising in connection with: (i) any acts or omissions of Seller
and its agents, employees and contractors pertaining to the Assets occurring or
arising out of events occurring prior to the Closing Date or any liability or
obligation of Seller which Buyer is not required to assume hereunder or which
accrues prior to the Closing, and (ii) any misrepresentation or breach of any
warranty or covenant made herein or in any document, certificate or exhibit
given or delivered pursuant hereto. The obligation set forth in this paragraph
shall survive the Closing and shall be a continuing obligation of Seller and its
successors and assigns.
12. POSSESSION. Seller shall deliver possession of the Assets to Buyer at the
Closing, subject to the Permitted Title Exceptions, provided, however, that
Seller shall afford authorized representatives of Buyer reasonable access to the
Hotel, subject to Paragraph 7 above, for the purposes of satisfying Buyer with
respect to the representations, warranties, and covenants of Seller contained
herein and with respect to satisfaction of any conditions precedent to the
Closing contained herein.
13. TRANSFER OF LIQUOR LICENSE. At the Closing, Buyer's designee (the
"Operator") and Seller shall enter into and deliver a management agreement (the
"Management Agreement") in form of Exhibit "A" hereto providing for the
Operator's operation of the Hotel as Seller's agent under Seller's liquor
permit. The term of such management agreement shall be until Operator has
obtained a liquor permit for the operation of the Hotel from the State of Ohio
or transferred Seller's liquor license to Operator. During such term, the
Operator shall pay to the Seller all employee's wages, including the employer's
portion of payroll taxes thereon and union benefit contributions, and all sales
tax obligations with respect to the operation of the Hotel during such term. The
Seller shall process the Hotel payroll and pay the employees thereof under its
workers compensation account number. The Seller shall also file all sales tax
returns under the Seller's vendors license number. In consideration of Seller's
processing of such payments as aforesaid, Operator shall pay Seller a fee of
$250.00 per month during the term of such management agreement.
<PAGE>
14. REPRESENTATIONS AND WARRANTIES.
(a) Buyer. Buyer acknowledges, covenants, represents and warrants to Seller
that the following are true as of the date of this Agreement and, in entering
into this Agreement, Seller is relying upon the following:
(i) Existence. Buyer is a validly existing corporation under the law
of the state of its formation and in good standing under the law of the
State of Delaware, and Buyer has the full right, authority and power to
enter into this Agreement, to consummate the transactions contemplated
herein and to perform its obligations hereunder and under those documents
and instruments to be executed by it at the Closing, and each of the
individuals executing this Agreement on behalf of Buyer is authorized to do
so, and this Agreement constitutes a valid and legally binding obligation
of Buyer enforceable against Buyer in accordance with its terms.
(ii) Due Authorization. Buyer's execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance of Buyer's obligations under the instruments required to be
delivered by Buyer at the Closing, do not and will not result in any
violation of, or default under, any term or provision of any agreement,
instrument, mortgage, loan agreement or similar document to which Buyer is
a party or by which Buyer is bound.
(iii) Threatened Proceedings. There is no litigation, investigation or
proceeding pending or, to the best of Buyer's knowledge, contemplated or
threatened against Buyer which would impair or adversely affect Buyer's
ability to perform its obligations under this Agreement or any other
instrument or document related hereto.
(b) Partnership. Partnership represents and warrants to Buyer that the
following are true as of the date of this Agreement, and in entering into this
Agreement Buyer is relying upon the following:
(i) Existence. Partnership is a duly formed and validly existing
partnership under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Partnership has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations hereunder
and under those documents and instruments to be executed by it at the
Closing, and each of the individuals executing this Agreement on behalf of
Partnership is authorized to do so, and this Agreement constitutes a valid
and legally binding obligation of Partnership enforceable against
Partnership in accordance with its terms.
(ii) Due Authorization. Partnership's execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
the performance of Partnership's obligations under the instruments required
to be delivered by Partnership at the Closing, do not and will not result
in any violation of or default under, any term or provision of any
agreement, instrument, mortgage, loan agreement or similar document to
which Partnership is a party or by which Partnership is bound.
<PAGE>
(iii) Threatened Proceedings. Other than as set forth in Schedule "G"
hereto (the "Disclosure Statement"), there is no pending or, to the best of
Partnership's knowledge, threatened judicial, municipal or administrative
proceedings affecting the Hotel or in which Partnership is or will be a
party by reason of Partnership's ownership of the Hotel or any portion
thereof, including, without limitation, proceedings for or involving
alleged building code violations, or personal injuries or property damage
alleged to have occurred on the Hotel or by reason of the condition or use
of the Hotel. The Disclosure Statement contains an accurate summary of the
status of all matters shown thereon. If any proceeding of the character
described in this subparagraph is initiated prior to closing, Partnership
shall promptly advise Buyer in writing.
(iv) Liabilities. That except for: (a) debts, liabilities and
obligations for which provision is made herein for proration or other
adjustments as of the Closing Date; (b) debts and obligations incurred by
Seller in the ordinary course of business which Seller agrees to pay on or
before the Closing Date except as provided herein; (c) debts, liabilities
and obligations to be assumed by Purchaser provided for herein; (d) debts
and obligations for goods which are purchased prior to the Closing Date but
remain the property of Purchaser thereafter, there will be no debts,
liabilities or obligations of Seller with respect to the Hotels or the
Property.
(v) Foreign Person. Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1954 as
amended.
(vi) Compliance With Laws. The Hotel properties are all in material
compliance with all Federal, State, Local (including local sewage district)
laws, rules, regulations ordinances, codes and orders governing,
establishing, limiting or otherwise affecting the discharge or disposal of
air pollutants, water pollutants, process wastewater or solid and hazardous
wastes. There are no pending or to Seller's knowledge threatened actions or
proceedings by the local municipality, sewage districts, state agencies
having jurisdiction over such matters, the U.S. Environmental Protection
Agency or any other governmental entity and to Seller's knowledge there is
no basis for any such action or proceedings. Seller has never disposed of
any noxious, toxic, solid or hazardous waste on the Real Property. Further,
Seller warrants and represents, to the best of its knowledge, that the Real
Property has not been used as a landfill, dump site, waste disposal area or
for any similar usage, and no underground storage tanks, petroleum products
or solid hazardous or toxic materials, as such terms are used and defined
under applicable local, state and federal environmental regulations, exist
on the surface or under the subsurface of the four properties or in any
surface or ground waters on or under the four properties.
(vii) Inventory Levels. As of the Closing Date, the inventory of
Operating Equipment and Operating Supplies will be in amounts which are at
least equal to the normal and customary levels of such inventories
historically maintained by the Hotel during the month in which the Closing
occurs, and all rooms will be consistently furnished and equipped with
items in good condition and repair (ordinary wear and tear expected).
<PAGE>
(viii) Known Latent Defects. That to the actual knowledge of the
managing partner of the Partnership, there are no material latent defects
affecting the Hotel.
(c) Corporation. Corporation represents and warrants to Buyer that the
following are true as of the date of this Agreement, and in entering into this
Agreement Buyer is relying upon the following:
(i) Existence. Corporation is a duly formed and validly existing
corporation under the law of the State of Ohio and is in good standing
under the law of the State of Ohio, and Corporation has the full right,
authority and power to enter into this Agreement, to consummate the
transaction contemplated herein and to perform its obligations hereunder
and under those documents and instruments to be executed by it at the
Closing, and each of the individuals executing this Agreement on behalf of
Corporation is authorized to do so, and this Agreement constitutes a valid
and legally binding obligation of Corporation enforceable against
Corporation in accordance with its terms.
(ii) Due Authorization. Corporation's execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby and
the performance of Corporation's obligations under the instruments required
to be delivered by Corporation at the Closing, do not and will not result
in any violation of, or default under, any term or provision of any
agreement, instrument, mortgage, loan agreement or similar document to
which Corporation is a party or by which Corporation is bound.
(iii) Threatened Proceedings. Other than as set forth in Exhibit "G"
hereto, there is no pending or, to the best of Corporation's knowledge,
threatened judicial, municipal or administrative proceedings affecting the
Hotel or in which Corporation is or will be a party by reason of
Corporation's ownership of the Hotel or any portion thereof, including,
without limitation, proceedings for or involving alleged building code
violations, or personal injuries or property damage alleged to have
occurred on the Hotel or by reason of the condition or use of the Hotel.
The Disclosure Statement contains an accurate summary of the status of all
matters shown thereon. If any proceeding of the character described in this
subparagraph is initiated prior to Closing, Corporation shall promptly
advise Buyer in writing.
(iv) Liquor Permit. The liquor permit issued by the State of Ohio for
the Hotel is in good standing, and all taxes related thereto have been
fully paid or adequately reserved by the Seller.
15. NOTICES. All notices or other communications required or provided to be sent
by either party or Escrow Agent shall be in writing and shall be sent by United
States Postal Service, postage prepaid or certified mail, return receipt
requested, or by any nationally known overnight delivery service, or by courier,
or in person (including by way of facsimile transmission). All notices shall be
deemed to have been given forty-eight (48) hours following deposit in the United
States Postal Service or upon personal delivery if sent by overnight delivery
service, courier or personally delivered. All notices shall be addressed to the
party at the address below:
<PAGE>
If to Seller:
Rockside Road Operating Corp.
c/o The Cornerstone Company
2857 Riviera Drive
Akron Ohio 44333-3415
Attention: Mr. Michael Gallucci, Jr. President
Fax No. (216) 867-2772
With a copy to:
Stark & Knoll Co., L.P.A.
1512 Ohio Edison Bldg.
76 S. Main Street
Akron, Ohio 44308
Attention: Thomas G. Knoll, Esq.
Fax No. (216) 376-6237
If to Buyer:
Janus American Group, Inc.
2300 Corporate Blvd., NW, Suite 232
Boca Raton, FL 33431
Attention: James E. Bishop
Fax No.: (516) 997-5331
With a copy to:
Janus American Group, Inc.
8534 East Kemper Road
Cincinnati, OH 45249-1709
Attention: Charles Thornton, Esq.
Fax No.: (513) 489-1955
Any address or name specified above may be changed by notice given to the
addressee by the other party in accordance with this Paragraph 15 The inability
to deliver because of a changed address of which no notice was given, or
rejection or other refusal to accept any notice, shall be deemed to be the
receipt of the notice as of the date of such inability to deliver or rejection
or refusal to accept. Any notice to be given by any party hereto may be given by
the counsel for such party. Any notice to be given to Escrow Agent shall be sent
to the address set forth in subparagraph 1(l) above.
16. SELLER'S REMEDIES. If Buyer shall breach any of the terms or provisions of
this Agreement or otherwise default hereunder after the Feasibility Expiration
Date, and as a result of such breach or default Buyer is unable to perform its
obligations at Closing and provided Seller
<PAGE>
has performed or tendered performance of all its obligations hereunder, Seller's
exclusive remedy shall be to retain the Earnest Money as liquidated damages as
provided in subparagraph 3(b) above. Nothing contained in this paragraph shall
limit or prevent Seller from enforcing Buyer's obligations and liabilities which
expressly survive a termination of this Agreement.
17. BUYER'S REMEDIES. If Seller breaches any of the terms or provisions of this
Agreement or otherwise defaults hereunder, in addition to all other rights and
remedies available at law or in equity, Buyer may (i) terminate this Agreement
and the Escrow by written notice to Seller and Escrow Agent, whereupon the
Earnest Money shall be immediately returned to Buyer; (ii) waive such default
and consummate the transaction contemplated hereby in accordance with the terms
hereof; or (iii) specifically enforce this Agreement. Nothing contained in this
paragraph shall limit or prevent Buyer from enforcing Seller's obligations and
liabilities which survive a termination of this Agreement.
18. CASUALTY; CONDEMNATION. Seller shall notify Buyer immediately of the
occurrence of any damage to or destruction of the Hotel, or any portion thereof,
or the institution or maintenance of any condemnation or similar proceedings
with respect to the Real Property or any portion thereof. In the event of any
damage to or destruction of any portion of the Hotel for which the cost to
repair exceeds $250,000, or if any such condemnation or other proceedings are
instituted or maintained, Buyer at its option either (i) may terminate this
Agreement, in which case the Earnest Money shall be returned to Buyer and
neither party shall have any further rights or obligations hereunder except as
provided in Paragraphs 7 and 21 or (ii) may consummate the purchase evidenced by
this Agreement. In all other events or if Buyer elects to consummate the
purchase pursuant to clause (ii) above, Buyer shall receive a credit at Closing
in an amount equal to (A) all insurance or condemnation proceeds collected by
Seller prior to the Closing, plus (B) Seller's deductible or self-insurance
limit or such lesser amount as is equal to the estimated cost to repair or
reconstruct those portions of the Property damaged or destroyed, and all rights
to all other insurance or condemnation proceeds arising out of such damage or
destruction or proceedings and not collected prior to the Closing, including any
business interruption and rental loss proceeds for any period after the Closing,
shall be assigned by Seller to Buyer as of the Closing.
19. COMMISSIONS. Seller has committed to pay a business brokerage fee to Ken F.
Seminatore of $120,500 for his services in connection with the transactions
represented by this Agreement and the Affiliated Sales Agreements. Buyer
warrants and represents to Seller that no other real estate sales or brokerage
commissions or like commissions are or may be due in connection with this
transaction as a result of Buyer's acts. Seller shall be solely responsible for
all commissions or like fees owing in connection with this transaction as a
result of its acts. Each party agrees to indemnify, defend and hold harmless the
other party from and against any claims by third parties made by or through the
acts of such party, for real estate or brokerage commissions, or a finders fee,
in connection with the transaction provided for herein, and all costs and
expenses incurred by the indemnitee in connection therewith including, but not
limited to, reasonable attorneys' fees. The indemnity provided for in this
paragraph shall survive the Closing or any earlier termination of this
Agreement.
<PAGE>
20. DISCLAIMER. Other than as expressly set forth herein, Seller hereby
specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to, or concerning (i) the nature and
condition of the Assets, including, without limitation, the water, soil and
geology or any other matter affecting the stability or integrity of the Real
Property or Improvements, and the suitability thereof and of the Assets for any
and all activities and uses which Buyer may elect to conduct thereon, and the
existence of any environmental hazards or conditions thereon (including the
presence of asbestos) or compliance with applicable Laws; (ii) the condition of
title to the Assets or the nature and extent of any right-of-way, lease,
possession, lien, encumbrance, license, reservation, condition or otherwise;
(iii) the compliance of the Assets or its operation with any covenants,
conditions, restrictions, or Laws; (iv) the profitability or losses or expenses
relating to the Assets and the businesses conducted in connection therewith; (v)
the existence, quality, nature, adequacy or physical condition of any utility
serving the Project; (vi) the zoning or other legal status of the Project; (vii)
the quality of any labor or materials relating in any way to the Assets; (viii)
the legal or tax consequences of this Agreement or its underlying transaction;
and (ix) the transferability of the Seller's rights under the Contracts. Buyer
acknowledges that prior to the Feasibility Expiration Date Seller will afford
Buyer the opportunity for full and complete investigations, examinations and
inspections of the Assets and all information to be delivered by Seller pursuant
to this Agreement and, other than as expressly set forth herein, Buyer is
relying solely on its own investigation and inspection of the Assets. Other than
as expressly set forth herein, or in subparagraph 14(b)(viii) hereof, the sale
of the Assets as provided for herein is made on an "AS IS" and "WHERE IS" basis,
and Buyer expressly acknowledges that, in consideration of the agreements of
Seller herein, other than as expressly set forth herein, Seller makes no
warranty or representation, express or implied, or arising by operation of law,
including, but not limited to, any warranty of condition, habitability,
merchantability, suitability or fitness for a particular use or purpose, in
respect of all or any of the Assets.
21. CONFIDENTIALITY AND RETURN OF DOCUMENTS. Buyer agrees that, until after the
Closing, all documentation or information delivered to Buyer or its
representatives or agents by Seller or Seller's representatives or agents
pertaining to the Assets shall be kept strictly confidential and will not be
used by Buyer or its representatives or agents, directly or indirectly, for any
purpose other than evaluating the Assets. Neither party shall release, or cause
or permit to be released any press notices, publicity (oral or written) or
advertising or otherwise announce or disclose, or cause or permit to be
announced or disclosed, in any manner whatsoever, except as may be required by
applicable law or regulation, the terms, conditions or substance of the
transaction contemplated herein without first obtaining the express written
consent of the other party hereto. It is understood that the foregoing shall
not, however, preclude Buyer from discussing the substance or any relevant
details of the transaction contemplated in this Agreement, nor disclosing the
terms of this Agreement, or the existence thereof, to Buyer's accountants,
attorneys and Consultants engaged in connection with this transaction, or such
other persons or entities to which disclosure is required by Law. If the sale of
the Assets contemplated herein is not consummated, each party shall promptly
return to the other party all information, documents, and other items received
from such other party in connection herewith. This provision shall survive the
Closing or any termination of this Agreement.
<PAGE>
22. WAIVER. The exercise or waiver of the performance by a party of any
obligation of the other party under this Agreement shall only be effective if
evidenced by a written statement signed by the party so exercising. No delay in
exercising any right or remedy shall constitute a waiver thereof and no waiver
by Seller or Buyer of the breach of any covenant of this Agreement shall be
construed as a waiver of any preceding or succeeding breach of the same or any
other covenant or condition of this Agreement.
23. TIME PERIODS. If the time for performance of any obligation hereunder
expires on a Saturday, Sunday or legal holiday, the time for performance shall
be extended to the next day which is not a Saturday, Sunday or legal holiday.
24. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. All
covenants, agreements, representations and warranties set forth in this
Agreement shall survive the Closing and shall not merge into the deed or other
instrument executed or delivered in connection with the transaction contemplated
hereby. The representations and warranties of Partnership contained in Paragraph
14.(b) and of Corporation contained in Paragraph 14.(c) shall survive the
Closing until the date which is one (1) year following the Closing Date except
for matters disclosed or actually known to Buyer prior to the Closing.
25. MODIFICATION OF AGREEMENT. No modification of this Agreement shall be deemed
effective unless in writing and signed by the parties hereto.
26. FURTHER INSTRUMENTS. Each party, promptly upon the request of the other,
shall execute and have acknowledged and delivered to the other or to Escrow
Agent, as may be appropriate, any and all further instruments reasonably
requested or appropriate to evidence or give effect to the provisions of this
Agreement and which are consistent with the provisions hereof.
27. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the
parties with regards to the purchase and sale of the Assets. All terms and
conditions contained in any other writings previously executed by the parties
(including the letter of intent dated May 21, 1998) and all other discussions,
understandings or agreements regarding the Assets and the subject matter hereof
shall be deemed to be superseded hereby.
28. INUREMENT. This Agreement shall be binding upon and inure to the benefit of
the permitted successors and assigns, if any, of the respective parties hereto.
29. APPLICABLE LAW. This Agreement, and all questions and disputes arising in
connection with it, shall be governed by and construed in accordance with the
laws of the State of Ohio.
30. DESCRIPTIVE HEADINGS. The descriptive headings of the paragraphs of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any provisions hereof.
<PAGE>
31. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
32. ASSIGNMENT. Other than to a Permitted Transferee, Buyer may not assign its
rights hereunder without the prior written consent of Seller, which consent may
be unreasonably withheld. No assignment proposed by Buyer, even if to a
Permitted Transferee, shall be valid and effective until the delivery to Seller
of written notice of such assignment together with an executed copy of the
documents pursuant to which such assignee assumes all of Buyer's covenants,
indemnities, obligations and agreements under this Agreement and agrees to be
bound by all of the terms, conditions and provisions hereof and thereof.
Notwithstanding any assignment to a Permitted Transferee, Buyer shall not be
released from all obligations and liabilities hereunder.
33. CONSTRUCTION. The parties agree that each party and its counsel have
reviewed and revised this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement or any amendments or exhibits
hereto.
34. INTERPRETATION. In this Agreement, the neuter gender includes the feminine
and masculine, and the singular number includes the plural, and the words
"person" and "party" include corporations, partnerships, individuals, firms,
trusts, or associations wherever the context so requires.
35. EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto and
referred to in this Agreement are incorporated herein by this reference and are
part of this Agreement.
36. COUNTERPARTS. This Agreement may be executed simultaneously or in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
37. RECORDATION. This Agreement shall not be recorded, but Buyer may record a
Memorandum of the Agreement upon obtaining Seller's prior written approval.
38. EXCLUSIVE NEGOTIATIONS. As an inducement to Buyer to investigate and analyze
the Assets, and to encourage Buyer to satisfy or waive the contingencies
referenced in Paragraph 6 above as soon as possible, Seller shall not, prior to
the Feasibility Expiration Date (and then only if Buyer fails to remove the
contingencies set forth in Paragraph 6.(a) or otherwise terminates this
Agreement), either seek or solicit any purchase offer or financing with respect
to the Assets, and Seller shall deal exclusively with Buyer toward consummating
the transaction contemplated by this Agreement in accordance with the terms and
conditions of this Agreement.
39. IRS REAL ESTATE SALES REPORTING. Buyer and Seller shall appoint Escrow Agent
as, and Escrow Agent shall agree to act as, "the person responsible for closing"
the transaction which is the subject of this Agreement pursuant to Internal
Revenue Code Section 6045(e). Buyer and Seller shall confirm such appointment in
the separate instructions given to
<PAGE>
Escrow Agent and shall instruct Escrow Agent to prepare and file all
informational returns, including without limitation, IRS Form 1099-S and to
otherwise comply with the provisions of Internal Revenue Code Section 6045(e).
40. BULK SALES WAIVER. Seller waives any requirement of Buyer to comply with any
applicable notice requirements pertaining to bulk sales or other similar laws.
Seller shall indemnify, defend and hold Buyer harmless for, from and against any
liability resulting from such waiver.
SELLER: BUYER:
ROCKSIDE ROAD OPERATING JANUS AMERICAN GROUP, INC.
CORP., an Ohio corporation
By: By:
Name: Michael Gallucci, Jr. Name: James E. Bishop
Its: President Its: President
ROCKSIDE ROAD PROPERTIES, an
Ohio general partnership
By:
Name: Michael Gallucci, Jr.
Its: Managing General Partner
<PAGE>
SCHEDULE "A"
Affiliated Sales Agreements
1. Purchase and Sale Agreement dated July 31, 1998 between North Canton
Operating Corp., Canton North Properties and Janus American Group, Inc.
2. Purchase and Sale Agreement dated July 31, 1998 between Galburton Inn, Inc.
and Janus American Group.
3. Purchase and Sale Agreement dated July 31, 1998 between West Montrose
Properties and Janus American Group, Inc.
<PAGE>
SCHEDULE "B"
Contracts
<PAGE>
SCHEDULE "C"
Franchise Agreement
Holiday Inn License Agreement dated as of May 31, 1985, between Holiday
Inns, Inc., a Tennessee corporation, and Rockside Road Properties, an Ohio
general partnership.
<PAGE>
SCHEDULE "D"
Personalty
[See Attached]
<PAGE>
SCHEDULE "E"
Real Property Description
[See Attached]
<PAGE>
SCHEDULE "F"
Allocation of Purchase Price
$ 2,500,000 - Land
$14,700,000 - Building
$ 3,400,000 - Chattels
$20,600,000 - Total Purchase Price
<PAGE>
SCHEDULE "G"
Disclosure Statement
<PAGE>
EXHIBIT "A"
Management Agreement
[See Attached]
<PAGE>
EXHIBIT "B"
Consulting Agreement
[See Attached]
<PAGE>
EXHIBIT "C"
Limited Warranty Deed
[See Attached]
<PAGE>
EXHIBIT "D"
Affidavit of Non-Foreign Person
[See Attached]
<PAGE>
EXHIBIT "E"
Assignment and Assumption of Contracts
[See Attached]
<PAGE>
EXHIBIT "F"
Assignment of Intangible Property
[See Attached]
<PAGE>
EXHIBIT "G"
Bill of Sale
[See Attached]
<PAGE>
EXHIBIT "H"
Assignment and Assumption of
Franchise Agreement
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,263,579
<SECURITIES> 0
<RECEIVABLES> 6,871,007
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,148,751
<PP&E> 34,293,917
<DEPRECIATION> 1,572,784
<TOTAL-ASSETS> 61,306,222
<CURRENT-LIABILITIES> 3,941,829
<BONDS> 0
0
105
<COMMON> 118,809
<OTHER-SE> 36,826,423
<TOTAL-LIABILITY-AND-EQUITY> 61,306,222
<SALES> 5,757,300
<TOTAL-REVENUES> 6,708,157
<CGS> 2,197,857
<TOTAL-COSTS> 5,969,997
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 924,987
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<INCOME-CONTINUING> 711,665
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<NET-INCOME> 711,665
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