<PAGE> 1
FORM 10-Q
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO ___________
Commission File No. 1-6869
PRIME HOSPITALITY CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2640625
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
700 Route 46 East, Fairfield, New Jersey 07004
(Address of principal executive offices)
(973) 882-1010
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes |X| No |_|
The registrant had 52,749,962 shares of common stock outstanding, $.01 par
value, as of August 11, 1998.
<PAGE> 2
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
-------
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1997 and June 30, 1998..................... 1
Consolidated Statements of Income
Three and Six Months Ended June 30, 1997
and June 30, 1998....................................... 2
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997
and June 30, 1998....................................... 3
Notes to Interim Consolidated Financial Statements......... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote to a Vote of Security
Holders................................................. 18
Item 6. Exhibits and Reports on Form 8-K........................... 19
Signatures ................................................ 20
<PAGE> 3
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31, June 30
1997 1998
=========== ===========
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 5,013 $ 59,399
Marketable securities available for sale ............. 8,697 19,476
Accounts receivable, net of reserves ................. 16,318 22,011
Current portion of mortgages and
notes receivable ................................... 2,271 2,142
Other current assets ................................. 28,780 16,864
----------- -----------
Total current assets ........................... 61,079 119,892
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization ..... 1,079,591 1,109,133
Mortgages and notes receivable, net of
current portion ...................................... 19,698 13,496
Other assets ............................................. 36,298 40,119
----------- -----------
TOTAL ASSETS ................................... $ 1,196,666 $ 1,282,640
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt .............................. $ 3,871 $ 3,197
Other current liabilities ............................ 76,921 81,983
----------- -----------
Total current liabilities ...................... 80,792 85,180
Long-term debt, net of current portion ................... 554,500 474,021
Deferred income .......................................... 18,558 86,014
Other liabilities ........................................ 18,403 10,050
----------- -----------
Total liabilities .............................. 672,253 655,265
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share;
20,000,000 shares authorized; none issued .......... -- --
Common stock, par value $.01 per share;
75,000,000 shares authorized; 47,182,972 and
53,633,015 shares issued and outstanding
at December 31, 1997 and June 30, 1998,
respectively ....................................... 472 546
Capital in excess of par value ....................... 419,242 508,656
Unrealized loss on marketable securities, net of taxes -- (2,612)
Retained earnings .................................... 105,737 139,600
Treasury stock (50,039 shares at December 31, 1997
and 1,048,939 shares at June 30, 1998) ............. (1,038) (18,815)
----------- -----------
Total stockholders' equity ..................... 524,413 627,375
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 1,196,666 $ 1,282,640
=========== ===========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements
-1-
<PAGE> 4
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
========= ========= ========= =========
<S> <C> <C> <C> <C>
Revenues:
Lodging ................................ $ 68,591 $ 100,394 $ 128,628 $ 186,995
Food and beverage ...................... 11,257 14,683 20,706 26,325
Management, franchise and other ........ 4,137 6,521 10,976 9,990
Interest on mortgages and
notes receivable ..................... 1,574 1,349 3,303 2,924
--------- --------- --------- ---------
Total revenues .................... 85,559 122,947 163,613 226,234
--------- --------- --------- ---------
Costs and expenses:
Direct hotel operating expenses:
Lodging .............................. 16,182 24,122 31,306 44,623
Food and beverage .................... 7,691 10,446 15,656 19,886
Selling and general .................. 16,366 24,052 34,001 46,203
Occupancy and other operating .......... 5,935 13,425 11,728 26,013
General and administrative ............. 5,758 6,399 11,521 12,982
Depreciation and amortization .......... 8,035 19,862 15,724 30,762
--------- --------- --------- ---------
Total costs and expenses .......... 59,967 98,306 119,936 180,469
--------- --------- --------- ---------
Operating income ........................... 25,592 24,641 43,677 45,765
Investment income .......................... 1,618 725 2,231 1,987
Interest expense ........................... (7,926) (5,701) (12,641) (11,488)
Other income ............................... 1,858 18,353 1,858 18,353
--------- --------- --------- ---------
Income before income taxes
and extraordinary items ................ 21,142 38,018 35,125 54,617
Provision for income taxes ................. 8,627 14,447 14,410 20,754
--------- --------- --------- ---------
Income before extraordinary items .......... 12,515 23,571 20,715 33,863
Extraordinary items - Gains on discharges of
indebtedness (net of income taxes) ..... 53 -- 75 --
--------- --------- --------- ---------
Net income ................................. $ 12,568 $ 23,571 $ 20,790 $ 33,863
========= ========= ========= =========
Earnings per common share:
Basic:
Income before extraordinary items ...... $ 0.27 $ 0.45 $ 0.45 $ 0.68
Extraordinary items .................... -- -- -- --
--------- --------- --------- ---------
Net earnings ............................... $ 0.27 $ 0.45 $ 0.45 $ 0.68
========= ========= ========= =========
Diluted:
Income before extraordinary items ...... $ 0.24 $ 0.43 $ 0.41 $ 0.63
Extraordinary items .................... -- -- -- --
--------- --------- --------- ---------
Net earnings ............................... $ 0.24 $ 0.43 $ 0.41 $ 0.63
========= ========= ========= =========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements
-2-
<PAGE> 5
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(In Thousands)
<TABLE>
<CAPTION>
1997 1998
========= =========
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 20,790 $ 33,863
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................. 15,724 30,762
Amortization of deferred financing costs ....... 1,335 1,567
Business interruption insurance revenue ........ (6,366) --
Utilization of net operating loss
carryforwards ............................... 1,824 3,227
Gains on settlement of notes receivable ........ -- (18,353)
Gains on discharges of indebtedness ............ (125) --
Gain on disposal of assets ..................... (1,858) --
Amortization of deferred gain .................. -- (4,329)
Increase (decrease) from changes in other
operating assets and liabilities:
Accounts receivable ......................... (4,049) (5,693)
Other current assets ........................ (2,842) 929
Other liabilities ........................... 10,178 2,426
--------- ---------
Net cash provided by operating
activities ................................. 34,611 44,399
--------- ---------
Cash flows from investing activities:
Net proceeds from mortgages and notes
receivable ..................................... 509 24,605
Disbursements for mortgages and
notes receivable ............................... (794) --
Proceeds from sales of property, equipment
and leasehold improvements ..................... 6,453 211,236
Construction of new hotels ....................... (137,549) (196,413)
Purchases of property, equipment and
leasehold improvements ......................... (30,017) (21,058)
Net proceeds from insurance settlement ........... -- 3,782
Decrease in restricted cash ...................... 2,772 (5,981)
Purchase of marketable securities ................ -- (375)
Proceeds from retirement of debt securities ...... 800 --
Other ............................................ (1,369) (3,654)
--------- ---------
Net cash (used in) provided by investing
activities ................................. (159,195) 12,142
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of debt ............... 267,254 79,926
Payments of debt ................................. (109,037) (66,354)
Purchase of treasury stock ....................... -- (17,777)
Proceeds from the exercise of stock options
and warrants ................................... 744 2,050
--------- ---------
Net cash provided (used in) by financing
activities ................................. 158,961 (2,155)
--------- ---------
Net increase in cash and cash equivalents ........ 34,377 54,386
Cash and cash equivalents at beginning of period . 47,473 5,013
--------- ---------
Cash and cash equivalents at end of period ....... $ 81,850 $ 59,399
========= =========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements
-3-
<PAGE> 6
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
In the opinion of management, the accompanying interim unaudited
consolidated financial statements of Prime Hospitality Corp. and subsidiaries
(the "Company" or "Prime") contain all material adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of June 30, 1998 and the results of its operations for the
three and six months ended June 30, 1997 and 1998 and cash flows for the six
months ended June 30, 1997 and 1998.
The consolidated financial statements for the three and six months ended
June 30, 1997 and 1998 were prepared on a consistent basis with the audited
consolidated financial statements for the year ended December 31, 1997. Certain
reclassifications have been made to the June 30, 1997 consolidated financial
statements to conform them to the June 30, 1998 presentation.
The consolidated results of operations for the three and six months ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full year. These interim unaudited consolidated financial statements should
be read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Note 2 - Accounting Policies
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5) which is required to be adopted in 1999. At that time, the Company will be
required to record a cumulative effect of a change in accounting principle to
write off any unamortized pre-opening costs that remain on the balance sheet at
the date of adoption. Additionally, on a prospective basis subsequent to the
adoption of this new standard, all future pre-opening costs will be expensed as
incurred. The Company believes that the adoption of SOP 98-5 will not have a
material effect on its financial condition or the results of its operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133) which is effective for fiscal
years beginning after June 15, 1999. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. The Company has
not yet quantified the impact of adopting SFAS 133 on its financial statements,
however, the Company expects the impact to be immaterial due to its limited
derivative activity.
- 4 -
<PAGE> 7
Note 3 - Merger
On December 1, 1997, the Company merged with HomeGate Hospitality, Inc.
("HomeGate"), a provider of mid-price extended-stay hotels. The transaction was
accounted for as a pooling of interests, which required that the historical
consolidated statements of operations of the companies be restated on a combined
basis without giving effect to operating synergies.
Note 4 - Debt
On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due
2002 were converted into 7.2 million shares of common stock of the Company at a
conversion price of $12 per share. The notes were transferred to stockholders'
equity in April 1998.
Note 5 - Sale/Leaseback Transactions
In January 1998, the Company completed the sale/leaseback of eight
full-service hotels to American General Hospitality, Inc. ("American General")
for $138.4 million consisting of $114.4 million in cash, $10.2 million in
assumed debt and $13.8 million in American General limited partnership operating
units. The Company is operating the hotels under a lease agreement with American
General which has a term of 10 years. The transaction generated a net gain of
approximately $65.0 million which will be recognized as a reduction of rent
expense over the life of the lease. The Company has also entered into an
agreement to sell and lease back eleven additional full-service hotels to
American General not later than March 31, 1999.
In June 1998, the Company sold nine AmeriSuites hotels to Equity Inns,
Inc. ("Equity Inns") for $97.0 million in cash. The sale is part of an ongoing
strategic relationship between the Company and Equity Inns which contemplates
the sale of approximately 20 hotels per year. The Company will continue to
operate the hotels under a lease agreement between Equity Inns and a subsidiary
of the Company for a ten-year term with certain renewal options. The
transaction generated a net gain of $15.0 million, which will be recognized as
a reduction of rent expense over the life of the lease. The Company will also
generate franchise income streams under a ten-year franchise agreement.
- 5 -
<PAGE> 8
Note 6 - Earnings Per Common Share
In 1997, the Company adopted SFAS No. 128, "Earnings per Share," (SFAS
128). Under SFAS 128, primary earnings per share has been replaced by basic
earnings per share which excludes any dilutive effects of options, warrants and
convertible securities. Fully diluted earnings per share is now called diluted
earnings per share and includes a change in applying the treasury stock method.
Earnings per share amounts for all prior periods have been restated to conform
to the SFAS 128 requirements.
Basic earnings per common share was computed based on the weighted average
number of common shares outstanding during each period. The weighted average
number of common shares used in computing basic earnings per share was 46.5
million and 52.6 million for the three months ended June 30, 1997 and 1998,
respectively, and 46.5 million and 49.7 million for the six months ended June
30, 1997 and 1998, respectively.
Diluted earnings per share reflects adjustments to basic earnings per
share for the dilutive effect of stock options and warrants and the elimination
of interest expense and the issuance of additional common shares from the
assumed conversion of the 7% convertible subordinated notes. The weighted
average number of common shares used in computing diluted earnings per share was
55.7 million and 55.2 million for the three months ended June 30, 1997 and 1998,
respectively, and 55.6 million and 55.3 million for the six months ended June
30, 1997 and 1998, respectively.
Note 7 - Interest Expense
The Company capitalized $3.9 million and $6.6 million for the three months
ended June 30, 1997 and 1998, respectively, and $7.7 million and $13.8 million
for the six months ended June 30, 1997 and 1998, respectively, of interest
related to borrowings used to finance hotel construction. Also included in
interest expense is the amortization of deferred financing fees of $764,000 and
$742,000 for the three months ended June 30, 1997 and 1998, respectively, and
$1.4 million and $1.6 million for the six months ended June 30, 1997 and 1998,
respectively.
Note 8 - Treasury Stock
In December 1997, the Company approved a program to purchase from time to
time up to one million shares of its common stock at various prices. The Company
completed this common stock purchase program over the six months ended June 30,
1998 at an average price of $17.78 per share. In July 1998, the Company
announced that it has authorized the repurchase of an additional two million
shares of stock at various prices from time to time. The Company is currently
limited to the purchase of approximately 400,000 shares under the terms of its
$200 million revolving credit
- 6 -
<PAGE> 9
facility ("Revolving Credit Facility"). The Company has requested a waiver of
those restrictive covenants in order to fully implement its new repurchase
program.
Note 9 - Comprehensive Income
In 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income," (SFAS 130). Under SFAS 130, the Company is required to report all
changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners in their
capacity as owners.
For the three and six months ended June 30, 1998, comprehensive income
consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 12,568 $ 23,571 $ 20,790 $ 33,863
Unrealized loss on
marketable securities;
net of taxes -- (2,612) -- (2,612)
-------- -------- -------- --------
Total $ 12,568 $ 20,959 $ 20,790 $ 31,251
======== ======== ======== ========
</TABLE>
Note 10- Depreciation and Amortization
During the quarter, the Company established a $10 millions valuation
reserve recorded as part of depreciation and amortization expense, related to
the expected sale of seven non-prototype HomeGate hotels. In accordance with
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," the Company has reduced the carrying value of the
assets to reflect current market conditions.
Note 11- Other Income
Other income consists of property transactions and other assets sales and
retirements. For the six months ended June 30, 1997, other income consisted of
net gains on property transactions of $1.9 million. For the six months ended
June 30, 1998 other income consisted of gains on the settlement of notes
receivable of $18.4 million.
- 7 -
<PAGE> 10
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
GENERAL
The Company is an owner, manager and franchisor of hotels throughout the
United States and the U.S. Virgin Islands. The Company operates three
proprietary brands, AmeriSuites (all-suites), HomeGate Studios & Suites
(extended-stay) and Wellesley Inns (limited service). Also within its portfolio
are owned and/or managed hotels operated under franchise agreements with
national hotel chains. As of July 31,1998, the Company owned 124 hotels (the
"Owned Hotels"), operated 28 hotels under lease agreements with real estate
investment trusts (the "Leased Hotels") and managed 10 hotels for third parties
(the "Managed Hotels"). The Company has significant equity interests in the
Owned Hotels and has economic interests limited to a percentage of revenue
(generally between 2.5% to 5.0%) on the Leased Hotels and the Managed Hotels.
The Company consolidates the results of operations of its Owned Hotels and
Leased Hotels and records management fees (including incentive management fees)
and interest income, where applicable, on the Managed Hotels.
The Company's strategy is to develop proprietary brands in growing market
segments. The Company's growth focuses on the new construction of AmeriSuites
and HomeGate hotels which are being developed both directly by the Company and
by franchisees. Through the development of its proprietary brands, the Company
is transforming itself from an owner/operator into a franchisor and manager of
quality brands. As a result, the Company is also reducing its dependence on
investment in real estate which is more cyclical and capital intensive.
On December 1, 1997, the Company completed its merger with Homegate
Hospitality, Inc. ("HomeGate"), a provider of mid-price extended-stay hotels.
The transaction was accounted for as a pooling of interests which required that
the historical consolidated statements of operations of the companies be
restated on a combined basis without giving effect to operating synergies.
For the three and six months ended June 30, 1998, earnings from recurring
operations increased by 61% and 47%, respectively, over the same periods in
1997. The earnings gains result from strong growth in revenue per available room
("REVPAR") and profit margins at comparable Owned Hotels, and significant new
AmeriSuites unit growth. For the comparable Owned Hotels, REVPAR increased by
8.8% and 8.0% for the three and six month periods, respectively. The combination
of strong REVPAR increases and effective expense controls resulted in increases
in gross operating profits of 10.6% and 11.2% for the three and six month
periods and improvements in gross operating margins from 49.5% to 50.5% for the
three month period and from 47.0% to 48.5% for the six month period. The
earnings growth was also favorably affected by the net addition of 66 hotels
since January 1, 1997, primarily through the development of new AmeriSuites
hotels.
- 8 -
<PAGE> 11
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased by 32.3% to $44.5 million for the three months ended June 30, 1998 and
by 28.8 % to $76.5 million for the six months ended June 30, 1998. Hotel EBITDA
increased by 24.2% to $43.3 million for the three month period and by 25.9% to
$78.6 million for the six month period. Hotel EBITDA represents EBITDA generated
from the operations of Owned Hotels and excludes management fee income, interest
income from mortgages and notes receivable, general and administrative expenses
and other revenues and expenses which do not directly relate to the operations
of Owned Hotels.
The Company's hotels operate in four segments of the industry: the upscale
all-suites segment, under the Company's proprietary AmeriSuites brand; the
mid-price extended-stay segment under the Company's proprietary HomeGate Studios
& Suites brand; the upscale full-service segment, under major national
franchises; and the midprice limited-service segment, primarily under the
Company's proprietary Wellesley Inns brand. The following table illustrates the
Hotel EBITDA contribution from each segment (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998
---- ---- ---- ----
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
All-suites .......... $14,286 41.3 $22,494 51.9% $22,964 36.8% $39,214 49.9%
Full-service ........ 14,727 42.6 13,678 31.6% 26,779 42.9% 23,872 30.4%
Limited-service ..... 5,236 15.1 5,033 11.6% 12,061 19.3% 11,945 15.2%
Extended-Stay ....... 323 1.0 2,123 4.9% 603 1.0% 3,585 4.5%
------- ----- ------- ----- ------- ----- ------- -----
Total ..... $34,572 100.0% $43,328 100.0% $62,407 100.0% $78,616 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Hotel EBITDA for the three and six months ended June 30, 1998 reflects the
shifting mix in the Company's hotel portfolio toward its proprietary AmeriSuites
brand. Based on the Company's development plans, Prime expects the relative
contribution from its all-suites AmeriSuites hotels and extended-stay HomeGate
hotels to increase in 1998 with the full-service hotels' percentage contribution
declining.
EBITDA and Hotel EBITDA are not measures of financial performance under
generally accepted accounting principles and should not be considered as
alternatives to net income as an indicator of the Company's operating
performance or as alternatives to cash flows as a measure of liquidity.
Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.
- 9 -
<PAGE> 12
Results of Operations For the Three and Six Months Ended June 30, 1998 Compared
to the Three and Six Months Ended June 30, 1997
The following table presents the components of operating income, operating
expense margins and other data for the Company and the Company's comparable
Owned Hotels for the three and six months ended June 30, 1997 and 1998. The
results of the seven hotels divested during 1997 and 1998 are not material to an
understanding of the results of the Company's operations in such periods and,
therefore, are not separately discussed.
<TABLE>
<CAPTION>
Comparable Owned
Total Hotels(2)
Three Months Ended Three Months Ended
June 30, June 30,
1997 1998 1997 1998
---- ---- ---- ----
(In thousands, except ADR and REVPAR)
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Lodging............................................ $ 68,591 $100,394 $48,488 $52,542
Food and beverage.................................. 11,257 14,683 6,823 7,443
Management, franchise and other.................... 4,137 6,521
Interest on mortgages and notes receivable 1,574 1,349
-------- --------
Total revenues............................. 85,559 122,947
-------- --------
Direct hotel operating expenses:
Lodging............................................ 16,182 24,122 11,571 12,418
Food and beverage.................................. 7,691 10,446 4,924 5,546
Selling and general................................ 16,366 24,052 11,191 11,728
Occupancy and other operating........................ 5,935 13,425
General and administrative........................... 5,758 6,399
Depreciation and amortization........................ 8,035 19,862
-------- --------
Total costs and expenses................... 59,967 98,306
-------- --------
Operating income..................................... 25,592 24,641
Operating Expense Margins:
Direct hotel operating expenses:
Lodging, as a percentage of lodging revenue 23.6% 24.0% 23.9% 23.6%
Food and beverage, as a percentage of food and
beverage revenue................................ 68.3% 71.1% 72.2% 74.5%
Selling and general, as a percentage of
lodging and food and beverage revenue 20.5% 20.9% 20.2% 19.6%
Occupancy and other operating, as a percentage
of lodging and food and beverage revenue 7.4% 11.7%
General and administrative, as a percentage of
total revenue...................................... 6.7% 5.2%
Other Data(1):
Occupancy............................................ 72.4% 68.0% 74.7% 74.4%
Average daily rate ("ADR")........................... $ 70.51 $ 78.51 $ 73.57 $ 80.32
Revenue per available room ("REVPAR")................ $ 51.04 $ 53.37 $ 54.95 $ 59.77
Gross operating profit............................... $39,609 $56,457 $27,625 $29,116
</TABLE>
(1) For purposes of showing operating trends, the seven hotels divested in
1997 have been excluded from the other data section of the tables.
(2) Comparable Owned Hotels refers to the 72 Owned Hotels which were open for
the full period in both 1997 and 1998 excluding the Frenchman's Reef,
which was impacted by hurricane damage.
- 10 -
<PAGE> 13
<TABLE>
<CAPTION>
Comparable Owned
Total Hotels(2)
Six Months Ended Six Months Ended
June 30, June 30,
1997 1998 1997 1998
---- ---- ---- ----
(In thousands, except ADR and REVPAR)
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues:
Lodging............................................. $ 128,628 $186,995 $77,986 $83,865
Food and beverage................................... 20,706 26,325 10,577 11,584
Management, franchise and other..................... 10,976 9,990
Interest on mortgages and notes receivable.......... 3,303 2,924
-------- --------
Total revenues.............................. 163,613 226,234
-------- --------
Direct hotel operating expenses:
Lodging............................................. 31,306 44,623 19,171 20,185
Food and beverage................................... 15,656 19,886 8,198 9,115
Selling and general................................. 34,001 46,203 19,528 19,830
Occupancy and other operating......................... 11,728 26,013
General and administrative............................ 11,521 12,982
Depreciation and amortization......................... 15,724 30,762
-------- --------
Total costs and expenses.................... 119,936 180,469
-------- --------
Operating income...................................... 43,677 45,765
Operating Expense Margins:
Direct hotel operating expenses:
Lodging, as a percentage of lodging revenue 24.3% 23.9% 24.6% 24.1%
Food and beverage, as a percentage of food and
beverage revenue................................. 75.6% 75.5% 77.5% 78.7%
Selling and general, as a percentage of
lodging and food and beverage revenue 22.8% 21.7% 22.0% 20.8%
Occupancy and other operating, as a percentage
of lodging and food and beverage revenue 7.9% 12.2%
General and administrative, as a percentage of
total revenue....................................... 7.0% 5.7%
Other Data(1):
Occupancy............................................. 66.2% 64.5% 69.7% 69.7%
Average daily rate ("ADR")............................ $ 72.74 $ 80.39 $ 73.70 $ 79.54
Revenue per available room ("REVPAR")................. $ 48.15 $ 51.82 $ 51.34 $ 55.43
Gross operating profit................................ $68,371 $102,608 $41,666 $46,317
</TABLE>
(1) For purposes of showing operating trends, the seven hotels divested in
1997 have been excluded from the other data section of the tables.
(2) Comparable Owned Hotels refers to the 63 Owned Hotels which were open for
the full period in both 1997 and 1998 excluding the Frenchman's Reef,
which was impacted by hurricane damage.
- 11 -
<PAGE> 14
Lodging revenues, which include room revenues and other related revenues
such as telephone and vending, increased by $31.8 and $58.4 million, or 46.4%
and 45.4%, respectively, for the three and six months ended June 30, 1998, as
compared to the same periods in 1997. Lodging revenues for the three months
ended June 30, 1998 increased due to incremental revenues of $27.7 million from
new hotels and higher revenues for comparable Owned Hotels, which increased by
$4.1 million, or 8.4%. Lodging revenues for the six months ended June 30, 1997
increased due to incremental revenues of $54.5 million from new hotels and
higher revenues for comparable Owned Hotels, which increased by $5.9 million or
7.5%. The reopening of the Frenchmen's Reef, which was closed for renovations
from April 1997 to December 1997, accounted for increases of $4.5 million and
$7.9 million respectively, for the three and six months ended June 30, 1998 as
compared to the same periods in 1997.
The following table sets forth hotel operating data for the comparable
Owned Hotels for the three and six months ended June 30, 1998 as compared to the
same periods in 1997, by product type:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 %Change 1997 1998 %Change
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
AmeriSuites
Occupancy 70.6% 74.0% 67.2% 69.5%
ADR $76.73 $81.90 $74.88 $79.69
REVPAR $54.14 $60.57 11.9% $50.35 $55.37 10.0%
Full-Service
Occupancy 78.8% 77.9% 68.6% 68.7%
ADR $90.79 $101.13 $89.16 $98.52
REVPAR $71.57 $78.77 10.1% $61.14 $67.71 10.8%
Wellesley Inns
Occupancy 77.1% 72.6% 73.3% 71.3%
ADR $54.67 $59.09 $61.25 $64.87
REVPAR $42.13 $42.88 1.8% $44.89 $46.25 3.0%
Total
Occupancy 74.7% 74.4% 69.7% 69.7%
ADR $73.57 $80.32 $73.70 $79.54
REVPAR $54.95 $59.77 8.8% $51.34 $55.43 8.0%
</TABLE>
The Company achieved solid revenue growth in all of its industry segments.
The REVPAR increases reflect the growing recognition of AmeriSuites as a
- 12 -
<PAGE> 15
leading brand in the fast-growing all-suites segment and favorable industry
trends in the full service segment with concentration in the Northeast. The
improvements in REVPAR at comparable Owned Hotels were generated by increases
in ADR, which rose by 9.2% and 7.9%, for the three and six month periods.
Occupancy was relatively stable at approximately 74% for the three month period
and approximately 70% for the six month period.
Food and beverage revenues increased by $3.4 million and $5.6 million, or
30.4% and 27.1%, respectively, for the three and six months ended June 30, 1998
as compared to the same periods in 1997 primarily attributable to increases of
$2.8 million and $4.4 million, respectively, for the three and six month periods
at the Frenchmen's Reef. Food and beverage revenues for comparable Owned Hotels
increased by $620,000 and $1.0 million, or 9.1% and 9.5%, respectively, for the
three and six months periods, due to increased banquet business.
Management, franchise and other revenue consists primarily of base,
incentive and other fees earned under management agreements, royalty fees
earned under franchise agreements, business interruption insurance revenue
related to hurricane damage at the Frenchman's Reef, and rental income.
Management, franchise and other revenue increased by $2.4 million, or 57.6%,
for the three months ended June 30, 1998 as compared to the same period in 1997
due to increased fees associated with the Managed Hotels, franchise royalty
fees derived from the sale of hotels in December 1997 and increased business
interruption insurance revenue. Management, franchise and other revenue
decreased by $1.0 million, or 9.0%, for the six months ended June 30, 1998 as
compared to the same period in 1997 primarily due to lower business
interruption insurance revenue. Business interruption insurance revenue is
based on the settlement in March 1998 of the Company's claim related to the
damage at the Frenchmen's Reef caused by Hurricane Bertha in July 1996. The
Company expects franchise revenues to increase as a result of several franchise
initiatives implemented by the Company including the formation of a franchise
sales team. The Company has also received the necessary statutory approvals to
begin franchising AmeriSuites and expects to begin franchising HomeGates and
Wellesley Inns by the end of August.
Interest on mortgages and notes receivable primarily relate to mortgages
secured by certain Managed Hotels. Interest on mortgages and notes receivable
decreased by $225,000 and $379,000 or 14.3% and 11.5%, respectively, for the
three and six months ended June 30, 1998 as compared to the same period in 1997
primarily due to conversions of notes receivable into operating hotel assets.
Direct lodging expenses increased by $7.9 million and $13.3 million, or
49.1% and 42.5%, respectively, for the three and six months ended June 30, 1998
as compared to the same periods in 1997 due primarily to the addition of new
hotels. Direct lodging expenses, as a percentage of lodging revenue were
relatively even, increasing from 23.6% to 24.0% for the three month period and
decreasing from 24.3% to 23.9% for the six month period. For comparable Owned
Hotels, direct lodging expenses as a percentage of lodging revenues decreased
from 23.9% to 23.6% for the three month period and from 24.6% to 24.1% for the
six month period primarily due to ADR increases and lower corresponding
increases in expenses.
- 13 -
<PAGE> 16
Direct food and beverage expenses for the three and six months ended June
30, 1998 increased by $2.8 million and $4.2 million, or 35.8% and 27.0%
respectively, as compared to the same periods in 1997 primarily due to the
Frenchman's Reef reopening. As a percentage of food and beverage revenues,
direct food and beverage expenses increased from 68.3% to 71.1% for the three
month period and decreased from 75.6% to 75.5% for the six month period. For
comparable Owned Hotels, food and beverage expenses as a percentage of food and
beverage revenues increased from 72.2% to 74.5% for the three month period and
from 77.5% to 78.7% for the six month period. The increases were primarily due
to the impact of the Frenchman's Reef. .
Direct hotel selling and general expenses consist primarily of hotel
expenses for Owned Hotels which are not specifically allocated to rooms or food
and beverage activities, such as administration, selling and advertising,
utilities, repairs and maintenance. Direct hotel selling and general expenses
increased by $7.7 million and $12.2 million, or 47.0% and 35.9%, respectively,
for the three and six months ended June 30, 1998 as compared to the same periods
in 1997 due primarily to the addition of new hotels. As a percentage of hotel
revenues (defined as lodging and food and beverage revenues), direct hotel
selling and general expenses increased from 20.5% to 20.9% for the three month
period due to increased expenses at the Frenchmen's Reef. For the six month
period, direct hotel selling and general expenses as a percentage of hotel
revenue decreased from 22.8% to 21.7%. For the comparable Owned Hotels, direct
hotel selling and general as a percentage of hotel revenues decreased from 20.2%
to 19.6% for the three month period and from 22.0% to 20.8% for the six month
period. The decreases in the total and comparable expense margins were primarily
due to ADR improvements, effective expense controls and decreases in
weather-related costs.
Occupancy and other operating expenses consist primarily of insurance,
real estate and other taxes and rent expense. Occupancy and other operating
expenses increased by $7.5 million and $14.3 million, or 126.2% and 121.8%,
respectively, as compared to the same periods in 1997 due to the rent expense
associated with the sale/leaseback of hotels to American General and Equity Inns
and the addition of new hotels. Occupancy and other operating expenses as a
percentage of hotel revenues increased from 7.4% to 11.7% for the three month
period and from 7.9% to 12.2% for the six month period due to rent expense
associated with the sale/leasebacks. Occupancy and other operating expenses are
expected to continue to increase as the Company plans to sell and leaseback
additional hotels.
General and administrative expenses consist primarily of centralized
management expenses such as operations management, sales and marketing, finance
and hotel support services associated with operating both the Owned Hotels and
Managed Hotels and general corporate expenses. General and administrative
expenses increased by $641,000 and $1.5 million, or 11.1% and 12.7%,
respectively, for the three and six months ended June 30, 1998 as compared to
the same periods in 1997 due to increased advertising, personnel and training
costs associated with opening the new AmeriSuites hotels. As a percentage of
total revenues, general and administrative expenses decreased from 6.7% to 5.2%
for the three month period and from 7.0% to 5.7% for the six month period due to
increased operating leverage.
- 14 -
<PAGE> 17
Depreciation and amortization expense increased by $11.8 million and $15.0
million, or 147.2% and 95.6%, respectively, for the three and six months ended
June 30, 1998 as compared to the same periods in 1997 due to the impact of new
hotel properties and a valuation reserve of $10 million related to the intended
disposition of seven non-prototype HomeGate hotels.
Investment income decreased by $893,000 and $244,000, or 55.2% and 10.9%,
respectively, for the three and six months ended June 30, 1998 as compared to
the same periods in 1997 due to changes in the weighted average cash balances.
Interest expense decreased by $2.2 million and $1.2 million, or 28.1% and
9.1%, respectively, for the three and six months ended June 30, 1998 as compared
to the same periods in 1997 primarily due to a favorable interest rate
environment and capitalized interest related to new hotels. The Company
capitalized interest of $3.9 million and $6.6 million for the three months ended
June 30, 1997 and 1998, and $7.7 million and $13.8 million for the six months
ended June 30, 1997 and 1998.
Other income consists of property transactions and other asset sales and
retirements. For the six months ended June 30, 1997, other income consisted of
net gains on property transactions of $1.9 million. For the six months ended
June 30, 1998 other income consisted of gains on the settlement of notes
receivable of $18.4 million.
Liquidity and Capital Resources
Prime's external growth focuses on the accelerated expansion of its
proprietary AmeriSuites and HomeGate brands through new construction both
directly by the Company and by franchisees. As of July 31, 1998, Prime had 74
AmeriSuites and 20 HomeGates in operation, (excluding seven hotels the Company
intends to divest), with plans to have a total of 90 to 95 AmeriSuites and 30 to
35 HomeGates opened by the end of 1998.
Prime believes that it has access to sufficient resources to implement its
planned expansion of the AmeriSuites and HomeGate brands, including capital from
the following sources: (i) borrowing availability under the Company's Revolving
Credit Facility; (ii) proceeds from sales of properties including sale/
leaseback transactions and; (iii) internally generated cash flow. The Company
may also from time to time seek additional debt or equity financing.
At June 30, 1998, the Company had cash, cash equivalents and current
marketable securities of $78.9 million. In addition, at June 30, 1998, the
Company had $159.4 million available under the Revolving Credit Facility.
The Company's major sources of cash for the six months end June 30, 1998
were net proceeds from the sale/leaseback of hotels of $210.3 million,
borrowings under the Revolving Credit Facility of $57.5 million and cash flow
from operations of $44.4 million. The Company's major uses of cash during the
period were capital expenditures of $217.5 million relating primarily to the
development of new hotels and debt repayments of $66.4 million.
- 15 -
<PAGE> 18
For the six months ended June 30, 1997 and 1998, cash flow from operations
was positively impacted by the utilization of net operating loss carryforwards
("NOLs") and other tax basis differences of $1.8 million and $3.2 million,
respectively. At June 30, 1998, the Company had federal NOLs relating primarily
to its predecessor, Prime Motor Inns, Inc. ("PMI"), of approximately $75.1
million which are subject to annual utilization limitations and expire beginning
in 2005 and continuing through 2007.
Sources of Capital. The Company has undertaken a strategic initiative to
dispose of significant hotel real estate and to invest the proceeds in the
growth of its proprietary brands. As part of this initiative, Prime has entered
into two strategic alliances with real estate investment trusts ("REITs").
In January 1998, the Company completed the sale/leaseback of eight
full-service hotels to American General for $138.4 million, consisting of $114.4
million in cash, $10.2 million in assumed debt and $13.8 million in American
General limited partnership operating units. Prime is operating the hotels under
a lease agreement with American General which has a term of 10 years. The sale
is the first phase of a transaction which also includes the sale and leaseback
of nine additional full-service hotels to American General not later than March
31, 1999.
In June 1998, the Company agreed to sell and lease back nine AmeriSuites
to Equity Inns for $97.0 million in cash. The sale is part of an ongoing
strategic relationship between the Company and Equity Inns, which contemplates
the sale of approximately 20 AmeriSuites per year. The Company will continue to
operate the hotels under a ten-year lease agreement and will also generate
franchise income streams under a ten-year franchise agreement.
During the quarter, the common stock prices of publicly traded REITs
declined to an extent which may impact their ability to raise equity capital. In
the event that the capital constraints cause REITs to reduce their hotel
acquisitions, the Company intends to finance its development through the sale of
properties to private sources including key franchisees or through the issuance
of debt. The Company's business plan also calls for the reduction of AmeriSuites
capital requirements by transferring certain corporate development sites to
franchisees.
The Company has a $200.0 million Revolving Credit Facility which bears
interest at LIBOR plus 2%. The facility is available through 2001 and may be
extended for an additional year. Borrowings under the facility are secured by
certain of the Company's hotels with recourse to the Company. Additional
properties may be added subject to the approval of the lenders. Availability
under the facility is subject to a borrowing base test and certain other
covenants. As of July 31, 1998, the Company had outstanding borrowings of $40.6
million under the facility and further availability of $159.4 million.
Uses of Capital. The Company's capital spending is focused primarily on
the development of its AmeriSuites and HomeGate hotel chains. For the six months
ended June 30, 1998, the
- 16 -
<PAGE> 19
Company spent $108.7 million on new construction of AmeriSuites and $87.7
million on new construction of HomeGates. The Company expects to spend a total
of approximately $500 million on development of new hotels in 1998 to be funded
by borrowings under the Revolving Credit Facility, the sales of hotels
and internally generated cash flow.
On March 12, 1998, the Company settled its insurance claim for $16.4
million related to damage at the Frenchman's Reef caused by Hurricane Bertha in
July 1996. The Company had previously received $2.5 million in 1997 and received
the remaining amount, net of deductibles, in April 1998.
For the six months ended June 30, 1998, the Company spent approximately
$21.1 million on capital improvements at its Owned Hotels of which approximately
$8.3 million related to the refurbishment of the Frenchman's Reef.
In December 1997, the Company approved a program to purchase from time to
time up to one million shares of its common stock at various prices. The Company
completed this common stock purchase program over the six months ended June 30,
1998 at an average price of $17.78 per share. In July 1998, the Company also
announced that it has authorized the repurchase of an additional two million
shares of stock at various prices from time to time. The Company is currently
limited to the purchase of approximately 400,000 shares under the terms of its
$200 million Revolving Credit Facility. The Company has requested a waiver of
these restrictive covenants in order to fully implement its new repurchase
program.
On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due
2002 were converted into 7.2 million shares of common stock of the Company at a
conversion price of $12 per share.
In order to facilitate future tax-deferred exchanges of hotel properties,
the Company from time to time enters into arrangements with an unaffiliated
third party under Section 1031 of the Internal Revenue Code of 1986, as amended.
As of June 30, 1998, the Company had advances of approximately $104.4 million to
such third party which advances are classified as property, equipment and
leasehold improvements.
The Company has preliminarily reviewed its systems and equipment as it
relates to year 2000 compliance. Based on this assessment, the Company believes
that its systems will be year 2000 compliant no later than December 1999 and
that the cost of compliance is not expected to be material to its cash flows,
financial condition or results of operations.
- 17 -
<PAGE> 20
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 13, 1998 (the
"Annual Meeting"). The Company's stockholders were asked to take the following
actions at the meeting:
(1) Elect two Class III Directors to serve until the 2001 annual meeting of
stockholders or until their successors shall otherwise be elected (the "Board
Proposal");
(2) Approve an amendment to the Company's 1995 Employee Stock Option Plan to (1)
increase the number of shares of common stock that may be issued pursuant to the
exercise of options to purchase common stock and (ii) increase the total number
of shares of common stock with respect to which options may be granted to any
one individual during any calendar year (the "Incentive Plan Proposal");
(3) Approve an amendment to the Company's 1995 Non-Employee Director Stock
Option Plan to (i) allow for the discretionary grants of options and (ii) modify
the termination and amendment provisions thereof (the "Stock Purchase Plan
Proposal"); and
(4) Ratify the Board of Directors' selection of Arthur Andersen LLP to serve as
the Company's independent auditors for the fiscal year ending December 31,1998
(the "Auditors Proposal").
With respect to the Board Proposal, the two individuals nominated for director
were both elected by the affirmative vote of a majority of shares of common
stock present at the Annual Meeting. The nominees and the votes received by each
are as follows:
FOR WITHHELD
--- -------
Howard M. Lorber 36,968,390 350,590
A. F. Petrocelli 36,833,581 485,399
The Incentive Plan Proposal, Stock Purchase Plan Proposal and Auditors Proposal
were also approved by affirmative vote of a majority of shares of common stock
present at the Annual Meeting. Each of the proposals received the following
votes:
FOR AGAINST ABSTENTIONS
--- ------- -----------
Incentive Plan Proposal 35,948,506 1,276,982 93,492
Stock Purchase Plan Proposal 31,517,579 5,699,769 101,632
Auditors Proposal 37,287,737 14,168 17,075
- 18 -
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K.
(a) 10.1 Purchase and Sale Agreement between Prime Hospitality
Corp., as seller, and Equity Inns Partnership, L.P., as
purchaser, dated June 26, 1998.
11 Computation of Earnings Per Share
27 Financial Data Schedule
- 19 -
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME HOSPITALITY CORP.
Date: August 12, 1998 By: /s/ David A. Simon
----------------------------
David A. Simon, President and
Chief Executive Officer
Date: August 12, 1998 By: /s/ John M. Elwood
----------------------------
John M. Elwood, Executive
Vice President and Chief
Financial Officer
- 20 -
<PAGE> 1
Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
EQUITY INNS PARTNERSHIP, L.P.,
as Purchaser
April __, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.........................................................1
1.1. Affiliate:.......................................................1
1.2. Agreement........................................................1
1.2A Alliance Agreement...............................................1
1.3. Allocable Purchase Price.........................................2
1.4. Assets...........................................................2
1.5. Business Day.....................................................2
1.6. Closing..........................................................2
1.7. Closing Date.....................................................2
1.8. Code.............................................................2
1.9. Contracts........................................................2
1.10. Counter-Offer...................................................2
1.11. Defective Property..............................................2
1.12. Deposit.........................................................2
1.13. Documents.......................................................2
1.14. Encumbrance.....................................................2
1.15. Escrow Agent....................................................2
1.16. Escrow Agreement................................................2
1.17. FF&E............................................................2
1.18. [Intentionally deleted.]........................................3
1.19. [Intentionally deleted.]........................................3
1.20. Hotel...........................................................3
1.21. Improvements....................................................3
1.22. Intangible Property.............................................3
1.23. Inventory.......................................................3
1.24. Lease...........................................................3
1.25. LP Agreement....................................................4
1.26. [Intentionally deleted.]........................................4
1.27. [Intentionally deleted.]........................................4
1.28. [Intentionally deleted.]........................................4
1.29. [Intentionally deleted.]........................................4
1.30. [Intentionally deleted.]........................................4
1.31. [Intentionally deleted.]........................................4
1.32. Permitted Encumbrances..........................................4
1.33. Properties......................................................4
1.34. Purchase Price..................................................4
1.35. Purchaser.......................................................4
1.36. Real Property...................................................4
1.37. Registration Rights Agreement...................................5
1.38. REIT............................................................5
(i)
<PAGE> 3
1.39. Review Period...................................................5
1.40. Seller..........................................................5
1.41. Seller Group....................................................5
1.42. Seller's knowledge..............................................5
1.43. Surveys.........................................................5
1.44. Tenant..........................................................5
1.45. Title Commitments...............................................5
1.46. Title Company...................................................5
SECTION 2. PURCHASE AND SALE; DILIGENCE........................................5
2.1. Purchase and Sale................................................5
2.2. Deposit..........................................................5
2.3. Diligence Inspections............................................6
2.4. Casualty; Condemnation...........................................7
2.5. Title Matters....................................................7
2.6. Survey Matters..................................................8
2.7. [Intentionally Deleted.].........................................9
2.8. Allocations; Radius Restrictions.................................9
2.9. Outparcels.......................................................9
SECTION 3. CLOSING; PURCHASE PRICE............................................10
3.1. Closing.........................................................10
3.2. Purchase Price..................................................10
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE......................10
4.1. Closing Documents...............................................10
4.2. Condition of Properties.........................................11
4.3. Title Policies..................................................12
4.4. Opinions of Counsel.............................................12
4.5. No PIP Requirement at Closing...................................12
4.6. Representations.................................................12
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.........................12
5.1. Purchase Price..................................................12
5.2. Closing Documents...............................................12
5.3. Opinion of Counsel..............................................12
5.4. Representations.................................................13
5.5. Amendment to LP Agreement.......................................13
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER...........................13
6.1. Status and Authority of Seller..................................13
6.2. Action of Seller................................................13
(ii)
<PAGE> 4
6.3. No Violations of Agreements.....................................13
6.4. Litigation......................................................13
6.5. Existing Leases, Agreements, Etc................................13
6.6. Utilities, Etc..................................................14
6.7. Compliance With Law.............................................14
6.8. Taxes...........................................................14
6.9. Not A Foreign Person............................................14
6.10. Hazardous Substances...........................................14
6.11. Insurance......................................................15
6.12. Ownership......................................................15
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................15
7.1. Status and Authority of Purchaser...............................15
7.2. Action of Purchaser.............................................16
7.3. No Violations of Agreements.....................................16
7.4. Litigation......................................................16
7.5. [Intentionally deleted.]........................................16
7.6. [Intentionally deleted.]........................................16
7.7. [Intentionally deleted.]........................................16
SECTION 8. COVENANTS OF SELLER AND PURCHASER..................................16
8.1. Covenants of Seller.............................................16
8.2. Covenants of Purchaser..........................................17
SECTION 9. CLOSING COSTS AND PRORATIONS.......................................17
9.1. Closing Costs...................................................17
9.2. Income and Expense Allocations..................................17
SECTION 10. DEFAULT...........................................................18
10.1. Default by Seller..............................................18
10.2. Default by Purchaser...........................................19
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................19
SECTION 12. MISCELLANEOUS.....................................................19
12.1. Agreement to Indemnify.........................................19
12.2. Brokerage Commissions..........................................20
12.3. Publicity......................................................20
12.4. Notices........................................................20
12.5. Waivers, Etc...................................................21
12.6. Assignment; Successors and Assigns.............................21
(iii)
<PAGE> 5
12.7. Severability...................................................22
12.8. Counterparts, Etc..............................................22
12.9. Governing Law..................................................22
12.10. Performance on Business Days..................................23
12.11. Attorneys' Fees...............................................23
12.12. Section and Other Headings....................................23
12.13. No Oral Modifications.........................................23
Exhibit A - The Properties
Exhibits B-1-10 - Legal Descriptions
Exhibit C - Form of Lease
Exhibit D - Exceptions to Seller Representations
and Warranties
Exhibit E - Schedule of Agreements
(iv)
<PAGE> 6
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of April __, 1998, between
PRIME HOSPITALITY CORP., a Delaware corporation ("Seller"), as seller, and
EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership ("Purchaser"), as
purchaser.
WITNESSETH:
WHEREAS, the Seller and the Purchaser entered into an alliance under the
Purchase and Sale Agreement dated as of September 22, 1997, as amended and
restated by Amended and Restated Purchase and Sale Agreement dated as of
December 2, 1997 (the "Alliance Agreement"); and
WHEREAS, Seller is the owner and holder of the Properties (as defined
herein); and
WHEREAS, Purchaser desires to purchase the Properties, as more fully
set forth below; and
WHEREAS, Seller is willing to sell the Properties to Purchaser, subject
to and upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Seller and Purchaser hereby
agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1. Affiliate: The term "Affiliate" of an entity shall
mean (a) an The term "Affiliate" of an entity shall mean (a) an entity that,
directly or indirectly, controls or is controlled by or is under common control
with such entity, (b) any other entity that owns, beneficially, directly or
indirectly, more than fifty percent (50%) of the outstanding capital stock,
shares or equity interests of such entity, or (c) any officer, director,
employee, partner or trustee of such entity or any person or entity controlling,
controlled by or under common control with such entity (excluding trustees and
entities serving in similar capacities who are not otherwise an Affiliate of
such entities).
1.2. "Agreement" shall mean this Purchase and Sale
Agreement, together with the Exhibits attached hereto or otherwise incorporated
herein by reference, as it and they may be amended from time to time as herein
provided.
1.2A "Alliance Agreement" shall have the meaning ascribed in
the Recitals to this Agreement.
<PAGE> 7
1.3. "Allocable Purchase Price" shall mean, with respect
to any of the Properties, the applicable amount set forth on Exhibit A hereto,
it being agreed that, prior to the expiration of the Review Period, Seller and
Purchaser shall, on request of the other party, use good faith efforts to agree
to a reasonable reallocation of such specified amounts.
1.4. "Assets" shall mean, with respect to any Hotel,
collectively, all of the Real Property, the FF&E, the Contracts, the Documents,
the Improvements and the Intangible Property owned by Seller in connection with
or relating to such Hotel.
1.5. "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which banking institutions in the State of
New York are authorized by law or executive action to close.
1.6. "Closing" shall have the meaning given such term in
Section 3.1.
1.7. "Closing Date" shall have the meaning given such term in
Section 3.1.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
1.9. "Contracts" shall mean, with respect to any Property, all
service contracts, equipment leases, booking agreements and other arrangements
or agreements to which Seller is a party affecting the ownership, repair,
maintenance, management, leasing or operation of such Property, to the extent
Seller's interest therein is assignable or transferable.
1.10. "Counter-Offer" shall have the meaning given such term
in Section 11.1.
1.11. "Defective Property" shall mean any Property which
(i) has been condemned in whole or in part, or (ii) by reason of damage by fire,
vandalism, acts of God or other casualty or cause, has suffered damage such that
expenditures equal to or greater than $500,000 (as such cost is determined by an
architect or engineer selected by Seller and reasonably satisfactory to
Purchaser) shall be required in order to restore such Property into
substantially the same condition as existing prior to such damage.
1.12. "Deposit" shall have the meaning given such term in
Section 2.2.
1.13. "Documents" shall mean, with respect to any Property,
all books, records and files relating to the leasing, maintenance, management or
operation of such Property.
1.14. "Encumbrance" shall have the meaning given such term in
Section 11.3.
1.15. "Escrow Agent" shall mean the Title Company.
1.16. "Escrow Agreement" shall mean the escrow agreement to
be entered into among Purchaser, Seller and Escrow Agent simultaneously
herewith.
- 2 -
<PAGE> 8
1.17. "FF&E " shall mean, with respect to any Property, all
appliances, machinery, devices, fixtures, appurtenances, equipment, furniture,
furnishings and articles of tangible personal property of every kind and nature
whatsoever owned by Seller and located in or at, or used exclusively in
connection with the ownership, operation or maintenance of such Property.
1.18. [Intentionally deleted.]
1.19. [Intentionally deleted.]
1.20. "Hotel" shall mean each hotel located at the
properties identified on Exhibit A, the legal descriptions of which are set
forth on Exhibits B-1 through B-10.
1.21. "Improvements" shall mean, with respect to any
Property, all buildings, fixtures, walls, fences, landscaping and other
structures and improvements situated on, affixed or appurtenant to the Real
Property with respect to such Property.
1.22. "Intangible Property" shall mean, with respect to any
Property, all transferable or assignable permits, certificates of occupancy,
operating permits, sign permits, development rights and approvals, certificates,
licenses, warranties and guarantees, the Contracts, telephone exchange numbers
identified with such Property held by Seller and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character with respect to such Property held by Seller, except (a) to the
extent held by or transferred to the Tenant under the Lease and (b) for all
trademarks, trade names, copyrights, patents or technical processes, including,
without limitation, any "AmeriSuites" brand name, logos and designs, owned or
used by Seller with respect to such Property.
1.23. "Inventory " shall mean all inventory located at the
Hotels, including, without limitation, all mattresses, pillows, bed linens,
towels, powder goods, soaps, cleaning supplies and such other supplies, together
with any food inventory such as cereal, breakfast rolls, coffee, which shall be
more particularly described in the schedule of Inventory approved by Purchaser
and delivered at Closing by Seller, and which shall be at a minimum in amounts
sufficient to comply with the requirements of the applicable franchise
agreement.
1.24. "Lease" shall mean, collectively, all of the leases
to be entered into between Purchaser, as landlord, and the Tenant, as tenant,
with respect to each of the Properties, each substantially in the form attached
as Exhibit C to the Alliance Agreement, with rent and other economic terms to be
reasonably calculated for each Hotel by the Purchaser (which shall be based on a
2.5% "leakage" on stabilized gross revenues as under the Alliance Agreement),
and written notice thereof issued to the Seller prior to expiration of the
Review Period, together with a letter agreement confirming that the Hotels,
together with the ten existing hotels leased by the Purchaser to the Tenant,
collectively constitute a "Cross Default Pool" under the Leases, except that the
form of lease shall be amended to provide that (a) all income from
telecommunication leases shall be payable to the Purchaser, (b) the lessee shall
have the option, in lieu of the requirement that the lessee maintain a minimum
capitalization, to maintain with lessor a security deposit in the form of a
letter of credit or cash, equal to or in excess of twenty percent of the
aggregate estimated rent for the current lease year (as specified in the annual
budget for such
- 3 -
<PAGE> 9
lease year) under all leases between lessor and its affiliates and lessee and
its affiliates (any such letter of credit shall be in form and substance
reasonably satisfactory to lessor and shall allow draws upon lessor certifying
that either (a) the letter of credit is within 30 days of expiration or (b) the
lessor has obtained a final judgment against lessee for damages in the amount of
such draw), and (c) the performance standards shall not apply in years in which
50% of guest rooms are out of service each for a period in excess of 4 weeks
solely as a result of (I) major renovations initiated by lessor or (ii) lessor
failing to make capital expenditures which lessor agreed to make in accordance
with a capital expenditure budget.
1.25. "LP Agreement" shall have the meaning given such term
in Section 3.2.
1.26. [Intentionally deleted.]
1.27. [Intentionally deleted.]
1.28. [Intentionally deleted.]
1.29. [Intentionally deleted.]
1.30. [Intentionally deleted.]
1.31. [Intentionally deleted.]
1.32. "Permitted Encumbrances" shall mean, with respect to
any Property, (a) liens for taxes, assessments and governmental charges with
respect to such Property not yet due and payable or due and payable but not yet
delinquent or as to which adequate reserves are provided therefor; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect the use of such Property as a hotel as
currently operated and constructed; (c) such other nonmonetary encumbrances as
do not, in Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a functioning hotel as
currently operated and constructed; (d) such other nonmonetary encumbrances with
respect to such Property which are not objected to by Purchaser in accordance
with Sections 2.5 and 2.6; and (e) such exceptions or matters, as the case may
be, otherwise accepted by Purchaser pursuant to Sections 2.5 and/or 2.6.
1.33. "Properties" shall mean all of the Assets relating to
the properties identified on Exhibit A, the legal descriptions of which are set
forth in Exhibits B-1 through B-10.
1.34. "Purchase Price" shall have the meaning given such
term in Section 3.2.
1.35. "Purchaser" shall have the meaning given such term in
the preamble to this Agreement.
1.36. "Real Property" shall mean the real property
described in the applicable Exhibit B-1 through B-10, together with all
easements, rights of way, privileges, licenses and appurtenances which Seller
may now own with respect thereto.
- 4 -
<PAGE> 10
1.37. "Registration Rights Agreement" shall mean that
certain Redemption and Registration Rights Agreement, substantially in the form
of Exhibit F to the Alliance Agreement, to be entered into by Purchaser, the
REIT, the general partner of Purchaser and Seller, as of the Closing Date.
1.38. "REIT" shall have the meaning given such term in Section
3.2.
1.39. "Review Period" shall mean the period commencing on
the date of this Agreement and expiring at 5 p.m., Eastern Time, on May 29,
1998.
1.40. "Seller" shall have the meaning given such term in
the preamble to this Agreement.
1.41. "Seller Group shall mean Seller and any Affiliate of
Seller that is a parent or direct or indirect wholly-owned subsidiary of Seller.
1.42. "Seller's knowledge" shall mean the actual knowledge of
Joseph Bernadino, Linda K. Rush, John M. Elwood, David Simon and Richard
Szymanski.
1.43. "Surveys" shall have the meaning given such term in
Section 2.5.
1.44. "Tenant" shall mean Caldwell Holding Corp.
1.45. "Title Commitments" shall have the meaning given such
term in Section 2.5.
1.46. "Title Company" shall mean Chicago Title Insurance
Company or such other title insurance company or companies as shall have been
reasonably approved by Purchaser and Seller.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1. Purchase and Sale. In consideration of the mutual
covenants herein contained, Purchaser hereby agrees to purchase from Seller, and
Seller hereby agrees to sell to Purchaser, all of Seller's right, title and
interest in and to the Properties for the Purchase Price, subject to and in
accordance with the terms and conditions of this Agreement.
2.2. Deposit. Purchaser shall deposit the sum of
$4,700,000 (the "Deposit") with the Escrow Agent, which amount shall be payable
as follows: (i) $250,000 within three Business Days after execution and delivery
of this Agreement, and (ii) $4,450,000 within three Business Days after
expiration of the Review Period. The Deposit shall be held in an
interest-bearing account pursuant to the terms of the Escrow Agreement, which
agreement shall be duly executed and delivered by the parties hereto
simultaneously herewith. If this Agreement shall terminate with respect to all
of the Properties pursuant to Section 2.3 or 10.1, the Deposit, together with
all interest accrued thereon, shall be returned to Purchaser. If this Agreement
shall terminate pursuant to Section 10.2, the Deposit, together with all
interest accrued thereon, shall be paid to Seller. If the Closing shall occur,
the Deposit shall be credited toward the Purchase Price, pursuant to Section
3.2, and the interest earned on the Deposit shall be paid to Purchaser.
- 5 -
<PAGE> 11
2.3. Diligence Inspections. (a) During the Review Period,
Seller shall permit Purchaser and its representatives to inspect the Properties
and the Improvements (including, without limitation, all roofs, electric,
mechanical and structural elements, and HVAC systems therein), to perform due
diligence, soil analysis and environmental investigations, to examine the books
of account and records of Seller with respect to the Properties, including,
without limitation, all leases and agreements affecting the Properties, and make
copies thereof, at such reasonable times as Purchaser or its representatives may
request by notice to Seller. Seller shall, in connection with Purchaser's due
diligence, provide Purchaser with copies, to the extent available, of the form
of franchise guidelines and franchise agreement for "AmeriSuites," which form of
franchise agreement shall be substantially similar to (i) the form which Tenant
shall enter into in connection with the Closing and (ii) (subject to any changes
made by franchisor to such form on a non-discriminatory basis) the form to be
employed with respect to any First Offer Hotels and Option Hotels. To the extent
that, in connection with such investigation, Purchaser, its agents,
representatives or contractors, damages or disturbs any of the Real Property or
the Improvements located thereon, Purchaser shall return the same to
substantially the same condition which existed immediately prior to such damage
or disturbance. Neither Purchaser nor any of its agents, representatives or
contractors shall have any right whatsoever to alter the condition of the
Property or any portion thereof without the prior written consent of Seller. In
no event shall any such inspection include any drilling into or under the
surface of the Property, soil sampling, water sampling or similar activities
commonly known as a "Phase II environmental study" without the prior written
consent of Seller (but shall include such inspections customarily performed
during a "Phase I environmental study"). In the event that the transactions
contemplated by this Agreement are not closed and consummated for any reason,
Purchaser shall, on request by Seller, deliver to Seller all tests, reports and
inspections of the Property made and conducted by Purchaser or for its benefit
or any other documents or information (including title commitments, UCC
financing statement search reports, title documents, surveys, zoning reports,
environmental audits, structural engineering reports, appraisals and the like),
which Purchaser has received pursuant to this Agreement; provided, however, that
Seller shall reimburse Purchaser's out-of-pocket expenses for any of the
foregoing materials (other than materials delivered by Seller or its agents or
representatives to Purchaser) which it requests that Purchaser so deliver.
Purchaser shall indemnify, defend and hold harmless Seller from and against any
and all expense, loss or damage which Seller may incur as a result of any act or
omission of Purchaser or its representatives, agents or contractors in
connection with such examinations and inspections, other than to the extent that
any expense, loss or damage arises from any gross negligence or willful
misconduct of Seller. The provisions of this Section 2.3 shall survive the
termination of this Agreement and the Closing.
(b) If Purchaser notifies Seller in writing that Purchaser elects to
terminate this Agreement either prior to (i) 5 p.m. Eastern Daylight Savings
Time, May 1, 1998 (for any reason or for no reason in the sole discretion of
Purchaser), or (ii) the expiration of the Review Period as to all of the Hotels
or, with respect to the Hotel located in Albuquerque, New Mexico only, 5 p.m.,
Eastern Daylight Savings Time, June 15, 1998 (for cause as a result of a
reasonable objection or aggregate of objections relating to title, survey,
zoning, compliance with law, environmental, engineering, the physical condition
of any Property, capital leases or required capital repairs as to any Property),
then this Agreement shall automatically terminate, the Deposit
- 6 -
<PAGE> 12
(and all interest thereon) shall be returned to Purchaser, and, upon return of
the Deposit (and all interest thereon), Purchaser and Seller shall have no
further rights, liabilities or obligations hereunder (except those that
expressly survive a termination of this Agreement).
2.4. Casualty; Condemnation. (a) If, prior to the Closing,
(i) any Property suffers a casualty or partial condemnation which would cause
such Property to become a Defective Property and (ii) such Property is not,
prior to the Closing, restored to a condition substantially the same as the
condition thereof immediately prior to such casualty or condemnation, either
Purchaser or Seller may, on notice to the other given prior to the Closing Date,
terminate this Agreement with respect to such Defective Property, in which event
Purchaser shall acquire all of the Properties other than such Defective
Property, and the Purchase Price shall be reduced by the Allocable Purchase
Price of such Defective Property. Promptly upon learning of the same, Seller
covenants and agrees to provide Purchaser with prompt written notice of any
casualty or condemnation affecting any Property.
(b) If, prior to the Closing, any Property shall be
condemned in its entirety, this Agreement shall automatically terminate with
respect to such Defective Property, in which event Purchaser shall acquire all
of the Properties other than such Defective Property, and the Purchase Price
shall be reduced by the Allocable Purchase Price of such Defective Property.
(c) If neither Purchaser nor Seller shall elect to
terminate this Agreement with respect to a Defective Property pursuant to
Paragraph (a) of this Section 2.4, Seller agrees (i) in the case of a casualty
loss, to assign to Purchaser at Closing its rights to any insurance proceeds
with respect to such loss, pay over to Purchaser any such proceeds already
received and give Purchaser a credit against the Purchase Price in the amount of
any deductible or uninsured loss, or (ii) in the case of a condemnation, to
assign to Purchaser at Closing its rights to any compensation in connection with
such condemnation and pay over to Purchaser any such compensation already
received, and, in either such event, Purchaser shall acquire such Defective
Property as provided herein.
(d) If any Property shall suffer a casualty loss which
shall not render the Property a Defective Property, Seller shall assign to
Purchaser at Closing its rights to any insurance proceeds with respect to such
loss, pay over to Purchaser any such proceeds already received and give
Purchaser a credit against the Purchase Price in the amount of any deductible or
uninsured loss, and Purchaser shall acquire such Property as provided herein.
2.5. Title Matters. Prior to the date of this Agreement,
Purchaser has ordered from the Title Company and directed the Title Company
promptly to deliver to Purchaser a preliminary title commitment, having an
effective date after the date of this Agreement, for an ALTA (or such other form
reasonably approved by Purchaser) owner's policy of title insurance with respect
to each of the Properties, together with complete and legible copies of all
instruments and documents referred to as exceptions to title (collectively, the
"Title Commitments").
As soon as reasonably practicable, but in no event later than the
expiration of the Review Period, Purchaser shall give Seller notice of any title
exceptions (other than Permitted Encumbrances) which adversely affect the
present use or operation of any Property in any material respect and as to which
Purchaser reasonably objects. If, for any reason, Seller is
- 7 -
<PAGE> 13
unable or unwilling to take such actions as may be required to cause such
exceptions to be removed from the Title Commitments (provided, however, that (i)
if such exceptions to title consist of mortgages, deeds of trust, mechanics'
liens, tax liens, other liens or charges which are capable of computation as a
fixed sum, Seller shall pay and discharge such exceptions at or prior to Closing
from the cash proceeds of sale, or otherwise, or, with respect to tax liens,
contest such liens in accordance with the provisions of the Lease, and (ii) if
such exceptions to title may be removed at a cost to Seller of not more than
$25,000 in the aggregate with respect to any single Property, and such removal
may be reasonably effectuated by Seller no later than the Closing Date, Seller
shall cause such exceptions to be removed), Seller shall give Purchaser notice
thereof; it being understood and agreed that, provided that Purchaser shall have
timely given notice of such objection to title, the failure of Seller to give
such notice as to its inability or unwillingness to cause the removal of any
exceptions shall be deemed an election by Seller to remedy such matters. If
Seller shall be unable or unwilling to remove any such title defects to which
Purchaser has reasonably objected, Purchaser may elect (i) to terminate this
Agreement with respect to the affected Property, in which event, the Purchase
Price shall be reduced by the Allocable Purchase Price of the affected
Properties and this Agreement shall be of no further force and effect with
respect to the affected Properties or (ii) to consummate the transactions
contemplated hereby, notwithstanding such title defect, without any abatement or
reduction in the Purchase Price on account thereof. Purchaser shall make any
such election by written notice to Seller given on or prior to the fifth
Business Day after Seller's notice of its unwillingness or inability to cure
such defect, and time shall be of the essence with respect to the giving of such
notice by Purchaser. Failure of Purchaser to give such notice shall be deemed an
election by Purchaser to proceed in accordance with clause (ii) above, and such
exception shall be a Permitted Encumbrance.
2.6. Survey Matters. Purchaser shall, promptly upon the
execution hereof, arrange for the preparation of a survey with respect to each
of the Properties (the "Surveys") by a licensed surveyor in the jurisdiction in
which each such Property is located, which (i) contains an accurate legal
description of the applicable Property, (ii) shows the location, dimension and
description (including applicable recording information) of all utilities,
easements, encroachments and other physical matters affecting such Property, the
number of striped parking spaces located thereon and all applicable building
set-back lines, (iii) states whether the applicable Property is located within a
100-year flood plain and (iv) is certified to Purchaser and the Title Company
and such other persons as shall have been requested by Purchaser or Seller.
As soon as reasonably practicable, but in no event later than the
expiration of the Review Period, Purchaser shall give Seller notice of any
matters shown thereon (other than Permitted Encumbrances) which adversely affect
any such Property in any material respect and as to which Purchaser reasonably
objects. If, for any reason, Seller is unwilling or unable to take such actions
as may be required to remedy the objectionable matters, Seller shall give
Purchaser prompt notice thereof. If Seller shall be unwilling or unable to
remove any such survey defect to which Purchaser has reasonably objected,
Purchaser may elect (i) to terminate this Agreement with respect to the affected
Property, in which event, the Purchase Price shall be reduced by the Allocable
Purchase Price of the affected Properties and this Agreement shall terminate and
be of no further force or effect with respect to the affected Properties or (ii)
to consummate the
- 8 -
<PAGE> 14
transactions contemplated hereby, notwithstanding such defect, without any
abatement or reduction in the Purchase Price on account thereof. Purchaser shall
make any such election by written notice to Seller given on or prior to the
fifth Business Day after Seller's notice of its inability to cure such defect
and time shall be of the essence with respect to the giving of such notice by
Purchaser. Failure of Purchaser to give such notice shall be deemed an election
by Purchaser to proceed in accordance with clause (ii) above and such matter
shall be a Permitted Encumbrance.
2.7. [Intentionally Deleted.]
2.8. Allocations; Radius Restrictions. Seller and
Purchaser shall, during the Review Period, use good faith efforts to agree (i)
to a reasonable allocation of the Purchase Price between the real property and
personal property included in the Properties and (ii) to radius distances for
non-compete restrictions with respect to each of the Properties, as set forth in
Section 7.2(f) of the Lease.
2.9. Outparcels. (a) The Seller is in the process of
subdividing (the "Subdivision") the land upon which each of the BWI (Baltimore),
Maryland and the Augusta, Georgia Hotels is located into two parcels, one
containing the applicable hotel and all related improvements, landscaped areas
and appurtenances (the "Hotel Parcel") and the other an adjacent unimproved
parcel of land (the "Outparcel"). In the event the Subdivision is completed
prior to the Closing, the Seller shall convey the Hotel Parcel to the Purchaser
in accordance with this Agreement and retain ownership of the Outparcel. In the
event the Subdivision is not completed prior to Closing, the Seller shall convey
to Purchaser both the Hotel Parcel and the Outparcel at Closing in accordance
with this Agreement, but the Purchaser, upon completion of the Subdivision,
shall convey (the "Reconveyance") the Subdivision Parcel to the Seller by
quitclaim deed (or its equivalent). The Seller shall provide the Purchaser with
(1) reasonable evidence that, upon the Subdivision and Reconveyance, the Hotel
Parcel shall comply with all applicable zoning and subdivision laws and (2) any
reasonable access, storm water detention and utility easements. The Purchaser
shall reasonably cooperate with the Subdivision and the Reconveyance, but the
Subdivision and Reconveyance are at the sole benefit of the Seller and the sole
costs related thereto, including the cooperation of the Purchaser, shall be paid
by Seller, and the Purchaser shall not be required to incur any expense or
liability with respect thereto.
(b) The deeds conveying the Hotels located in BWI
(Baltimore), Maryland, Augusta, Georgia and Las Vegas, Nevada shall contain a
restrictive covenant prohibiting the construction, operation or use of a hotel,
motel or similar improvement or use on any adjacent Outparcel or property
retained by Seller or its affiliate. The deed conveying the Hotel located in Las
Vegas, Nevada shall contain (i) a reciprocal access and parking easement between
the Hotel and the adjacent Seller retained outparcel in form and substance
reasonably satisfactory to the Seller and the Purchaser, sufficient to comply
with applicable zoning and special permit requirements and (ii) a covenant
requiring any construction, operation or use of a restaurant on the 10,800
square feet site on the adjacent property retained by Seller or its affiliates
first be consented to by the Purchaser, which consent shall not be unreasonably
denied so long as such construction, operation and use does not adversely affect
parking for such Hotel.
- 9 -
<PAGE> 15
SECTION 3. CLOSING; PURCHASE PRICE.
3.1. Closing. The purchase and sale of the Properties
shall be consummated at a closing (the "Closing") to be held at the offices of
Hunton & Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136,
or at such other location as Seller and Purchaser may agree, at 10:00 a.m. local
time, on a date chosen by Purchaser with reasonable notice to Seller prior to
June 30, 1998 (the "Closing Date").
3.2. Purchase Price. (a) At the Closing, Purchaser shall
pay to Seller for the Properties a purchase price (the "Purchase Price") in the
amount of One Hundred One Million Three Hundred Sixteen Thousand Six Hundred
Thirty-Three ($101,316,633) Dollars (subject to customary prorations and
adjustments), except that Purchaser shall receive a credit against the Purchase
Price in the amount of the Deposit.
(a) [Intentionally deleted.]
(b) The Purchase Price shall be payable by wire transfer
of immediately available funds on the Closing Date to an account or accounts to
be designated by Seller prior to the Closing, subject to the terms of paragraph
(c) of this Section 3.2.
(c) [Intentionally deleted.]
(d) [Intentionally deleted.]
(e) [Intentionally deleted.]
(f) [Intentionally deleted.]
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Properties on the Closing
Date shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date, which Seller covenants to use commercially
reasonable efforts to fulfill:
4.1. Closing Documents. Seller shall have delivered to
Purchaser:
(a) Good and sufficient special warranty deeds, with
legal descriptions based on the deeds by which Seller received title to the
Properties, and quitclaim deeds with legal descriptions based on the Surveys, if
the Surveys indicate any differing legal descriptions, all in forms as shall be
customary in the various jurisdictions in which the Properties are located, with
respect to all of the Properties, in proper statutory form for recording, duly
executed and acknowledged by Seller, conveying fee simple title to the
applicable Properties, free from all liens and encumbrances other than the
Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and
substance reasonably satisfactory to Seller and Purchaser, duly executed and
acknowledged by Seller, with respect to
- 10 -
<PAGE> 16
all of Seller's right, title and interest in, to and under the FF&E, the
Documents and the Intangible Property with respect to the Properties;
(c) A bill of sale and assignment agreement, in form and
substance reasonably satisfactory to Seller, Purchaser and Tenant, duly executed
and acknowledged by Seller, to Tenant, with respect to all of Seller's right,
title and interest in, to and under the Inventory and the Contracts, with
respect to the Properties;
(d) Duly executed and acknowledged memoranda of lease,
setting forth the material terms of each Lease, in form and substance reasonably
satisfactory to Seller and Purchaser;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) Duly executed environmental disclosure forms, as and to
the extent required by applicable law;
(g) To the extent the same are in Seller's possession,
original, fully executed copies of all Contracts pertaining to the Properties;
(h) A duly executed copy of the Lease and all other
documents and sums required to be delivered by Seller and/or the Tenant pursuant
thereto;
(i) A duly executed copy of the franchise agreement between
the Tenant and the franchisor with respect to each of the Properties;
(j) A duly executed copy of the Registration Rights Agreement;
(k) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller and
the Tenant;
(l) an affidavit of Seller in accordance with Section
1445 of the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
(m) Such other conveyance documents, certificates, deeds,
and other instruments as may be required by this Agreement or as Purchaser or
the Title Company may reasonably require to effectuate the transactions
contemplated hereunder.
4.2. Condition of Properties. (a) All of the Properties
and all Improvements located thereon shall, except as otherwise provided in
Section 2.3, be in substantially the same physical condition as on the date of
this Agreement, ordinary wear and tear excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Properties in any material respect;
- 11 -
<PAGE> 17
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Properties which would render any Property a Defective Property; and
(d) All material licenses, permits and other
authorizations necessary for the current use, occupancy and operation of the
Properties shall be in full force and effect in all material respects.
4.3. Title Policies. The Title Company shall be prepared,
subject only to payment of the applicable premium, endorsement and related fees
and delivery of all conveyance documents in recordable form, to issue title
insurance policies to Purchaser, in accordance with Section 2.5, together with
such affirmative coverages as Purchaser may reasonably require and shall have
been determined by the Title Company as available prior to the expiration of the
Review Period.
4.4. Opinions of Counsel. Purchaser shall have received a
written opinion from counsel to Seller, in form and substance reasonably
satisfactory to Purchaser and Seller's counsel, regarding the organization and
authority of Seller and Tenant.
4.5. No PIP Requirement at Closing. There shall be no PIP
requirement imposed by the franchisor in connection with the Closing.
4.6. Representations. All representations and warranties made
herein by Seller shall be true and correct in all material respects.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Properties on the Closing Date
to Purchaser is subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, which Purchaser covenants to use
commercially reasonable efforts to fulfill:
5.1. Purchase Price. Purchaser shall deliver to Seller the
Purchase Price, pursuant to Section 3.1.
5.2. Closing Documents. Purchaser shall have delivered to
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 (including, without limitation, the
Registration Rights Agreement executed by Purchaser, the REIT and the general
partner of Purchaser), where applicable;
(b) Certified copies of all charter documents,
partnership agreements, applicable resolutions and certificates of incumbency
with respect to Purchaser and its general partner; and
(c) [Intentionally deleted.]
5.3. Opinion of Counsel. Seller shall have received a
written opinion from counsel to Purchaser, in form and substance reasonably
satisfactory to Seller and Purchaser's counsel, regarding the organization and
authority of Purchaser and the REIT.
- 12 -
<PAGE> 18
5.4. Representations. All representations and warranties made
herein by Purchaser shall be true and correct in all material respects.
5.5. Amendment to LP Agreement. Purchaser shall have
caused Exhibit A of the LP Agreement to be amended so as to add Seller as a
limited partner listed thereon.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents and
warrants to Purchaser as follows:
6.1. Status and Authority of Seller. Seller is a
corporation duly organized, validly existing and in corporate good standing
under the laws of its state of incorporation, and has all requisite power and
authority under the laws of such state and its respective charter documents to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. Seller has duly qualified to transact
business in each jurisdiction in which the nature of the business conducted by
it requires such qualification, except where failure to do so could not
reasonably be expected to have a material adverse effect.
6.2. Action of Seller. Seller has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by Seller or
Tenant on or prior to the Closing Date, such document shall constitute the valid
and binding obligation and agreement of Seller or Tenant, as the case may be,
enforceable against Seller or Tenant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
6.3. No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Seller or of the Lease by Tenant,
nor compliance with the terms and provisions hereof or thereof, will result in
any breach of the terms, conditions or provisions of, or conflict with or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any Property pursuant to the terms of any indenture, mortgage,
deed of trust, note, evidence of indebtedness or any other agreement or
instrument by which Seller or Tenant is bound, except pursuant to the Lease or
this Agreement.
6.4. Litigation. Neither Seller nor Tenant has received
any written notice of and, to Seller's knowledge, no action or proceeding is
pending or threatened and no investigation looking toward such an action or
proceeding has begun, which (a) questions the validity of this Agreement or the
Lease or any action taken or to be taken pursuant hereto, (b) will result in any
material adverse change in the business, operation, affairs or condition of the
Properties, taken as a whole, (c) will result in or subject the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any part of the Properties, which would render such Property a Defective
Property.
6.5. Existing Leases, Agreements, Etc. Other than any
agreements provided to Purchaser prior to the execution of this Agreement and
listed on the schedule attached hereto as
- 13 -
<PAGE> 19
Exhibit E, there are no other material agreements affecting the Properties which
will be binding on Purchaser subsequent to the Closing Date, which Purchaser
cannot terminate.
6.6. Utilities, Etc. To Seller's knowledge, all utilities
and services necessary for the use and operation of the Properties (including,
without limitation, road access, gas, water, electricity and telephone) are
available thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of the Properties and
for their respective intended purposes. To Seller's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Properties.
6.7. Compliance with Law. To Seller's knowledge, except as
set forth on Exhibit D attached hereto, (i) the Properties and the current use
and operation thereof do not violate any material federal, state, municipal and
other governmental statutes, ordinances, by-laws, rules, regulations or any
other legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, subdivision, land use, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof (including liquor license, if required). Except
as disclosed to Purchaser, Seller has not received written notice of any
threatened request, application, proceeding, plan, study or effort which would
materially adversely affect the current use or zoning of any of the Properties
or which would materially adversely modify or realign any adjacent street or
highway.
6.8. Taxes. To Seller's knowledge, other than the amounts
disclosed by tax bills (copies of which have been delivered by Seller to
Purchaser prior to the execution of this Agreement), no taxes or special
assessments of any kind (special, bond or otherwise) are or have been levied
with respect to any of the Properties, or any portion thereof, which are
outstanding or unpaid, other than amounts not yet due and payable or, if due and
payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. Except as set forth on Exhibit
D attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), to Seller's knowledge, Seller has not stored or disposed of
(or engaged in the business of storing or disposing of) or has released or
caused the release of any hazardous waste, contaminants, oil, radioactive or
other material on any of the Properties, or any portion thereof, the removal of
which is required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to Seller's knowledge, except as set forth on Exhibit D
attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in the ordinary course of a hotel business in accordance with
applicable law.
- 14 -
<PAGE> 20
6.11. Insurance. Seller has not received any written notice
from any insurance carrier of defects or inadequacies in the Properties which,
if uncorrected, would result in a termination of insurance coverage or a
material increase in the premiums charged therefor.
6.12. Ownership. All Assets, Contracts, FF&E, Intangible
Property and Real Property are owned by Seller and are assignable and
transferable without the consent of any third party (or, if any such consent is
required, such consent shall be obtained no later than the Closing), and there
are no capital leases, except as set forth on Exhibit E.
The representations and warranties made in this Agreement by
Seller shall be deemed remade by Seller as of the Closing Date with the same
force and effect as if made on, and as of, such date.
Except as otherwise expressly provided in this Agreement or
any documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by Seller, on
Seller's behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real Property,
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
Without negating the covenants, representations and warranties of Seller under
this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Without negating the covenants,
representations and warranties of Seller under this Agreement, Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Properties in their "as is" condition on the
Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller as follows:
7.1. Status and Authority of Purchaser. Purchaser is a
Tennessee limited partnership duly organized, validly existing and in trust good
standing under the laws of the State of Tennessee, and, prior to the expiration
of the Review Period, will have all requisite power and authority under the laws
of such state and under its charter documents to enter into and perform
- 15 -
<PAGE> 21
its obligations under this Agreement and to consummate the transactions
contemplated hereby. Purchaser has duly qualified and is in good standing as a
foreign limited partnership in each jurisdiction in which the nature of the
business conducted by it requires such qualification.
7.2. Action of Purchaser. Prior to the expiration of
Review Period, Purchaser will take all necessary action to authorize the
execution, delivery and performance of this Agreement and the Lease, and upon
the execution and delivery of any document to be delivered by Purchaser on or
prior to the Closing Date such document shall constitute the valid and binding
obligation and agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement nor the Lease by Purchaser, nor
compliance with the terms and provisions hereof, will result in any breach of
the terms, conditions or provisions of, or conflict with or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any
property or assets of Purchaser pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness or any other agreement
or instrument by which Purchaser is bound.
7.4. Litigation. No investigation, action or proceeding is
pending and, to Purchaser's knowledge, no action or proceeding is threatened and
no investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
7.5. [Intentionally deleted.]
7.6. [Intentionally deleted.]
7.7. [Intentionally deleted.]
The representations and warranties made in this Agreement by Purchaser
shall be deemed remade by Purchaser as of the Closing Date with the same force
and effect as if made on, and as of, such date.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
Purchaser between the date of this Agreement and the Closing Date as follows:
(a). Upon learning of any material change in any condition
with respect to any of the Properties or of any event or circumstance which
makes any representation or warranty of Seller to Purchaser under this Agreement
untrue or misleading in any material respect, promptly to notify Purchaser
thereof (Purchaser agreeing, on learning of any such fact or condition, promptly
to notify Seller thereof).
- 16 -
<PAGE> 22
(b) To continue or cause to continue to operate each of
the Properties as an "AmeriSuites" hotel, in a good and businesslike fashion
consistent with its past practices and to cause each of the Properties to be
maintained in good working order and condition in a manner consistent with its
past practice.
(c) To provide to Purchaser, promptly upon reasonable
request, such unaudited financial and other information and certifications of
Seller with respect to the Properties as Purchaser may from time to time
reasonably request in order to comply with any applicable securities laws and/or
any rules, regulations or requirements of the Securities and Exchange Commission
and, if required or requested, to permit Purchaser to incorporate by reference
any information included in filings made by Seller with the Securities and
Exchange Commission.
(d) To deliver to Purchaser the items set forth in Section 4.1
and Section 4.4.
8.2. Covenants of Purchaser. Purchaser hereby covenants with
Seller on and as of the Closing Date as follows:
(a) To deliver to Seller the items set forth in Section 5.2.
SECTION 9. CLOSING COSTS AND PRORATIONS.
9.1. Closing Costs. Each of the parties hereto shall pay
its own expenses in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any legal and accounting
fees, the costs and expenses of preparing engineering and environment reports,
market studies and appraisals, the cost of the Surveys, Title Commitments,
zoning reports, UCC financing statement search reports, environmental audits,
zoning reports, structural engineering reports, appraisals and the like, whether
or not the transactions contemplated hereby are consummated (but subject,
however, to the provisions of Section 2.3, with respect to items which Purchaser
delivers to Seller at Seller's request). Seller and Purchaser shall each pay 50%
of all state and local sales, transfer, excise, value-added or other similar
taxes, and all recording and filing fees that may be imposed by reason of the
sale, transfer, assignment, delivery and leasing (other than any tax imposed in
connection with the recording of a memorandum of lease, which amounts shall be
paid pursuant to the terms of the applicable Lease) of the Properties.
9.2. Income and Expense Allocations. All income 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, the
Purchaser and Tenant 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 or Tenant, as applicable, shall
be entitled to all income and responsible for all expenses for the period of
time from, after and including the date of Closing, with the Purchaser entitled
to income and responsible for expenses related to ownership and the Tenant
entitled to income and responsible for expenses related to operations. Only
adjustments between the Seller and the Purchaser (and not those between the
Seller and the Tenant) (with such supporting documentation as the parties hereto
may require being attached as exhibits to the
- 17 -
<PAGE> 23
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 outside the Closing Settlement Statements between the
Purchaser, the Tenant, 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) Real estate and personal property taxes (which shall
be prorated between the Seller and the Purchaser).
(b) 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 Tenant).
(c) Amounts under the Operating Agreements to be assigned
to and assumed by the Tenant (which shall be prorated between the Seller and the
Tenant).
(d) Utility charges (including but not limited to charges
for water, sewer and electricity) (which shall be prorated between the Seller
and the Tenant).
(e) 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 Tenant).
The Tenant 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 clearinghouses. Notwithstanding the foregoing, room revenues for the
evening preceding Closing shall be divided equally between the Seller and the
Tenant.
Neither the Purchaser nor the Tenant 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 Tenant collects same, such amounts will be
promptly remitted to the Seller in the form received after application of the
amount received to any amounts due to Purchaser or Tenant.
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 Tenant 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.
SECTION 10. DEFAULT.
10.1. Default by Seller. If Seller shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or if Seller shall fail to perform any of the material
covenants and agreements contained herein to be performed by Seller and such
- 18 -
<PAGE> 24
failure continues for a period of ten (10) days after notice thereof from
Purchaser, Purchaser may, (i) sue for specific performance and damages, (ii) sue
for damages without specific performance (with or without terminating this
Agreement and receiving a refund of the Deposit, and all interest thereon) or
(iii) exercise any other right or remedy at law or in equity; provided, however,
that Purchaser shall in no event be entitled to monetary damages in excess of an
amount equal to the amount of the Deposit.
10.2. Default by Purchaser. If Purchaser shall have made
any representation or warranty herein which shall be untrue or misleading in any
material respect, or if Purchaser shall fail to perform any of the covenants and
agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from Seller, Seller
may, as its sole and exclusive remedy at law and in equity, terminate this
Agreement. In the event that Seller shall so terminate this Agreement, the
Deposit, together with all interest accrued thereon, shall be retained by
Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall,
except as expressly provided herein, have no further monetary or nonmonetary
obligations hereunder, other than with respect to obligations which expressly
survive the termination hereof (which obligations shall not include the
obligation to purchase the Properties hereunder).
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL.
The Right of First Offer and Commitment to Sell contained in the
Alliance Agreement are hereby ratified and confirmed, and remain in full force
and effect.
SECTION 12. MISCELLANEOUS.
12.1. Agreement to Indemnify. (a) Subject to any express
provisions of this Agreement to the contrary, Seller shall indemnify and hold
harmless Purchaser from and against any and all obligations, claims, losses,
damages, liabilities, and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and disbursements) arising out of (x) any
damage to property of others or injury to or death of any person or any claims
for any debts or obligations occurring on or about or in connection with any
Property or any portion thereof at any time or times prior to the Closing, (y)
any liabilities for taxes due from Seller which shall have accrued prior to the
Closing in connection with any Property and (z) any failure by Seller to comply
with applicable "bulk sale" laws.
(b) Whenever either party shall learn through the filing
of a claim or the commencement of a proceeding or otherwise of the existence of
any liability for which the other party is or may be responsible under this
Agreement, the party learning of such liability shall notify the other party
promptly and furnish such copies of documents (and make originals thereof
available) and such other information as such party may have that may be used or
useful in the defense of such claims and shall afford said other party full
opportunity to defend the same in the name of such party and shall generally
cooperate with said other party in the defense of any such claim.
- 19 -
<PAGE> 25
(c) The provisions of this Section 12.1 shall survive the
Closing and the termination of this Agreement.
12.2. Brokerage Commissions. Each of the parties hereto
represents to the other parties that it dealt with no broker, finder or like
agent in connection with this Agreement or the transactions contemplated hereby.
Seller shall be solely responsible for and shall indemnify and hold harmless
Purchaser and its respective legal representatives, heirs, successors and
assigns from and against any loss, liability or expense, including, reasonable
attorneys' fees, arising out of any claim or claims for commissions or other
compensation for bringing about this Agreement or the transactions contemplated
hereby made by any broker, finder or like agent other than such loss, liability
or expense resulting from Purchaser's breach of its representations made in this
Section 12.2. The provisions of this Section 12.2 shall survive the Closing and
any termination of this Agreement.
12.3. Publicity. The parties agree that no party shall,
with respect to this Agreement and the transactions contemplated hereby, contact
or conduct negotiations with public officials, make any public pronouncements,
issue press releases or otherwise furnish information regarding this Agreement
or the transactions contemplated to any third party without the consent of the
other parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except to consultants, advisors, investors, lenders, underwriters
and other parties reasonably necessary to consummate the transactions required
hereby and as required by law or contractual obligations of such parties to
third parties. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof.
12.4. Notices. (a) Any and all notices, demands, consents,
approvals, offers, elections and other communications required or permitted
under this Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent
hereunder shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by telecopier,
and, in all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day which is not
a Business Day or is required to be delivered on or before a specific day which
is not a Business Day, the day of receipt or required delivery shall
automatically be extended to the next Business Day.
- 20 -
<PAGE> 26
(c) All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to time
and at any time during the term of this Agreement to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
12.5. Waivers, Etc. Any waiver of any term or condition of
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any
- 21 -
<PAGE> 27
manner such party's right at a later time to enforce or require performance of
such provision or any other provision hereof. This Agreement may not be amended,
nor shall any waiver, change, modification, consent or discharge be effected,
except by an instrument in writing executed by or on behalf of the party against
whom enforcement of any amendment, waiver, change, modification, consent or
discharge is sought.
12.6. Assignment; Successors and Assigns. This Agreement
and all rights and obligations hereunder shall not be assignable by any party
without the written consent of the other parties, except that, after the
Closing, (i) Seller may assign its surviving rights, if any, under this
Agreement to Tenant or an Affiliate of Seller, and (ii) Purchaser may assign its
right to purchase a First Offer Hotel or an Option Hotel to one or more
Affiliates of Purchaser, and Purchaser may assign its rights and obligations
hereunder to an Affiliate of Purchaser, provided that Purchaser remain liable
for its obligations hereunder. The provisions of this Agreement shall not merge
with delivery of the deeds and shall survive Closing. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
12.7. Severability. If any provision of this Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution or statute or rule of public policy or
for any other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
12.8. Counterparts, Etc. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
12.9. Governing Law. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of the State of New York which
are to be performed entirely within the State of New York, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality,
- 22 -
<PAGE> 28
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of New York; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10. Performance on Business Days. In the event the date
on which performance or payment of any obligation of a party required hereunder
is other than a Business Day, the time for payment or performance shall
automatically be extended to the first Business Day following such date.
12.11. Attorneys' Fees. If any lawsuit or arbitration or
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.
12.12. Section and Other Headings. The headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
12.13. No Oral Modifications. This Agreement may not be
amended, nor shall any waiver, change, modification, consent or discharge be
effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
[REMAINDER OF THIS PAGE LEFT BLANK.]
- 23 -
<PAGE> 29
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
SELLER:
PRIME HOSPITALITY CORP.
By:________________________________________________
Name:______________________________________________
Title: ____________________________________________
- 24 -
<PAGE> 30
SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust,
its general partner
By:__________________________________________
Name:________________________________________
Title:_______________________________________
- 25 -
<PAGE> 31
EXHIBIT A
THE PROPERTIES
Equity Inns Partnership, L.P.
Purchase of Ten AmeriSuites Hotels
from Prime Hospitality Corp.
(Spring, 1998)
<TABLE>
<CAPTION>
PROPERTY NUMBER OF ROOMS PRICE
-------- --------------- -----
<S> <C> <C>
1) Riverchase (Birmingham), Alabama 128 7,682,190
2) Kendall (Miami), Florida 67 10,549,690
3) Augusta, Georgia 111 4,320,220
4) Baton Rouge, Louisiana 128 10,881,060
5) BWI (Baltimore), Maryland 128 9,976,410
6) Mall of America (Minneapolis), Minnesota 128 9,586,660
7) Albuquerque, New Mexico 128 9,541,320
8) Las Vegas, Nevada 202 19,115,573
9) Cool Springs (Nashville), Tennessee 128 11,243,490
10) Wolfchase (Memphis), Tennessee 128 8,420,020
1276 $101,316,633
==== ============
</TABLE>
<PAGE> 32
EXHIBIT B-1
Record Legal Description
AmeriSuites Hotel
Riverchase (Birmingham), Alabama
The land is in the State of Alabama, County of Jefferson, and is
described as follows:
Parcel I:
Lot 5, according to the Addition to Galleria Woods, as recorded in Map
Book 31 page 3 in the Probate Office of Jefferson County, Alabama, Bessemer
Division; being situated in Jefferson County, Alabama.
Parcel II:
The beneficial interest in and to the non-exclusive easement for
pedestrian and vehicular ingress and egress as set out and described in
paragraph 2, page 2, of the "Reciprocal Access Easement Agreement" by and
between Brown Trout Investments, Ltd., and Harbert-Equitable Joint Venture,
dated December 20, 1996 and recorded as Inst. #9663/1965 in the Probate Office.
<PAGE> 33
EXHIBIT B-2
Record Legal Description
AmeriSuites Hotel
Kendall (Miami), Florida
The East 1/2 of the East 1/2 of the NW 1/4 of the NW 1/4 of the NW 1/4
Less the North 393.00 feet, lying and being in Section 6, Township 55 South,
Range 40 East, Dade County, Florida being more particularly described as
follows:
Commence at the Northwest corner of said Section 6; thence North
87(Degree)44'11" East along the North line of the NW 1/4 of said Section 6 for
501.52 feet; thence South 02(Degree)30'46" East along the West line of said East
1/2, East 1/2, NW 1/4 of NW 1/4 of NW 1/4 of Section 6 for 393.00 feet to the
Point of Beginning of the hereinafter described parcel of land; thence continue
South 02(Degree)30'46" East along the previously described course for 264.80
feet to the Southwest corner thereof; thence North 87(Degree)38'23" East along
the South line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4 of Section 6
for 167.77 feet to the Southeast corner thereof; thence North 02(Degree)33'57"
West along the East line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4, for
264.52 feet to a point on a line being 393.00 feet South of and parallel with
said North line of the NW 1/4 of Section 6; thence South 87(Degree)44'11" West
along said parallel line for 167.53 feet to the POINT OF BEGINNING;
together with an Ingress and Egress Easement over and across a portion
of the North 393.00 feet of the East 1/2 of the East 1/2 of the NW 1/4 of the NW
1/4 of the NW 1/4 less the North 55.00 feet for right-of-way on North Kendal
Drive (NW 88th St.) (SR #94) of Section 6, Township 55 South, Range 40 East,
Dade County, Florida, being more particularly described as follows:
Commence at the Northwest corner of said Section 6; thence North
87(Degree)44'11" East along the North line of the NW 1/4 of said Section 6 for
501.52 feet; thence South 02(Degree)30'46" East along the West line of said East
1/2, East 1/2, NW 1/4, of the NW 1/4 of the NW 1/4 of Section 6 for 55.00 feet
to a point on South right-of-way line of said North Kendal Drive (SW 88th St.)
(SR #94); thence North 87(Degree)44'11" East along said South right-of-way line
being South of and parallel to the said North line of the NW 1/4 of Section 6
for 17.43 feet to a point on a circular curve whose radius point bears South
41(Degree)40'57" West for 25.00 feet also being the Point of Beginning of the
hereinafter described easement; thence Southeasterly and Southwesterly along
said 25 foot radius curve leading to the right, through a central angle of
64(Degree)19'03" for an arc of 28.06 feet to a point of tangency; thence South
16(Degree)00'00" West for 40.99 feet to a Point of Curvature; thence Southerly
along a 110.00 foot radius curve leading to the left through a central angle of
18(Degree)30'46" for an arc of 35.54 feet to a point of tangency; thence South
2(Degree)-30'-46" East along a line parallel to and 5.00 feet East of the West
line of said East 1/2, East 1/2, NW 1/4, NW 1/4, NW 1/4 of Section 6 for 238.29
feet; thence North 87(Degree)44'11" East along a line 338.00 feet South of and
parallel to the said South right-of-way line of North Kendal Drive (SW 88th St.)
for 25.00 feet; thence North 02(Degree)30'46" West along a line parallel to and
30.00 feet East of the said West line of the East 1/2, East 1/2, NW 1/4, NW 1/4,
NW 1/4 of Section 6 for 238.40 feet to a
<PAGE> 34
point of curvature; thence Northeasterly along an 85.00 foot radius curve
leading to the right through a central angle of 18(Degree)30'46" for an arc of
27.46 feet to a point of tangency; thence North 16(Degree)00'00" East for 65.74
feet to a point of curvature; thence Northeasterly along a 25.00 foot radius
curve leading to the right through a central angle of 27(Degree)47'25" for an
arc of 12.13 feet to a point on said South right-of-way line of North Kendal
Drive (SW 88th St.); thence South 87(Degree)44'11" West along said South
right-of-way line for 44.28 feet to the POINT OF BEGINNING.
<PAGE> 35
EXHIBIT B-3
Record Legal Description
AmeriSuites Hotel
Augusta, Georgia
Parcel One:
All that tract or parcel of land, situate, lying and being in the 90th
G.M. District of Richmond County, Georgia, fronting for a distance of 176.99
feet along Claussen Road and being more particularly described as follows:
Beginning at the eastern right-of-way of Stevens Creek Road where it
intersects with Claussen Road; thence along the right-of-way of Claussen Road in
a northeasterly direction 1,846.00 feet to an iron pin being the point of
beginning; thence North 47(Degree)48'45" West a distance of 269.31 feet to an
iron pin; thence North 42(Degree)11'15" East a distance 74.50 feet to an iron
pin; thence North 47(Degree)48'45" West a distance of 130.00 feet to a point;
thence North 41(Degree)42'59" East a distance of 355.00 feet to a point; thence
South 47(Degree)48'37" East a distance of 104.93 feet to a point; thence South
24(Degree)38'11" West a distance of 247.33 feet to a point; thence South
43(Degree)38'43" East a distance of 233.88 feet to a point on the said
right-of-way of Claussen Road; thence along said right-of-way South
45(Degree)35'30" West a distance of 176.99 feet to the point of beginning.
Parcel Two:
All that lot or parcel of land, with all improvements thereon, situate,
lying and being in Richmond County, Georgia, being 6.752 Acres fronting 30.0
feet on the western right-of-way of I-20 Frontage Road and being further
described as follows: BEGINNING at an iron pin set on the western right-of-way
of I-20 Frontage Road at a point which marks the southern boundary of property
now or formerly of Dorothy Roesel Carpenter and the northern boundary of
property of Glynn Land Company; thence North 43(Degree)38'58" West, a distance
of 212.96 feet to a point; thence North 24(Degree)38'11" East a distance of
578.39 feet to a point; thence North 63(Degree)52'37" West a distance of 519.74
feet to an iron pin; then South 26(Degree)03'45" West a distance of 577.98 feet
to an iron pin; then South 47(Degree)48'45" East a distance of 314.27 feet to a
point; thence North 41(Degree)42'59" East a distance of 333.53 feet to a point;
thence South 47(Degree)48'37" East a distance of 111.54 feet to a point; thence
South 24(Degree)38'11" West a distance of 224.81 feet to a point; thence South
43(Degree)38'43" East a distance of 233.88 feet to a point on the western
right-of-way of I-20 Frontage Road; thence northeasterly along said right-of-way
a distance of 30.0 feet to the point of beginning.
LESS AND EXCEPTING from Parcel Two, however, any portion of said
property which is contained within the boundary of the property described as
Parcel One hereof.
Parcel Three:
<PAGE> 36
ALL that lot or parcel of land, with any improvements thereon, situate, lying
and being in the 1269th G.M. District of Richmond County, Georgia, containing
0.05 acres, as more particularly shown as "Parcel 'A'" on a plat dated April 4,
1984, prepared by George L. Godman, R.L.S. for James R. Childs, Jr. and Kathryn
D. Childs and Decatur Federal Savings and Loan Association, which is recorded in
the Office of the Clerk of Superior Court of Richmond County, Georgia, in Realty
Reel 182, page 232. Reference is hereby made to said plat for a more complete
and accurate description as to the metes, bounds and location of said property.
<PAGE> 37
EXHIBIT B-4
Record Legal Description
AmeriSuites Hotel
Baton Rouge, Louisiana
Parcel I:
One (1) certain lot or parcel of ground, together with all the
buildings and improvements thereon, and all of the rights, ways, privileges,
servitudes, appurtenances and advantages thereunto belonging or in anywise
appertaining, located in Section 57, Township 7 South, Range 1 East, being
designated as TRACT "A-1A-2-1" on a map entitled "Survey Map of the
Resubdivision of Tract 'A-1A' of the Original George Paulat Tract into Tracts
"A-1A-1', 'A-1A-2', 'A-1A-3', 'A-1A-4', located in Section 57, T-7-S, R-1-E,
G.L.D., East Baton Rouge Parish, Louisiana, for William B. Skillman et al",
which map was revised to show the resubdivision of Tract 'A-1A-4' into Tracts
'A-1A-4A', 'A-1A-4B' and 'A-1A-4C', and revised to show the addition of a
portion of Tract A-1A-2 to Tract A-1A-3, which revised map is recorded as
Original 116, Bundle 9763, official records of East Baton Rouge Parish,
Louisiana, the said Tract A-1A-2-1 containing 2.6187 acres and having such
measurements and dimensions as shown on the above referenced map.
Parcel II:
A non-exclusive servitude for the purpose of ingress, egress,
pedestrian and vehicular traffic and parking over and across that portion of the
following described property designated as "Common Areas" in that act of
Declaration of Servitudes, Covenants and Restrictions dated April 12, 1996,
executed by Piccadilly Cafeterias, Inc., which is recorded as Original 855,
Bundle 10679 of the official records of East Baton Rouge Parish, Louisiana:
One (1) certain lot or parcel of ground, together with all the buildings and
improvements thereon, and all of the rights, ways, privileges, servitudes,
appurtenances and advantages thereunto belonging or in anywise appertaining,
located in Section 57, Township 7 South, Range 1 East, being designated as TRACT
"A-1A-3-1" on a map entitled "Survey Map of the Resubdivision of Tract 'A-1A' of
the Original George Paulat Tract into Tracts "A-1A-1', 'A-1A-2', 'A-1A-3',
'A-1A-4', located in Section 57, T-7-S, R-1-E, G.L.D., East Baton Rouge Parish,
Louisiana, for William B. Skillman et al", which map was revised to show the
resubdivision of Tract 'A-1A-4' into Tracts 'A-1A-4A', 'A-1A-4B' and 'A-1A-4C',
and revised to show the addition of a portion of Tract A-1A-2 to Tract A-1A-3,
which revised map is recorded as Original 116, Bundle 9763, official records of
East Baton Rouge Parish, Louisiana, the said Tract A-1A-3-1 having such
measurements and dimensions as shown on the above referenced map.
<PAGE> 38
EXHIBIT B-5
Record Legal Description
AmeriSuites Hotel
BWI (Baltimore), Maryland
All that lot of ground situate in Anne Arundel County, State of
Maryland and described as follows:
BEING KNOWN AND DESIGNATED as Lot No. 5 as shown on plat entitled
"Revised Plat of Resubdivision Plat of a Part of Plat 2 Section 2 & Plat 1
Section 1 Airport Square Technology Park", which plat is recorded among the Land
Records of Anne Arundel County in Plat Book 100 folio 1 and being more
particularly described as follows:
BEGINNING for the same at a point on the northernmost outline of the
170.2857 acre tract shown on the Boundary Survey Plat of the Frank Bray Cromwell
Property, dated January 24, 1973, and prepared by Matz, Childs & Associates,
said point being located South 78 degrees 22 minutes 50 seconds East 47.99 feet
from the northwest corner of said tract, running thence and binding on part of
said outline (1) South 78 degrees 22 minutes 50 seconds East 550.38 feet to the
west side of Aero Drive, thence binding thereon two courses: (2) South 11
degrees 37 minutes 10 seconds West 404.00 feet and (3) southwesterly by a curve
to the right with a radius of 70.00 feet for a distance of 109.96 feet, the
chord of said arc being South 56 degrees 37 minutes 10 seconds West 98.99 feet
to the north side of International Drive, thence binding thereon four courses:
(4) North 76 degrees 44 minutes 38 seconds West 175.07 feet (5) North 78 degrees
22 minutes 50 seconds West 163.13 feet (6) westerly by a curve to the right with
a radius of 554.00 feet for a distance of 44.14 feet, the chord of said arc
being North 76 degrees 05 minutes 53 seconds West 44.13 feet and (7)
northwesterly by a curve to the right with a radius of 145.00 feet for a
distance of 159.00 feet, the chord of said arc being North 42 degrees 24 minutes
03 seconds West 151.16 feet to the east side of Nursery Road, thence binding
thereon at the distance of 75.00 feet from the centerline of Nursery Road as
established by Greenhorne & O'Mara, Inc. two courses: (8) North 17 degrees 51
minutes 57 seconds East 79.38 feet and (9) northerly by a curve to the left with
a radius of 2621.48 feet for a distance of 300.09 feet, the chord of said arc
being North 14 degrees 35 minutes 11 seconds East 299.93 feet to the place of
beginning.
Containing 5.9595 acres of land, more or less.
<PAGE> 39
Subject to revertible easements for supporting slopes along Aero Road,
International Drive, and Nursery Road.
BEING the same lot of ground which by Deed dated August 26, 1988 and
recorded among the Land Records of Anne Arundel County in Liber 4684 folio 267
was granted and intended to be conveyed to American Motor Inns, Incorporated.
BY Certificate of Merger dated October 8, 1992 and filed with the
Maryland State Department of Assessments and Taxation (a copy of which is
recorded among the Land Records of Anne Arundel County in Liber 5961 folio 820),
American Motor Inns, Incorporated merged into and became known as Prime
Hospitality Corp.
BEING ALSO the same lot of ground which by Confirmatory Deed dated
________________, 1995 and recorded among the Land Records of Anne Arundel
County in Liber __________ folio ___________, was granted and conveyed by
Interchange Properties to Prime Hospitality Corp.
<PAGE> 40
EXHIBIT B-6
Record Legal Description
AmeriSuites Hotel
Mall of Americas, Minneapolis, Minnesota
Lot 1, Block 1, Viking Drive West 2nd Addition, according to the recorded plat
thereof, and situate in Hennepin County, Minnesota, together with the
appurtenant easement(s) contained in Document No. 5368640 and Document No.
6608210.
<PAGE> 41
EXHIBIT B-7
Record Legal Description
AmeriSuites Hotel
Albuquerque, New Mexico
All that parcel of land, together with all improvements thereon and
appurtenances thereto, lying in the City of Albuquerque, County of Bernalillo,
New Mexico, such parcel of land is more particularly described as follows:
Tract lettered B-1 of LA MESA MEDICAL CENTER, Albuquerque, New Mexico
as the same is shown and designated on the plat thereof filed in the Office of
the County Clerk of Bernalillo County, New Mexico on July 15, 1996 in Map Book
96C, folio 314.
<PAGE> 42
EXHIBIT B-8
Record Legal Description
AmeriSuites Hotel
Las Vegas, Nevada
Situate in the County of Clark, State of Nevada, described as follows:
That portion of the Southwest Quarter (SW 1/4) of Section 22, Township
21 South, Range 61 East, M.D.B. & M., described as follows:
Parcel One (1) of the certain Parcel Map on file in File 89, Page 1, in the
Office of the County Recorder of Clark County, Nevada and recorded May 19, 1997
in Book 970519 of Official Records as Document No. 01053.
<PAGE> 43
EXHIBIT B-9
Record Legal Description
AmeriSuites Hotel
Cool Springs (Nashville), Tennessee
The land situated in the County of Williamson, State of Tennessee, and
is described as follows:
Land in Williamson County, Tennessee, being Lot No. 353 on the Final
Plat of Cool Springs East Subdivision, Section Ten, of record in Plat Book 23,
page 127, Register's Office for Williamson County, Tennessee.
Being the same property conveyed to Prime Hospitality Corp. by deed from Cool
Springs Real Estate Associates, L.P. of record in Book 1456, page 68 in
Register's Office for Williamson County, Tennessee.
<PAGE> 44
EXHIBIT B-10
Record Legal Description
AmeriSuites Hotel
Wolfchase (Memphis), Tennessee
Commencing at a point on the west line of Germantown Parkway
(right-of-way varies) +2,073.01 feet south of the south line of U.S. Highway 64;
thence S 43(Degree) 37' 35" W a distance of 258.12 feet to a point; thence S
08(Degree) 07' 05" W a distance of 257.51 feet to a point; thence S 27(Degree)
51' 03" W a distance of 147.39 feet to a point; thence S 49(Degree) 06' 37" W a
distance of 325.61 feet to a point; thence S 48(Degree) 59' 58" W a distance of
9.56 feet to a point; thence S 58(Degree)13' 30" W a distance of 0.30 feet to a
point; thence along a 653.11 foot radius curve to the left an arc distance of
449.74 feet (chord S 38(Degree) 29' 51" W, 440.91 feet) to a point; thence along
a 582.50 foot radius curve to the left an arc distance of 248.13 feet (chord N
85(Degree)52' 23" W, 246.26 feet) to a point of compound curvature; thence along
a 417.50 foot radius curve to the left an arc distance of 195.24 feet (chord S
68(Degree) 31' 35" W, 193.47 feet) to the POINT OF BEGINNING; thence continuing
along a 417.50 foot radius curve to the left an arc distance of 123.63 feet
(chord S 46(Degree) 38' 46" W, 123.18 feet) to a point; thence N 45(Degree) 19'
14" W a distance of 565.74 feet to a point; thence S 90(Degree) 00' 00" E a
distance of 438.85 feet to a point; thence S 00(Degree) 00' 00" W a distance of
180.92 feet to a point of curvature; thence along a 168.00 foot radius curve to
the left an arc distance of 95.00 feet (chord S 16(Degree) 11' 59" E, 93.74
feet) to a point of tangency; thence S 32(Degree) 23' 58" E a distance of 50.09
feet to the point of beginning
Together with rights for access, ingress and egress in that
Construction, Operation and Reciprocal Easement Agreement by and between Home
Depot U.S.A., Inc., and Faison-Memphis Limited Partnership, for The Commons
Shopping Center, being of record at Instrument No. FS 5933, in the Register's
Office of Shelby County, Tennessee.
Together with easement rights in and to that certain Reciprocal Access
Easement by and between Volunteer '91 Limited Partnership, a Texas limited
partnership, Kraft Food Ingredients Company, and St. Louis Investment
Properties, Inc., a Missouri corporation, and Faison-Memphis Limited
Partnership, a North Carolina limited partnership, recorded at Document No. FP
2012, in the Register's Office of Shelby County, Tennessee.
Together with rights for access, ingress and egress across the L & G Development
property as more particularly described in that certain Reciprocal Access
Easement Agreement dated December 5, 1995, by and between L & G Development,
LLC, Dayton Hudson Corporation, Anthony Giacosa, Charles Giacosa, and Faison
Capital Development, Inc., recorded December 5, 1995, at Document No. FM 5344,
and rerecorded on December 6, 1995, at Document No. FM 5852, both recordings in
the Register's Office of Shelby County, Tennessee.
<PAGE> 45
EXHIBIT C
FORM OF LEASE
Exhibit C to the Alliance Agreement is incorporated hereto as Exhibit C.
<PAGE> 46
EXHIBIT D
EXCEPTIONS TO SELLER REPRESENTATIONS AND WARRANTIES
None
<PAGE> 47
EXHIBIT E
SCHEDULE OF AGREEMENTS
RIVERCHASE (BIRMINGHAM) AMERISUITES
OPERATING AGREEMENTS
LODGENET ENTERTAINMENT CORPORATION - Lodgenet Guest Pay Agreement.
Dated: 8/14/97. Term: 7 years
LODGENET ENTERTAINMENT CORPORATION - PrimeStar Free to Guest Agreement.
Dated: 8/14/97. Term: 7 years
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
5/13/97. Term: 39 months.
OUTDOOR COMMUNICATIONS INC. - Painted Display Contract. Dated: 3/16/98.
Term: 12 months.
<PAGE> 48
KENDALL (MIAMI) AMERISUITES
OPERATING AGREEMENTS
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
11/22/95. Term: 39 months.
MOWREY ELEVATOR SERVICE, INC. - Full Maintenance Elevator Service
Policy. Dated: 10/1/96. Term: 5 years. Cancelable upon 30 days written notice.
ON COMMAND VIDEO CORPORATION - Video Service Agreement. Dated: 1/29/96.
Term: 7 years.
<PAGE> 49
AUGUSTA AMERISUITES
OPERATING AGREEMENTS
ON COMMAND VIDEO CORPORATION - Master System Agreement. Dated: 11/2/95.
Term: 7 years.
UNITED STATES ELEVATOR CORPORATION - Elevator Maintenance Agreement.
Dated 12/20/90. Term: 5 years with automatic renewals.
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
3/29/96. Term: 39 months.
LAMAR TRANSIT ADVERTISING - Shelter Contract. Dated: 10/1/97. Term: 12
months.
FRIDEN NEOPOST - Purchase Order Lease of Postage Equipment. Dated:
12/21/95. Term: 39 months.
<PAGE> 50
BATON ROUGE AMERISUITES
OPERATING AGREEMENTS
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated
9/19/96. Term: 39 months.
SCHINDLER ELEVATOR CORPORATION - Preventive Maintenance Agreement.
Dated: 12/31/97. Term: 1 year with automatic 1 year renewals.
WBRZ-TV CHANNEL 2 - License Agreement. Dated 11/1/97. Term: 2 years.
<PAGE> 51
BWI (BALTIMORE) AMERISUITES
OPERATING AGREEMENTS
ON COMMAND VIDEO CORPORATION - Master System Agreement. Dated: 11/2/95.
Term: 7 years with automatic renewals.
ACKERLEY AIRPORT ADVERTISING - Outdoor sign agreement. Dated: 10/1/97.
Term: 12 months.
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
4/3/96. Term: 39 months.
<PAGE> 52
MALL OF AMERICA (EDEN PRAIRIE) (MINNEAPOLIS) AMERISUITES
OPERATING AGREEMENTS
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
9/19/96. Term: 39 months.
ON COMMAND VIDEO CORPORATION - Master System Agreement (Exhibit B).
Dated: 12/29/95. Term: 7 years.
<PAGE> 53
LAS VEGAS AMERISUITES
OPERATING AGREEMENTS
MITA COPYSTAR AMERICA - Lease of (2) copiers. Dated: 9/9/97. Term: 39
months.
FRIDEN NEOPOST - Lease of Postage Equipment. Dated 2/18/98. Term: 39
months.
LODGENET ENTERTAINMENT CORPORATION - Guest Pay Agreement. Dated:
8/6/97. Term: 7 years.
<PAGE> 54
COOL SPRINGS (NASHVILLE) AMERISUITES
OPERATING AGREEMENTS
LODGENET ENTERTAINMENT CORPORATION - PrimeStar Free to Guests TV
Service. Dated: 7/14/97. Term: 7 years.
LODGENET ENTERTAINMENT CORPORATION - Guest Pay Agreement. Dated:
7/14/97. Term: 7 years.
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
3/6/97. Term: 39 months.
PITNEY BOWES CREDIT CORPORATION - Quarterly Invoice for Lease of
Postage Equipment. Commencement Date: 7/10/97. Term: 51 months.
FRYE ADVERTISING SERVICES CO. - Advertising Display Contract. Dated:
2/1/98. Term: 12 months.
<PAGE> 55
ALBUQUERQUE, NEW MEXICO AMERISUITES
OPERATING AGREEMENTS
[To be prepared by the Seller and approved by the Purchaser prior to
the expiration of the Review Period.]
<PAGE> 56
WOLFCHASE (MEMPHIS) AMERISUITES
OPERATING AGREEMENTS
SCHINDLER ELEVATOR CORPORATION - Preventive Maintenance Agreement.
Dated: 1/7/98. Term: 1 year with 1 year automatic renewals.
FRIDEN NEOPOST - Purchase Order - Rental of Postage Meter. Dated:
1/20/97. Term: Ongoing.
TANNER-PECK OUTDOOR ADVERTISING - Painted Bulletin Order. Dated:
11/4/96. Term: 3 years.
MITA COPYSTAR AMERICA - Purchase Order Lease of (2) Copiers. Dated:
9/17/96. Term: 39 months.
ON COMMAND VIDEO CORPORATION - Master System Agreement (Exhibit B).
Dated: 12/29/95. Term: 7 years.
<PAGE> 57
AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment to Purchase and Sale Agreement, dated as of May ___,
1998, between PRIME HOSPITALITY CORP., a Delaware corporation ("Seller"), and
EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership ("Purchaser"),
recites and provides as follows:
RECITALS
A. By Purchase and Sale Agreement dated as of April __, 1998 ( the
"Original Agreement"), the Seller agreed to sell and the Purchaser agreed to
purchase a portfolio of ten AmeriSuites Hotels (collectively, the "Hotels") and
related property rights (collectively, the "Properties"), more particularly
described in the Original Agreement.
B. The Seller and the Purchaser desire to amend the Original Agreement
on the terms and conditions set forth herein.
AMENDMENT
NOW, THEREFORE, for and in consideration of the mutual provisions of
this Amendment, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Defined Terms. All of the capitalized terms used in this Amendment
shall have the same meaning as set forth in the Existing Agreement unless
otherwise defined in this Amendment.
2. Substitute Hotels. The original Agreement is hereby partially
terminated as to this Hotel located in Primacy (Memphis), Tennessee (the
"Terminated Hotel"). The Seller agrees to sell and the Purchaser agrees to
purchase the AmeriSuites hotel located in _______________, as more particularly
described in Exhibit B attached hereto (the "Substitute Hotel"), which shall be
deemed a Hotel under the Original Agreement substituted in lieu of the
Terminated Hotel. The Purchase Price is amended to $____________________, with
the Allocable Purchase Price attributable to the Substitute Hotel equality
$__________________, and with Exhibit A to the Original Agreement being deleted
and Exhibit A attached hereto being substituted in lieu thereof. The list of
Contracts applicable to the Substitute Hotel is attached hereto as Exhibit E.
The purchase and sale of the Substitute Hotel shall be governed by the terms and
conditions of the Original Agreement, provided, however, that the Review Period
for the Substitute Property only shall expire on the date one day prior to the
Closing Date.
3. Ratification. Except to the extent amended by this Amendment, the
Seller and the Purchaser ratify and confirm the Existing Agreement, which
remains in full force and effect.
4. Integration. This Amendment constitutes the entire agreement between
the parties with respect to the modification of the Existing Agreement. There
are no promises, agreements, conditions, undertakings, understandings, or
covenants, oral or written, express or
1
<PAGE> 58
implied, between the parties with respect to the modification of the Existing
Agreement, or the transactions described in the Existing Agreement, other than
as set forth in this Amendment.
5. Successors and Assigns. All the terms and conditions of this
Amendment shall be binding upon, and inure to the benefit of, the parties hereto
and their respective permitted heirs, successors and assigns.
6. Counterparts. To facilitate execution, this Amendment shall be
executed in as many counterparts as may be required.
2
<PAGE> 59
SIGNATURE PAGE
AMENDMENT TO PURCHASE AND SALE AGREEMENT
PRIME HOSPITALITY CORP.
By: _______________________________
Name:______________________________
Title:_____________________________
3
<PAGE> 60
SIGNATURE PAGE
AMENDMENT TO PURCHASE AND SALE AGREEMENT
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:_____________________________
4
<PAGE> 61
EQUITY INNS PARTNERSHIP, L.P.
c/o EQUITY INNS, INC.
Suite 102
4735 Spottswood Avenue
Memphis, Tennessee 38117
May 27, 1998
BY FACSIMILE
973/882-1787
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07004
Attention: Joseph Bernadino, Esquire
EQUITY INNS PARTNERSHIP, L.P./PRIME HOSPITALITY CORP.
SALE-LEASEBACK OF TEN AMERISUITES HOTELS, SPRING, 1998
Gentlemen:
This letter is with respect to the Agreement of Purchase and Sale dated
as of April 30, 1998 (the "Agreement") between Prime Hospitality Corp., as
seller, and the undersigned Equity Inns Partnership, L.P., as purchaser. This
letter hereby amends the Agreement to provide that the "Review Period" (as
defined in the Agreement) shall not expire until 5:00 p.m., eastern, on June 15,
1998.
Very truly yours,
EQUITY INNS PARTNERSHIP, L.P., a Tennessee
limited partnership
By: Equity Inns Trust, a Maryland real estate
investment trust, general partner
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE> 62
Prime Hospitality Corp.
August 13, 1998
Page 2
SEEN AND AGREED:
PRIME HOSPITALITY CORP.
By: ______________________________
Name:_____________________________
Title:______________________________
<PAGE> 1
(c) All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to time
and at any time during the term of this Agreement to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
12.5. Waivers, Etc. Any waiver of any term or condition of
this Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any
- 21 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-20-1998
<CASH> 59,399
<SECURITIES> 19,476
<RECEIVABLES> 22,011
<ALLOWANCES> 415
<INVENTORY> 0
<CURRENT-ASSETS> 119,892
<PP&E> 1,187,758
<DEPRECIATION> 78,625
<TOTAL-ASSETS> 1,282,640
<CURRENT-LIABILITIES> 85,180
<BONDS> 474,021
546
0
<COMMON> 0
<OTHER-SE> 626,829
<TOTAL-LIABILITY-AND-EQUITY> 1,282,640
<SALES> 226,234
<TOTAL-REVENUES> 226,234
<CGS> 0
<TOTAL-COSTS> 180,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,488
<INCOME-PRETAX> 54,617
<INCOME-TAX> 20,754
<INCOME-CONTINUING> 33,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,863
<EPS-PRIMARY> .68
<EPS-DILUTED> .63
</TABLE>
