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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 14 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 2, 1998
ShoLodge, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
9-19840 62-1015641
(Commission File Number) (I.R.S. Employer Identification Number)
130 Maple Drive, North
Hendersonville, TN
(Address or principal executive office)
37075
(Zip code)
615-264-8000
(Registrant's telephone number)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 2, 1998, the Company completed a sale transaction under which it
sold the real and personal property relating to 16 Shoney's Inns for a total
sales price of $90.0 million. The sales price consisted of $22.5 million in
cash, of which $12.2 million is to be held in escrow, with the balance of $67.5
million in the form of interest-bearing promissory notes with interest only
through July 30, 2000. $7.7 million of the principal will be due in March of
1999, and the remaining $59.8 million will be payable beginning July 31, 2000,
based upon a 25-year amortization schedule with a final maturity of July 30,
2003.
The cash proceeds of the transaction will be applied to (1) reduce debt by $14.1
million by paying off debt obligations on the properties sold, or escrowing
funds to do so, (2) pay accrued expenses and expenses of this transaction in an
amount of $546,000, and (3) general corporate purposes in the amount of $7.9
million. The Company has been earning interest on the promissory notes and
escrowed cash effective August 1, 1998, when the purchasers of the properties
commenced operation of the inns. The purchasers of the inns will continue to
operate them as Shoney's Inns as franchisees of the Company.
The effect of this transaction on a pro forma basis, had it occurred as of the
beginning of the year ended December 28, 1997, would be to decrease hotel
revenues by $26.4 million, increase franchising revenues by $1.1 million,
decrease hotel operating expenses by $15.4 million, decrease general and
administrative expenses by $213,000, decrease rent expense by $209,000, decrease
depreciation and amortization expense by $3.3 million, decrease interest expense
by $2.7 million, increase interest income by $4.4 million, decrease other income
by $70,000, create a gross gain on the sale of hotels of $35.0 million, increase
minority interests in earnings of consolidated subsidiaries and partnerships by
$2.0 million, and increase the extraordinary loss on early extinguishment of
debt (net of income tax benefit of $493,000) by $909,000.
The effect of this transaction on a pro forma basis on the two quarters ended
July 12, 1998, had it occurred as of the beginning of the year ended December
27, 1998, would be to decrease hotel revenues by $13.7 million, increase
franchising revenues by $579,000, decrease hotel operating expenses by $8.0
million, decrease general and administrative expenses by $175,000, decrease rent
expense by $114,000, decrease depreciation and amortization expense by $2.0
million, decrease interest expense by $1.0 million, increase interest income by
$2.7 million, decrease other income by $45,000, create a gross gain on the sale
of hotels of $35.0 million, increase minority interests in earnings of
consolidated subsidiaries and partnerships by $2.1 million, and increase the
extraordinary loss on early extinguishment of debt (net of income tax benefit of
$493,000) by $909,000.
On a pro forma basis as of July 12, 1998, the Company's cash would increase by
$7.9 million, current assets other than cash would increase by $7.4 million, net
property and equipment would decrease by $55.9 million, deferred charges would
decrease by $806,000, securities held to maturity of $9.4 million would be
eliminated, other assets would increase by $59.4 million, current liabilities
would increase by $2.5 million, long-term debt associated with lodging
facilities
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and capitalized lease obligations would decrease by $23.6 million, deferred
income taxes would increase by $7.7 million, minority interests in equity of
consolidated subsidiaries and partnerships would increase by $2.2 million, and
shareholders' equity would increase by $19.8 million.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(b) Proforma condensed financial statements
See narrative description in Item 2 above.
(c) Exhibits:
10.1 Motel Purchase Agreement made as of July 22, 1998
10.2 First Amendment to Motel Purchase Agreement made as of July
30, 1998
99.1 Press Release issued by ShoLodge, Inc. on September 4, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SHOLODGE, INC.
Date: September 17, 1998 By: /s/ Bob Marlowe
----------------------------
Bob Marlowe
Secretary-Treasurer
Chief Accounting Officer
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EXHIBIT 10.1
MOTEL PURCHASE AGREEMENT
THIS MOTEL PURCHASE AGREEMENT (the "Agreement") is made as of July 22, 1998, by
and among the parties set forth on the attached Exhibit A (referred to herein
individually as "Seller" and collectively as "Sellers"), and the parties set
forth on Exhibit B (referred to herein individually as "Buyer" and collectively
as "Buyers").
RECITALS
A. The Sellers are the owners, directly or through affiliates, of 16
limited service motels at various geographic locations operated under
the franchise name "Shoney's Inn" or "Shoney's Inn & Suites", which
properties are identified by owner and location on Exhibit A.
B. The Sellers desire to sell, and Buyers desire to purchase, the Property
(as defined below) upon and subject to the terms and conditions set
forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises and the respective
agreements, covenants and conditions set forth in this Agreement, the receipt
and sufficiency of which are hereby acknowledged, Sellers and Buyers agree as
follows:
1. Sale of Property. Sellers agree to sell to Buyers, and Buyers agree
to buy from Sellers, the following property (the items set forth and
identified below are referred to hereinafter collectively as the
"Property"):
1.1. Real Property. The eleven (11) parcels of real property owned
in fee simple by Sellers, as set forth and legally described
on the attached Schedule 1.1.a. (the "Land") together with
(1) Sellers' interest as lessee or sublessee, as applicable
in all of the ground leases set forth and identified on
Schedule 1.1.b. ("Ground Leases"), (2) all buildings and
improvements constructed or located on the Land and on the
real property leased pursuant to the Ground Leases,
including, without limitation, all of the Asset Motels set
forth in Section 1.3 ("Buildings") and (3) Sellers interest
as lessor in all leases with respect to the Land and
Buildings, including but not limited to the lease of certain
real property adjacent to the Gallatin, Tennessee, Shoney's
Inn (collectively "Leases") identified on Schedule 1.1.c.
(collectively the "Real Property").
1.2. Easements and Awards. All right, title and interest of
Sellers, if any, in and to any easements, rights-of-way,
privileges, licenses and other similar interests in, on, or
to, any land, highway, street, road, or avenue, open or
proposed, in, on or across, in front of, abutting or
adjoining, the Real Property; and all right, title and
interest of Sellers, if any, in any sign leases on the Real
Property, in and to any awards made, or to be made in lieu
thereof, and in and to any unpaid awards for damage thereto by
reason of a change of grade of any such highway, street, road
or avenue, or rights of Sellers
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in any condemnation awards related to the Real Property
(collectively, the "Easements and Awards").
1.3. Asset Motels. The fourteen (14) motel properties set forth and
identified on the attached Schedule 1.3 (the "Asset Motels").
1.4. Stock Sale Motels. All of the issued and outstanding shares of
stock (the "Stock") of ShoLodge, Inc., a Tennessee
corporation, in Shoney's Inns Group IV, Inc., a Tennessee
corporation ("Group IV"), which entity owns through an
affiliate MURJAC, Inc., a Tennessee corporation ("MURJAC"),
the two motel properties set forth and identified on the
attached Schedule 1.4 (the "Stock Sale Motels") (the Asset
Motels and the Stock Sale Motels are sometimes referred to
collectively hereinafter as the "Motels") (Group IV and
MURJAC are sometimes hereinafter referred to as the "Stock
Sale Companies.")
1.5. Fixtures and Tangible Personal Property. All of the fixtures,
furniture, furnishings, fittings, equipment, machinery,
apparatus, signage, appliances, draperies, carpeting, and
other similar articles of tangible personal property used or
usable in connection with any part of any of the Asset Motels
situated in or about the Real Property owned or leased by
Sellers, as applicable, subject to such depletions,
resupplies, substitutions and replacements as shall occur and
be made in the normal course of business but in accordance
with present standards, excluding, however: (i) Consumables
(as defined in Section 1.12 below); (ii) Operating Equipment
(as defined in Section 1.6 below); (iii) equipment and
property leased pursuant to Motel Contracts (as defined in
Section 1.7 below); (iv) property owned by guests, Sellers'
employees or other persons furnishing goods or services to
each of the Asset Motels; and (v) Vehicles as defined in
Section 1.13 below (collectively the "Personal Property").
1.6. Operating Equipment. All china, glassware, linens, silverware
and uniforms, whether in use or held in reserve storage for
future use, in connection with the operation of each of the
Asset Motels, which are in Sellers' possession on the date
of this Agreement ("Operating Equipment"), subject to such
depletion and restocking as shall be made in the normal
course of business, excluding however, (i) Consumables, and
(ii) property owned by guests, Sellers' employees or other
persons furnishing goods or services to each Asset Motel
site.
1.7. Motel Contracts. To the extent assignable, all service,
maintenance, purchase order, lease and other contracts and
agreements, including equipment leases, if any, and any
amendments thereto, with respect to the maintenance,
operation, provisioning, or equipping of each Asset Motel and
any elevators located therein, as well as written warranties
and guaranties relating thereto, if any, including those
relating to heating and cooling equipment and/or mechanical
equipment that are expressly assumed by Buyers in accordance
with Section 10.6 of this Agreement (collectively the "Motel
Contracts").
1.8. Reservations and Advance Deposits. The advance reservations
and bookings with regard to the Asset Motels, as the same
may be amended, canceled and renewed (the
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"Reservations") and advance deposits made in respect thereof
(the "Advance Deposits").
1.9. Bookings. Contracts for the use or occupancy of guest rooms
and meeting and banquet facilities, if any, of each Asset
Motel, which shall be assumed by Buyers ("Bookings").
1.10. Other Assets. All promotional literature, and other
advertising materials or agreements used or proposed for use
in connection with the operation of and located at the Asset
Motels; all client lists, correspondence with clients,
financial and accounting software and report formats,
personnel records, blueprints actually in Sellers' possession,
as-built surveys in Sellers' possession, records and files
owned or held by Sellers and related to the operation of the
Asset Motels and all other assets, properties, rights and
claims of Sellers related to or used or held for use in
connection with any or all of the aforesaid property of every
kind and description located at the Asset Motels, as the same
shall exist on the Closing Date (as defined in Section 4
below) whether or not specifically delivered to the Buyers
hereunder (collectively the "Other Assets").
1.11. Permits, Warranties, Records. Sellers' interests in the
following items, all of which relate to the Property to the
extent assignable: all permits, licenses, maps, certificates
of occupancy, building inspection approvals and governmental
authorizations and approvals issued to Sellers and used in or
relating to the ownership, occupancy or operation of any part
of the Asset Motels, including those necessary for the sale
and on-premises consumption of food, liquor and other
alcoholic beverages, including but not limited to, the liquor
licenses for the Nashville, Tennessee (Music Valley Drive) and
Tallahassee Motels, but excluding any of the foregoing which
are not transferable by Sellers ("Permits") to the extent
assignable; all warranties and guaranties relating to the
Property ("Warranties") and claims against third parties in
connection therewith; and all business records relating to
personal property taxes, real estate taxes, assessments,
insurance, rents, maintenance, repairs, capital improvements
and services and employment and personal files of employees to
be retained by the applicable Buyer in accordance with Section
12 hereof in each case with respect to the Asset Motels
("Records").
1.12. Consumables. All maintenance and housekeeping and guest
supplies, including soap, cleaning materials and matches,
stationery and printing, and other supplies of all kinds, in
each case whether partially used, unused, or held in reserve
storage for future use in connection with the maintenance and
operation of each of the Asset Motels, which are in Sellers
possession at the Asset Motels on the date of this Agreement,
subject to such depletion and restocking as shall occur and be
made in the normal course of business, excluding, however, (i)
Operating Equipment, and (ii) property owned by guests or
Sellers' employees or other persons furnishing goods or
services to each of the Asset Motels (collectively the
"Consumables").
1.13. Vehicles. All automobiles, vans, trucks and other vehicles
owned by Sellers and used in connection with the operation
of the Asset Motels (collectively the "Vehicles").
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1.14. Liquor, Gift Shop and Petty Cash. All of: (i) the useable
portion (i.e., that portion which is suitable for consumption
and can be resold in the ordinary course of Buyers' business)
of the inventory of liquor, spirits, beer, wine and alcoholic
beverages located in the Nashville, Tennessee (Music Valley
Drive), Motel; (ii) the useable portion (i.e., that portion
which is by industry standards suitable for resale within
the normal and customary operations of the gift shop) of the
inventory of items for sale in the gift shop located in the
Nashville, Tennessee, (Music Valley Drive) Motel; and (iii)
the petty cash actually on hand as of the Closing Date in
any of the Motels (collectively the "Additional Purchase
Items").
2. Purchase Price and Manner of Payment. The total purchase price
("Purchase Price") to be paid for that portion of the Property set
forth in Sections 1.1-1.13 shall be Ninety Million and 00/100 Dollars
($90,000,000.00) and shall be allocated amongst separate elements of
the Property as set forth on Schedule 2. Buyer and Seller agree to use
the respective allocations among the elements of the Property as set
forth on Schedule 2 for federal income tax purposes. The purchase price
for the Additional Purchase Items as set forth in Section 1.14 shall be
determined and paid in accordance with Section 2.4 hereof.
2.1. Buyers have deposited with Partners Title Company, 712 Main,
Suite 2000E, Texas Commerce Bank Building, Houston, Texas
77002-3218, Attn: Sandra Paige ("Escrow Holder") $2,000,000
(the "Earnest Money"). The Earnest Money shall be held by
the Escrow Holder and shall be disbursed as provided herein.
If the acquisition and sale of the Property as contemplated
hereunder shall close pursuant to the terms and conditions
of this Agreement, the Earnest Money shall be applied on the
Closing Date as part of the cash portion of the Purchase
Price. If Buyers shall terminate this Agreement in its
entirety pursuant to a specific right to terminate this
Agreement as provided for herein, $1,930,000 shall be refunded
to Buyers, and the remaining $70,000 shall belong to Sellers,
provided that Sellers shall not be in default under this
Agreement.
2.2. $20,500,000.00 in cash on the Closing Date.
2.3. The balance of $67,500,000 by execution and delivery of a
nonrecourse promissory note for each Motel (individually a
"Purchase Money Note" and collectively the "Purchase Money
Notes") by the applicable Buyer to the applicable Seller on
the Closing Date evidencing the purchase money loan from
Sellers to Buyers (individually a "Purchase Money Loan" or
collectively the "Purchase Money Loan") the terms and
conditions of which are described as follows:
2.3.1. Terms. The Purchase Money Loan shall be for a term of
five (5) years from the Closing Date. During the
first twelve (12) months subsequent to the Closing
Date, monthly payments of interest only on the
outstanding principal balance of the Purchase Money
Notes shall be due thereunder. On the first
anniversary date thereof (the "Amortization
Commencement") the then outstanding principal balance
of the Purchase Money Loan shall be amortized over a
25-year term with level monthly payments of principal
and interest until the maturity date at which date
all principal plus any accrued but unpaid interest
shall be due and payable. Payments on the Purchase
Money Loan
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shall be subject to adjustment as provided in Section
2.3.5. Notwithstanding the foregoing, the Purchase
Money Note with respect to the Nashville, Tennessee
(Music Valley Drive), Motel shall, at the option of
the Seller, be due and payable 120 days subsequent to
the Closing Date.
2.3.2. Rate. During the first twelve (12) month period
subsequent to the Closing Date, the Purchase
Money Loan shall bear interest at a rate of 8%
(interest only) computed on the then outstanding
principal balance of the Purchase Money Notes. From
and after the Amortization Commencement, the Purchase
Money Notes shall bear interest at a rate equal to
the "Index" plus the Base Rate and subject to a floor
and a ceiling as described herein. For purposes of
this paragraph the Index shall be the spread between
8 1/2% and the rate on U.S. Treasury bills with five
year maturities on the date of Amortization
Commencement. The "Base Rate" shall be equal to the
rate on five year U.S. Treasury bills on the date of
Amortization Commencement. On each anniversary date
of the Amortization Commencement, the Base Rate shall
be adjusted to the rate on U.S. Treasury bills with
five (5) year maturities on such date and the monthly
payments during the next twelve (12) month period
shall be determined based upon the then applicable
aggregate interest rate over the remaining
amortization period. Notwithstanding anything
contained herein to the contrary, the total interest
rate in any one year shall not be adjusted (up or
down) by an amount greater than 100 basis points nor
more than 200 basis points total from the
Amortization Commencement to the maturity date.
2.3.3. Prepayments. The Purchase Money Loan shall be subject
to prepayment in whole or in part only as provided
for herein. In order to prepay all or a portion of
the Purchase Money Loan, Buyers must provide Sellers
with sixty (60) days prior written notice thereof.
Further, at such time as only five (5) or fewer Motel
properties remain securing the Purchase Money
Mortgages (defined below), the Buyers may make
further partial prepayments only if the Buyers have
provided collateral to secure the unpaid Purchase
Money Notes, other than the remaining Motel
properties, reasonably satisfactory to the holder or
holders of such Purchase Money Notes to ensure that
the holder or holders of such Purchase Money Notes
will not incur a loss on the remaining balance of the
Purchase Money Notes. The Buyers may make a total
repayment with five (5) or fewer Motel properties
securing the Purchase Money Loan. Each Motel listed
on Schedule 1.3 and Schedule 1.4 shall be allocated
its pro-rata share of the Purchase Money Loan based
upon the portion of the total Purchase Price
attributable to each Motel as set forth on Schedule
2. Partial prepayment and a corresponding release of
the applicable Purchase Money Mortgage shall be based
upon each Motel's allocable portion of the Purchase
Money Loan.
2.3.4. Collateral. The Purchase Money Loan shall be
nonrecourse to the Buyers and shall be secured by a
separate mortgage on each Asset Motel and all of the
Property located thereon or therein (individually a
"Purchase Money Mortgage" and collectively the
"Purchase Money Mortgages"). Each
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Purchase Money Note and each Purchase Money Mortgage
and the "Pledge Agreement" (as hereinafter described)
and each FF&E Assignment (as hereinafter described)
shall contain cross-collateralization and
cross-default provisions. The Purchase Money Mortgage
with respect to a specific Asset Motel property shall
be released in the event of a prepayment of a
particular Asset Motel property meeting the
requirements of Section 2.3.3 hereof. Each Purchase
Money Mortgage shall be a first lien on the
applicable Asset Motel and Property except for
encumbrances which the Buyers agree to accept in
accordance with the terms set forth in this
Agreement. The Purchase Money Loan shall also be
secured by the pledge of, and grant of a security
interest in, the Stock (the "Pledge Agreement").
Further, at such time as the indebtedness payable to
certain third parties as described in Schedule 8.26
below is paid in full, the Purchase Money Loan shall
be secured by a first priority mortgage on the Stock
Sale Motels.
2.3.5. Adjustment. In connection with the acquisition of the
Stock, payments on the Purchase Money Notes for each
of the Stock Sale Motels shall be adjusted as
provided for herein. Any amounts paid by MURJAC or
Group IV as "Revenue Participation Payments" to the
"Trustee" for the benefit of the bondholders pursuant
to that certain Indenture dated as of April 15, 1986
shall be deducted from and credited as payment
against any and all amounts otherwise due from the
Buyer of the Stock to ShoLodge, Inc. under the terms
of such Purchase Money Notes. To the extent that such
amounts paid to the Trustee exceed amounts due under
the applicable Purchase Money Note with respect to
the Stock the other Buyers shall be entitled to
offset payments then due on all of the remaining
Purchase Money Notes on a pro rata basis (i.e., based
upon the relative amounts of the then outstanding
principal balance of such Purchase Money Notes).
2.3.6. Franchise Agreement/Acceleration. In the event
the Franchise Agreement (as hereinafter defined) with
respect to a Motel is terminated for any reason, the
holder of the Purchase Money Note with respect to
such Motel shall have the right, at such holder's
option, to accelerate the indebtedness evidenced by
such Purchase Money Note, in which event such
indebtedness shall be due and payable in full on the
date one hundred eighty (180) days after such
acceleration. Further, if at such time the Purchase
Money Notes with respect to five (5) or fewer Motels
are then outstanding, the holders of all such
Purchase Money Notes shall have such right to call
the indebtedness evidenced by such Purchase Money
Notes, unless, at such date, the applicable Buyers
have provided security (other than the Motels), if
necessary, reasonably satisfactory to the holder or
holders of such remaining Purchase Money Notes to
ensure that the holder thereof will not incur a loss
with respect to the remaining outstanding principal
balance of such Purchase Money Notes on a manner
similar to the provisions of Section 2.3.3.
2.3.7. Prior to closing, each Buyer shall establish a bank
account at a bank approved by ShoLodge, Inc.
("ShoLodge"). As long as any portion of the
indebtedness evidenced by a Purchase Money Note
remains unpaid, the Buyer executing
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such Purchase Money Note shall deposit each month
into such account, in arrears, an amount equal to
four percent (4%) of gross sales for the previous
month at the Motel for which such Purchase Money Note
was executed. Funds may be withdrawn from this
account by such Buyer only for capital repairs or
replacements, capital improvements and renovations at
such Motel and otherwise as approved by ShoLodge. The
obligation of each Buyer as set forth in the
paragraph shall be set forth in each Purchase Money
Note. Further, the holder of each Purchase Money Note
shall be granted a security interest in and
assignment of the account established with respect to
such Purchase Money Note (the "FF&E Assignment").
2.4 Payment for Additional Purchase Items. On the Closing Date,
Buyer and Seller of the Nashville, Tennessee (Music Valley
Drive) Motel shall take or cause to be taken a physical
inventory of each of the items constituting the Additional
Purchase Items. The purchase price for the Additional
Purchase Items shall be the Sellers wholesale cost of such
inventory plus the actual amount of petty cash on hand in
any of the Motels as of the Closing Date. The purchase price,
so determined shall be paid by the Buyers to the Sellers in
cash on or before 30 days subsequent to the Closing Date.
3. Contingencies. The obligations of Buyers under this Agreement are
contingent upon each of the following:
3.1. Sellers Performance. Sellers shall have performed all of their
obligations under this Agreement.
3.2. Representations and Warranties. The representations and
warranties of Sellers contained in this Agreement must be true
and accurate in all material respects now and on the Closing
Date as if made on the Closing Date.
3.3. Authorization. Receipt of corporate or partnership
resolutions, as applicable, in form and substance acceptable
to Buyers and Buyers' counsel, to the effect that (i) each
Seller has full power and authority to execute and deliver the
documents to be executed and deliver to Buyers; (ii) each
signatory on behalf of the Sellers has full power and
authority to act for and on behalf of Sellers; and (iii) this
Agreement and the documents to be delivered by Sellers at
Closing are valid and binding and enforceable against the
Sellers in accordance with their terms, subject to general
principles of equity and the effect of laws on the rights of
creditors generally.
3.4. Title. Title shall have been found acceptable, or been made
acceptable, in accordance with the requirements and terms of
Section 6 below.
3.5. Access and Inspection of Real Property. Sellers shall have
allowed Buyers, and Buyers' agents, immediate access to the
Motels, without charge and at all reasonable times for the
purpose of Buyers' investigation and testing the same.
Sellers shall make available to Buyers and Buyers' agents
without charge a copy of all plans and specifications, soil
reports, engineering and architectural studies or reports,
grading plans, topographical maps and similar data, records,
inventories, permits, correspondence and environmental
reports in Sellers' possession, all relating to or
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affecting the Motels. Buyers shall have been satisfied with
the results of all tests and investigations on or before the
Contingency Date (as hereinafter specified). In the event that
the Buyers make any changes, alterations or modifications to
any of the Motels while conducting the due diligence
investigations described in this Section 3, either directly or
through their agents, Buyers agree to restore the Motel
properties to their original physical condition. Further, the
Buyers agree to indemnify and hold Sellers harmless from and
against any liability, loss, claim or damage resulting to
Sellers from Buyers' physical inspections and/or due diligence
at any of the Motels. In connection with the contingencies set
forth in this Section 3.5, Buyers represent to Sellers that
Buyers have inspected the Motels and that this condition has
been waived except for the Buyers' review and approval of the
results of structural and/or engineering studies with regard
to the New Orleans, Louisiana, Jackson, Mississippi, and
Nashville, Tennessee (Music Valley Drive) Motels.
3.6. Inspection of the Motels. Sellers shall allow Buyers and
their agents or representatives to enter upon the Motels, for
such purposes as Buyers may reasonably require in order to
perform inspections, investigations, market studies and
examinations or to facilitate the transition of ownership with
respect to the Motels, provided such inspections do not
unreasonably interfere with the continued operation of the
Motels in the ordinary course of business. Buyers agree that
the results of any inspections, investigations, market studies
and examinations as Buyers may desire to perform pursuant to
the foregoing shall be treated as confidential, and Buyers
shall not disclose the same to any person or entity other than
Buyers' counsel and accountants and other agents and
representatives of Buyers and their investors and lenders,
consulted in connection with the acquisitions of the Property,
who shall also agree to treat such items as confidential. In
the event that the transaction contemplated hereby is not
consummated, any and all reports, financial and operating
information obtained by Buyers, or their representatives,
shall be returned to Sellers. In connection with the
contingencies set forth in this Section 3.6, Buyers represent
to Sellers that Buyers have inspected the Real Property and
the Motels and that this condition has been waived except for
the results of structural and/or engineering studies with
regard to the New Orleans, Louisiana, Jackson, Mississippi,
and Nashville, Tennessee (Music Valley Drive) Motels.
3.7. Management Agreements/Franchise Agreements. The purchase of
the Property is contingent upon the termination of the
existing management agreements, if any, with respect to each
of the Motels in such a manner that the Buyers (or MURJAC
with respect to the Stock Sale Motels) shall have no liability
of any kind or nature thereunder. Further, ShoLodge Franchise
Systems, Inc., a Tennessee corporation ("Franchisor") must
terminate the existing franchise agreements with respect to
each Motel and Buyers (MURJAC with respect to the Stock Sale
Motels) and Franchisor must negotiate and execute new
franchise agreements for each Motel satisfying the
requirements set forth in Section 4.1.22.
3.8. Financial Information. Buyers shall have received and approved
all financial statements from the year 1995 to June 14, 1998,
relating to capital improvements, operating income, and
expenses with respect to the Motels which shall include the
consolidating audit report prepared by Sellers' auditors in
connection with the
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completion of the audit of the Asset Motels for 1995-1997.
Sellers shall also provide Buyers 1998 unaudited year-to-date
operating statements through June 14, 1998. Sellers agree that
Buyers may contract directly with Sellers' auditors for the
preparation of audited historical financial statements for
1995-1997 with respect to the Asset Motels and agree to allow
the Buyers access to this information for this limited
purpose. Sellers shall provide Buyers with occupancy rates and
information for each Asset Motel for 1995 through year-to-date
through June 14, 1998.
3.9. Other Property. Buyers shall have received and approved a copy
of each Ground Lease and any lease with respect to an Asset
Motel.
3.10. Document Review. Buyers shall have determined that they are
satisfied with their review and analysis of the Leases,
Motel Contracts, Permits, Warranties, Records, and Bookings
and all related documentation to such documents.
3.11. Government Approvals. Buyers shall have obtained at their sole
cost and expense, all final governmental approvals necessary
in Buyers' judgment in order to make the use of the Property
which Buyers intend. Sellers shall cooperate in all reasonable
respects with Buyers in obtaining such approvals, and shall
execute such applications, permits and other documents as
may be reasonably required in connection therewith; provided
that Sellers shall not incur any expense in connection
therewith.
3.12. Environmental Assessment. At Buyers' sole cost and expense,
Buyers shall have obtained and be satisfied with, in Buyers'
sole discretion, a Phase I Environmental Site Assessment of
each Motel property.
3.13. [RESERVED]
3.14. Waiver of Right of First Refusal. With respect to the
Nashville, Tennessee (Music Valley Drive) Motel owned by
Shoney's Inn of Music Valley, Ltd, which has a partner not
affiliated with the Sellers, such Seller shall have delivered
to the applicable Buyer a signed acknowledgment and waiver
executed by the non-affiliated partner evidencing that it has
waived its right of first refusal with respect to such Motel.
3.15. [RESERVED]
3.16. Shoney's Inns Group IV, Inc. and MURJAC. Buyer shall have
received copies of, reviewed and approved in it sole
discretion: (i) all of the organizational documents, stock
certificates and minutes of the Stock Sale Companies; (ii)
all financial statements of the Stock Sale Companies from
1995-1997 and 1998 year to June 14, 1998, which financial
statements and information indicate any and all liabilities,
claims and/or obligations outstanding with respect to the
Stock Sale Companies; (iii) a schedule of all liabilities or
obligations of MURJAC or Group IV not otherwise shown on the
financial statements or in a schedule to this Agreement,
together with a list and a brief description, if applicable,
of any other potential claims, causes of action and suits
asserted or threatened against the Stock Sale Companies; and
(iv)
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all contracts, agreements and instruments to which the Stock
Sale Companies are bound except for such contracts, agreements
and instruments which can be terminated without cost or
penalty of any kind solely at the discretion of MURJAC or
Group IV, as applicable, on sixty (60) day or less notice.
3.17. Uniform Commercial Code Searches. Buyers shall have received
Uniform Commercial Code, tax and judgment lien records
searches (conducted through a date reasonably proximate to
the Closing Date) of filings in such records in all
jurisdictions where the Sellers have any Property, which shall
be in form, scope and substance satisfactory to the Buyers
and their counsel and which shall not disclose any
encumbrances not otherwise disclosed in a schedule to this
Agreement.
3.18. Agreements and Contracts. Sellers shall provide Buyers with
copies of all agreements or contracts applicable to the
Property which are not terminable solely by Buyers (with no
liability resulting to Buyers from such termination) on
sixty (60) days or shorter notice and Buyers shall have
approved such contracts and agreements in their sole
discretion.
3.19. Material Change. There shall have been no material adverse
change in the physical condition of the Motels or the Real
Property and no material change in the operations of the
Motels from the last date of inspection by a Buyer or the
agent or representative of a Buyer to the Closing Date.
3.20. Failure of Conditions. If any Buyers' condition precedent as
set forth in this Section 3 has not been fulfilled and
satisfied as of the Closing Date unless such condition
precedent has been waived, or deemed to have been waived, as
set forth herein, provided that Buyers themselves are not in
default, Buyers shall have the right, at their option and
subject to Section 3.21 to either: (a) terminate this
Agreement with respect to the specific Motel(s) that are the
subject of the failure of such contingency and the Purchase
Price shall be adjusted accordingly; or (b) to seek specific
performance of this Agreement.
3.21. Remedies Limited. If any of Buyers' conditions precedent as
set forth in this Section 3 have not been fulfilled and
satisfied as permitted herein or waived or deemed to have
been waived, as set forth herein, Buyer shall not have the
right to exercise the remedy prescribed in Section 3.20
without the consent of ShoLodge, Inc. if it has previously
exercised such right with regard to four (4) Motels. In such
instance, the Buyers remedy shall be to terminate this
Agreement in its entirety in which case the provisions of
Section 2.1 shall apply.
With respect to those Buyers' contingencies set forth in Sections 3.5,
3.6, 3.8, 3.9, 3.10, 3.16, and 3.18, the "Contingency Date" for
purposes of this Agreement is the date 10 days subsequent to the date
of the execution of this Agreement by all Buyers and Sellers. With
respect to all other Buyers' contingencies provided for in this
Section 3, the "Contingency Date" is the Closing Date. If any
contingency has not been satisfied on or before the applicable
Contingency Date for such contingency, then this Agreement may be
terminated as to the specific Motel for which there is a failed
contingency by written notice from Buyers to Sellers given on or prior
to the applicable deadline. Should Buyers fail to terminate this
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Agreement (either in its entirety or as to a specific Motel) by such
applicable deadline date, Buyers shall be deemed to have waived such
contingencies; (provided, however, that failure to terminate as to a
specific Motel for one contingency shall not prevent Buyer from
terminating this Agreement as to a specific Motel on account of the
failure of other contingencies). Upon termination of this Agreement as
specified in Section 3.21, the Earnest Money and any interest accrued
thereon shall be released to Buyers and Sellers in accordance with
Section 2.1 and upon return, neither party will have any further rights
or obligations regarding this Agreement or the Property, except as
expressly provided herein. The indemnification obligation of Buyers set
forth in Section 3.5 and the obligations to return reports and
financial and operating information as set forth in Section 3.6 shall
survive the termination of this Agreement. Further, the obligation of
Buyers concerning confidentiality as set forth in Section 10.4 shall
survive the termination of the Agreement. All the contingencies are
specifically for the benefit of the Buyers, and the Buyers shall have
the right to waive any contingency by written notice to Sellers and
shall be deemed to have waived contingencies as otherwise provided
herein.
3.22. Sellers' Contingencies. The obligations of Sellers hereunder
shall be subject to the following contingencies.
3.22.1. Board of Directors Approval. The approval of the
board of directors of ShoLodge, Inc. to the sale of
the Property shall have been obtained.
3.22.2. Lender's Approval. ShoLodge, Inc. shall have received
approval from its lenders to the sale of the Property
as contemplated under this Agreement. To the extent
that the approvals provided for in Section 3.22.1 or
3.22.2 are not obtained, Sellers shall reimburse
Buyers for all of Buyers' costs in connection with
their performance hereunder subject to a maximum
limit of $150,000.
3.22.3. Music Valley Drive. The applicable Seller with
respect to the Nashville, Tennessee (Music Valley
Drive) Motel must receive a waiver of the right of
first refusal from any of its partners which are
entitled to the benefit of such right of first
refusal.
3.22.4. Delivery of Consents and Estoppels. The applicable
Seller shall have received the consents to
assignments and estoppels referred to and required to
be delivered pursuant to Sections 4.13 and 4.14
hereof.
In the event that the contingencies to Sellers' performance
have not occurred by the Closing Date, Sellers may terminate this
Agreement either (i) in its entirety, or (2) with respect to the
Nashville, Tennessee (Music Valley Drive) Motel, only as applicable,
and pay to Buyer the $150,000 in cash provided for in Section 3.22.2
herewith, if applicable.
4. Closing. The closing of the purchase and sale contemplated by this
Agreement (the "Closing") shall occur on July 30, 1998 subject to
extensions at the request of Sellers or Buyers but in no event later
than August 31, 1998 (the "Closing Date"), or such other date as Buyers
and Sellers mutually agree to in writing. The Closing shall take place
at the offices of the Sellers' legal counsel in Nashville, Tennessee.
Sellers agrees to deliver
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possession of the Property to Buyers on the Closing Date. In the event
that all of the conditions with respect to the purchase and sale of all
of the Property have not been satisfied on the Closing Date, Buyers may
elect, at their option, to proceed to closing with respect to all or
some portion of the Property (provided that Buyers close on at least
twelve (12) of the Motels) with appropriate assurances or security
concerning post closing satisfaction of any unfulfilled contingencies.
Buyers and Sellers agree to use their best efforts to accommodate
closing in such circumstance.
4.1. Sellers' Closing Documents. On the Closing Date, Sellers shall
execute and deliver to Buyers the following (collectively,
"Sellers' Closing Documents") (if applicable), all in form
and content reasonably satisfactory to Buyers and Buyers'
counsel (to the extent applicable to a particular Seller and
a particular Buyer):
4.1.1. Deed. A special or limited warranty deed for each
separate parcel of Real Property conveying the Real
Property and the Easements and Awards to Buyers,
free and clear of all encumbrances, except the
"Permitted Encumbrances" (hereafter defined).
4.1.2. Bill of Sale. A warranty bill of sale transferring to
Buyers all of Sellers' right, title and interest in
and to the Personal Property, Consumables, Operating
Equipment, Reservations, Advance Deposits, Additional
Purchase Items and Other Assets.
4.1.3. Assignment of Ground Leases. An assignment conveying
the Ground Leases to the applicable Buyers, free and
clear of all encumbrances, which shall (except as to
the Bossier City, Louisiana, Ground Lease) include a
consent to assignment and estoppel from the
applicable ground lessor, including the right to
grant a mortgage.
4.1.4. Assignment of Leases. An assignment conveying the
Leases to the applicable Buyers free and clear of
all encumbrances, which shall include a consent to
assignment and estoppel from the applicable lessee if
required.
4.1.5. Assignment of Motel Contracts, Permits, Bookings,
Warranties and Miscellaneous Documents. To the extent
assignable, an assignment of the Permits, Bookings,
Warranties and Buyers' Motel Contracts, conveying
Sellers' interest to Buyers together with the consent
of all parties who are required to consent to such
assignment to the extent that the applicable Buyer
determines it would or may have any liability or
suffer any loss as a result of a failure to obtain
such consents.
4.1.6. Prepaid Deposits. All prepaid Advance Deposits
relating to Bookings assumed by Buyers.
4.1.7. Room Reservation Records. Copies of all room
reservations and service and maintenance records not
previously delivered to Buyers to be delivered on
site at the Real Property, together with
correspondence and other records pertaining thereto
which Buyers will reasonably require in the future
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operation of the Motels (but specifically excluding
tax and other records not necessary for the continued
operations of the Motels).
4.1.8. Keys. Keys or codes to all doors to, and equipment
and utility rooms located on, the Real Property.
4.1.9. Bills Paid Affidavit; Tax Clearance Certificates.
Sellers shall have each delivered an affidavit
certifying that all bills and obligations of the
business of operating the Motels prior to Closing
have either been paid in full or will be paid in full
in accordance with the provisions of Section 5
hereof.
4.1.10. Original Documents. Originals or copies of the Ground
Leases, the Leases, Motel Contracts, Permits,
Warranties, Bookings and Records.
4.1.11. FIRPTA Affidavit. A non-foreign affidavit, properly
executed, containing such information as is required
by IRC Section 1445(b)(2) and its regulations.
4.1.12. Resolutions. Resolutions of each Seller authorizing
the sale of the Property owned by each Seller and the
undertaking of the transactions contemplated by this
Agreement.
4.1.13. Certificate of Occupancy. Originals or copies of the
certificate of occupancy (or local equivalent) for
each Motel permitting its present uses, issued by
the applicable government authority.
4.1.14. Preliminary Closing Statement. A counterpart of the
preliminary Closing Statements as described in
Section 5.12, executed by Sellers.
4.1.15. Owner's Duplicate Certificates of Title. If any of
the Real Property is torrens or registered property,
the owner's duplicate certificates of title regarding
the Real Property.
4.1.16. IRS Forms. A Designation Agreement designating the
"reporting person" for purposes of completing
Internal Revenue Form 1099 and, if applicable,
Internal Revenue Form 8594.
4.1.17. Well Certificate. A certificate signed by the
appropriate Seller warranting that there are no wells
on the Real Property or if there are wells, a "Well
Certificate" in the form required by applicable law,
if required by applicable law.
4.1.18. Storage Tanks. If any of the Real Property contains
or contained a storage tank, an affidavit with
respect thereto if required by applicable law.
4.1.19. Individual Sewage Treatment Systems. If any of the
Real Property contains an individual sewage
treatment system, a disclosure statement if required
by applicable law.
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4.1.20. Other Documents. All other documents reasonably
determined by Buyers or the Title Company to be
necessary to transfer the Property to the Buyers
free and clear of all encumbrances, except for
Permitted Encumbrances.
4.1.21. Titles. Titles to all of the Vehicles referred to in
Section 1.13 hereof.
4.1.22. Franchise Licenses. Sellers shall cause to be
delivered to Buyers (MURJAC as to the Stock Sale
Motels) franchise license agreements (the "Franchise
Agreements") with Franchisor for each Motel. The
Franchise Agreements shall contain such provisions as
the Franchisor and the applicable Buyers mutually
agree, pursuant to which the applicable Buyers
(and/or MURJAC with respect to the Stock Sale Motels)
will be granted the right and license to continue to
operate each Motel as a "Shoney's Inn" or "Shoney's
Inn & Suites" lodging facility, as applicable. Such
Franchise Agreements will be negotiated in good faith
from the Franchisor's standard form but will provide
that (i) the royalty fee shall be the same percentage
of gross sales as set forth in the existing license
agreement for such Motel as such percentages are set
forth on Schedule 4.1.22 attached hereto; and (ii)
that each Buyer shall have the right to assign its
interest in such Franchise Agreement, on a one time
basis, to an affiliate of such Buyer, or a real
estate investment trust or similar entity without the
payment of any assumption or transfer fees (but such
Buyer shall pay for all costs and expenses incurred
by Franchisor relating to such assignment and such
Buyer shall not be released from its obligations
under such Franchise Agreement). Each Franchise
Agreement shall be for a term of twenty years with a
five year liquidated damages provision.
4.1.23. Acknowledgment and Waiver of Right of First Refusal.
Seller Shoney's Inn of Music Valley, Ltd. shall
deliver a duly executed waiver of right of first
refusal ("Waiver") from any and all of such Seller's
partners who have a right of first refusal, which
Waiver shall acknowledge the sale of the Motel to the
applicable Buyer and release, waive and terminate
such partner's right of first refusal as it relates
to the sale of such Motel contemplated by this
Agreement.
4.1.24. Stock Certificates for Stock Sale Motels. Stock
certificates evidencing all of the Stock free
and clear of all encumbrances and other defects in
title, duly endorsed or otherwise accompanied by duly
executed stock powers sufficient to transfer
ownership of said certificates and the Stock
evidenced thereby to the applicable Buyer.
4.1.25. Resignations. Resignations duly signed by such
persons as may be requested by the applicable Buyer
of the Stock on or before the Closing Date and
effective upon acceptance, pursuant to which such
persons shall resign from their positions as officers
and directors of Group IV and MURJAC.
4.1.26. Opinion of Counsel. An opinion of counsel in form and
substance mutually agreed upon by and between the
Buyers and Sellers.
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4.1.27. Group IV and MURJAC Certification. An affidavit of
the president or chief financial officer of ShoLodge
that: (i) there are no liabilities, obligations, or
debt of the Stock Sale Companies, other than as
disclosed on Schedule 8.26 or Schedule 8.26.1 or on
the financial statements provided to the applicable
Buyer, and (ii) there are no claims, proceedings,
suits or causes of action which are existing or
threatened against the Stock Sale Companies, except
as described therein.
4.2. Buyers' Closing Documents. On the Closing Date, Buyers will
execute and deliver to Sellers or shall deliver to Buyers as
applicable, the following (collectively, "Buyers' Closing
Documents"):
4.2.1. Cash Portion of Buyers' Price. The funds required by
Section 2.2, by wire transfer of immediately
available funds.
4.2.2. Purchase Money Loan Documents. All documents
necessary to evidence the Purchase Money Loan, to
secure the Purchase Money Loan and to perfect such
security all as described in Section 2.3 of this
Agreement including, without limitation, the Purchase
Money Notes, the Purchase Money Mortgages, the Pledge
Agreement, the FF&E Assignment, and the UCC-1
Financing Statements relating thereto.
4.2.3. IRS Form. A Designation Agreement designating the
"reporting person" for purposes of completing
Internal Revenue Form 1099 and, if applicable,
Internal Revenue Form 8594.
4.2.4. Resolutions. Resolutions of each of the Buyers
authorizing the Buyers to purchase the Property and
to undertake the transaction contemplated by this
Agreement, including, without limitation, the
execution and delivery of the Purchase Money Notes,
the Purchase Money Mortgage, the FF&E Assignment, and
the Pledge Agreement, as applicable.
4.2.5. Assumption. An assumption of all obligations of
Sellers arising from and after the Closing Date
under the items assigned to Buyers pursuant to
Sections 4.1.3, 4.1.4. and 4.1.5 hereof, subject to
Section 4.6.
4.2.6. Preliminary Closing Statement. A counterpart of the
preliminary Closing Statements, executed by the
Buyers.
4.2.7. Opinion of Counsel. An opinion of counsel in form
and substance mutually agreed upon by and between the
Buyers and the Sellers.
4.2.8. Certificates evidencing the Stock and stock power as
contemplated by the Pledge Agreement.
4.3. Additional Closing Documents. On the Closing Date and as a
condition thereof, Buyers shall receive the following
additional closing documents in form and substance acceptable
to Buyers:
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4.3.1. ALTA Title Insurance Policy ("Title Policy,").
Title Policies issued in favor of Buyers by Partners
Title Company, 725 Main, Suite 2000E, Texas Commerce
Bank Building, Houston, Texas 77002-3218 (the "Title
Company"), in the amount of the Purchase Price
allocated to the Motel and its Property set forth in
Schedule 2 and insuring Buyers' interest in the Real
Property, subject only to the Permitted Encumbrances
and otherwise in conformity with the Title
Commitments (as defined in Section 6) and Section 6.
4.3.2. Zoning Letters. Zoning letters from each city
where the Motels are located evidencing that each
Motel and surrounding Real Property is in compliance
with applicable zoning requirements.
4.4. Concurrent Transactions. All documents or other deliveries
required to be delivered by Buyers or Sellers at Closing,
and all transactions required to be consummated concurrently
with Closing, shall be deemed to have been delivered at and
to have been consummated simultaneously with all other
transactions and all other deliveries, and no deliveries shall
be deemed to have been made, and no transactions shall be
deemed to have been consummated, until all deliveries
required to be made Buyers and Sellers shall have been made,
and all transactions contemplated by this Agreement shall
have been consummated, except to the extent that such
delivery or transaction may be waived by the party to be
benefited thereby.
4.5. Bond Financings. The applicable Sellers and Buyers acknowledge
the existence of certain series of tax exempt bonds
outstanding with respect to the Motels as disclosed as
Schedule 4.5 attached hereto (the "Bonds") and the fact that
the debt represented by the Bonds cannot be repaid until
September 1, 1998. The applicable Sellers and Buyers agree
that in the event the purchase and sale of the applicable
Motel closes in accordance with the terms and conditions of
this Agreement, cash shall be escrowed with the Escrow
Holder at the Closing from the cash portion of the purchase
price for such Motel as provided for in Section 2.2 hereof
in an amount sufficient to repay the Bonds and obtain a
release of any and all liens and encumbrances against the
Motels, the Real Property and the Property, if any, related
thereto. The Escrow Holder shall be directed to repay the
debt represented by the Bonds on September 1, 1998 or
earlier, if possible,, in accordance with the documents
pursuant to which the Bonds were issued and to obtain the
release of any and all liens and encumbrances with regard to
the applicable Motels.
4.6. Further Assurances. Sellers and Buyers will, at the Closing,
or at any time or from time to time thereafter, upon request
of a party, execute such additional instruments, documents
or certificates as a party or the Title Company deems
reasonably necessary, including without limitation, any state,
county or local transfer declarations in order to convey,
assign and transfer the Property to Buyers, to grant or
perfect the security to Sellers as described herein and
otherwise carry out the transactions contemplated by this
Agreement.
4.7. Possession. Possession of the Property shall delivered to the
Buyers at Closing, subject to the Permitted Encumbrances.
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4.8. Non-assumed Liabilities. With respect to the Asset Motels
and except as otherwise provided in this Agreement, the Buyers
will not assume, be obligated to assume or be responsible in
any way for any liabilities or obligations of Sellers on the
Closing Date including, without limitation, (a) any
liabilities arising from breaches or defaults under any of the
Motel Contracts or other agreements of Sellers occurring prior
to the Closing Date; (b) any liabilities arising from any
claims, actions, suits, proceedings or investigations,
existing prior to the Closing or relating to events occurring
prior to the Closing against the Sellers or any affiliate of
Sellers, at law or in equity before or by any federal, state,
municipal, local or foreign government or other governmental
department, commission, board, agency, instrumentality or
authority; or (c) any liabilities for any claim arising out of
any bodily injury, personal injury, property damage or
economic loss occurring prior to the Closing.
4.9. Indemnification by the Sellers. ShoLodge, Inc. shall indemnify
and hold harmless the applicable Buyer from and against, and
shall reimburse the Buyer with respect to, any and all loss,
damage, liability, costs and expense, including reasonable
attorneys' fees ("the Buyer's Loss"), incurred by the Buyer
by reason of or arising out of or in connection with (i) the
breach or inaccuracy in any material respect of any
representation or warranty of ShoLodge, individually or
collectively, or at any Seller contained in this Agreement
or in any certificate or other document delivered pursuant
to this Agreement, (ii) the failure of the Sellers or any of
them to perform any covenants, agreements, or conditions
required by this Agreement to be performed by them, (iii)
any liability or obligation, claim, cause of action of Group
IV or MURJAC including, without limitation, the accrued tax
liability of Group IV and MURJAC as of the Closing Date
other than the liability for the outstanding amount of those
certain Revenue, Appreciation Payment and Principal
Repayment Bonds Due April 15, 2001 and other matters
disclosed on Schedule 8.26 or Schedule 8..26.1 or disclosed
on the financial statements provided the applicable Buyer,
and (iv) Sellers failure to comply with bulk sales laws, if
required or applicable to the transaction contemplated
hereto, and (v) any and all actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses
(including attorney's fees) incident to any of the foregoing.
Any claim for indemnification hereunder shall be made within
two (2) years [or six (6) years with respect to any matter
related to a federal, state, or local income, franchise or
sales tax liability of the Stock Sale Companies] from the
date of execution of this Agreement. With regard to claims
made or suits filed within such period, ShoLodge, Inc.'s
indemnification shall continue to be effective until all
such suits or claims have been finally resolved.
5. Prorations. With regard to each Motel, Sellers and Buyers agree to
the following pro-rations and allocation of costs regarding this
Agreement:
5.1. Title Insurance and Closing Fee. Sellers will pay all
costs of the Title Evidence as defined in Section 6.1 below
and Sellers shall pay the fees charged by the Title Company
for any escrow required regarding "Buyers' Objections" as
defined in Section 6.2 below. Buyers will pay all premiums
required for the issuance of the Owner's Title Policy and any
mortgagee's Title Policy. Sellers and Buyers will each pay
one-half of any closing fee or charge imposed by any closing
agent or by the Title Company.
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5.2. Deed Tax. State deed tax, transfer taxes and similar taxes and
recording fees payable in connection with this transaction
shall be paid by Sellers or Buyers in accordance with the
local custom for commercial real estate transactions in the
jurisdiction where the property is located. If there is no
local custom or if such custom is ambiguous or disputed
then, in such event the cost of such deed tax or transfer
tax shall be paid 50% by the applicable Buyers and 50% by
the applicable Sellers. The Buyers shall pay all costs for
recording the Purchase Money Loan documents.
5.3. Real Estate Taxes and Special Assessments. All levied and
pending of special assessments existing on or with respect to
the Motels as of the Closing Date shall be paid by Seller in
full at the Closing Date. Taxes payable for all years prior to
1998 shall be paid in full by Seller on the Closing Date. Real
estate taxes payable in 1998 and 1999 shall be prorated based
upon and in accordance with local custom for commercial real
estate transfers in the jurisdiction in which the Motel is
located. If no such local custom exists or if such local
custom is ambiguous or disputed, then real estate taxes
payable in 1998 shall be prorated on a calendar year basis,
based upon the Closing Date and Buyer shall be liable for all
taxes payable in 1999.
5.4. Rents. All rents and other charges under the Ground Leases and
the Leases will be pro-rated as of the Closing Date.
5.5. Receivables; Trade Accounts Payable; Continuing Obligations.
Receivables and trade accounts payable shall be identified
as 12.01 A.M. local time on the Closing Date (the "Cut-off
Time"). Sellers shall retain all of the accounts receivables
for each separate Motel operation (including, without
limitation credit card receivables) incurred in the ordinary
course of business in accordance with the Motels' credit
policies in existence as of the Cut-off Time (the
"Receivables"). Following the Closing, Sellers shall have
the right to collect all Receivables, and if the Buyers
(MURJAC as to the Stock Sale Motels) shall receive any
payment on account of any Receivables at any time following
the Closing, Buyers (MURJAC as to the Stock Sale Motels)
shall promptly remit such payment to the Sellers. Buyers
(MURJAC as to the Stock Sale Motels) will honor, for their
account, the terms and rates of all pre-Closing reservations
confirmed for dates after the Closing Date. Any pre-Closing
down payments on such confirmed reservations and other
advance payments made with respect to Bookings for each of
the Motel facilities for dates on or after the Closing Date
will be credited to Buyers at the Closing. Sellers shall pay
all trade accounts payable due as of the Cut-off Time for
goods and services received prior to the Cut-off Time. Each
Buyer may either refuse delivery of or accept and pay for
goods and services received following the Cut-off Time
except for the Motel Contracts which Buyer has agreed to
assume in accordance with Section 10.6 hereof. Each Buyer
shall establish its own new trade accounts with vendors to
be effective from and after the Cut-off Time. All commitments
and promotional and other obligations to provide free or
discounted guests rooms, meeting rooms or other banquet
facilities at each of the Motels which have not been
satisfied in full as of the Closing Date and which are not
included in the Motel Contracts (collectively referred to
herein as "Continuing Obligations") shall be identified as
of the Cut-off Time, and Buyers shall receive a credit
against the Purchase Price in an amount equal to the
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projected cost actually to be incurred by Buyers in fulfilling
such Continuing Obligations.
5.6. Sale and Transfer Taxes and Assessments. All sales, occupancy,
room and other taxes incurred in connection with the Motels'
operations, water and sewer rents, rates and charges, vault
charges, canopy permit fees, sign lease payments, and other
municipal permit fees shall be prorated on an accrual basis
as of the Cut-off Time. If the amount of any such item is
not ascertainable on the Closing Date, the credit therefor
shall be based on the most recent available bill and shall
be reprorated upon receipt of the actual tax bill. Sales
taxes or similar taxes and fees resulting from the sale of
the Property, if any, shall be paid by Sellers and Buyers in
accordance with the local custom for commercial real estate
transactions in the jurisdiction in which the Property is
located. If there is no local custom or if such local custom
is ambiguous or disputed, then, in such event, the cost of
such sales or similar tax or fee shall be paid 50% by the
applicable Buyer and 50% by the applicable Seller.
5.7. Utility and Service Contracts. Amounts payable under telephone
and telex contracts and contracts for the supply of heat,
steam, electric power, gas, lighting and any other utility
service shall be prorated on an accrual basis as of the
Cut-off Time, and Sellers shall receive a credit for each
deposit if any, made by or on behalf of Sellers as security
under any such public service contracts provided that the
same is transferable and remains on deposit for the benefit
of Buyers (MURJAC as to the Stock Sale Motels). Where
possible, cut-off readings will be secured for all utilities
on the Closing Date.
5.8. Motel Contracts. Any amounts prepaid or payable under any
Motel Contracts assumed by Buyers shall be prorated on an
accrual basis as of the Cut-off Time. All Motel Contracts not
assumed by Buyers shall remain the sole obligation of the
Sellers.
5.9. Vending Machine Receipts. All receipts in vending machines at
the Motels if any, at the Cut-off Time shall become property
of Buyers at Closing, and Sellers shall receive a ratable
credit therefor.
5.10. Other. Such other items (except as provided to the contrary in
this Agreement) which are normally prorated and adjusted in
the sale of a motel shall be prorated and adjusted as of the
Cut-off Time and all deposits and prepaid items which inure
to the benefit of the Buyers (MURJAC as to the Stock Sale
Motels), for which Sellers shall receive a credit.
5.11. Attorney's Fees. Each of the parties will pay its own
attorney's fees, except that a party defaulting under this
Agreement or any Closing Document will pay the reasonable
attorneys' fees and court costs incurred by the nondefaulting
party to enforce its rights hereunder; should such
nondefaulting party prevail in such efforts to enforce this
Agreement.
5.12. Closing Statements. Each party shall cause it designated
representatives to enter the Motels at reasonable times and
without unreasonably interfering with operations,
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both before and after the Closing Date, for the purpose of
making such inventories, examinations and audits of the Motels
and of the books and records of the Motels, as they deem
necessary to make the adjustments and prorations required
under this Section 5, or under any other provisions of this
Agreement. Based upon such inventories, examinations and
audits, at the Closing, the representatives of the parties
shall jointly prepare and deliver to each party a preliminary
Closing Statement for each Motel which shall show the net
amount due either to Sellers or Buyers as a result thereof,
and such net amount will be added to or subtracted from the
cash balance of the Purchase Price to be paid to Sellers
pursuant to Section 2.2 hereof. Within sixty (60) days
following the Closing Date, Sellers and Buyers shall agree on
a final Closing Statement setting forth the final
determination of all items to be included on the preliminary
Closing Statements. The net amount due Sellers or Buyers, if
any, by reason of adjustments in the preliminary Closing
Statements as shown in the final Closing Statement, shall be
paid in cash by the party obligated therefor within ten (10)
days following the date of delivery of the final Closing
Statement to the parties. In the event the representatives of
the parties are unable to reach agreement with respect to the
final Closing Statement, the parties shall submit their
dispute to a firm of independent certified public accountants
of recognized standing in the motel industry (the
"Accountants"), and the determinations of such firm shall be
conclusive on all parties hereto. Any cost associated with
retention of the Accountants shall be borne equally by the
Sellers and the Buyers.
5.13. Bills and Invoices Subsequent to Closing Date. Sellers agree
that, with regard to any of the accounts payable referred to
in Section 5.5, taxes and other assessments referred to in
Section 5.6, utility and service contracts in Section 5.7
and contractual obligations provided for in Section 5.8, for
which Sellers are responsible, Sellers agree to pay in the
ordinary course of business. In the event that Buyers
receive an invoice or bill for amounts which are the Sellers'
obligations hereunder, Buyers shall forward such invoices
and bills to Sellers and Sellers agree to pay such amounts.
5.14. MURJAC and Group IV Other Assets and Liabilities. With regard
to Group IV or MURJAC, ShoLodge, Inc. shall (i) distribute
any cash deposits, undistributed cash profits, cash
equivalents, but excluding petty cash (which is being
purchased by the applicable Buyer in accordance with Section
1.14 hereof) which are not escrowed for payment or security
for payment of the debt represented by those certain Revenue
Appreciation Payment and Principal Repayment Bonds due April
16, 2001 (the "MURJAC Bonds"), and (ii) pay or cause to be
paid or discharged in full any and all of MURJAC's or Group
IV's liabilities, obligations, costs or expenses of any kind
or nature of the Stock Sale Companies including accrued but
unpaid federal and state income, franchise and sales tax
liabilities as well as any and all liability resulting to
Group IV or MURJAC from the 338(h)(10) election referred to
in Section 8.25 hereof except for the MURJAC Bonds and the
Motel Contracts to be assumed by the applicable Buyer
relating to the Stock Sale Motels and any other matters
described in Schedule 8.26 or Section 8.26.1 or on the
financial statements delivered to the applicable Buyer.
6. Title Examination. Title Examination will be conducted as follows:
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6.1. Sellers' Title Evidence. Sellers shall, within 10 days after
the date of this Agreement, furnish the following
(collectively the "Title Evidence") to Buyers: (a) a
commitment ("Title Commitment") for an ALTA Form B Owner's
Policy of Title Insurance from the Title Company committing
to insure title to the Real Property in the amount of the
Purchase Price allocated to each Motel as set forth on
Schedule 2, issued by a Title Company; and (b) if the Real
Property is abstract property, Sellers shall also deliver to
Buyers an Abstract of Title to the Real Property certified to
a current date to include all appropriate judgment and
bankruptcy searches (Seller shall execute at closing
customary affidavits to allow the Title Company to delete
standard exceptions).
6.2. Survey, UCC Searches and Affirmative Insurance. Buyers shall
obtain, as a condition of the acquisition of any Motel, at
Buyers' cost and expense: (a) an ALTA as-built survey
prepared by a registered land surveyor and certified to
Buyers and Buyers' lender, if any, showing the Real Property
and location of all buildings and easements thereon and such
other information and containing such matters as Buyers or
Buyers' lender shall reasonably request; and (b) UCC
searches against Sellers by name, local and Secretary of
State, and the covering of the Property, the results of which
shall be satisfactory to Buyers in Buyers' sole discretion;
(c) insurance from the Title Company committing to delete
the standard exceptions and providing affirmative insurance
regarding zoning, contingency, appurtenant easements and such
other matters as may be identified by Buyers.
6.3. Buyers' Objections. On or before the Closing Date, Buyers will
make written objections ("Objections") to the form and/or
contents of the Title Evidence. Buyers' failure to make
Objections within such time period will constitute waiver of
Objections. Any matter shown on such Title Evidence and not
objected to by Buyers shall be a "Permitted Encumbrance"
hereunder. Sellers shall use their best efforts to correct
any Objections on or before a date ten (10) days after the
receipt by the Seller of such objection and, in such event,
the Closing Date with respect to such Motel shall be extended
as necessary to allow the applicable Seller to satisfy such
Objection. To the extent an Objection or any matter related
to survey, UCC searches, and affirmative insurance referred
to in Section 6.2 can be satisfied by the payment of money,
Buyers shall have the right to apply a portion of the cash
payable to Sellers at the closing up to a maximum of $25,000
per Motel to satisfaction of such Objection, and the amount
so applied shall reduce the amount of cash payable to
Sellers at the Closing. If (i) the Objections are not cured
on or before the Closing Date, or (ii) if the survey or UCC
searches referred to in Section 6.2 are not acceptable to
Buyer in Buyer's sole discretion or the Buyer cannot obtain
the affirmative insurance referred to in Section 6.2, then,
in such event, Buyers will have the option to do any of the
following:
6.3.1. Terminate this Agreement with respect to the Motel
that is the subject of the Objection and to reduce
the Purchase Price accordingly; or/and
6.3.2. Withhold from the Purchase Price an amount which, in
the reasonable judgment of the Title Company, is
sufficient to assure cure of the Objections or allow
the Buyer to obtain an adequate survey or
satisfactory UCC searches
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or to obtain the affirmative insurance coverages all
as described in Section 6.2 up to a maximum amount of
$25,000 per Motel. Any amount so withheld will be
placed in escrow with the Title Company, pending such
cure. If Sellers do not cure such Objections within
sixty (60) days after such escrow is established,
Buyers may then cure such Objections and charge the
costs against the escrowed amount. The parties agree
to execute and deliver such documents as may be
reasonably required by the Title Company, and Sellers
agree to pay the charges of the Title Company to
create and administer the escrow; or
6.3.3. Waive the objections and proceed to close.
7. Actions and Operations Pending Closing. Sellers agree that from the
date hereof through Closing Date:
7.1. The Motels will continue to be operated and maintained
substantially in accordance with Sellers' present standards.
7.2. Sellers will maintain in effect policies of casualty and
liability insurance, or similar policies of insurance, with
the same limits of coverage which they carry with respect to
each Motel and the Property located therein and thereon.
7.3. Sellers will not dispose of any of the Property, except for
personal property, fixtures and Consumables, as the case may
be, disposed of and replaced in the ordinary course of
business.
7.4. Except in the ordinary course of business, Sellers will not
enter into or modify, without Buyers' written consent, which
shall not be unreasonably withheld, delayed or conditioned,
any contracts or leases arising out of, or related to, the
Property including, without limitation, the Ground Leases.
8. Representations and Warranties. ShoLodge, for itself, represents and
warrants to the applicable Buyer as follows:
8.1. Existence; Authority. Each Seller is duly organized, and, if
applicable, qualified and in good standing under the laws of
the state under which it is organized and is qualified under
the state laws where it conducts its business and is required
to so qualify, and has the requisite power and authority to
enter into and perform this Agreement and Sellers' Closing
Documents to which it is a party; such documents have been
duly authorized by all necessary action; such documents are
valid and binding obligations of each Seller, and are
enforceable in accordance with their terms, except for laws
relating to bankruptcy insolvency and creditors' rights
generally.
8.2. Ground Leases. Attached hereto as Schedule 1.1.b. is a
complete listing of all Ground Leases affecting the Real
Property. Each applicable Seller has made available to the
applicable Buyer a correct and complete copy of each Ground
Lease and all its amendments. The Ground Leases are in full
force and neither Sellers, nor
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landlord, are in default in any material respect under the
Ground Leases. Other than the Ground Leases and the Leases,
there are no other ground leases or possessory rights of
others regarding the Real Property.
8.3. Leases. Attached here to as Schedule 1.1.c. is a complete
listing of all Leases affecting the Real Property. Seller has
made available to the applicable Buyer a correct copy of each
Lease and all its amendments. The Leases are in full force and
neither Seller, nor lessee, is in default under the Leases in
any material respect. Other than the Ground Leases and the
Leases, there are no other leases or possessory rights of
others regarding the Real Property.
8.4. Motel Contracts. Attached to this Agreement as Schedule 8.4
is a true and correct listing of all Motel Contracts,
identified by Motel site which are not terminable with 60
days or less notice solely at Buyers' discretion (with no
liability resulting to Buyers therefrom). The applicable
Seller has made available to the applicable Buyer a correct
and complete copy of each Motel Contract and its amendments
which will survive a Closing hereunder.
8.5. Personal Property and Operating Equipment. The Sellers own the
Personal Property and Operating Equipment free and clear of
any and all liens, claims, encumbrances, security interests
or other rights in favor of any third party. None of the
Personal Property or the Operating Equipment is the subject
of any conditional sales agreement, title retention agreement
or deferred payment arrangement secured by chattel mortgage,
security agreement or otherwise which will survive closing
hereunder except as specifically identified and set forth in
Schedule 8.5.
8.6. Materialman's Liens. No action has been taken, suffered or
permitted by or on behalf of Sellers, the effect of which
would be to establish or cause the inception or priority of
any mechanic's or materialman's lien, statutory,
constitutional, common law, or otherwise, or other lien,
charge or encumbrance upon any of the Motels or the Property,
or any part thereof or interest therein. No lien or lien
claims, choate or inchoate, arising from the action of
Sellers exist or, as of the date of this Agreement, can exist
for the benefit of mechanic's or materialman's with regard
to the Property and no such lien will be created as a result
of the Sellers' completion of the physical improvements set
forth in Section 10.1 hereof.
8.7. Notice of Repairs. To ShoLodge's best knowledge no notice has
been received from any insurance company that has issued an
insurance policy with respect to any portion of the Motels
or from any board of fire underwriters (or other body
exercising similar functions), claiming any defects or
deficiency or requiring the performance of any repairs,
replacements, alterations or other work. To ShoLodge's best
knowledge there are no outstanding orders of repair or
notices of violation against the Motels or business conducted
thereon from any city, county, state, federal or other
governmental agency or regulatory body.
8.8. Zoning Compliance. To ShoLodge's best knowledge no zoning,
building, fire or similar law, ordinance, code, order,
regulation or restriction is, or as of the Closing will be,
violated by the continued maintenance, operation or use of
any of the Motels
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as currently maintained, operated and used. To ShoLodge's best
knowledge, no written notice of any violation of such laws has
been issued by any governmental authority having jurisdiction
over the Motels.
8.9. Operations. To ShoLodge's best knowledge, Sellers have
received no notice of actual or threatened cancellation or
suspension of any utility services or certificate of occupancy
for any portion of the Real Property. To ShoLodge's best
knowledge the Property is and has been used in compliance with
all governmental permits. To ShoLodge's best knowledge, all
necessary permits have been obtained and are in full force and
effect and no default exists thereunder.
8.10. Environmental Laws. To ShoLodge's best knowledge, no toxic or
hazardous substances or wastes, pollutants or contaminants
(including, without limitation, asbestos, urea formaldehyde,
the group of organic compounds known as polychlorinated
biphenyls, petroleum products including gasoline, fuel oil,
crude oil and various constituents of such products, and any
hazardous substance as defined in any state, local or federal
law, regulation, rule, policy or order relating to the
protection of the environment) (collectively, "Hazardous
Substances") have been generated, treated, stored, transferred
from, released or disposed of, or otherwise placed, deposited
in or located on the Property in violation of applicable
law, nor to ShoLodge's best knowledge has any activity been
undertaken on the Property which would cause or contribute
to the Property becoming a treatment, storage or disposal
facility within the meaning of and in violation of, and state,
local or federal law, regulation, rule, policy or order
relating to the protection of the environment. To ShoLodge's
best knowledge, there has been no discharge, release or
threatened release of Hazardous Substances from the Property
in violation of applicable law. To ShoLodge's best knowledge,
there are no Hazardous Substances or conditions in or on the
Property that may support a claim or cause of action under
any state, local or federal law, regulation, rule, policy or
order relating to the protection of the environment. To
ShoLodge's best knowledge, the Property is not now, and
never has been, listed on any list of sites contaminated
with Hazardous Substances, nor to ShoLodge's best knowledge
used as landfill, dump, disposal or storage site for
Hazardous Substances.
8.11. Sellers' Defaults. Sellers are is not in default concerning
any of their obligations or liabilities regarding the
Property which would become a liability for the Buyers
hereunder.
8.12. Operating Statements. The operating statements for each
Motel Property for the period from January 1, 1995 to current
year-to-date through June 14, 1998, that have been supplied by
the applicable Seller to the applicable Buyer are correct and
complete in all material respects and have been prepared in
accordance with generally accepted accounting standards.
8.13. FIRPTA Law. No Seller is a "foreign person", "foreign
partnership", "foreign trust" or "foreign estate", as those
terms are defined in Section 1445 of the Internal Revenue
Code.
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8.14. Proceedings. To ShoLodge's best knowledge, there is no
action, litigation, investigation, condemnation or proceeding
of any kind pending or threatened against any Seller or any
portion of the Property owned by any Seller which would impose
liability on Buyers.
8.15. Condition. To ShoLodge's best knowledge the buildings,
structures and improvements included within the Property are
structurally sound and in good repair, and to ShoLodge's best
knowledge all mechanical, electrical, heating, air
conditioning, drainage, sewer, water and plumbing systems are
in proper working order.
8.16. Wells and Individual Sewage Treatment Systems. To ShoLodge's
best knowledge, no wells or individual sewage treatment
systems exist on the Property.
8.17. Storage Tanks. To ShoLodge's best knowledge, no above ground
or underground tanks are located in or about the Property,
or have been located under, in or about the Property and
have subsequently been removed or filled. To ShoLodge's best
knowledge the extent storage tanks exist on or under the
Real Property, such storage tanks have been duly registered
with all appropriate regulatory and governmental bodies, and
otherwise are in compliance with applicable federal, state
and local statutes, regulations, ordinances and other
regulatory requirements.
8.18. Reports. Sellers have delivered to Buyers copies of all
environmental reports and studies relating to the Property
which are in the possession of Sellers.
8.19. No Conflict or Lien. Neither the execution or delivery of this
Agreement nor the consummation of the transaction as
contemplated herein will conflict with or result in a breach
of any contract, to which any Seller is a party or by which
any of its property is bound, or constitute a default
thereunder or, except as contemplated herein, result in the
creation of any lien or encumbrance upon the Property.
8.20. No Proceedings. To ShoLodge's best knowledge no legal or
administrative proceeding is threatened or pending against any
Seller which would adversely affect its right to convey the
Property owned by any Seller to the applicable Buyer as
contemplated in this Agreement.
8.21. Utilities. To ShoLodge's best knowledge, water, gas,
telephone, electricity and storm sewer utilities are currently
available on the Property and are sufficient to satisfy the
current needs of each Motel.
8.22. Private Restrictions. To ShoLodge's best knowledge there are
no private restrictions that prohibit or adversely, affect
the current uses of the Real Property.
8.23. Capital Structure (Stock Sale Motels). The authorized capital
stock of Group IV consists of 100,000 shares of common
stock, $1.00 par value per share, of which 1,000 shares are
issued and outstanding. Group IV does not have any
outstanding subscriptions, warrants, options, calls or
commitments relating to its capital stock and no obligations
or securities convertible into or exchangeable for common
stock. All
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outstanding shares of common stock are validly issued, full
paid, not assessable and free of preemptive rights.
8.24. No Violation. Neither the execution and delivery by Sellers of
this Agreement nor the consummation of the transaction
contemplated hereby nor compliance by Sellers with any of
the provisions hereof will:
8.24.1. Violate or conflict with any provisions of a Seller's
organizational documents (i.e., its Charter or Bylaws
or its Partnership Agreement, or Certificate of
Limited Partnership, as applicable);
8.24.2. Violate or constitute a default under or give rise to
any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of
any agreement or instrument to which a Seller is a
party and which will be a continuing obligation of a
Buyer after Closing or by which a Seller or any of the
Property is bound, except as has been duly and validly
waived, consented to or approved by the other parties
to such agreement or instrument;
8.24.3. Result in the creation or imposition of any security
interest, lien or other encumbrance upon any of the
Property under any agreement or commitment to which a
Seller is a party or by which a Seller is bound or to
which any of the Property is subject; or violate any
statute or law or any judgment, order, decree,
regulation or rule of any court or governmental
authority applicable to any of the Property.
8.25. 338 Election. With regard to the sale of the Stock, ShoLodge,
Inc. (and/or Group IV with respect to MURJAC) agrees to make
a joint election with the applicable Buyer pursuant to
Section 338(h)(10) of the Internal Revenue Code of 1986 with
respect to Group IV and MURJAC in such a manner that the
assets of Group IV and MURJAC shall receive a step-up in
basis accorded under Section 338(b).
8.26. Loans-Stock Sale Motels. Schedule 8.26 attached hereto fully
describes all including accrued but unpaid federal, state or
local income or franchiser tax liability, outstanding loans,
liabilities or other evidences of indebtedness which Group
IV and MURJAC is a party which will remain outstanding after
the Closing Date.
8.26.1. Claims, Contingent Liabilities. Schedule 8.26.1 lists
all of the contracts and agreements to which the
Stock Sale Companies are a party and are currently in
force and effect and lists all contingent
liabilities, and claims or suits outstanding or
threatened against the Stock Sale Companies.
8.27. Employee Benefit Plans. Representation. Specific to Seller's
of Stock Sale Motels.
8.27.1. Qualified Plans.
8.27.1.1. Welfare Benefit Plans. Except as set
forth on Schedule 8.27, neither Group IV
nor MURJAC maintains any "employee
welfare benefit plans" (as defined in
Section 3(1) of the Employee Retirement
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Income Security Act of 1974 ("ERISA")) or
makes any contributions to such plans,
including any multi-employer welfare plans
(such employee welfare benefit plans
hereinafter collectively referred to as the
"Welfare Benefit Plans").
8.27.1.2. Pension Benefit Plans. Except as set forth
on Schedule 8.27, neither Group IV nor
MURJAC maintains any "employee pension
benefit plans" (as defined in Section 3(2)
of ERISA and not exempted under Section 4(b)
or 201 of ERISA) or makes any contributions
to or is required to make any contributions
to such plans, including but not limited to
any pension plans (whether defined benefit,
money purchase or target benefit), profit
sharing plans, stock bonus plans, employee
stock ownership plans, 401(k) plans,
employer pension plans, annuity plans and
other qualified deferred compensation plans,
and including any multi-employer pension
plans (such employee pension benefit plans
hereinafter collectively referred to as the
"Pension Benefit Plans").
8.27.1.3. Non-Qualified Plans. Except as set forth in
Schedule 8.27, neither Group IV nor MURJAC
is a party to and does not maintain,
contribute to or have any other obligations
under any plan (including but not limited to
health insurance, life insurance, disability
insurance, deferred compensation,
contractual death benefits or stock option)
exempt from the requirements of ERISA,
including vesting, participation and/or
funding requirements, and not qualified
under the Internal Revenue Code of 1986, as
amended.
8.27.1.4. General Plan Representations. To ShoLodge's
best knowledge, there are no pending legal
actions or arbitration proceedings with
respect to any qualified or non-qualified
plan of Group IV or MURJAC or which may in
any way affect such plans.
8.27.1.5. Specific Representations. To ShoLodge's best
knowledge, all of the Welfare Benefit Plans
and Pension Benefit Plans of Group IV and
MURJAC have and do comply with applicable
law, have been administered in compliance
with applicable law, have had no funding
deficiencies and have participated in no
prohibited transactions. Except as set forth
in Schedule 8.27, neither Group IV nor
MURJAC has any Welfare Benefit Plans or
Employee Pension Plans that require a
contribution either during the present
fiscal year or that will require future
contributions. All corporation
contributions to such plans are purely
discretionary and no commitment has been
given to anyone to make any contributions
during this fiscal year or later fiscal
years.
8.28. Compliance with Law Specific to Sellers of the Stock Sale
Motels. Group IV and MURJAC have heretofore complied,
substantially and in good faith, with all applicable
federal, state and local laws, regulations, orders and
guidelines relating to
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their business, including, without limitation, employment,
wages, hours, working conditions and collective bargaining
agreements of the their employees, all laws relating to
withholding proper and accurate amounts from their employees'
pay and all other laws, regulations and orders applicable to
the business, except in cases where failure to so comply would
not have a material adverse effect on the business or
financial condition of Group IV or MURJAC. Group IV and MURJAC
have not received notice of any violation of any environmental
or zoning laws, building, fire or other regulatory laws,
statutes, ordinances or regulations relating to their
property. Group IV and MURJAC have all permits and licenses
from governmental authorities required to conduct their
business as now conducted.
8.29. Title to Stock. ShoLodge owns 1,000 shares of the common
stock of Group IV which constitutes all of the issued and
outstanding capital stock of Group IV, and at the Closing Date
the applicable Buyer will own such stock free and clear of any
and all security interests, liens, encumbrances, restrictions,
claims or other defects in title, except as contemplated in
this Agreement.
8.30. Representations and Warranties Limited. Other than as
expressly stated above, neither ShoLodge nor the Sellers make
any representation or warranty of any kind or nature with
respect to the Property or otherwise. Other than the
representations and warranties set forth herein, Buyers agree
that the Property is to be sold as-is where-is with all
faults, if any. Further, whenever any representation or
warranty is limited "to ShoLodge's best knowledge" or words of
similar effect, the representation or warranty is made to the
actual present, conscious awareness of the current executive
officers of ShoLodge.
8.31. Indemnification. Subject to the limitations set forth herein,
ShoLodge will indemnify the applicable Buyer, its successors
and assigns, against, and will hold the applicable Buyer,
its successors and assigns, harmless from, any expenses or
damages, including reasonable attorneys' fees, that the
applicable Buyer incurs because of the breach of any of the
above representations and warranties. The foregoing
representations and warranties shall survive the closing for
a period of two (2) years or six (6) years with respect to
any matter related to a federal, state or local income
franchise, or sales tax liability of the Stock Sale
Companies and, with respect to claims made or suits filed
within such period, thereafter until all claims of Buyers
for which ShoLodge has received written notice within the
time period described above and all suits filed by Buyers
within the time period described above have been resolved,
at which time all of such representations and warranties
shall be merged into the closing documents.
9. Representations and Warranties of Buyers. Each Buyer, for itself,
hereby represents and warrants to the applicable Seller as follows
(which such representations and warranties will survive Closing):
9.1. Due Organization. Each Buyer is a limited liability company,
duly organized, validly existing and in good standing
under the laws of the State of Ohio.
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9.2. Authority. This Agreement, the Purchase Money Notes, the
Purchase Money Mortgages, the Pledge Agreement, the FF&E
Assignments and all other documents which evidence or secure
the Purchase Money Loan or are executed pursuant to this
Agreement are valid and binding agreements of the Buyers
enforceable against the Buyers in accordance with their terms,
except to the extent enforcement thereof is limited by
bankruptcy, insolvency or laws of similar impact. Each Buyer
is acting as principal in this transaction with authority to
close the transaction.
10. Additional Covenants. In addition, the parties agree as follows:
10.1. Physical Improvements to Motels. On or before the Closing
Date, or as soon thereafter as possible, Sellers', at their
expense, shall cause the construction of the physical
improvements to the Motels as set forth and identified on
the attached Schedule 10.1.
10.2. Books and Records. The transfer contemplated hereby includes
the books and records of Sellers pertaining strictly to the
business of and located at the Motels. Buyers covenant and
agree that such books and records will remain in the Motels
or at Buyers' offices for examination and audit by Sellers
and their agents after the Closing as provided in this
section. Books and records not pertaining strictly to the
business of the Motels may be removed by Sellers within a
reasonable time after the Closing Date. Buyers agree to
preserve all books and records, files and correspondence,
and not destroy or dispose of the same, for at least three
(3) years following the Closing Date. Buyers agree to
provide Sellers and their representatives access to such
books, records, files and correspondence at all reasonable
times upon reasonable notice to Buyers and provided Sellers'
access does not unreasonably interfere with the continued
operation of the Motels in the ordinary course of business.
10.3. Safe Deposits. If applicable, prior to the Closing Date,
Sellers shall send written notice to guests or tenants or
other persons who have safe deposit boxes at the Motels,
advising of the sale contemplated by this Agreement and
requesting removal of the contents thereof prior to the
Closing Date or the removal thereof and concurrent re-deposit
of such contents on the Closing Date pursuant to new safe
deposit agreements with Buyers (MURJAC as to the Stock Sale
Motels). Sellers shall have a representative present when the
boxes are opened, in the presence of a representative of the
Buyers. On the Closing Date, Sellers shall cause the delivery
to Buyers of all keys to the safe deposit boxes at the Motels
not at the time in use by guests at the property or other
depositors, all receipts and agreements relating to all safe
deposit boxes and a complete lists of safe deposit boxes in
use at the Motels, which list shall contain the name and room
number of each depositor. Should the depositors wish to
continue the use of a safe deposit box, arrangements
satisfactory to the applicable Buyer, in its sole discretion,
shall be made for such continued use with a representative
selected by the applicable Buyer. The applicable Seller shall
be responsible to the applicable Buyer for depositors who are
using said safe deposit boxes and do not respond to the
written notice for verification or who so resend, but do not
enter into a written agreement with the applicable Buyer
(MURJAC as to the Stock Sale Motels), and the applicable
Seller agrees to indemnify and hold the
29
<PAGE> 30
applicable Buyer harmless against any damages, including
attorney's fees, arising out of any claim with respect to any
depositor not executing a new agreement with such Buyer
(MURJAC as to the Stock Sale Motels).
10.4. Confidentiality Agreement. Buyers acknowledge that certain
Confidentiality Agreement dated May 29, 1998 between
ShoLodge and Paramount Financial Group (the "Confidentiality
Agreement"), and Buyers hereby agree to be bound by all of
the terms and provisions thereof as if the Confidentiality
Agreement had been signed by each Buyer as "Recipient"
thereunder. Buyers further acknowledge and agree that the
terms and provisions of the Confidentiality Agreement, as
assumed by Buyers pursuant to the preceding sentence, shall
survive any termination of this Purchase Agreement. No Buyer
shall make any public pronouncements, issue any press
releases, or otherwise publicly disseminate information
concerning the execution of this Agreement or the closing of
the transaction contemplated herein without the prior and
express written consent of ShoLodge.
10.5. Hart-Scott-Rodino Act. If it shall be determined that the
transaction contemplated by this Agreement is subject to the
reporting requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 15 U.S.C 18(a) (1976) (the "Hart
Act"), then each party shall forthwith proceed to make the
necessary filings, and take all other action necessary to
comply with the Hart Act and the rules and regulations
thereunder. Buyers shall pay the filing fee required to be
paid in connection with such filing. If the requirements of
this Section 10.5 have not been fulfilled before the Closing
Date the parties may extend the Closing, but not more than
thirty (30) days. If such requirements have been fulfilled
prior to the expiration of such thirty (30) day period,
Sellers and Buyers, if said party has performed its
obligations under this Section 10.5 in good faith, may
terminate this Agreement by notice furnished to the other
party, in which event the Earnest Money shall be disbursed
as provided in Section 2.1.
10.6. Motel Contracts. Buyers shall assume all Motel Contracts
set forth in Schedule 8.4 plus all other contracts affecting
the Motels which are terminable with 60 days or less notice
solely at Buyers' option (with no liability resulting to
Buyers from such termination).
10.7. Personal Property. Each applicable Seller agrees to discharge
or repay in its entirety any debt, loan, liability or
financing outstanding with regard to any item of personal
property or fixtures located at the Motels and owned (or
leased by) the Seller.
11. Casualty; Condemnation. With respect to each Motel, if all or any
part of a Motel is substantially damaged by fire, casualty, the
elements or any other cause, the applicable Seller shall immediately
give notice to the applicable Buyer, and the applicable Buyer shall
have the right to remove the Motel stated in the notice from this
Agreement by giving notice within thirty (30) days after such notice
from the applicable Seller. If the applicable Buyer shall fail to give
the notice, then the parties shall proceed to Closing, and the
applicable Seller shall assign to the applicable Buyer all rights to
insurance proceeds resulting from such event. If eminent domain
proceedings are threatened or commenced against all or any part of a
Motel, the applicable Seller shall immediately give notice to the
applicable Buyer,
30
<PAGE> 31
and the applicable Buyer shall have the right to remove the Motel
stated in the notice from this Agreement by giving notice within thirty
(30) days after notice from the applicable Seller. If the applicable
Buyer shall fail to give the notice, then the parties shall proceed to
Closing, and the applicable Seller shall assign to the applicable Buyer
all rights to appear in and receive any award from such proceedings.
The right of Buyers to remove from this Agreement a specific Motel
shall be subject to the provisions of Section 3.21 such that if such
right has been previously exercised with respect to four (4) Motels
Buyers thereafter shall only be entitled to terminate this Agreement in
its entirely.
12. Employees. Sellers shall make the general manager and sales director of
each Motel available to Buyers for interviews commencing at least two
weeks prior to the expected Closing Date of July 30, 1998. Buyers
shall have the continuing right during said period to review all
employment records and files of the general manager and sales director
of each Motel, and the right to have representatives on the Property
for such purposes up to and including the Closing Date or date of
termination of this Agreement, whichever occurs first. Buyers
acknowledges that (i) all employees working at or in connection the
Motels are employees of Sellers (MURJAC, in the case of the Stock Sale
Motels), and (ii) prior to the consummation of the Closing, Buyers
shall have no rights whatsoever in connection with the hiring or
discharge of said employees. Sellers covenant and agree to terminate
the employment of any and all employees at the Asset Sale Motels
effective as of the Closing Date. Sellers shall provide Buyers with a
statement of the termination notice period, if any, required to be
given to any terminated employee at the Asset Sale Motels pursuant to
any applicable employment agreements or collective bargaining
agreements. Any employees' wages, sick pay, vacation pay, bonuses,
social security taxes and other payroll taxes, workman's compensation
insurance, contributions due in respect of pension, profit sharing
and/or welfare plans, and other fringe benefits, if any, with respect
to any employees at the Asset Sale Motels, for periods prior to
Closing shall be the responsibility of Sellers. Sellers shall indemnify
and defend Buyers from and against any and all claims, causes of
action, proceedings, judgments, damages, penalties and liabilities
made, assessed or rendered against Buyers and any costs and expenses
(including attorney's fees and disbursements) incurred by Buyers with
respect to claims, causes of action, judgments, damages, penalties and
liabilities asserted by any of the employees of Sellers at the Asset
Motels with respect to the period prior to Closing, including, without
limitation, claims under the Federal Worker Adjustment And Retraining
Notification Act, 29 U.S.C. Sections 2101-2109 for all the Asset
Motels. Buyers agree that they will rehire all of the property level
employees except those identified on Schedule 12. Further, Buyers
shall be under no obligation to rehire the director of sales and
general managers at any Asset Motel.
13. Broker's Commission. Sellers and Buyers represent to each other that
they have dealt with no brokers, finders or the like in connection
with this transaction, and agree to indemnify and hold each other
harmless from all claims, damages, costs or expenses of or for any
such fees or commissions resulting from their actions or agreements
regarding the execution or performance of this Agreement, and will pay
all costs of defending any action or lawsuit brought to recover any
such fees or commissions incurred by the other party, including
reasonable attorneys' fees.
14. Indemnification by Buyers. Buyers shall defend, indemnify and hold
Sellers harmless from and against any loss, cost, damage and expense,
including judgments and reasonable
31
<PAGE> 32
attorneys' fees, which may be suffered or incurred by Sellers by reason
of (1) any amount due for any liability of Buyers relating to a third
party claim for breach of contract incurred or attributable to the
operation or ownership of the Motels on or after the Closing Date, or
(ii) for any amount due for any liability of Buyers relating to a third
party claim for tort liability incurred or attributable to the
operation or ownership of the Motels on or after the Closing Date.
15. Assignment. Neither party may assign its rights under this Agreement
before or after the Closing without the consent of the other party.
Any such assignment will not relieve such assigning party of its
obligations under this Agreement.
16. Survival. Except as limited in Section 8.31 above, all of the terms
of this Agreement and warranties and representations herein contained
shall survive and be enforceable after the Closing.
17. Notices. Any notice required or permitted hereunder shall be given
by personal delivery upon an authorized representative of a party
hereto; or if mailed in a sealed wrapper by United States registered or
certified mail, return receipt requested, postage prepaid; or if
transmitted by facsimile copy followed by mailed notice; or if
deposited cost paid with a nationally recognized, reputable overnight
courier, properly addressed as follows:
If to Buyers: Paramount Hospitality Group, LLC
1967 Newark-Granville Road
P.O. Box 496
Granville, OH 43023
Attn: Michael Menzer
Fax:(614) 587-4626
With Copy to: Winthrop & Weinstine, P.A.
3000 Dain Rauscher Plaza
Sixty South Sixth Street
Minneapolis, Minnesota 55402
Attn: Todd B. Urness, Esq.
Fax #: (612) 347-0600
If to Sellers: ShoLodge, Inc.
130 Maple Drive North
Hendersonville, Tennessee 37075
Attn: Leon Moore
Fax #: (615) 264-1758
With Copy to: Boult, Cummings, Conners & Berry PLC
414 Union Street, Suite 1600
P.O. Box 198062
Nashville, TN 37219
Attn: Patrick L. Alexander
Fax #: (615) 252-6362
32
<PAGE> 33
Notices shall be deemed effective on the earlier of the date of receipt
or the date of deposit, as aforesaid; provided, however, that if
notice is given by deposit, the time for response to any notice by the
other party shall commence to run one business day after any such
deposit. Any party may change its address for the service of notice by
giving notice of such change 10 days prior to the effective date of
such change.
18. Miscellaneous. The paragraph headings or captions appearing in this
Agreement are for convenience only, are not a part of this Agreement,
and are not to be considered in interpreting this Agreement. This
written Agreement constitutes the complete agreement between the
parties and supersedes any prior oral or written agreements between the
parties regarding the Property. There are no verbal agreements that
change this Agreement, and no waiver of any of its terms will be
effective unless in a writing executed by the party so waiving. This
Agreement binds and benefits the parties and their successors and
permitted assigns.
19. Withdrawal of Offer. This Agreement shall be deemed to be withdrawn,
unless accepted by Sellers, and a fully executed counterpart of this
Agreement returned to Buyers on or before July 24, 1998.
(Signatures on next page.)
33
<PAGE> 34
Sellers and Buyers have executed this Agreement as of the date first written
above.
<TABLE>
<CAPTION>
SELLERS: BUYERS:
-------- -------
<S> <C>
MOBAT, Inc., a Tennessee corporation Capitol Lithia Springs, LLC, an Ohio limited
liability company
By: /s/ Bob Marlowe
Its: Secretary and Treasurer By: /s/ Michael J. Menzer
Its: President
Delaware Inns, Inc., a Tennessee corporation Capitol Newark, LLC, an Ohio limited liability
company
By: /s/ Leon Moore
Its: President By: /s/ Michael J. Menzer
Its: President
Carolina Inns, Inc., a Tennessee corporation
Capitol Greensboro, LLC, an Ohio limited
By: /s/ Leon Moore liability company
Its: President
By: /s/ Michael J. Menzer
Its: President
Shoney's Inn, Inc., a Tennessee corporation
Capitol Gallatin, LLC, an Ohio limited liability
By: /s/ Leon Moore company
Its: President
By: /s/ Michael J. Menzer
Its: President
Sunshine Inns, Inc., a Tennessee corporation
Capitol Pensacola, LLC, an Ohio limited liability
By: /s/ Leon Moore company
Its: President
By: /s/ Michael J. Menzer
Its: President
Capitol Tallahassee, LLC, an Ohio limited
liability company
By: /s/ Michael J. Menzer
Its: President
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C>
Shoney's Inn of Independence, a Tennessee general Capitol Independence, LLC, an Ohio limited
partnership liability company
By: Two Seventeen, Inc.,
a Tennessee corporation, a general partner By: /s/ Michael J. Menzer
Its: President
By: /s/ Leon Moore
Its: President
Capitol Lafayette, LLC, an Ohio limited liability
By: Inn Partners, Inc., company
a Tennessee corporation, a general partner
By: /s/ Michael J. Menzer
By: /s/ Leon Moore Its: President
Its: President
LAFLA Inn, Inc., a Tennessee corporation
Capitol Tuscaloosa, LLC, an Ohio limited
By: /s/ Leon Moore liability company
Its: President
By: /s/ Michael J. Menzer
Its: President
Alabama Lodging Corporation, a Tennessee
corporation Capitol Demonbreun, LLC, an Ohio limited
liability company
By: /s/ Leon Moore
Its: President By: /s/ Michael J. Menzer
Its: President
Demonbreun Hotel Associates, Ltd., a Tennessee
limited partnership Capitol Baton Rouge, LLC, an Ohio limited
By: Inn Partners, Inc., a Tennessee coporation, a liability company
general partner
By: /s/ Michael J. Menzer
By: /s/ Leon Moore Its: President
Its: President
By: ShoLodge, Inc., a Tennessee corporation, Capitol New Orleans, LLC, an Ohio limited
a general partner liability company
By: /s/ Leon Moore By: /s/ Michael J. Menzer
Its: President Its: President
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C>
Shoney's Inn of Baton Rouge, a Tennessee general
partnership Capitol Music Valley, LLC, an Ohio limited
By: Two Seventeen, Inc., liability company
a Tennessee corporation, a general partner
By: /s/ Michael J. Menzer
By: /s/ Leon Moore Its: President
Its: President
By: Inn Partners, Inc.,
a Tennessee corporation, a general partner
By: /s/ Leon Moore
Its: President
Capitol Bossier City, LLC, an Ohio limited
Shoney's Inns of New Orleans, Ltd., liability company
a Tennessee limited partnership
By: ShoLodge, Inc., a Tennessee corporation, By: /s/ Michael J. Menzer
Managing General Partner Its: President
By: /s/ Leon Moore
Its: President
Shoney's Inn of Music Valley, Ltd., CAPITOL MURJACK, Inc., an Ohio corporation
a Tennessee limited partnership
By: ShoLodge, Inc., a Tennessee corporation, its By: /s/ Michael J. Menzer
only general partner Its: President
By: /s/ Leon Moore
Its: President
Shoney's Inn of Bossier City, Ltd.,
a Tennessee limited partnership
By ShoLodge, Inc., a Tennessee corporation,
Managing General Partner
By: /s/ Leon Moore
Its: President
ShoLodge, Inc., a Tennessee corporation
By: /s/ Leon Moore
Its: President
</TABLE>
36
<PAGE> 37
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
SCHEDULE 1.1.A. Real Property Legal Descriptions
SCHEDULE 1.1.B. List of Ground Leases (Seller as Lessee), identified by Property
SCHEDULE 1.1.C. Leases (Seller as Lessor), identified by Property
SCHEDULE 1.3 Asset Motels (14 properties)
SCHEDULE 1.4 Stock Sale Motels (2 properties)
SCHEDULE 2 Allocation of Purchase Price and Purchase Money Loan
SCHEDULE 4.1.22 Franchise License Agreement - Royalty fee as percentage of gross sales
SCHEDULE 4.1.29 Affidavit to and Certification of Liabilities, Obligations, and Debts of
Group IV and MURJACK
SCHEDULE 4.5 Outstanding Tax Exempt Bonds/Bond Financing
SCHEDULE 8.4 List of all Motel Contracts, identified by Property
SCHEDULE 8.5 Personal Property and Operating Equipment subject to or secured by
security agreement(s) of any kind and manner
SCHEDULE 8.26 Stock Sale Company Loans - Equipment Financings
SCHEDULE 8.26.1 Stock Sale, Contingent Contracts and Agreements
SCHEDULE 8.27 Employee Benefit Plans (Group IV and MURJAC)
Welfare Benefit Plans
Pension Benefit Plans
Non-Qualified Plans
General Plan Representations
Specific Representations
SCHEDULE 10.1 Improvements
SCHEDULE 12 Employees not rehired by Buyer
EXHIBIT A Sellers
EXHIBIT B Buyers
</TABLE>
37
<PAGE> 38
EXHIBIT A
SELLERS
<TABLE>
<CAPTION>
FEE OWNERSHIP
SELLER MOTEL PROPERTIES
------ ----------------
<S> <C>
1. MOBAT, Inc., a Tennessee corporation Douglasville (Lithia Springs), Douglas County, Georgia
2. Delaware Inns, Inc., a Tennessee corporation Newark, New Castle County, Delaware
3. Carolina Inns, Inc., a Tennessee corporation Greensboro, Guiford County, North Carolina
4. ShoLodge, Inc., a Tennessee corporation Ridgeland (Jackson), Madison County, Mississippi
*Stock Sale*
5. Sunshine Inns, Inc., a Tennessee corporation Pensacola, Escambia County, Florida
6. ShoLodge, Inc., a Tennessee corporation Murfreesboro, Rutherford County, Tennessee
*Stock Sale*
7. Shoney's Inn of Independence, Independence, Jackson County, Missouri
a Tennessee general partnership
8. LAFLA Inn, Inc., a Tennessee corporation Lafayette, Lafayette Parish, Louisiana
9. Shoney's Inn, Inc. a Tennessee corporation Gallatin, Sumner County, Tennessee
10. Demonbreun Hotel Associates, Ltd., Nashville, Davidson County, Tennessee (Demonbreun Street)
a Tennessee limited partnership
11. Shoney's Inn of Baton Rouge, Baton Rouge, East Baton Rouge Parish, Louisiana
a Tennessee general partnership
12. Alabama Lodging Corporation Tuscaloosa, Tuscaloosa County, Alabama
LEASEHOLD INTEREST
SELLER MOTEL PROPERTIES
------ ----------------
13. Shoney's Inns of New Orleans, Ltd., Metairie (New Orleans), Jefferson Parish, Louisiana
a Tennessee limited partnership
14. Sunshine Inns, Inc., Tallahassee, Leon County, Florida
a Tennessee corporation
15. Shoney's Inn of Music Valley, Ltd., Nashville, Davidson County, Tennessee
a Tennessee limited partnership (Music Valley Drive)
</TABLE>
38
<PAGE> 39
<TABLE>
<CAPTION>
FEE AND SUBLEASEHOLD INTEREST
SELLER MOTEL PROPERTIES
------ ----------------
<S> <C>
16. Shoney's Inn of Bossier City, Ltd., Bossier City, Bossier Parish, Louisiana
a Tennessee limited partnership
</TABLE>
39
<PAGE> 40
EXHIBIT B
BUYERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
BUYERS PROPERTY LOCATION
- -------------------------------------------------------------------------------------------------------
<S> <C>
Capitol Lithia Springs, LLC, an Ohio limited Douglasville (Lithia Springs), Douglas County,
liability company Georgia
- -------------------------------------------------------------------------------------------------------
Capitol Newark, LLC, an Ohio limited liability Newark, New Castle County, Delaware
company
- -------------------------------------------------------------------------------------------------------
Capitol Greensboro, LLC, an Ohio limited liability Greenboro, Guilford County, North Carolina
company
- -------------------------------------------------------------------------------------------------------
CAPITOL MURJACK, Inc., an Ohio corporation Ridgeland (Jackson), Madison County,
Mississippi
[stock purchase]
- -------------------------------------------------------------------------------------------------------
Capitol Pensacola, LLC, an Ohio limited liability Pensacola, Escambia County, Florida
company
- -------------------------------------------------------------------------------------------------------
CAPITOL MURJACK, Inc., an Ohio corporation Murfreesboro, Rutherford County, Tennessee
[stock purchase]
- -------------------------------------------------------------------------------------------------------
Capitol Independence, LLC, an Ohio limited Independence, Jackson County, Missouri
liability company
- -------------------------------------------------------------------------------------------------------
Capitol Lafayette, LLC, an Ohio limited liability LaFayette, LaFayette Parish, Louisiana
company
- -------------------------------------------------------------------------------------------------------
Capitol Gallatin, LLC, an Ohio limited liability Gallatin, Sumner County, Tennessee
company
- -------------------------------------------------------------------------------------------------------
Capitol Demonbreun, LLC, an Ohio limited Nashville, Davidson County, Tennessee
liability company
- -------------------------------------------------------------------------------------------------------
Capitol Baton Rouge, LLC, an Ohio limited Baton Rouge, East Baton Rouge County,
liability company Louisiana
- -------------------------------------------------------------------------------------------------------
Capitol Tuscaloosa, LLC, an Ohio limited liability Tuscaloosa, Tuscaloosa County, Alabama
company
- -------------------------------------------------------------------------------------------------------
Capitol New Orleans, LLC, an Ohio limited Metarie (New Orleans), Jefferson Parish,
liability company Louisiana
- -------------------------------------------------------------------------------------------------------
Capitol Tallahassee, LLC, an Ohio limited liability Tallahassee, Leon County, Florida
company
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
BUYERS PROPERTY LOCATION
- -------------------------------------------------------------------------------------------------------
<S> <C>
Capitol Music Valley, LLC, an Ohio limited Nashville (Music Valley Drive), Davidson
liability company County, Tennessee
- -------------------------------------------------------------------------------------------------------
Capitol Bossier City, LLC, an Ohio limited Bossier City, Bossier Parish, Louisiana
liability company
- -------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO MOTEL PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO MOTEL PURCHASE AGREEMENT (the
"Amendment") is made as of July 30, 1998, by and among the parties set forth on
the attached Exhibit A (referred to herein individually as "Seller" and
collectively as "Sellers"), and the parties set forth on Exhibit B (referred to
herein individually as "Buyer" and collectively as "Buyers").
W I T N E S S E T H:
WHEREAS, Sellers and Buyers are parties to that certain Motel
Purchase Agreement (the "Agreement") dated as of July 22, 1998; and
WHEREAS, Sellers and Buyers desire to modify and amend the
Agreement in certain respects as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Sellers and Buyers
agree as follows:
1. Section 2.3.1 of the Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
2.3.1. Terms. The Purchase Money Loan shall be for a
term of five (5) years from the Closing Date. During the first
twenty-four (24) months subsequent to the Closing Date,
monthly payments of interest only on the outstanding principal
balance of the Purchase Money Notes shall be due thereunder.
On the second anniversary date thereof (the "Amortization
Commencement") the then outstanding principal balance of the
Purchase Money Loan shall be amortized over a 25-year term
with level monthly payments of principal and interest until
the maturity date at which date all principal plus any accrued
but unpaid interest shall be due and payable. Payments on the
Purchase Money Loan shall be subject to adjustment as provided
in Section 2.3.5. Notwithstanding the foregoing, the Purchase
Money Note with respect to the Nashville, Tennessee (Music
Valley Drive) Motel shall mature on March 15, 1999.
2. Section 2.3.2 of the Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
2.3.2. Rate. During the first twelve (12) month
period subsequent to the Closing Date, the Purchase Money Loan
shall bear interest at a rate of 8% (interest only) computed
on the then outstanding principal balance of the Purchase
Money Notes. From and after the first anniversary date of the
Closing Date (the "Initial
<PAGE> 2
Rate Adjustment Date"), the Purchase Money Notes shall bear
interest at a rate equal to the "Index" plus the Base Rate and
subject to a floor and a ceiling as described herein. For
purposes of this paragraph the Index shall be the spread
between 8 1/2% and the rate on U.S. Treasury bills with five
(5) year maturities on the Initial Rate Adjustment Date. The
"Base Rate" shall be equal to the rate on five (5) year U.S.
Treasury bills on the Initial Rate Adjustment Date. On each
anniversary date of the Initial Rate Adjustment Date, the Base
Rate shall be adjusted to the rate on U.S. Treasury bills with
five (5) year maturities on such date and the monthly payments
during the next twelve (12) month period shall be determined
based upon the then applicable aggregate interest rate over
the remaining amortization period. Notwithstanding anything
contained herein to the contrary, the total interest rate in
any one year shall not be adjusted (up or down) by an amount
greater than 100 basis points nor more than 200 basis points
total from the Initial Rate Adjustment Date to the maturity
date.
3. Section 3.22 of the Agreement is hereby amended by adding
at the end thereof a new Section 3.22.5 as follows:
3.22.5. Consent to Assumption of Bonds. The
applicable Seller shall have received the consent of First
Union National Bank and Wachovia Bank of North Carolina, N.A.
to the assumption by the applicable Buyer of the obligations
of the applicable Seller with respect to the Bonds (as defined
in Section 4.5 hereof) and the granting of the Purchase Money
Mortgages with respect to the Asset Motels financed by the
Bonds as contemplated in this Agreement.
4. Section 4.2 of the Agreement is hereby amended by adding at
the end thereof a new Section 4.2.9 as follows:
4.2.9. Assumption Documents. An assumption by the
applicable Buyer of all obligations of the applicable Seller
relating to the Bonds and the documents executed by the
applicable Buyer in connection therewith.
5. Section 4.5 of the Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
4.5. Bond Financings. The applicable Sellers and the
applicable Buyers acknowledge the existence of certain series
of tax exempt bonds outstanding with respect to the Motels as
disclosed on Schedule 4.5 attached hereto (the "Bonds"). The
applicable Sellers acknowledge the desire of the applicable
Buyers to maintain such tax exempt financing in place and, in
an effort to accomplish this desire, the applicable Sellers
and the applicable Buyers agree as follows:
- 2 -
<PAGE> 3
4.5.1. Cash Escrow. The Sellers identified
in Schedule 4.5.1 attached hereto shall deliver to
the issuer of the credit enhancement for the
applicable Bonds as escrow agent (each an "Escrow
Agent") immediately available funds on the Closing
Date in the respective amounts as specified on
Schedule 4.5.1. Such amounts shall be held by the
Escrow Agent in escrow pursuant to a separate
agreement for each Asset Motel financed with the
Bonds, such escrow agreements to be entered into at
Closing and to incorporate the applicable provisions
of this Section 4.5. Such funds shall be invested as
directed by mutual agreement of the applicable
Sellers and the applicable Buyers, as specified on
Schedule 4.5.1 hereto, or if they are unable to
agree, in a money market investment, with the
earnings to be disbursed as set forth herein. Such
funds shall not be invested at a yield in excess of
the yield on the applicable Bonds unless an opinion
of Bond Counsel is delivered to the applicable
Sellers stating that investment at a yield in excess
of the yield on the applicable Bonds will not cause
such Bonds to lose their tax exempt status.
4.5.2. Term of Escrow. Except with respect
to disbursements to make principal and interest
payments on the Bonds as described in Section 4.5.3
below and as otherwise provided in Section 4.5.4
below, the funds deposited with the Escrow Agent
pursuant to Section 4.5.1 above shall be held in
escrow until the earlier of (i) March 15, 1999, or
(ii) August 31, 1998 unless on or prior to such date
the applicable Seller, ShoLodge and, if applicable,
Shoney's, Inc., and all of their affiliates, are
released from any and all liability with respect to
such Bonds and the documents executed in connection
therewith, including, without limitation, the
reimbursement obligation to the issuer of the credit
enhancement securing such Bonds, or (iii) the
refinancing of the applicable Bonds so that (A) the
applicable Seller, ShoLodge and, if applicable,
Shoney's Inc., and all their affiliates, have been
released as set forth in part (ii) and (B) either (x)
the Purchase Money Mortgage given with respect to
such Asset Motel is a first priority mortgage lien on
such Asset Motel, or (y) the Purchase Money Note
delivered with respect to such Asset Motel is paid in
full. The applicable Seller and/or ShoLodge shall
have the exclusive right until August 17, 1998 to
obtain the release as contemplated in part (ii) and
part (iii)(A) of the immediately preceding sentence.
In the event that such release has not been obtained
on or before August 17, 1998, the applicable Buyer
shall have the right to attempt to obtain such
release, and, in such regard, the applicable Buyer
shall be entitled to pledge, as security for the new
letter of credit provider, the escrowed funds
referred to in Section 4.5.1. Should such release be
obtained on or before August 31, 1998 in accordance
with part (ii) of the third preceding sentence and
should such Bonds be
- 3 -
<PAGE> 4
refinanced in accordance with part (iii) of the third
preceding sentence on or before March 15, 1999, the
then remaining principal portion of the funds held in
escrow with respect to such Asset Motel and all
undisbursed investment earnings thereon shall be
disbursed to the Buyer reflected on Schedule 4.5.1.
In the event that such release is not obtained on or
before August 31, 1998 in accordance with part (ii)
of the fourth preceding sentence or in the event that
such refinancing of the applicable Bonds does not
occur in accordance with part (iii) of the fourth
preceding sentence on or before March 15, 1999, the
remaining principal portion of the escrow funds with
respect to such Asset Motel and all undisbursed
investment earnings thereon shall be disbursed
directly to the trustee for the applicable Bonds for
the redemption and payment in full the principal of,
and interest on, such Bonds on the earliest
redemption date thereafter or, if applicable, to the
issuer of any credit enhancement securing such Bonds
to reimburse such issuer for the payment of the
principal of, and interest on, such Bonds made by
such credit enhancer. All interest due and payable
upon the redemption of such Bonds and not paid from
the disbursement of investment earnings described in
the preceding sentence shall be paid by the
applicable Buyer. Any remaining undisbursed
investment earnings after payment in full of such
Bonds shall be disbursed to the applicable Buyer. For
purposes of this Section 4.5.2, "release" shall not
mean the release of any breach of a representation or
warranty then in existence or any then existing
default with respect to a non-monetary obligation.
4.5.3. Principal and Interest Payments. On
the dates as specified in Schedule 4.5.3, an amount
from the escrowed funds as specified in Schedule
4.5.3 shall be disbursed to the trustee for the
applicable Bonds to pay principal payments required
to be made by the applicable Buyer on the Bonds as
specified on such schedule or, if applicable, to the
issuer of any credit enhancement securing such Bonds
to reimburse such issuer for the payment of the
principal of such Bonds made by such credit enhancer.
On each interest payment date with respect to the
Bonds, undisbursed investment earnings shall be
disbursed to the trustee for the applicable Bonds to
pay interest payments required to be made by the
applicable Buyer on the Bonds on such interest
payment date or, if applicable, to the issuer of any
credit enhancement securing such Bonds to reimburse
such issuer for the payment of the interest of such
Bonds made by such credit enhancer. Each applicable
Buyer shall have the right to make directly to the
trustee and/or the credit enhancer payments of
principal or interest on any principal or interest
payment date, in which case the applicable Buyer
shall receive reimbursement from the principal
portion of the escrowed funds or
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<PAGE> 5
undisbursed investment earnings thereon, as
applicable. For purposes of this Section 4.5,
interest shall include letter of credit and
remarketing fees.
4.5.4. Default. Should the applicable Buyer
default in its obligation to make interest payments
on the Bonds and should such default continue for ten
(10) days, the applicable Seller, at its option, may
direct that the remaining principal portion of the
escrow funds and all undisbursed investment earnings
thereon shall be disbursed directly to the trustee
for the Bonds for the redemption and payment in full
of the principal of, and interest on, the Bonds on
the earliest redemption date thereafter or, if
applicable, to the issuer of the credit enhancement
for the Bonds to reimburse such credit enhancer for
the payment of the principal of, and interest on, the
Bonds made by such credit enhancer. All interest due
and payable upon the redemption of the Bonds and not
paid from the disbursement of investment earnings as
described in the preceding sentence shall be paid by
the applicable Buyer. Any remaining undisbursed
investment earnings after payment in full of such
Bonds shall be disbursed to the applicable Buyer.
4.5.5. Assumption of Obligations. The
applicable Buyers shall assume all obligations of the
applicable Sellers with respect to the Bonds and all
documents executed in connection thereof, including
the reimbursement obligation to the issuer of the
credit enhancement securing such Bonds. In connection
with the assumption of the Bonds, ShoLodge and/or the
applicable Sellers represent to the applicable Buyers
that (i) to their best knowledge, there is not an
event of default in existence with respect to the
documents evidencing, securing or governing the Bonds
and no event which would, but for the passage of time
or provision of notice or both constitute an event of
default under such documents. ShoLodge and the
applicable Sellers agree to indemnify and hold the
applicable Buyers harmless from and against any loss,
damage, liability or expense paid or incurred by the
applicable Buyers as a result of any existing breach
of any obligation, undertaking, representation or
warranty by the applicable Seller and/or ShoLodge
under the terms and conditions of any of the
documents or agreements evidencing, securing or
governing the Bonds. Further, ShoLodge and/or the
applicable Sellers acknowledge and agree that certain
of the obligations of the applicable Sellers and/or
ShoLodge under such documents can, by their nature,
only be performed or observed by ShoLodge and/or the
applicable Sellers, including, without limitation,
the obligations under those certain reimbursement
agreements entered into by and between the bank
providing the letter of credit insuring the Bonds and
ShoLodge, and ShoLodge and/or the applicable Sellers
agree to continue to perform or observe such
obligations until such time as the credit enhancement
securing the Bonds has been released or terminated.
The applicable Buyers shall receive a credit from the
applicable Sellers for all
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<PAGE> 6
interest which has accrued but has not yet been paid
with respect to such Bonds, and all interest which
becomes due and payable after Closing shall be paid
by the applicable Buyers. The applicable Sellers
shall receive a credit for all fees paid in advance
with respect to such Bonds after giving effect to the
proration of such fees between the applicable Buyers
and the applicable Sellers until the Closing Date.
4.5.6. Costs. All costs and expenses
incurred in maintaining the Bonds, including, without
limitation, the cost of providing opinions of bond
counsel and the cost of the attorneys for Sellers in
preparing the assumption and escrow documents as
described herein (but not to exceed $7,500) and the
fees and expenses payable to the issuers of the
credit enhancement securing such Bonds to obtain
their consent to the transactions contemplated in
this Section 4.5, and all costs and expenses related
to the refinancing of such Bonds shall be paid by the
applicable Buyers. No such fees and expenses payable
to such issuers of credit enhancement shall be
incurred without the prior written approval of the
applicable Buyer.
4.5.7. Economic Benefit. In the event that
the Bonds, or any portion thereof, are refinanced as
contemplated in this Section 4.5, the "economic
benefit" (as hereinafter defined) of such refinancing
shall be shared one-half (1/2) by the applicable
Sellers as identified on Schedule 4.5.1 and one-half
(1/2) by the applicable Buyers as identified on
Schedule 4.5.2. The "economic benefit" shall be an
amount calculated by multiplying the outstanding
principal amount of the indebtedness or portion
thereof which refinances the Bonds as contemplated in
this Section 4.5 by a percentage equal to the
difference between the interest rate on the
indebtedness or portion thereof which refinances the
Bonds as contemplated in this Section 4.5 and nine
percent (9%). The economic benefit shall be split as
described herein for the period from the date of such
refinancing until the date the indebtedness which
refinances such Bonds (or if applicable, any
subsequent refinancing or refinancings thereof) is
paid in full. The economic benefit payable to the
applicable Sellers as identified on Schedule 4.5.1
shall be paid by the applicable Buyers as identified
on Schedule 4.5.1 monthly in arrears, but the
applicable Buyers shall first be entitled to recoup,
equally out of each party's portion of the economic
benefit, the amount of all costs and expenses
incurred in maintaining the Bonds and in refinancing
the same. The applicable Buyers shall provide the
applicable Sellers an itemized breakdown of all such
costs and expenses immediately upon the closing of
any such refinancing of the Bonds contemplated
herein.
6. The Agreement is hereby amended by deleting the page
attached thereto entitled "SCHEDULES AND EXHIBITS" and substituting in lieu
thereof such page attached to this Amendment.
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<PAGE> 7
7. The Agreement is hereby amended by attaching thereto
Schedule 4.5.1 and Schedule 4.5.3 attached to this Amendment.
8. Except as hereby modified and amended, the Agreement shall
continue in full force and effect.
(signatures on following pages)
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<PAGE> 8
Dated as of the date set forth above.
<TABLE>
<CAPTION>
SELLERS: BUYERS:
-------- -------
<S> <C>
MOBAT, Inc., a Tennessee corporation Capitol Lithia Springs, LLC, an Ohio
limited liability company
By: Capitol Realty I, LLC, its Managing
By: /s/ Bob Marloew Member
-----------------------------------
Its: Secretary
----------------------------------- By: /s/ Michael J. Menzer
-----------------------------------
Michael J. Menzer, a Member
Delaware Inns, Inc., a Tennessee
corporation
Capitol Newark, LLC, an Ohio limited
liability company
By: /s/ Leon Moore
----------------------------------- By: Capitol Realty I, LLC, its Managing
Its: President Member
-----------------------------------
By: /s/ Michael J. Menzer
Carolina Inns, Inc., a Tennessee -----------------------------------
corporation Michael J. Menzer, a Member
By: /s/ Leon Moore Capitol Greensboro, LLC, an Ohio limited
----------------------------------- liability company
Its: President
----------------------------------- By: Capitol Realty I, LLC, its Managing
Member
Shoney's Inn, Inc., a Tennessee
corporation By: /s/ Michael J. Menzer
-----------------------------------
Michael J. Menzer, a Member
By: /s/ Leon Moore
-----------------------------------
Its: President
-----------------------------------
Sunshine Inns, Inc., a Tennessee
corporation
By: /s/ Leon Moore
-----------------------------------
Its: President
-----------------------------------
</TABLE>
- 8 -
<PAGE> 9
<TABLE>
<S> <C>
Shoney's Inn of Independence, a Tennessee Capitol Gallatin, LLC, an Ohio limited
general partnership liability company
By: Two Seventeen, Inc., a Tennessee By: Capitol Realty I, LLC, its Managing
corporation, a general partner Member
By: /s/ Leon Moore
----------------------------------- By: /s/ Michael J. Menzer
Its: President -----------------------------------
----------------------------------- Michael J. Menzer, a Member
By: Inn Partners, Inc., a Tennessee
corporation, a general partner Capitol Pensacola, LLC, an Ohio limited
liability company
By: /s/ Leon Moore
----------------------------------- By: Capitol Realty I, LLC, its Managing
Its: President Member
-----------------------------------
By: /s/ Michael J. Menzer
LAFLA Inn, Inc., a Tennessee corporation -----------------------------------
Michael J. Menzer, a Member
By: /s/ Leon Moore
----------------------------------- Capitol Tallahassee, LLC, an Ohio limited
Its: President liability company
-----------------------------------
By: Capitol Realty I, LLC, its Managing
Member
Alabama Lodging Corporation, a
Tennessee corporation
By: /s/ Michael J. Menzer
-----------------------------------
By: /s/ Leon Moore Michael J. Menzer, a Member
-----------------------------------
Its: President
----------------------------------- Capitol Independence, LLC, an Ohio
limited liability company
Demonbreun Hotel Associates, Ltd., a By: Capitol Realty I, LLC, its Managing
Tennessee limited partnership Member
By: Inn Partners, Inc., a Tennessee
corporation, a general partner By: /s/ Michael J. Menzer
-----------------------------------
By: /s/ Leon Moore Michael J. Menzer, a Member
-----------------------------------
Its: President
-----------------------------------
</TABLE>
- 9 -
<PAGE> 10
<TABLE>
<S> <C>
By: ShoLodge, Inc., a Tennessee Capitol Lafayette, LLC, an Ohio limited
corporation, a general partner liability company
By: /s/ Leon Moore By: Capitol Realty I, LLC, its Managing
----------------------------------- Member
Its: President
-----------------------------------
By: /s/ Michael J. Menzer
-----------------------------------
Shoney's Inn of Baton Rouge, a Tennessee Michael J. Menzer, a Member
general partnership
By: Two Seventeen, Inc., a Tennessee Capitol Tuscaloosa, LLC, an Ohio limited
corporation, a general partner liability company
By: /s/ Leon Moore By: Capitol Realty I, LLC, its Managing
----------------------------------- Member
Its: President
-----------------------------------
By: /s/ Michael J. Menzer
By: Inn Partners, Inc., a Tennessee -----------------------------------
corporation, a general partner Michael J. Menzer, a Member
By: /s/ Leon Moore
----------------------------------- Capitol Demonbreun, LLC, an Ohio
Its: President limited liability company
-----------------------------------
By: Capitol Realty I, LLC, its Managing
Member
Shoney's Inns of New Orleans, Ltd., a
Tennessee limited partnership
By: /s/ Michael J. Menzer
By: ShoLodge, Inc., a Tennessee -----------------------------------
corporation, Managing General Michael J. Menzer, a Member
Partner
By: /s/ Leon Moore Capitol Baton Rouge, LLC, an Ohio
----------------------------------- limited liability company
Its: President
----------------------------------- By: Capitol Realty I, LLC, its Managing
Member
Shoney's Inn of Music Valley, Ltd., a
Tennessee limited partnership By: /s/ Michael J. Menzer
-----------------------------------
By: ShoLodge, Inc., a Tennessee Michael J. Menzer, a Member
corporation, its only general partner
By: /s/ Leon Moore
-----------------------------------
Its: President
-----------------------------------
</TABLE>
- 10 -
<PAGE> 11
<TABLE>
<S> <C>
Shoney's Inn of Bossier City, Ltd., a Capitol New Orleans, LLC, an Ohio
Tennessee limited partnership limited liability company
By: ShoLodge, Inc., a Tennessee By: Capitol Realty I, LLC, its Managing
corporation, Managing General Member
Partner
By: /s/ Leon Moore By: /s/ Michael J. Menzer
----------------------------------- -----------------------------------
Its: President Michael J. Menzer, a Member
-----------------------------------
Capitol Music Valley, LLC, an Ohio
ShoLodge, Inc., a Tennessee corporation limited liability company
By: /s/ Leon Moore By: Capitol Realty I, LLC, its Managing
----------------------------------- Member
Its: President
-----------------------------------
By: /s/ Michael J. Menzer
-----------------------------------
Michael J. Menzer, a Member
Capitol Bossier City, LLC, an Ohio limited
liability company
By: Capitol Realty I, LLC, its Managing
Member
By: /s/ Michael J. Menzer
-----------------------------------
Michael J. Menzer, a Member
CAPITOL MURJACK, Inc., an Ohio
corporation
By: /s/ Michael J. Menzer
-----------------------------------
Its: President
-----------------------------------
</TABLE>
- 11 -
<PAGE> 12
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 1.1.a. Real Property Legal Descriptions
Schedule 1.1.b. List of Ground Leases (Seller as Lessee), identified by Property
Schedule 1.1.c. Leases (Seller as Lessor), identified by Property
Schedule 1.3 Asset Motels (14 properties)
Schedule 1.4 Stock Sale Motels (2 properties)
Schedule 2 Allocation of Purchase Price and Purchase Money Loan
Schedule 4.1.22 Franchise License Agreement - Royalty fee as percentage of gross sales
Schedule 4.5 Outstanding Tax Exempt Bonds/Bond Financing
Schedule 4.5.1. Cash Escrow
Schedule 4.5.3 Bond Principal Payments
Schedule 8.4 List of all Motel Contracts, identified by Property
Schedule 8.5 Personal Property and Operating Equipment subject to or secured by
security agreement(s) of any kind and manner
Schedule 8.26 Stock Sale Company Loans - Equipment Financings
Schedule 8.26.1 Stock Sale, Contingent Contracts and Agreements
Schedule 8.27 Employee Benefit Plans (Group IV and MURJAC)
Schedule 10.1 Improvements
Schedule 12 Employees not rehired by Buyer
EXHIBIT A Sellers
EXHIBIT B Buyers
</TABLE>
<PAGE> 1
EXHIBIT 99.1
Contact: Bob Marlowe
Chief Financial Officer
(615) 264-8000
SHOLODGE ANNOUNCES CONSUMMATION OF THE SALE
OF 16 SHONEY'S INNS FOR $90 MILLION
Hendersonville, Tennessee (September 4, 1998) - ShoLodge, Inc. (Nasdaq/NM:LODG)
today announced that it has completed the sale of 16 of its company-owned
Shoney's Inns (2,051 rooms) to Capitol Lodging Management Corporation (CLMC) of
Granville, Ohio, previously announced on August 3, 1998, for a gross sales price
of $90 million, or $44,000 per room. The sales price consists of $22.5 million
in cash with the balance of $67.5 million in the form of interest-bearing
promissory notes with interest only through July 30, 2000. $7.7 million of the
principal will be due in March 1999, and the remaining $59.8 million will be
payable beginning July 31, 2000, based upon a 25-year amortization schedule with
a final maturity of July 30, 2003. The cash proceeds were used primarily to
reduce indebtedness and for general corporate purposes. CLMC commenced operation
of the inns on August 1, 1998, and escrowed cash of $22.5 million at that time.
ShoLodge has been earning interest on the promissory notes and escrowed cash
effective August 1, 1998. The 16 Shoney's Inns are located in Tennessee (4),
Louisiana (4), Florida (2), Georgia (1), North Carolina (1), Delaware (1),
Alabama (1), Mississippi (1), and Missouri (1). ShoLodge will record an
after-tax gain of approximately $20 million on the sale of the 16 inns in the
third quarter.
Commenting on the transaction, Leon Moore, chief executive
officer of ShoLodge, said, "We are pleased to welcome CLMC as our new and
largest franchisee of Shoney's Inns. All 16 will remain as Shoney's Inns under
license agreements with ShoLodge and will be managed by CLMC. The president of
CLMC, Ronald L. Marcou, is very familiar to us and is well respected throughout
our company and the industry. Ron served as vice president and director of
operations for ShoLodge for nearly ten years until mid-1997, with management
responsibility for all of the company-owned and managed Shoney's Inns, as well
as working with other franchisees.
Ron Marcou commented, "Capitol Lodging is excited about this
opportunity and plans to help ShoLodge further expand the Shoney's Inn chain."
Leon Moore went on to say, "Our plan is to consider additional
opportunities to sell our other 15 company-owned Shoney's Inns, comprising 1,743
rooms, in order to continue our
<PAGE> 2
strategy of owning, developing and operating Sumner Suites and to grow our
Shoney's Inns brand through franchising. There are currently 74 Shoney's Inns
(of which 15 are company-owned) with a total of 7,188 rooms. Another eight
franchised inns are under construction and should be opening this year. Thus far
this year, four company-owned Sumner Suites have opened, and another six are
under construction and should be opening this year."
ShoLodge owns, develops and operates the Sumner Suites brand
of hotels and owns, develops, operates and franchises Shoney's Inns and Shoney's
Inns & Suites.
This press release contains forward-looking statements
relating to certain matters which reflect management's best judgment based on
factors currently known and involve risks and uncertainties. Actual results
could differ materially from the anticipated results or expectations expressed
in the Company's forward-looking statements. Forward-looking information
provided by the Company pursuant to the safe harbor established under the
Private Securities Litigation Reform Act of 1995 should be evaluated in the
context of these factors which are contained in the Company's Securities and
Exchange Commission ("SEC") filings, including its periodic reports filed under
the Securities Exchange Act of 1934, as amended. Copies of these filings are
available upon request from the Company. In addition, the Company disclaims any
intent or obligation to update these forward-looking statements.
###
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