<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
|_| Confidential, For Use of the Commission only
(as permitted by Rule 14a-6(e)(2))
Growth Hotel Investors
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Montgomery Realty Company - 85, General Partner
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Limited Partnership Assignee Units
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
36,932
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$1,596.91 per Unit
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$58,977,000
- --------------------------------------------------------------------------------
(5) Total fee paid:
$11,796
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
GROWTH HOTEL INVESTORS
<PAGE>
GROWTH HOTEL INVESTORS,
a California Limited Partnership
NOTICE OF MEETING OF UNIT HOLDERS
To Be Held on May __, 1997
NOTICE IS HEREBY GIVEN that a Meeting of Holders of Limited Partnership
Assignee Units (the "Unit Holders") of Growth Hotel Investors, a California
Limited Partnership (the "Partnership"), will be held at the Partnership's
executive offices located at One Insignia Financial Plaza, Greenville, South
Carolina 29602 on May __, 1997 at 10:00 a.m., Eastern Standard Time, to approve
the sale of substantially all of the assets of the Partnership (the
"Transaction") to Equity Inns Partnership, L.P., a Tennessee limited partnership
(the "Purchaser"), pursuant to an Agreement of Purchase and Sale (the "Sale
Agreement"), dated as of March 14, 1997, between the Partnership and the
Purchaser.
The Agreement of Purchase and Sale is more fully described in the Proxy
Statement accompanying this Notice of Meeting. APPROVAL OF THE TRANSACTION WILL
RESULT IN THE DISSOLUTION OF THE PARTNERSHIP AND THE DISTRIBUTION TO UNIT
HOLDERS OF THE CASH PROCEEDS REALIZED AS DESCRIBED IN THE PROXY STATEMENT.
Approval of the Transaction requires the affirmative vote of Unit
Holders who own of record a majority of the outstanding Units of the
Partnership. Only Unit Holders of record at the close of business on April __,
1997 are entitled to notice of and to vote at the Meeting and at any
postponements or adjournments thereof. All Unit Holders are cordially invited to
attend the Meeting. However, to assure your representation at the Meeting, you
are urged to mark, sign and return the enclosed proxy card as promptly as
possible in the postage paid envelope enclosed for that purpose. Any Unit Holder
attending the Meeting may vote in person even if he or she has returned a proxy.
BY ORDER OF
MONTGOMERY REALTY COMPANY - 85,
General Partner
Greenville, South Carolina
May __, 1997
TO ENSURE THAT YOUR UNITS ARE REPRESENTED AT THE MEETING, COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE PAID ENVELOPE
PROVIDED. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
GROWTH HOTEL INVESTORS,
a California Limited Partnership
--------------------------
PROXY STATEMENT
--------------------------
36,932 Limited Partnership Assignee Units
This Proxy Statement (the "Proxy Statement") is being furnished to
holders of Limited Partnership Assignee Units (the "Unit Holders") of Growth
Hotel Investors, a California Limited Partnership (the "Partnership"), in
connection with the solicitation of proxies by Montgomery Realty Company - 85,
the general partner of the Partnership (the "General Partner"), for use at a
meeting of Unit Holders (including any adjournments or postponements thereof) to
be held on May __, 1997 (the "Meeting"). At the Meeting, the Unit Holders will
consider and vote upon a proposal to approve the sale of substantially all of
the assets of the Partnership (the "Transaction") to Equity Inns Partnership,
L.P., a Tennessee limited partnership (the "Purchaser"), pursuant to an
Agreement of Purchase and Sale (the "Sale Agreement"), dated as of March 14,
1997, between the Partnership and the Purchaser.
The Sale Agreement is attached as Annex A hereto and is incorporated
herein by reference.
If the Transaction is approved by the holders of record of a majority
of the outstanding Units, subject to the satisfaction of certain other
conditions to closing, it is anticipated that the Transaction will be
consummated on May 30, 1997, or such later date as the Partnership and the
Purchaser may agree. Following the closing of the Transaction, the General
Partner intends to distribute an aggregate of approximately $38,971,000 ($1,055
per Unit) to the Unit Holders. The Partnership has made certain representations
and warranties to the Purchaser in the Sale Agreement which survive the closing
of the Transaction for a period of one year. If the Purchaser does not allege
any breach of such representations and warranties during the one-year period
following the closing of the Transaction, the General Partner intends to
liquidate and dissolve the Partnership and distribute all of its remaining
assets (estimated at $1,620,000 in the aggregate or $43 per Unit) to the Unit
Holders as soon as practical following the expiration of such one-year period.
This Proxy Statement, the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 and the accompanying form of proxy are
first being mailed to Unit Holders of the Partnership on or about May __,
1997. See "Incorporation of Certain Documents by Reference".
The date of this Proxy Statement is May __, 1997.
<PAGE>
INFORMATION CONCERNING THE MEETING AND VOTING
General. This Proxy Statement is being furnished to Unit Holders of the
Partnership in connection with the solicitation of proxies by the General
Partner for use at the Meeting to be held at the Partnership's executive offices
located at One Insignia Financial Plaza, Greenville, South Carolina 29602, on
May __, 1997 at 10:00 a.m. local time. At the Meeting, the Unit Holders will be
asked to approve the sale (the "Transaction") of substantially all of the assets
of the Partnership to Equity Inns Partnership, L.P., a Tennessee limited
partnership (the "Purchaser"), pursuant to an Agreement of Purchase and Sale
(the "Sale Agreement"), dated as of March 14, 1997, between the Partnership and
the Purchaser, and the consummation of the transactions contemplated thereby,
which are more fully described herein. A copy of the Sale Agreement is attached
as Annex A hereto.
THE GENERAL PARTNER HAS APPROVED THE AGREEMENT, HAS DETERMINED THAT THE
TRANSACTION IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PARTNERSHIP AND ITS
UNIT HOLDERS AND RECOMMENDS THAT THE UNIT HOLDERS VOTE FOR APPROVAL OF THE
TRANSACTION. SEE "DESCRIPTION OF THE TRANSACTION--BACKGROUND OF THE
TRANSACTION."
Record Date and Voting. The General Partner has fixed April __, 1997 as
the record date (the "Record Date") for the determination of those Unit Holders
entitled to notice of and to vote at the Meeting. Only holders of record of
Limited Partnership Assignee Units at the close of business on the Record Date
will be entitled to notice of and to vote at the Meeting. As of the Record Date,
there were 36,932 Units outstanding, which were held by approximately ___
holders of record. Each holder of record of Units on the Record Date is entitled
to cast one vote per Unit on the proposal to approve the Transaction and on any
other matter properly submitted for the vote of the Unit Holders at the Meeting.
The presence, either in person or by properly executed proxy, of the holders of
a majority of the outstanding Units entitled to vote at the Meeting is necessary
to constitute a quorum at the Meeting. Abstentions will be counted as present
for purposes of determining the presence or absence of a quorum at the Meeting.
The approval of the Transaction by Unit Holders will require the
affirmative vote of the holders of Units who own of record a majority of the
outstanding Units of the Partnership. As described in "Description of the
Transaction--Terms of Sale Agreement," such Unit Holder approval is a condition
to consummation of the Transaction. In determining whether the proposal has
received the requisite number of affirmative votes, abstentions will not be
counted and will have the same effect as a vote against the proposal to approve
the Transaction.
Devon Associates, a New York general partnership that includes past and
present owners and affiliates of the General Partner and that is the largest
holder of Units, has advised the General Partner that it intends to vote all
13,396 Units owned by it in favor of the Transaction. See "Description of the
Transaction--Background of the Transaction". Such Units represent 36.27% of the
total number of outstanding Units. See "Security Ownership of Certain Beneficial
Owners and Management".
All Units which are entitled to be voted and are represented at the
Meeting by properly executed proxies received prior to or at such meeting, and
not revoked, will be voted at such Meeting in accordance with the instructions
indicated on such proxies. If no instructions are indicated, such proxies will
be voted for the approval of the Transaction and otherwise in the discretion of
the proxy holders, including with respect to, among other things, a motion to
adjourn
-2-
<PAGE>
or postpone the Meeting to another time and/or place; provided, however, that no
proxy which is voted against the proposal to approve the Transaction will be
voted in favor of any such adjournment or postponement.
Revocation of Proxies. The presence of a Unit Holder at the Meeting
will not automatically revoke such Unit Holder's proxy. Any proxy given by a
Unit Holder pursuant to this solicitation may be revoked by the person giving it
at any time before it is exercised by (i) delivering to the General Partner a
written notice of revocation bearing a later date than the proxy; (ii)
delivering to the General Partner a duly executed proxy bearing a later date; or
(iii) attending the Meeting and voting in person. Any written notice of
revocation or subsequently executed proxy should be sent so as to be delivered
to the Partnership c/o IFGP Corporation, One Insignia Financial Plaza, P.O. Box
2347, Greenville, South Carolina 29602, Attention: George Buchanan, or hand
delivered to the General Partner at or before the taking of the vote at the
Meeting.
Solicitation. The Partnership will bear all expenses of this
solicitation of proxies from the Unit Holders. In addition to solicitation by
use of the mails, proxies may be solicited by officers and employees of the
General Partner in person or by telephone, telegram or other means of
communication. Such officers and employees will not be additionally compensated,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. The Partnership has retained Beacon Hill Associates, a proxy
solicitation firm, to assist in such solicitation. The fee to be paid to such
firm is not expected to exceed $_____ plus reasonable out-of-pocket costs and
expenses. In addition, the Partnership will make arrangements with brokerage
firms and other custodians, nominees and fiduciaries to send proxy materials to
their principals and will reimburse such parties for their expenses in doing so.
Separate Voting. The enclosed proxy is not valid with respect to any
interest you may have in Growth Hotel Investors II, a California limited
partnership which is an affiliate of the Partnership. You will receive a
separate proxy card for such other partnership in which you may own limited
partnership assignee units.
Dissenters' Rights. There will be no dissenters' rights of appraisal
with respect to the Transaction.
-3-
<PAGE>
THE PARTNERSHIP
General
The Partnership was organized on June 28, 1984 under the laws of the
State of California. Its principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602. Its telephone number is (864)
239-1000.
The Partnership's primary business is the ownership of limited service
hotels and it presently owns interests in 22 Hampton Inn Hotels. Eighteen of the
Hampton Inn Hotels are owned in a joint venture (the "Hampton Inns Joint
Venture") with Hampton Inns, Inc. ("Hampton Inns") in which the Partnership and
an affiliated partnership, Growth Hotel Investors II ("GHI II") (through Growth
Hotel Investors Combined Fund No. 1 (the "Combined Fund")) own an 80% interest
and Hampton Inns owns a 20% subordinated interest. Under the terms of the joint
venture agreement, Hampton Inns is not entitled to receive any distributions of
sale proceeds on account of its interest until such time as the Combined Fund
has received cumulative distributions equal to 100% of its capital contribution
plus a 12% return thereon. Approximately 32% of the Combined Fund is owned by
the Partnership and 68% is owned by GHI II. In addition to its interest in the
Combined Fund, the Partnership also owns interests in four other Hampton Inn
Hotels, two of which are owned in joint venture with non-affiliated entities.
All of the Hampton Inn Hotels are operated under a license agreement with
Hampton Inns. The 18 hotels owned by the Hampton Inns Joint Venture are managed
by Hampton Inns and the four other hotels in which the Partnership has an
ownership interest are managed by non-affiliated third parties.
The original anticipated holding period of the Partnership's properties
was 5 to 10 years following the acquisition of a property. Currently, properties
in the Partnership's portfolio have been held for varying periods ranging from
approximately 8 to 11 years. For more information about the Partnership,
reference is made to the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, which is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference".
Hotel Properties
A description of the hotel properties (each, a "Hotel Property") in
which the Partnership has an ownership interest is set forth below. Except as
otherwise indicated, all Hotel Properties are owned in fee.
<TABLE>
<CAPTION>
Mortgage Balance at
Name and Location Date of Purchase Rooms December 31, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hampton Inn-Syracuse(1) 12/85 117 $ -0-
6605 Old Collamer Rd.
East Syracuse, New York
Hampton Inn-Brentwood 12/85 114 $ -0-
5630 Franklin Pike Circle
Nashville, Tennessee
Hampton Inn-Aurora(1) 12/86 132 $3,036,515
South Abilene
Aurora, Colorado
Hampton Inn-Albuquerque North 04/87 125 $2,375,000
7433 Pan American Freeway
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Balance at
Name and Location Date of Purchase Rooms December 31, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albuquerque, New Mexico
GROWTH HOTEL INVESTORS
COMBINED FUND NO.1(2)
Hampton Inn-Memphis I-40 (3) 12/86 117 $1,770,874
1585 Sycamore View Drive
Memphis, Tennessee
Hampton Inn-Columbia-West 12/86 121 $2,061,925
1094 Chris Drive
West Columbia, South Carolina
Hampton Inn-Spartanburg 12/86 112 $1,767,234
6023 Alexander Road
Spartanburg, South Carolina
Hampton Inn-Little Rock-North 12/86 123 $2,015,540
500 West 29th Street
North Little Rock, Arkansas
Hampton Inn-Amarillo 12/86 116 $1,120,553
1700 140 East
Amarillo, Texas
Hampton Inn-Greenville 12/86 123 $2,053,737
246 Congaree Road
Greenville, South Carolina
Hampton Inn-Charleston-Airport 12/86 125 $2,143,783
4701 Arco Lane
North Charleston, South Carolina
Hampton Inn-Memphis-Poplar 12/86 126 $2,797,741
5320 Poplar Avenue
Memphis, Tennessee
Hampton Inn-Greensboro 12/86 121 $1,981,886
2004 Veasly Street
Greensboro, North Carolina
Hampton Inn-Birmingham 12/86 123 $2,425,740
1466 Montgomery Hwy.
Birmingham, Alabama
Hampton Inn-Atlanta-Roswell 03/87 129 $2,643,020
9995 Dogwood Road
Roswell, Georgia
Hampton Inn-Chapel Hill 03/87 122 $2,256,843
1740 US 15 & 501 Highway
Chapel Hill, North Carolina
Hampton Inn-Dallas-Richardson 03/87 130 $2,768,704
1577 Gateway
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Mortgage Balance at
Name and Location Date of Purchase Rooms December 31, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richardson, Texas
Hampton Inn-Nashville (3) 03/87 120 $2,183,086
2350 Elm Hill Parkway
Nashville, Tennessee
Hampton Inn-San Antonio 06/87 123 $2,451,416
4803 Manitou Drive
San Antonio, Texas
Hampton Inn-Madison Heights 12/87 126 $2,833,922
32420 Stephenson Highway
Madison Heights, Michigan
Hampton Inn-Mountain Brook(3) 12/87 131 $2,542,870
2731 U.S. Highway 280
Birmingham, Alabama
------------------
Hampton Inn-Northlake(3) 09/88 130 $2,365,768
3400 Northlake Parkway
Atlanta, Georgia
</TABLE>
- ------------------
(1) Hotel Property is owned by a joint venture or limited partnership in
which the Partnership has a controlling interest.
(2) The Hotel Properties listed under this heading are owned by the Hampton
Inns Joint Venture. The estimated mortgage balance information included
in the table under the heading Growth Hotel Investors Combined Fund No. 1
represents 100% of the interest of the Combined Fund in the Hotel
Properties. As approximately 32% of the Combined Fund is owned by the
Partnership, $12,254,000 of the mortgage balance is attributable to
interests owned by the Partnership.
(3) The Hotel Property is subject to a land lease extending as follows:
<TABLE>
<CAPTION>
Option
Year Lease Period
Land Lease Expires (Years)
------------------------------------------------------------ ------------ -------------
<S> <C> <C>
Hampton Inn-Memphis I-40 East 2004 20
Hampton Inn-Nashville-Briley Parkway 2006 20
Hampton Inn-Mountain Brook 2007 50
Hampton Inn-Northlake 2008 40
</TABLE>
-6-
<PAGE>
Growth Hotel Investors,
a California Limited Partnership
Selected Historical Financial Information
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
===================================================================================================================================
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
- ------------------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands except per unit data)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $9,831 $10,341 $10,049 $10,895 $ 8,798
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE
MINORITY INTEREST
IN JOINT VENTURES' OPERATIONS $2,558 $3,556 $2,920 $2,716 $(1,893)
- ------------------------------------------------------------------------------------------------------------------------------------
MINORITY INTEREST IN JOINT
VENTURES' OPERATIONS 35 (28) (36) (36) 34
- ------------------------------------------------------------------------------------------------------------------------------------
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT
OF DEBT -- -- 606 -- --
---- ---- ---- ---- ---
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 2,593 $ 3,528 $ 3,490 $ 2,680 $(1,859)
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP ASSIGNEE UNIT(1)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 65 $ 89 $ 73 $ 68 $ (44)
- ------------------------------------------------------------------------------------------------------------------------------------
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT -- -- 15 -- --
---- ---- --- ---- ---
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 65 $ 89 $ 88 $ 68 $ (44)
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $28,422 $27,510 $27,898 $31,672 $29,908
======= ======= ======= ======= ========
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM OBLIGATIONS:
Notes payable $ 5,412 $ 5,433 $ 7,655 $12,488 $12,518
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
CASH DISTRIBUTIONS PER
LIMITED PARTNERSHIP ASSIGNEE
UNIT (actual amount based on admission
to partnership) $ 40 $ 40 $ 40 $ 35 $ 20
==== ==== ==== ==== ====
====================================================================================================================================
</TABLE>
- --------
(1) $1,000 original contribution per unit, based on weighted average limited
partnership assignee units outstanding during the period, after allocation to
the General Partner.
-7-
<PAGE>
DESCRIPTION OF THE TRANSACTION
The following information concerning the Transaction, insofar as it
relates to matters contained in the Sale Agreement, describes the material
aspects of the Transaction but does not purport to be a complete description and
is qualified in its entirety by reference to the Sale Agreement which is
incorporated herein by reference and attached hereto as Annex A. Unit Holders
are urged to read carefully and in its entirety the Sale Agreement.
Effects of the Transaction
Pursuant to the terms of the Sale Agreement, subject to the
satisfaction or waiver (where permissible) of certain conditions, including,
among other things, the approval of the Transaction by the requisite vote of the
Unit Holders of the Partnership, the Purchaser will acquire substantially all of
the Partnership's assets for an aggregate gross purchase price of approximately
$58,977,000. After (1) applying approximately $17,666,000 of the gross purchase
price to the satisfaction of existing mortgage indebtedness on the Partnership's
Hotel Properties, (2) the payment of $508,000 for the Partnership's
share of an estimated $1,500,000 franchise transfer fee payable by the
Partnership and GHI II to Hampton Inns, (3) provision for the payment
of approximately $847,000 for certain Hotel Property improvement expenses
required by Hampton Inns, (4) payment of an aggregate of $400,000 to joint
ventures not affiliated with the Partnership, (5) provision for brokerage
expenses estimated at $584,000, (6) provision for the payment of $610,000 for
the Partnership's share of class action counsel fees payable by the Partnership
and GHI II estimated at an aggregate of $1,800,000 and (7) provision for
additional closing expenses estimated at approximately $859,000 incurred in
connection with the Transaction, including a contingency reserve of $350,000,
the Partnership estimates that it will realize net proceeds of approximately
$37,503,000 from the Transaction. This amount, when added to the estimated
available cash on hand of the Partnership of $3,903,000, will result in
approximately $41,406,000 being available for distribution by the Partnership.
See "Terms of the Sale Agreement -- Satisfaction of Certain Indebtedness and
Expenses".
Upon the consummation of the Transaction, the Partnership will cease
all further business operations. Following the closing of the Transaction, the
General Partner intends to distribute an aggregate of approximately $38,971,000
($1,055 per Unit) to the Unit Holders (see "Certain Federal Income Tax
Consequences--State Taxes" for a description of certain amounts to be withheld
from such distribution in order to satisfy state tax withholding requirements).
The General Partner further intends to retain approximately $1,620,000 for a
period of up to one year as a reserve to satisfy any claims by the Purchaser in
the event of any breach by the Partnership of certain representations and
warranties made to the Purchaser in the Sale Agreement. See "Terms of Sale
Agreement -- Survival of Representations". If the Purchaser does not make a
claim for damages based upon any such breach during such one-year period, the
General Partner intends to liquidate and dissolve the Partnership and distribute
all remaining assets (estimated at $43 per Unit) as soon as practical following
the expiration of such one-year period.
If the Transaction is consummated, it is estimated that the General
Partner will receive approximately $815,000 upon consummation and an estimated
additional $32,000 upon the liquidation of the Partnership. See "--Interest of
the General Partner" for a more complete description of the consideration to be
received by the General Partner from the proceeds of the Transaction.
Closing of the Transaction
-8-
<PAGE>
The Transaction will be consummated after satisfaction or waiver of the
latest to occur of certain conditions to the Transaction specified in the Sale
Agreement, which consummation (the "Closing") is expected to occur on May 30,
1997, or such later date as the Partnership and the Purchaser may agree. See
"Terms of Sale Agreement--Conditions to Closing." The Sale Agreement may be
terminated by either party if, among other reasons, the Transaction has not been
consummated on or before said date and may otherwise be terminated by the
Partnership and/or the Purchaser upon the failure of certain conditions. See
"Terms of Sale Agreement--Termination."
Because the Purchaser seeks to obtain full ownership of each of the
Properties in which the Partnership may only own a partial indirect interest,
the Closing is conditioned, among other things, upon approval by the holders of
a majority of the outstanding units in GHI II of a similar transaction with the
Purchaser. If such other approval is not obtained, the Purchaser is not required
to consummate the Transaction with the Partnership.
Information About the Purchaser
Equity Inns Partnership, L.P. (the "Purchaser") is a Tennessee limited
partnership organized in 1994. The general partner of the Purchaser is Equity
Inns Trust, a Maryland real estate investment trust. The Trust is a
wholly-owned subsidiary of Equity Inns, Inc., a real estate investment trust
incorporated in 1993 whose shares are traded on the New York Stock Exchange.
Equity Inns, Inc. presently owns, through the Trust, an approximate 96.1% equity
interest in the Purchaser. At December 31, 1996, Equity Inns, Inc. had
consolidated total assets of approximately $317,880,000.
The Purchaser owns 55 hotel properties with a total of 6,554 rooms in 28
states. Thirty-six of the hotel properties are Hampton Inn hotels. All of the
Purchaser's hotels are operated by affiliates of Interstate Hotel Company, a
publicly owned hotel management company, pursuant to percentage lease
arrangements which provide for rent based, in part, on the revenues from the
hotels.
The Purchaser's principal executive offices are located at 4735
Spottswood Avenue, Suite 102, Memphis, Tennessee 38117 and its telephone number
at that location is (901) 761-9651.
Background of the Transaction
On February 15, 1996, Devon Associates ("Devon"), a New York general
partnership that includes past and present owners and affiliates of the General
Partner, commenced two tender offers (the "Tender Offers") to purchase up to
15,000 of the outstanding Units of the Partnership and up to 21,000 of the
outstanding Units of GHI II. On February 21, 1996 and February 28, 1996, two
class and derivative action lawsuits (the "Actions") entitled Wallace et. al. v.
Devon Associates et. al. and R&S Asset Partners et. al. v. Devon Associates et.
al. were filed, respectively, in the Supreme Court of the State of New York and
the Superior Court for the State of California challenging the Tender Offers.
The Actions asserted various claims for, inter alia, breaches of fiduciary duty,
breaches of contract and negligence by Devon, the General Partner and various
affiliated or related persons and entities.
The Actions were litigated by the various plaintiffs on a coordinated
basis and by Stipulation of Settlement (the "Stipulation"), dated April 24,
1996, the claims asserted in each of the Actions were conditionally settled. On
August 27, 1996, following a settlement hearing held on July 18,
-9-
<PAGE>
1996, a Final Order and Judgment was issued in the California action approving
the proposed settlement of claims as fair, reasonable and adequate and, pursuant
to the Stipulation, the New York action was thereafter voluntarily dismissed
with prejudice.
The Stipulation, among other things, requires the General Partner,
consistent with its contractual and fiduciary duties, to take any such actions
as are reasonably necessary to solicit offers for the purchase of the
Partnership's assets which maximize the value of the Units and obligates the
General Partner to deal fairly and in good faith with persons or entities
expressing an interest in making a bona fide offer to purchase such assets.
On September 3, 1996, the Partnership, together with GHI II, retained
the national investment banking firm of Bear, Stearns Real Estate Group, Inc.
("Bear Stearns") to serve as a financial adviser and agent to assist in
arranging the sale of the hotel properties. For its services, Bear Stearns is
to receive a brokerage commission of 0.875% of the gross purchase price of the
hotel properties. Bear Stearns conducted due diligence of all the hotel
properties owned by the Partnership and GHI II, met with management of the
Partnership and of GHI II, prepared valuations of each of the 28 hotel
properties owned by the Partnership and GHI II and prepared an offering
memorandum to be sent to potential purchasers of the hotel properties.
In November and December 1996, Bear Stearns sent the offering
memorandum for the 28 hotel properties to numerous potential purchasers. Several
qualified purchasers expressed interest in the portfolio and received and
reviewed additional financial information concerning the hotel properties.
Several offers were submitted to the General Partner, and the General Partner,
after considering the likelihood of successfully closing a transaction on the
offered terms with each prospective buyer, selected the Purchaser's bid.
The Purchaser's bid was not the highest bid received by the
Partnership. The General Partner considered a higher bid which, unlike the
Purchaser's bid, was conditioned, among other things, on the bidder's receipt of
financing from an institutional lender and which would also have required the
bidder to locate and raise a substantial equity participation to support the
financing. The General Partner rejected the higher bid in view of these
impediments to a successful closing.
On March 14, 1997, following six weeks of negotiations and initial due
diligence by the Purchaser, the Partnership entered into the Sale Agreement, and
GHI II and each of the joint venture entities through which either the
Partnership or GHI II owns a hotel property entered into definitive agreements
substantially identical to the Sale Agreement (each, a "Companion Agreement")
with the Purchaser for the sale of substantially all of their assets.
The solicitation of offers for the sale of substantially all of the
Partnership's assets was conducted in accordance with the provisions of the
court approved Stipulation, which required such sale, and was not a volitional
decision by the General Partner. Plaintiffs' counsel in the Actions was
permitted to comment upon the solicitation process and received copies of all
materials received or sent by the General Partner during the process.
Furthermore, the General Partner will not have an ongoing relationship with the
Purchaser or with the operation of the Hotel Properties and will be receiving
for its interest only those pro rata amounts provided for in the Partnership
Agreement. See "--Interest of the General Partner". Accordingly, in view of the
extensive marketing effort undertaken by the General Partner, and the
well-established real estate market that exists for the purchase of limited
service hotels, the General Partner did not believe it necessary to obtain
appraisals of the Hotel Properties, other than the valuations prepared by Bear
Stearns, or that a fairness opinion with respect to the Transaction was
appropriate.
Terms of Sale Agreement
Assets to be Sold. The Partnership will sell to the Purchaser all of
its interests in the 22 Hampton Inn Hotels which it owns. On the same date that
the Partnership entered into the Sale Agreement with the Purchaser, GHI II and
each of the joint venture entities through which either the Partnership or GHI
II owns a hotel property entered into the Companion Agreements and agreed to
sell to the Purchaser all of their interests in the Hampton Inn Hotels owned by
them. Because GHI II and certain joint ventures in which it has a controlling
interest own interests in an additional 6 Hampton Inn Hotels, the Purchaser has
agreed to acquire a total of 28 Hampton Inn Hotels for an aggregate gross
purchase price of $182 million.
The gross purchase price will be allocated among the Hampton Inn Hotels
owned by the Partnership and GHI II and their respective joint venture entities
pursuant to the Sale Agreement with the Purchaser. To obtain the allocated
amount, the Purchaser and the selling entities determined the capitalization
rate (i.e., net operating income divided by gross purchase price) for
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the 28 Hampton Inn Hotels using the net operating income of the entire 28
Hampton Inn Hotel portfolio for the year ended December 31, 1996 and applied
such capitalization rate to each separate Hotel Property based upon its net
operating income for the year then ended.
Based upon such allocation, the aggregate gross purchase price to be
received by the Partnership from the Purchaser for its interests in its Hotel
Properties is approximately $58,977,000.
Satisfaction of Certain Indebtedness and Expenses. It is a condition of
the Sale Agreement that the existing aggregate mortgage indebtedness estimated
at approximately $17,666,000 on the Partnership's Hotel Properties be satisfied
at Closing. Further, Hampton Inns, the franchisor for each of the Hotel
Properties, has required as a condition to the transfer of its franchise or
license to the Purchaser that a Property Improvement Plan with respect to each
such Hotel Property be undertaken by the Partnership prior to Closing. It is
estimated that the Property Improvement Plan required to be undertaken by the
Partnership will result in additional expenditures of approximately $847,000.
To the extent that such improvements have not been completed prior to Closing,
the Partnership has agreed to provide the Purchaser a credit against the gross
purchase price for such improvements. Further, Hampton Inns will seek to impose
a transfer fee of up to $1,500,000 in connection with the transfer to the
Purchaser of a franchise license for all of the 28 Hampton Inn Hotels. The
Partnership will be required to bear its aliquot share of this transfer fee
which is estimated to be approximately $508,000.
As part of the Transaction, the Partnership will acquire its joint
venturer's interest in Hampton Inn - Aurora for $150,000 and will be required to
make a distribution to its joint venture partner in the Hampton Inn - Syracuse
property of $250,000. After provision for (1) brokerage expenses estimated at
$584,000, which includes a brokerage fee payable to Bear Stearns by the
Partnership in the amount of approximately $516,000, (2) payment to class action
counsel of approximately $610,000, representing the Partnership's share of
estimated counsel fees of up to $1,800,000 (see "Description of Transaction --
Background of the Transaction"), the payment of which fees is subject to
approval by the Superior Court for the State of California, and (3) additional
Closing expenses estimated at approximately $858,000, including a contingency
reserve of $350,000, the Partnership will realize net proceeds of approximately
$37,503,000 from the sale of its Hotel Properties. This amount, when added to
the available cash on hand of the Partnership estimated to be $3,903,000 at
Closing, will result in approximately $41,406,000 being available for
distribution by the Partnership. Of this amount, approximately $38,971,000
($1,055 per Unit) will be distributed to the Unit Holders and approximately
$815,000 will be distributed to the General Partner as soon as practical
following the Closing, and the balance of approximately $1,620,000 will be
retained by the Partnership for at least a one-year period. See "--Survival of
Representations".
In determining the amount of cash to be available for distribution by
the Partnership, no provision has been made for the payment by Hampton Inns of
any amount to restore the deficit in its capital account under the Hampton Inns
Joint Venture, nor has any provision been made for the payment to Hampton Inns
of any amount on account of its subordinated interest in the Hampton Inns Joint
Venture.
Deposit. At the time of the execution of the Sale Agreement and the
Companion Agreements, the Purchaser deposited the sum of $10 million (the
"Deposit") with Commonwealth Land Title Insurance Company (the "Escrow Agent")
under the Sale Agreement and the Companion Agreements. The Escrow Agent is
required to hold the Deposit in escrow until the Closing or the earlier
termination of the Sale Agreement and the Companion Agreements and is required
to pay over or apply the Deposit in accordance with the terms of the Sale
Agreement. If any party objects to the payment by the Escrow Agent of the
Deposit to another party, the Escrow
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<PAGE>
Agent is required to continue to hold the Deposit until otherwise directed by
written instructions from the parties or a final judgment of a court of
competent jurisdiction which, by lapse of time or otherwise, shall no longer be
subject to appeal or reversal.
Termination. The Sale Agreement may be terminated by the Purchaser if
any condition to Closing cannot or will not be satisfied and the Partnership
fails, within 10 days after notice from the Purchaser, to cure any such matter.
In such event, the Purchaser may require the Partnership to pay to the Purchaser
the amount of $500,000 as agreed upon liquidated damages, which liquidated
damages shall be in lieu of any other damages under the Sale Agreement and the
Companion Agreements. In lieu of such payment, the Purchaser may seek specific
performance of the Sale Agreement. In no event, however, shall the Partnership
or GHI II be required to expend more than $500,000 in the aggregate to correct
any matter not deliberately caused by it. If the Purchaser fails, within 10 days
after notice from the Partnership, to satisfy any condition to Closing required
to be performed by it, the Partnership has the right to terminate the Sale
Agreement and retain $3,240,000, representing its pro rata share of the Deposit
paid by the Purchaser to the Escrow Agent, as full and complete liquidated
damages for the Purchaser's default.
Representations and Warranties. The Partnership has made a series of
representations and warranties to the Purchaser, many of which are limited to
the knowledge of the Partnership and certain affiliated entities. These
representations and warranties include, among other matters, statements by the
Partnership with respect to its organization, its authority to enter into the
Sale Agreement and to consummate the transactions contemplated by the Sale
Agreement, the non-contravention of the Sale Agreement with any of the
Partnership's organizational documents or any other agreement binding upon the
Partnership, the status of the Partnership's material contracts and other
agreements, the absence of any action or other litigation which could affect the
enforceability of the Sale Agreement or which materially and adversely affect
the business or financial position or results of operations of the Partnership
and the accuracy of certain disclosures previously made to the Purchaser.
The Purchaser has also made a series of representations and warranties
to the Partnership regarding, among other matters, its organization, its
authorization to enter into the Sale Agreement and to consummate the transaction
thereby contemplated, the non-contravention of the Sale Agreement with the
Purchaser's organizational documents or any other agreement binding upon the
Purchaser and the absence of any action or litigation which could affect the
enforceability of the Sale Agreement.
Survival of Representations. The representations and warranties made by
the Partnership to the Purchaser in the Sale Agreement will survive the Closing
for a period of one year. Any claim for damages by the Purchaser based upon an
alleged breach of a representation or warranty by the Partnership must be made
in writing within such one-year period. The Purchaser and the Partnership have
agreed that the Partnership's liability for any such claim under the Sale
Agreement and any of the Companion Agreements shall in no event exceed the
aggregate amount of $5 million. The Partnership and GHI II have agreed that,
regardless of which entity is in breach of a representation or warranty to the
Purchaser, all claims by the Purchaser against either the Partnership or GHI II
under the Sale Agreement or any of the Companion Agreements shall be shared by
the Partnership and GHI II such that the Partnership's maximum exposure to the
Purchaser for any such breach shall not exceed $1,620,000 and GHI II's maximum
exposure shall not exceed $3,380,000.
The General Partner believes that the sharing arrangement with GHI II
is equitable to the Partnership regardless of which entity is in breach. The
arrangement reduces the potential liability of the Partnership from $5,000,000
to $1,620,000. Further, it reduces the amount which the Partnership would
otherwise retain to secure such liability, thus permitting the more expeditious
distribution to Unit Holders of a greater amount of the net proceeds of the
Transaction. The arrangement is consistent with the agreements with GHI II
governing 18 of the Partnership's 22 Hotel Properties and eliminates the
difficulty of allocating liability if each of the Partnership and GHI II were
subject to claims by the Purchaser for more than $5,000,000 in damages. The
General Partner believes that the sharing arrangement is permitted under the
Amended and Restated Agreement of Limited Partnership of the Partnership and is
not violative of any fiduciary duty owed to Unit Holders.
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<PAGE>
Operations Prior to Closing. The Partnership has agreed that until the
Closing it will operate its Hotel Properties only in the usual, regular and
ordinary manner consistent with prior practice and will use all reasonable
efforts to preserve intact its business organization, keep available the
services of its officers and employees and preserve its relationships with
suppliers and others having business dealings with it. The Partnership has also
agreed to direct its managing agents to continue to use commercially reasonable
efforts to take guest reservations, book functions and meetings and otherwise
promote the business of its Hotel Properties. The Partnership has further agreed
not to diminish the quality or quantity of maintenance and upkeep services
provided to its Hotel Properties and not to remove or permit the removal of any
part of its property unless the same is replaced prior to Closing with similar
items of at least equal quality acceptable to the Purchaser.
Conditions to Closing. It is a condition to the obligations of the
Partnership and the Purchaser to consummate the Transaction that, among other
things, the approval of the Transaction by Unit Holders owning a majority of the
Units be obtained, as required by the Partnership Agreement, and that the
transactions contemplated under each of the Companion Agreements be
simultaneously consummated. Thus, the vote of the holders of a majority in
interest of limited partner assignee units in GHI II approving the sale by GHI
II of substantially all of its assets to the Purchaser is a condition to the
Partnership's ability to consummate the Transaction. There can be no assurance
that the holders of a majority in interest of such units in GHI II will approve
the sale and thus permit the Partnership to consummate the Transaction.
Because each of the Companion Agreements is substantially identical to
the Sale Agreement with respect to the representations, warranties, covenants
and conditions to closing contained in the Sale Agreement, the consummation of
the Transaction by the Partnership is dependent upon satisfaction by each of the
other parties to the Companion Agreements of similar conditions to closing.
However, if there is a failure of a condition precedent under the Sale Agreement
or any of the Companion Agreements as to one or more of the hotels, but not as
to all of the hotels, upon the mutual consent of the Partnership and the
Purchaser, the Sale Agreement or the relevant Companion Agreement may be
terminated as to such hotel or hotels only and a pro rata credit against the
gross purchase price for such excluded hotel or hotels be given to the Purchaser
by the owner(s) of such hotel or hotels.
The consummation of the Transaction is also conditioned upon (1)
receipt by the Purchaser of good and marketable fee simple title to the Hotel
Properties, subject to agreed upon permitted title exceptions, insurable at
regularly scheduled rates by Commonwealth Land Title Insurance
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<PAGE>
Company, (2) receipt by the Purchaser of a franchise or license on customary
terms from Hampton Inns for a minimum term of ten (10) years, (3) cancellation
of certain existing Hotel Property management agreements, (4) Closing on May 30,
1997 or, subject to agreement with the Purchaser, such later date as the parties
may agree and (5) other conditions customary for transactions of this nature.
Interest of the General Partner
Neither the General Partner nor, except as set forth below with respect
to interests owned by Devon Associates, any affiliate of the General Partner has
any interest in the Transaction other than with respect to its two (2%) percent
general partnership interest in the Partnership. Such two (2%) percent interest
will receive a pro rata share of all distributions to be made by the
Partnership, which distribution to the General Partner is estimated to be
approximately $815,000 upon the Closing and an estimated additional $32,000 upon
the liquidation and dissolution of the Partnership.
Devon Associates, a New York general partnership that includes past and
present owners and affiliates of the General Partner, owns 13,396 Units or
36.27% of the Units, representing the largest single holder of Units in the
Partnership. If the Transaction is consummated, Devon Associates will receive
its pro rata share of all distributions to be made by the Partnership to Unit
Holders.
If the Transaction is consummated, in accordance with the provisions of
the Amended and Restated Agreement of Limited Partnership of GHI II, the General
Partner, in its capacity as general partner of GHI II, will receive from GHI II
a subordinated sales interest fee payment in the estimated amount of $637,000.
The ability of the General Partner to receive such subordinated sales interest
fee payment from GHI II is dependent upon the consummation of the Transaction
with the Partnership, which, among other things, is dependent upon the approval
of the Transaction by Unit Holders who own a majority of the outstanding Units
of the Partnership.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain federal income
tax consequences of the Transaction. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations
thereunder, Internal Revenue Service rulings, practice and procedures and
judicial and administrative decisions in effect as of the date of this Proxy
Statement. All of the foregoing are subject to change, and any such change could
affect the continuing accuracy of this summary. This summary does not discuss
all aspects of federal income taxation that may be relevant to a particular Unit
Holder in light of such Unit Holder's specific circumstances or to certain types
of Unit Holders subject to special treatment under the federal income tax laws
(for example, dealers in securities, banks and insurance companies). The
Transaction will be a taxable transaction for federal income tax purposes, and
may also be taxable in the various states in which the Properties are located,
as well as a Unit Holder's state of residence. EACH UNIT HOLDER SHOULD CONSULT
HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH UNIT HOLDER
OF THE TRANSACTION.
The Partnership will recognize gain on the Transaction. Such gain, as
well as the Partnership's taxable income from operations until the consummation
of the Transaction, will be allocated among the Unit Holders in accordance with
the provisions of the Partnership Agreement. Based on the results of Partnership
operations through December 31, 1996, a Unit Holder who acquired his Units at
the time of the Partnership's original offering of Units will be allocated net
gain on the Transaction (after deducting a capital loss of approximately $72 per
Unit that is anticipated to result to the Partnership in 1997 on the liquidation
of the Hampton Inns Joint Venture) that the General Partner estimates will be
approximately $541 per Unit. Under the passive activity loss rules (discussed
below), such gain generally will be treated as passive activity income, which
should allow the Unit Holder to deduct (subject to any other applicable
limitations) a corresponding amount of the Unit Holder's passive activity
losses, if any, from other investments.
A Unit Holder's allocable share of Partnership's gain on the
Transaction will be treated as capital gain except as hereinafter described.
First, the portion of such gain that is attributable to items of inventory and
other non-capital assets will be treated as ordinary income; this portion is
estimated by the General Partner to be less than 1%. Second, the portion of such
gain that is attributable to depreciation recapture will be treated as ordinary
income; this portion is estimated by the General Partner to be $47 per Unit.
Third, for Unit Holders which are corporations, an additional portion of their
gain equal to 20% of their share of the depreciation deductions previously
claimed by the Partnership that are not otherwise subject to general
depreciation recapture will be treated as ordinary income. Finally, to the
extent that a Unit Holder claimed ordinary losses from any sales or exchanges of
depreciable property (or other business assets) within the preceding five
taxable years, a portion of such Unit Holder's gain from the Transaction will be
treated as ordinary income.
Cash distributions received by a Unit Holder from the Partnership
following the Transaction,
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<PAGE>
including distributions in liquidation of the Partnership, will reduce a Unit
Holder's adjusted tax basis in his Units but will not result in the Unit
Holder's recognition of any income or gain except if and to the extent such
distributions (and the amount of any reduction in the Unit Holder's share of
Partnership liabilities) exceed the Unit Holder's adjusted tax basis in his
Units. Based on the General Partner's estimates of the amount of taxable gain
from the Transaction allocable to Unit Holders (which will increase their
adjusted tax basis in their Units) and the amount of cash to be distributed to
Unit Holders, the General Partner currently does not anticipate that Unit
Holders who acquired their Units in the Partnership's original offering of Units
will recognize any further income or gain as a result of receiving the cash
distributions described in this Proxy Statement. If a Unit Holder has any
remaining adjusted tax basis in his Units after the Partnership has distributed
all its assets in complete liquidation, then such Unit Holder may be entitled to
claim a capital loss. Assuming the Partnership is not liquidated until after the
year in which the Transaction occurs, such loss (if any) generally could not be
applied by the Unit Holder to offset gain allocated to him from the Transaction
but could be applied to offset the Unit Holder's capital gains, if any, from
other sources in the year the Partnership is liquidated (or subsequent years).
Under current law, long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 28%, whereas the maximum marginal federal income tax rate for other income of
such persons is 39.6%. Capital losses are deductible only to the extent of
capital gains, except that non-corporate taxpayers may deduct up to $3,000 of
capital losses in excess of the amount of their capital gains against ordinary
income. Excess capital losses generally can be carried forward to succeeding
years (a corporation's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); in addition, corporations,
but not non-corporate taxpayers, are allowed to carry back excess capital losses
to the three preceding years.
Under Section 469 of the Code, a non-corporate taxpayer or personal
service corporation can deduct passive activity losses in any year only to the
extent of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
Gain allocated to a Unit Holder on the Transaction will be treated as passive
activity income, which, for a Unit Holder who or which is subject to this
limitation, will increase the amount of passive activity losses that such Unit
Holder can currently deduct under this limitation. If a Unit Holder subsequently
recognizes a loss on the liquidation of the Partnership, such loss, although a
passive activity loss, generally could be deducted (subject to any other
applicable limitations) under the passive activity loss rules in the year the
Partnership is completely liquidated.
Gain allocable to a foreign Unit Holder on the Transaction will be
subject to U.S. federal income tax. The Partnership will be required to deduct
and withhold from amounts otherwise distributable to foreign Unit Holders, a tax
(calculated at the highest federal income tax rate applicable to such persons)
based on the amount of Transaction gain allocable to such Unit Holders. Amounts
withheld would be creditable against a foreign Unit Holder's federal income tax
liability and, if in excess thereof, a refund could be obtained from the
Internal Revenue Service by filing a U.S. income tax return.
State Taxes
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<PAGE>
In addition to the federal income tax consequences described above,
Unit Holders should consider potential state and local tax consequences of the
Transaction. A Unit Holder's allocable share of the Partnership's taxable gain
from the Transaction generally will be required to be included in determining
his reportable income for state or local tax purposes in the jurisdiction in
which he is a resident. In addition, a number of states in which the Properties
are located impose a tax on non-resident Unit Holders determined with reference
to their share of Partnership income derived from such state, and the
Partnership will be required to withhold from the initial distribution of $1,055
per Unit an amount estimated by the General Partner to be $20 per Unit on
account of such taxes. To the extent that a non-resident Unit Holder pays tax
(including his share of taxes paid by the Partnership on his behalf) to a state
by virtue of Partnership operations within that state, he may be entitled to a
deduction or credit against tax owed to his state of residence with respect to
the same income. Unit Holders are urged to consult their own tax advisers
concerning the state and local tax consequences to them of the Transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding Units of
the Partnership owned by each person who is known by the Partnership to own
beneficially or exercise voting or dispositive control over more than 5% of the
Partnership's limited partnership assignee units, by each of the directors of
the General Partner of the Partnership and by all directors and executive
officers of the General Partner as a group as of March 1, 1997.
<TABLE>
<CAPTION>
==========================================================================================================================
Name and address of Amount and nature of % of Class
Beneficial Owner Beneficial Owner
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Devon Associates (1)(2) 13,396 36.27
- --------------------------------------------------------------------------------------------------------------------------
All directors and executive -- --
officers as a group (four
persons)
==========================================================================================================================
</TABLE>
- ----------
(1) The business address for Devon Associates is 100 Jericho Quadrangle,
Suite 214, Jericho, New York 11753.
(2) Based upon information supplied to the Partnership by Devon Associates.
The Partnership is a limited partnership and has no officers or
directors. The General Partner has discretionary control over most of the
decisions made by or for the Partnership in accordance with the terms of the
Partnership Agreement. Affiliates of the Partnership's General Partner own less
than one percent of the Partnership's voting securities.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 filed with the Securities and Exchange Commission by the
Partnership (File No. 0-15347) is incorporated by reference in this Proxy
Statement.
All documents and reports filed by the Partnership pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 after the
date of this Proxy Statement and prior to the date of the Meeting shall be
deemed to be incorporated by reference in this Proxy Statement and to be a part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document or report incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein, or in any
other subsequently filed document or report which also is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
EXPERTS
The financial statements incorporated by reference in this Proxy
Statement by reference to the 1996 Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 have been audited by Imowitz Koenig &
Co., LLP, independent certified public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving such reports.
The general discussion under "Certain Federal Income Tax Consequences"
was reviewed by Rosenman & Colin LLP and is included herein in reliance upon the
authority of said firm as experts in taxation.
OTHER MATTERS
The Partnership knows of no other matters to be submitted to the
Meeting. If any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the Units
as the General Partner may recommend.
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<PAGE>
ANNEX A
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT, dated as of March 14, 1997, GROWTH HOTEL INVESTORS, a
California limited partnership (the "Seller"), and EQUITY INNS PARTNERSHIP,
L.P., a Tennessee limited partnership (the "Purchaser"), provides:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION
1. Definitions. The following terms shall have the indicated
meanings:
"Act of Bankruptcy" shall mean if a party hereto (or any
general partner thereof, if such party is a partnership) shall (a) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its Property, (b) admit in writing its inability to pay its debts as they become
due, (c) make a general assignment for the benefit of its creditors, (d) file a
voluntary petition or commence a voluntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect), (e) be adjudicated a bankrupt
or insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or partnership action for the purpose of effecting any
of the foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 consecutive days.
"Assignment Agreement [Operating Agreement]" shall mean that
certain assignment and assumption agreement, in the form attached hereto as
Exhibit E, whereby the Seller assigns and the Purchaser's Lessee assumes the
Operating Agreements.
"Authorizations" shall mean all licenses, permits and
approvals required by any governmental or quasi-governmental agency, body or
officer for the ownership, operation and use of the Property or any part
thereof, including, without limitation, all elevator and pool licenses required
to operate the Property in its current manner.
<PAGE>
"Bill of Sale [Inventory]" shall mean that certain bill of
sale, in the form attached hereto as Exhibit B, conveying title to the Inventory
to the Purchaser's Lessee.
"Bill of Sale [Personal Property]" shall mean that certain
bill of sale, in the form attached hereto as Exhibit C, conveying title to the
Tangible Personal Property and Intangible Personal Property from the Seller to
the Purchaser.
"Closing" shall mean the Closing of the purchase and sale of
the Property pursuant to this Agreement.
"Closing Date" shall mean the date the Deed is recorded in the
appropriate land records.
"Companion Purchase Agreements" shall mean those certain other
Agreements of Purchase and Sale dated as of the date of this Agreement by and
between Purchaser and Aurora/GHI Associates No.1, a California general
partnership, North Coast Syracuse Limited Partnership, an Ohio limited
partnership, Hampton/GHI Associates No.1, a California general partnership,
Growth Hotel Investors II, a California limited partnership, Hampton/GHI
Associates No.2, a Texas general partnership and GHI II Big River Associates, a
California general partnership, respectively.
"Deed" shall mean those certain deeds conveying title to the
Real Property with special warranty of title from the Seller to the Purchaser,
subject only to Permitted Title Exceptions. The description of the Land in the
Deed shall be by courses and distances and, if there is a discrepancy between
the description of the Land attached hereto as an exhibit and the description of
the Land as shown on the Survey, the description of the Land in the Deed shall
be identical to the description shown on the Survey.
"Deposit" shall mean the aggregate amount of Ten Million
Dollars ($10,000,000) deposited with the Escrow Agent by the Purchaser under
this Agreement and all of the Companion Agreements upon full execution and
delivery of this Agreement and all of the Companion Agreements,with all interest
thereon being paid as accrued to Purchaser. The Deposit shall be invested by the
Escrow Agent in a manner acceptable to the Seller and the Purchaser and shall be
held and disbursed by the Escrow Agent in strict accordance with the terms and
provisions of this Agreement.
"Escrow Agent" shall mean the New York City national office of
the Title Company.
"FIRPTA Certificate" shall mean the affidavit of the Seller
under Section 1445 of the Internal Revenue Code certifying that the Seller is
not a foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations), in the form attached hereto as Exhibit D.
2
<PAGE>
"General Partner" shall mean collectively Montgomery Realty
Company-85, a California general partnership, and NPI Realty Management Corp., a
Florida corporation.
"Governmental Body" means any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"Hotel" shall mean the hotels and their related amenities set
forth on Schedule 1 attached hereto.
"Improvements" shall mean the Hotel and all other buildings,
improvements, fixtures and other items of real estate located on the Land
(including any restaurant, pool, parking and recreational areas) located on the
Land.
"Intangible Personal Property" shall mean all intangible
personal property owned by the Seller and used in connection with the ownership,
operation, leasing, occupancy or maintenance of the Property, including, without
limitation, the right to use any trade names and all variations thereof, the
Authorizations, escrow accounts, general intangibles, business records, plans
and specifications, surveys and title insurance policies pertaining to the Real
Property and the Personal Property, warranties, telephone and facsimile numbers
relating to the Property, post office box addresses associated with the
Property, any unpaid award for taking by condemnation or any damage to the Land
by reason of a change of grade or location of or access to any street or
highway, and the share of the Tray Ledger determined under this Agreement,
excluding (a) any of the aforesaid rights the Purchaser elects not to acquire,
(b) the Seller's cash on hand, in bank accounts and invested with financial
institutions and (c) accounts receivable except for the above described share of
the Tray Ledger.
"Inventory" shall mean all inventory located at the Hotel,
including without limitation, all mattresses, pillows, bed linens, towels, paper
goods, soaps, cleaning supplies and other such supplies, together with any food
inventory such as cereal, breakfast rolls, coffee.
"Land" shall mean that those certain parcels of real estate
described on Exhibit A- 1-2 attached hereto, together with all easements,
rights, privileges, remainders, reversions and appurtenances thereunto belonging
or in any way appertaining, and all of the estate, right, title, interest, claim
or demand whatsoever of the Seller therein, in the streets and ways adjacent
thereto and in the beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired.
"Licensor" shall mean Hampton Inns, Inc. or its successor.
"Limited Partner Approval" shall mean the affirmative vote of
a majority in interest of the limited partners of Growth Hotel Investors, a
California limited partnership and Growth Hotel Investors II, a California
limited partnership who are entitled to vote on the sale of the Property.
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"Operating Agreements" shall mean the management agreements,
service contracts, supply contracts, leases and other agreements in effect with
respect to the construction, ownership, operation, occupancy or maintenance of
the Property a true and correct schedule as prepared by Seller's managing agent
of which is attached hereto as Schedule 2.
"Owner's Title Policy" shall mean an owner's policy of title
insurance issued to the Purchaser by the Title Company, pursuant to which the
Title Company insures the Purchaser's ownership of fee simple title to the Real
Property (including the marketability thereof) subject only to Permitted Title
Exceptions. The Owner's Title Policy shall insure the Purchaser in the amount of
the Purchase Price and shall be acceptable in form and substance to the
Purchaser. The description of the Land in the Owner's Title Policy shall be by
courses and distances and shall be identical to the description shown on the
Survey.
"Permitted Title Exceptions" shall mean (i) those exceptions
to title to the Real Property that are satisfactory to the Purchaser as
determined under this Agreement, and (ii) occupancy rights of Hotel guests.
"PIP" shall mean any Property Improvement Plan required by the
Licensor for the transfer or grant of the license to Purchaser's Lessee with
respect to the Property.
"Property" shall mean collectively the Real Property, the
Inventory, the Tangible Personal Property and the Intangible Personal Property.
"Purchase Price" shall mean the allocable portion of the
aggregate purchase price of One Hundred Eighty Two Million Dollars
($182,000,000) applicable to this Agreement and the Companion Agreements
allocated amongst the Hotels in accordance with Schedule 1 payable in the manner
described in this Agreement.
"Purchaser's Lessee" shall mean any lessee of the Purchaser
with respect to the Property, such as Crossroads Future Company, L.L.C., a
Delaware limited liability company, or some other unaffiliated or affiliated
Lessee, or the property manager or designee thereof.
"Real Property" shall mean the Land and the Improvements.
"Reservation System" shall mean the reservation terminals and
reservation system equipment and software, if any, currently used in connection
with the Hotel.
"Seller's Organizational Documents" shall mean the documents
related to the creation, formation and governance of the Seller and the General
Partner.
"Study Period" shall mean the period commencing at 9:00 a.m.
on the date hereof, and continuing through 5:00 p.m., Eastern Standard Time, on
the date forty-five (45) days after the date of execution of this Agreement by
the Purchaser as evidenced on the signature page of the Purchaser to this
Agreement.
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"Survey" shall mean the survey of the Property prepared under
this Agreement.
"Tangible Personal Property" shall mean the items of tangible
personal property consisting of all furniture, fixtures and equipment situated
on, attached to, or used in the operation of the Hotel, and all furniture,
furnishings, equipment, machinery, and other personal property of every kind
located on or used in the operation of the Hotel and owned by the Seller,
including without limitation, the Reservation System, the Telephone System, and
restaurant supplies such as coffee makers, refrigerators, microwave ovens, and
juice machines.
"Telephone System" shall mean all telephones, telephone
systems, PBXs, switches, switchboards, internal wiring, junction boxes, computer
systems, software and other equipment used or usable in connection with
telephonic communications, both internal and external, at the Hotel.
"Title Commitment" shall mean the commitment by the Title
Company to issue the Owner's Title Policy.
"Title Company" shall mean Commonwealth Land Title Insurance
Company.
"Tray Ledger" shall mean the revenue from rooms occupied as of
12:01 a.m. on the Closing Date, exclusive of food, beverage, telephone and
similar charges which shall be retained by the Seller, including any sales
taxes, room taxes or other taxes thereon.
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary for the operation and occupancy
of the Property as a hotel.
1.2 Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The headings contained herein are solely for convenience
of reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement, and therefore any usual
rules of construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Agreement or any exhibits hereto.
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ARTICLE II
PURCHASE AND SALE; DEPOSIT;
PAYMENT OF PURCHASE PRICE
2.1 Purchase and Sale. The Seller agrees to sell and the Purchaser
agrees to purchase the Property for the Purchase Price and in accordance with
the other terms and conditions set forth herein.
2.2 Deposit. The Deposit shall be delivered by the Purchaser to the
Escrow Agent after the full execution and delivery of this Agreement, and the
Escrow Agent shall (a) deliver the Deposit to Purchaser if Closing fails to
occur for any reason other than a default by Purchaser, (b) apply the Deposit at
the Closing against the Purchase Price or (c) pay the Deposit to the Seller as
liquidated damages under this Agreement if Closing fails as a result of a
default by Purchaser, all in accordance with this Agreement.
2.3 Study Period. (a) The Purchaser shall have the right, until 5:00
p.m. on the last day of the Study Period, and thereafter if the Purchaser
notifies the Seller that the Purchaser has elected to proceed to Closing in the
manner described below, to enter upon the Real Property and to perform, at the
Purchaser's expense, such economic, surveying, engineering, environmental and
topographic investigations as the Purchaser may deem appropriate; provided,
however, that Purchaser (i) shall give Seller and Seller's asset manager, Sage
Hospitality Resources, L.P., reasonable prior notice of such inspections and
investigations, including the name of Purchaser's consultant and a description
of the tests and inspections to be performed on the Property, and (ii) Purchaser
shall use its best efforts to minimize any interference with the operation of
the Property. Seller shall have the right to disapprove of Purchaser's
consultant and/or the methods of the proposed tests and inspection on reasonable
grounds (e.g., overly invasive testing means), in which case Purchaser may
propose reasonable alternative consultants and/or testing methods or terminate
this Agreement. Purchaser shall provide Seller a copy of any assessments,
reports or test results obtained by Purchaser from third parties in connection
with such tests and inspections. Purchaser shall keep confidential any
information regarding the Property contained in such reports and shall not
disclose such information to any third party other than the Licensor and
potential lessees, managers, lenders, underwriters, investors and the like (and
their consultants or attorneys engaged to review such reports) except as
required by law or court order or to comply with Purchaser's securities
reporting requirements. If any such disclosure is made by Purchaser, Purchaser
shall instruct any such third party to whom such information is disclosed to
keep such information confidential. If for any reason the Purchaser notifies the
Seller, in writing, prior to the expiration of the Study Period that it has
determined not to proceed to Closing, this Agreement automatically shall
terminate, the Deposit shall be returned to the Purchaser except as expressly
provided herein, and upon return of the Deposit, the Purchaser and the Seller
shall have no further rights, liabilities or obligations hereunder (except as
expressly survive the termination of this Agreement).
(b) During and, if the Purchaser has elected to proceed to
Closing, after the Study Period, the Seller shall make available to the
Purchaser, its agents, auditors, engineers,
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attorneys and other designees, for inspection copies of all existing
architectural and engineering studies, surveys, title insurance policies, zoning
and site plan materials, correspondence, environmental audits and other related
materials or information if any, relating to the Property which are in, or come
into, the Seller's possession.
(c) The Purchaser shall indemnify and defend the Seller
against any loss, damage or claim arising from entry upon the Real Property by
the Purchaser or any agents, contractors or employees of the Purchaser. The
Purchaser, at its own expense, shall restore any damage to the Real Property
caused by any of the tests or studies made by the Purchaser. This
indemnification shall survive any termination of this Agreement or any closing
of the transaction contemplated herein.
(d) During the Study Period, the Purchaser shall examine title
to the Property, and, prior to the expiration of the Study Period, shall notify
the Seller of any defects in title that the Purchaser is unwilling to accept.
Within ten days after such notification, the Seller shall notify the Purchaser
whether the Seller is willing to cure such defects; the Seller's failure to so
notify the Purchaser shall be deemed to be the Seller's refusal to cure all such
defects. If the Seller is willing to cure such defects, the Seller shall act
promptly and diligently to cure such defects at its expense. If such defects
consist of deeds of trust, mechanics' liens, tax liens or other liens or charges
in a fixed sum or capable of computation as a fixed sum by parties claiming by,
through or under Seller, the Seller shall pay and discharge (and the Title
Company is authorized to pay and discharge at Closing) such defects at Closing.
If the Seller is unwilling or unable to cure any other such defects by Closing,
the Purchaser shall elect (1) to waive such defects and proceed to Closing
without any abatement in the Purchase Price or (2) to terminate this Agreement
and receive a full refund of the Deposit. The Seller shall not, after the date
of this Agreement, subject the Property to any liens, encumbrances, covenants,
conditions, restrictions, easements or other title matters or seek any zoning
changes or take any other action which may affect or modify the status of title
without the Purchaser's prior written consent, which consent shall not be
unreasonably withheld or delayed. All title matters revealed by the Purchaser's
title examination and not objected to by the Purchaser as provided above shall
be deemed Permitted Title Exceptions.
(e) Without limiting the generality of Section 2.3(b) above,
upon the execution of this Agreement, the Seller shall deliver to Purchaser
copies of the items set forth in Schedule 3 attached hereto for each of the
Hotels within a reasonable period of time after such execution; provided,
however, Purchaser's sole remedy in the event the Seller does not deliver such
information to Purchaser shall be to terminate the Agreement during the Study
Period. Thereafter the Deposit will be returned to Purchaser and this Agreement
shall terminate and neither the Seller nor the Purchaser shall have any further
rights, liabilities or obligations hereunder (except as expressly survive the
termination of this Agreement).
2.4 Payment of Purchase Price. The Purchase Price shall be paid to
the Seller in the following manner:
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(a) At Closing, the Deposit shall be applied against the
Purchase Price and the Purchaser shall receive a credit against the Purchase
Price in an amount equal to (i) the Deposit, (ii) the amount of the Transfer Fee
(as defined herein) not paid by the Seller on or before the Closing subject to
the limitation set forth in Section 5.1(i) herein, and (iii) the amounts called
for by Section 5.3(i) herein, if any.
(b) The Purchaser shall pay the balance of the Purchase Price,
as adjusted for the payment of transaction expenses and prorations as provided
in this Agreement, to the Seller or other applicable party at Closing by making
a wire transfer of immediately available federal funds to the account of the
Seller or other applicable party as specified in writing by the Seller.
2.5 Allocation of Purchase Price. The parties agree that the Purchase
Price shall be allocated among the Properties pursuant to Schedule 1 attached
hereto. In addition, the Seller and the Purchaser shall use reasonable efforts
to reach an agreement as to the allocation of the various components of the
Property during the Study Period; provided, however if such an agreement cannot
be reached by the expiration of the Study Period, the allocation submitted by
the Seller shall govern.
ARTICLE III
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Purchaser to enter into this Agreement and to purchase
the Property, the Seller hereby makes the following representations, warranties
and covenants with respect to the Property, upon each of which the Seller
acknowledges and agrees that the Purchaser is entitled to rely and has relied:
3.1 Organization and Power. The Seller is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
California, qualified to transact business in the state where the Hotel is
located, and has all requisite powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform its obligations hereunder and under any document
or instrument required to be executed and delivered on behalf of the Seller
hereunder.
3.2 Authorization and Execution. Subject to obtaining Limited Partner
Approval, this Agreement has been duly authorized by all necessary action on the
part of the Seller, has been duly executed and delivered by the Seller, (and
assuming that this Agreement constitutes a valid and binding obligation of
Purchaser) constitutes the valid and binding agreement of the Seller and is
enforceable in accordance with its terms (except as enforcement may be limited
by (and subject to) the provisions of the United States Bankruptcy Code and
other applicable laws which affect the rights and remedies of creditors
generally). There is no other person or entity who has an ownership interest in
the Property or whose consent is required in connection with the Seller's
performance of its obligations hereunder.
3.3 Noncontravention. The execution and delivery of, and the
performance by the Seller of its obligations under, this Agreement do not and
will not contravene, or constitute a
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default under, any provision of applicable law or regulation, and assuming the
Seller obtains Limited Partner Approval, the Seller's Organizational Documents
or any agreement, judgment, injunction, order, decree or other instrument
binding upon the Seller, or result in the creation of any lien or other
encumbrance on any asset of the Seller. Upon (and assuming consummation of) the
Closing, there will be no outstanding agreements (written or oral) pursuant to
which the Seller (or any predecessor to or representative of the Seller) has
agreed to sell or has granted an option or right of first refusal to purchase
the Property or any part thereof which have not expired.
3.4 No Special Taxes; Taxes. The Seller has no knowledge of, nor has it
or to Seller's knowledge any of its managing agents for the respective Hotels
have, received any written notice of, any special taxes or assessments relating
to the Property or any part thereof or any planned public improvements that may
result in a special tax or assessment against the Property. All real estate and
personal property taxes, and to the best of Seller's knowledge all sales and
other taxes assessed against the Seller in connection with the Property or the
operation of the Property have been paid to the extent currently due and owing.
3.5 Compliance with Existing Laws. To Seller's knowledge, the Seller
possesses all requisite Authorizations, each of which is valid and in full force
and effect, and no provision, condition or limitation of any of the
Authorizations has been breached or violated. The Seller has no knowledge, nor
has it or to Seller's knowledge any of its managing agents for the respective
Hotels have, received written notice, of any existing or threatened violation of
any provision of any applicable building, zoning, subdivision, environmental or
other governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
3.6 Operating Agreements. Seller will deliver to Purchaser true and
correct copies of all Operating Agreements as delivered to Seller by Seller's
managing agent during the Study Period. To Seller's knowledge, the Seller has
performed all of its obligations under each of the Operating Agreements and, no
fact or circumstance has occurred which, by itself or with the passage of time
or the giving of notice or both, would constitute a default under any of the
Operating Agreements. The Seller shall not enter into any new management
agreement, maintenance or repair contract, supply contract, lease in which it is
lessee or other agreements with respect to the Property, nor shall the Seller
enter into any agreements modifying the Operating Agreements except in the
ordinary course of business, unless (a) any such agreement or modification will
not bind the Purchaser or the Property after the date of Closing or (b) the
Seller has obtained the Purchaser's prior written consent to such agreement or
modification, which consent shall not be unreasonably withheld or delayed.
3.7 Warranties and Guaranties. The Seller shall not before or after
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to the Improvements and the
Personal Property or any part thereof, except with the prior written consent of
the Purchaser.
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3.8 Insurance. To Seller's knowledge, the Property is adequately
insured against all risks for full replacement value, and all such insurance
policies are valid and in full force and effect, all premiums for such policies
were paid when due and all future premiums for such policies (and any
replacements thereof) shall be paid by the Seller on or before the due date
therefor. The Seller shall pay all premiums on, and shall not cancel or
voluntarily allow to expire, any such Seller's insurance policies unless such
policy is replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced. The Seller agrees to cancel any such policies as of the date of
Closing.
3.9 Condemnation Proceedings; Roadways. Neither the Seller or to
Seller's knowledge any of its managing agents for the respective Hotels, have
received any written notice of any condemnation or eminent domain proceeding
pending or threatened against the Property or any part thereof. The Seller has
no knowledge of any change or proposed change in the route, grade or width of,
or otherwise affecting, any street or road adjacent to or serving the Real
Property.
3.10 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of the Seller, threatened against or affecting the Seller in any
court, before any arbitrator or before or by any Governmental Body which (a) in
any manner raises any question affecting the validity or enforceability of this
Agreement or any other agreement or instrument to which the Seller is a party or
by which it is bound and that is or is to be used in connection with, or is
contemplated by, this Agreement, (b) could materially and adversely affect the
business, financial position or results of operations of the Seller, (c) could
materially and adversely affect the ability of the Seller to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) could create a lien on the Property, any part thereof or any interest
therein, or (e) could otherwise adversely affect the Property, any part thereof
or any interest therein or the use, operation, condition or occupancy thereof,
except for the matters disclosed on Schedule 4 attached hereto.
3.11 Labor Disputes and Agreements. To Seller's knowledge, there are no
labor disputes pending or, threatened as to the operation or maintenance of the
Property or any part thereof. The Seller is not a party to any union or other
collective bargaining agreement with employees employed in connection with the
ownership, operation or maintenance of the Property. The Seller is not a party
to any employment contracts or agreements that will be binding upon the
Purchaser or Purchaser's Lessee after the Closing or otherwise. Neither the
Seller nor its managing agent will, between the end of the Study Period and the
date of Closing, enter into any new employment contracts or agreements or hire
any new employees other than in the ordinary course of business, except with the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed. The Purchaser will not be obligated to give or pay any
amount to any employee of the Seller or the Seller's managing agent unless the
Purchaser or Purchaser's Lessee elects to hire that employee. Neither the
Purchaser nor Purchaser's Lessee shall have any liability under any pension or
profit sharing plan that the Seller or its managing agent may have established
with respect to the Property or their or its employees. All of the Seller's
employees shall be terminated by Seller as of the Closing Date.
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3.12 Financial Information. Seller's income and expense statements
which have been delivered to Purchaser are to Seller's knowledge correct and
complete in all material respects and present accurately the results of the
operations of the Property for the periods indicated as prepared by Seller's
managing agent. The consolidated financial statements for Growth Hotel Investors
for the year ended December 31, 1995 which have or will be delivered to
Purchaser during the Study Period present fairly, in all material respects, the
consolidated financial position of the partnership for the year then ended. The
Seller will deliver the 1996 consolidated financial statements for Growth Hotel
Investors to Purchaser during the Study Period.
3.13 Organizational Documents. The Seller's Organizational Documents
are in full force and effect and have not been modified or supplemented, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default thereunder.
3.14 Operation of Property. The Seller covenants, that between the date
hereof and the date of Closing (a) it will instruct its managing agents for the
Hotel to operate the Property only in the usual, regular and ordinary manner
consistent with the Seller's prior practice, (b) it will, and it will instruct
its managing agents for the Hotel to, maintain its books of account and records
in the usual, regular and ordinary manner, in accordance with sound accounting
principles applied on a basis consistent with the basis used in keeping its
books in prior years and (c) it will, and it will instruct its managing agents
for the Hotel to, use all reasonable efforts to preserve intact its present
business organization, keep available the services of its present officers,
partners and employees and preserve its relationships with suppliers and others
having business dealings with it. The Seller shall direct its managing agents to
continue to use commercially reasonably efforts to take guest room reservations
and to book functions and meetings and otherwise to promote the business of the
Property in generally the same manner as the Seller and its managing agents did
prior to the execution of this Agreement. All advance room bookings and
reservations and all meetings and function bookings shall continue to be booked
at rates, prices and charges heretofore customarily charged by the Seller for
such purposes, and in accordance with the Seller's published rate schedules.
Except as otherwise permitted hereby, from the date hereof until Closing, the
Seller shall not, and shall direct its managing agents to not, take any action
or fail to take action the result of which (i) would have a material adverse
effect on the Property or the Purchaser's ability to continue the operation
thereof after the date of Closing in substantially the same manner as presently
conducted, (ii) would reduce or cause to be reduced any room rents or any other
charges over which the Seller has operational control, or (iii) would cause any
of the representations and warranties contained in this Article III to be untrue
in any material respect as of Closing. Seller shall direct its managing agents
to provide access to the Purchaser daily reports showing the income and expenses
of the Hotel and all departments thereof, together with such periodic
information with respect to room reservations and other bookings, as the Seller
customarily keeps internally for its own use.
3.15 Personal Property. All of the Tangible Personal Property,
Intangible Personal Property and Inventory being conveyed at Closing by the
Seller to the Purchaser or to the Purchaser's managing agent, lessee or
designee, are free and clear of all leases, liens and
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encumbrances and will be so on the date of Closing and the Seller has good,
merchantable title thereto and the right to convey same in accordance with the
terms of the Agreement.
3.16 Bankruptcy. No Act of Bankruptcy has occurred with respect
to the Seller, or any general partner of the Seller if the Seller is a
partnership.
3.17 Brokerage Commission. The Seller has not engaged the services of,
nor is it or will it become liable to, any real estate agent, broker, finder or
any other person or entity for any brokerage or finder's fee, commission or
other amount with respect to the transactions described herein, other than Bear
Stearns & Co., Inc. The Seller shall indemnify and defend the Purchaser against
any loss, damage or claim arising from any claim for a broker's or finder's fee,
commission or other amount due by any party or entity claiming by, through or
under Seller resulting from the transactions contemplated by this Agreement,
which indemnification shall survive any termination of this Agreement.
3.18 Hazardous Substances. Seller has no knowledge: (a) of the presence
of any "Hazardous Substances" (as defined below) on the Property, or any portion
thereof, or, (b) of any spills, releases, discharges, or disposal of Hazardous
Substances that have occurred or are presently occurring on or onto the
Property, or any portion thereof, or (c) of the presence of any PCB transformers
serving, or stored on, the Property, or any portion thereof, and Seller has no
knowledge of any failure to comply with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances (as used herein, "Hazardous
Substances" shall mean any substance or material whose presence, nature,
quantity or intensity of existence, use, manufacture, disposal, transportation,
spill, release or effect, either by itself or in combination with other
materials is either: (1) potentially injurious to the public health, safety or
welfare, the environment or the Property, (2) regulated, monitored or defined as
a hazardous or toxic substance or waste by any Governmental Body, or (3) a basis
for liability of the owner of the Property to any Governmental Body or third
party, and Hazardous Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products, by-products or
components thereof, and asbestos, but shall exclude Hazardous Substances that
are used in the ordinary course of business of the Property in accordance with
applicable legal standards).
3.19 Independent Audit. The Seller shall, and shall direct its managing
agents to, provide access to the Purchaser's representatives to all financial
and other information relating to the Property for audit purposes. The Seller
shall also provide to the Purchaser's representatives a signed letter in
substantially the form attached hereto as Exhibit F in connection with the
normal course of auditing the Property in accordance with generally accepted
auditing standards.
3.20 Bulk Sale Compliance. The Seller shall indemnify the Purchaser
against any claim, loss or liability arising under the bulk sales law applicable
to Seller in connection with the transaction contemplated herein.
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3.21 Liquor Permits. Alcoholic beverages are not served at any of the
Hotels by the Seller or Seller's managing or other agents.
3.22 To Seller's Knowledge. (i) As used in this Agreement, the words
"to Seller's knowledge" or words of similar import shall be deemed to mean, and
shall be limited to, the actual (as distinguished from implied, imputed or
constructive) knowledge of the employees and officers of the General Partner who
are directly responsible for the ownership, operation and sale of the Property,
as well as Michael L. Ashner and Peter Braverman, without such persons having
any obligation to make any independent inquiry or investigation whatsoever,
except for "due inquiry" as described below. Nothing in this Agreement shall be
deemed to create or impose any personal liability of any kind whatsoever on any
of the shareholders, directors, officers, employees or agents of the General
Partner or the within named individuals.
(ii) As used in this Agreement, the words "after due inquiry" or words
of similar import shall be deemed to mean, and shall be limited to mean, that
the General Partner has used its reasonable efforts to confirm in writing the
accuracy of the representations and warranties set forth in this Article III
with the Seller's managing agent for the respective Hotel, and delivered any
such response to the Purchaser during the Study Period. As noted in subparagraph
(i) above, nothing in this Agreement shall be deemed to create or impose any
personal liability of any kind whatsoever on any of the any of the officers or
employees of Seller's managing agents.
3.23 Survival of Seller's Representations and Warranties. The
representations and warranties of Seller contained in this Agreement will
survive the Closing for a period of one year after the Closing Date; and any
claim based upon any alleged breach thereof must be alleged (in writing) within
such one year period. Failure to give notice on any alleged breach within the
time period specified herein shall constitute a waiver of any such claim.
Further, Seller's liability for any such claim, if any, shall in no event exceed
an aggregate amount of $5,000,000 under this Agreement and the Companion
Agreements. In addition, and notwithstanding any other provision of this
Agreement, if Purchaser has actual knowledge of any misrepresentation or breach
of Seller on or prior to the Closing Date, and nevertheless proceeds to close on
the Closing Date, then Purchaser shall be deemed to waive, and hereby waives,
any such misrepresentation or breach.
The Purchaser has the right to rely thereon and that each such
representation, warranty and covenant constitutes a material inducement to the
Purchaser to execute this Agreement and to close the transaction contemplated
hereby and to pay the Purchase Price to the Seller.
ARTICLE IV
PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Seller to enter into this Agreement and to sell the
Property, the Purchaser hereby makes the following representations, warranties
and covenants with respect to the Property, upon each of which the Purchaser
acknowledges and agrees that the Seller is entitled to rely and has relied:
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4.1 Organization and Power. The Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Tennessee, and has all partnership powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform its obligations under this Agreement and any
document or instrument required to be executed and delivered on behalf of the
Purchaser hereunder.
4.2 Authorization and Execution. Subject to obtaining board of director
approval of the corporate general partner of the Purchaser, this Agreement has
been duly authorized by all necessary action on the part of the Purchaser, has
been duly executed and delivered by the Purchaser, (and assuming that this
Agreement constitutes a valid and binding obligation of Seller) constitutes the
valid and binding agreement of the Purchaser and is enforceable in accordance
with its terms (except as enforcement may be limited by (and subject to) the
provisions of the United States Bankruptcy Code and other applicable laws which
affect the rights and remedies of creditors generally. There is no other person
or entity whose consent is required in connection with the Purchaser's
performance of its obligations hereunder.
4.3 Noncontravention. The execution and delivery of this Agreement and
the performance by the Purchaser of its obligations hereunder do not and will
not contravene, or constitute a default under, any provisions of applicable law
or regulation, the Purchaser's partnership agreement or any agreement, judgment,
injunction, order, decree or other instrument binding upon the Purchaser or
result in the creation of any lien or other encumbrance on any asset of the
Purchaser.
4.4 Litigation. There is no action, suit or proceeding, pending or
known to be threatened, against or affecting the Purchaser in any court or
before any arbitrator or before any Governmental Body which (a) in any manner
raises any question affecting the validity or enforceability of this Agreement
or any other agreement or instrument to which the Purchaser is a party or by
which it is bound and that is to be used in connection with, or is contemplated
by, this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of the Purchaser, (c) could
materially and adversely affect the ability of the Purchaser to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) could create a lien on the Property, any part thereof or any interest
therein or (e) could adversely affect the Property, any part thereof or any
interest therein or the use, operation, condition or occupancy thereof.
4.5 Bankruptcy. No Act of Bankruptcy has occurred with respect to the
Purchaser.
4.6 Brokerage Commission. The Purchaser has not engaged the services
of, nor is it or will it become liable to, any real estate agent, broker, finder
or any other person or entity for any brokerage or finder's fee, commission or
other amount with respect to the transaction described herein. The Purchaser
shall indemnify and defend the Seller against any loss, damage or claim arising
from any claim for a broker's or finder's fee, commission or other amount due
any person or entity claiming by, through or under Purchaser resulting from the
transactions
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contemplated by this Agreement, which indemnification shall survive any
termination of this Agreement.
4.7 No Other Representations or Warranties: AS-IS.
(a) Purchaser represents, warrants and agrees that (i) except
as, and solely to the extent, specifically set forth in this Agreement, neither
Seller nor any of the employees, agents or attorneys of Seller make any verbal
or written representations, warranties, promises or guaranties whatsoever to
Purchaser, whether express or implied, of any sort or nature relating to the
condition (physical, financial or otherwise) or operation of the Property, the
access, fitness for any specific use, merchantability, habitability, or the lie
and topography, of all or any portion of the Property, the existence, location
or availability of utility lines for water, sewer, drainage, electricity or any
other utility, the income-producing potential of the Hotel, the competition or
market of the Hotel or the actual or projected revenue and expenses of the
Property, the laws, regulations and rules applicable to the Property or the
compliance (or non-compliance) of the Property therewith, any environmental
laws, regulations and rules (or other laws relative to Hazardous Materials)
applicable to the Property or the compliance (or non-compliance) of the Property
therewith, the quantity, quality or condition of the articles of personal
property included in the transactions contemplated hereby, the use or occupancy
of the Property or any part thereof or any other matter or thing affecting or
relating to the Property or the transactions contemplated hereby, and Purchaser
has not relied upon any such representations, warranties, promises or guarantees
or upon any statements made in any informational brochure with respect to the
Property, and (ii) upon the expiration of the Study Period and provided
Purchaser does not elect to terminate the Agreement as provided for herein, the
Purchaser will have examined the Property, and based upon such examination, will
be familiar with the physical condition thereof, and will have conducted such
investigations of the financial affairs and management of the Property as
Purchaser considered appropriate, and elected to proceed with the transaction
having made and relied solely on Purchaser's own independent investigation,
inspection, analysis, appraisal, examination and evaluation of the facts and
circumstances except as, and solely to the extent, specifically set forth in
this Agreement.
(b) Except as specifically provided for in this Agreement,
Purchaser agrees to accept the Property "as is" in its present condition,
subject to reasonable use, wear, tear and natural deterioration of the Property
between the date of this Agreement and the Closing Date.
ARTICLE V
CONDITIONS AND ADDITIONAL COVENANTS
5.1 The Purchaser's obligations hereunder are subject to the
satisfaction of the following conditions precedent and the compliance by the
Seller with the following covenants:
(a) Seller's Deliveries. The Seller shall have delivered
to the Escrow Agent or the Purchaser, as the case may be, on or before the date
of Closing, all of the documents called for by Section 6.2 hereof.
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(b) Representations, Warranties and Covenants; Obligations of
Seller; Certificate. All of the Seller's representations and warranties made in
this Agreement shall be true and correct as of the date hereof and as of the
date of Closing as if then made in all material respects, there shall have
occurred no material adverse change in the financial condition of the Property
since the date hereof, the Seller shall have performed all of its covenants and
other obligations under this Agreement and the Seller shall have executed and
delivered to the Purchaser at Closing a certificate pertaining to its
representations and warranties as set forth in Article III.
(c) Title Insurance. Good and marketable fee simple title to
the Real Property shall be insurable as such by the Title Company at or below
its regularly scheduled rates subject only to Permitted Title Exceptions as
determined in accordance with Section 2.3.
(d) Survey. The Purchaser shall have obtained prior to the
expiration of the Study Period a current Survey of the Land delineating the
boundary lines of the Land, the location of the Improvements, all rights of way
and easements thereon and contiguous public roads and otherwise acceptable to
the Purchaser. The Survey shall be prepared for the benefit of, and shall be
certified to, the Purchaser and the Title Company. Furthermore, the Survey shall
be adequate for the Title Company to delete any exception for general survey
matters in the Owner's Title Policy.
(e) Title to Property. The Purchaser shall have determined
prior to the expiration of the Study Period that the Seller is the sole owner of
good and marketable fee simple title to the Real Property and to the Tangible
Personal Property free and clear of all liens, leases, encumbrances,
restrictions, conditions and agreements except for Permitted Title Exceptions.
The Seller shall not have taken any action from the date hereof and through and
including the date of Closing that would adversely affect the status of title to
the Real Property.
(f) Condition of Improvements. The Improvements and the
Tangible Personal Property (including but not limited to the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall at Closing be in substantially the same condition as
at the expiration of the Study Period, normal wear and tear and casualty
excepted. Prior to Closing, the Seller shall not have diminished the quality or
quantity of maintenance and upkeep services heretofore provided to the Real
Property and the Tangible Personal Property and the Seller shall not have
diminished the Inventory except in the ordinary course of business. The Seller
shall not have removed or caused or permitted to be removed any part or portion
of the Real Property or the Tangible Personal Property unless the same is
replaced, prior to Closing, with similar items of at least equal quality and
acceptable to the Purchaser.
(g) Utilities. The Purchaser shall determine during the Study
Period that all of the Utilities shall be installed in and operating at the
Property, and service shall be available for the removal of garbage and other
waste from the Property.
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(h) Land Use. The Purchaser shall determine during the Study
Period that the current use and occupancy of the Property for hotel purposes are
permitted as a matter of right as a principal use under all laws applicable
thereto without the necessity of any special use permit, special exception or
other special permit, permission or consent.
(i) Franchise. The Purchaser or its designee shall have
received a franchise or license or commitment to enter into franchise or license
with respect to the Hotel from the Licensor for a minimum term of ten (10) years
from the date hereof, all upon Licensor's customary terms and conditions, and
otherwise reasonably acceptable to the Purchaser. The Purchaser will use its
best efforts to obtain such approval and shall pay its expenses associated
therewith. The Seller shall assist the Purchaser in respect thereto, and shall
pay the reasonable transfer fees imposed by Licensor in connection with the
transfer of the license to the Purchaser not to exceed an aggregate amount of
$1,500,000 for all of the Hotels under this Agreement and the Companion
Agreements (the "Transfer Fee").
(j) Approval. The obligations of the Purchaser under this
Agreement are subject to the approval of the board of directors of Equity Inns
Trust, general partner of the Purchaser, which approval shall be obtained prior
to the expiration of the Study Period.
(k) Management Agreement. The Seller shall have (a)
canceled any existing management agreement with respect to the Property
effective on or before the Closing Date and (b) paid any termination fee
required thereunder.
5.2 The Seller's obligations hereunder are subject to the
satisfaction of the following conditions precedent and the compliance by the
Purchaser with the following cove nants:
(a) Approval. The obligations of the Seller under this
Agreement are subject to Seller's receipt of Limited Partner Approval, which
approval shall be sought upon expiration of the Study Period; the Seller shall
use its reasonable efforts to obtain such consent promptly upon expiration of
the Study Period. The Purchaser shall be entitled to review only those
disclosures pertaining to the Purchaser's organization and background
information set forth in any proxy statement submitted by the Seller to the
Securities and Exchange Commission; Purchaser's failure to comment on any such
disclosure materials within two (2) business days after receipt shall be deemed
Purchaser's acceptance of such disclosures.
(b) Franchise. The existing franchise agreements with respect
to the Hotel with the Licensor shall have been terminated as of the Closing Date
with no further liability to Seller other than the payment of the Transfer Fee
and performance of all obligations under the franchise agreement through the
date of Closing; the Seller shall use its reasonable efforts to obtain such
agreement to terminate from the Licensor.
5.3 The obligations of the parties hereunder are subject to the
satisfaction of the following conditions precedent and the compliance by the
Purchaser or Seller of the following covenants:
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(i) a PIP in sufficient detail (including the costs thereof)
mutually acceptable to the Seller and the Purchaser shall have been obtained
from Licensor prior to the expiration of the Study Period at Seller's expense.
Prior to Closing, Seller shall undertake to complete the improvements required
by the PIP, or alternatively provide Purchaser a credit against the Purchase
Price at Closing for those improvements not completed prior to Closing in the
amount set forth in the PIP for the cost of materials or completion of work; and
(ii) the simultaneous consummation of settlement under the
Companion Agreements; provided, however, if there is a failure of a condition
precedent under the Agreement or Companion Agreements as to one or more of the
Hotels, but not as to all of the Property, upon the mutual consent of the Seller
and the Purchaser, the Agreement or Companion Agreements may terminate as to
such Hotel or Hotels only and close on the remaining Hotels, and the Purchaser
would receive a prorata credit against the Purchaser Price per Schedule 1 for
such excluded Hotel or Hotels.
ARTICLE VI
CLOSING
6.1 Closing. Closing shall be held in the offices of the Escrow Agent,
or at a location that is mutually acceptable to the parties, on May 30, 1997.
Possession of the Property shall be delivered to the Purchaser at Closing,
subject only to Permitted Title Exceptions and the occupancy rights of Hotel
guests.
6.2 Seller's Deliveries. At Closing, the Seller shall deliver to
Purchaser all of the following instruments, each of which shall have been duly
executed and, where applicable, acknowledged on behalf of the Seller and shall
be dated as of the date of Closing:
(a) The certificate required by Section 5.2.
(b) The Deed.
(c) The Bill of Sale [Inventory].
(d) The Bill of Sale [Personal Property].
(e) Certificate(s)/Registration of Title for
any vehicle owned by the Seller and used in connection with the Property.
(f) A certificate or letter from the Licensor
with respect to the Property terminating as of the date of Closing the
franchise of Seller with respect to the Property and stating the termination
date and that all transfer/termination fees have been paid for by Seller
subject to the limitation set forth in Section 5.1(i) herein.
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(g) Such agreements, affidavits or other
documents, including, if necessary, the Seller's partnership agreement, as may
be required by the Title Company to issue the Owner's Title Policy.
(h) The FIRPTA Certificate.
(i) True, correct and complete copies of all
warranties, if any, of manufacturers, suppliers and installers possessed by the
Seller and relating to the Improvements and the Personal Property, or any part
thereof (which shall be delivered at the Property).
(j) Certified copies of the Seller's
Organizational Documents.
(k) Appropriate instruments, approvals and
consents of the Seller authorizing (1) the execution on behalf of the Seller of
this Agreement and the documents to be executed and delivered by the Seller
prior to, at or otherwise in connection with Closing, and (2) the performance
by the Seller of its obligations hereunder and under such documents.
(l) A valid, final and unconditional
certificate of occupancy or the like for the Property issued by the
appropriate governmental authority at the time of completion of the Hotel.
(m) All the Operating Agreements (which shall
be delivered at the Property).
(n) The written consent of the Licensor to the
transfer of the license, if applicable, and if so required.
(o) All current real estate and personal
property tax bills in the Seller's possession or under its control.
(p) A complete set of all guest registration
cards, guest transcripts, guest histories, and all other available guest
information (which shall be delivered at the Property).
(q) An updated schedule of employees, showing
salaries and duties with a statement of the length of service of each such
employee, brought current to a date not more than 48 hours prior to the Closing.
(r) A complete list of all advance room
reservations, functions and the like, in reasonable detail so as to enable the
Purchaser to honor the Seller's commitments in that regard (which shall be
delivered at the Property).
(s) A list of the Seller's outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due the Seller.
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(t) All keys for the Property (which shall be
delivered at the Property).
(u) All books, records, operating reports,
appraisal reports, files and other materials in the Seller's possession or
control which are necessary in the Purchaser's discretion to maintain
continuity of operation of the Property (which shall be delivered at the
Property).
(v) Written notice executed by Seller
notifying all interested parties, including all tenants under any leases of
the Property, that the Property has been conveyed to the Purchaser and
directing that all payments, inquiries and the like be forwarded to the
Purchaser at the address to be provided by the Purchaser.
(w) Any other document or instrument
reasonably requested by the Purchaser or required hereby.
6.3 Purchaser's Deliveries. At Closing, the Purchaser shall pay
or deliver to the Seller the following:
(a) The Purchase Price.
(b) Any other document or instrument reasonably
requested by the Seller or required hereby.
(c) Such agreements, affidavits or other documents as
may be required by the Title Company to issue the Owner's Title Policy.
6.4 Mutual Deliveries. At Closing, the Purchaser (or, as
applicable, the Purchaser's Lessee) and the Seller shall mutually execute and
deliver each to the other:
(a) The Assignment Agreement [Operating Agreements].
(b) A closing statement reflecting the Purchase Price and the
adjustment and prorations required hereunder and the allocation of income and
expenses required hereunder.
(c) Such other and further documents as may be reasonably
required by either party hereto or their respective counsel.
6.5 Closing Costs. Except as is otherwise provided in this Agreement,
each party hereto shall pay its own legal fees and expenses. Seller shall pay
for all filing fees for the Deed, the preparation of the documents to be
delivered by the Seller hereunder, and for the releases of any deeds of trust,
mortgages and other financing encumbering the Property and for any costs
associated with any corrective instruments. The Seller shall pay all sales taxes
and similar impositions through the date of Closing and all sales taxes assessed
as a result of the transaction contemplated by this Agreement. If Closing
occurs, the Purchaser shall pay the real estate
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transfer, recording or other similar taxes due with respect to the transfer of
title, all charges for title insurance premiums, surveys, UCC financing searches
and zoning verifications and all other costs (except any costs incurred by the
Seller for its own account) in carrying out the transactions contemplated
hereunder.
6.6 Income and Expense Allocations. All income, except any Intangible
Personal Property, and expenses with respect to the Property, and applicable to
the period of time before and after Closing, determined in accordance with sound
accounting principles consistently applied, shall be allocated between the
Seller and the Purchaser as set forth below. The Seller shall be entitled to all
income and responsible for all expenses for the period of time up to but not
including the date of Closing, and the Purchaser shall be entitled to all income
and responsible for all expenses for the period of time from, after and
including the date of Closing. Only adjustments for ground rent, if any, and
real estate taxes shall be shown on the settlement statements (with such
supporting documentation as the parties hereto may require being attached as
exhibits to the settlement statements) and shall increase or decrease (as the
case may be) the cash portion of the Purchase Price payable by the Purchaser.
All other such adjustments shall be made by separate agreement between the
Purchaser, the Purchaser's Lessee, and the Seller and shall be payable by check
or wire directly between such parties. Without limiting the generality of the
foregoing, the following items of income and expense shall be allocated at
Closing:
(a) Current and prepaid rents (not including rentals for
individual guest hotel rooms), including, without limitation, prepaid room
receipts, function receipts and other reservation receipts (all of which items
shall be credited to the Purchaser's Lessee).
(b) Real estate and personal property taxes (which shall be
prorated between the Seller and the Purchaser).
(c) Amounts under the Operating Agreements (which shall be
prorated between the Seller and the Purchaser's Lessee).
(d) Utility charges (including but not limited to charges for
water, sewer and electricity) (which shall be prorated between the Seller and
the Purchaser's Lessee).
(e) Value of fuel stored on the Property at the price paid for
such fuel by the Seller, including any taxes (which shall be credited to the
Seller).
(f) All prepaid reservations and contracts for rooms confirmed
by the Seller prior to the Closing Date for dates after the Closing Date, all of
which the Purchaser shall honor (all of which items shall be credited to the
Purchaser's Lessee).
The Purchaser's Lessee shall purchase the Tray Ledger from the Seller
for the full actual value thereof, less a deduction for any amounts charged by
credit card issuers or clearing houses. Notwithstanding the foregoing, room
revenues for the evening preceding Closing shall be divided equally between the
Seller and the Purchaser's Lessee.
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At Closing, the Seller shall pay to all persons employed at the
Property by the Seller all wages, accrued vacation pay, pension and welfare
benefits, and other fringe benefits.
Neither the Purchaser nor the Purchaser's Lessee shall be obligated to
collect any accounts receivable or revenues accrued prior to the Closing Date
for the Seller, but if the Purchaser or the Purchaser's Lessee collects same,
such amounts will be promptly remitted to the Seller in the form received.
If accurate allocations cannot be made at Closing because current bills
are not obtainable (as, for example, in the case of utility bills or tax bills),
the parties shall allocate such income or expenses at Closing on the best
available information, subject to adjustment upon receipt of the final bill or
other evidence of the applicable income or expense. Any income received or
expense incurred by the Seller, the Purchaser or the Purchaser's Lessee with
respect to the Property after the date of Closing shall be promptly allocated in
the manner described herein and the parties shall promptly pay or reimburse any
amount due. The Seller shall pay at Closing all special assessments and taxes
applicable to the Property due and payable prior to Closing.
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ARTICLE VII
CONDEMNATION; RISK OF LOSS
7.1 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, the Seller shall give written
notice thereof to the Purchaser promptly after the Seller learns or receives
notice thereof. If all or any part of the Real Property is, or is to be, so
condemned or sold, the Purchaser shall have the right to terminate this
Agreement only with respect to the Hotel so affected and an adjustment will made
to the Purchase Price in accordance with Schedule 1 attached hereto to reflect
the loss of the Hotel. If the Purchaser elects not to terminate this Agreement,
all proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to the
Purchaser at Closing.
7.2 Risk of Loss; Casualty. The risk of any loss or damage to the
Property prior to the recordation of the Deed shall remain upon the Seller. If,
prior to Closing the Property is damaged by fire or other casualty to the extent
that the cost of repairing such damage shall be $100,000 or more, the Purchaser
shall have the right, upon notice in writing to the Seller delivered within 15
days after actual notice of such fire or other casualty, to terminate this
Agreement only with respect to the Hotel so affected and an adjustment will made
to the Purchase Price in accordance with Schedule 1 attached hereto to reflect
the loss of the Hotel, whereupon the Deposit shall be returned immediately to
the Purchaser, and neither party shall have any further liability to the other
hereunder. If the Purchaser does not elect, or is not entitled, to terminate
this Agreement, the Purchase Price shall not be reduced except as hereinafter
set forth, but the Purchaser shall be entitled to an assignment of all of the
Seller's share of the proceeds of fire or other casualty insurance and rent
insurance proceeds (if any) payable, and the Seller shall have no obligation to
repair or restore the Property; provided, however, that the Purchase Price shall
be reduced by an amount equal to the sum of (1)) the "deductible" applied by the
Seller's insurer with respect to such fire or casualty and (2) the amount by
which the proceeds of such insurance will be reduced by reason of the
application of any co-insurance clause in the Seller's insurance policy. If the
Purchaser proceeds to Closing hereunder, the Seller shall not compromise, settle
or adjust any claims to such proceeds or awards, without the Purchaser's prior
written consent, not to be unreasonably withheld or delayed.
ARTICLE VIII
LIABILITY OF PURCHASER; INDEMNIFICATION;
TERMINATION RIGHTS
8.1 Liability of Purchaser. Except for any obligation expressly assumed
or agreed to be assumed by the Purchaser hereunder, the Purchaser does not
assume any obligation of the Seller or any liability for claims arising out of
any occurrence prior to Closing.
8.2 Indemnification by the Seller and the Purchaser.
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(a) Seller agrees to indemnify, defend and hold Purchaser and
its affiliates and any of their partners, shareholders, directors, officers,
employees and agents entirely harmless against and from any claim, demand, cause
of action, judgment, damage, loss, liability, cost or expense (including
attorneys' fees and expenses), which the Purchaser may suffer, sustain, incur or
otherwise become subject to (either directly or indirectly as a result of any
affiliate of Purchaser suffering, sustaining, incurring or otherwise becoming
subject to same), as a result of, in whole or in part by any and all obligations
to, liabilities to or claims asserted by any third parties pertaining to any
injury to or the death of any person or damage to property of third parties in
any way relating to or arising from Seller's ownership of the Property prior to
Closing (except to the extent caused by Purchaser or its agents).
(b) Purchaser agrees to indemnify, defend and hold Seller and
its affiliates and any of their partners, shareholders, directors, officers,
employees and agents entirely harmless against and from any claim, demand, cause
of action, judgment, damage, loss, liability, cost or expense (including
attorneys' fees and expenses), which the Seller may suffer, sustain, incur or
otherwise become subject to (either directly or indirectly as a result of any
affiliate of Seller's suffering, sustaining, incurring or otherwise becoming
subject to same), as a result of, in whole or in part by any and all obligations
to, liabilities to or claims asserted by any third parties pertaining to any
injury to or the death of any person or damage to property of third parties in
any way relating to or arising from Purchaser's ownership of the Property
subsequent to Closing (except to the extent caused by Seller or its agents).
(c) Whenever either party shall learn through the filing of a
claim or the commencement of a proceeding or otherwise of the existence of any
liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
within a reasonable period of time and furnish copies of such documents (and
make originals thereof available) and such other information as such party may
have that may be used or useful in the defense of such claims and shall afford
said other party full opportunity to defend the same in the name of such party
and generally shall cooperate with said other party in the defense of any such
claim.
(d) The provisions of this Section 8.2 shall survive the
Closing of this Agreement.
8.3 Termination by the Purchaser. If any condition set forth herein
cannot or will not be satisfied prior to Closing, or upon the occurrence of any
other event that would entitle the Purchaser to terminate this Agreement and its
obligations hereunder, and the Seller fails to cure any such matter within ten
business days after notice thereof from the Purchaser, the Purchaser, at its
option, may elect either (a) to terminate this Agreement and the Companion
Agreements whereupon the Escrow Agent shall return the Deposit to Purchaser and
Seller shall pay Purchaser five hundred thousand dollars ($500,000.00) under
this Agreement and the Companion Agreements as agreed-upon liquidated damages
and not as a penalty, it being otherwise difficult or impossible to estimate
Purchaser's actual damages, and which liquidated damages shall be in lieu of any
other damages or the right to specific performance; or (b) be entitled to sue
Seller for
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specific performance of this Agreement and the Companion Agreements provided,
however, Seller shall not be required to expend in excess of Five Hundred
Thousand Dollars ($500,000.00) under this Agreement and the Companion Agreements
to correct any matter Seller did not deliberately cause; or (c) only if
Purchaser shall not be entitled to specific performance by reason of Seller's
conveying or encumbering all or any part of the Property subsequent to the date
of this Agreement, terminate this Agreement and the Companion Agreements by
giving written notice of termination to Seller, receive a full and immediate
refund of the Deposit and all interest earned thereon, and seek damages for
breach of this Agreement and the Companion Agreements by Seller.
8.4 Termination by Seller. If, prior to Closing, the Purchaser defaults
in performing any of its obligations under this Agreement (including its
obligation to purchase the Property), and the Purchaser fails to cure any such
default within ten business days after notice thereof from the Seller, then the
Seller's sole remedy for such default shall be to terminate this Agreement and
retain the Deposit. The Seller and the Purchaser agree that, in the event of
such a default, the damages that the Seller would sustain as a result thereof
would be difficult if not impossible to ascertain. Therefore, the Seller and the
Purchaser agree that, the Seller shall retain the Deposit as full and complete
liquidated damages and as the Seller's sole remedy.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Completeness; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.
9.2 Assignments Except as otherwise set forth in this Section, neither
the Seller nor the Purchaser shall have the right to assign all or any part of
its interest in this Agreement without the prior written consent of the other
party, which consent may be withheld in the parties sole discretion, and any
such attempted assignment without the other party's consent shall be null and
void and of no further force or effect. Notwithstanding the foregoing, the
Purchaser shall have the right, power and authority to assign this Agreement and
all rights hereunder to any affiliated entity or an entity in which the
Purchaser or a principal of the Purchaser has a fifty percent (50%) ownership
and control interest or, for a limited partnership, in which the Purchaser or a
principal of the Purchaser is the managing general partner or, for a limited
liability company, in which the Purchaser or a principal of the Purchaser is the
managing member. The Purchaser shall be and remain liable and responsible for
payment and performance of all obligations hereunder or undertaken by the
Purchaser to be paid or performed pursuant to any permitted assignment.
9.3 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
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9.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
9.5 Governing Law. This Agreement and all documents referred to
herein shall be governed by and construed and interpreted in accordance with
the laws of the state of New York.
9.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
9.7 Severability. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9.8 Costs. Regardless of whether Closing occurs hereunder, and except
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation fees of attorneys, engineers
and accountants.
9.9 Escrow Agent. (a) The Escrow Agent shall hold the Deposit in escrow
in a separate segregated bank account (or as otherwise agreed in writing by the
Seller and the Purchaser) until the Closing or sooner termination hereof and
shall pay over or apply such proceeds in accordance with the terms of this
Section. The Escrow Agent shall invest the Deposit in such manner agreed to in
writing by the Seller and the Purchaser or, in the absence of any such written
instructions, in an interest bearing account at Citibank, N.A.. At Closing, the
Deposit shall be paid by the Escrow Agent to the Seller and applied to the
Purchase Price as a credit for the Purchaser. The reasonable fees and expenses
of Escrow Agent shall be paid one-half by the Seller and one-half by the
Purchaser. If the Escrow Agent receives a copy of a notice to the Seller from
the Purchaser prior to the expiration of the Study Period terminating this
Agreement and the Companion Agreements, then the Escrow Agent shall promptly
refund the Deposit to the Purchaser, without the necessity of any further
notice, act or authorization, including, without limitation, any notice to or
from the Seller, and notwithstanding any objection or other act or notice by the
Seller. The Seller hereby unconditionally and irrevocably releases the Escrow
Agent from any liability for returning the Deposit to the Purchaser in the event
the Purchaser gives such notice of termination of this Agreement and the
Companion Agreements prior to the expiration of the Study Period.
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(b) After the expiration of the Study Period, if for any
reason Closing does not occur and either party makes a written demand upon the
Escrow Agent for payment or delivery of the Deposit, the Escrow Agent shall give
written notice to the other party of such demand. If the Escrow Agent does not
receive a written objection from the other party to the proposed payment within
10 business days after the giving of such notice, the Escrow Agent is hereby
authorized to make such payment. If the Escrow Agent does receive such written
objection within such 10 day period or if for any other reason the Escrow Agent
in good faith shall elect not to make such payment, the Escrow Agent shall
continue to hold the Deposit until otherwise directed by written instructions
from the parties hereto or a final judgment of a court of competent
jurisdiction, which by lapse of time or otherwise, shall no longer be or shall
not be subject to appeal or reversal. The Escrow Agent shall, however, have the
right at any time to file a suit with a court of competent jurisdiction and to
deliver or pay the Deposit to such court (or an officer thereof). The Escrow
Agent shall give written notice of such deposit to the Seller and the Purchaser.
Upon such deposit, the Escrow Agent shall be relieved of and discharged from all
further obligations and responsibilities hereunder. The provisions of this
paragraph shall not be applicable to a return of the Deposit as a result of a
termination of this Agreement during the Study Period, which shall be governed
by Section 9.9(a).
(c) The parties acknowledge that the Escrow Agent is acting at
their request and convenience and solely as a stakeholder, that the Escrow Agent
shall not be deemed to be the agent of either of the parties and that the Escrow
Agent shall not be liable to either of the parties for any act or omission on
its part unless taken or suffered in bad faith, in willful disregard of this
contract or involving gross negligence. The Seller and the Purchaser hereby
jointly and severally indemnify and hold the Escrow Agent harmless from and
against all liabilities, costs, claims and expenses (including reasonable
attorneys' fees) incurred in connection with the performance by the Escrow Agent
of its duties hereunder, except with respect to actions or omissions taken or
suffered by the Escrow Agent in bad faith, in willful disregard of this contract
or involving gross negligence on the part of the Escrow Agent.
(d) The Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Section 9.9 of this Agreement or its duties hereunder, and it
shall incur no liability and shall be fully protected in respect of any action
taken, omitted or suffered by it in good faith in accordance with the advice of
such counsel.
(e) The Escrow Agent may resign at any time upon thirty (30)
days prior written notice. In the case of Escrow Agent's resignation, the Escrow
Agent's only duty, until a successor escrow agent shall have been appointed
jointly by the Seller and the Purchaser and shall have accepted such
appointment, shall be to hold and dispose of the Deposit in accordance with the
provisions contained in this Agreement (but without regard to any notices,
requests, instructions or demands received by the Escrow Agent from the Seller
and/or the Purchaser after its notice of resignation shall have been given,
unless the same shall be a direction by both the Seller and the Purchaser that
the entire balance of the Deposit be delivered out of escrow).
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9.10 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, sent prepaid by
Federal Express (or a comparable overnight delivery service) or sent by the
United States mail, certified, postage prepaid, return receipt requested, at the
addresses and with such copies as designated below. Any notice, request, demand
or other communication delivered or sent in the manner aforesaid shall be deemed
given or made (as the case may be) when actually delivered to the intended
recipient.
If to the Seller:
NPI Realty Management Corp.
c/o IFGP Corporation
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attn: William H. Jarrard, Jr.
With copy to: Post & Heymann, LLP
100 Jericho Quadrangle, Suite 214
Jericho, New York 11753
Attn: William W. Post, Esquire
If to the Purchaser: Equity Inns Partnership, L.P.
c/o Equity Inns, Inc.
4735 Spottswood Avenue, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
with a copy to: Hunton & Williams
1751 Pinnacle Drive
Suite 1700
McLean, Virginia 22102
Attn: Gerald R. Best, Esq.
Or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and the Escrow Agent in a manner described in this Section.
9.11 Incorporation by Reference. All of the exhibits attached hereto
are by this reference incorporated herein and made a part hereof.
9.12 Further Assurances. The Seller and the Purchaser each covenant and
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be
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reasonably required by either party hereto for the purpose of or in connection
with consummating the transactions described herein.
9.13 No Partnership. This Agreement does not and shall not be construed
to create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Seller and Purchaser specifically
established hereby.
9.14 Time of Essence. Time is of the essence with respect to every
provision hereof.
9.15 Confidentiality. The Seller and the Purchaser and their
representatives, including any brokers or other professionals, shall keep the
existence and terms of this Agreement strictly confidential, except to the
extent disclosure is compelled by law, and then only to the extent of such
compulsion, and except to the Licensor, potential lessees, lenders, managers,
underwriters, investors and the like and their agents, employees, consultants,
managers, accountants, lawyers and other professional advisers on a need to know
basis.
9.16 Operating Lease. The Seller (a) acknowledges that, prior,
simultaneously with or after Closing, the Purchaser may lease the Property to a
Purchaser's Lessee, and (b) agrees that any such Purchaser's Lessee (and any
guarantor of the obligations of the Purchaser's Lessee under such lease) shall
be entitled to the benefit of such rights and remedies of the Purchaser under
this Agreement (including, without limitation, the representations and
warranties of the Seller contained in this Agreement) to the extent hereafter
specified by the Purchaser. Further, Purchaser's mortgagee shall be entitled to
the benefit of such rights and remedies of the Purchaser under this Agreement,
provided that such mortgagee agrees to assumes the obligations of Purchaser
herein as if such mortgagee was the purchaser hereunder.
9.17 Survival. The provisions of this Article IX shall survive the
Closing or earlier termination of this Agreement.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed in their names by their respective duly-authorized
representatives.
[SIGNATURES ON FOLLOWING PAGE]
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SIGNATURE PAGE
AGREEMENT OF PURCHASE AND SALE
SELLER:
GROWTH HOTEL INVESTORS,
a California limited partnership
By: MONTGOMERY REALTY COMPANY-85,
a California general partnership,
its general partner
By: NPI REALTY MANAGEMENT CORP.,
a Florida corporation,
its managing general partner
By: _________________________
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SIGNATURE PAGE
AGREEMENT OF PURCHASE AND SALE
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P., a Tennessee
limited partnership
By: EQUITY INNS TRUST, a Maryland real
estate investment trust, its general partner
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
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ACKNOWLEDGMENT OF ESCROW AGENT
Commonwealth Land Title Insurance Company, as Escrow Agent, hereby
acknowledges receipt of the foregoing Agreement of Purchase and Sale, and agrees
to perform its duties as Escrow Agent consistently therewith.
Commonwealth Land Title Insurance Company
By: ________________________
Title:_______________________
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EXHIBIT A
LAND
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SCHEDULE 3
CONTRACT DELIVERIES
(a) Past 3 years and year-to-date detailed income and expense
statements. Monthly income and expense statements for current
year. Consolidated Financial Statements of Growth Hotel
Investors for calendar year ended 1995.
(b) Any existing appraisals
(c) All Operating Agreements
(d) Any existing title reports, commitments or policies, title
documents, and surveys
(e) Any existing environmental audits
(f) Any existing zoning information and current certificates of
occupancy
(g) Any existing engineering report
(h) Copies of Seller's Organizational Documents
(i) Last PIP (Product Improvement Plan)
(j) Last inspection report by Seller's current Franchisor
(k) Star Report (two most recent)
(l) Guest Satisfaction Rating System Report
(m) Current year's and (if prepared) next year's budget
(n) Permits and Licenses (liquor, state and local business
licenses, pool, elevator, etc.)
(o) Utility letter (sewer, water, gas & electricity) including
monthly bills for previous 12 months
(p) Schedule indicating all pertinent information with respect to
any employment agreement in effect as of the date of the
Agreement (i.e., name of employee, social security number,
wage or salary, accrued vacation benefits, other fringe
benefits, and the like)
(q) Employee contracts, if any
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(r) Union representation, if any
(s) Any litigation (pending or threatened)
(t) Tax bills/assessments (real and personal) for last two years
(u) Plans and specifications, if available
(v) Details of capital improvements, renovation and FF&E upgrade
over past 3 years
(w) ADA compliance studies, if available
(x) Past 3 years summary of monthly occupancy and average rates,
if available
(y) Warranties and guarantees relating to the Tangible Personal
Property
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SCHEDULE 4
Litigation Schedule
1. R & S Asset Partners, a Florida General Partnership, Jesse B.
Small, on their own behalves, on behalf of all others similarly situated, and
derivatively on behalf of Nominal Defendants, Plaintiffs, v. Devon Associates,
Cayuga Associates, L.P., Cayuga Capital Corp., Fleetwood Corp., Carl C. Icahn,
Michael L. Ashner, Martin Lifton, Arthur N. Queler, Insignia Financial Group,
Inc. IFGP, Corp., National Property Investors, Inc., NPI Equity Investments II,
Inc., Fox Realty Investors, Portfolio Realty Associates, L.P., Emmet J. Cashin,
Jr., Jarold A. Evans, W. Patrick McDowell, Apollo Real Estate Advisors, L.P.,
and Montgomery Realty Company-85, Defendants and Growth Hotel Investors, a
California limited partnership and Growth Hotel Investors II, a California
limited partnership, Nominal Defendants in the Superior Court of the State of
California for the County of Los Angeles, Case No. BC 145220;
2. William Wallace, Mildred Wallace, Edith G. Martin, Paul
Allemang, and Gwen Allemang, on behalf of themselves and all others similarly
situated, and derivatively on behalf of Growth Hotel Investors, a California
limited partnership, and Growth Hotel Investors II, a California limited
partnership, Plaintiffs, v. Devon Associates, Montgomery Realty 85, GHI
Associates, Cayuga Associates, L.P., Cayuga Capital Corp., Insignia Financial
Corp., Inc., L.P. and Fleetwood Corp., Defendants and Growth Hotel Investors, a
California limited partnership and Growth Hotel Investors II, a California
limited partnership, Nominal Defendants in the Supreme Court for the State of
New York County of New York, Index No. 96/00866.
<PAGE>
ANNEX B
GROWTH HOTEL INVESTORS,
a California Limited Partnership
MEETING OF UNIT HOLDERS
TO BE HELD ON MAY __, 1997
This Proxy is solicited on Behalf of the General Partner of Growth
Hotel Investors
The undersigned hereby appoints William H. Jarrard, Jr. and George
Buchanan, or either one of them, attorney with full power of substitution and
revocation to each, to vote for and in the name of the undersigned all of the
Limited Partnership Assignee Units of Growth Hotel Investors, a California
limited partnership (the "Partnership"), which the undersigned is entitled to
vote at the Meeting of Unit Holders to be held on May __, 1997, at 10:00 a.m.,
Eastern Standard Time, and at any adjournments thereof.
The Proxy will be voted as you specify above with respect to the matter
set forth above. If this Proxy is executed but no choice is indicated, the Units
represented by this Proxy will be voted FOR the approval of the sale of
substantially all of the assets of the Partnership to Equity Inns Partnership,
L.P. (the "Purchaser") pursuant to an Agreement of Purchase and Sale, dated as
of March 14, 1997, between the Partnership and the Purchaser, and the
consummation of the transactions contemplated thereby and otherwise in the
discretion of the proxy holders.
Please be sure to sign the Proxy on the reverse side.
(Continued and to be signed on the reverse side)
GROWTH HOTEL INVESTORS
ONE INSIGNIA FINANCIAL PLAZA
P.O. BOX 1089
GREENVILLE, SOUTH CAROLINA 29602
[Reverse Side]
To approve the sale of substantially all of the assets of the Partnership to
Equity Inns Partnership, L.P. (the "Purchaser") pursuant to an Agreement of
Purchase and Sale, dated as of March 14, 1997, between the Partnership and the
Purchaser and the transactions contemplated thereby.
FOR / / AGAINST / / ABSTAIN / /
The undersigned hereby acknowledges receipt of
the Notice of Meeting of Unit Holders and the
related Proxy Statement dated May __, 1997.
NOTE: Please sign exactly as name or names
appear hereon. If acting as executor,
administrator, trustee, guardian, etc., please
give your full title as it appears hereon.
When signing as joint tenants, all parties in
the joint tenancy must sign. When a proxy is
given by a corporation, it should be signed by
an authorized officer and the corporate seal
affixed. No postage is required if returned in
the enclosed envelope and mailed in the United
States.
DATE:_________________________________________
X______________________________________(L.S.)
X______________________________________(L.S.)
PLEASE VOTE, SIGN AND DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
ANNEX C
Growth Hotel Investors
One Insignia Financial Plaza
P.O. Box 2347
Greenville, S.C. 29602
May __, 1997
Dear Unit Holder:
We are very pleased to present to you the opportunity described in the
enclosed Proxy Statement concerning the sale by Growth Hotel Investors (the
"Partnership") of all of its hotel properties to Equity Inns Partnership, L.P.
The sale requires the vote of a majority of the outstanding Units in the
Partnership. The General Partner has approved the sale and recommends that the
Unit Holders vote for its approval.
If the sale is consummated, it is anticipated that each Unit Holder will
receive an initial distribution of approximately $1,055 per Unit and, upon the
liquidation and dissolution of the Partnership, will receive a final
distribution of approximately $43 per Unit.
YOUR VOTE IS VERY IMPORTANT. WE URGE YOU TO READ THE ENCLOSED DOCUMENTS
CAREFULLY AND TO RETURN YOUR SIGNED PROXY AS SOON AS POSSIBLE.
Very truly yours,
MONTGOMERY REALTY COMPANY - 85
General Partner
