<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 10, 1997
------------------------------------------------
Date of Report (Date of Earliest Event Reported)
EQUITY INNS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
Tennessee O-23290 62-1550848
- ---------------------------- --------------------- -------------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
</TABLE>
4735 Spottswood
Suite 102
Memphis, Tennessee 38117
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(Address of Principal Executive Offices) (Zip Code)
(901) 761-9651
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Consummation of AmeriSuites Hotels Acquisition
On December 10, 1997, Equity Inns Partnership, L.P. (the
"Partnership"), a Tennessee limited partnership of which a wholly-owned
subsidiary of Equity Inns, Inc. (the "Company") serves as the sole general
partner and currently owns an approximate 94.9% general partnership interest,
completed the acquisition of ten AmeriSuite brand all-suites hotels (the
"AmeriSuite Hotels"), with an aggregate of 1,239 rooms in six states, from Prime
Hospitality Corp., a publicly traded hotel corporation ("Prime"). The aggregate
purchase price for the AmeriSuites Hotels was $86,966,000, including the
issuance of 572,847 units of limited partnership interest ("Units") in the
Partnership to Prime, valued at their time of issuance at $8,696,000. The
Company funded the purchase of the AmeriSuites Hotels through a combination of
the net proceeds of the Company's recently completed fourth follow-on offering
of its Common Stock, the above-mentioned issuance of Units, and borrowings under
the Company's $250 million unsecured line of credit.
The AmeriSuites Hotels are located in Flagstaff, Arizona (118 rooms);
Jacksonville, Florida (112 rooms); Miami, Florida (126 rooms); Tampa, Florida
(126 rooms); Indianapolis (Keystone), Indiana (126 rooms); Kansas City (Overland
Park), Kansas (126 rooms); Cincinnati (Blue Ash), Ohio (127 rooms); Cincinnati
(Forest Park), Ohio (126 rooms); Columbus, Ohio (126 rooms); and Richmond,
Virginia (126 rooms). The AmeriSuites Hotels are leased to Caldwell Holding
Corp., a subsidiary of Prime, pursuant to percentage leases providing for rent
payments equal to the greater of (i) fixed base rent ("Base Rent") or (ii)
percentage rent based in part on the revenues of the Hotels ("Percentage Rent").
Base Rent and the revenue threshold amounts for Percentage Rent generally adjust
annually based on changes in the U.S. Consumer Price Index.
The following sets forth (i) the annual Base Rent and (ii) the annual
Percentage Rent formula for each AmeriSuites Hotel:
<TABLE>
<CAPTION>
Annual Annual Percentage
Hotel Base Rent Rent Formula
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Flagstaff, Arizona $604,797 35.7% of room revenue up
to $1,429,598, plus 71.3%
of room revenue in excess
of $1,429,598
Jacksonville, Florida $668,102 38% of room revenue up
to $1,440,612, plus 76%
of room revenue in excess
of $1,440,612
Miami, Florida $1,121,317 38% of room revenue up
to $1,541,385, plus 76%
of room revenue in excess
of $1,541,385
Tampa, Florida $1,094,602 38% of room revenue up
to $1,554,487, plus 76.1%
of room revenue in excess
of $1,554,487
</TABLE>
1
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<TABLE>
<CAPTION>
Annual Annual Percentage
Hotel Base Rent Rent Formula
----- --------- -------------------------
<S> <C> <C>
Indianapolis (Keystone), $772,646 37.6% of room revenue up
Indiana to $1,569,772, plus 75.1%
of room revenue in excess
of $1,569,772
Kansas City (Overland $984,020 37.2% of room revenue up
Park), Kansas to $1,715,252, plus 74.4%
of room revenue in excess
of $1,715,252
Cincinnati (Blue Ash), $783,325 36.5% of room revenue up
Ohio to $1,511,842, plus 72.9%
of room revenue in excess
of $1,511,842
Cincinnati (Forest Park), $696,473 35.9% of room revenue up
Ohio to $1,576,564, plus 71.8%
of room revenue in excess
of $1,576,564
Columbus, Ohio $887,176 37.2% of room revenue up
to $1,762,402, plus 74.4%
of room revenue in excess
of $1,762,402
Richmond, Virginia $1,131,097 38% of room revenue up
to $1,678,389, plus 76.1%
of room revenue in excess
of $1,678,389
</TABLE>
As a part of the Company's agreement with Prime, Prime has granted the
Company, for each of the three years following the closing of the acquisition of
the AmeriSuites Hotels, (i) a right of first offer to purchase all portfolios of
five or more AmeriSuites hotels that Prime decides to sell (provided, however,
that Prime need not offer more than 20 hotels per each year of such three-year
period) and (b) a commitment to offer to sell to the Company not less than five
AmeriSuites hotels during each year of such three-year period.
Pursuant to Rule 3-05 of Regulation S-X, no financial statements are
required to be filed in connection with this Current Report on Form 8-K.
2
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<CAPTION>
ITEM 7. EXHIBITS.
<S> <C> <C>
(a) Financial Statements. No financial statements are required to be filed
hereto, pursuant to Rule 3-05 of Regulation S-X.
(c) Exhibits. The following exhibits required by Item 601 of Regulation
S-K are listed below:
10.1 Amended and Restated Purchase and Sale Agreement between Prime
Hospitality Corp. and Equity Inns Partnership, L.P. dated December 2,
1997.
10.2 Second Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.3 Third Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.4 Fourth Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.5 Form of Percentage Lease Agreement between Equity Inns Partnership,
L.P. as lessor and Caldwell Holding Corp. as Lessee.
</TABLE>
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITY INNS, INC.
(Registrant)
Date: December 19, 1997 By: /s/ Howard A. Silver
- ------------------------ --------------------------
Howard A. Silver, Executive Vice
President, Secretary, Treasurer and
Chief Financial Officer
4
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EXHIBITS
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<CAPTION>
Item
Number Description
- ------ -----------
<S> <C>
10.1 Amended and Restated Purchase and Sale Agreement between Prime
Hospitality Corp. and Equity Inns Partnership, L.P. dated December 2,
1997.
10.2 Second Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.3 Third Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.4 Fourth Purchase and Sale Agreement between Prime Hospitality Corp. and
Equity Inns Partnership, L.P. dated December 2, 1997.
10.5 Form of Percentage Lease Agreement between Equity Inns Partnership,
L.P. as lessor and Caldwell Holding Corp. as Lessee.
</TABLE>
5
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
EQUITY INNS PARTNERSHIP, L.P.,
as Purchaser
December 2, 1997
1. Flagstaff, AZ
2. Cincinnati,
OH/ Forest
Park
3. Jacksonville,
FL
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Page
SECTION 1. DEFINITION.........................................................1
1.2. Agreement..........................................................2
1.3. Allocable Purchase Price...........................................2
1.4. Assets.............................................................2
1.5. Business Day.......................................................2
1.6. Closing............................................................2
1.7. Closing Date.......................................................2
1.8. Code...............................................................2
1.9. Contracts..........................................................2
1.10. Counter-Offer......................................................2
1.11. Defective Property.................................................2
1.12. Deposit............................................................3
1.13. Diligence Notice Letter............................................3
1.14. Documents..........................................................3
1.15. Encumbrance........................................................3
1.16. Escrow Agent.......................................................3
1.17. Escrow Agreement...................................................3
1.18. FF&E...............................................................3
1.19. First Offer Hotels.................................................3
1.20. First Offer Response Period........................................3
1.21. Hotel..............................................................3
1.22. Improvements.......................................................3
1.23. Intangible Property................................................4
1.24. Inventory..........................................................4
1.25. Lease..............................................................4
1.26. LP Agreement.......................................................4
1.27. Option Hotels......................................................4
1.28. Option Response Period.............................................4
1.29. Notice of Sale.....................................................4
1.30. Offer Period.......................................................4
1.31. Option Period......................................................4
1.32. Permitted Encumbrances.............................................5
1.33. Properties.........................................................5
1.34. Purchase Price.....................................................5
1.35. Purchaser..........................................................5
1.36. Real Property......................................................5
1.37. REIT...............................................................5
</TABLE>
(i)
<PAGE>
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Page
1.38. Review Period......................................................5
1.39. Seller.............................................................5
1.40. Seller Group.......................................................5
1.41. Seller's knowledge.................................................5
1.42. Surveys............................................................6
1.43. Tenant.............................................................6
1.44. Title Commitments..................................................6
1.45. Title Company......................................................6
SECTION 2. PURCHASE AND SALE; DILIGENCE.......................................6
2.1. Purchase and Sale..................................................6
2.2. Deposit............................................................6
2.3. Due Diligence......................................................6
2.4. Casualty; Condemnation.............................................7
2.5. Title Matters......................................................8
2.6. Survey Matters.....................................................8
SECTION 3. CLOSING; PURCHASE PRICE............................................8
3.1. Closing............................................................8
3.2. Purchase Price.....................................................9
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE......................9
4.1. Closing Documents..................................................9
4.2. Condition of Properties...........................................11
4.3. Title Policies....................................................11
4.4. Opinions of Counsel...............................................11
4.5. No PIP Requirement at Closing.....................................11
4.6. Representations...................................................11
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE........................11
5.1. Purchase Price....................................................12
5.2. Closing Documents.................................................12
5.3. Opinion of Counsel................................................12
5.4. Representations...................................................12
5.5. Amendment to LP Agreement.........................................12
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER..........................12
6.1. Status and Authority of Seller....................................12
</TABLE>
(ii)
<PAGE>
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Page
6.2. Action of Seller..................................................12
6.3. No Violations of Agreements.......................................13
6.4. Litigation........................................................13
6.5. Existing Leases, Agreements, Etc..................................13
6.6. Utilities, Etc....................................................13
6.7. Compliance With Law...............................................14
6.8. Taxes.............................................................14
6.9. Not A Foreign Person..............................................14
6.10. Hazardous Substances..............................................14
6.11. Insurance.........................................................15
6.12. Ownership.........................................................15
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................16
7.1. Status and Authority of Purchaser.................................16
7.2. Action of Purchaser...............................................16
7.3. No Violations of Agreements.......................................16
7.4. Litigation........................................................16
7.5. No Conflicts......................................................16
7.6. REIT Status, Organization.........................................17
7.7. REIT Filings......................................................17
SECTION 8. COVENANTS OF SELLER AND PURCHASER.................................17
8.1. Covenants of Seller...............................................17
8.2. Covenants of Purchaser............................................18
SECTION 9. CLOSING COSTS.....................................................18
9.1. Closing Costs.....................................................18
SECTION 10. DEFAULT...........................................................18
10.1. Default by Seller.................................................18
10.2. Default by Purchaser..............................................19
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................19
11.1. Right of First Offer..............................................19
11.2. Commitment to Sell................................................21
11.3. General Provisions................................................22
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
SECTION 12. MISCELLANEOUS.....................................................24
12.1. Agreement to Indemnify............................................24
12.2. Brokerage Commissions.............................................25
12.3. Publicity.........................................................25
12.4. Notices...........................................................26
12.5. Waivers, Etc......................................................27
12.6. Assignment; Successors and Assigns................................27
12.7. Severability......................................................28
12.8. Counterparts, Etc.................................................28
12.9. Governing Law.....................................................28
12.10. Performance on Business Days......................................29
12.11. Attorneys' Fees...................................................29
12.12. Section and Other Headings........................................29
12.13. No Oral Modifications.............................................29
12.14. Incorporation by Reference........................................29
</TABLE>
Exhibit A - The Properties
(iv)
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT is made as of the
2nd day of December, 1997, between PRIME HOSPITALITY CORP., a Delaware
corporation ("Seller"), as seller, and Equity Inns Partnership, L.P., a
Tennessee limited partnership ("Purchaser"), as purchaser.
WITNESSETH:
WHEREAS, Seller and Purchaser entered into that certain Purchase and
Sale Agreement (the "Original Agreement"), dated as of September 22, 1997, as
amended by that certain Amendment to Purchase and Sale Agreement (the "First
Amendment"), dated as of November 6, 1997, Second Amendment to Purchase and Sale
Agreement (the "Second Amendment"), dated as of November 10, 1997 and Third
Amendment to Purchase and Sale Agreement (the "Third Amendment"), dated as of
November 19, 1997 (the Original Agreement, as amended by the First Amendment,
the Second Amendment and the Third Amendment, shall hereinafter be referred to
as the "Prior Agreement"), with respect to certain properties more particularly
described therein; and
WHEREAS, Seller and Purchaser desire to amend and restate the Prior
Agreement to exclude certain of the properties which were included therein and
to make certain other modifications more particularly set forth herein; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Properties, subject to and upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Seller and Purchaser hereby
agree that all of the provisions of the Prior Agreement are superseded, amended
and restated to read as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
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<PAGE>
1.1. Affiliate: The term "Affiliate" of an entity shall mean (a) an
entity that, directly or indirectly, controls or is controlled by or is under
common control with such entity, (b) any other entity that owns, beneficially,
directly or indirectly, more than fifty percent (50%) of the outstanding capital
stock, shares or equity interests of such entity, or (c) any officer, director,
employee, partner or trustee of such entity or any person or entity controlling,
controlled by or under common control with such entity (excluding trustees and
entities serving in similar capacities who are not otherwise an Affiliate of
such entities).
1.2. "Agreement" shall mean this Purchase and Sale Agreement, together
with Exhibits A through E attached hereto, as it and they may be amended from
time to time as herein provided.
1.3. "Allocable Purchase Price" shall mean, with respect to any of the
Properties, the applicable amount set forth on Exhibit A hereto.
1.4. "Assets" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts, the Documents, the Improvements
and the Intangible Property owned by Seller in connection with or relating to
such Hotel.
1.5. "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in the State of New York are
authorized by law or executive action to close.
1.6. "Closing" shall have the meaning given such term in
Section 3.1.
1.7. "Closing Date" shall have the meaning given such term in
Section 3.1.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
1.9. "Contracts" shall mean, with respect to any Property, all service
contracts, equipment leases, booking agreements and other arrangements or
agreements to which Seller is a party affecting the ownership, repair,
maintenance, management, leasing or operation of such Property, to the extent
Seller's interest therein is assignable or transferable.
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<PAGE>
1.10. "Counter-Offer" shall have the meaning given such term
in Section 11.1.
1.11. "Defective Property" shall mean any Property which (i) has been
condemned in whole or in part, or (ii) by reason of damage by fire, vandalism,
acts of God or other casualty or cause, has suffered damage such that
expenditures equal to or greater than $500,000 (as such cost is determined by an
architect or engineer selected by Seller and reasonably satisfactory to
Purchaser) shall be required in order to restore such Property into
substantially the same condition as existing prior to such damage.
1.12. "Deposit" shall have the meaning given such term in
Section 2.2.
1.13. "Diligence Notice Letter" shall mean that certain letter, dated
November 6, 1997, from Purchaser to Seller, delivered pursuant to Sections 2.5
and 2.6 of the Original Agreement.
1.14. "Documents" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.15. "Encumbrance" shall have the meaning given such term in
Section 11.3.
1.16. "Escrow Agent" shall mean the Title Company.
1.17. "Escrow Agreement" shall mean that certain Escrow Agreement,
dated as of September 22, 1997, among Purchaser, Seller and Escrow Agent.
1.18. "FF&E " shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by Seller and located in or at, or used exclusively in connection with the
ownership, operation or maintenance of such Property.
1.19. "First Offer Hotels" shall have the meaning given such
term in Section 11.1.
1.20. "First Offer Response Period" shall have the meaning
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<PAGE>
given such term in Section 11.1.
1.21. "Hotel" shall mean each hotel located at the properties
identified on Exhibit A, the legal descriptions of which are set forth on
Exhibits B-1 through B-3.
1.22. "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.23. "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the Contracts, telephone exchange numbers identified
with such Property held by Seller and all other transferable intangible
property, miscellaneous rights, benefits and privileges of any kind or character
with respect to such Property held by Seller, except (a) to the extent held by
or transferred to the Tenant under the Lease and (b) for all trademarks, trade
names, copyrights, patents or technical processes, including, without
limitation, any "AmeriSuites" brand name, logos and designs, owned or used by
Seller with respect to such Property.
1.24. "Inventory " shall mean all inventory located at the Hotels,
including, without limitation, all mattresses, pillows, bed linens, towels,
powder goods, soaps, cleaning supplies and such other supplies, together with
any food inventory such as cereal, breakfast rolls, coffee, which shall be more
particularly described in the schedule of Inventory approved by Purchaser and
delivered at Closing by Seller, and which shall be at a minimum in amounts
sufficient to comply with the requirements of the applicable franchise
agreement.
1.25. "Lease" shall mean, collectively, all of the leases to be entered
into between Purchaser, as landlord, and the Tenant, as tenant, with respect to
each of the Properties, each substantially in the form attached hereto as
Exhibit C.
1.26. "LP Agreement" shall mean that certain Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.,
dated as of June 25, 1997.
-4-
<PAGE>
1.27. "Option Hotels" shall have the meaning given such term
in Section 11.2.
1.28. "Option Response Period" shall have the meaning given
such term in Section 11.2.
1.29. "Notice of Sale" shall have the meaning given such term
in Section 11.2.
1.30. "Offer Period" shall have the meaning given such term
in Section 11.1.
1.31. "Option Period" shall have the meaning given such term
in Section 11.3.
1.32. "Permitted Encumbrances" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with respect
to such Property not yet due and payable or due and payable but not yet
delinquent or as to which adequate reserves are provided therefor; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect the use of such Property as a hotel as
currently operated and constructed; (c) such other nonmonetary encumbrances as
do not, in Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a functioning hotel as
currently operated and constructed; (d) such other nonmonetary encumbrances with
respect to such Property which shall not have been objected to by Purchaser
pursuant to the Diligence Notice Letter; and (e) such exceptions or matters, as
the case may be, otherwise accepted by Purchaser.
1.33. "Properties" shall mean all of the Assets relating to the
properties identified on Exhibit A, the legal descriptions of which are set
forth in Exhibits B-1 through B-3.
1.34. "Purchase Price" shall have the meaning given such term
in Section 3.2.
1.35. "Purchaser" shall have the meaning given such term in
the preamble to this Agreement.
1.36. "Real Property" shall mean the real property described
in the applicable Exhibit B-1 through B-3, together with all
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<PAGE>
easements, rights of way, privileges, licenses and appurtenances which Seller
may now own with respect thereto.
1.37. "REIT" shall mean Equity Inns, Inc.
1.38. "Review Period" shall mean the period which commenced on the date
of the Prior Agreement and expired on November 10, 1997.
1.39. "Seller" shall have the meaning given such term in the
preamble to this Agreement.
1.40. "Seller Group shall mean Seller and any Affiliate of Seller that
is a parent or direct or indirect wholly-owned subsidiary of Seller.
1.41. "Seller's knowledge" shall mean the actual knowledge of
Joseph Bernadino, John M. Elwood, David Simon and Richard
Szymanski.
1.42. "Surveys" shall have the meaning given such term in
Section 2.5.
1.43. "Tenant" shall mean Caldwell Holding Corp., a Delaware
corporation, a wholly-owned subsidiary of Seller.
1.44. "Title Commitments" shall have the meaning given such
term in Section 2.5.
1.45. "Title Company" shall mean Chicago Title Insurance Company or
such other title insurance company or companies as shall have been reasonably
approved by Purchaser and Seller.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1. Purchase and Sale. In consideration of the mutual covenants herein
contained, Purchaser hereby agrees to purchase from Seller, and Seller hereby
agrees to sell to Purchaser, all of Seller's right, title and interest in and to
the Properties for the Purchase Price, subject to and in accordance with the
terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited the sum of $1,308,750
-6-
<PAGE>
(the "Deposit") with the Escrow Agent. The Deposit shall be held in an
interest-bearing account pursuant to the terms of the Escrow Agreement. If this
Agreement shall terminate with respect to all of the Properties pursuant to
Section 10.1, the Deposit, together with all interest accrued thereon, shall be
returned to Purchaser. If this Agreement shall terminate pursuant to Section
10.2, the Deposit, together with all interest accrued thereon, shall be paid to
Seller. If the Closing shall occur, the Deposit shall be credited toward the
Purchase Price, pursuant to Section 3.2, and the interest earned on the Deposit
shall be paid to Purchaser.
2.3. Due Diligence. Any forms of franchise guidelines and franchise
agreements for "AmeriSuites" which Seller shall have provided to Purchaser in
connection with Purchaser's due diligence shall be substantially similar to (i)
the form which Tenant shall enter into in connection with the Closing and (ii)
(subject to any changes made by franchisor to such form on a non-discriminatory
basis) the form to be employed with respect to any First Offer Hotels and Option
Hotels. To the extent that, in connection with its due diligence investigation,
Purchaser, its agents, representatives or contractors, shall have damaged or
disturbed any of the Real Property or the Improvements located thereon,
Purchaser shall return the same to substantially the same condition which
existed immediately prior to such damage or disturbance. In the event that the
transactions contemplated by this Agreement are not closed and consummated for
any reason, Purchaser shall, on request by Seller, deliver to Seller all tests,
reports and inspections of the Property made and conducted by Purchaser or for
its benefit or any other documents or information (including title commitments,
UCC financing statement search reports, title documents, surveys, zoning
reports, environmental audits, structural engineering reports, appraisals and
the like), which Purchaser has received pursuant to this Agreement; provided,
however, that Seller shall reimburse Purchaser's out-of-pocket expenses for any
of the foregoing materials (other than materials delivered by Seller or its
agents or representatives to Purchaser) which it requests that Purchaser so
deliver. Purchaser shall indemnify, defend and hold harmless Seller from and
against any and all expense, loss or damage which Seller may incur as a result
of any act or omission of Purchaser or its representatives, agents or
contractors in connection with such examinations and inspections, other than to
the extent that any expense, loss or damage arises from any gross negligence or
willful misconduct of Seller. The provisions of this
-7-
<PAGE>
Section 2.3 shall survive the termination of this Agreement and the Closing.
2.4. Casualty; Condemnation. (a) If, prior to the Closing, (i) any
Property suffers a casualty or partial condemnation which would cause such
Property to become a Defective Property and (ii) such Property is not, prior to
the Closing, restored to a condition substantially the same as the condition
thereof immediately prior to such casualty or condemnation, either Purchaser or
Seller may, on notice to the other given prior to the Closing Date, terminate
this Agreement with respect to such Defective Property, in which event Purchaser
shall acquire all of the Properties other than such Defective Property, and the
Purchase Price shall be reduced by the Allocable Purchase Price of such
Defective Property. Promptly upon learning of the same, Seller covenants and
agrees to provide Purchaser with prompt written notice of any casualty or
condemnation affecting any Property.
(b) If, prior to the Closing, any Property shall be condemned in its
entirety, this Agreement shall automatically terminate with respect to such
Defective Property, in which event Purchaser shall acquire all of the Properties
other than such Defective Property, and the Purchase Price shall be reduced by
the Allocable Purchase Price of such Defective Property.
(c) If neither Purchaser nor Seller shall elect to terminate this
Agreement with respect to a Defective Property pursuant to Paragraph (a) of this
Section 2.4, Seller agrees (i) in the case of a casualty loss, to assign to
Purchaser at Closing its rights to any insurance proceeds with respect to such
loss, pay over to Purchaser any such proceeds already received and give
Purchaser a credit against the Purchase Price in the amount of any deductible or
uninsured loss, or (ii) in the case of a condemnation, to assign to Purchaser at
Closing its rights to any compensation in connection with such condemnation and
pay over to Purchaser any such compensation already received, and, in either
such event, Purchaser shall acquire such Defective Property as provided herein.
(d) If any Property shall suffer a casualty loss which shall not render
the Property a Defective Property, Seller shall assign to Purchaser at Closing
its rights to any insurance proceeds with respect to such loss, pay over to
Purchaser any such proceeds already received and give Purchaser a credit against
the Purchase
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Price in the amount of any deductible or uninsured loss, and Purchaser shall
acquire such Property as provided herein.
2.5. Title Matters. Purchaser has received from the Title Company a
preliminary title commitment, having an effective date after the date of this
Agreement, for an ALTA (or such other form reasonably approved by Purchaser)
owner's policy of title insurance with respect to each of the Properties,
together with complete and legible copies of all instruments and documents
referred to as exceptions to title (collectively, the "Title Commitments").
Except as set forth on the Diligence Notice Letter, Purchaser acknowledges and
agrees that it does not have any objection to any title exceptions which affect
the Properties.
2.6. Survey Matters. Purchaser has received a survey with respect to
each of the Properties (the "Surveys") by a licensed surveyor in the
jurisdiction in which each such Property is located, which (i) contains an
accurate legal description of the applicable Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting such
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the applicable Property
is located within a 100-year flood plain and (iv) is certified to Purchaser and
the Title Company and such other persons as shall have been requested by
Purchaser or Seller. Except as set forth on the Diligence Notice Letter,
Purchaser acknowledges and agrees that it does not have any objection to any
matter shown on the Surveys.
SECTION 3. CLOSING; PURCHASE PRICE.
3.1. Closing. The purchase and sale of the Properties shall be
consummated at a closing (the "Closing") to be held at the offices of Hunton &
Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136, or at such
other location as Seller and Purchaser may agree, at 10:00 a.m. local time, on
or about December
10, 1997 (the "Closing Date").
3.2. Purchase Price. (a) At the Closing, Purchaser shall pay
to Seller for the Properties a purchase price (the "Purchase Price") in the
amount of $18,430,139 (subject to customary prorations and adjustments), except
that Purchaser shall receive a credit against the Purchase Price in the amount
of the Deposit.
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(b) The Purchase Price shall be payable by wire transfer of immediately
available funds on the Closing Date to an account or accounts to be designated
by Seller prior to the Closing.
(c) Notwithstanding anything to the contrary contained in Section 2.3
hereof or this Section 3.2, if either Seller or Purchaser shall not be ready to
close with respect to one or more Hotels by the Closing Date, the Closing shall
occur as to such Hotels as to which the parties shall agree, and the parties
shall agree as to one or more additional closings of groups of one or more
Hotels until settlement has occurred as to all of the Hotels, provided that
settlement shall have occured as to all of the Hotels no later than December 22,
1997. In the event of more than one Closing, this Agreement shall be deemed a
separate agreement as to each Hotel and, except as otherwise agreed to between
Seller and Purchaser, (a) the Purchase Price for each individual Hotel shall be
the applicable Allocable Purchase Price, and (b) the Deposit for each individual
Hotel shall equal the amount set forth on Exhibit A. In the event of multiple
Closings, the place and manner of Closing shall be as reasonably agreed between
Seller and Purchaser.
(d) The provisions of Sections 3.2(c) and (e) shall survive the
Closing.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Properties on the Closing
Date shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date, which Seller covenants to use commercially
reasonable efforts to fulfill:
4.1. Closing Documents. Seller shall have delivered to Purchaser:
(a) Good and sufficient special warranty deeds, with legal descriptions
based on the deeds by which Seller received title to the Properties, and
quitclaim deeds with legal descriptions based on the Surveys, if the Surveys
indicate any differing legal descriptions, all in forms as shall be customary in
the various jurisdictions in which the Properties are located, with respect to
all of the Properties, in proper statutory form for recording, duly
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executed and acknowledged by Seller, conveying fee simple title to the
applicable Properties, free from all liens and encumbrances other than the
Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller and Purchaser, duly executed and acknowledged
by Seller, with respect to all of Seller's right, title and interest in, to and
under the FF&E, the Documents and the Intangible Property with respect to the
Properties;
(c) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller, Purchaser and Tenant, duly executed and
acknowledged by Seller, to Tenant, with respect to all of Seller's right, title
and interest in, to and under the Inventory and the Contracts, with respect to
the Properties;
(d) Duly executed and acknowledged memoranda of lease, setting forth
the material terms of each Lease, in form and substance reasonably satisfactory
to Seller and Purchaser;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) Duly executed environmental disclosure forms, as and to the extent
required by applicable law;
(g) To the extent the same are in Seller's possession,
original, fully executed copies of all Contracts pertaining to the
Properties;
(h) A duly executed copy of the Lease and all other documents and sums
required to be delivered by Seller and/or the Tenant pursuant thereto;
(i) A duly executed copy of the franchise agreement between the Tenant
and the franchisor with respect to each of the Properties;
(j) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to Seller and the
Tenant;
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(k) an affidavit of Seller in accordance with Section 1445 of the Code
and such documentation as shall be required to comply with the reporting
requirements of Section 1099-S of the Code; and
(l) Such other conveyance documents, certificates, deeds, and other
instruments as may be required by this Agreement or as Purchaser or the Title
Company may reasonably require to effectuate the transactions contemplated
hereunder.
4.2. Condition of Properties. (a) All of the Properties
and all Improvements located thereon shall, except as otherwise
provided in Section 2.3, be in substantially the same physical
condition as on September 22, 1997, ordinary wear and tear
excepted;
(b) No material default or event which with the giving of notice and/or
lapse of time could constitute a material default shall have occurred and be
continuing under any material agreement benefiting or affecting the Properties
in any material respect;
(c) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
Properties which would render any Property a Defective Property; and
(d) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Properties shall be in full
force and effect in all material respects.
4.3. Title Policies. The Title Company shall be prepared, subject only
to payment of the applicable premium, endorsement and related fees and delivery
of all conveyance documents in recordable form, to issue title insurance
policies to Purchaser, in accordance with Section 2.5, together with such
affirmative coverages as Purchaser may reasonably require and shall have been
determined by the Title Company as available prior to the date hereof.
4.4. Opinions of Counsel. Purchaser shall have received a written
opinion from counsel to Seller, in form and substance reasonably satisfactory to
Purchaser and Seller's counsel, regarding the organization and authority of
Seller and Tenant.
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4.5. No PIP Requirement at Closing. There shall be no PIP
requirement imposed by the franchisor in connection with the
Closing.
4.6. Representations. All representations and warranties
made herein by Seller shall be true and correct in all material
respects.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Properties on the Closing Date
to Purchaser is subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, which Purchaser covenants to use
commercially reasonable efforts to fulfill:
5.1. Purchase Price. Purchaser shall deliver to Seller the Purchase
Price, pursuant to Section 3.1.
5.2. Closing Documents. Purchaser shall have delivered to
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1, where applicable;
(b) Certified copies of all charter documents, partnership agreements,
applicable resolutions and certificates of incumbency with respect to Purchaser
and its general partner; and
5.3. Opinion of Counsel. Seller shall have received a written opinion
from counsel to Purchaser, in form and substance reasonably satisfactory to
Seller and Purchaser's counsel, regarding the organization and authority of
Purchaser and the REIT.
5.4. Representations. All representations and warranties
made herein by Purchaser shall be true and correct in all material
respects.
5.5. Amendment to LP Agreement. Purchaser shall have caused Exhibit A
of the LP Agreement to be amended so as to add Seller as a limited partner
listed thereon.
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents and
warrants to Purchaser as follows:
6.1. Status and Authority of Seller. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of its
state of incorporation, and has all requisite power and authority under the laws
of such state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Seller has duly qualified to transact business in each jurisdiction in
which the nature of the business conducted by it requires such qualification,
except where failure to do so could not reasonably be expected to have a
material adverse effect.
6.2. Action of Seller . Seller has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller or Tenant
on or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller or Tenant, as the case may be,
enforceable against Seller or Tenant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
6.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by Seller or of the Lease by Tenant, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon any Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller or Tenant is bound, except pursuant to the Lease or this Agreement.
6.4. Litigation. Neither Seller nor Tenant has received any
written notice of and, to Seller's knowledge, no action or
proceeding is pending or threatened and no investigation looking
toward such an action or proceeding has begun, which (a) questions
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the validity of this Agreement or the Lease or any action taken or to be taken
pursuant hereto, (b) will result in any material adverse change in the business,
operation, affairs or condition of the Properties, taken as a whole, (c) will
result in or subject the Properties to a material liability, or (d) involves
condemnation or eminent domain proceedings against any part of the Properties,
which would render such Property a Defective Property.
6.5. Existing Leases, Agreements, Etc. Other than any agreements
provided to Purchaser prior to the execution of this Agreement and listed on the
schedule attached hereto as Exhibit E, there are no other material agreements
affecting the Properties which will be binding on Purchaser subsequent to the
Closing Date, which Purchaser cannot terminate.
6.6. Utilities, Etc. To Seller's knowledge, all utilities and services
necessary for the use and operation of the Properties (including, without
limitation, road access, gas, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of the Properties and
for their respective intended purposes. To Seller's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Properties.
6.7. Compliance with Law. To Seller's knowledge, except as set forth on
Exhibit D attached hereto, (i) the Properties and the current use and operation
thereof do not violate any material federal, state, municipal and other
governmental statutes, ordinances, by-laws, rules, regulations or any other
legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, subdivision, land use, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof (including liquor license, if required). Except
as disclosed to Purchaser, Seller has not received written notice of any
threatened request, application, proceeding, plan, study or effort which would
materially adversely affect the current use or zoning of any of the Properties
or which would materially adversely modify or realign any adjacent street or
highway.
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6.8. Taxes. To Seller's knowledge, other than the amounts disclosed by
tax bills (copies of which have been delivered by Seller to Purchaser prior to
the execution of this Agreement), no taxes or special assessments of any kind
(special, bond or otherwise) are or have been levied with respect to any of the
Properties, or any portion thereof, which are outstanding or unpaid, other than
amounts not yet due and payable or, if due and payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. Except as set forth on Exhibit D attached
hereto or as described in any environmental report delivered to Purchaser
(including, without limitation, the environmental site assessments set forth on
Exhibit D), to Seller's knowledge, Seller has not stored or disposed of (or
engaged in the business of storing or disposing of) or has released or caused
the release of any hazardous waste, contaminants, oil, radioactive or other
material on any of the Properties, or any portion thereof, the removal of which
is required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to Seller's knowledge, except as set forth on Exhibit D
attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in the ordinary course of a hotel business in accordance with
applicable law.
6.11. Insurance. Seller has not received any written notice from any
insurance carrier of defects or inadequacies in the Properties which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. Ownership. All Assets, Contracts, FF&E, Intangible Property and
Real Property are owned by Seller and are assignable and transferable without
the consent of any third party (or, if any such consent is required, such
consent shall be obtained no later than the Closing), and there are no capital
leases, except as set forth on Exhibit E.
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The representations and warranties made in this Agreement by Seller
shall be deemed remade by Seller as of the Closing Date with the same force and
effect as if made on, and as of, such date.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by Seller, on
Seller's behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real Property,
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
Without negating the covenants, representations and warranties of Seller under
this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Without negating the covenants,
representations and warranties of Seller under this Agreement, Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Properties in their "as is" condition on the
Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller as follows:
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7.1. Status and Authority of Purchaser. Purchaser is a Tennessee
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Tennessee and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a foreign limited partnership in each jurisdiction in which the
nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
Lease, and upon the execution and delivery of any document to be delivered by
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement nor the Lease by Purchaser, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of Purchaser pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Purchaser is bound.
7.4. Litigation. No investigation, action or proceeding is pending and,
to Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
7.5. No Conflicts. Neither the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby by
Purchaser, will conflict with or result in a material breach or violation of, or
constitute a default under the charter, bylaws, certificate of limited
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partnership or LP Agreement, as the case may be, of the REIT or Purchaser; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or Purchaser is a party or to which
they, either of them, any of their respective properties or other assets is
subject; or any applicable material statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to the REIT or
Purchaser.
7.6. REIT Status. The REIT is a "qualified real estate investment
trust" as defined in Section 856 of the Code.
7.7. REIT Filings. The private placement memorandum delivered by
Purchaser to Seller on September 18, 1997 with respect to the REIT does not
include, as of such date, any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
The representations and warranties made in this Agreement by Purchaser
shall be deemed remade by Purchaser as of the Closing Date with the same force
and effect as if made on, and as of, such date.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
Purchaser between the date of this Agreement and the Closing Date
as follows:
(a) Upon learning of any material change in any condition with respect
to any of the Properties or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate each of the Properties
as an "AmeriSuites" hotel, in a good and businesslike fashion consistent with
its past practices and to cause each of the Properties to be maintained in good
working order and condition in a manner consistent with its past practice.
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(c) To provide to Purchaser, promptly upon reasonable request, such
unaudited financial and other information and certifications of Seller with
respect to the Properties as Purchaser may from time to time reasonably request
in order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission.
(d) To deliver to Purchaser the items set forth in Section 4.1 and
Section 4.4.
8.2. Covenants of Purchaser. Purchaser hereby covenants with
Seller on and as of the Closing Date as follows:
(a) To deliver to Seller the items set forth in Section 5.2.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its own
expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, the costs
and expenses of preparing engineering and environment reports, market studies
and appraisals, the cost of the Surveys, Title Commitments, zoning reports, UCC
financing statement search reports, environmental audits, zoning reports,
structural engineering reports, appraisals and the like, whether or not the
transactions contemplated hereby are consummated (but subject, however, to the
provisions of Section 2.3, with respect to items which Purchaser delivers to
Seller at Seller's request). Seller and Purchaser shall each pay 50% of all
state and local sales, transfer, excise, value-added or other similar taxes, and
all recording and filing fees that may be imposed by reason of the sale,
transfer, assignment, delivery and leasing (other than any tax imposed in
connection with the recording of a memorandum of lease, which amounts shall be
paid pursuant to the terms of the applicable Lease) of the Properties.
SECTION 10. DEFAULT.
10.1. Default by Seller. If (a) Seller shall have made any
representation or warranty herein which shall be untrue or
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misleading in any material respect, or (b) Seller shall fail to perform any of
the material covenants and agreements contained herein to be performed by Seller
and such failure continues for a period of ten (10) days after notice thereof
from Purchaser, Purchaser may, (i) sue for specific performance and damages,
(ii) sue for damages without specific performance (with or without terminating
this Agreement and receiving a refund of the Deposit, and all interest thereon)
or (iii) exercise any other right or remedy at law or in equity; provided,
however, that Purchaser shall in no event be entitled to monetary damages in
excess of the amount of the Deposit.
10.2. Default by Purchaser. If (a) Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Purchaser shall fail to perform any of the covenants
and agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from Seller, Seller
may, as its sole and exclusive remedy at law and in equity, terminate this
Agreement. In the event that Seller shall so terminate this Agreement, the
Deposit, together with all interest accrued thereon, shall be retained by
Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall,
except as expressly provided herein, have no further monetary or nonmonetary
obligations hereunder, other than with respect to obligations which expressly
survive the termination hereof (which obligations shall not include the
obligation to purchase the Properties hereunder).
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL.
11.1. Right of First Offer.
(a) If, during the Option Period, any member of the Seller Group
desires to sell any five (5) or more "AmeriSuites" hotels as a group (such group
of hotels being hereinafter collectively referred to as the "First Offer
Hotels"), then before offering the First Offer Hotels for sale to third parties,
Seller shall (i) deliver to Purchaser a notice (an "Offer") setting forth the
price and all material terms and conditions upon which Seller would be willing
to sell the First Offer Hotels, and (ii) shall provide copies of, or reasonable
access to, all due diligence materials with respect to the First Offer Hotels in
Seller's possession or control (including occupancy, ADR and Rev PAR
information,
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financial statements, title policies, title documents, surveys, environmental
audits, zoning reports, income and expense statements, appraisals, operating
agreements, engineering reports, PIPs, Star reports, budgets, litigation reports
and similar materials). Within 30 days following receipt of the Offer (such
30-day period, the "First Offer Response Period"), Purchaser shall by notice to
Seller either (i) accept the Offer, (ii) deliver to Seller a counter-offer (a
"Counter-Offer") setting forth a price and all of the material terms and
conditions upon which Purchaser would be willing to purchase the First Offer
Hotels, or (iii) elect not to accept the Offer or deliver a Counter-Offer. If
Purchaser shall fail to deliver notice of its election pursuant to the foregoing
sentence during the First Offer Response Period, Purchaser shall be deemed
conclusively to have elected not to accept the Offer or deliver a Counter-Offer.
(b) In the event that Purchaser delivers a Counter-Offer, within 10
days thereafter Seller may elect to accept the Counter- Offer by delivering
notice to Purchaser of such election.
(c) In the event that Purchaser does not elect to accept Seller's Offer
or deliver a Counter-Offer, Seller shall be free to offer to sell the First
Offer Hotels during the Offer Period to any and all third parties upon
substantially the same terms and conditions as set forth in the Offer, but at a
price not less than an amount equal to 95% of the purchase price set forth in
the Offer. In the event that Purchaser delivers a Counter-Offer and Seller does
not accept such Counter-Offer, Seller shall be free to offer to sell the First
Offer Hotels during the Offer Period to any and all third parties upon
substantially the same terms and conditions as set forth in the Offer, but at a
price not less than an amount equal to 100% of the purchase price set forth in
the Offer. The "Offer Period" shall mean the period of six months following the
earlier of the date of delivery to Seller of a Counter-Offer or, if none shall
be delivered, the expiration of the First Offer Response Period.
(d) In the event that Purchaser accepts the Offer within the First
Offer Response Period, or in the event that Seller accepts Purchaser's
Counter-Offer within the 10-day period referred to in paragraph (a) of this
Section 11.1, then Purchaser and Seller shall, within 10 days of Purchaser's
acceptance of the Offer or Seller's acceptance of the Counter-Offer, as the case
may be,
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execute and deliver to each other a contract of sale relating to the First Offer
Hotels, which contract of sale shall, to the extent consistent with the terms
and conditions as set forth in the Offer or the Counter-Offer, as the case may
be, incorporate the terms of the Original Agreement, but which shall be modified
as necessary to reflect the price and such terms and conditions set forth in the
Offer or the Counter-Offer. Upon execution of a contract of sale pursuant to the
immediately foregoing sentence, Purchaser shall, simultaneously therewith, pay
the "Deposit" amount required thereunder, which amount shall be held in escrow
pursuant to the terms thereof. Seller shall sell and Purchaser shall purchase
(and, where applicable, Purchaser shall lease to Seller) the First Offer Hotels
in accordance with said contract of sale.
(e) If Purchaser and Seller shall be unable to agree on the terms of a
contract of sale pursuant to, and within the time periods set forth in,
paragraph (d) of this Section 11.1, the parties shall submit such issue to
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association or any successor organization thereto.
(f) In the event that a sale of First Offer Hotels is consummated with
a third party, provided that Seller shall have complied with the requirements
hereof, then this Agreement automatically shall terminate and be of no further
force or effect simultaneously therewith with respect to such First Offer
Hotels.
(g) Purchaser's rights hereunder shall not apply to any foreclosure
sale of any First Offer Hotels, and upon the completion of any such foreclosure
sale, this Agreement automatically shall terminate and be of no further force or
effect simultaneously therewith with respect to such First Offer Hotels, unless
the purchaser at such foreclosure sale is an Affiliate of Seller. No further
instrument or confirmation shall be required with respect to such termination.
(h) Purchaser's rights hereunder shall not apply (i) to any transfer of
Seller's hotel properties, by operation of law, deed or otherwise, to any
parent, affiliate or wholly-owned subsidiary of Seller or to any entity which is
a successor to Seller by way of merger, consolidation or corporate
reorganization or by the purchase of substantially all of the assets,
partnership interests or shares of stock of Seller, but the obligations of this
Section
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<PAGE>
11 shall apply to any successor and Seller shall cause such successor to assume
such obligations.
(i) Seller shall be obligated to offer no more than twenty (20) First
Offer Hotels to Purchaser during each year of the Option Period; provided,
however, that any First Offer Hotels with respect to which Seller shall have
failed to enter into a sales contract (with a Person (as defined in the Lease)
other than Purchaser) during each such year shall not count toward the
aforementioned twenty-hotel minimum.
(j) Seller agrees that it shall not deliberately and in bad faith
structure sales so as to avoid the requirements of this Section 11.1 by selling
five or more hotels to the same purchaser in any one-year period in quantities
of fewer than five hotels per transaction.
11.2. Commitment to Sell.
(a) During each successive 12-month period during the Option Period,
Seller shall offer to sell to Purchaser not fewer than five (5) "AmeriSuites"
hotels, or such lesser number of "AmeriSuites" hotels as shall then be owned by
Seller (any such hotel or hotels being hereinafter collectively referred to as
the "Option Hotels"), by issuance of a notice of sale to Purchaser (the "Notice
of Sale"), pursuant to the terms of this Section 11.2. In connection with the
issuance of a Notice of Sale, Seller shall provide copies of, or reasonable
access to, all due diligence materials with respect to the First Offer Hotels in
Seller's possession or control (including occupancy, ADR and Rev PAR
information, financial statements, title policies, title documents, surveys,
environmental audits, zoning reports, income and expense statements, appraisals,
operating agreements, engineering reports, PIPs, Star reports, budgets,
litigation reports and similar materials).
(b) The Notice of Sale shall set forth the proposed purchase price and
such other reasonable material terms and conditions upon which Seller would be
willing to sell the Option Hotels. Within 30 days following receipt of the
Notice of Sale (such 30-day period, the "Option Response Period"), Purchaser
shall by notice to Seller either (i) agree to purchase the Option Hotels
pursuant to the terms set forth in the Notice of Sale, or (ii)
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<PAGE>
elect not to purchase the Option Hotels. If Purchaser shall fail to deliver
notice of its election pursuant to the foregoing sentence during the Option
Response Period, Purchaser shall be deemed conclusively to have elected not to
purchase the Option Hotels.
(c) In the event that Purchaser elects to purchase the Option Hotels
pursuant to the foregoing paragraph (b) of this Section 11.2, then Purchaser and
Seller shall, within 10 days of Purchaser's election, execute and deliver to
each other a contract of sale relating to the Option Hotels, which contract of
sale shall, to the extent consistent with the terms and conditions as set forth
in the Notice of Sale, incorporate the terms of the Original Agreement, but
which shall be modified as necessary to reflect the price and such terms and
conditions set forth in the Notice of Sale. Upon execution of a contract of sale
pursuant to the immediately foregoing sentence, Purchaser shall, simultaneously
therewith, pay the "Deposit" amount required thereunder, which amount shall be
held in escrow pursuant to the terms thereof. Seller shall sell and Purchaser
shall purchase (and, where applicable, Purchaser shall lease to Seller) the
Option Hotels in accordance with said contract of sale.
(d) Seller and Purchaser shall use reasonable, good faith efforts to
agree upon the terms of the contract of sale pursuant to the foregoing paragraph
(c) of this Section 11.2. If Seller and Purchaser shall be unable to agree on
the terms thereof within 10 days after Purchaser's election to purchase,
Seller's offer and Purchaser's acceptance shall be deemed revoked and
terminated, and Seller shall be deemed to have satisfied its obligations
hereunder with respect to such Option Hotels.
11.3. General Provisions.
(a) Time shall be of the essence as to all periods set
forth in this Section 11.
(b) Any First Offer Hotels offered pursuant to the provisions of
Section 11.1 shall also be deemed Option Hotels for the purpose of satisfying
Seller's obligation to offer hotel properties to Purchaser pursuant to Section
11.2.
(c) Notwithstanding anything to the contrary contained
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<PAGE>
herein, Purchaser's right of first offer and Seller's commitment to sell, as set
forth in Section 11.1(a) and 11.1(b) hereof, shall only apply during the period
commencing on the Closing Date and terminating on the date immediately preceding
the third anniversary thereof (the "Option Period"), and Seller shall have no
obligation to deliver Purchaser an Offer with respect to any hotels other than
during such Option Period, unless Seller has failed to offer Purchaser an
aggregate of 15 Option Hotels, in which event such period shall be extended
until Seller fulfills such requirement (which extension shall not negate any
other rights and remedies which Purchaser may have).
(d) None of the rights created or granted pursuant to this Section 11
shall constitute a lien on any property, and all such rights are, and will at
all times be, subject and subordinate to the lien of all mortgages and other
financing arrangements, except where a member of the Seller Group is the
lender/creditor (including, without limitation, any deed to secure debt, deed of
trust, collateral assignment, or other similar instrument creating a lien or
other encumbrance as security (an "Encumbrance")) which may now or hereafter
encumber or affect Seller's interest in any hotels which it now or hereafter
owns, or any portion thereof, and to all advances, increases, renewals,
modifications, consolidations, extensions, participations and replacements
thereof, irrespective of the time of recording or the priority of the lien of
such mortgage or other Encumbrance, all without the necessity of any further
instrument of subordination.
(e) If Purchaser shall at any time breach its agreement to purchase any
First Offer Hotel or Option Hotel or materially default under any contract of
sale entered into with respect thereto (subject to any applicable notice and
cure period), Purchaser shall thenceforward have no further rights to purchase
hotel properties pursuant to Sections 11.1 or 11.2, and Seller shall have no
further obligations under said Sections. The foregoing provision shall be in
addition to any and all other remedies, including liquidated damages provisions,
that Seller may have under said contracts of sale; provided, however, that
Seller shall have no further remedies, other than as set forth in this Paragraph
(e), with respect to such breach or default.
(f) Where any offer to sell First Offer Hotels pursuant to Section 11.1
or Option Hotels pursuant to Section 11.2 includes, as
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<PAGE>
a term thereof, the right of Seller to lease back the applicable hotel property
from Purchaser, references to the sale thereof in this Section 11 shall be
deemed also to include such an agreement to lease. Unless expressly required in
the applicable Offer or Notice of Sale, Purchaser shall not be obligated to
lease back any First Offer Hotel or Option Hotel purchased by Purchaser to
Seller, Tenant or any other member of the Seller Group. Where a First Offer
Hotel or Option Hotel purchased by Purchaser is not leased back to Seller or
such leaseback or a Lease expires or is terminated, then, so long as Purchaser,
an Affiliate of Purchaser or their purchaser is the owner of such hotel, Seller
shall not unreasonably withhold, delay or condition the issuance of an
"AmeriSuites" franchise agreement from Purchaser, Purchaser's tenant or other
operator upon such franchise terms granted Tenant with respect to the Hotels.
(g) Neither party hereto shall record this Agreement or any memorandum
thereof without the written consent of the other party.
(h) The obligations of Seller under this Section 11 shall apply to any
"AmeriSuites" hotels which any member of the Seller Group owns or which any
member has the right to sell, and Seller shall cause such members of the Seller
Group desiring to sell any "AmeriSuites" or similar hotel to comply with this
Section 11 on the same terms as Seller. Reference to "sell" in this Section 11
shall refer to sale of fee simple title, ground lease, joint venture or similar
arrangements.
(i) Use of the form of the Original Agreement in preparing any
agreement of purchase and sale for a First Offer Hotel or Option Hotel shall
include, without limitation, the terms regarding (i) the Review Period, (ii) a
two-tiered Deposit in the maximum amount of 4.7% of the purchase price as
liquidated damages and (iii) (if applicable) the same form of Lease (excluding
economic and other material terms contained in the applicable Offer or Notice of
Sale); provided, however, that use of the form of the Original Agreement shall
not include (x) the provisions of Section 3.2 thereof with respect to the
payment of a portion of the purchase price with LP Units (as defined therein)
(unless expressly agreed by the parties thereto) or (y) the provisions of
Section 11 hereof.
(j) Notwithstanding anything to the contrary contained
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<PAGE>
herein, Seller shall in no event have any obligation to purchase additional
"AmeriSuites" hotels in order to comply with the requirements to offer hotels to
Purchaser pursuant to the provisions of this Section 11.
(k) The provisions of this Section 11 shall survive the Closing.
SECTION 12. MISCELLANEOUS.
12.1. Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, Seller shall indemnify and hold harmless
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with any Property or
any portion thereof at any time or times prior to the Closing, (y) any
liabilities for taxes due from Seller which shall have accrued prior to the
Closing in connection with any Property and (z) any failure by Seller to comply
with applicable "bulk sale" laws.
(b) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(c) The provisions of this Section 12.1 shall survive the Closing and
the termination of this Agreement.
12.2. Brokerage Commissions. Each of the parties hereto
represents to the other parties that it dealt with no broker,
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<PAGE>
finder or like agent in connection with this Agreement or the transactions
contemplated hereby, other than Merrill Lynch & Co. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
any loss, liability or expense, including, reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by Merrill
Lynch & Co. or any other broker, finder or like agent other than such loss,
liability or expense resulting from Purchaser's breach of its representations
made in this Section 12.2. The provisions of this Section 12.2 shall survive the
Closing and any termination of this Agreement.
12.3. Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except to consultants, advisors, investors, lenders, underwriters
and other parties reasonably necessary to consummate the transactions required
hereby and as required by law or contractual obligations of such parties to
third parties. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof.
12.4. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a
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<PAGE>
notice by telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either received
on a day which is not a Business Day or is required to be delivered on or before
a specific day which is not a Business Day, the day of receipt or required
delivery shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
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<PAGE>
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
12.5. Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
12.6. Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except that, after the Closing, (i) Seller
may assign its surviving rights, if any, under this Agreement to Tenant or an
Affiliate of Seller, and (ii) Purchaser may assign its right to purchase a First
Offer Hotel or an Option Hotel to one or more Affiliates of Purchaser, and
Purchaser may assign its rights and obligations hereunder to an Affiliate of
Purchaser, provided that Purchaser remain liable for its obligations hereunder.
The provisions of this Agreement shall not merge with delivery of the deeds and
shall
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<PAGE>
survive Closing. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement is not intended and shall not
be construed to create any rights in or to be enforceable in any part by any
other persons.
12.7. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12.8. Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
12.9. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of New York
applicable to contracts between residents of the State of New York which are to
be performed entirely within the State of New York, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement
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<PAGE>
occurs, or any cause of action otherwise accrues; or (iv) where any action or
other proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of a jurisdiction other than the State of New
York; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10. Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
12.11. Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
12.12. Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12.13. No Oral Modifications. This Agreement may not be amended, nor
shall any waiver, change, modification, consent or discharge be effected, except
by an instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
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<PAGE>
12.14. Incorporation by Reference. All of the provisions applicable to
the Properties set forth in Paragraph 7 of the First Amendment and Paragraph 2
of the Second Amendment are hereby incorporated by reference as if fully set
forth herein and are ratified and confirmed by Seller and Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ David A. Simon
Its: President
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust,
its general partner
By: /s/ Howard A. Silver
Its:Chief Financial Officer
<PAGE>
Exhibit A
The Properties
<TABLE>
<CAPTION>
Allocable Deposit
Location Purchase Price Radius Restriction Allocation
- -------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
1. Flagstaff, AZ $ 5,169,458 10 miles $436,250
1. Cincinnati, OH/ $ 6,985,218 8 miles--Restricted $436,250
Forest Park radius does not
include the Cincinnati
Riverfront sub market
1. Jacksonville, $ 6,275,463 6 miles-- Restricted $436,250
FL radius does not
include the Deerwood
office and Downtown
sub markets
</TABLE>
<PAGE>
EXHIBIT 10.2
SECOND PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
EQUITY INNS PARTNERSHIP, L.P.,
as Purchaser
December 2, 1997
1. Richmond/
Innsbrook,
VA
2. Tampa, FL
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Page
SECTION 1. DEFINITIONS........................................................1
1.2. Agreement..........................................................2
1.3. Allocable Purchase Price...........................................2
1.4. Assets.............................................................2
1.5. Business Day.......................................................2
1.6. Closing............................................................2
1.7. Closing Date.......................................................2
1.8. Code...............................................................2
1.9. Contracts..........................................................2
1.10. Defective Property.................................................2
1.11. Deposit............................................................2
1.12. Diligence Notice Letter............................................3
1.13. Documents..........................................................3
1.14. Escrow Agent.......................................................3
1.15. Escrow Agreement...................................................3
1.16. FF&E...............................................................3
1.17. Hotel..............................................................3
1.18. Improvements.......................................................3
1.19. Intangible Property................................................3
1.20. Inventory..........................................................3
1.21. Lease..............................................................4
1.22. LP Agreement.......................................................4
1.23. Permitted Encumbrances.............................................4
1.24. Properties.........................................................4
1.25. Purchase Price.....................................................4
1.26. Purchaser..........................................................4
1.27. Real Property......................................................4
1.28. REIT...............................................................5
1.29. Seller.............................................................5
1.30. Seller's knowledge.................................................5
1.31. Surveys............................................................5
1.32. Tenant.............................................................5
1.33. Title Commitments..................................................5
1.34. Title Company......................................................5
SECTION 2. PURCHASE AND SALE; DILIGENCE.......................................5
2.1. Purchase and Sale..................................................5
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
2.2. Deposit............................................................5
2.3. Due Diligence......................................................6
2.4. Casualty; Condemnation.............................................6
2.5. Title Matters......................................................7
2.6. Survey Matters.....................................................7
2.7. Tax Free Exchange..................................................8
SECTION 3. CLOSING; PURCHASE PRICE............................................8
3.1. Closing............................................................8
3.2. Purchase Price.....................................................8
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE......................9
4.1. Closing Documents..................................................9
4.2. Condition of Properties...........................................10
4.3. Title Policies....................................................11
4.4. Opinions of Counsel...............................................11
4.5. No PIP Requirement at Closing.....................................11
4.6. Representations...................................................11
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE........................11
5.1. Purchase Price....................................................11
5.2. Closing Documents.................................................11
5.3. Opinion of Counsel................................................12
5.4. Representations...................................................12
5.5. Amendment to LP Agreement.........................................12
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER..........................12
6.1. Status and Authority of Seller....................................12
6.2. Action of Seller..................................................12
6.3. No Violations of Agreements.......................................12
6.4. Litigation........................................................13
6.5. Existing Leases, Agreements, Etc..................................13
6.6. Utilities, Etc....................................................13
6.7. Compliance With Law...............................................13
6.8. Taxes.............................................................14
6.9. Not A Foreign Person..............................................14
6.10. Hazardous Substances..............................................14
6.11. Insurance.........................................................14
6.12. Ownership.........................................................14
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................15
7.1. Status and Authority of Purchaser.................................15
7.2. Action of Purchaser...............................................16
7.3. No Violations of Agreements.......................................16
7.4. Litigation........................................................16
7.5. No Conflicts......................................................16
7.6. REIT Status, Organization.........................................16
7.7. REIT Filings......................................................17
SECTION 8. COVENANTS OF SELLER AND PURCHASER.................................17
8.1. Covenants of Seller...............................................17
8.2. Covenants of Purchaser............................................17
SECTION 9. CLOSING COSTS.....................................................18
9.1. Closing Costs.....................................................18
SECTION 10. DEFAULT...........................................................18
10.1. Default by Seller.................................................18
10.2. Default by Purchaser..............................................18
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................19
SECTION 12. MISCELLANEOUS.....................................................19
12.1. Agreement to Indemnify............................................19
12.2. Brokerage Commissions.............................................19
12.3. Publicity.........................................................20
12.4. Notices...........................................................20
12.5. Waivers, Etc......................................................22
12.6. Assignment; Successors and Assigns................................22
12.7. Severability......................................................22
12.8. Counterparts, Etc.................................................23
12.9. Governing Law.....................................................23
12.10. Performance on Business Days......................................23
12.11. Attorneys' Fees...................................................23
12.12. Section and Other Headings........................................24
12.13. No Oral Modifications.............................................24
12.14. Incorporation by Reference........................................24
</TABLE>
Exhibit A - The Properties
(iii)
<PAGE>
SECOND PURCHASE AND SALE AGREEMENT
THIS SECOND PURCHASE AND SALE AGREEMENT is made as of the 2nd day of
December, 1997, between PRIME HOSPITALITY CORP., a Delaware corporation
("Seller"), as seller, and Equity Inns Partnership, L.P., a Tennessee limited
partnership ("Purchaser"), as purchaser.
WITNESSETH:
WHEREAS, Seller and Purchaser entered into that certain Purchase and
Sale Agreement (the "Original Agreement"), dated as of September 22, 1997, as
amended by that certain Amendment to Purchase and Sale Agreement (the "First
Amendment"), dated as of November 6, 1997, Second Amendment to Purchase and Sale
Agreement (the "Second Amendment"), dated as of November 10, 1997 and Third
Amendment to Purchase and Sale Agreement (the "Third Amendment"), dated as of
November 19, 1997 (the Original Agreement, as amended by the First Amendment,
the Second Amendment and the Third Amendment, shall hereinafter be referred to
as the "Prior Agreement"), with respect to certain properties more particularly
described therein, which Prior Agreement was amended and restated in its
entirety pursuant to that certain Amended and Restated Purchase and Sale
Agreement (the "Amended Agreement") dated of even date herewith; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, certain hotel properties located in Tampa, Florida and
Richmond, Virginia, subject to and upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Seller and Purchaser hereby
agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1. Affiliate: The term "Affiliate" of an entity shall mean
(a) an entity that, directly or indirectly, controls or is
controlled by or is under common control with such entity, (b) any
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other entity that owns, beneficially, directly or indirectly, more than fifty
percent (50%) of the outstanding capital stock, shares or equity interests of
such entity, or (c) any officer, director, employee, partner or trustee of such
entity or any person or entity controlling, controlled by or under common
control with such entity (excluding trustees and entities serving in similar
capacities who are not otherwise an Affiliate of such entities).
1.2. "Agreement" shall mean this Purchase and Sale Agreement, together
with Exhibits A through E attached hereto, as it and they may be amended from
time to time as herein provided.
1.3. "Allocable Purchase Price" shall mean, with respect to either of
the Properties, the applicable amount set forth on Exhibit A hereto.
1.4. "Assets" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts, the Documents, the Improvements
and the Intangible Property owned by Seller in connection with or relating to
such Hotel.
1.5. "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in the State of New York are
authorized by law or executive action to close.
1.6. "Closing" shall have the meaning given such term in
Section 3.1.
1.7. "Closing Date" shall have the meaning given such term in
Section 3.1.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
1.9. "Contracts" shall mean, with respect to any Property, all service
contracts, equipment leases, booking agreements and other arrangements or
agreements to which Seller is a party affecting the ownership, repair,
maintenance, management, leasing or operation of such Property, to the extent
Seller's interest therein is assignable or transferable.
1.10. "Defective Property" shall mean any Property which (i) has been
condemned in whole or in part, or (ii) by reason of damage by fire, vandalism,
acts of God or other casualty or cause, has
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suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore such
Property into substantially the same condition as existing prior to such damage.
1.11. "Deposit" shall have the meaning given such term in
Section 2.2.
1.12. "Diligence Notice Letter" shall mean that certain letter, dated
November 6, 1997, from Purchaser to Seller, delivered pursuant to Sections 2.5
and 2.6 of the Original Agreement.
1.13. "Documents" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.14. "Escrow Agent" shall mean the Title Company.
1.15. "Escrow Agreement" shall mean that certain Escrow Agreement,
dated as of September 22, 1997, among Purchaser, Seller and Escrow Agent.
1.16. "FF&E " shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by Seller and located in or at, or used exclusively in connection with the
ownership, operation or maintenance of such Property.
1.17. "Hotel" shall mean each hotel located at the properties
identified on Exhibit A, the legal descriptions of which are set forth on
Exhibits B-1 through B-2.
1.18. "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.19. "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the Contracts, telephone exchange numbers identified
with such Property
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held by Seller and all other transferable intangible property, miscellaneous
rights, benefits and privileges of any kind or character with respect to such
Property held by Seller, except (a) to the extent held by or transferred to the
Tenant under the Lease and (b) for all trademarks, trade names, copyrights,
patents or technical processes, including, without limitation, any "AmeriSuites"
brand name, logos and designs, owned or used by Seller with respect to such
Property.
1.20. "Inventory " shall mean all inventory located at the Hotels,
including, without limitation, all mattresses, pillows, bed linens, towels,
powder goods, soaps, cleaning supplies and such other supplies, together with
any food inventory such as cereal, breakfast rolls, coffee, which shall be more
particularly described in the schedule of Inventory approved by Purchaser and
delivered at Closing by Seller, and which shall be at a minimum in amounts
sufficient to comply with the requirements of the applicable franchise
agreement.
1.21. "Lease" shall mean, collectively, all of the leases to be entered
into between Purchaser, as landlord, and the Tenant, as tenant, with respect to
each of the Properties, each substantially in the form attached hereto as
Exhibit C.
1.22. "LP Agreement" shall mean that certain Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.,
dated as of June 25, 1997.
1.23. "Permitted Encumbrances" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with respect
to such Property not yet due and payable or due and payable but not yet
delinquent or as to which adequate reserves are provided therefor; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect the use of such Property as a hotel as
currently operated and constructed; (c) such other nonmonetary encumbrances as
do not, in Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a functioning hotel as
currently operated and constructed; (d) such other nonmonetary encumbrances with
respect to such Property which shall not have been objected to by Purchaser
pursuant to the Diligence Notice Letter; and (e) such exceptions or matters, as
the case may be, otherwise accepted by Purchaser.
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1.24. "Properties" shall mean all of the Assets relating to the
properties identified on Exhibit A, the legal descriptions of which are set
forth in Exhibits B-1 through B-2.
1.25. "Purchase Price" shall have the meaning given such term
in Section 3.2.
1.26. "Purchaser" shall have the meaning given such term in
the preamble to this Agreement.
1.27. "Real Property" shall mean the real property described in the
applicable Exhibit B-1 through B-2, together with all easements, rights of way,
privileges, licenses and appurtenances which Seller may now own with respect
thereto.
1.28. "REIT" shall mean Equity Inns, Inc.
1.29. "Seller" shall have the meaning given such term in the
preamble to this Agreement.
1.30. "Seller's knowledge" shall mean the actual knowledge of
Joseph Bernadino, John M. Elwood, David Simon and Richard
Szymanski.
1.31. "Surveys" shall have the meaning given such term in
Section 2.5.
1.32. "Tenant" shall mean Caldwell Holding Corp., a Delaware
corporation, a wholly-owned subsidiary of Seller.
1.33. "Title Commitments" shall have the meaning given such
term in Section 2.5.
1.34. "Title Company" shall mean Chicago Title Insurance Company or
such other title insurance company or companies as shall have been reasonably
approved by Purchaser and Seller.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1. Purchase and Sale. In consideration of the mutual covenants herein
contained, Purchaser hereby agrees to purchase from Seller, and Seller hereby
agrees to sell to Purchaser, all of Seller's right, title and interest in and to
the Properties for the Purchase Price, subject to and in accordance with the
terms and
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conditions of this Agreement.
2.2. Deposit. Purchaser has deposited the sum of $872,500 (the
"Deposit") with the Escrow Agent. The Deposit shall be held in an
interest-bearing account pursuant to the terms of the Escrow Agreement. If this
Agreement shall terminate with respect to all of the Properties pursuant to
Section 10.1, the Deposit, together with all interest accrued thereon, shall be
returned to Purchaser. If this Agreement shall terminate pursuant to Section
10.2, the Deposit, together with all interest accrued thereon, shall be paid to
Seller. If the Closing shall occur, the Deposit shall be credited toward the
Purchase Price, pursuant to Section 3.2, and the interest earned on the Deposit
shall be paid to Purchaser.
2.3. Due Diligence. Any forms of franchise guidelines and franchise
agreements for "AmeriSuites" which Seller shall have provided to Purchaser in
connection with Purchaser's due diligence shall be substantially similar to (i)
the form which Tenant shall enter into in connection with the Closing. To the
extent that, in connection with its due diligence investigation, Purchaser, its
agents, representatives or contractors, shall have damaged or disturbed any of
the Real Property or the Improvements located thereon, Purchaser shall return
the same to substantially the same condition which existed immediately prior to
such damage or disturbance. In the event that the transactions contemplated by
this Agreement are not closed and consummated for any reason, Purchaser shall,
on request by Seller, deliver to Seller all tests, reports and inspections of
the Property made and conducted by Purchaser or for its benefit or any other
documents or information (including title commitments, UCC financing statement
search reports, title documents, surveys, zoning reports, environmental audits,
structural engineering reports, appraisals and the like), which Purchaser has
received pursuant to this Agreement; provided, however, that Seller shall
reimburse Purchaser's out-of-pocket expenses for any of the foregoing materials
(other than materials delivered by Seller or its agents or representatives to
Purchaser) which it requests that Purchaser so deliver. Purchaser shall
indemnify, defend and hold harmless Seller from and against any and all expense,
loss or damage which Seller may incur as a result of any act or omission of
Purchaser or its representatives, agents or contractors in connection with such
examinations and inspections, other than to the extent that any expense, loss or
damage arises from any gross negligence or willful misconduct of Seller. The
provisions of this Section 2.3 shall survive the termination of
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this Agreement and the Closing.
2.4. Casualty; Condemnation. (a) If, prior to the Closing, (i) any
Property suffers a casualty or partial condemnation which would cause such
Property to become a Defective Property and (ii) such Property is not, prior to
the Closing, restored to a condition substantially the same as the condition
thereof immediately prior to such casualty or condemnation, either Purchaser or
Seller may, on notice to the other given prior to the Closing Date, terminate
this Agreement with respect to such Defective Property, in which event Purchaser
shall acquire all of the Properties other than such Defective Property, and the
Purchase Price shall be reduced by the Allocable Purchase Price of such
Defective Property. Promptly upon learning of the same, Seller covenants and
agrees to provide Purchaser with prompt written notice of any casualty or
condemnation affecting any Property.
(b) If, prior to the Closing, any Property shall be condemned in its
entirety, this Agreement shall automatically terminate with respect to such
Defective Property, in which event Purchaser shall acquire all of the Properties
other than such Defective Property, and the Purchase Price shall be reduced by
the Allocable Purchase Price of such Defective Property.
(c) If neither Purchaser nor Seller shall elect to terminate this
Agreement with respect to a Defective Property pursuant to Paragraph (a) of this
Section 2.4, Seller agrees (i) in the case of a casualty loss, to assign to
Purchaser at Closing its rights to any insurance proceeds with respect to such
loss, pay over to Purchaser any such proceeds already received and give
Purchaser a credit against the Purchase Price in the amount of any deductible or
uninsured loss, or (ii) in the case of a condemnation, to assign to Purchaser at
Closing its rights to any compensation in connection with such condemnation and
pay over to Purchaser any such compensation already received, and, in either
such event, Purchaser shall acquire such Defective Property as provided herein.
(d) If any Property shall suffer a casualty loss which shall not render
the Property a Defective Property, Seller shall assign to Purchaser at Closing
its rights to any insurance proceeds with respect to such loss, pay over to
Purchaser any such proceeds already received and give Purchaser a credit against
the Purchase Price in the amount of any deductible or uninsured loss, and
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Purchaser shall acquire such Property as provided herein.
2.5. Title Matters. Purchaser has received from the Title Company a
preliminary title commitment, having an effective date after the date of this
Agreement, for an ALTA (or such other form reasonably approved by Purchaser)
owner's policy of title insurance with respect to each of the Properties,
together with complete and legible copies of all instruments and documents
referred to as exceptions to title (collectively, the "Title Commitments").
Except as set forth in the Diligence Notice Letter, Purchaser acknowledges and
agrees that it does not have any objection to any title exceptions which affect
the Properties.
2.6. Survey Matters. Purchaser has received a survey with respect to
each of the Properties (the "Surveys") by a licensed surveyor in the
jurisdiction in which each such Property is located, which (i) contains an
accurate legal description of the applicable Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting such
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the applicable Property
is located within a 100-year flood plain and (iv) is certified to Purchaser and
the Title Company and such other persons as shall have been requested by
Purchaser or Seller. Except as set forth in the Diligence Notice Letter,
Purchaser acknowledges and agrees that it does not have any objection to any
matter shown on the Surveys.
2.7. Tax Free Exchange. (a) Notwithstanding anything to the contrary
set forth herein, Seller may take such steps as shall be necessary to qualify
the sale of the Properties or any of them under Section 1031 of the Code,
including the use and assignment of this Agreement to a "qualified intermediary"
within the meaning of Treas. Regs. ss. 1.1031(k)-1(g)(4), or the use of any
other multiparty arrangement described in Treas. Regs. ss. 1.1031(k)-1(g).
Purchaser shall use commercially reasonable efforts to cooperate (which
cooperation shall be at Seller's expense) in so structuring a Section 1031
exchange, if so desired by Seller, provided that such structuring shall not
materially adversely affect Purchaser's rights hereunder.
(b) Purchaser shall not be required to incur additional
liability by reason of the provisions of this Section 2.7 (unless
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Seller shall first agree to indemnify Purchaser with respect thereto).
(c) Purchaser and its agents and attorneys do not guarantee any
specific tax treatment by reason of the provisions of this Section 2.7.
SECTION 3. CLOSING; PURCHASE PRICE.
3.1. Closing. The purchase and sale of the Properties shall be
consummated at a closing (the "Closing") to be held at the offices of Hunton &
Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136, or at such
other location as Seller and Purchaser may agree, at 10:00 a.m. local time, on
or about December
3, 1997 (the "Closing Date").
3.2. Purchase Price. (a) At the Closing, Purchaser shall pay to Seller
for the Properties a purchase price (the "Purchase Price") in the amount of
$24,041,515 (subject to customary prorations and adjustments), except that
Purchaser shall receive a credit against the Purchase Price in the amount of the
Deposit.
(b) The Purchase Price shall be payable by wire transfer of immediately
available funds on the Closing Date to an account or accounts to be designated
by Seller prior to the Closing.
(c) Notwithstanding anything to the contrary contained in this Section
3.2, if either Seller or Purchaser shall not be ready to close with respect to
either of the Hotels by the Closing Date, the closing shall occur as to such
Hotel as to which the parties are ready to close, and the parties shall agree as
to a subsequent closing date for the other Hotel, provided that settlement shall
have occurred as to both of the Hotels no later than December 22, 1997. In the
event of more than one closing, this Agreement shall be deemed a separate
agreement as to each Hotel and, except as otherwise agreed to between Seller and
Purchaser, (a) the Purchase Price for each individual Hotel shall be the
applicable Allocable Purchase Price, and (b) the Deposit for each individual
Hotel shall equal the amount set forth on Exhibit A. In the event of multiple
closings, the place and manner of closing shall be as reasonably agreed between
Seller and Purchaser.
(d) The provisions of Sections 3.2(c) and (e) shall survive the
Closing.
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SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Properties on the Closing
Date shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date, which Seller covenants to use commercially
reasonable efforts to fulfill:
4.1. Closing Documents. Seller shall have delivered to Purchaser:
(a) Good and sufficient special warranty deeds, with legal descriptions
based on the deeds by which Seller received title to the Properties, and
quitclaim deeds with legal descriptions based on the Surveys, if the Surveys
indicate any differing legal descriptions, all in forms as shall be customary in
the various jurisdictions in which the Properties are located, with respect to
all of the Properties, in proper statutory form for recording, duly executed and
acknowledged by Seller, conveying fee simple title to the applicable Properties,
free from all liens and encumbrances other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller and Purchaser, duly executed and acknowledged
by Seller, with respect to all of Seller's right, title and interest in, to and
under the FF&E, the Documents and the Intangible Property with respect to the
Properties;
(c) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller, Purchaser and Tenant, duly executed and
acknowledged by Seller, to Tenant, with respect to all of Seller's right, title
and interest in, to and under the Inventory and the Contracts, with respect to
the Properties;
(d) Duly executed and acknowledged memoranda of lease, setting forth
the material terms of each Lease, in form and substance reasonably satisfactory
to Seller and Purchaser;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) Duly executed environmental disclosure forms, as and to the extent
required by applicable law;
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(g) To the extent the same are in Seller's possession,
original, fully executed copies of all Contracts pertaining to the
Properties;
(h) A duly executed copy of the Lease and all other documents and sums
required to be delivered by Seller and/or the Tenant pursuant thereto;
(i) A duly executed copy of the franchise agreement between the Tenant
and the franchisor with respect to each of the Properties;
(j) A duly executed copy of the Registration Rights
Agreement;
(k) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to Seller and the
Tenant;
(l) an affidavit of Seller in accordance with Section 1445 of the Code
and such documentation as shall be required to comply with the reporting
requirements of Section 1099-S of the Code; and
(m) Such other conveyance documents, certificates, deeds, and other
instruments as may be required by this Agreement or as Purchaser or the Title
Company may reasonably require to effectuate the transactions contemplated
hereunder.
4.2. Condition of Properties. (a) All of the Properties
and all Improvements located thereon shall, except as otherwise
provided in Section 2.3, be in substantially the same physical
condition as on September 22, 1997, ordinary wear and tear
excepted;
(b) No material default or event which with the giving of notice and/or
lapse of time could constitute a material default shall have occurred and be
continuing under any material agreement benefiting or affecting the Properties
in any material respect;
(c) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
Properties which would render any Property a Defective Property; and
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(d) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Properties shall be in full
force and effect in all material respects.
4.3. Title Policies. The Title Company shall be prepared, subject only
to payment of the applicable premium, endorsement and related fees and delivery
of all conveyance documents in recordable form, to issue title insurance
policies to Purchaser, in accordance with Section 2.5, together with such
affirmative coverages as Purchaser may reasonably require and shall have been
determined by the Title Company as available prior to the date hereof.
4.4. Opinions of Counsel. Purchaser shall have received a written
opinion from counsel to Seller, in form and substance reasonably satisfactory to
Purchaser and Seller's counsel, regarding the organization and authority of
Seller and Tenant.
4.5. No PIP Requirement at Closing. There shall be no PIP
requirement imposed by the franchisor in connection with the
Closing.
4.6. Representations. All representations and warranties
made herein by Seller shall be true and correct in all material
respects.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Properties on the Closing Date
to Purchaser is subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, which Purchaser covenants to use
commercially reasonable efforts to fulfill:
5.1. Purchase Price. Purchaser shall deliver to Seller the Purchase
Price, pursuant to Section 3.1.
5.2. Closing Documents. Purchaser shall have delivered to
Seller:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1 (including, without limitation, the Registration Rights
Agreement executed by Purchaser, the REIT and the general partner of Purchaser),
where applicable;
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(b) Certified copies of all charter documents, partnership agreements,
applicable resolutions and certificates of incumbency with respect to Purchaser
and its general partner; and
5.3. Opinion of Counsel. Seller shall have received a written opinion
from counsel to Purchaser, in form and substance reasonably satisfactory to
Seller and Purchaser's counsel, regarding the organization and authority of
Purchaser and the REIT.
5.4. Representations. All representations and warranties made
herein by Purchaser shall be true and correct in all material
respects.
5.5. Amendment to LP Agreement. Purchaser shall have caused Exhibit A
of the LP Agreement to be amended so as to add Seller as a limited partner
listed thereon.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents and
warrants to Purchaser as follows:
6.1. Status and Authority of Seller. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of its
state of incorporation, and has all requisite power and authority under the laws
of such state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Seller has duly qualified to transact business in each jurisdiction in
which the nature of the business conducted by it requires such qualification,
except where failure to do so could not reasonably be expected to have a
material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller or Tenant
on or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller or Tenant, as the case may be,
enforceable against Seller or Tenant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
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6.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by Seller or of the Lease by Tenant, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon any Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller or Tenant is bound, except pursuant to the Lease or this Agreement.
6.4. Litigation. Neither Seller nor Tenant has received any written
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the
Properties, taken as a whole, (c) will result in or subject the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any part of the Properties, which would render such Property a Defective
Property.
6.5. Existing Leases, Agreements, Etc. Other than any agreements
provided to Purchaser prior to the execution of this Agreement and listed on the
schedule attached hereto as Exhibit E, there are no other material agreements
affecting the Properties which will be binding on Purchaser subsequent to the
Closing Date, which Purchaser cannot terminate.
6.6. Utilities, Etc. To Seller's knowledge, all utilities and services
necessary for the use and operation of the Properties (including, without
limitation, road access, gas, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of the Properties and
for their respective intended purposes. To Seller's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Properties.
6.7. Compliance with Law. To Seller's knowledge, except as
set forth on Exhibit D attached hereto, (i) the Properties and the
current use and operation thereof do not violate any material
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federal, state, municipal and other governmental statutes, ordinances, by-laws,
rules, regulations or any other legal requirements, including, without
limitation, those relating to construction, occupancy, zoning, subdivision, land
use, adequacy of parking, environmental protection, occupational health and
safety and fire safety applicable thereto; and (ii) there are presently in
effect all material licenses, permits and other authorizations necessary for the
current use, occupancy and operation thereof (including liquor license, if
required). Except as disclosed to Purchaser, Seller has not received written
notice of any threatened request, application, proceeding, plan, study or effort
which would materially adversely affect the current use or zoning of either of
the Properties or which would materially adversely modify or realign any
adjacent street or highway.
6.8. Taxes. To Seller's knowledge, other than the amounts disclosed by
tax bills (copies of which have been delivered by Seller to Purchaser prior to
the execution of this Agreement), no taxes or special assessments of any kind
(special, bond or otherwise) are or have been levied with respect to either of
the Properties, or any portion thereof, which are outstanding or unpaid, other
than amounts not yet due and payable or, if due and payable, not yet delinquent.
6.9. Not A Foreign Person. Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. Except as set forth on Exhibit D attached
hereto or as described in any environmental report delivered to Purchaser
(including, without limitation, the environmental site assessments set forth on
Exhibit D), to Seller's knowledge, Seller has not stored or disposed of (or
engaged in the business of storing or disposing of) or has released or caused
the release of any hazardous waste, contaminants, oil, radioactive or other
material on either of the Properties, or any portion thereof, the removal of
which is required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to Seller's knowledge, except as set forth on Exhibit D
attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in the ordinary
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course of a hotel business in accordance with applicable law.
6.11. Insurance. Seller has not received any written notice from any
insurance carrier of defects or inadequacies in the Properties which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. Ownership. All Assets, Contracts, FF&E, Intangible Property and
Real Property are owned by Seller and are assignable and transferable without
the consent of any third party (or, if any such consent is required, such
consent shall be obtained no later than the Closing), and there are no capital
leases, except as set forth on Exhibit E.
The representations and warranties made in this Agreement by Seller
shall be deemed remade by Seller as of the Closing Date with the same force and
effect as if made on, and as of, such date.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by Seller, on
Seller's behalf or otherwise, including, without limitation, the physical
condition of the Properties, title to or the boundaries of the Real Property,
pest control matters, soil conditions, the presence, existence or absence of
hazardous wastes, toxic substances or other environmental matters, compliance
with building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
Without negating the covenants, representations and warranties of Seller under
this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Without negating the covenants,
representations and warranties of Seller under this Agreement, Purchaser further
-16-
<PAGE>
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management
or other advice with respect to this transaction and is relying solely
upon the advice of third party accounting, tax, legal, architectural,
engineering, property management and other advisors. Subject to the provisions
of this Agreement, Purchaser shall purchase the Properties in their "as is"
condition on the Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller as follows:
7.1. Status and Authority of Purchaser. Purchaser is a Tennessee
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Tennessee and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a foreign limited partnership in each jurisdiction in which the
nature of the business conducted by it requires such qualification.
7.2. Action of Purchaser. Purchaser has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
Lease, and upon the execution and delivery of any document to be delivered by
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement nor the Lease by Purchaser, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of Purchaser pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any
-17-
<PAGE>
other agreement or instrument by which Purchaser is bound.
7.4. Litigation. No investigation, action or proceeding is pending and,
to Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
7.5. No Conflicts. Neither the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby by
Purchaser will conflict with or result in a material breach or violation of, or
constitute a default under the charter, bylaws, certificate of limited
partnership or LP Agreement, as the case may be, of the REIT or Purchaser; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or Purchaser is a party or to which
they, either of them, any of their respective properties or other assets is
subject; or any applicable material statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to the REIT or
Purchaser.
7.6. REIT Status. The REIT is a "qualified real estate investment
trust" as defined in Section 856 of the Code.
7.7. REIT Filings. The private placement memorandum delivered by
Purchaser to Seller on September 18, 1997 with respect to the REIT does not
include, as of such date, any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
The representations and warranties made in this Agreement by Purchaser
shall be deemed remade by Purchaser as of the Closing Date with the same force
and effect as if made on, and as of, such date.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
Purchaser between the date of this Agreement and the Closing Date
as follows:
(a) Upon learning of any material change in any condition
-18-
<PAGE>
with respect to either of the Properties or of any event or circumstance which
makes any representation or warranty of Seller to Purchaser under this Agreement
untrue or misleading in any material respect, promptly to notify Purchaser
thereof (Purchaser agreeing, on learning of any such fact or condition, promptly
to notify Seller thereof).
(b) To continue or cause to continue to operate each of the Properties
as an "AmeriSuites" hotel, in a good and businesslike fashion consistent with
its past practices and to cause each of the Properties to be maintained in good
working order and condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable request, such
unaudited financial and other information and certifications of Seller with
respect to the Properties as Purchaser may from time to time reasonably request
in order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission.
(d) To deliver to Purchaser the items set forth in Section 4.1 and
Section 4.4.
8.2. Covenants of Purchaser. Purchaser hereby covenants
with Seller on and as of the Closing Date as follows:
(a) To deliver to Seller the items set forth in Section
5.2.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its own
expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, the costs
and expenses of preparing engineering and environment reports, market studies
and appraisals, the cost of the Surveys, Title Commitments, zoning reports, UCC
financing statement search reports, environmental audits, zoning reports,
structural engineering reports, appraisals and the like, whether or not the
transactions contemplated hereby are consummated (but subject, however, to the
provisions of Section 2.3, with
-19-
<PAGE>
respect to items which Purchaser delivers to Seller at Seller's request). Seller
and Purchaser shall each pay 50% of all state and local sales, transfer, excise,
value-added or other similar taxes, and all recording and filing fees that may
be imposed by reason of the sale, transfer, assignment, delivery and leasing
(other than any tax imposed in connection with the recording of a memorandum of
lease, which amounts shall be paid pursuant to the terms of the applicable
Lease) of the Properties.
SECTION 10. DEFAULT.
10.1. Default by Seller. If (a) Seller shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Seller shall fail to perform any of the material
covenants and agreements contained herein to be performed by Seller and such
failure continues for a period of ten (10) days after notice thereof from
Purchaser, or (c) Seller shall be in default under (x) that certain Third
Purchase and Sale Agreement, dated of even date herewith, or (y) that certain
Fourth Purchase and Sale Agreement, dated of even date herewith each between
Seller and Purchaser, Purchaser may, (i) sue for specific performance and
damages, (ii) sue for damages without specific performance (with or without
terminating this Agreement and receiving a refund of the Deposit, and all
interest thereon) or (iii) exercise any other right or remedy at law or in
equity; provided, however, that Purchaser shall in no event be entitled to
monetary damages in excess of the amount of the Deposit.
10.2. Default by Purchaser. If (a) Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Purchaser shall fail to perform any of the covenants
and agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from Seller, or (c)
Purchaser shall be in default under (x) that certain Third Purchase and Sale
Agreement, dated of even date herewith, or (y) that certain Fourth Purchase and
Sale Agreement, dated of even date herewith each between Seller and Purchaser,
Seller may, as its sole and exclusive remedy at law and in equity, terminate
this Agreement. In the event that Seller shall so terminate this Agreement, the
Deposit, together with all interest accrued thereon, shall be retained by
Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall,
except as expressly provided herein, have no further monetary or nonmonetary
obligations hereunder, other than
-20-
<PAGE>
with respect to obligations which expressly survive the termination hereof
(which obligations shall not include the obligation to purchase the Properties
hereunder).
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL.
11.1. The Purchase and Sale of the Properties hereunder shall not be
deemed a purchase and sale of a Right of First Offer Hotel or an Option Hotel
(as defined in the Amended Agreement) pursuant to Section 11 of the Amended
Agreement.
SECTION 12. MISCELLANEOUS.
12.1. Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, Seller shall indemnify and hold harmless
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with any Property or
any portion thereof at any time or times prior to the Closing, (y) any
liabilities for taxes due from Seller which shall have accrued prior to the
Closing in connection with any Property and (z) any failure by Seller to comply
with applicable "bulk sale" laws.
(b) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(c) The provisions of this Section 12.1 shall survive the Closing and
the termination of this Agreement.
12.2. Brokerage Commissions. Each of the parties hereto
represents to the other parties that it dealt with no broker,
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<PAGE>
finder or like agent in connection with this Agreement or the transactions
contemplated hereby, other than Merrill Lynch & Co. Seller shall be solely
responsible for and shall indemnify and hold harmless Purchaser and its
respective legal representatives, heirs, successors and assigns from and against
any loss, liability or expense, including, reasonable attorneys' fees, arising
out of any claim or claims for commissions or other compensation for bringing
about this Agreement or the transactions contemplated hereby made by Merrill
Lynch & Co. or any other broker, finder or like agent other than such loss,
liability or expense resulting from Purchaser's breach of its representations
made in this Section 12.2. The provisions of this Section 12.2 shall survive the
Closing and any termination of this Agreement.
12.3. Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except to consultants, advisors, investors, lenders, underwriters
and other parties reasonably necessary to consummate the transactions required
hereby and as required by law or contractual obligations of such parties to
third parties. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement of the
transactions contemplated by this Agreement has been made. No party shall record
this Agreement or any notice thereof.
12.4. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of
-22-
<PAGE>
receipt or refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be delivered on
or before a specific day which is not a Business Day, the day of receipt or
required delivery shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
-23-
<PAGE>
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
12.5. Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
12.6. Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except that, after the Closing, Seller may
assign its surviving rights, if any, under this Agreement to Tenant or an
Affiliate of Seller, and Purchaser may assign its rights and obligations
hereunder to an Affiliate of Purchaser, provided that Purchaser remain liable
for its obligations hereunder. The provisions of this Agreement shall not merge
with delivery of the deeds and shall survive Closing. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. This
Agreement is not intended
-24-
<PAGE>
and shall not be construed to create any rights in or to be
enforceable in any part by any other persons.
12.7. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12.8. Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof.
12.9. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of New York
applicable to contracts between residents of the State of New York which are to
be performed entirely within the State of New York, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi)
-25-
<PAGE>
whether the laws of the forum jurisdiction otherwise would apply the laws of a
jurisdiction other than the State of New York; or (vii) any combination of the
foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10. Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
12.11. Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
12.12. Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12.13. No Oral Modifications. This Agreement may not be amended, nor
shall any waiver, change, modification, consent or discharge be effected, except
by an instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
12.14. Incorporation by Reference. All of the provisions applicable to
the Properties set forth in Paragraph 7 of the First Amendment and of Paragraph
2 of the Second Amendment are hereby incorporated by reference as if fully set
forth herein and are ratified and confirmed by Seller and Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ David A. Simon
Its: President
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust,
its general partner
By: /s/ Howard A. Silver
Its:Chief Financial Officer
<PAGE>
Exhibit A
The Properties
<TABLE>
<CAPTION>
Allocable Deposit
Location Purchase Price Radius Restriction Allocation
- -------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
1. Richmond/ $ 12,332,445 5 miles $436,250
Innsbrook, VA
1. Tampa, FL $ 11,709,070 5 miles-- $436,250
Restricted radius
does not include
the downtown sub
market
</TABLE>
<PAGE>
EXHIBIT 10.3
THIRD PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
EQUITY INNS PARTNERSHIP, L.P.,
as Purchaser
December 2, 1997
1. Columbus, OH
2. Miami, FL
3. Overland Park,
KS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Page
SECTION 1. DEFINITIONS........................................................1
1.2. Agreement..........................................................2
1.3. Allocable Purchase Price...........................................2
1.4. Assets.............................................................2
1.5. Business Day.......................................................2
1.6. Closing............................................................2
1.7. Closing Date.......................................................2
1.8. Code...............................................................2
1.9. Contracts..........................................................2
1.10. Defective Property.................................................2
1.11. Deposit............................................................2
1.12. Diligence Notice Letter............................................3
1.13. Documents..........................................................3
1.14. Escrow Agent.......................................................3
1.15. Escrow Agreement...................................................3
1.16. FF&E...............................................................3
1.17. Hotel..............................................................3
1.18. Improvements.......................................................3
1.19. Intangible Property................................................3
1.20. Inventory..........................................................3
1.21. Lease..............................................................4
1.22. LP Agreement.......................................................4
1.23. Miami Property.....................................................4
1.24. Permitted Encumbrances.............................................4
1.25. Properties.........................................................4
1.26. Purchase Price.....................................................4
1.27. Purchaser..........................................................4
1.28. Real Property......................................................5
1.29. REIT...............................................................5
1.30. Review Period......................................................5
1.31. Seller.............................................................5
1.32. Seller's knowledge.................................................5
1.33. Surveys............................................................5
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
1.34. Tenant.............................................................5
1.35. Title Commitments..................................................5
1.36. Title Company......................................................5
SECTION 2. PURCHASE AND SALE; DILIGENCE.......................................5
2.1. Purchase and Sale..................................................5
2.2. Deposit............................................................5
2.3. Diligence Inspections..............................................6
2.4. Casualty; Condemnation.............................................7
2.5. Title Matters......................................................8
2.6. Survey Matters.....................................................9
2.7. Tax Free Exchange.................................................10
SECTION 3. CLOSING; PURCHASE PRICE...........................................10
3.1. Closing...........................................................10
3.2. Purchase Price....................................................10
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.....................11
4.1. Closing Documents.................................................11
4.2. Condition of Properties...........................................12
4.3. Title Policies....................................................13
4.4. Opinions of Counsel...............................................13
4.5. No PIP Requirement at Closing.....................................13
4.6. Representations...................................................13
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE........................13
5.1. Purchase Price....................................................13
5.2. Closing Documents.................................................13
5.3. Opinion of Counsel................................................14
5.4. Representations...................................................14
5.5. Amendment to LP Agreement.........................................14
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER..........................14
6.1. Status and Authority of Seller....................................14
6.2. Action of Seller..................................................14
6.3. No Violations of Agreements.......................................15
6.4. Litigation........................................................15
6.5. Existing Leases, Agreements, Etc..................................15
6.6. Utilities, Etc....................................................15
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
6.7. Compliance With Law...............................................15
6.8. Taxes.............................................................16
6.9. Not A Foreign Person..............................................16
6.10. Hazardous Substances..............................................16
6.11. Insurance.........................................................16
6.12. Ownership.........................................................16
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................17
7.1. Status and Authority of Purchaser.................................17
7.2. Action of Purchaser...............................................18
7.3. No Violations of Agreements.......................................18
7.4. Litigation........................................................18
7.5. No Conflicts......................................................18
7.6. REIT Status, Organization.........................................19
7.7. REIT Filings......................................................19
SECTION 8. COVENANTS OF SELLER AND PURCHASER.................................19
8.1. Covenants of Seller...............................................19
8.2. Covenants of Purchaser............................................19
SECTION 9. CLOSING COSTS.....................................................20
9.1. Closing Costs.....................................................20
SECTION 10. DEFAULT...........................................................20
10.1. Default by Seller.................................................20
10.2. Default by Purchaser..............................................20
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................21
SECTION 12. MISCELLANEOUS.....................................................21
12.1. Agreement to Indemnify............................................21
12.2. Brokerage Commissions.............................................22
12.3. Publicity.........................................................22
12.4. Notices...........................................................22
12.5. Waivers, Etc......................................................24
12.6. Assignment; Successors and Assigns................................24
12.7. Severability......................................................24
12.8. Counterparts, Etc.................................................25
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
12.9. Governing Law.....................................................25
12.10. Performance on Business Days......................................25
12.11. Attorneys' Fees...................................................25
12.12. Section and Other Headings........................................26
12.13. No Oral Modifications.............................................26
12.14. Incorporation by Reference........................................26
</TABLE>
Exhibit A - The Properties
(iv)
<PAGE>
THIRD PURCHASE AND SALE AGREEMENT
THIS THIRD PURCHASE AND SALE AGREEMENT is made as of the 2nd day of
December, 1997, between PRIME HOSPITALITY CORP., a Delaware corporation
("Seller"), as seller, and Equity Inns Partnership, L.P., a Tennessee limited
partnership ("Purchaser"), as purchaser.
WITNESSETH:
WHEREAS, Seller and Purchaser entered into that certain Purchase and Sale
Agreement (the "Original Agreement"), dated as of September 22, 1997, as amended
by that certain Amendment to Purchase and Sale Agreement (the "First
Amendment"), dated as of November 6, 1997, Second Amendment to Purchase and Sale
Agreement (the "Second Amendment"), dated as of November 10, 1997 and Third
Amendment to Purchase and Sale Agreement (the "Third Amendment"), dated as of
November 19, 1997 (the Original Agreement, as amended by the First Amendment,
the Second Amendment and the Third Amendment, shall hereinafter be referred to
as the "Prior Agreement"), with respect to certain properties more particularly
described therein, which Prior Agreement was amended and restated in its
entirety pursuant to that certain Amended and Restated Purchase and Sale
Agreement (the "Amended Agreement") dated of even date herewith; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, certain hotel properties located in Columbus, Ohio,
Overland Park, Kansas and Miami, Florida, subject to and upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree
as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1. Affiliate: The term "Affiliate" of an entity shall
mean (a) an entity that, directly or indirectly, controls or is
controlled by or is under common control with such entity, (b) any
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other entity that owns, beneficially, directly or indirectly, more than fifty
percent (50%) of the outstanding capital stock, shares or equity interests of
such entity, or (c) any officer, director, employee, partner or trustee of such
entity or any person or entity controlling, controlled by or under common
control with such entity (excluding trustees and entities serving in similar
capacities who are not otherwise an Affiliate of such entities).
1.2. "Agreement" shall mean this Purchase and Sale Agreement, together
with Exhibits A through E attached hereto, as it and they may be amended from
time to time as herein provided.
1.3. "Allocable Purchase Price" shall mean, with respect to any of the
Properties, the applicable amount set forth on Exhibit A hereto.
1.4. "Assets" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts, the Documents, the Improvements
and the Intangible Property owned by Seller in connection with or relating to
such Hotel.
1.5. "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in the State of New York are
authorized by law or executive action to close.
1.6. "Closing" shall have the meaning given such term in
Section 3.1.
1.7. "Closing Date" shall have the meaning given such term
in Section 3.1.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
1.9. "Contracts" shall mean, with respect to any Property, all service
contracts, equipment leases, booking agreements and other arrangements or
agreements to which Seller is a party affecting the ownership, repair,
maintenance, management, leasing or operation of such Property, to the extent
Seller's interest therein is assignable or transferable.
1.10. "Defective Property" shall mean any Property which (i)
has been condemned in whole or in part, or (ii) by reason of damage
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by fire, vandalism, acts of God or other casualty or cause, has suffered damage
such that expenditures equal to or greater than $500,000 (as such cost is
determined by an architect or engineer selected by Seller and reasonably
satisfactory to Purchaser) shall be required in order to restore such Property
into substantially the same condition as existing prior to such damage.
1.11. "Deposit" shall have the meaning given such term in
Section 2.2.
1.12. "Diligence Notice Letter" shall mean that certain letter, dated
November 6, 1997, from Purchaser to Seller, delivered pursuant to Sections 2.5
and 2.6 of the Original Agreement.
1.13. "Documents" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.14. "Escrow Agent" shall mean the Title Company.
1.15. "Escrow Agreement" shall mean that certain Escrow Agreement,
dated as of September 22, 1997, among Purchaser, Seller and Escrow Agent.
1.16. "FF&E " shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by Seller and located in or at, or used exclusively in connection with the
ownership, operation or maintenance of such Property.
1.17. "Hotel" shall mean each hotel located at the properties
identified on Exhibit A, the legal descriptions of which are set forth on
Exhibits B-1 through B-3.
1.18. "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.19. "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the
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Contracts, telephone exchange numbers identified with such Property held by
Seller and all other transferable intangible property, miscellaneous rights,
benefits and privileges of any kind or character with respect to such Property
held by Seller, except (a) to the extent held by or transferred to the Tenant
under the Lease and (b) for all trademarks, trade names, copyrights, patents or
technical processes, including, without limitation, any "AmeriSuites" brand
name, logos and designs, owned or used by Seller with respect to such Property.
1.20. "Inventory " shall mean all inventory located at the Hotels,
including, without limitation, all mattresses, pillows, bed linens, towels,
powder goods, soaps, cleaning supplies and such other supplies, together with
any food inventory such as cereal, breakfast rolls, coffee, which shall be more
particularly described in the schedule of Inventory approved by Purchaser and
delivered at Closing by Seller, and which shall be at a minimum in amounts
sufficient to comply with the requirements of the applicable franchise
agreement.
1.21. "Lease" shall mean, collectively, all of the leases to be entered
into between Purchaser, as landlord, and the Tenant, as tenant, with respect to
each of the Properties, each substantially in the form attached hereto as
Exhibit C.
1.22. "LP Agreement" shall mean that certain Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.,
dated as of June 25, 1997.
1.23. "Miami Property" shall mean the Property located in
Miami, Florida.
1.24. "Permitted Encumbrances" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with respect
to such Property not yet due and payable or due and payable but not yet
delinquent or as to which adequate reserves are provided therefor; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect the use of such Property as a hotel as
currently operated and constructed; (c) such other nonmonetary encumbrances as
do not, in Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a functioning hotel as
currently operated and constructed; (d) such other nonmonetary encumbrances with
respect to such Property which
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shall not have been objected to by Purchaser pursuant to the Diligence Notice
Letter (or, with respect to the Miami Property, which are not objected to by
Purchaser in accordance with Sections 2.5 and 2.6 hereof); and (e) such
exceptions or matters, as the case may be, otherwise accepted by Purchaser.
1.25. "Properties" shall mean all of the Assets relating to the
properties identified on Exhibit A, the legal descriptions of which are set
forth in Exhibits B-1 through B-3.
1.26. "Purchase Price" shall have the meaning given such term
in Section 3.2.
1.27. "Purchaser" shall have the meaning given such term in
the preamble to this Agreement.
1.28. "Real Property" shall mean the real property described in the
applicable Exhibit B-1 through B-3, together with all easements, rights of way,
privileges, licenses and appurtenances which Seller may now own with respect
thereto.
1.29. "REIT" shall mean Equity Inns, Inc.
1.30. "Review Period" shall mean the period which commenced on November
10, 1997 and will expire on the date one day prior to the Closing Date.
1.31. "Seller" shall have the meaning given such term in the
preamble to this Agreement.
1.32. "Seller's knowledge" shall mean the actual knowledge of
Joseph Bernadino, John M. Elwood, David Simon and Richard
Szymanski.
1.33. "Surveys" shall have the meaning given such term in
Section 2.5.
1.34. "Tenant" shall mean Caldwell Holding Corp., a Delaware
corporation, a wholly-owned subsidiary of Seller.
1.35. "Title Commitments" shall have the meaning given such
term in Section 2.5.
1.36. "Title Company" shall mean Chicago Title Insurance
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Company or such other title insurance company or companies as shall have been
reasonably approved by Purchaser and Seller.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1. Purchase and Sale. In consideration of the mutual covenants herein
contained, Purchaser hereby agrees to purchase from Seller, and Seller hereby
agrees to sell to Purchaser, all of Seller's right, title and interest in and to
the Properties for the Purchase Price, subject to and in accordance with the
terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited the sum of $1,406,327 (the
"Deposit") with the Escrow Agent. The Deposit shall be held in an
interest-bearing account pursuant to the terms of the Escrow Agreement. If this
Agreement shall terminate with respect to all of the Properties pursuant to
Section 10.1, the Deposit, together with all interest accrued thereon, shall be
returned to Purchaser. If this Agreement shall terminate pursuant to Section
10.2, the Deposit, together with all interest accrued thereon, shall be paid to
Seller. If the Closing shall occur, the Deposit shall be credited toward the
Purchase Price, pursuant to Section 3.2, and the interest earned on the Deposit
shall be paid to Purchaser.
2.3. Diligence Inspections. (a) During the Review Period, Seller shall
permit Purchaser and its representatives to inspect the Miami Property and the
Improvements thereon (including, without limitation, all roofs, electric,
mechanical and structural elements, and HVAC systems therein), to perform due
diligence, soil analysis and environmental investigations, to examine the books
of account and records of Seller with respect to the Miami Property, including,
without limitation, all leases and agreements affecting the Miami Property, and
make copies thereof, at such reasonable times as Purchaser or its
representatives may request by notice to Seller. Seller shall, in connection
with Purchaser's due diligence, provide Purchaser with copies, to the extent
available, of the form of franchise guidelines and franchise agreement for
"AmeriSuites," which form of franchise agreement shall be substantially similar
to the form which Tenant shall enter into in connection with the Closing. To the
extent that, in connection with its investigation of any of the Properties,
Purchaser, its agents, representatives or contractors, damages or disturbs any
of the Real Property or the Improvements located thereon, Purchaser shall return
the same to substantially the same condition which
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existed immediately prior to such damage or disturbance. Neither Purchaser nor
any of its agents, representatives or contractors shall have any right
whatsoever to alter the condition of the Property or any portion thereof without
the prior written consent of Seller. In no event shall any such inspection
include any drilling into or under the surface of the Property, soil sampling,
water sampling or similar activities commonly known as a "Phase II environmental
study" without the prior written consent of Seller (but shall include such
inspections customarily performed during a "Phase I environmental study"). In
the event that the transactions contemplated by this Agreement are not closed
and consummated for any reason, Purchaser shall, on request by Seller, deliver
to Seller all tests, reports and inspections of the Property made and conducted
by Purchaser or for its benefit or any other documents or information (including
title commitments, UCC financing statement search reports, title documents,
surveys, zoning reports, environmental audits, structural engineering reports,
appraisals and the like), which Purchaser has received pursuant to this
Agreement; provided, however, that Seller shall reimburse Purchaser's
out-of-pocket expenses for any of the foregoing materials (other than materials
delivered by Seller or its agents or representatives to Purchaser) which it
requests that Purchaser so deliver. Purchaser shall indemnify, defend and hold
harmless Seller from and against any and all expense, loss or damage which
Seller may incur as a result of any act or omission of Purchaser or its
representatives, agents or contractors in connection with such examinations and
inspections, other than to the extent that any expense, loss or damage arises
from any gross negligence or willful misconduct of Seller. The provisions of
this Section 2.3 shall survive the termination of this Agreement and the
Closing.
(b) If Purchaser notifies Seller in writing prior to the
expiration of the Review Period that Purchaser elects to terminate this
Agreement with respect to the Miami Property (for any reason or for no reason in
the sole discretion of Purchaser), then this Agreement shall automatically
terminate with respect to the Miami Property only, in which event this Agreement
shall remain in full force and effect with respect to all of the Properties
other than the Miami Property, and the Purchase Price shall be reduced by the
Allocable Purchase Price of the Miami Property.
2.4. Casualty; Condemnation. (a) If, prior to the Closing,
(i) any Property suffers a casualty or partial condemnation which
would cause such Property to become a Defective Property and (ii)
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such Property is not, prior to the Closing, restored to a condition
substantially the same as the condition thereof immediately prior to such
casualty or condemnation, either Purchaser or Seller may, on notice to the other
given prior to the Closing Date, terminate this Agreement with respect to such
Defective Property, in which event Purchaser shall acquire all of the Properties
other than such Defective Property, and the Purchase Price shall be reduced by
the Allocable Purchase Price of such Defective Property. Promptly upon learning
of the same, Seller covenants and agrees to provide Purchaser with prompt
written notice of any casualty or condemnation affecting any Property.
(b) If, prior to the Closing, any Property shall be condemned
in its entirety, this Agreement shall automatically terminate with respect to
such Defective Property, in which event Purchaser shall acquire all of the
Properties other than such Defective Property, and the Purchase Price shall be
reduced by the Allocable Purchase Price of such Defective Property.
(c) If neither Purchaser nor Seller shall elect to terminate
this Agreement with respect to a Defective Property pursuant to Paragraph (a) of
this Section 2.4, Seller agrees (i) in the case of a casualty loss, to assign to
Purchaser at Closing its rights to any insurance proceeds with respect to such
loss, pay over to Purchaser any such proceeds already received and give
Purchaser a credit against the Purchase Price in the amount of any deductible or
uninsured loss, or (ii) in the case of a condemnation, to assign to Purchaser at
Closing its rights to any compensation in connection with such condemnation and
pay over to Purchaser any such compensation already received, and, in either
such event, Purchaser shall acquire such Defective Property as provided herein.
(d) If any Property shall suffer a casualty loss which shall
not render the Property a Defective Property, Seller shall assign to Purchaser
at Closing its rights to any insurance proceeds with respect to such loss, pay
over to Purchaser any such proceeds already received and give Purchaser a credit
against the Purchase Price in the amount of any deductible or uninsured loss,
and Purchaser shall acquire such Property as provided herein.
2.5. Title Matters. (a) Purchaser has received from the
Title Company a preliminary title commitment, having an effective
date after the date of this Agreement, for an ALTA (or such other
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form reasonably approved by Purchaser) owner's policy of title insurance with
respect to each of the Properties, together with complete and legible copies of
all instruments and documents referred to as exceptions to title (collectively,
the "Title Commitments"). Except as set forth in the Diligence Notice Letter,
Purchaser acknowledges and agrees that it does not have any objection to any
title exceptions which affect any of the Properties other than the Miami
Property.
(b) As soon as reasonably practicable, but in no event later
than the expiration of the Review Period, Purchaser shall give Seller notice of
any title exceptions (other than Permitted Encumbrances) which adversely affect
the present use or operation of the Miami Property in any material respect and
as to which Purchaser reasonably objects. If, for any reason, Seller is unable
or unwilling to take such actions as may be required to cause such exceptions to
be removed from the Title Commitments (provided, however, that (i) if such
exceptions to title consist of mortgages, deeds of trust, mechanics' liens, tax
liens, other liens or charges which are capable of computation as a fixed sum,
Seller shall pay and discharge such exceptions at or prior to Closing from the
cash proceeds of sale, or otherwise, or, with respect to tax liens, contest such
liens in accordance with the provisions of the Lease, and (ii) if such
exceptions to title may be removed at a cost to Seller of not more than $25,000
in the aggregate with respect to any single Property, and such removal may be
reasonably effectuated by Seller no later than the Closing Date, Seller shall
cause such exceptions to be removed), Seller shall give Purchaser notice
thereof; it being understood and agreed that, provided that Purchaser shall have
timely given notice of such objection to title, the failure of Seller to give
such notice as to its inability or unwillingness to cause the removal of any
exceptions shall be deemed an election by Seller to remedy such matters. If
Seller shall be unable or unwilling to remove any such title defects with
respect to the Miami Property to which Purchaser has reasonably objected,
Purchaser may elect (i) to terminate this Agreement with respect to the Miami
Property, in which event the Purchase Price shall be reduced by the Allocable
Purchase Price of the Miami Property and this Agreement shall be of no further
force and effect with respect to the Miami Property or (ii) to consummate the
transactions contemplated hereby, notwithstanding such title defect, without any
abatement or reduction in the Purchase Price on account thereof. Purchaser shall
make any such election by written notice to Seller given promptly after Seller's
notice of its
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unwillingness or inability to cure such defect (but, in no event later than the
Closing Date), and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above,
and such exception shall be a Permitted Encumbrance.
2.6. Survey Matters. (a) Purchaser has received a survey with respect
to each of the Properties (the "Surveys") by a licensed surveyor in the
jurisdiction in which each such Property is located, which (i) contains an
accurate legal description of the applicable Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting such
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the applicable Property
is located within a 100-year flood plain and (iv) is certified to Purchaser and
the Title Company and such other persons as shall have been requested by
Purchaser or Seller. Except as set forth on the Diligence Notice Letter,
Purchaser acknowledges and agrees that it does not have any objection to any
matter shown on the Surveys (other than the Survey for the Miami Property).
(b) As soon as reasonably practicable, but in no event later
than the expiration of the Review Period, Purchaser shall give Seller notice of
any matters shown on the Survey for the Miami Property (other than Permitted
Encumbrances) which adversely affect the Miami Property in any material respect
and as to which Purchaser reasonably objects. If, for any reason, Seller is
unwilling or unable to take such actions as may be required to remedy the
objectionable matters, Seller shall give Purchaser prompt notice thereof. If
Seller shall be unwilling or unable to remove any such survey defect to which
Purchaser has reasonably objected, Purchaser may elect (i) to terminate this
Agreement with respect to the Miami Property, in which event, the Purchase Price
shall be reduced by the Allocable Purchase Price of the Miami Property, and this
Agreement shall terminate and be of no further force or effect with respect to
the Miami Property or (ii) to consummate the transactions contemplated hereby,
notwithstanding such defect, without any abatement or reduction in the Purchase
Price on account thereof. Purchaser shall make any such election by written
notice to Seller given promptly after Seller's notice of its inability to cure
such defect (but, in no event later than the
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Closing Date), and time shall be of the essence with respect to the giving of
such notice by Purchaser. Failure of Purchaser to give such notice shall be
deemed an election by Purchaser to proceed in accordance with clause (ii) above
and such matter shall be a Permitted Encumbrance.
2.7. Tax Free Exchange. (a) Notwithstanding anything to the contrary
set forth herein, Seller may take such steps as shall be necessary to qualify
the sale of the Properties or any of them under Section 1031 of the Code,
including the use and assignment of this Agreement to a "qualified intermediary"
within the meaning of Treas. Regs. ss. 1.1031(k)-1(g)(4), or the use of any
other multiparty arrangement described in Treas. Regs. ss. 1.1031(k)-1(g).
Purchaser shall use commercially reasonable efforts to cooperate (which
cooperation shall be at Seller's expense) in so structuring a Section 1031
exchange, if so desired by Seller, provided that such structuring shall not
materially adversely affect Purchaser's rights hereunder.
(b) Purchaser shall not be required to incur additional
liability by reason of the provisions of this Section 2.7 (unless Seller shall
first agree to indemnify Purchaser with respect thereto).
(c) Purchaser and its agents and attorneys do not guarantee
any specific tax treatment by reason of the provisions of this Section 2.7.
SECTION 3. CLOSING; PURCHASE PRICE.
3.1. Closing. The purchase and sale of the Properties shall be
consummated at a closing (the "Closing") to be held at the offices of Hunton &
Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136, or at such
other location as Seller and Purchaser may agree, at 10:00 a.m. local time, on
or about December
3, 1997 (the "Closing Date").
3.2. Purchase Price. (a) At the Closing, Purchaser shall pay to Seller
for the Properties a purchase price (the "Purchase Price") in the amount of
$29,549,175 (subject to customary prorations and adjustments), except that
Purchaser shall receive a credit against the Purchase Price in the amount of the
Deposit.
(b) The Purchase Price shall be payable by wire transfer
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of immediately available funds on the Closing Date to an account or accounts to
be designated by Seller prior to the Closing.
(c) Notwithstanding anything to the contrary contained in this
Section 3.2, if either Seller or Purchaser shall not be ready to close with
respect to either of the Hotels by the Closing Date, the closing shall occur as
to such Hotel as to which the parties are ready to close, and the parties shall
agree as to a subsequent closing date or dates for the other Hotels, provided
that settlement shall have occured as to all of the Hotels no later than
December 22, 1997. In the event of more than one Closing, this Agreement shall
be deemed a separate agreement as to each Hotel and, except as otherwise agreed
to between Seller and Purchaser, (a) the Purchase Price for each individual
Hotel shall be the applicable Allocable Purchase Price, and (b) the Deposit for
each individual Hotel shall equal the amount set forth on Exhibit A. In the
event of multiple closings, the place and manner of closing shall be as
reasonably agreed between Seller and Purchaser.
(d) The provisions of Sections 3.2(c) and (e) shall survive
the Closing.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Properties on the Closing
Date shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date, which Seller covenants to use commercially
reasonable efforts to fulfill:
4.1. Closing Documents. Seller shall have delivered to Purchaser:
(a) Good and sufficient special warranty deeds, with legal
descriptions based on the deeds by which Seller received title to the
Properties, and quitclaim deeds with legal descriptions based on the Surveys, if
the Surveys indicate any differing legal descriptions, all in forms as shall be
customary in the various jurisdictions in which the Properties are located, with
respect to all of the Properties, in proper statutory form for recording, duly
executed and acknowledged by Seller, conveying fee simple title to the
applicable Properties, free from all liens and encumbrances other than the
Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and
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substance reasonably satisfactory to Seller and Purchaser, duly executed and
acknowledged by Seller, with respect to all of Seller's right, title and
interest in, to and under the FF&E, the Documents and the Intangible Property
with respect to the Properties;
(c) A bill of sale and assignment agreement, in form and
substance reasonably satisfactory to Seller, Purchaser and Tenant, duly executed
and acknowledged by Seller, to Tenant, with respect to all of Seller's right,
title and interest in, to and under the Inventory and the Contracts, with
respect to the Properties;
(d) Duly executed and acknowledged memoranda of lease, setting
forth the material terms of each Lease, in form and substance reasonably
satisfactory to Seller and Purchaser;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) Duly executed environmental disclosure forms, as and to
the extent required by applicable law;
(g) To the extent the same are in Seller's possession,
original, fully executed copies of all Contracts pertaining to the
Properties;
(h) A duly executed copy of the Lease and all other documents
and sums required to be delivered by Seller and/or the Tenant pursuant thereto;
(i) A duly executed copy of the franchise agreement between
the Tenant and the franchisor with respect to each of the Properties;
(j) A duly executed copy of the Registration Rights
Agreement;
(k) Certified copies of all charter documents, applicable
corporate resolutions and certificates of incumbency with respect to Seller and
the Tenant;
(l) An affidavit of Seller in accordance with Section 1445 of
the Code and such documentation as shall be required to comply with the
reporting requirements of Section 1099-S of the Code; and
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(m) Such other conveyance documents, certificates, deeds, and
other instruments as may be required by this Agreement or as Purchaser or the
Title Company may reasonably require to effectuate the transactions contemplated
hereunder.
4.2. Condition of Properties. (a) All of the Properties and all
Improvements located thereon shall, except as otherwise provided in Section 2.3,
be in substantially the same physical condition as on September 22, 1997 (or,
with respect to the Miami Property, November 10, 1997), ordinary wear and tear
excepted;
(b) No material default or event which with the giving of
notice and/or lapse of time could constitute a material default shall have
occurred and be continuing under any material agreement benefiting or affecting
the Properties in any material respect;
(c) No action shall be pending or threatened for the
condemnation or taking by power of eminent domain of all or any material portion
of the Properties which would render any Property a Defective Property; and
(d) All material licenses, permits and other authorizations
necessary for the current use, occupancy and operation of the Properties shall
be in full force and effect in all material respects.
4.3. Title Policies. The Title Company shall be prepared, subject only
to payment of the applicable premium, endorsement and related fees and delivery
of all conveyance documents in recordable form, to issue title insurance
policies to Purchaser, in accordance with Section 2.5, together with such
affirmative coverages as Purchaser may reasonably require and shall have been
determined by the Title Company as available prior to the date hereof.
4.4. Opinions of Counsel. Purchaser shall have received a written
opinion from counsel to Seller, in form and substance reasonably satisfactory to
Purchaser and Seller's counsel, regarding the organization and authority of
Seller and Tenant.
4.5. No PIP Requirement at Closing. There shall be no PIP
requirement imposed by the franchisor in connection with the Closing.
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4.6. Representations. All representations and warranties made
herein by Seller shall be true and correct in all material
respects.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Properties on the Closing Date
to Purchaser is subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, which Purchaser covenants to use
commercially reasonable efforts to fulfill:
5.1. Purchase Price. Purchaser shall deliver to Seller the Purchase
Price, pursuant to Section 3.1.
5.2. Closing Documents. Purchaser shall have delivered to
Seller:
(a) Duly executed and acknowledged counterparts of the
documents described in Section 4.1 (including, without limitation, the
Registration Rights Agreement executed by Purchaser, the REIT and the general
partner of Purchaser), where applicable;
(b) Certified copies of all charter documents, partnership
agreements, applicable resolutions and certificates of incumbency with respect
to Purchaser and its general partner; and
5.3. Opinion of Counsel. Seller shall have received a written opinion
from counsel to Purchaser, in form and substance reasonably satisfactory to
Seller and Purchaser's counsel, regarding the organization and authority of
Purchaser and the REIT.
5.4. Representations. All representations and warranties made
herein by Purchaser shall be true and correct in all material
respects.
5.5. Amendment to LP Agreement. Purchaser shall have caused Exhibit A
of the LP Agreement to be amended so as to add Seller as a limited partner
listed thereon.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents and
warrants to Purchaser as follows:
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6.1. Status and Authority of Seller. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of its
state of incorporation, and has all requisite power and authority under the laws
of such state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Seller has duly qualified to transact business in each jurisdiction in
which the nature of the business conducted by it requires such qualification,
except where failure to do so could not reasonably be expected to have a
material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller or Tenant
on or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller or Tenant, as the case may be,
enforceable against Seller or Tenant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
6.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by Seller or of the Lease by Tenant, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon any Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller or Tenant is bound, except pursuant to the Lease or this Agreement.
6.4. Litigation. Neither Seller nor Tenant has received any written
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the
Properties, taken as a whole, (c) will result in or subject the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any part of the Properties, which would render such Property a Defective
Property.
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<PAGE>
6.5. Existing Leases, Agreements, Etc. Other than any agreements
provided to Purchaser prior to the execution of this Agreement and listed on the
schedule attached hereto as Exhibit E, there are no other material agreements
affecting the Properties which will be binding on Purchaser subsequent to the
Closing Date, which Purchaser cannot terminate.
6.6. Utilities, Etc. To Seller's knowledge, all utilities and services
necessary for the use and operation of the Properties (including, without
limitation, road access, gas, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of the Properties and
for their respective intended purposes. To Seller's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Properties.
6.7. Compliance with Law. To Seller's knowledge, except as set forth on
Exhibit D attached hereto, (i) the Properties and the current use and operation
thereof do not violate any material federal, state, municipal and other
governmental statutes, ordinances, by-laws, rules, regulations or any other
legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, subdivision, land use, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof (including liquor license, if required). Except
as disclosed to Purchaser, Seller has not received written notice of any
threatened request, application, proceeding, plan, study or effort which would
materially adversely affect the current use or zoning of any of the Properties
or which would materially adversely modify or realign any adjacent street or
highway.
6.8. Taxes. To Seller's knowledge, other than the amounts disclosed by
tax bills (copies of which have been delivered by Seller to Purchaser prior to
the execution of this Agreement), no taxes or special assessments of any kind
(special, bond or otherwise) are or have been levied with respect to any of the
Properties, or any portion thereof, which are outstanding or unpaid, other than
amounts not yet due and payable or, if due and payable, not yet delinquent.
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<PAGE>
6.9. Not A Foreign Person. Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. Except as set forth on Exhibit D attached
hereto or as described in any environmental report delivered to Purchaser
(including, without limitation, the environmental site assessments set forth on
Exhibit D), to Seller's knowledge, Seller has not stored or disposed of (or
engaged in the business of storing or disposing of) or has released or caused
the release of any hazardous waste, contaminants, oil, radioactive or other
material on any of the Properties, or any portion thereof, the removal of which
is required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to Seller's knowledge, except as set forth on Exhibit D
attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in the ordinary course of a hotel business in accordance with
applicable law.
6.11. Insurance. Seller has not received any written notice from any
insurance carrier of defects or inadequacies in the Properties which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. Ownership. All Assets, Contracts, FF&E, Intangible Property and
Real Property are owned by Seller and are assignable and transferable without
the consent of any third party (or, if any such consent is required, such
consent shall be obtained no later than the Closing), and there are no capital
leases, except as set forth on Exhibit E.
The representations and warranties made in this Agreement by Seller
shall be deemed remade by Seller as of the Closing Date with the same force and
effect as if made on, and as of, such date.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by Seller, on
Seller's behalf or
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<PAGE>
otherwise, including, without limitation, the physical condition of the
Properties, title to or the boundaries of the Real Property, pest control
matters, soil conditions, the presence, existence or absence of hazardous
wastes, toxic substances or other environmental matters, compliance with
building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
Without negating the covenants, representations and warranties of Seller under
this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Without negating the covenants,
representations and warranties of Seller under this Agreement, Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Properties in their "as is" condition on the
Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller as follows:
7.1. Status and Authority of Purchaser. Purchaser is a Tennessee
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Tennessee and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a foreign limited partnership in each jurisdiction in which the
nature of the business conducted by it requires such qualification.
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<PAGE>
7.2. Action of Purchaser. Purchaser has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
Lease, and upon the execution and delivery of any document to be delivered by
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement nor the Lease by Purchaser, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of Purchaser pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Purchaser is bound.
7.4. Litigation. No investigation, action or proceeding is pending and,
to Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
7.5. No Conflicts. Neither the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby by
Purchaser will conflict with or result in a material breach or violation of, or
constitute a default under the charter, bylaws, certificate of limited
partnership or LP Agreement, as the case may be, of the REIT or Purchaser; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or Purchaser is a party or to which
they, either of them, any of their respective properties or other assets is
subject; or any applicable material statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to the REIT or
Purchaser.
7.6. REIT Status. The REIT is a "qualified real estate investment
trust" as defined in Section 856 of the Code.
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<PAGE>
7.7. REIT Filings. The private placement memorandum delivered by
Purchaser to Seller on September 18, 1997 with respect to the REIT does not
include, as of such date, any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
The representations and warranties made in this Agreement by Purchaser
shall be deemed remade by Purchaser as of the Closing Date with the same force
and effect as if made on, and as of, such date.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
Purchaser between the date of this Agreement and the Closing Date
as follows:
(a) Upon learning of any material change in any condition with respect
to any of the Properties or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate each of the Properties
as an "AmeriSuites" hotel, in a good and businesslike fashion consistent with
its past practices and to cause each of the Properties to be maintained in good
working order and condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable request, such
unaudited financial and other information and certifications of Seller with
respect to the Properties as Purchaser may from time to time reasonably request
in order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission.
(d) To deliver to Purchaser the items set forth in Section 4.1 and
Section 4.4.
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<PAGE>
8.2. Covenants of Purchaser. Purchaser hereby covenants
with Seller on and as of the Closing Date as follows:
(a) To deliver to Seller the items set forth in Section
5.2.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its own
expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, the costs
and expenses of preparing engineering and environment reports, market studies
and appraisals, the cost of the Surveys, Title Commitments, zoning reports, UCC
financing statement search reports, environmental audits, zoning reports,
structural engineering reports, appraisals and the like, whether or not the
transactions contemplated hereby are consummated (but subject, however, to the
provisions of Section 2.3, with respect to items which Purchaser delivers to
Seller at Seller's request). Seller and Purchaser shall each pay 50% of all
state and local sales, transfer, excise, value-added or other similar taxes, and
all recording and filing fees that may be imposed by reason of the sale,
transfer, assignment, delivery and leasing (other than any tax imposed in
connection with the recording of a memorandum of lease, which amounts shall be
paid pursuant to the terms of the applicable Lease) of the Properties.
SECTION 10. DEFAULT.
10.1. Default by Seller. If (a) Seller shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Seller shall fail to perform any of the material
covenants and agreements contained herein to be performed by Seller and such
failure continues for a period of ten (10) days after notice thereof from
Purchaser, or (c) Seller shall be in default under (x) that certain Second
Purchase and Sale Agreement, dated of even date herewith, or (y) that certain
Fourth Purchase and Sale Agreement, dated of even date herewith, each between
Seller and Purchaser, Purchaser may, (i) sue for specific performance and
damages, (ii) sue for damages without specific performance (with or without
terminating this Agreement and receiving a refund of the Deposit, and all
interest thereon) or (iii) exercise any other right or remedy at law or in
equity; provided, however, that Purchaser shall in no event be entitled to
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<PAGE>
monetary damages in excess of the amount of the Deposit.
10.2. Default by Purchaser. If (a) Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Purchaser shall fail to perform any of the covenants
and agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from Seller, or (c)
Purchaser shall be in default under (x) that certain Second Purchase and Sale
Agreement, dated of even date herewith, or (y) that certain Fourth Purchase and
Sale Agreement, dated of even date herewith, each between Seller and Purchaser,
Seller may, as its sole and exclusive remedy at law and in equity, terminate
this Agreement. In the event that Seller shall so terminate this Agreement, the
Deposit, together with all interest accrued thereon, shall be retained by
Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall,
except as expressly provided herein, have no further monetary or nonmonetary
obligations hereunder, other than with respect to obligations which expressly
survive the termination hereof (which obligations shall not include the
obligation to purchase the Properties hereunder).
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL.
11.1. The Purchase and Sale of the Properties hereunder shall not be
deemed a purchase and sale of a Right of First Offer Hotel or an Option Hotel
(as defined in the Amended Agreement) pursuant to Section 11 of the Amended
Agreement.
SECTION 12. MISCELLANEOUS.
12.1. Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, Seller shall indemnify and hold harmless
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with any Property or
any portion thereof at any time or times prior to the Closing, (y) any
liabilities for taxes due from Seller which shall have accrued prior to the
Closing in connection with any Property and (z) any failure by Seller to comply
with applicable "bulk sale" laws.
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<PAGE>
(b) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(c) The provisions of this Section 12.1 shall survive the Closing and
the termination of this Agreement.
12.2. Brokerage Commissions. Each of the parties hereto represents to
the other parties that it dealt with no broker, finder or like agent in
connection with this Agreement or the transactions contemplated hereby, other
than Merrill Lynch & Co. Seller shall be solely responsible for and shall
indemnify and hold harmless Purchaser and its respective legal representatives,
heirs, successors and assigns from and against any loss, liability or expense,
including, reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by Merrill Lynch & Co. or any other
broker, finder or like agent other than such loss, liability or expense
resulting from Purchaser's breach of its representations made in this Section
12.2. The provisions of this Section 12.2 shall survive the Closing and any
termination of this Agreement.
12.3. Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except to consultants, advisors, investors, lenders, underwriters
and other parties reasonably necessary to consummate the transactions required
hereby and as required by law or contractual obligations of such parties to
third parties. No party, or its employees shall trade in the securities of any
parent or affiliate of Seller or of Purchaser until a public announcement
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of the transactions contemplated by this Agreement has been made. No party shall
record this Agreement or any notice thereof.
12.4. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
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<PAGE>
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
12.5. Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be
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<PAGE>
effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
12.6. Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except that, after the Closing, (i) Seller
may assign its surviving rights, if any, under this Agreement to Tenant or an
Affiliate of Seller, and Purchaser may assign its rights and obligations
hereunder to an Affiliate of Purchaser, provided that Purchaser remain liable
for its obligations hereunder. The provisions of this Agreement shall not merge
with delivery of the deeds and shall survive Closing. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
12.7. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12.8. Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and
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<PAGE>
shall supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
12.9. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of New York
applicable to contracts between residents of the State of New York which are to
be performed entirely within the State of New York, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10. Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
12.11. Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
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<PAGE>
12.12. Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12.13. No Oral Modifications. This Agreement may not be amended, nor
shall any waiver, change, modification, consent or discharge be effected, except
by an instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
12.14. Incorporation by Reference. All of the provisions applicable to
the Properties set forth in Paragraph 7 of the First Amendment, Paragraph 2 of
the Second Amendment and Paragraph 5 of the Third Amendment are hereby
incorporated by reference as if fully set forth herein and are ratified and
confirmed by Seller and Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ David A. Simon
Its: President
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust,
its general partner
By: /s/ Howard A. Silver
Its:Chief Financial Officer
<PAGE>
Exhibit A
The Properties
<TABLE>
<CAPTION>
Allocable Deposit
Location Purchase Price Radius Restriction Allocation
- -------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
13. Columbus, $ 8,532,055 8 miles--Restricted $436,250
OH radius does not
include the Tuttle
Crossing and
Downtown sub
markets
14. Miami, FL $11,786,674 $533,827
15. Overland $ 9,230,446 6 miles--Restricted $436,250
Park, KS radius does not
include the Lenexa
and Country Club
Plaza sub markets
</TABLE>
<PAGE>
EXHIBIT 10.4
FOURTH PURCHASE AND SALE AGREEMENT
BETWEEN
PRIME HOSPITALITY CORP.,
as Seller,
and
EQUITY INNS PARTNERSHIP, L.P.,
as Purchaser
December 2, 1997
1. Cincinnati,
OH/ Blue Ash
2. Indianapolis,
IN/ Keystone
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Page
SECTION 1. DEFINITIONS........................................................1
1.2. Agreement..........................................................2
1.3. Allocable Purchase Price...........................................2
1.4. Assets.............................................................2
1.5. Business Day.......................................................2
1.6. Closing............................................................2
1.7. Closing Date.......................................................2
1.8. Code...............................................................2
1.9. Contracts..........................................................2
1.10. Defective Property.................................................2
1.11. Deposit............................................................2
1.12. Diligence Notice Letter............................................3
1.13. Documents..........................................................3
1.14. Escrow Agent.......................................................3
1.15. Escrow Agreement...................................................3
1.16. FF&E...............................................................3
1.17. Hotel..............................................................3
1.18. Improvements.......................................................3
1.19. Intangible Property................................................3
1.20. Inventory..........................................................3
1.21. Lease..............................................................4
1.22. LP Agreement.......................................................4
1.23. LP Units...........................................................4
1.24. Permitted Encumbrances.............................................4
1.25. Properties.........................................................4
1.26. Purchase Price.....................................................4
1.27. Purchaser..........................................................4
1.28. Real Property......................................................4
1.29. Registration Rights Agreement......................................5
1.30. REIT...............................................................5
1.31. Review Period......................................................5
1.32. Seller.............................................................5
1.33. Seller Group.......................................................5
1.34. Seller's knowledge.................................................5
1.35. Surveys............................................................5
1.36. Tenant.............................................................5
1.37. Title Commitments..................................................5
1.38. Title Company......................................................5
</TABLE>
(i)
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<TABLE>
<S> <C> <C> <C>
Page
SECTION 2. PURCHASE AND SALE; DILIGENCE.......................................5
2.1. Purchase and Sale..................................................5
2.2. Deposit............................................................6
2.3. Due Diligence......................................................6
2.4. Casualty; Condemnation.............................................6
2.5. Title Matters......................................................7
2.6. Survey Matters.....................................................8
SECTION 3. CLOSING; PURCHASE PRICE............................................8
3.1. Closing............................................................8
3.2. Purchase Price.....................................................8
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.....................10
4.1. Closing Documents.................................................10
4.2. Condition of Properties...........................................11
4.3. Title Policies....................................................12
4.4. Opinions of Counsel...............................................12
4.5. No PIP Requirement at Closing.....................................12
4.6. Representations...................................................12
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE........................12
5.1. Purchase Price....................................................12
5.2. Closing Documents.................................................12
5.3. Opinion of Counsel................................................13
5.4. Representations...................................................13
5.5. Amendment to LP Agreement.........................................13
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER..........................13
6.1. Status and Authority of Seller....................................13
6.2. Action of Seller..................................................13
6.3. No Violations of Agreements.......................................14
6.4. Litigation........................................................14
6.5. Existing Leases, Agreements, Etc..................................14
6.6. Utilities, Etc....................................................14
6.7. Compliance With Law...............................................14
6.8. Taxes.............................................................15
6.9. Not A Foreign Person..............................................15
6.10. Hazardous Substances..............................................15
6.11. Insurance.........................................................15
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page
6.12. Ownership.........................................................16
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................17
7.1. Status and Authority of Purchaser.................................17
7.2. Action of Purchaser...............................................17
7.3. No Violations of Agreements.......................................17
7.4. Litigation........................................................17
7.5. No Conflicts......................................................17
7.6. REIT Status, Organization.........................................18
7.7. REIT Filings......................................................18
SECTION 8. COVENANTS OF SELLER AND PURCHASER.................................18
8.1. Covenants of Seller...............................................18
8.2. Covenants of Purchaser............................................19
SECTION 9. CLOSING COSTS.....................................................19
9.1. Closing Costs.....................................................19
SECTION 10. DEFAULT...........................................................19
10.1. Default by Seller.................................................19
10.2. Default by Purchaser..............................................20
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL..........................20
SECTION 12. MISCELLANEOUS.....................................................20
12.1. Agreement to Indemnify............................................20
12.2. Brokerage Commissions.............................................21
12.3. Publicity.........................................................21
12.4. Notices...........................................................21
12.5. Waivers, Etc......................................................23
12.6. Assignment; Successors and Assigns................................23
12.7. Severability......................................................23
12.8. Counterparts, Etc.................................................24
12.9. Governing Law.....................................................24
12.10. Performance on Business Days......................................25
12.11. Attorneys' Fees...................................................25
12.12. Section and Other Headings........................................25
12.13. No Oral Modifications.............................................25
12.14. Incorporation by Reference........................................25
</TABLE>
Exhibit A - The Properties
(iii)
<PAGE>
FOURTH PURCHASE AND SALE AGREEMENT
THIS FOURTH PURCHASE AND SALE AGREEMENT is made as of the 2nd day of
December, 1997, between PRIME HOSPITALITY CORP., a Delaware corporation
("Seller"), as seller, and Equity Inns Partnership, L.P., a Tennessee limited
partnership ("Purchaser"), as purchaser.
WITNESSETH:
WHEREAS, Seller and Purchaser entered into that certain Purchase and
Sale Agreement (the "Original Agreement"), dated as of September 22, 1997, as
amended by that certain Amendment to Purchase and Sale Agreement (the "First
Amendment"), dated as of November 6, 1997, Second Amendment to Purchase and Sale
Agreement (the "Second Amendment"), dated as of November 10, 1997 and Third
Amendment to Purchase and Sale Agreement (the "Third Amendment"), dated as of
November 19, 1997 (the Original Agreement, as amended by the First Amendment,
the Second Amendment and the Third Amendment, shall hereinafter be referred to
as the "Prior Agreement"), with respect to certain properties more particularly
described therein, which Prior Agreement was amended and restated in its
entirety pursuant to that certain Amended and Restated Purchase and Sale
Agreement (the "Amended Agreement") dated of even date herewith; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, certain hotel properties located in Cincinnati (Blue Ash),
Ohio and Indianapolis, Indiana, subject to and upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Seller and Purchaser hereby
agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below or in the Section of this Agreement referred to below:
1.1. Affiliate: The term "Affiliate" of an entity shall mean
(a) an entity that, directly or indirectly, controls or is
controlled by or is under common control with such entity, (b) any
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other entity that owns, beneficially, directly or indirectly, more than fifty
percent (50%) of the outstanding capital stock, shares or equity interests of
such entity, or (c) any officer, director, employee, partner or trustee of such
entity or any person or entity controlling, controlled by or under common
control with such entity (excluding trustees and entities serving in similar
capacities who are not otherwise an Affiliate of such entities).
1.2. "Agreement" shall mean this Purchase and Sale Agreement, together
with Exhibits A through F attached hereto, as it and they may be amended from
time to time as herein provided.
1.3. "Allocable Purchase Price" shall mean, with respect to either of
the Properties, the applicable amount set forth on Exhibit A hereto.
1.4. "Assets" shall mean, with respect to any Hotel, collectively, all
of the Real Property, the FF&E, the Contracts, the Documents, the Improvements
and the Intangible Property owned by Seller in connection with or relating to
such Hotel.
1.5. "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which banking institutions in the State of New York are
authorized by law or executive action to close.
1.6. "Closing" shall have the meaning given such term in
Section 3.1.
1.7. "Closing Date" shall have the meaning given such term in
Section 3.1.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated thereunder.
1.9. "Contracts" shall mean, with respect to any Property, all service
contracts, equipment leases, booking agreements and other arrangements or
agreements to which Seller is a party affecting the ownership, repair,
maintenance, management, leasing or operation of such Property, to the extent
Seller's interest therein is assignable or transferable.
1.10. "Defective Property" shall mean any Property which (i) has been
condemned in whole or in part, or (ii) by reason of damage by fire, vandalism,
acts of God or other casualty or cause, has
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suffered damage such that expenditures equal to or greater than $500,000 (as
such cost is determined by an architect or engineer selected by Seller and
reasonably satisfactory to Purchaser) shall be required in order to restore such
Property into substantially the same condition as existing prior to such damage.
1.11. "Deposit" shall have the meaning given such term in
Section 2.2.
1.12. "Diligence Notice Letter" shall mean that certain letter, dated
November 6, 1997, from Purchaser to Seller, delivered pursuant to Sections 2.5
and 2.6 of the Original Agreement.
1.13. "Documents" shall mean, with respect to any Property, all books,
records and files relating to the leasing, maintenance, management or operation
of such Property.
1.14. "Escrow Agent" shall mean the Title Company.
1.15. "Escrow Agreement" shall mean that certain Escrow Agreement,
dated as of September 22, 1997, among Purchaser, Seller and Escrow Agent.
1.16. "FF&E " shall mean, with respect to any Property, all appliances,
machinery, devices, fixtures, appurtenances, equipment, furniture, furnishings
and articles of tangible personal property of every kind and nature whatsoever
owned by Seller and located in or at, or used exclusively in connection with the
ownership, operation or maintenance of such Property.
1.17. "Hotel" shall mean each hotel located at the properties
identified on Exhibit A, the legal descriptions of which are set forth on
Exhibits B-1 through B-2.
1.18. "Improvements" shall mean, with respect to any Property, all
buildings, fixtures, walls, fences, landscaping and other structures and
improvements situated on, affixed or appurtenant to the Real Property with
respect to such Property.
1.19. "Intangible Property" shall mean, with respect to any Property,
all transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates, licenses,
warranties and guarantees, the Contracts, telephone exchange numbers identified
with such Property
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held by Seller and all other transferable intangible property, miscellaneous
rights, benefits and privileges of any kind or character with respect to such
Property held by Seller, except (a) to the extent held by or transferred to the
Tenant under the Lease and (b) for all trademarks, trade names, copyrights,
patents or technical processes, including, without limitation, any "AmeriSuites"
brand name, logos and designs, owned or used by Seller with respect to such
Property.
1.20. "Inventory " shall mean all inventory located at the Hotels,
including, without limitation, all mattresses, pillows, bed linens, towels,
powder goods, soaps, cleaning supplies and such other supplies, together with
any food inventory such as cereal, breakfast rolls, coffee, which shall be more
particularly described in the schedule of Inventory approved by Purchaser and
delivered at Closing by Seller, and which shall be at a minimum in amounts
sufficient to comply with the requirements of the applicable franchise
agreement.
1.21. "Lease" shall mean, collectively, all of the leases to be entered
into between Purchaser, as landlord, and the Tenant, as tenant, with respect to
each of the Properties, each substantially in the form attached hereto as
Exhibit C.
1.22. "LP Agreement" shall have the meaning given such term
in Section 3.2.
1.23. "LP Units" shall have the meaning given such term in
Section 3.2.
1.24. "Permitted Encumbrances" shall mean, with respect to any
Property, (a) liens for taxes, assessments and governmental charges with respect
to such Property not yet due and payable or due and payable but not yet
delinquent or as to which adequate reserves are provided therefor; (b)
applicable zoning regulations and ordinances provided the same do not prohibit
or impair in any material respect the use of such Property as a hotel as
currently operated and constructed; (c) such other nonmonetary encumbrances as
do not, in Purchaser's reasonable opinion, impair marketability and do not
materially interfere with the use of such Property as a functioning hotel as
currently operated and constructed; (d) such other nonmonetary encumbrances with
respect to such Property which shall not have been objected to by Purchaser
pursuant to the Diligence Notice Letter; and (e) such exceptions or matters, as
the
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case may be, otherwise accepted by Purchaser.
1.25. "Properties" shall mean all of the Assets relating to the
properties identified on Exhibit A, the legal descriptions of which are set
forth in Exhibits B-1 through B-2.
1.26. "Purchase Price" shall have the meaning given such term
in Section 3.2.
1.27. "Purchaser" shall have the meaning given such term in
the preamble to this Agreement.
1.28. "Real Property" shall mean the real property described in the
applicable Exhibit B-1 through B-2, together with all easements, rights of way,
privileges, licenses and appurtenances which Seller may now own with respect
thereto.
1.29. "Registration Rights Agreement" shall mean that certain
Redemption and Registration Rights Agreement, substantially in the form of
Exhibit F, to be entered into by Purchaser, the REIT, the general partner of
Purchaser and Seller, as of the Closing Date.
1.30. "REIT" shall have the meaning given such term in
Section 3.2.
1.31. "Review Period" shall mean the period which commenced on the date
of the Prior Agreement and expired on November 10, 1997.
1.32. "Seller" shall have the meaning given such term in the
preamble to this Agreement.
1.33. "Seller Group" shall mean Seller and any Affiliate of Seller that
is a parent or direct or indirect wholly-owned subsidiary of Seller.
1.34. "Seller's knowledge" shall mean the actual knowledge of
Joseph Bernadino, John M. Elwood, David Simon and Richard
Szymanski.
1.35. "Surveys" shall have the meaning given such term in
Section 2.5.
1.36. "Tenant" shall mean Caldwell Holding Corp., a Delaware
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corporation, a wholly-owned subsidiary of Seller.
1.37. "Title Commitments" shall have the meaning given such
term in Section 2.5.
1.38. "Title Company" shall mean Chicago Title Insurance Company or
such other title insurance company or companies as shall have been reasonably
approved by Purchaser and Seller.
SECTION 2. PURCHASE AND SALE; DILIGENCE.
2.1. Purchase and Sale. In consideration of the mutual covenants herein
contained, Purchaser hereby agrees to purchase from Seller, and Seller hereby
agrees to sell to Purchaser, all of Seller's right, title and interest in and to
the Properties for the Purchase Price, subject to and in accordance with the
terms and conditions of this Agreement.
2.2. Deposit. Purchaser has deposited the sum of $436,250 (the
"Deposit") with the Escrow Agent. The Deposit shall be held in an
interest-bearing account pursuant to the terms of the Escrow Agreement. If this
Agreement shall terminate with respect to all of the Properties pursuant to
Section 10.1, the Deposit, together with all interest accrued thereon, shall be
returned to Purchaser. If this Agreement shall terminate pursuant to Section
10.2, the Deposit, together with all interest accrued thereon, shall be paid to
Seller. If the Closing shall occur, the Deposit shall be credited toward the
Purchase Price, pursuant to Section 3.2, and the interest earned on the Deposit
shall be paid to Purchaser.
2.3. Due Diligence. Any forms of franchise guidelines and franchise
agreements for "AmeriSuites" which Seller shall have provided to Purchaser in
connection with Purchaser's due diligence shall be substantially similar to (i)
the form which Tenant shall enter into in connection with the Closing and (ii)
(subject to any changes made by franchisor to such form on a non-discriminatory
basis) the form to be employed with respect to any First Offer Hotels and Option
Hotels. To the extent that, in connection with its due diligence investigation,
Purchaser, its agents, representatives or contractors, shall have damaged or
disturbed any of the Real Property or the Improvements located thereon,
Purchaser shall return the same to substantially the same condition which
existed immediately prior to such damage or disturbance. In the event that the
transactions contemplated by this Agreement are not
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closed and consummated for any reason, Purchaser shall, on request by Seller,
deliver to Seller all tests, reports and inspections of the Property made and
conducted by Purchaser or for its benefit or any other documents or information
(including title commitments, UCC financing statement search reports, title
documents, surveys, zoning reports, environmental audits, structural engineering
reports, appraisals and the like), which Purchaser has received pursuant to this
Agreement; provided, however, that Seller shall reimburse Purchaser's
out-of-pocket expenses for any of the foregoing materials (other than materials
delivered by Seller or its agents or representatives to Purchaser) which it
requests that Purchaser so deliver. Purchaser shall indemnify, defend and hold
harmless Seller from and against any and all expense, loss or damage which
Seller may incur as a result of any act or omission of Purchaser or its
representatives, agents or contractors in connection with such examinations and
inspections, other than to the extent that any expense, loss or damage arises
from any gross negligence or willful misconduct of Seller. The provisions of
this Section 2.3 shall survive the termination of this Agreement and the
Closing.
2.4. Casualty; Condemnation. (a) If, prior to the Closing, (i) any
Property suffers a casualty or partial condemnation which would cause such
Property to become a Defective Property and (ii) such Property is not, prior to
the Closing, restored to a condition substantially the same as the condition
thereof immediately prior to such casualty or condemnation, either Purchaser or
Seller may, on notice to the other given prior to the Closing Date, terminate
this Agreement with respect to such Defective Property, in which event Purchaser
shall acquire all of the Properties other than such Defective Property, and the
Purchase Price shall be reduced by the Allocable Purchase Price of such
Defective Property. Promptly upon learning of the same, Seller covenants and
agrees to provide Purchaser with prompt written notice of any casualty or
condemnation affecting any Property.
(b) If, prior to the Closing, any Property shall be condemned in its
entirety, this Agreement shall automatically terminate with respect to such
Defective Property, in which event Purchaser shall acquire all of the Properties
other than such Defective Property, and the Purchase Price shall be reduced by
the Allocable Purchase Price of such Defective Property.
(c) If neither Purchaser nor Seller shall elect to
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terminate this Agreement with respect to a Defective Property pursuant to
Paragraph (a) of this Section 2.4, Seller agrees (i) in the case of a casualty
loss, to assign to Purchaser at Closing its rights to any insurance proceeds
with respect to such loss, pay over to Purchaser any such proceeds already
received and give Purchaser a credit against the Purchase Price in the amount of
any deductible or uninsured loss, or (ii) in the case of a condemnation, to
assign to Purchaser at Closing its rights to any compensation in connection with
such condemnation and pay over to Purchaser any such compensation already
received, and, in either such event, Purchaser shall acquire such Defective
Property as provided herein.
(d) If any Property shall suffer a casualty loss which shall not render
the Property a Defective Property, Seller shall assign to Purchaser at Closing
its rights to any insurance proceeds with respect to such loss, pay over to
Purchaser any such proceeds already received and give Purchaser a credit against
the Purchase Price in the amount of any deductible or uninsured loss, and
Purchaser shall acquire such Property as provided herein.
2.5. Title Matters. Purchaser has received from the Title Company a
preliminary title commitment, having an effective date after the date of this
Agreement, for an ALTA (or such other form reasonably approved by Purchaser)
owner's policy of title insurance with respect to each of the Properties,
together with complete and legible copies of all instruments and documents
referred to as exceptions to title (collectively, the "Title Commitments").
Except as set forth on the Diligence Notice Letter, Purchaser acknowledges and
agrees that it does not have any objection to any title exceptions which affect
the Properties.
2.6. Survey Matters. Purchaser has received a survey with respect to
each of the Properties (the "Surveys") by a licensed surveyor in the
jurisdiction in which each such Property is located, which (i) contains an
accurate legal description of the applicable Property, (ii) shows the location,
dimension and description (including applicable recording information) of all
utilities, easements, encroachments and other physical matters affecting such
Property, the number of striped parking spaces located thereon and all
applicable building set-back lines, (iii) states whether the applicable Property
is located within a 100-year flood plain and (iv) is certified to Purchaser and
the Title Company and such other persons as shall have been requested by
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Purchaser or Seller. Except as set forth on the Diligence Notice Letter,
Purchaser acknowledges and agrees that it does not have any objection to any
matter shown on the Surveys.
SECTION 3. CLOSING; PURCHASE PRICE.
3.1. Closing. The purchase and sale of the Properties shall be
consummated at a closing (the "Closing") to be held at the offices of Hunton &
Williams, 200 Park Avenue, 43rd Floor, New York, New York 10166-0136, or at such
other location as Seller and Purchaser may agree, at 10:00 a.m. local time, on
or about December 10, 1997 (the "Closing Date").
3.2. Purchase Price. (a) At the Closing, Purchaser shall pay to Seller
for the Properties a purchase price (the "Purchase Price") in the amount of
$14,945,448 (subject to customary prorations and adjustments), except that
Purchaser shall receive a credit against the Purchase Price in the amount of the
Deposit.
(b) The Purchase Price shall be payable by wire transfer of immediately
available funds on the Closing Date to an account or accounts to be designated
by Seller prior to the Closing, subject to the terms of paragraph (c) of this
Section 3.2.
(c) Purchaser shall pay to Seller a portion of the Purchase Price equal
to $8,696,626 in the form of 572,847 units of limited partnership interest in
Purchaser (the "LP Units") at a value of $15.1814 per LP Unit. The cash
equivalent of an LP Unit, for which Purchaser shall receive a credit against the
Purchase Price, is equal to the average of the last reported sale prices of the
common stock of Equity Inns, Inc. (the "REIT"), the sole shareholder of the
general partner of the Purchaser, as reported on the New York Stock Exchange on
the ten (10) Business Days immediately preceding the date of the Prior
Agreement. Seller may not distribute or otherwise assign, transfer or convey any
LP Unit to any person or entity except in accordance with the terms of that
certain Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P., dated as of June 25, 1997 (the "LP Agreement"), without
the prior written consent of the general partner of Purchaser. Any purported
attempt to transfer, assign or convey the LP Units, other than in accordance
with the preceding sentence, shall be null and void and of no effect. To
effectuate this section, Seller and any proposed transferee of the LP Units will
execute and deliver to Purchaser (i) promptly upon request by
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Purchaser, such investor response forms contained with any private placement
memorandum delivered to Seller on behalf of Purchaser, (ii) at the closing of
such proposed transfer, an executed counterpart of the LP Agreement and
Registration Rights Agreement and (iii) any other document reasonably requested
by Purchaser in connection therewith. Notwithstanding the foregoing, Seller
shall have the right to redeem the LP Units for common stock of the REIT and to
sell or otherwise transfer such common stock in accordance with the terms of the
LP Agreement and the Registration Rights Agreement. Any purported attempt to
sell, transfer, assign or convey such common stock other than in accordance with
the preceding shall be null and void and of no effect.
(d) Seller shall allocate the portion of the Purchase Price which is to
be paid in LP Units such that LP Units valued at $7,607,493 shall be allocated
to the Property located in Blue Ash, Ohio and LP Units valued at $1,089,133
shall be allocated to the Property located in Indianapolis, Indiana.
Notwithstanding the foregoing, in the event that, prior to the Closing, this
Agreement shall be terminated with respect to a Defective Property pursuant to
Section 2.4, Seller and Purchaser shall use good faith efforts to agree to a
reasonable reallocation of the LP Units allocated to such Defective Property to
the other Property and among properties being conveyed pursuant to the other
purchase and sale agreements between Seller and Purchaser executed in connection
herewith. If Seller and Purchaser shall fail to agree on such reallocation,
Purchaser shall have the right to terminate this Agreement, in which event the
Deposit (and all interest thereon) shall be returned to Purchaser, and, upon
return of the Deposit (and all interest thereon), Purchaser and Seller shall
have no further rights, liabilities or obligations hereunder (except those that
expressly survive a termination of this Agreement).
(e) Without limiting the fiduciary duties of the general partner of
Purchaser to the limited partners of Purchaser pursuant to the LP Agreement and
under applicable law, the general partner of Purchaser shall not, without the
prior written consent of Seller, permit any amendment to the LP Agreement set
forth in Sections 11(a) through (d) thereof that would discriminate against
Seller relative to the rights of the other holders of LP Units.
(f) Notwithstanding anything to the contrary contained in Section 2.3
hereof or this Section 3.2, if either Seller or Purchaser shall not be ready to
close with respect to one or more
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Hotels by the Closing Date, the Closing shall occur as to such Hotels as to
which the parties shall agree, and the parties shall agree as to one or more
additional closings of groups of one or more Hotels until settlement has
occurred as to all of the Hotels, provided that settlement shall have occured as
to all of the Hotels no later than December 22, 1997. In the event of more than
one Closing, this Agreement shall be deemed a separate agreement as to each
Hotel and, except as otherwise agreed to between Seller and Purchaser, (a) the
Purchase Price for each individual Hotel shall be the applicable Allocable
Purchase Price, (b) the Deposit for each individual Hotel shall equal the amount
set forth on Exhibit A and (c) the LP Units shall be allocated to the Hotels in
accordance with Section 3.2(d) hereof. In the event of multiple Closings, the
place and manner of Closing shall be as reasonably agreed between Seller and
Purchaser.
(g) The provisions of Sections 3.2(c) and (e) shall survive the
Closing.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of Purchaser to acquire the Properties on the Closing
Date shall be subject to the satisfaction of the following conditions precedent
on and as of the Closing Date, which Seller covenants to use commercially
reasonable efforts to fulfill:
4.1. Closing Documents. Seller shall have delivered to Purchaser:
(a) Good and sufficient special warranty deeds, with legal descriptions
based on the deeds by which Seller received title to the Properties, and
quitclaim deeds with legal descriptions based on the Surveys, if the Surveys
indicate any differing legal descriptions, all in forms as shall be customary in
the various jurisdictions in which the Properties are located, with respect to
all of the Properties, in proper statutory form for recording, duly executed and
acknowledged by Seller, conveying fee simple title to the applicable Properties,
free from all liens and encumbrances other than the Permitted Encumbrances;
(b) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller and Purchaser, duly executed and acknowledged
by Seller, with respect to all of Seller's right, title and interest in, to and
under the FF&E, the
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Documents and the Intangible Property with respect to the Properties;
(c) A bill of sale and assignment agreement, in form and substance
reasonably satisfactory to Seller, Purchaser and Tenant, duly executed and
acknowledged by Seller, to Tenant, with respect to all of Seller's right, title
and interest in, to and under the Inventory and the Contracts, with respect to
the Properties;
(d) Duly executed and acknowledged memoranda of lease, setting forth
the material terms of each Lease, in form and substance reasonably satisfactory
to Seller and Purchaser;
(e) Duly executed transfer tax forms, as required by
applicable law;
(f) Duly executed environmental disclosure forms, as and to the extent
required by applicable law;
(g) To the extent the same are in Seller's possession,
original, fully executed copies of all Contracts pertaining to the
Properties;
(h) A duly executed copy of the Lease and all other documents and sums
required to be delivered by Seller and/or the Tenant pursuant thereto;
(i) A duly executed copy of the franchise agreement between the Tenant
and the franchisor with respect to each of the Properties;
(j) A duly executed copy of the Registration Rights
Agreement;
(k) Certified copies of all charter documents, applicable corporate
resolutions and certificates of incumbency with respect to Seller and the
Tenant;
(l) An affidavit of Seller in accordance with Section 1445 of the Code
and such documentation as shall be required to comply with the reporting
requirements of Section 1099-S of the Code; and
(m) Such other conveyance documents, certificates, deeds, and other
instruments as may be required by this Agreement or as
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Purchaser or the Title Company may reasonably require to effectuate the
transactions contemplated hereunder.
4.2. Condition of Properties. (a) All of the Properties and
all Improvements located thereon shall, except as otherwise
provided in Section 2.3, be in substantially the same physical
condition as on September 22, 1997, ordinary wear and tear
excepted;
(b) No material default or event which with the giving of notice and/or
lapse of time could constitute a material default shall have occurred and be
continuing under any material agreement benefiting or affecting the Properties
in any material respect;
(c) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
Properties which would render any Property a Defective Property; and
(d) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Properties shall be in full
force and effect in all material respects.
4.3. Title Policies. The Title Company shall be prepared, subject only
to payment of the applicable premium, endorsement and related fees and delivery
of all conveyance documents in recordable form, to issue title insurance
policies to Purchaser, in accordance with Section 2.5, together with such
affirmative coverages as Purchaser may reasonably require and shall have been
determined by the Title Company as available prior to the date hereof.
4.4. Opinions of Counsel. Purchaser shall have received a written
opinion from counsel to Seller, in form and substance reasonably satisfactory to
Purchaser and Seller's counsel, regarding the organization and authority of
Seller and Tenant.
4.5. No PIP Requirement at Closing. There shall be no PIP
requirement imposed by the franchisor in connection with the
Closing.
4.6. Representations. All representations and warranties made
herein by Seller shall be true and correct in all material
respects.
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SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to convey the Properties on the Closing Date
to Purchaser is subject to the satisfaction of the following conditions
precedent on and as of the Closing Date, which Purchaser covenants to use
commercially reasonable efforts to fulfill:
5.1. Purchase Price. Purchaser shall deliver to Seller the Purchase
Price, pursuant to Section 3.1.
5.2. Closing Documents. Purchaser shall have delivered to
Seller:
(a) Duly executed and acknowledged counterparts of the documents
described in Section 4.1 (including, without limitation, the Registration Rights
Agreement executed by Purchaser, the REIT and the general partner of Purchaser),
where applicable;
(b) Certified copies of all charter documents, partnership agreements,
applicable resolutions and certificates of incumbency with respect to Purchaser
and its general partner; and
(c) Duly executed certificates of limited partnership representing the
LP Units.
5.3. Opinion of Counsel. Seller shall have received a written opinion
from counsel to Purchaser, in form and substance reasonably satisfactory to
Seller and Purchaser's counsel, regarding the organization and authority of
Purchaser and the REIT.
5.4. Representations. All representations and warranties made
herein by Purchaser shall be true and correct in all material
respects.
5.5. Amendment to LP Agreement. Purchaser shall have caused Exhibit A
of the LP Agreement to be amended so as to add Seller as a limited partner
listed thereon.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Purchaser to enter into this Agreement, Seller represents and
warrants to Purchaser as follows:
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6.1. Status and Authority of Seller. Seller is a corporation duly
organized, validly existing and in corporate good standing under the laws of its
state of incorporation, and has all requisite power and authority under the laws
of such state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. Seller has duly qualified to transact business in each jurisdiction in
which the nature of the business conducted by it requires such qualification,
except where failure to do so could not reasonably be expected to have a
material adverse effect.
6.2. Action of Seller. Seller has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by Seller or Tenant
on or prior to the Closing Date, such document shall constitute the valid and
binding obligation and agreement of Seller or Tenant, as the case may be,
enforceable against Seller or Tenant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors.
6.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by Seller or of the Lease by Tenant, nor
compliance with the terms and provisions hereof or thereof, will result in any
breach of the terms, conditions or provisions of, or conflict with or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon any Property pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Seller or Tenant is bound, except pursuant to the Lease or this Agreement.
6.4. Litigation. Neither Seller nor Tenant has received any written
notice of and, to Seller's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or proceeding has
begun, which (a) questions the validity of this Agreement or the Lease or any
action taken or to be taken pursuant hereto, (b) will result in any material
adverse change in the business, operation, affairs or condition of the
Properties, taken as a whole, (c) will result in or subject the Properties to a
material liability, or (d) involves condemnation or eminent domain proceedings
against any part of the Properties, which would render such Property a Defective
Property.
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6.5. Existing Leases, Agreements, Etc. Other than any agreements
provided to Purchaser prior to the execution of this Agreement and listed on the
schedule attached hereto as Exhibit E, there are no other material agreements
affecting the Properties which will be binding on Purchaser subsequent to the
Closing Date, which Purchaser cannot terminate.
6.6. Utilities, Etc. To Seller's knowledge, all utilities and services
necessary for the use and operation of the Properties (including, without
limitation, road access, gas, water, electricity and telephone) are available
thereto, are of sufficient capacity to meet adequately all needs and
requirements necessary for the current use and operation of the Properties and
for their respective intended purposes. To Seller's knowledge, no fact,
condition or proceeding exists which would result in the termination or material
impairment of the furnishing of such utilities to the Properties.
6.7. Compliance with Law. To Seller's knowledge, except as set forth on
Exhibit D attached hereto, (i) the Properties and the current use and operation
thereof do not violate any material federal, state, municipal and other
governmental statutes, ordinances, by-laws, rules, regulations or any other
legal requirements, including, without limitation, those relating to
construction, occupancy, zoning, subdivision, land use, adequacy of parking,
environmental protection, occupational health and safety and fire safety
applicable thereto; and (ii) there are presently in effect all material
licenses, permits and other authorizations necessary for the current use,
occupancy and operation thereof (including liquor license, if required). Except
as disclosed to Purchaser, Seller has not received written notice of any
threatened request, application, proceeding, plan, study or effort which would
materially adversely affect the current use or zoning of either of the
Properties or which would materially adversely modify or realign any adjacent
street or highway.
6.8. Taxes. To Seller's knowledge, other than the amounts disclosed by
tax bills (copies of which have been delivered by Seller to Purchaser prior to
the execution of this Agreement), no taxes or special assessments of any kind
(special, bond or otherwise) are or have been levied with respect to either of
the Properties, or any portion thereof, which are outstanding or unpaid, other
than amounts not yet due and payable or, if due and payable, not yet delinquent.
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6.9. Not A Foreign Person. Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
6.10. Hazardous Substances. Except as set forth on Exhibit D attached
hereto or as described in any environmental report delivered to Purchaser
(including, without limitation, the environmental site assessments set forth on
Exhibit D), to Seller's knowledge, Seller has not stored or disposed of (or
engaged in the business of storing or disposing of) or has released or caused
the release of any hazardous waste, contaminants, oil, radioactive or other
material on either of the Properties, or any portion thereof, the removal of
which is required or the maintenance of which is prohibited or penalized by any
applicable Federal, state or local statutes, laws, ordinances, rules or
regulations, and, to Seller's knowledge, except as set forth on Exhibit D
attached hereto or as described in any environmental report delivered to
Purchaser (including, without limitation, the environmental site assessments set
forth on Exhibit D), the Properties are free from any such hazardous waste,
contaminants, oil, radioactive and other materials, except any such materials
maintained in the ordinary course of a hotel business in accordance with
applicable law.
6.11. Insurance. Seller has not received any written notice from any
insurance carrier of defects or inadequacies in the Properties which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.12. Ownership. All Assets, Contracts, FF&E, Intangible Property and
Real Property are owned by Seller and are assignable and transferable without
the consent of any third party (or, if any such consent is required, such
consent shall be obtained no later than the Closing), and there are no capital
leases, except as set forth on Exhibit E.
The representations and warranties made in this Agreement by Seller
shall be deemed remade by Seller as of the Closing Date with the same force and
effect as if made on, and as of, such date.
Except as otherwise expressly provided in this Agreement or any
documents to be delivered to Purchaser at the Closing, Seller disclaims the
making of any representations or warranties, express or implied, regarding the
Properties or matters affecting the Properties, whether made by Seller, on
Seller's behalf or
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otherwise, including, without limitation, the physical condition of the
Properties, title to or the boundaries of the Real Property, pest control
matters, soil conditions, the presence, existence or absence of hazardous
wastes, toxic substances or other environmental matters, compliance with
building, health, safety, land use and zoning laws, regulations and orders,
structural and other engineering characteristics, traffic patterns, market data,
economic conditions or projections, and any other information pertaining to the
Properties or the market and physical environments in which they are located.
Without negating the covenants, representations and warranties of Seller under
this Agreement, Purchaser acknowledges (i) that Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property and (ii) that Purchaser is not relying upon any
statements, representations or warranties of any kind, other than those
specifically set forth in this Agreement or in any document to be delivered to
Purchaser at the Closing made by Seller. Without negating the covenants,
representations and warranties of Seller under this Agreement, Purchaser further
acknowledges that it has not received from or on behalf of Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
third party accounting, tax, legal, architectural, engineering, property
management and other advisors. Subject to the provisions of this Agreement,
Purchaser shall purchase the Properties in their "as is" condition on the
Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce Seller to enter into this Agreement, Purchaser represents and
warrants to Seller as follows:
7.1. Status and Authority of Purchaser. Purchaser is a Tennessee
limited partnership duly organized, validly existing and in trust good standing
under the laws of the State of Tennessee and has all requisite power and
authority under the laws of such state and under its charter documents to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Purchaser has duly qualified and is in good
standing as a foreign limited partnership in each jurisdiction in which the
nature of the business conducted by it requires such qualification.
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7.2. Action of Purchaser. Purchaser has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
Lease, and upon the execution and delivery of any document to be delivered by
Purchaser on or prior to the Closing Date such document shall constitute the
valid and binding obligation and agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
7.3. No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement nor the Lease by Purchaser, nor compliance with
the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of Purchaser pursuant to the terms of any indenture, mortgage, deed of
trust, note, evidence of indebtedness or any other agreement or instrument by
which Purchaser is bound.
7.4. Litigation. No investigation, action or proceeding is pending and,
to Purchaser's knowledge, no action or proceeding is threatened and no
investigation looking toward such an action or proceeding has begun, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
7.5. No Conflicts. Neither the issuance, sale and delivery by Purchaser
of the LP Units, the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby by Purchaser, nor the
redemption of LP Units for Redemption Shares (as defined in the LP Agreement) by
Seller will conflict with or result in a material breach or violation of, or
constitute a default under the charter, bylaws, certificate of limited
partnership or LP Agreement, as the case may be, of the REIT or Purchaser; any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the REIT or Purchaser is a party or to which
they, either of them, any of their respective properties or other assets is
subject; or any applicable material statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to the REIT or
Purchaser.
7.6. REIT Status. The REIT is a "qualified real estate
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investment trust" as defined in Section 856 of the Code.
7.7. REIT Filings. The private placement memorandum delivered by
Purchaser to Seller on September 18, 1997 with respect to the REIT does not
include, as of such date, any untrue statement of a material fact or omit to
state any material fact required to be stated or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.
The representations and warranties made in this Agreement by Purchaser
shall be deemed remade by Purchaser as of the Closing Date with the same force
and effect as if made on, and as of, such date.
SECTION 8. COVENANTS OF SELLER AND PURCHASER.
8.1. Covenants of Seller. Seller hereby covenants with
Purchaser between the date of this Agreement and the Closing Date
as follows:
(a) Upon learning of any material change in any condition with respect
to either of the Properties or of any event or circumstance which makes any
representation or warranty of Seller to Purchaser under this Agreement untrue or
misleading in any material respect, promptly to notify Purchaser thereof
(Purchaser agreeing, on learning of any such fact or condition, promptly to
notify Seller thereof).
(b) To continue or cause to continue to operate each of the Properties
as an "AmeriSuites" hotel, in a good and businesslike fashion consistent with
its past practices and to cause each of the Properties to be maintained in good
working order and condition in a manner consistent with its past practice.
(c) To provide to Purchaser, promptly upon reasonable request, such
unaudited financial and other information and certifications of Seller with
respect to the Properties as Purchaser may from time to time reasonably request
in order to comply with any applicable securities laws and/or any rules,
regulations or requirements of the Securities and Exchange Commission and, if
required or requested, to permit Purchaser to incorporate by reference any
information included in filings made by Seller with the Securities and Exchange
Commission.
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(d) To deliver to Purchaser the items set forth in Section 4.1 and
Section 4.4.
8.2. Covenants of Purchaser. Purchaser hereby covenants with
Seller on and as of the Closing Date as follows:
(a) To deliver to Seller the items set forth in Section 5.2.
SECTION 9. CLOSING COSTS.
9.1. Closing Costs. Each of the parties hereto shall pay its own
expenses in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, any legal and accounting fees, the costs
and expenses of preparing engineering and environment reports, market studies
and appraisals, the cost of the Surveys, Title Commitments, zoning reports, UCC
financing statement search reports, environmental audits, zoning reports,
structural engineering reports, appraisals and the like, whether or not the
transactions contemplated hereby are consummated (but subject, however, to the
provisions of Section 2.3, with respect to items which Purchaser delivers to
Seller at Seller's request). Seller and Purchaser shall each pay 50% of all
state and local sales, transfer, excise, value-added or other similar taxes, and
all recording and filing fees that may be imposed by reason of the sale,
transfer, assignment, delivery and leasing (other than any tax imposed in
connection with the recording of a memorandum of lease, which amounts shall be
paid pursuant to the terms of the applicable Lease) of the Properties.
SECTION 10. DEFAULT.
10.1. Default by Seller. If (a) Seller shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Seller shall fail to perform any of the material
covenants and agreements contained herein to be performed by Seller and such
failure continues for a period of ten (10) days after notice thereof from
Purchaser, or (c) Seller shall be in default under (x) that certain Second
Purchase and Sale Agreement, dated of even date herewith, or (y) that certain
Third Purchase and Sale Agreement, dated of even date herewith, each between
Seller and Purchaser, Purchaser may, (i) sue for specific performance and
damages, (ii) sue for damages without specific performance (with or without
terminating this Agreement and receiving a refund of the Deposit, and all
interest thereon) or
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(iii) exercise any other right or remedy at law or in equity; provided, however,
that Purchaser shall in no event be entitled to monetary damages in excess of
the amount of the Deposit.
10.2. Default by Purchaser. If (a) Purchaser shall have made any
representation or warranty herein which shall be untrue or misleading in any
material respect, or (b) Purchaser shall fail to perform any of the covenants
and agreements contained herein to be performed by it and such failure shall
continue for a period of ten (10) days after notice thereof from Seller, or (c)
Purchaser shall be in default under (x) that certain Second Purchase and Sale
Agreement, dated of even date herewith, or (y) that certain Third Purchase and
Sale Agreement, dated of even date herewith, each between Seller and Purchaser,
Seller may, as its sole and exclusive remedy at law and in equity, terminate
this Agreement. In the event that Seller shall so terminate this Agreement, the
Deposit, together with all interest accrued thereon, shall be retained by
Seller, as liquidated damages and not as a penalty, whereupon Purchaser shall,
except as expressly provided herein, have no further monetary or nonmonetary
obligations hereunder, other than with respect to obligations which expressly
survive the termination hereof (which obligations shall not include the
obligation to purchase the Properties hereunder).
SECTION 11. RIGHT OF FIRST OFFER; COMMITMENT TO SELL.
11.1. The Purchase and Sale of the Properties hereunder shall not be
deemed a purchase and sale of a Right of First Offer Hotel or an Option Hotel
(as defined in the Amended Agreement) pursuant to Section 11 of the Amended
Agreement.
SECTION 12. MISCELLANEOUS.
12.1. Agreement to Indemnify. (a) Subject to any express provisions of
this Agreement to the contrary, Seller shall indemnify and hold harmless
Purchaser from and against any and all obligations, claims, losses, damages,
liabilities, and expenses (including, without limitation, reasonable attorneys'
and accountants' fees and disbursements) arising out of (x) any damage to
property of others or injury to or death of any person or any claims for any
debts or obligations occurring on or about or in connection with any Property or
any portion thereof at any time or times prior to the Closing, (y) any
liabilities for taxes due from Seller which shall have accrued prior to the
Closing in connection
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with any Property and (z) any failure by Seller to comply with applicable "bulk
sale" laws.
(b) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(c) The provisions of this Section 12.1 shall survive the Closing and
the termination of this Agreement.
12.2. Brokerage Commissions. Each of the parties hereto represents to
the other parties that it dealt with no broker, finder or like agent in
connection with this Agreement or the transactions contemplated hereby, other
than Merrill Lynch & Co. Seller shall be solely responsible for and shall
indemnify and hold harmless Purchaser and its respective legal representatives,
heirs, successors and assigns from and against any loss, liability or expense,
including, reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by Merrill Lynch & Co. or any other
broker, finder or like agent other than such loss, liability or expense
resulting from Purchaser's breach of its representations made in this Section
12.2. The provisions of this Section 12.2 shall survive the Closing and any
termination of this Agreement.
12.3. Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated to any third party without the consent of the other
parties, which consent shall not be unreasonably withheld, delayed or
conditioned, except to consultants, advisors, investors, lenders, underwriters
and other parties reasonably necessary to consummate the transactions required
hereby and as required by law
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or contractual obligations of such parties to third parties. No party, or its
employees shall trade in the securities of any parent or affiliate of Seller or
of Purchaser until a public announcement of the transactions contemplated by
this Agreement has been made. No party shall record this Agreement or any notice
thereof.
12.4. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
All such notices shall be addressed,
if to Seller to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
[Telecopier No. (201) 882-8577]
and
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
[Telecopier No. (201) 882-8577]
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esq.
[Telecopier No. (212) 821-8111]
if to Purchaser, to:
Equity Inns Partnership, L.P.
4735 Spottswood, Suite 102
Memphis, Tennessee 38117
Attn: Mr. Phillip H. McNeill, Sr.
[Telecopier No. (901) 761-1485]
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
Attn: Gerald R. Best, Esq.
[Telecopier No. (703) 714-7410]
By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
12.5. Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision
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or any other provision hereof. This Agreement may not be amended, nor shall any
waiver, change, modification, consent or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
12.6. Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except that, after the Closing, (i) Seller
may assign its surviving rights, if any, under this Agreement to Tenant or an
Affiliate of Seller, and Purchaser may assign its rights and obligations
hereunder to an Affiliate of Purchaser, provided that Purchaser remain liable
for its obligations hereunder. The provisions of this Agreement shall not merge
with delivery of the deeds and shall survive Closing. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. This
Agreement is not intended and shall not be construed to create any rights in or
to be enforceable in any part by any other persons.
12.7. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
12.8. Counterparts, Etc. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
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same instrument. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and shall supersede and take
the place of any other instruments purporting to be an agreement of the parties
hereto relating to the subject matter hereof.
12.9. Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State of New York
applicable to contracts between residents of the State of New York which are to
be performed entirely within the State of New York, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.10. Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
12.11. Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.
-27-
<PAGE>
12.12. Section and Other Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
12.13. No Oral Modifications. This Agreement may not be amended, nor
shall any waiver, change, modification, consent or discharge be effected, except
by an instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
12.14. Incorporation by Reference. All of the provisions applicable to
the Properties set forth in Paragraph 7 of the First Amendment, Paragraph 2 of
the Second Amendment, and Paragraph 6 of the Third Amendment, are hereby
incorporated by reference as if fully set forth herein and are ratified and
confirmed by Seller and Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLER:
PRIME HOSPITALITY CORP.
By: /s/ David A. Simon
Its: President
PURCHASER:
EQUITY INNS PARTNERSHIP, L.P.
By: Equity Inns Trust,
its general partner
By: /s/ Howard A. Silver
Its:Chief Financial Officer
The undersigned hereby acknowledges its agreement to the provisions of Section
3.2(e) hereof.
EQUITY INNS TRUST
By: /s/ Howard A. Silver
Its: Chief Financial Officer
<PAGE>
Exhibit A
The Properties
<TABLE>
<CAPTION>
Allocable Deposit
Location Purchase Price Radius Restriction Allocation
- -------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
1.1.1 Cincinnati, $7,607,493 5 miles--Restricted $ 0
OH/Blue Ash radius does not
include the Fields
Ertl sub market
1.1.2 Indianapolis, $ 7,337,955 5 miles--Restricted $436,250
IN/Keystone radius does not
include the Meridian
sub market but does
include the Castleton
sub market
</TABLE>
<PAGE>
EXHIBIT 10.5
LEASE AGREEMENT
DATED AS OF DECEMBER __, 1997
BETWEEN
EQUITY INNS PARTNERSHIP, L.P.
AS LESSOR
AND
CALDWELL HOLDING CORP.
AS LESSEE
AMERISUITES HOTEL
CITY/COUNTY OF ________________,
STATE OF ______________
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
1.1. Leased Property......................................................1
1.2. Term.................................................................2
1.3. Lease Restatement\Multi-Property Loan Transaction....................2
ARTICLE 2
2.1. Definitions..........................................................3
ARTICLE 3
3.1. Rent................................................................15
3.2. Confirmation of Percentage Rent.....................................18
3.3. Additional Charges..................................................19
3.4. Rent Payable Without Deduction......................................19
3.5. Conversion of Property..............................................19
3.6. Budgets.............................................................19
3.7. Approval of Annual Budget...........................................21
3.8. Capital Improvements................................................21
3.9. Books and Records...................................................22
ARTICLE 4
4.1. Payment of Impositions..............................................22
4.2. Notice of Impositions...............................................23
4.3. Adjustment of Impositions...........................................23
4.4. Utility Charges.....................................................24
4.5. Insurance Premiums..................................................24
4.6. Ground Rent.........................................................24
4.7. Franchise Fees......................................................24
ARTICLE 5
5.1. No Termination, Abatement, etc......................................24
5.2. Abatement Procedures................................................25
ARTICLE 6
6.1. Ownership of the Leased Property....................................25
6.2. Inventory and FF&E..................................................25
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6.3. Lessor's Representations............................................25
6.4. Lessee's Representations............................................25
6.5. Lessor's Lien.......................................................26
ARTICLE 7
7.1. Condition of the Leased Property....................................26
7.2. Use of the Leased Property..........................................26
7.3. Lessor to Grant Easements, etc......................................28
ARTICLE 8
8.1. Compliance with Legal and Insurance Requirements, etc...............28
8.2. Legal Requirement Covenants.........................................28
8.3. Environmental Covenants.............................................29
ARTICLE 9
9.1. Maintenance and Repair..............................................31
9.2. Encroachments, Restrictions, etc....................................33
ARTICLE 10
10.1. Alterations.........................................................33
10.2. Salvage.............................................................34
10.3. Joint Use Agreements................................................34
ARTICLE 11
11.1. Liens...............................................................34
ARTICLE 12
12.1. Permitted Contests..................................................34
ARTICLE 13
13.1. General Insurance Requirements......................................35
13.2. Responsibility for Premiums.........................................37
13.3. Replacement Cost....................................................37
13.4. Workers' Compensation...............................................37
13.5. Waiver of Subrogation...............................................37
13.6. Form Satisfactory, etc..............................................37
13.7. Increase in Limits..................................................38
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13.8. Blanket Policy......................................................38
13.9. Separate Insurance..................................................38
13.10. Reports on Insurance Claims.........................................38
ARTICLE 14
14.1. Insurance Proceeds..................................................38
14.2. Reconstruction in the Event of Damage or Destruction Covered by
Insurance.........................................................39
14.3. Reconstruction in the Event of Damage or Destruction not Covered
by Insurance......................................................40
14.4. Inventory...........................................................40
14.5. Abatement of Rent...................................................40
14.6. Damage Near End of Term.............................................40
14.7. Waiver..............................................................41
ARTICLE 15
15.1. Definitions.........................................................41
15.2. Parties' Rights and Obligations.....................................41
15.3. Total Taking........................................................41
15.4. Allocation of Award.................................................41
15.5. Partial Taking......................................................42
15.6. Temporary Taking....................................................42
ARTICLE 16
16.1. Events of Default...................................................43
16.2. Surrender...........................................................46
16.3. Damages.............................................................46
16.4. Waiver..............................................................47
16.5. Application of Funds................................................47
ARTICLE 17
17.1. Lessor's Right to Cure Lessee's Default.............................47
ARTICLE 18
18.1. Provisions Relating to Purchase of the Leased Property..............48
ARTICLE 19
19.1. Personal Property Limitation........................................48
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<PAGE>
19.2. Sublease Rent Limitation............................................49
19.3. Sublease Tenant Limitation..........................................49
19.4. Lessee Ownership Limitation.........................................49
19.5. Lessee Officer and Employee Limitations.............................49
19.6. Payments to Affiliates of Lessee and Use of Complimentary Rooms.....49
19.7. Management Agreement................................................50
ARTICLE 20
20.1. Holding Over........................................................50
ARTICLE 21
21.1. Risk of Loss........................................................51
ARTICLE 22
22.1. Indemnification.....................................................51
ARTICLE 23
23.1. Subletting and Assignment...........................................52
23.2. Attornment..........................................................53
ARTICLE 24
24.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants........................................53
ARTICLE 25
25.1. Lessor's Right to Inspect...........................................54
ARTICLE 26
26.1. No Waiver...........................................................54
ARTICLE 27
27.1. Remedies Cumulative.................................................54
ARTICLE 28
28.1. Acceptance of Surrender.............................................55
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<PAGE>
ARTICLE 29
29.1. No Merger of Title..................................................55
ARTICLE 30
30.1. Conveyance by Lessor................................................55
30.2. Mortgage Subordination, Attornment and Nondisturbance...............55
ARTICLE 31
31.1. Quiet Enjoyment.....................................................56
ARTICLE 32
32.1. Notices.............................................................56
ARTICLE 33
33.1. Appraisers..........................................................57
ARTICLE 34
34.1. Lessor May Grant Mortgages..........................................58
34.2. Lessee's Right to Cure..............................................58
34.3. Grant of Easements or Imposition of Restrictions....................58
ARTICLE 35
35.1. Miscellaneous.......................................................59
35.2. Transition Procedures...............................................59
35.3. Waiver of Presentment, etc..........................................60
ARTICLE 36
36.1. Memorandum of Lease.................................................60
ARTICLE 37
37.1. Transfer of Assets of Lessee........................................60
ARTICLE 38
38.1. Compliance With Franchise Agreement.................................60
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<PAGE>
ARTICLE 39
39.1. Capital Expenditures and Reserves...................................61
ARTICLE 40
40.1. Definitions.........................................................62
40.2. Performance Standard................................................62
ARTICLE 41
41.1. Arbitration.........................................................63
ARTICLE 42
42.1. Right of First Offer................................................63
42.2. Sale of Leased Property by Lessor...................................63
42.3. Termination of Lease................................................64
42.4. Substitute Franchisee...............................................64
42.5. Limitation of Terminations..........................................65
ARTICLE 43
43.1. Change in REIT Status or REIT Regulations...........................65
ARTICLE 44
44.1. Lease Renewal.......................................................65
vi
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (as may be modified, amended or restated,
hereinafter called "Lease"), made as of the ______ day of _______, 1997, between
EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership (hereinafter
called "Lessor"), and CALDWELL HOLDING CORP., a Delaware corporation
(hereinafter called "Lessee"), provides as follows:
Intending to be legally bound, Lessor and Lessee agree that Lessor, in
consideration of the payment of rent by Lessee to Lessor, the covenants and
agreements to be performed by Lessee, and upon the terms and conditions
hereinafter stated, does hereby rent and lease unto Lessee, and Lessee does
hereby rent and lease from Lessor, the Leased Property.
ARTICLE 1
1.1. Leased Property. The "Leased Property" is comprised of Lessor's
interest in the following:
(a) the parcel of land or ground leasehold interests
described on Exhibit A attached hereto and by reference incorporated herein (the
"Land");
(b) all buildings, structures and other improvements and
structures of every kind including, but not limited to, walls, fences,
landscaping, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and offsite), parking areas and roadways appurtenant
to such buildings and structures presently situated upon affixed or appurtenance
the Land (collectively, the "Leased Improvements");
(c) all easements, rights-of-way, privileges, licenses and
appurtenances relating to the Land and the Leased Improvements;
(d) all appliances, machinery, devices, fixtures,
appurtenances, equipment, furniture, furnishings and articles of tangible
personal property of every kind and nature whatsoever (excluding Inventory) and
located in or at, or used exclusively in connection with the ownership,
operation or maintenance of the Land and the Leased Improvement (the "FF&E");
(e) all service contracts, equipment leases and other
arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Hotel;
(f) all transferable or assignable permits, certificates of
occupancy, operating permits, sign permits, development rights and approvals,
certificates, licenses, warranties and guarantees, the contracts, telephone
exchange numbers identified with the Hotel held by Lessor and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character with respect to such property held by Seller, except
for all trademarks, trade names, copyrights, patents or technical processes,
including, without limitation, any brand name, logos and designs, owned or used
by Seller with respect to such property; and
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<PAGE>
(g) all books, records and files relating to the leasing,
maintenance, management or operation of the Hotel.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, FINANCING INSTRUMENTS, MORTGAGES,
DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH WOULD BE
DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.
1.2. Term. The term of the Lease (the "Term") shall commence on the
date hereof (the "Commencement Date") and shall end on the tenth (10th)
anniversary of the last day of the month in which the Commencement Date occurs,
unless sooner terminated or later renewed and extended in accordance with the
provisions hereof.
1.3. Lease Restatement\Multi-Property Loan Transaction. At the Lessor's
request, the Lessee shall reasonably cooperate with the Lessor in any effort by
Lessor to finance the Leased Property in any multi-property mortgage loan
transaction (including, without limitation, a rated collateralized mortgage
backed securities transaction), which cooperation shall include, without
limitation:
(1) Amending and restating this Lease (and any Other Leases
specified by Lessor) with a new special purpose, bankruptcy
remote Affiliate of Lessor, as landlord, and a new special
purpose, bankruptcy remote Affiliate of Lessee, as tenant, on
the same economic terms as this Lease, in the form of this
Lease (with any reasonable changes required by the lender that
do not materially or adversely affect the lessee).
(2) Any such amendment and restatement of this Lease shall be
removed from its previous Cross Default Pool and shall be
cross-defaulted with all of the Other Leases in the collateral
pool for such loan (the "Collateralized Cross Default Pool")
up to a maximum of twenty Affiliated Leases within each
Collateralized Cross Default Pool.
(3) The Lessor shall pay the reasonable out of pocket expenses of
the Lessee (including reasonable attorneys' fees) with respect
to such cooperation under this section.
ARTICLE 2
2.1. Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms
2
<PAGE>
not otherwise defined herein have the meanings assigned to them in accordance
with generally accepted accounting principles as are at the time applicable, (c)
all references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision. In addition, as used in this Lease, the
following terms shall have the following meanings:
Additional Charges: As defined in Section 3.3 below.
Affiliate: The term "Affiliate" of a Person shall mean (a) any Person
that, directly or indirectly, Controls or is Controlled by or is under common
Control with such Person, (b) any other Person that owns, beneficially, directly
or indirectly, more than fifty percent (50%) of the outstanding capital stock,
shares or equity interests of such Person, or (c) any officer, director,
employee, partner or trustee of such Person or any Person controlling,
controlled by or under common control with such Person (excluding trustees and
Persons serving in similar capacities who are not otherwise an Affiliate of such
Person).
Affiliated Leases: This Lease and the Other Leases, collectively.
Annual Budgets: The Operating Budget and Capital Budget prepared,
delivered and approved in accordance with Section 3.6 below.
Annual Revenue Computation: As defined in Exhibit C attached hereto.
Average Consumer Price Index: As defined in Section 3.1 below.
Award: As defined in Section 15.1(c) below.
Base Rate: The rate of interest announced publicly by Citibank, N.A.,
in New York, New York, from time to time, as such bank's prime rate. If no such
rate is announced or becomes discontinued, then such other prime rate of such
other commercial or savings bank which is a Lending Institution as Lessor may
reasonably designate.
Base Rent: As defined in Article 3 below.
Beverage Sales: Gross revenue from (i) the sale of wine, beer, liquor
or other alcoholic beverages, whether sold in the bar or lounge, delivered to a
guest room, sold at meetings or banquets or at any other location at the Leased
Property or from (ii) non-alcoholic beverages sold in the bar or lounge. Such
revenues shall not include the following:
(a) Any gratuity or service charge added to a customer's bill
or statement in lieu of a gratuity which is paid to an employee;
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<PAGE>
(b) Any revenues that are subsequently credited, rebated or
refunded in the ordinary course of business; and
(c) Sales taxes or taxes of any other kind imposed on the sale
of alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of New York, New York, or in
the municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 3.6(b) below.
Capital Expenditure Reserve Account: As defined in Section 39.1 below.
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Improvements: Capital improvements to the Facility, determined
in accordance with GAAP, to (A) the external walls and internal load-bearing
walls (other than windows and plate glass) of the Facility; (B) the roof of the
Facility; (C) private roadways, parking areas, sidewalks and curbs appurtenant
thereto (other than cleaning, patching and striping); (D) mechanical, electrical
and plumbing systems that service common areas, entire wings of the Facility or
the entire Facility, including conduit and ductware connected thereto; and (E)
items of the types described on Exhibit B attached hereto as "Capital Items" of
the Facility.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Claims: As defined in Section 12.1 below.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2 above.
Condemnation, Condemnor: As defined in Section 15.1 below.
Consumer Price Index: The "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Items for Urban Consumers (1982-1984 = 100) (CPI-U).
Control: (Including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
4
<PAGE>
Cross Default Pool: Pools of Affiliated Leases that are cross
defaulted under Section 16.1(a) of this Lease.
Collateralized Cross Default Pool: Pools of Affiliated Leases that are
cross defaulted under Section 1.3.
Date of Taking: As defined in Section 15.1(b) below.
EBITDA: As defined in Section 42.3 below.
Environmental Authority: Any department, agency or other body or
component of any Government that exercises any form of jurisdiction or authority
under any Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All existing and future applicable federal, state,
local and foreign laws and regulations relating to pollution of the environment
(including without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including without limitation laws and regulations
relating to emissions, discharges, Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and
TSCA.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or criminal fine, and
any court costs and reasonable amounts for attorney's fees, fees for witnesses
and experts, and costs of investigation and preparation for defense of any claim
or any Proceeding, regardless of whether such Proceeding is threatened in
writing, pending or completed, that is asserted against or imposed upon Lessor,
Lessee, any Predecessor or the Leased Property and arising out of:
(a) Failure of Lessee, Lessor, any Predecessor or the Leased
Property to comply at any time with all Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property in violation of Environmental Laws;
(c) A Release at any time of any Hazardous Materials on, in,
at, under or in any way affecting the Leased Property;
5
<PAGE>
(d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental Law
similar to CERCLA; or
(e) Any and all claims for injury or damage to Persons or
property arising out of exposure to Hazardous Materials originating or located
at the Leased Property, or resulting from operation thereof.
Equity Inns: Equity Inns, Inc., a Tennessee corporation, and its
successors and assigns.
Event of Default: As defined in Section 16.1 below.
Excess Personal Property: As defined in Section 19.1 below.
Facility: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
Fair Market Rental: The fair market rental of the Leased Property means
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Lease for the term in question, (a) assuming that
Lessee is not in default thereunder and (b) determined in accordance with the
appraisal procedures set forth in Article 33 or in such other manner as shall be
mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased Property means
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article 33 or in such other manner as shall be
mutually acceptable to Lessor and Lessee, (c) assuming that such seller must pay
customary closing costs and title premiums, and (d) taking into account the
positive or negative effect on the value of the Leased Property attributable to
the interest rate, amortization schedule, maturity date, prepayment penalty and
other terms and conditions of any encumbrance that is assumed by the transferee.
In addition, in determining the Fair Market Value with respect to damaged or
destroyed Lease Property such value shall be determined as if such Leased
Property has not been so damaged or destroyed.
FF&E: As defined in Section 1.1.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year: The 12-month period from January 1 to December 31.
Food Sales: Gross revenue from the sale, for on-site consumption, of
food and non-alcoholic beverages sold at the Leased Property, including in
respect to guest rooms, banquet rooms, meeting rooms and other similar rooms.
Such revenues shall not include the following:
6
<PAGE>
(a) Vending machine sales;
(b) Any gratuity or service charges added to a customer's bill
or statement in lieu of a gratuity which is paid to an employee;
(c) Non-alcoholic beverages sold from the bar or lounge;
(d) Sales taxes or taxes of any other kind imposed on the sale
of food or nonalcoholic beverages;
(e) Any revenues that are subsequently credited, refunded or
rebated in the ordinary course of business; and
(f) Amounts representing the value or cost of food or
nonalcoholic beverages provided on a complimentary basis to onsite employees of
the Hotel.
Franchise Agreement: Any franchise agreement or license agreement with
a franchisor under which the Facility is operated.
GAAP: U.S. generally accepted accounting principles.
Government: The United States of America, any state, district or
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.
Gross Operating Expenses: All salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees at the Facility, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1 below,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, food, beverages, laundry
service expense, the cost of Inventories and fixed asset supplies, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation of
the Facility incurred by Lessee in accordance with the provisions hereof
(excluding, however, (1) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (2) expenditures by Lessor pursuant to Article 13 and (3) payments
on any Mortgage or other mortgage or security instrument on the Leased
Property); all determined in accordance with GAAP and the Uniform System. No
part of Lessee's central office overhead or general or administrative expense
(as opposed to that of the Facility) shall be deemed to be a part of Gross
Operating Expenses, as herein provided. Reasonable out-of-pocket expenses of
Lessee incurred for the account of or in connection with the Hotel operations,
including but not limited to postage, telephone charges and reasonable travel
expenses of employees, officers and other representatives and consultants of
7
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Lessee and its Affiliates, shall be deemed to be a part of Gross Operating
Expenses and such Persons shall be afforded reasonable accommodations, food,
beverages, laundry, valet and other such services by and at the Hotel without
charge to such Persons or Lessee.
Gross Operating Profit: For any Fiscal Year, the excess of Gross
Revenues for such Fiscal
Year over Gross Operating Expenses for such Fiscal Year.
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Facility
(including gross Room Revenues, Food Sales, Beverage Sales, Other Income and
rentals or other payments from tenants, lessees, licensees or concessionaires
but not including their gross receipts) whether on a cash basis or credit, paid
or collected, determined in accordance with generally accepted accounting
principles and the Uniform System, excluding, however: (i) funds furnished by
Lessor, (ii) federal, state and municipal excise, sales, and use taxes collected
directly from patrons and guests or as a part of the sales price of any goods,
services or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments, (iii)
gratuities, (iv) proceeds of insurance and condemnation, (v) proceeds from sales
other than sales in the ordinary course of business, (vi) all loan proceeds from
financing or refinancings of the Hotel or interests therein or components
thereof, (vii) judgments and awards, except any portion thereof arising from
normal business operations of the hotel, and (viii) items constituting
"allowances" under the Uniform System.
Hazardous Materials:
(a) "Hazardous Waste" as defined in RCRA or in any
Environmental Law;
(b) "Hazardous Substances" as defined in CERCLA or in any
Environmental Law;
(c) Toxic Substances, as defined in TSCA or in any
Environmental Law;
(d) Insecticides, Fungicides, or Rodenticides, as defined in
FIFRA or in any Environmental Law;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyls, asbestos and urea formaldehyde; and
(f) Any other regulated substances under any Environmental
Law.
Holder: The beneficiary of any Mortgage, or purchaser at foreclosure
or by deed in lieu thereof.
Hotel: The Facility.
8
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Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), water, sewer or other rents and
charges, excises, tax inspection, authorization and similar fees and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term hereof may be
assessed or imposed on or with respect to or be a lien upon (a) Lessor's
interest in the Leased Property, (b) the Leased Property, or any part thereof or
any rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity conducted
on or in connection with the Leased Property, or the leasing or use of the
Leased Property or any part thereof by Lessee. Nothing contained in this
definition of Impositions shall be construed to require Lessee to pay (1) any
tax based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Lessor or any other Person, or (2) any net revenue tax of
Lessor or any other Person, or (3) any tax imposed with respect to the sale,
exchange or other disposition by Lessor of any Leased Property or the proceeds
thereof, or (4) any single business, gross receipts (other than a tax on any
rent received by Lessor from Lessee), transaction, privilege or similar taxes as
the same relate to or are imposed upon Lessor, except to the extent that any
tax, assessment, tax levy or charge that Lessee is obligated to pay pursuant to
the first sentence of this definition and that is in effect at any time during
the Term hereof is totally or partially repealed, and a tax, assessment, tax
levy or charge set forth in clause (1) or (2) is levied, assessed or imposed
expressly in lieu thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
Party pursuant to Article 22 below.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, including, but not limited to,
linens and other non-depreciable personal property, and including any property
of the type described in Section 1221(1) of the Code.
Land: As defined in Article 1 above.
Lease: This Lease, as may be from time to time amended or restated.
Leased Improvements; Leased Property: Each as defined in Article 1
above.
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Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether or not hereafter enacted and in force, including (a) all laws, rules or
regulations pertaining to the environment, occupational health and safety and
public health, safety or welfare, and (b) any laws, rules or regulations that
may (1) require repairs, modifications or alterations in or to the Leased
Property or (2) in any way adversely affect the use and enjoyment thereof; and
all permits, licenses and authorizations and regulations relating thereto and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, credit company, federally
insured commercial or savings bank, national banking association, savings and
loan association, investment bank, employees welfare, pension or retirement fund
or system, corporate profit sharing or pension trust, college or university, or
real estate investment trust, including any corporation qualified to be treated
for federal tax purposes as a real estate investment trust, such trust having a
net worth of at least $10,000,000.
Lessee: The Lessee designated on this Lease and its permitted
successors and assigns.
Lessee Indemnified Party: Prime, Lessee, any Affiliate of Lessee, any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest (including a
stockholder's interest) in Lessee, the officers, directors, stockholders,
members, partners, employees, agents and representatives of Lessee and any
corporate stockholder, agent, or representative of Lessee, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, stockholder, members, partners, employee, agent or representative.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Equity Inns Trust, Equity Inns, Inc., Lessor,
any Affiliate of Lessor, any other Person against whom any claim for
indemnification may be asserted hereunder as a result of a direct or indirect
ownership interest (including a stockholder's or partnership interest) in
Lessor, the officers, directors, stockholders, members, partners, employees,
agents and representatives of the general partner of Lessor and any partner,
agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, member, partner, employee, agent or representative.
Licenses: As defined in Section 35.2 below.
Management Agreement: As defined in Section 19.7 below.
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Manager: As defined in Section 19.7 below.
Minimum Price. The sum of (a) the equity in the Leased Property at the
time of acquisition of the Leased Property by Lessor (i.e., that portion of the
purchase price of the Leased Property paid by Lessor in cash) plus (b) other
capital expenditures on the Leased Property by Lessor after the date of
acquisition by Lessor plus (c) the unpaid principal balance of all encumbrances
against the Leased Property at the time of purchase of the Leased Property by
Lessee, less (x) all proceeds received by Lessor from any financing or
refinancing of the Leased Property after the date of acquisition by Lessor
(after payment of any debt refinanced and net of any costs and expenses incurred
in connection with such financing or refinancing, including, without limitation,
loan points, commitment fees and commissions and legal fees) and (y) the net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Mortgage: As defined in Section 30.2 below.
Net Present Value: As defined in Section 42.3 below.
Notice: A notice given pursuant to Article 32 below.
Offer Price, Offer Notice: As defined in Section 42.1 below.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer of Lessee
authorized so to sign by the Lessee, or any other Person whose power and
authority to act has been authorized by delegation in writing by any such
officer.
Operating Budget: As defined in Section 3.6(a) below.
Other Income: All revenues, receipts and income of any kind derived
directly or indirectly from or in connection with the Facility and included in
Gross Revenues, other than Room Revenues, Food Sales and Beverage Sales.
Other Leases: Any other leases (excluding this Lease) between the
Lessor or an Affiliate of Lessor, as landlord, and Lessee, Prime or a direct or
indirect subsidiary of Prime, as tenant, for a hotel property.
Other Properties: Any other property (excluding the Leased Property)
encumbered by the Other Leases.
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Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of Base
Rent or Percentage Rent.
Percentage Rent: As defined in Section 3.1(b) below.
Person: Any Government, natural person, corporation, partnership or
other legal entity, including general and limited partnerships, stock companies
or associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
Personal Property Limitation: As defined in Section 19.1 below.
Personal Property Taxes: All personal property taxes imposed on FF&E
(excluding Inventory and other personal property owned by the Lessee).
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by the Lessee,
either contractually or by operation of law, relating to the Leased Property.
Primary Intended Use: As defined in Section 7.2(b) below.
Prime: Prime Hospitality Corp., its successors and assigns.
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
Quarterly Revenues Computation: As defined in Exhibit D attached
hereto.
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general and special
assessments, if any, which are imposed upon the Land, and any improvements
thereon.
REIT: As defined in Section 43.1 below.
Rejectable Offer Price: An amount equal to the greater of (a) the Fair
Market Value, determined as of the applicable purchase date, or (b) the Minimum
Price.
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Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent, Percentage Rent, and Additional
Charges.
Revenues Computations: The Quarterly Revenues Computation and the
Annual Revenues Computation.
Room Revenues: Gross revenue from the rental of guest rooms, whether
to individuals, groups or transients, at the Facility, excluding the following:
(a) the amount of all credits, rebates or refunds to customers,
guests or patrons; and
(b) all sales taxes or any other taxes imposed on the rental of
such guest rooms; and
(c) any fees collected for amenities including, but not
limited to, telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
State: The State or Commonwealth of the United States in which the
Leased Property is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or control, as applicable
(individually, a "Subsidiary").
Substitute Leases: As defined in Section 42.3 below.
Taking: A taking or voluntary conveyance during the Term hereof of all
or part of the Leased Property, or any interest therein, or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
Term: As defined in Section 1.2 above.
Termination Payment: As defined in Section 42.3 below.
TSCA: The Toxic Substances Control Act, as amended.
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Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility such that, in the good faith judgment of Lessee and Lessor, reasonably
exercised, the Facility cannot be operated on a commercially practicable basis
for its Primary Intended Use, taking into account, among other relevant factors,
the number of usable rooms and projected revenues.
Uniform System: The Uniform System of Accounts for Hotels (8th Revised
Edition, 1986) as published by the Hotel Association of New York City, Inc., as
same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility such that, in the good faith judgment of Lessee and Lessor, reasonably
exercised, due to casualty damage or loss through Condemnation, the Facility
cannot function as an integrated hotel facility consistent with standards
applicable to a well maintained and operated hotel.
ARTICLE 3
3.1. Rent. Subject to such rights of offset and abatement expressly set
forth in this Lease, and otherwise without any right of offset or abatement,
Lessee will pay to Lessor in lawful money of the United States of America which
shall be legal tender for the payment of public and private debts, in
immediately available funds, at Lessor's address set forth on the signature page
or at such other place or to such other Person, as Lessor from time to time may
designate in a Notice, all Base Rent, Percentage Rent and Additional Charges,
during the Term, as follows:
(a) Base Rent: During the Term, the annual sum in the amount
set forth on Exhibit C hereto (as adjusted under the terms of this Lease with
respect to increases in the Consumer Price Index) as the "Base Rent" for the
Leased Property, payable in advance in equal, consecutive monthly installments,
on or before the tenth day of each calendar month of the Term ("Base Rent");
provided, however, that the first and last monthly payments of Base Rent shall
be prorated as to any partial month (subject to adjustment as provided in
accordance with the express terms of this Lease); and
(b) Percentage Rent: For each Fiscal Year during the Term
commencing with the Fiscal Year beginning January 1 of the calendar year
including the Commencement Date, Tenant shall pay percentage rent ("Percentage
Rent") quarterly, with respect to the four calendar quarters of each Fiscal Year
(excluding such quarters or portions thereof which precede the Commencement
Date), in an amount calculated by the following formula:
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The amount equal to the Quarterly Revenues Computation (as
defined on Exhibit C attached hereto), less (1) an amount
equal to the Base Rent paid year to date for the applicable
Fiscal Year, less (2) an amount equal to Percentage Rent paid
year to date for the applicable Fiscal Year, equals the
Percentage Rent for the applicable quarter.
Notwithstanding the amounts of Percentage Rent paid quarterly pursuant
to the formula set forth above, for any Fiscal Year during the Term commencing
with the Fiscal Year in which the Commencement Date Occurs, the Percentage Rent
payable under this Lease shall be equal to the amount calculated by the
following formula:
The amount equal to the Annual Revenues Computation (as
defined on Exhibit C attached hereto) less an amount equal to
Base Rent paid with respect to the year to date for the
applicable Fiscal Year equals Percentage Rent for the
applicable Fiscal Year.
(c) Officer's Certificate/Monthly. Within fourteen (14) days
after the last day of each calendar month during the Term, Lessee shall deliver
to Lessor an Officer's Certificate in form reasonably acceptable to Lessor
setting forth for such previous calendar month, (i) ADR, occupancy and RevPAR
forecasts on a rolling twelve month basis, (ii) a summary of ongoing Capital
Improvements being performed or supervised by Lessee and related Capital
Expenditures, (iii) occupancy rates, (iv) status of out of order rooms, (v)
Lessee capitalization and net worth and (vi) such other matters reasonably
requested by Lessor.
(d) Officer's Certificates/Quarterly. Within thirty (30) days
after the last day of each quarter of each Fiscal Year (or part thereof) in the
Term, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor, together with the applicable quarterly Percentage Rent
payment, setting forth the amount of Room Revenues and the calculation of
Percentage Rent accrued and paid for such quarter including the quarterly
Revenues Computation. Such quarterly payments shall be based on the formulas set
forth in Section 3.1(b) above. There shall be no reduction in the Base Rent
regardless of the result of the Revenues Computation.
In addition, on or before March 31 of each year during the Term, Lessee
shall deliver to Lessor an Officer's Certificate reasonably acceptable to Lessor
setting forth the computation of the actual Percentage Rent that accrued for
each quarter of the Fiscal Year that ended on the immediately preceding December
31. Additionally, if the annual Percentage Rent due and payable for any Fiscal
Year (as shown in the applicable Officer's Certificate) exceeds the amount
actually, paid as Percentage Rent by Lessee for such year, Lessee shall pay such
excess to Lessor at the time such certificate is delivered. If the Percentage
Rent actually due and payable for such Fiscal Year is shown by such certificate
to be less than the amount actually paid as Percentage Rent for the applicable
Fiscal Year, Lessor, at Lessee's option, shall reimburse such amount to Lessee
or credit such amount against subsequent months' Base Rent and, to the extent
necessary, subsequent quarters' Percentage Rent payments. Any such credit to
Base Rent shall not be applied for purposes of calculating Percentage Rent
payable for any subsequent quarter.
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Any difference between the annual Percentage Rent due and payable for
any Fiscal Year (as shown in the applicable Officer's Certificate or as adjusted
pursuant to Section 3.1(e) below) and the total amount of quarterly payments for
such Fiscal Year actually paid by Lessee as Percentage Rent, whether in favor of
Lessor or Lessee, shall bear interest at the Overdue Rate, which interest shall
accrue from the due date of the last quarterly payment for the Fiscal Year until
the amount of such difference shall be paid or otherwise discharged. Any such
interest payable to Lessor shall be deemed to be and shall be payable as
Additional Charges.
The obligation to pay Percentage Rent due through the date of
termination of this Lease shall survive the expiration or earlier termination of
the Term, and a final reconciliation, taking into account, among other relevant
adjustments, any adjustments which are accrued after such expiration or
termination date but which related to Percentage Rent accrued prior to such
termination date, and Lessee's good faith best estimate of the amount of any
unresolved contractual allowances, shall be made not later than two years after
such expiration or termination date, but Lessee shall advise Lessor within sixty
(60) days after such expiration or termination date of Lessee's best estimate at
that time of the approximate amount of such adjustments, which estimate shall
not be binding on Lessee or have any legal effect whatsoever; and provided
further that Lessee's failure to give any of the foregoing estimates shall not
constitute a waiver of any rights of Lessee hereunder.
(e) CPI Adjustments. For each Fiscal Year during the Term
beginning with the Fiscal Year after the first full Fiscal Year of the Term, the
Base Rent then in effect, and the threshold dollar amounts of Room Revenues then
included in the Revenues Computations set forth in Section 3.1(b) above, shall
be adjusted as follows:
(1) The Average Consumer Price Index for the twelve months ended on
September 30 of the most recently completed Fiscal Year shall be divided by the
Average Consumer Price Index for the twelve months ended on September 30 of the
prior Fiscal Year;
(2) The new Base Rent for the then current Fiscal Year shall be equal to
the product of the Base Rent in effect in the most recently ended Fiscal Year
and the quotient obtained under subparagraph (1) above;
(3) The new threshold dollar amounts in the applicable Revenues
Computations described in Section 3.1(b) above for the then current Fiscal Year
shall be the product of the threshold dollar amounts of Room Revenues in effect
in the most recently ended Fiscal Year and the quotient obtained in subparagraph
(1) above.
The amount of any adjustment under paragraphs (e)(1)-(3) to Base Rent
and the threshold dollar amounts of Room Revenues for any Fiscal Year shall not
exceed 7% of the Base Rent and threshold dollar amounts of Room Revenues
applicable for the prior Fiscal Year.
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Lessor shall calculate the annual Consumer Price Index adjustments as
soon as reasonably possible after the Consumer Price Index becomes available and
shall notify Lessee in writing of the amount of the annual adjustment, together
with a copy of the computation showing the adjustment amount.
Adjustments calculated as set forth above in the Base Rent and
threshold Room Revenues amounts shall be effective on the applicable Fiscal
Year. If Rent is paid in any Fiscal Year prior to determination of the amount of
any adjustment to Base Rent or the threshold dollar amounts of Room Revenues
applicable for such Fiscal Year, payment adjustments for any shortfall in or
overpayment of Rent paid shall be made with the first Base Rent payment due
after the amount of the adjustments is determined.
The "Average Consumer Price Index" for any period shall be the average
of the Consumer Price Index for all months during the period.
(4) If (A) a significant change is made in the number or
nature (or both) of items used in determining the Consumer Price Index, or (B)
the Consumer Price Index shall be discontinued for any reason, the Bureau of
Labor Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index, together with information which will make possible a
conversion to the new index in computing the adjusted Base Rent and threshold
dollar amounts of Room Revenues hereunder. If for any reason the Bureau of Labor
Statistics does not furnish such an index and such information, the parties will
instead mutually select, accept and use such other index or comparable
statistics on the cost of living in Washington, D.C. that is computed and
published by an agency of the United States or a responsible financial
periodical of recognized authority.
3.2. Confirmation of Percentage Rent. Lessee shall utilize, or cause to
be utilized, an accounting system for the Leased Property in accordance with its
usual and customary practices, and in accordance with GAAP and the Uniform
System, that will accurately record all data necessary to compute the amount of
Room Revenues and the Percentage Rent, and Lessee shall retain, for at least
five years after the expiration of each Fiscal Year (and in any event until the
reconciliation described in this Section above for such Fiscal Year has been
made), reasonably adequate records conforming to such accounting system showing
all data necessary to compute Percentage Rent for the applicable Fiscal Years.
Lessor, at its expense (except as provided hereinbelow), shall have the right
from time to time at reasonable times on reasonable notice by its accountants or
representatives to audit the information that formed the basis for the data set
forth in any Officer's Certificate provided under Section 3.1(d) above and, in
connection with such audits, to examine all Lessee's records (including
supporting data, sales and excise tax returns and franchise reports) reasonably
required to verify Percentage Rent, subject to any prohibitions or limitations
on disclosure of any such data under Legal Requirements. If any such audit
discloses a deficiency in the payment of Percentage Rent, and either Lessee
agrees with the result of such audit or the matter is otherwise determined or
compromised, Lessee shall forthwith pay to Lessor the amount of the deficiency,
as finally agreed or determined, together with interest at the Overdue Rate from
the date when said payment should have been made to the date of payment thereof;
provided, however, that as to any audit that is commenced more than
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two years after the date Percentage Rent for any Fiscal Year is reported by
Lessee to Lessor, the deficiency, if any, with respect to such Percentage Rent
shall bear interest at the Overdue Rate only from the date such determination of
deficiency is made unless such deficiency is the result of gross negligence or
willful misconduct on the part of Lessee, in which case interest at the Overdue
Rate will accrue from the date such payment should have been made to the date of
payment thereof. If any such audit discloses that the Percentage Rent actually
due from Lessee for any Fiscal Year exceed those reported by Lessee by more than
3%, Lessee shall pay the cost of such audit and examination. Any proprietary
information obtained by Lessor pursuant to the provisions of this Section shall
be treated as confidential, except that such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the parties
and except further that Lessor may disclose such information to prospective
lenders. The obligations of Lessee contained in this Section shall survive the
expiration or earlier termination of this Lease.
3.3. Additional Charges. In addition to the Base Rent and Percentage
Rent, (a) Lessee also will pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions (other than Impositions
which are Lessor's obligations hereunder) due under this Lease and (b) in the
event of any failure on the part of Lessee to pay any of those items referred to
in clause (a) of this Section, Lessee also will promptly pay and discharge every
fine, penalty, interest and cost that may be within applicable grace periods, if
any, added for non-payment or late payment of such items (the items referred to
in clauses (a) and (b) of this Section being additional rent hereunder and being
referred to herein collectively as the "Additional Charges"), and Lessor shall
have all legal, equitable and contractual rights, powers and remedies provided
either in this Lease or by statute or otherwise in the case of non-payment of
the Additional Charges as in the case of non-payment of the Base Rent including,
but not limited to, the right to pay such Additional Charges on behalf of Lessee
and to require reimbursement thereof by Lessee, together with interest thereon
at the Overdue Rate. If any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges that are payable
directly to Lessor) shall not be paid on its due date, within applicable grace
periods, if any, Lessee will pay Lessor on demand, as Additional Charges, a late
charge (to the extent permitted by law) computed at the Overdue Rate on the
amount of such installment, from the due date of such installment to the date of
payment thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay same from monies received from Lessee.
3.4. Rent Payable Without Deduction. The Rent shall be paid to Lessor
so that this Lease shall yield to Lessor the full amount of the installments of
Base Rent, Percentage Rent and Additional Charges throughout the Term, but
subject to any other provisions of this Lease that expressly provide (a) for
adjustment or abatement of Rent or other charges or (b) that certain Capital
Expenditures shall be paid or performed by Lessor.
3.5. Conversion of Property. If, during the Term, Lessee desires to
provide food, beverage or other operations at the Facility (other than
complimentary continental breakfast), Lessee shall give notice of such desire to
Lessor. Lessor and Lessee shall then commence negotiations to adjust Rent
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to reflect the proposed change to the operation of the Facility, each acting
reasonably and in good faith. All other terms of this Lease will remain
substantially the same. During negotiations, which shall not extend beyond sixty
(60) days, Lessee shall not "convert" the Facility and shall continue fulfilling
its obligations under the existing terms of this Lease. If no agreement is
reached after such 60-day period, such issue shall be submitted to binding
arbitration.
3.6. Budgets. Lessee shall submit the following Budgets to Lessor:
(a) Not later than thirty (30) days prior to the commencement
of each Fiscal Year, An operating budget ("Operating Budget") prepared in
accordance with this Section, in substantially the form of Exhibit D attached
hereto, including Lessee's reasonable estimate of Gross Operating Expenses and
Gross Operating Profit. The Operating Budget shall be prepared in good faith and
designed so as to maximize Room Revenues in a commercially reasonable manner
(even if such reduces Lessee's percentage of Gross Operating Profit so long as
such does not reduce Gross Operating Profit), and shall otherwise be in
accordance with the Uniform System to the extent applicable and shall show by
month and quarter and for the full Fiscal Year in the degree of detail specified
by the Uniform System, the following:
(i) Lessee's reasonable estimate of monthly Gross
Revenues (including room rates and Room Revenues) (which estimate shall be
delivered by Lessee to Lessor not later than sixty (60) days prior to the
commencement of each Fiscal Year), for the forthcoming Fiscal Year itemized
on schedules on a quarterly basis as approved by Lessor and Lessee, as same may
be revised or replaced from time to time by Lessee and approved by Lessor,
together with the assumptions, in narrative form, forming the basis of such
schedules.
(ii) An estimate of the amounts to be dedicated to
routine, non-capital repair and maintenance so as to prevent commercially
unreasonable deferred repair and maintenance and reduce the amount of current
and future Capital Improvements and Capital Expenditures, which amounts shall
be consistent with maintenance and repair practices at other hotels Lessee or
its Affiliates own or have owned (which practices Lessee shall disclose
to Lessor in the event of a related budget dispute);
(iii) A cash flow projection;
(iv) Lessee's reasonable estimate of Percentage Rent
by quarter for the Fiscal Year; and
(v) A narrative description of the program for
advertising and marketing the Hotel for the forthcoming Fiscal Year so as to
maximize Room Revenues in a commercially reasonable manner (even if such reduces
Lessee's percentage of Gross Operating Profit so long as such does not reduce
Gross Operating Profit), and containing a detailed budget itemization of the
proposed advertising expenditures by category and the assumptions, in narrative
form, forming the basis of such budget itemizations, which shall at a minimum
provide a total advertising and marketing
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program a minimum of property sales staff and off premise signage consistent
with such practices at other hotels Lessee or its Affiliates own or have owned
(which practices Lessee shall disclose to Lessor in the event of a related
budget dispute).
(b) Not later than sixty (60) days prior to the commencement
of each Fiscal Year, a capital budget ("Capital Budget") in substantially the
form of Exhibit F attached hereto, containing a description in reasonable detail
of the proposed Capital Improvements and an estimate of all amounts Lessor will
be requested to provide for Capital Improvements to the Facility or any of its
components for the Fiscal Year. The Capital Budget shall be prepared in
accordance with the Uniform System to the extent applicable.
3.7. Approval of Annual Budget. Within thirty (30) days following
submission of the Annual Budget to Lessor, Lessor shall give Lessee written
notice either (a) that Lessor approves the Annual Budget or (b) indicating with
reasonable specificity the respects in which Lessor objects to the Annual
Budget; provided, however, that Lessor approval rights shall not apply with
respect to nondiscretionary budget items required by law such as Impositions
(subject to the right of the Lessor to contest such Impositions or other
non-discretionary items). In the latter event, Lessor and Lessee shall act
promptly, reasonably and in good faith to seek to resolve Lessor's objections.
In the event that Lessor and Lessee fail to reach agreement with respect to the
Annual Budget within thirty (30) days after receipt of Lessor's written notice,
Lessee and Lessor shall refer any disputed Annual Budget matter to arbitration
using procedures set forth in Article 41 below and each party shall endeavor to
cause such arbitration to be completed as quickly as possible, but in any event
not later than six (6) months following referral to arbitration. Pending the
results of such arbitration or the earlier agreement of the parties, (i) if the
Operating Budget has not been agreed upon, for the first ninety (90) days of the
new Lease Year the Leased Property will be operated in a manner reflecting the
prior Lease Year's actual revenues, and thereafter the Leased Property will be
operated for the full Lease Year (including the first 90 days thereof) in a
manner consistent with the prior Lease Year's Operating Budget, in each case
adjusted pursuant to Consumer Price Index adjustment provisions of this Lease
until a new Operating Budget is adopted, and (ii) if the Capital budget has not
been agreed upon, no Capital Expenditures shall be made unless the same are set
forth in a previously approved Capital Budget or are specifically required by
Lessor. In the event Lessor fails to deliver the notice set forth in this
section, within the required time period, the Annual Budget shall be deemed
approved. Lessor shall be obligated to make all Capital Expenditures which are
pursuant to a Capital Budget which has been approved or deemed approved in
accordance with the procedures set forth above.
3.8. Capital Improvements.
(a) The selection of all design professionals and contractors
for Capital Improvements shall be made by Lessor, after consultation with
Lessee.
(b) All contracts in connection with Capital Improvements with
an Affiliate of Lessee in excess of $10,000 and all other contracts in excess of
$25,000 (and other contracts
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specified by Lessor) shall be subject to competitive bidding procedures
requiring a minimum of three bids and otherwise reasonably acceptable to Lessor.
Lessor shall also have the right to review and approve all contract bids,
whether competitively bid or not, such approval not to be unreasonably withheld,
delayed or conditioned. Lessor may also retain, at its sole cost and expense, an
inspecting architect or engineer to monitor costs, time, quality and performance
for all Capital Improvements.
3.9. Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Facility on
an accrual basis, all in accordance with the Uniform System and GAAP and the
obligations of Lessee under this Lease Facility. The books of account and all
other records relating to or reflecting the operation of the Facility shall be
kept at the Facility or at the offices of Lessee at the address set forth
hereinabove and shall be available to Lessor and its representatives and its
auditors or accountants, at all reasonable times on reasonable notice (not in
excess of 14 days) for examination, audit, inspection, and transcription. All of
such books and records pertaining to the Facility including, without limitation,
books of account, guest records and front office records, at all times shall be
the property of Lessor and shall not be removed from the Facility without Lessor
Approval.
ARTICLE 4
4.1. Payment of Impositions. Subject to the provisions of Article 12
relating to permitted contests, Lessee will pay, or cause to be paid, all
Impositions (other than Real Estate Taxes and Personal Property Taxes, which
shall be paid by Lessor) before any fine, penalty, interest or cost may be added
for non-payment, such payments to be made directly to the taxing or other
authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. Subject
to the right of the Lessor to contest the same, Lessor shall pay all Real Estate
Taxes and Personal Property Taxes before any fine, penalty, interest or cost may
be added for non-payment, to the extent the failure to do so materially and
adversely affects the rights of the Lessee under this Lease, such payments to be
made directly to the taxing or other authorities where feasible, and will
furnish to Lessee copies of official receipts or other satisfactory proof
evidencing such payments. Lessee's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon the
Leased Property or any part thereof. If any such Imposition may, at the option
of the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Lessee may exercise the option
to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and in such event, shall pay such installments
during the Term hereof (subject to Lessee's right of contest pursuant to the
provisions of Article 12 below) as the same respectively become due and before
any fine, penalty, premium, further interest or cost may be added thereto.
Lessor, at its expense, shall, to the extent required or permitted by applicable
law, prepare and file all tax returns in respect of Lessor's net income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes, Real Estate Taxes, Personal Property Taxes and taxes
on its capital stock, and Lessee, at its expense, shall, to the extent required
or permitted by applicable laws and regulations, prepare and file all other tax
returns and reports in respect of any Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect
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of any Imposition paid by Lessee, the same shall be paid over to or retained by
Lessee if no Event of Default shall have occurred hereunder and be continuing.
If an Event of Default shall have occurred and be continuing, any such refund
shall be paid over to or retained by Lessor. Any such funds retained by Lessor
due to an Event of Default shall be applied as provided in Article 16 below.
Lessor and Lessee shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. Lessee
shall file all Personal Property Tax returns in such jurisdictions where it is
legally required to so file. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for any
property classified as personal property. Where Lessor is legally required to
file Personal Property Tax returns, Lessee shall provide Lessor with copies of
assessment notices in sufficient time for Lessor to file a protest. Lessor may,
upon notice to Lessee, at Lessor's option and at Lessor's sole expense, protest,
appeal, or institute such other proceedings (in its or Lessee's name) as Lessor
may deem appropriate to effect a reduction of real estate or personal property
assessments for those Impositions to be paid by Lessor, and Lessee, at Lessor's
expense as aforesaid, shall fully cooperate with Lessor in such protest, appeal,
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, and liabilities against or
incurred by Lessee in connection with such cooperation. Lessee may, upon notice
to Lessor, at Lessee's option and at Lessee's sole expense, protest, appeal, or
institute such other proceedings (in its or Lessor's name) as Lessee may deem
appropriate to effect a reduction of real estate or personal property
assessments for those Impositions to be paid by Lessee, and Lessor, at Lessee's
expense as aforesaid, shall fully cooperate with Lessee in such protest, appeal,
or other action. Lessee hereby agrees to indemnify, defend, and hold harmless
Lessor from and against any claims, obligations, and liabilities against or
incurred by Lessor in connection with such cooperation. Billings for
reimbursement of Personal Property Taxes by Lessee to Lessor shall be
accompanied by copies of a bill therefor and payment thereof which identify the
personal property with respect to which such payments are made. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities.
4.2. Notice of Impositions. To the extent Lessor is notified of any
Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions, but such failure shall obviate any default hereunder for a
reasonable time after Lessee receives Notice of any Imposition which it is
obligated to pay during the first taxing period applicable thereto.
4.3. Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's and Lessor's obligation to pay
its prorated share thereof after termination shall survive such termination.
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4.4. Utility Charges. Lessee will be solely responsible for obtaining
and maintaining utility services to the Leased Property and will pay or cause to
be paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.
4.5. Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article 13 below.
4.6. Ground Rent. In the event that Lessor's interest in the Land is
pursuant to a ground lease, Lessor shall be solely responsible for payment of
any ground rent due with respect to the Leased Property.
4.7. Franchise Fees. Lessee will pay or cause to be paid all franchise
fees due and owing in accordance with the terms and conditions of the Franchise
Agreement.
ARTICLE 5
5.1. No Termination, Abatement, etc. Except as otherwise specifically
provided in this Lease, and except for loss of the Franchise Agreement solely by
reason of any action or inaction by Lessor, Lessee, to the extent permitted by
law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the written consent of Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of the Rent, or setoff against the Rent, nor
shall the obligations of Lessee be otherwise affected by reason of (a) any
damage to, or destruction of, any Leased Property or any portion thereof from
whatever cause or any Taking of the Leased Property or any portion thereof, (b)
the lawful or unlawful prohibition of, or restriction upon, Lessee's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person, corporation, partnership or other entity, or by reason of eviction
by paramount title, (c) any claim which Lessee has or might have against Lessor
by reason of any default or breach of any warranty by Lessor under this Lease or
any other agreement between Lessor and Lessee, or to which Lessor and Lessee are
parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor, or (e) for any other
cause whether similar or dissimilar to any of the foregoing other than a
discharge of Lessee from any such obligations as a matter of law. Lessee hereby
specifically waives all rights, arising from any occurrence whatsoever, which
may now be conferred upon it by law to (1) modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof, or (2)
entitle Lessee to any abatement, reduction, suspension or deferment of the Rent
or other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessee hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Lessee hereunder shall continue to be payable in all events.
5.2. Abatement Procedures. In the event of a partial Taking as
described in Section 15.5 below, the Lease shall not terminate, but the Base
Rent shall be abated in the manner and to the extent that is fair, just and
equitable to both Lessee and Lessor, taking into consideration, among
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other relevant factors, the number of usable rooms, the amount of square
footage, or the revenues affected by such partial Taking. If Lessor and Lessee
are unable to agree upon the amount of such abatement within thirty (30) days
after such partial Taking, the matter may be submitted by either party to
arbitration in accordance with the provisions of Article 41 below for
resolution.
ARTICLE 6
6.1. Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2. Inventory and FF&E. The Lessor shall cause the Lessor's seller of
the Leased Property to convey to Lessee the initial Inventory in an amount to
comply with franchisor requirements. Lessee, at Lessee's expense, will acquire
and maintain through the Term such Inventory as is required to operate the
Leased Property in the manner contemplated by this Lease and the Franchise
Agreement. Any items of personal property (excluding Inventory) installed,
affixed, assembled or placed on the Land or Leased Improvements shall be deemed
FF&E except (i) employee personal property and (ii) personal property of Lessee
agreed in writing between Lessor and Lessee. Lessee, at the commencement of the
Term, and from time to time thereafter, shall provide Lessor with an accurate
list of all such items of FF&E. Lessee shall repair and maintain the FF&E at its
expense. Lessee shall not remove any FF&E except for replacement thereof in
accordance with the Capital Budget (except upon termination of this Lease, the
Lessee may remove any proprietary computer management software, provided Lessee
cooperates in transferring any related books and records to the management
system of the Lessor's designee). Lessee shall surrender possession of the FF&E
and Inventory to Lessor in good repair upon expiration or termination of this
Lease.
6.3. Lessor's Representations. Lessor represents and warrants that (a)
Lessor is a validly existing entity organized under the laws of the state of its
formation and is qualified to do business in all states in which it is required
to so qualify due to the nature of its business activities, (b) Lessor has the
requisite power and authority to enter into this Lease and (c) that this Lease
has been duly authorized by all necessary action on behalf of Lessor and by all
necessary trust action on behalf of the general partner of Lessor.
6.4. Lessee's Representations. Lessee represents and warrants that (a)
Lessee is a validly existing entity organized under the laws of the state of its
formation and is qualified to do business in all states in which it is required
to so qualify due to the nature of its business activities, (b) Lessee has the
requisite power and authority to enter into this Lease and (c) this Lease has
been duly authorized by all necessary action on behalf of Lessee and its
constituent entities.
6.5. Lessor's Lien. To the fullest extent permitted by applicable law,
Lessor is granted a lien and security interest on all Lessee's personal property
now or hereinafter placed in or upon the Leased Property, and such lien and
security interest shall remain attached to such Lessee's personal property until
payment in full of all Rent and satisfaction of all of Lessee's obligations
hereunder;
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provided, however, Lessor shall subordinate its lien and security interest to
that of any non-Affiliate of Lessee which finances such Lessee's personal
property or any non-Affiliate conditional seller of such Lessee's personal
property, the terms and conditions of such subordination to be satisfactory to
Lessor in the exercise of reasonable discretion. Lessee shall, upon the request
of Lessor, execute such financing statements or other documents or instruments
reasonably requested by Lessor to perfect the lien and security interests herein
granted.
ARTICLE 7
7.1. Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the Leased Property and has found the same to
be satisfactory for its purposes hereunder. Lessee is leasing the Leased
Property "as is" in its present condition. Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
7.2. Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its commercially reasonable efforts to obtain and to
maintain all approvals needed to use and operate the Leased Property and the
Facility under applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility, and for such other uses as may be necessary or
incidental to such use or such other use as otherwise approved by Lessor (the
"Primary Intended Use"). Lessee shall not use the Leased Property or any portion
thereof for any other use without the prior written consent of Lessor, which
consent may be granted, denied or conditioned upon Lessor's sole discretion. No
use shall be made or permitted to be made of the Leased Property, and no acts
shall be done, which will cause the cancellation or increase the premium of any
insurance policy covering the Leased Property or any part thereof (unless
another adequate policy reasonably satisfactory to Lessor is available and
Lessee pays any premium increase), nor shall Lessee sell or permit to be kept,
used or sold in or about the Leased Property any article which may be prohibited
by law or fire underwriter's regulations. Lessee shall, at its sole cost, comply
with all of the requirements pertaining to the Leased Property of any insurance
board, association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property.
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(c) Subject to the provisions of this Lease regarding casualty
and condemnation, Lessee covenants and agrees that during the Term it will (1)
operate continuously the Leased Property as a hotel facility, (2) keep in full
force and effect and comply with all the provisions of the Franchise Agreement
(except that Lessee shall have no obligation to complete any capital
improvements to the Leased Property required by the franchisor unless Lessor
funds the costs thereof except as expressly provided in this Lease) with respect
to the operation of the Hotel, (3) not terminate or amend the Franchise
Agreement without the consent of Lessor, (4) maintain appropriate certifications
and licenses for such use and (5) operate and maintain the Leased Property so as
to maximize the Gross Revenues generated therefrom in a commercially reasonable
manner consistent with sound business practices, and Lessee will not operate or
maintain the Facility nor reduce or minimize Gross Operating Expenses for the
purpose of increasing Gross Operating Profit or otherwise to the extent such
actions adversely affect the maximization of Gross Revenues in a commercially
unreasonable manner (even if such reduces Lessee's percentage of Gross Operating
Profit so long as such does not reduce Gross Operating Profit).
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Facility, nor shall Lessee cause or
permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, to be used in such a manner as (1) might reasonably tend
to impair Lessor's (or Lessee's, as the case may be) title thereto or to any
portion thereof, or (2) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of the Leased Property or any portion thereof, except as necessary in
the ordinary and prudent operation of the Facility on the Leased Property.
(f) Neither Lessee, Prime nor any direct or indirect
subsidiary of Prime shall franchise, own, lease, operate, develop, construct,
manage, joint venture, nor have any other interest in, any hotel or motel
facility, with the AmeriSuites or similar name or any successor name, or similar
midpriced all suite hotel, within the distance from the Leased Property set
forth on Exhibit F attached hereto during the Term of this Lease. Lessee agrees
to deliver to Lessor upon request by Lessor from time to time a list of hotels
and motels (and locations) in which Lessee, Prime or any direct or indirect
subsidiary of Prime has an interest as franchisor, developer, contractor, owner,
partner, lessee, manager or otherwise.
7.3. Lessor to Grant Easements, etc. Lessor will, from time to time, so
long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld, delayed, or conditioned and
the approval of any Mortgage lender), (a) grant easements and other rights in
the nature of easements with respect to the Leased Property to third parties,
(b) release existing easements or other rights in the nature of easements which
are for the benefit of the Leased Property, (c) dedicate or transfer unimproved
portions of the Leased Property for road, highway or other public purposes, (d)
execute petitions to have the Leased Property annexed to any municipal
corporation or utility district, (e) execute amendments to any covenants and
restrictions affecting the Leased
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Property and (f) execute and deliver to any Person any instrument appropriate to
confirm or effect such grants, releases, dedications, transfers, petitions and
amendments (to the extent of its interests in the Leased Property), but only
upon delivery to Lessor of an Officer's Certificate stating that such grant,
release, dedication, transfer, petition or amendment does not interfere with the
proper conduct of the business of Lessee on the Leased Property and does not
materially reduce the value of the Leased Property.
ARTICLE 8
8.1. Compliance with Legal and Insurance Requirements, etc. Subject to
the provisions of this Lease below relating to permitted contests, Lessee, at
its expense, will promptly (a) comply in all material respects with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, and (b)
procure, maintain and comply, in all material respects with all appropriate
licenses and other authorizations required for any use of the Leased Property
then being made, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.
8.2. Legal Requirement Covenants. Lessee covenants and agrees that the
Leased Property shall not be used for any unlawful purpose, and that Lessee
shall not permit or suffer to exist any unlawful use of the Leased Property by
others. Lessee shall acquire and maintain all appropriate licenses,
certifications, permits and other authorizations and approvals needed to operate
the Leased Property in its customary manner for the Primary Intended Use, and
any other lawful use conducted on the Leased Property as may be permitted from
time to time hereunder. Lessee further covenants and agrees that Lessee's use of
the Leased Property and maintenance, alteration, and operation of the same, and
all parts thereof, shall at all times conform to all Legal Requirements, unless
the same are finally determined by a court of competent jurisdiction to be
unlawful (and Lessee shall cause all such sub-tenants, invitees or others to so
comply with all Legal Requirements). Lessee may, however, upon prior Notice to
Lessor, contest the legality or applicability of any such Legal Requirement or
any licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder, and
at Lessee's sole expense. If by the terms of any such Legal Requirement
compliance therewith pending the prosecution of any such proceeding may legally
be delayed without the incurrence of any lien, charge or liability of any kind
against the Facility and without subjecting Lessee or Lessor to any liability,
civil or criminal, for failure so to comply therewith, Lessee may delay
compliance therewith until the final determination of such proceeding. If any
lien, charge or civil or criminal liability would be incurred by reason of any
such delay, Lessee, on the prior written consent of Lessor, which consent shall
not be unreasonably withheld, may nonetheless contest as aforesaid and delay as
aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay and (b) prosecutes the contest with due diligence and in good faith.
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8.3. Environmental Covenants. Lessor and Lessee (in addition to, and
not in diminution of, Lessee's covenants and undertakings in Sections 8.1 and
8.2 above) covenant and agree as follows:
(a) Lessee shall comply in all material respects with all
Environmental Laws applicable to the Leased Property during the Term in
connection with the lease, management operation, maintenance and repair of the
Property; provided, however, that Lessee shall not be liable for the costs of
remediation of any environmental matter except those (i) caused by a Lessee
Indemnified Party or their invitee during the Term or (ii) known to Prime prior
to the date of this Lease and not disclosed to the Lessor. Lessee agrees to give
Lessor prompt written notice upon becoming aware of same of (1) all
Environmental Liabilities; (2) all pending, threatened in writing or anticipated
Proceedings, and all written notices, demands or investigations, relating to any
Environmental Liability or relating to the issuance, revocation or change in any
Environmental Authorization required for operation of the Leased Property and
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by lessee at, on, in or under any property adjacent to the
Leased Property which may affect the Leased Property.
(b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities caused by the malfeasance or gross negligence of
Lessor.
(c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities caused by any Lessee Indemnified Party in connection
with the lease, management, operation, maintenance and repair of the Property.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c) above, the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceedings, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless such counsel has been approved by the indemnifying
Party, which approval shall not be unreasonably withheld. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding made without its
consent, which shall not be unreasonably withheld, but if settled with the
consent of the Indemnifying Party, or if settled without its consent (if its
consent shall be unreasonably withheld), or if there be a final nonappealable
judgment for an adversary party in any such Proceeding, the Indemnifying Party
shall indemnify and hold harmless the Indemnified Parties from and against any
liabilities incurred by such Indemnified Parties by reason of such settlement or
judgment.
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(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill wells, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable. So long as
the Term of this Lease has not expired or otherwise terminated, the Indemnifying
Party shall cause such remediation work to be performed in a good and
workmanlike manner in compliance with all legal requirements to the reasonable
satisfaction of the Indemnified Party.
(f) The indemnification rights and obligations provided for in
this Article 8 shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this Article 8 shall survive the termination of this Lease.
For purposes of this Section 8.3, all amounts for which any Indemnified
Party seeks indemnification shall be computed net of (a) any actual income tax
benefit resulting therefrom to such Indemnified Party, (b) any insurance
proceeds received (net of tax effects) with respect thereto, and (c) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnified Party has against such third parties which reduce the damages that
would otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may be,
any claims or rights it may have against any third party which would materially
reduce the amount of damages otherwise incurred by such Indemnified Party.
Notwithstanding anything to the contrary contained in this Lease, if
Lessor shall become entitled to the possession of the Leased Property by virtue
of the termination of the Lease or repossession of the Leased Property, then
Lessor may assign its indemnification rights under this Section 8.3 (but not any
other rights hereunder) to any Person to whom the Lessor subsequently transfers
the Leased Property.
ARTICLE 9
9.1. Maintenance and Repair.
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(a) Lessee, at Lessor's option, shall make or supervise all
Capital Improvements and Capital Expenditures required by the Capital Budget.
The Lessee shall be responsible for performing all Capital Improvements, and
shall be responsible for the Capital Expenditures related thereto, caused by the
negligence, willful misconduct, failure to properly maintain and repair or
improper deferral of maintenance and repair by the Lessee or its manager or
employees and agents. Unless so caused by the negligence, willful misconduct,
failure to properly maintain or repair, or the deferral of maintenance and
repair, Lessee shall not be required to bear the cost of any Capital
Improvements, including (without limitation) Capital Improvements required by
the Franchisor under the Franchise Agreement. Except for Capital Expenditures
required of Lessee under this Lease, Lessor shall be responsible for all Capital
Expenditures, subject to (i) Lessor's right to approve all Capital Expenditures,
in connection with Lessor's approval or deemed approval of the Capital Budget
and (ii) Lessor's right in its sole discretion to refuse to make any Capital
Expenditure required by the Franchisor. Except as set forth in the preceding
sentence, nothing herein shall be construed to require Lessor to build or
rebuild any improvement on the Leased Property, or to fund any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the Leased Property, whether ordinary or extraordinary, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, or to maintain the Leased Property in any way.
Lessee hereby waives, to the extent permitted by law, the right to make repairs
at the expense of Lessor pursuant to any law in effect at the time of the
execution of this Lease or hereafter enacted. Lessor shall have the right to
give, record and post, as appropriate, notices of nonresponsibility under any
mechanic's lien laws now or hereafter existing.
(b) Lessee will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto that are under Lessee's
control, including windows and plate glass, parking lots, HVAC, mechanical,
electrical and plumbing systems and equipment (including conduit and ductware),
and non-load bearing interior walls, in good order and repair, except for
ordinary wear and tear (whether or not the need for such repairs occurred as a
result of Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as otherwise provided in the
provisions of this Agreement regarding hazard insurance and condemnation
proceeds, with reasonable promptness, make all necessary and appropriate
maintenance, repairs, replacements, and improvements thereto of every kind and
nature, whether interior or exterior ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term of this Lease (concealed or otherwise), or required by
any governmental agency having jurisdiction over the Leased Property in such a
manner as to minimize current and future Capital Improvements and Capital
Expenditures. Lessee, however, shall be permitted to prosecute claims against
Lessor's predecessors in title for breach of any representation or warranty or
for any latent defects in the Leased Property to be maintained by Lessee unless
Lessor is already diligently pursuing such a claim. All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the original
work. Lessee will not take or omit to take any action, the taking or omission of
which might materially impair the value or the usefulness of the Leased Property
or any part thereof for its Primary Intended Use. Except as set forth in this
Lease regarding hazard insurance, condemnation proceeds and payments of Capital
Expenditures due to the failure to properly maintain and repair, or deferral of
maintenance and repairs, Lessee shall not be required to
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bear the costs of complying with this Section with respect to items classified
as capital items under GAAP, but shall be required to comply with this Section
as to such items if and to the extent that amounts made available therefor by
Lessor from the reserve required to be established by Lessor under Article 39
below or are otherwise provided by Lessor.
(c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (1) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (2)
giving Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against Lessor
in respect thereof or to make any agreement that may create, or in any way be
the basis for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in accordance with the
terms of this Lease above during the entire Term of the Lease), or damage by
casualty or Condemnation (subject to the obligations of Lessee to restore or
repair as set forth herein).
9.2. Encroachments, Restrictions, etc. If any of the Leased
Improvements, at any time, materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject, then promptly at the behest of any Person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (a)
obtain valid and effective easements, licenses, waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment, violation
or impairment, whether the same shall affect Lessor or Lessee or (b) make such
changes in the Leased Improvements, and take such other actions, as Lessee in
the good faith exercise of its judgment deems reasonably practicable to remove
such encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of Article 10
below. Lessee's obligations under this Section shall be in addition to and shall
in no way
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discharge or diminish any obligation of any insurer under any policy of title or
other insurance held by Lessor.
ARTICLE 10
10.1. Alterations. After receiving approval of Lessor, which approval
shall not be unreasonably withheld (and the consent of any Mortgage lender, if
required), Lessee shall have the right to make such additions, modifications or
improvements to the Leased Property from time to time as Lessee deems desirable
for its permitted uses and purposes, provided that such action will not
significantly alter the character or purposes or significantly detract from the
value or operating efficiency thereof and will not significantly impair the
revenue-producing capability of the Leased Property or adversely affect the
ability of the Lessee to comply with the provisions of this Lease. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor. Nothing set forth in this Section is intended to
abrogate or limit Lessor's obligations to make Capital Expenditures set forth in
the approved Capital Budget pursuant to Section 3.7 above.
10.2. Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles 9 or 10 shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing for such work.
10.3. Joint Use Agreements. If Lessee constructs additional
improvements that are connected to the Leased Property or share maintenance
facilities, HVAC, electrical, plumbing or other systems, utilities, parking or
other amenities, the parties shall enter into a mutually agreeable
cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, which approval is not to be unreasonably withheld,
conditioned or delayed to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.
ARTICLE 11
11.1. Liens. Subject to the provisions of Article 12 below relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters, if any, included as exceptions in the
title policy insuring Lessor's interest in the Leased Property, (c)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3.
above, (d) liens for those taxes upon Lessor which Lessee is not required to pay
hereunder, (e) subleases permitted by Article 23 below, (f) liens for
Impositions or for sums resulting from
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noncompliance with Legal Requirements so long as (1) the same are not yet
payable or are payable without the addition of any fine or penalty or (2) such
liens are in the process of being contested as permitted by Article 12 below,
(g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums
either disputed or not yet due provided that (3) the payment of such sums shall
not be postponed under any related contract for more than sixty (60) days after
the completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor or (4) any such liens are in
the process of being contested as permitted by Article 12 below, (h) any liens
which are the responsibility of Lessor pursuant to the provisions of Article 34
below.
ARTICLE 12
12.1. Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by Article 11 above, by
appropriate legal proceedings in good faith and with due diligence (but this
shall not be deemed or construed in any way to relieve, modify or extend
Lessee's covenants to pay or its covenants to cause to be paid any such charges
at the time and in the manner as in this Article provided), on condition,
however, that such legal proceedings shall not operate to relieve Lessee from
its obligations hereunder and shall not cause the sale or risk the loss of any
portion of the Leased Property, or any part thereof, or cause Lessor or Lessee
to be in default under any Mortgage, or other agreement encumbering the Leased
Property or any interest therein. Upon the request of Lessor, Lessee shall
either (a) provide a bond or other assurance reasonably satisfactory to Lessor
that all Claims which may be assessed against the Leased Property together with
interest and penalties, if any, thereon will be paid, or (b) deposit within the
time otherwise required for payment with a bank or trust company as trustee upon
terms reasonably satisfactory to Lessor, as security for the payment of such
Claims, money in an amount sufficient to pay the same, together with interest
and penalties in connection therewith, as to all Claims which may be assessed
against or become a Claim on the Leased Property, or any part thereof, in said
legal proceedings. Lessee shall furnish Lessor and any lender of Lessor with
reasonable evidence of such deposit within five (5) Business Days of the same.
Lessor agrees to join in any such proceedings if the same be required to legally
prosecute such contest of the validity of such Claims; provided, however, that
Lessor shall not thereby be subject to any liability for the payment of any
costs or expenses in connection with any proceedings brought by Lessee; and
Lessee covenants to indemnify and save harmless Lessor from any such costs or
expenses. Lessee shall be entitled to any refund of any Claims and such charges
and penalties or interest thereon which have been paid by Lessee or paid by
Lessor and for which Lessor has been fully reimbursed. In the event that Lessee
fails to pay any Claims when due or to provide the security therefor as provided
in this paragraph and to diligently prosecute any contest of the same, Lessor
may, upon ten (10) days advance Notice to Lessee, pay such charges together with
any interest and penalties and the same shall be repayable by Lessee to Lessor
as Additional Charges at the next Payment Date provided for in this Lease;
provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any claims.
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ARTICLE 13
13.1. General Insurance Requirements. During the Term of this Lease,
Lessee shall at all times keep the Leased Property insured with the kinds and
amounts of insurance described below and in accordance with any Mortgage. This
insurance shall be written by qualified, solvent companies which can legally
write insurance in the State. The policies must name Lessor as the insured or as
an additional named insured, as the case may be, with minimum deductibles
customary in the industry. Losses shall be payable to Lessor. Subject to Section
13.10 below, any loss adjustment with respect to the insurance coverages set
forth in items (a), (b) and (c) below shall be made by Lessor acting in its sole
and absolute discretion. Evidence of insurance shall be deposited with Lessor.
The policies on the Leased Property, including the Leased Improvements, and
FF&E, shall include:
(a) Building insurance of risks on the "Special Form" or "All
Risk Form" in an amount not less than 100% of the then full replacement cost
thereof (as defined in Section 13.3 below) or such other amount which is
acceptable to Lessor, and personal property insurance on the "Special Form" or
"All Risk Form" in the full amount of the replacement cost thereof;
(b) Earthquake and flood insurance in reasonable and adequate
amounts as mutually agreed by Lessor and Lessee;
(c) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, now or hereafter installed
in the Facility, in the minimum amount of $5,000,000 or in such greater amounts
as are then customary or as may be reasonably requested by Lessor from time to
time;
(d) Loss of income and business interruption insurance on the
"Special Form" or "All Risk Form", in the amount of the greater of (i) one year
of Base Rent or (ii) the prior Fiscal Year's Base Rent plus Percentage Rent for
the benefit of Lessor, which business interruption proceeds, except those
allocable to Percentage Rent (which shall be paid to Lessor), shall be paid to
Lessee provided Lessee continues to pay Base Rent and no uncured Event of
Default has occurred and is continuing);
(e) Commercial general liability insurance, with amounts not
less than $10,000,000 covering each of the following: bodily injury, death, or
property damage liability per occurrence, personal and advertising injury,
general aggregate, products and completed operations, with respect to Lessor,
and liquor law or "dram shop" liability, if liquor or alcoholic beverages are
served on the Leased Property, with respect to Lessor and Lessee;
(f) Insurance covering such other hazards and in such amounts
as may be customary for comparable properties in the area of the Leased Property
and is available from
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insurance companies, insurance pools or other appropriate companies authorized
to do business in the State at rates which are economically practicable in
relation to the risks covered as may be reasonably requested by Lessor;
(g) Fidelity bonds with limits and deductibles as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent hotel management practices in the
United States or otherwise required by law;
(h) Workers' compensation insurance to the extent necessary to
protect Lessor and the Leased Property against Lessee's worker's compensation
claims;
(i) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000; and
(j) Such other insurance as Lessor may reasonably request for
facilities such as the Leased Property and the operation thereof.
13.2. Responsibility for Premiums. Lessee shall keep in force the
foregoing insurance coverage at its expense.
13.3. Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.4. Workers' Compensation. Lessee, at its sole cost, shall at all
times maintain adequate workers' compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such workers' compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.5. Waiver of Subrogation. All insurance policies carried by Lessor
or Lessee covering the Leased Property, including, without limitation, contents,
fire and casualty insurance, shall expressly waive any right of subrogation on
the part of the insurer against the other party. The parties hereto agree that
their policies will include such waiver clause or endorsement so long as the
same are obtainable without extra cost, and in the event of such an extra charge
the other party, at its election, may pay the same, but shall not be obligated
to do so.
13.6. Form Satisfactory, etc. All of the policies of insurance referred
to in this Article 13 shall be written in a form, with deductibles and by
insurance companies reasonably satisfactory to Lessor. Lessee shall pay all of
the premiums therefor, and deliver such policies or certificates thereof to
Lessor prior to their effective date (and, with respect to any renewal policy,
thirty (30) days prior
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to the expiration of the existing policy), and in the event of the failure of
Lessee either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessor
at the times required, Lessor shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums thereon, and Lessee shall
reimburse Lessor for any premium or premiums paid by Lessor for the coverages
required under this Section upon written demand therefor, and Lessee's failure
to repay the same within thirty (30) days after Notice of such failure from
Lessor shall constitute an Event of Default within the meaning of Section
16.1(b) below. Each insurer mentioned in this Article 13 shall agree, by
endorsement to the policy or policies issued by it, or by independent instrument
furnished to Lessor, that it will give to Lessor thirty (30) days' written
notice before the policy or policies in question shall be materially altered,
allowed to expire or canceled.
13.7. Increase in Limits. If either Lessor or Lessee at any time deems
the limits of the personal injury or property damage under the comprehensive
public liability insurance then carried to be either excessive or insufficient,
Lessor and Lessee shall endeavor in good faith to agree on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.
13.8. Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 13, Lessee may bring the insurance provided for herein
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee; provided, however, that the coverage afforded
to Lessor and Lessee will not be reduced or diminished or otherwise be different
from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article 13 are
otherwise satisfied.
13.9. Separate Insurance. Lessee shall not on Lessee's own initiative
or pursuant to the request or requirement of any third party, take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article to be furnished, or increase the amount of any then
existing insurance by securing an additional policy or additional policies,
unless all parties have an insurable interest in the subject matter of the
insurance, including in all cases Lessor, are included therein as additional
insured, and the loss is payable under such additional separate insurance in the
same manner as losses are payable under this Lease. Lessee shall immediately
notify Lessor that Lessee has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.
13.10. Reports on Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Leased Property, any damage or destruction to
the Leased Property and the estimated cost of repair thereof and shall prepare
any and all reports required by any insurance company in connection therewith.
All such reports shall be timely filed with the insurance company as required
under the terms of the insurance policy involved, and a final copy of such
report shall be furnished to Lessor. Lessee shall not adjust, settle, or
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compromise any insurance loss, or execute proofs of such loss, with respect to
the insurance coverages with respect to any single casualty or other event
without the prior written consent of Lessor.
ARTICLE 14
14.1. Insurance Proceeds. Subject to the provisions of Section 13.1(d)
with respect to loss of income insurance and Section 14.6 below and the terms of
any Mortgage, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article 13(a) through (c) and (f) above shall be settled or
compromised by and paid to Lessor and held in trust by Lessor in an
interest-bearing account, shall be made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof, and, if applicable, shall be paid
out by Lessor from time to time for the reasonable costs of such reconstruction
or repair upon terms specified in this Lease and such other reasonable terms and
conditions specified by Lessor consistent with the disbursement procedures for a
construction loan of similar size and scope. Any excess proceeds of insurance
remaining after the completion of the restoration or reconstruction of the
Leased Property shall be paid to Lessor. If neither Lessor nor Lessee is
required or elects to repair and restore, and this Lease is terminated as
described in Section 14.2 below, all such insurance proceeds shall be retained
by Lessor. All salvage resulting from any risk covered by insurance shall belong
to Lessor.
14.2. Reconstruction in the Event of Damage or Destruction Covered
by Insurance.
(a) Except as provided in Section 14.6 below, if during the
Term the Leased Property is totally or substantially destroyed by a risk covered
by the insurance described in Article 13 above and the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessor shall, at Lessor's
option, either (1) have Lessee restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease (subject to the provisions of Section
14.2(c) below), or (2) terminate this Lease by written notice thereof to Lessee.
If Lessor elects restoration of the Facility, the insurance proceeds shall be
paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of reasonable terms and conditions, and any excess
proceeds remaining after such restoration shall be paid to Lessor. If Lessor
terminates the Lease with respect to the Leased Property, Lessor shall be
entitled to retain all insurance proceeds and the Lessee shall pay all Rent due
through the date of such termination and an amount equal to any deductible and
value of any uninsured loss under available insurance that Lessee was required
to maintain under this Lease.
(b) Except as provided in Section 14.6 below, if during the
Term the Leased Property is partially destroyed by a risk covered by the
insurance described in Article 13 above, but the Facility is not thereby
rendered Unsuitable for its Primary Intended Use, Lessor (with the cooperation
of the Lessee) shall restore the Facility to substantially the same condition as
existed immediately before the damage or destruction and otherwise in accordance
with the terms of the
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Lease, subject to the provisions of Section 14.2(c) below. Such damage or
destruction shall not terminate this Lease. However, if, under this Section,
Lessee cannot within a reasonable time obtain all necessary government
approvals, including building permits, licenses and conditional use permits,
after diligent efforts to do so, to perform all required repair and restoration
work and to operate the Facility for its Primary Intended Use in substantially
the same manner as that existing immediately prior to such damage or destruction
and otherwise in accordance with the terms of the Lease, Lessor may (a) give
Lessee written notice of termination of the Lease or (b) restore the Leased
Premises using the proceeds of insurance. If Lessor terminates this Lease,
Lessor shall be entitled to retain all insurance proceeds, and Lessee shall pay
all Rent due through the date of such termination and an amount equal to any
deductible and value of any uninsured loss under available insurance that Lessee
was required to maintain under this Lease. If Lessor restores the Facility, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions specified by Lessor, and any excess proceeds remaining after such
restoration shall be paid to Lessor.
(c) If the estimated cost of the repair or restoration exceeds
the amount of proceeds received by Lessor and Lessee from the insurance required
under Article 13 above, and then if Lessor elects to make such repairs or
restoration, Lessee shall be obligated to contribute the amount of any loss
which would have been insured but for Lessee's failure to maintain insurance
required by this Lease, payable to Lessor prior to the commencement of work
thereon to be held in trust.
14.3. Reconstruction in the Event of Damage or Destruction not Covered
by Insurance. Except as provided in Section 14.6 below, if during the Term the
Facility is totally or substantially destroyed by a risk not covered by the
insurance described in Article 13 above, whether or not such damage or
destruction renders the Facility Unsuitable for its Primary Intended Use, Lessor
at its option shall either (a) restore the Facility to substantially the same
condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) terminate the
Lease.
14.4. Inventory. All insurance proceeds payable by reason of any loss
of or damage to any of Inventory in excess of Franchisor requirements shall be
paid to Lessee; provided, however, no such payments shall diminish or reduce the
insurance payments otherwise payable to or for the benefit of Lessor hereunder.
14.5. Abatement of Rent. Any damage or destruction due to casualty
notwithstanding, this Lease shall remain in full force and effect provided that
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall not abate during the period required for the
applicable repair and restoration; provided that the Lessee shall receive a
credit against such rental payments and other charges in an amount equal to any
loss of income insurance proceeds actually received by Lessor pursuant to any
loss of income insurance pursuant to Section 13.1(d) above.
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14.6. Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Facility rendering it unsuitable for its Primary Intended Use occurs during
the last 24 months of the Term, then Lessee shall have the right to terminate
this Lease by giving written notice to Lessor within thirty (30) days after the
date of damage or destruction, whereupon all accrued Rent and an amount equal to
the sum of (i) any deductible under available insurance and (ii) the cost to
restore any uninsured loss that Lessee was required to maintain insurance
against under this Lease where such insurance was available shall be paid to
Lessor immediately, and this Lease shall automatically terminate five (5) days
after the date of such notice and payment, without any further liability by
Lessee to Lessor other than liabilities that expressly survive a termination of
this Lease.
14.7. Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Facility that
Lessor is obligated to restore or may restore under any of the provisions of
this Lease.
ARTICLE 15
15.1. Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2. Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article 15.
15.3. Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, Lessee and Lessor shall each have the option, by notice to the other, at
any time prior to the Date of Taking, to terminate this Lease as of the Date of
Taking. Upon such date, if such Notice has been
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given, this Lease shall thereupon cease and terminate and the provisions of
Section 42.3 below shall not apply. All Base Rent, Percentage Rent and
Additional Charges paid or payable by Lessee hereunder shall be apportioned as
of the Date of Taking, and Lessee shall promptly pay Lessor such amounts.
15.4. Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond the
Term, shall be solely the property of and payable to Lessor. Any Award made for
loss of Lessee's business during the remaining Term, if any, for the taking of
Inventory in excess of Franchisor requirements, or for removal and relocation
expenses of Lessee in any such proceedings shall be the sole property of and
payable to Lessee. In any Condemnation proceedings Lessor and Lessee shall each
seek its Award in conformity herewith, at its respective expense; provided,
however, neither party shall initiate, prosecute or acquiesce in any proceedings
that may result in a diminution of any Award payable to the other party.
15.5. Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is still suitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3 above, Lessee at its cost shall with all reasonable dispatch, but
only to the extent of any condemnation awards made available to Lessee and any
other sums advanced by Lessor pursuant to the next sentence, restore the untaken
portion of any Leased Improvements so that such Leased Improvements constitute a
complete architectural unit of the same general character and condition (as
nearly as may be possible under the circumstances) as the Leased Improvements
existing immediately prior to the Condemnation. If the condemnation awards are
not adequate to restore the Facility to that condition, each of Lessor and
Lessee shall have the right to terminate this Lease, without in any way
affecting any other leases in effect between Lessor and Lessee, by giving Notice
to the other; provided, however that, if such termination is by Lessee, Lessor
shall have the right, in its sole discretion, to nullify the termination and
keep this Lease in full force by providing, within thirty (30) days after
Lessee's Notice of termination, a Notice to Lessee of Lessor's unconditional,
legally binding obligation to be responsible for all restoration costs in excess
of the condemnation awards. If this Lease is not terminated and Lessee restores
the Facility, the condemnation awards, and any other sums made available by
Lessor as aforesaid, shall be held in trust by Lessor and paid out by Lessor
from time to time for the reasonable costs of such restoration upon satisfaction
of reasonable terms and conditions, and any excess awards remaining after such
restoration shall be retained by Lessor unless the partial condemnation
materially impairs the operations or financial performance of the Facility, in
which latter event the award shall be equitably apportioned between Lessor and
Lessee in proportion to the then fair market values of the respective estates
and interests of Lessor and Lessee in and to the Leased Property and under this
Lease.
15.6. Temporary Taking. If the whole or any part of the Leased Property
or of Lessee's interest under this Lease is condemned by any Condemnor for its
temporary use or occupancy, this Lease shall not terminate by reason thereof,
and Lessee shall continue to pay, in the manner and at the terms herein
specified, the full amounts of Base Rent and Additional Charges. In addition,
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three (3)
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preceding Fiscal Years (or if three (3) Fiscal Years shall not have elapsed, the
average during the preceding Fiscal Years) to the extent of any business
interruption insurance and condemnation proceeds that are received by Lessee.
Except only to the extent that Lessee may be prevented from so doing pursuant to
the terms of the order of the Condemnor, Lessee shall continue to perform and
observe all of the other terms, covenants, conditions and obligations hereof on
the part of the Lessee to be performed and observed, as though such Condemnation
had not occurred. In the event of any Condemnation as in this Section described,
the entire amount of any Award made for such Condemnation allocable to the Term
of this Lease, whether paid by way of damages, rent or otherwise, shall be paid
to Lessee. Lessee covenants that upon the termination of any such period of
temporary use or occupancy it will, at its sole cost and expense (subject to
Lessor's contribution as set forth below), restore the Leased Property as nearly
as may be reasonably possible to the condition in which the same was immediately
prior to such Condemnation, unless such period of temporary use of occupancy
extends beyond the expiration of the Term, in which case Lessee shall not be
required to make such restoration. If restoration is required hereunder, Lessor
shall contribute to the cost of such restoration that portion of its entire
Award that is specifically allocated to such restoration in the judgment or
order of the court, if any, and Lessee shall fund the balance of such costs.
ARTICLE 16
16.1. Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) If an Event of Default occurs under any of the Other
Leases in the Cross Default Pool that includes this Lease. All Affiliated Leases
(including this Lease) shall be grouped together in chronological order in
accordance with commencement date (or such other order agreed to in writing by
the Lessor and the Lessee) in pools of up to a maximum of twenty Affiliated
Leases (each pool individually, a "Cross Default Pool") so that (a) no Cross
Default Pool contains more than twenty Affiliated Leases and (b) no more than
one Cross Default Pool contains fewer than twenty Affiliated Leases. An Event of
Default under any Affiliated Lease shall constitute an Event of Default under
all Affiliated Leases in such Affiliated Lease's Cross Default Pool, but shall
not constitute an Event of Default in any other Affiliated Lease not in such
Affiliated Lease's Cross Default Pool. In the event any Affiliated Lease is
removed from a Cross Default Pool and placed into a Collateralized Cross Default
Pool, all of the Cross Default Pools will be reorganized so that all of the
Cross Default Pools (excluding any Collateralized Cross Default Pools) contain a
maximum of twenty Affiliated Leases in chronological order of their commencement
date and no more than one Cross Default Pool contains fewer than twenty
Affiliated Leases. In the event more than one Affiliated Lease has the same
commencement date, the chronological order of such Affiliated Leases shall be as
agreed to in writing between lessor and lessee and, absent such agreement, in
alphabetical order in accordance with the city or county in which the leased
property is located. Upon entering into an Affiliated Lease, the Lessor and the
Lessee shall execute and deliver a written agreement confirming which Affiliated
Leases are in which Cross Default Pool or Collateralized Cross Default Pool; or
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(b) if Lessee fails to make payment of the Base Rent,
Percentage Rent or Additional Charges within ten (10) days after written notice
from Lessor that the same has become due and payable; or
(c) except as set forth in Section 16.1(b) above, if Lessee
fails to observe or perform any other term, covenant or condition of this Lease
and such failure is not cured by such party within a period of thirty (30) days
after receipt by Lessee of Notice thereof from the other party, unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case Lessee shall have an additional reasonable period of time to cure
such breach provided Lessee proceeds promptly and with due diligence to cure the
failure and diligently completes the curing thereof; or
(d) if Lessee shall file a petition in bankruptcy or
reorganization for an arrangement pursuant to any federal or state bankruptcy
law or any similar federal or state law, or shall be adjudicated a bankrupt or
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of Lessee or any Affiliate of Lessee as a
bankrupt or its reorganization pursuant to any federal or state bankruptcy law
or any similar federal or state law shall be filed in any court and Lessee or
any Affiliate of Lessee shall be adjudicated a bankrupt and such adjudication
shall not be vacated or set aside or stayed within sixty (60) days after the
entry of an order in respect thereof, or if a receiver of the Lessee or any
Affiliate of Lessee or of the whole or substantially all of the assets of the
Lessee or any Affiliate of Lessee shall be appointed in any proceedings brought
by the Lessee or any Affiliate of Lessee or if any such receiver, trustee or
liquidator shall be appointed in any proceeding brought against Lessee or any
Affiliate of Lessee shall not be vacated or set aside or stayed within sixty
(60) days after such appointment; or
(e) if Lessee is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, if Lessee in any manner,
permits the sale or divestiture of substantially all of its assets; or
(f) if the estate or interest of Lessee in the Leased Property
or any part thereof or any ownership interest in Lessee is voluntarily or
involuntarily transferred, assigned, conveyed, levied upon or attached in any
proceeding, except (A) where Lessee is contesting such lien or attachment in
good faith in accordance with the express terms of this Agreement, (B) transfer
and the like of the ownership interest of the Lessee in the case of a merger,
consolidation or sale of all of the assets of Prime where the transferee or
surviving entity is a reputable hotel management company with assets and a net
worth comparable to Prime prior to such transaction) and (C) otherwise expressly
permitted herein; or
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee (without the consent of Lessor) voluntarily
ceases operations on the Leased Property for a period in excess of thirty (30)
days; or
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(h) if an event of default has been declared by the franchisor
under the Franchise Agreement with respect to the Facility on the Leased
Premises as a result of any action or failure to act by the Lessee or any other
Person with whom Lessee contracts for management services at the Facility (other
than a failure to complete a Capital Improvement required by the franchisor
resulting from Lessor's failure to fund the Capital Expenditure therefor
pursuant to Section 9.1(b) above) and Lessee has failed, within thirty (30) days
thereafter, to cure such default by either (1) curing the underlying default
under the Franchise Agreement and paying all costs and expenses associated
therewith, or (2) obtaining at Lessee's sole cost and expense a substitute
franchise license agreement with a substitute franchisor acceptable to Lessor,
on terms and conditions acceptable to Lessor; provided, however, that if Lessee
is in good faith disputing an assertion of default by the franchisor or is
proceeding diligently to cure such default, the 30-day period shall be extended
for such reasonable period of time as Lessee continues during this period to
dispute such default in good faith or diligently proceeds to cure such default
and so long as there is no period during which the Facility is not operated
pursuant to a Franchise Agreement approved by Lessor not to be unreasonably
withheld; or
(i) the Lessee shall fail at any time in any Lease Year to (y)
be capitalized with cash and unrestricted marketable securities and (z) have a
tangible net worth, calculated in accordance with GAAP, both (y) and (z) in an
amount equal to or in excess of an amount equal to twenty percent of the
aggregate estimated Rent for such Lease Year (as specified in the Annual Budgets
for such Lease Year) under this Lease and any Other Lease under which the Lessee
is the tenant; or
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease, or any other lease between Lessor or an Affiliate of
Lessor, as Landlord, and Lessee or any Affiliate of Lessee, as tenant within the
applicable Cross Default Pool.
If Lessor fails to observe or perform any term, covenant or condition
of this Lease and such failure is not cured by Lessor within a period of thirty
(30) days after receipt by Lessor of Notice thereof from Lessee, unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case it shall not be deemed a "Lessor Default" if Lessor proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof, then, Lessee may exercise one or more remedies available to it
herein or at law or in equity, including, but not limited to its right to
terminate this Lease; provided, however, that such Lessor Default shall not
constitute a Lessor Default or other breach under any of the Other Leases and
Lessee shall have no rights or remedies with respect to the Other Leases as a
result of a Lessor Default under this Lease.
If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation shall receive, in addition
to its damages incurred, such sum as the court shall determine as its reasonable
attorneys' fees, and all costs and expenses incurred in connection therewith.
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No Event of Default or Lessor Default (other than a failure to make a
payment of money) shall be deemed to exist under subsections (c) or the second
preceding paragraph above during any time the curing thereof is prevented by an
Unavoidable Delay, provided that upon the cessation of such Unavoidable Delay,
Lessee or Lessor, as the case may be, remedies such default or Event of Default
or Lessor Default without further delay.
16.2. Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1 above) and is continuing, whether
or not this Lease has been terminated pursuant to Section 16.1 above, Lessee
shall, if requested by Lessor so to do, immediately surrender and assign to
Lessor or Lessor's designee the Leased Property including, without limitation,
any and all books, records, files, licenses, permits and keys relating thereto,
and quit the same and Lessor may enter upon and repossess the Leased Property by
reasonable force, summary proceedings, ejectment or otherwise, and may remove
Lessee and all other Persons and any and all personal property from the Leased
Property, subject to rights of any hotel guests and to any requirement of law.
Lessee hereby waives any and all requirements of applicable laws for service of
notice to re-enter the Leased Property.
16.3. Damages. Neither (a) the termination of this Lease, (b) the
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for
liquidated and agreed current damages for Lessee's default; either:
(1) Without termination of Lessee's right to
possession of the Leased Property, each installment of Rent (including
Percentage Rent as determined below) and other sums payable by Lessee to Lessor
under the Lease as the same becomes due and payable, which Rent and other sums
shall bear interest at the Overdue Rate, and Lessor may enforce, by action or
otherwise, any other term or covenant of this Lease; or
(2) the sum of:
(A) the unpaid Rent which had been earned
at the time of termination, repossession or reletting, and
(B) the worth at the time of termination,
repossession or reletting of the amount by which the unpaid Rent for the balance
of the Term after the time of termination, repossession or reletting, exceeds
the amount of such rental loss that Lessee proves could be reasonably avoided
and as reduced for rentals received after the time of termination, repossession
or reletting, if and to the extent required by applicable law, and
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(C) any other amount necessary to compensate
Lessor for all the detriment proximately caused by Lessee's failure to
perform its obligations under this Lease or which in the ordinary course of
things, would be likely to result therefrom. The worth at the time of
termination, repossession or reletting of the amount referred to in subparagraph
(B) is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of New York at the time of award plus 1%.
Percentage Rent for the purposes of this Section 16.3 shall be a sum
equal to (i) the average of the annual amounts of the Percentage Rent for the
three (3) Fiscal Years immediately preceding the Fiscal Year in which the
termination, re-entry or repossession takes place, or (ii) if three (3) Fiscal
Years shall not have elapsed, the average of the Percentage Rent during the
preceding Fiscal Years during which the Lease was in effect, or (iii) if one (1)
Fiscal Year has not elapsed, the amount derived by annualizing the Percentage
Rent from the effective date of this Lease.
16.4. Waiver. If this Lease is terminated pursuant to Section 16.1
above, Lessee waives, to the extent permitted by applicable law, (a) any right
to a trial by jury in the event of summary proceedings to enforce the remedies
set forth in this Article 16, and (b) the benefit of any laws now or hereafter
in force exempting property from liability for rent or for debt and Lessor
waives any right to "pierce the corporate veil" of Lessee other than to the
extent funds shall have been inappropriately paid any Affiliate of Lessee
following a default resulting in an Event of Default.
16.5. Application of Funds. Any payments received by Lessor under any
of the provision of this Lease during the existence or continuance of any Event
of Default shall be applied to Lessee's obligations in the order that Lessor may
determine or as may be prescribed by the laws of the State.
ARTICLE 17
17.1. Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or to perform any act required to be made or performed under this
Lease including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement other than a failure to complete improvements
required by the franchisor because the Lessor has not provided Lessee with funds
therefor, and fails to cure the same within the relevant time periods expressly
provided in this Lease, Lessor, without waiving or releasing any obligation of
Lessee, and without waiving or releasing any obligation or default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of lessee, and may, to the
extent permitted by law, enter upon the Leased Property for such purpose and,
subject to the provisions of Section 16.4. above, take all such action thereon
as, in Lessor's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Lessee. All sums so paid by Lessor and all costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessor,
shall be paid by Lessee to Lessor on demand. The obligations of
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Lessee and rights of Lessor contained in this Article shall survive the
expiration or earlier termination of this Lease.
ARTICLE 18
18.1. Provisions Relating to Purchase of the Leased Property. If Lessee
purchases the Leased Property from Lessor pursuant to any of the terms of this
Lease, Lessor shall, upon receipt from Lessee of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to Lessee a
special warranty deed or its equivalent customary in the jurisdiction where the
Leased Property is located conveying the entire interest of Lessor in and to the
Leased Property to Lessee free and clear of all encumbrances other than (a)
those that Lessee has agreed hereunder to pay or discharge, (b) those mortgage
liens, if any, that Lessee has agreed in writing to accept and to take title
subject to, (c) those liens and encumbrances subject to which the Leased
Property was conveyed to Lessor, (d) encumbrances, easements, licenses or rights
of way required to be imposed on the Leased Property under Section 7.3. above,
and (e) any other encumbrances permitted to be imposed on the Leased Property
under the provisions of Article 34 that are assumable at no cost to Lessee or to
which Lessee may take subject without cost to Lessee. The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid in cash to Lessor or as Lessor may direct, in federal
or other immediately available funds, except as otherwise mutually agreed by
Lessor and Lessee. All expenses of such conveyance, including, without
limitation, the cost of title examination or title insurance, if desired by
Lessee, Lessee's attorneys' fees incurred in connection with such conveyance and
release, and transfer taxes and recording fees, shall be paid by Lessee. Lessor
shall pay its attorney's fees.
ARTICLE 19
19.1. Personal Property Limitation. Anything contained in this Lease to
the contrary notwithstanding, the average of the adjusted tax bases of the items
of personal property that are leased to the Lessee under this Lease at the
beginning and at the end of any Fiscal Year shall not exceed 15% of the average
of the aggregate adjusted tax bases of the Leased Property at the beginning and
at the end of such Fiscal Year (the "Personal Property Limitation"). If Lessor
reasonably anticipates that the Personal Property Limitation will be exceeded
for any Fiscal Year, Lessor shall notify Lessee, and Lessee either (a) shall
purchase at fair market value any personal property anticipated to be in excess
of the Personal Property Limitation (the "Excess Personal Property") either from
the Lessor or a third party or (b) shall lease the Excess Personal Property from
a third party. In either case, Lessee's Rent obligation shall be equitably
adjusted. In addition, in the case of the purchase or lease of Excess Personal
Property by the Lessee from a third party, the Lessor's capital expenditure
reserve obligation pursuant to Article 39 shall be appropriately decreased to
reflect the reduced need for Capital Expenditures with respect to Lessor-owned
personal property. This Section 19.1 is intended to ensure that the Rent
qualifies as "rents from real property," within the meaning of Section 856(d) of
the Code, or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.
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19.2. Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the Rent would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.
19.3. Sublease Tenant Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property to
any Person in which Equity Inns, owns, directly or indirectly, a 10% or greater
interest, within the meaning of Section 856(d)(2)(B) of the Code, or any similar
or successor provisions thereto.
19.4. Lessee Ownership Limitation. Anything contained in this Lease to
the contrary notwithstanding, neither Lessee nor an Affiliate of the Lessee
shall acquire, directly or indirectly, a 10% or greater interest in Equity Inns,
within the meaning of Section 856(d)(2)(B) of the Code, or any similar or
successor provision thereto.
19.5. Lessee Officer and Employee Limitations. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees of
the Lessee (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property) shall be
officers or employees of Equity Inns (or any Person who serves as an advisor to
Equity Inns). In addition, if a Person serves as both (a) a director of the
Lessee (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property) and (b) a director
or trustee and officer (or employee) of Equity Inns (or any Person who serves as
an advisor of Equity Inns), that Person shall not receive any compensation for
serving as a director of the Lessee (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property). Furthermore, if a Person serves as both a director and officer
(or employee) of the Lessee (or any Person who furnishes or renders services to
the tenants of the Leased Property, or manages or operates the Leased Property),
that Person shall not receive any compensation for serving as a director or
trustee of Equity Inns (or any Person who serves as an advisor of Equity Inns).
19.6. Payments to Affiliates of Lessee and Use of Complimentary Rooms.
Notwithstanding anything to the contrary contained in this Lease, Lessee shall
make no payments to Affiliates as Gross Operating Expenses unless expressly set
forth in the Operating Budget or an approved Capital Budget or otherwise
expressly agreed to in writing by Lessor, in either case, after full written
disclosure by Lessee to Lessor of the affiliation, competitive pricing and any
other related information requested by Lessor. Furthermore, Lessee shall be
permitted to contract with its Affiliates for management and other services and
to pay fees for such services, provided that such contracts and fees are
disclosed in writing to Lessor and such fees shall not be included in Gross
Operating Expenses and Lessee's obligation to pay such fees shall be
subordinated to Lessee's obligation to pay Base Rent, Percentage Rent and
Additional Charges to Lessor pursuant to the terms of this Lease. Lessee may
provide hotel rooms and services at the Facility on a complimentary basis
without charge or other consideration
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to employees of the Lessee or Affiliates of Lessee visiting the Leased Property
from outside the area in which the Licensed Property is located on business
related to the Leased Property to the extent such practice does not decrease
Gross Revenues, but Lessee shall not provide such complimentary rooms or service
as compensation to parties providing materials or services to the Lessee or an
Affiliate of Lessee.
19.7. Management Agreement. Lessor shall have the right to approve or
disapprove in advance any manager or proposed manager (a "Manager") of the
Facility as well as any agreement relating to the management or operation of the
Facility (a "Management Agreement") by a Manager (provided, however, that
Lessor's consent shall not be required with respect to any Manager which is an
Affiliate of Lessee) and Lessee will provide Lessor with an executed copy of any
Management Agreement so approved by Lessor, which approvals shall not be
unreasonably withheld. Notwithstanding the foregoing, nothing herein shall be
construed as requiring that Lessee engage a Manager for the Facility. Any
Management Agreement (whether with a Manager which is an Affiliate or is not an
Affiliate of Lessee) must provide that (i) upon termination of this Lease or
termination of Lessor's or Lessee's right to possession of the Leased Property
for any reason, the Management Agreement may be terminated by Lessor without
liability for any payment due or to become due to the Manager thereunder; (ii)
any management fees shall be subordinated to payments of Rent to Lessor
hereunder; and (iii) in the event Lessee is in default, the Manager shall, at
the election of Lessor and provided the Manager continues to be paid, continue
to perform under the terms of the Management Agreement for a period not to
exceed ninety (90) days, provided that such election by Lessor shall not
constitute a waiver by Lessor of any rights or remedies Lessor may have as a
result of Lessee's default. No fees or other amounts payable by Lessee to any
Manager shall excuse Lessee from its obligations to pay Rent and other amounts
payable by Lessee to Lessor hereunder. No Management Agreement may be amended or
modified in any manner without the prior written consent of Lessor, which
consent shall not be unreasonably withheld, delayed or conditioned.
ARTICLE 20
20.1. Holding Over. If Lessee for any reason remains in possession of
the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay as rental each month 150% the aggregate of (a) one-twelfth of the
aggregate Base Rent and Percentage Rent payable with respect to the last Fiscal
Year of the Term, (b) all Additional Charges accruing during the applicable
month and (c) all other sums, if any, payable by Lessee under this Lease with
respect to the Leased Property. During such period, Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
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ARTICLE 21
21.1. Risk of Loss. During the Term, the risk of loss or of decrease in
the enjoyment and beneficial use of the Leased Property in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through,
or under Lessor) is assumed by Lessee except as specifically provided in this
Lease, and, in the absence of negligence, willful misconduct or breach of this
Lease by Lessor, Lessor shall in no event be answerable or accountable therefor,
nor shall any of the events mentioned in this Section entitle Lessee to any
abatement of Rent except as specifically provided in this Lease.
ARTICLE 22
22.1. Indemnification. Notwithstanding the existence of any insurance,
and without regard to the policy limits of any such insurance or self-insurance,
but subject to Section 16.4. above and Article 8 above, Lessee will protect,
indemnify, hold harmless and defend Lessor from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
for matters initially accruing during the Term (including, without limitation,
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Lessor Indemnified Parties by
reason of: (a) any accident, injury to or death of Persons or loss of or damage
to property occurring on or about the Leased Property or adjoining sidewalks,
including without limitation any claims under liquor liability, "dram shop" or
similar laws, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Lessee or any of its agents, employees or
invitees of the Leased Property or any litigation, proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified Party
is made a party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of a Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder. The Lessee's
indemnification under this Section shall not include (a) the negligence of any
nonsupervisory on site employee of Lessee, provided Lessee pays the damages
resulting therefrom as a part of Gross Operating Expenses (and not as a Capital
Expenditure), including, without limitation, any reduction in Rent caused by
such negligence and (b) any loss to the extent caused by Lessor.
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of (a) the gross
negligence or willful misconduct of Lessor arising in connection with this
Lease; or (b) any failure on the part of Lessor to perform or comply with any of
the terms of this Lease.
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To the extent that neither of the foregoing paragraphs applies to a
particular liability, action, claim, damage, cost or expense arising out of
operation of the Leased Property, such liability, action, claim, damage, cost or
expense shall be paid as a Gross Operating Expense.
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten (10) days after liability therefor on the part
of the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the day of payment. An
Indemnifying Party, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against the Indemnified
Party. The Indemnified Party, at its expense, shall be entitled to participate
in any such claim, action, or proceeding, and the Indemnifying party may not
compromise or otherwise dispose of the same without the consent of the
Indemnified Party, which may not be unreasonably withheld. Nothing herein shall
be construed as indemnifying a Lessor Indemnified Party against its own grossly
negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE 23
23.1. Subletting and Assignment. Subject to the provisions of this
Lease regarding limitations on sublease rent and the identity of subtenants and
any other express conditions or limitations set forth herein, Lessee shall not
assign or sublet under this Lease without the express written consent of Lessor,
which consent may be withheld, delayed or conditioned in Lessor's sole
discretion. In the case of a subletting, the sublessee shall comply with the
provisions of this Agreement, and in the case of an assignment, the assignee
shall assume in writing and agree to keep and perform all of the terms of this
Lease on the part of Lessee to be kept and performed and shall be, and become,
jointly and severally liable with Lessee for the performance thereof. In case of
either an assignment or a subletting made during the Term, Lessee shall remain
primarily liable, as principal rather than as surety, for the prompt payment of
the Rent and for the performance and observance of all of the covenants and
conditions to be performed by Lessee hereunder. An original counterpart of each
such sublease and assignment and assumption, duly executed by Lessee and such
sublessee or assignee, as the case may be, in form and substance satisfactory to
Lessor, shall be delivered promptly to Lessor. Any transfer of an ownership
interest in Lessee or any constituent entity shall be subject to the same
limitations as are applicable to a direct assignment of this Lease pursuant to
this Section 23.1. Notwithstanding anything to the contrary contained herein,
Lessee may (i) without Lessor's consent, assign this Lease or sublet all or any
part of the Leased Property to any parent, or wholly-owned subsidiary of Lessee
or of Prime, or to any entity which is a successor to Lessee or Prime by way of
merger, consolidation or corporate reorganization or by the purchase of all of
the assets, partnership interests or shares of stock of Lessee, provided Lessee
remains liable under this Lease, and Lessor receives counterparts of all related
documents or (ii) sublet all or any part of the Leased Property to retail,
restaurant or other concessions, at market rates, in the ordinary course of
business with the consent of the Lessor, which consent shall not be unreasonably
withheld,
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conditioned nor delayed. At the request of the Lessor, Lessee shall sublet, on a
nonrecourse basis, any outparcel of the Leased Premises not necessary for the
operation of the Facility under which the Lessor, as fee owner, is liable for
all obligations of the sublandlord and receives all of the rent and other
benefits of the sublease. Alternatively, at the request of the Lessor, the
Lessee shall partially terminate this Lease as to any such outparcel, free of
any purchase option, right of first offer or right of first refusal, without any
termination fee or other consideration.
23.2. Attornment. Lessee shall insert in each sublease permitted under
this Lease above provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee hereunder will, at Lessor's option, attorn to Lessor and
waive any right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease and (c) if
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease (excluding rentals received under subleases requested by Lessor under
the next to last sentence of Section 23.1).
ARTICLE 24
24.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.
(a) At any time and from time to time upon not less than ten
(10) days Notice by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified (or listing any
modification), and in full force and effect (or stating why it is not in full
force and effect), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be relied
upon by Lessor, any lender and any prospective purchaser of the Leased Property.
(b) Throughout the Term, Lessee will furnish to Lessor all
financial statements and financial and operating information, and access to
Lessee's books and records at reasonable times and on reasonable notice.
(c) At any time and from time to time upon not less than ten
(10) days notice by Lessee, Lessor will furnish to Lessee or to any Person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified (or listing any modifications) and in full force and effect (or
stating why it is not in full force and effect), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
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ARTICLE 25
25.1. Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
notice and in the presence of a representative of Lessee, subject only to any
business confidentiality requirements reasonably requested by Lessee. Lessee
shall provide hotel rooms and services at the Facility on a complimentary basis
without charge or other consideration for the Lessor and its employees and
agents when they are visiting the Leased Premises or the area in which the
Leased Premises are located.
ARTICLE 26
26.1. No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE 27
27.1. Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE 28
28.1. Acceptance of Surrender. No surrender to Lessor of this Lease or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE 29
29.1. No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
or entity may acquire, own or hold, directly or indirectly: (a) this Lease or
the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Leased Property.
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ARTICLE 30
30.1. Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property conveys the Leased Property in accordance with the terms hereof
other than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
30.2. Mortgage Subordination, Attornment and Nondisturbance. This Lease
and Lessee's interest hereunder shall at all times be subject and subordinate to
the lien and security title of any deeds to secure debt, deeds of trust,
mortgages, or other interests heretofore or hereafter granted by Lessor and to
any and all advances to be made thereunder and to all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof (all of
which are herein called the "Mortgage") and Lessee shall attorn to and recognize
such Mortgage lender or its purchaser at foreclosure as its landlord under this
Lease; provided, however, such subordination and attornment is conditioned upon
delivery to Lessee of a subordination, non-disturbance and attornment agreement,
in form and substance satisfactory to Lessor's Mortgage lender and reasonably
satisfactory to Lessee, which provides that, provided that an Event of Default
is not then continuing under this Lease, together with such other terms required
by Lessor's Mortgage lender, Lessee shall not be disturbed in its possession of
the Leased Property hereunder following a foreclosure of such Mortgage. Lessee
shall, at Lessor's request, promptly execute, acknowledge and deliver any
instrument which may be required to evidence subordination, attornment and
non-disturbance to any Mortgage and to the holder thereof. In the event of
Lessee's failure to deliver such agreement, Lessor may, in addition to any other
remedies for breach of covenant hereunder, execute, acknowledge, and deliver the
agreement as the agent or attorney-in-fact of Lessee, and Lessee hereby
irrevocably constitutes Lessor its attorney-in-fact for such purpose, Lessee
acknowledging that the appointment is coupled with an interest and is
irrevocable. Lessee hereby waives and releases any claim it might have against
Lessor or any other party for any actions lawfully taken by the Holder of any
Mortgage.
ARTICLE 31
31.1. Quiet Enjoyment. So long as an Event of Default is not then
continuing, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term hereof, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances subject to which the Leased Property was conveyed to Lessor or
hereafter consented to by Lessee or provided for herein. Notwithstanding the
foregoing, Lessee shall have the right by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Section.
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ARTICLE 32
32.1. Notices. All notices, demands, requests, consents approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served, mailed (by registered or certified mail, return receipt
requested and postage prepaid), or sent by commercial overnight mail service
(including, without limitation, Federal Express or UPS), addressed to the
following addresses:
If to the Lessor: Equity Inns Partnership, L.P.
4735 Spottswood
Suite 102
Memphis, Tennessee 38117
Attention: Phillip H. McNeill, Sr.
with a copy to: Hunton & Williams
1751 Pinnacle Drive
McLean, Virginia 22102
Attention: Gerald R. Best, Esquire
If to the Lessee: c/o Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: Mr. David Simon
and
c/o Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07707-2700
Attn: General Counsel
with a copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Eugene A. Pinover, Esquire
Each party to this Lease may designate such other address or addresses
upon Notice to the other party. Personally delivered Notice shall be effective
upon receipt, Notice given by overnight mail service shall be effective on the
day after deposit with the service, and Notice given by mail shall be effective
at the time of deposit in the U.S. Mail system, but any prescribed period of
Notice and any right or duty to do any act or make any response within any
prescribed period or on a date certain after the service of such Notice given by
mail shall be extended five (5) days.
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ARTICLE 33
33.1. Appraisers. If it becomes necessary to determine the Fair Market
Value or Fair Market Rental of the Leased Property for any purpose of this
Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) appoint a second Person as appraiser on its behalf.
The appraisers thus appointed, each of whom must be a member of the American
Institute of Real Estate Appraisers (or any successor organization thereto) with
at least five (5) years experience in the State appraising property similar to
the Leased Property, shall, within forty-five (45) days after the date of the
Notice appointing the first appraiser, proceed to appraise the Leased Property
to determine the Fair Market Value or Fair Market Rental thereof as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of their decision to the relevant date); provided, however, that if only one
appraiser shall have been so appointed, then the determination of such appraiser
shall be final and binding upon the parties. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its Fair Market Value at the
time the Leased Property was acquired by Lessor. If two appraisers are appointed
and if the difference between the amounts so determined does not exceed 5% of
the lesser of such amounts, then the Fair Market Value or Fair Market Rental
shall be an amount equal to 50% of the sum of the amounts so determined. If the
difference between the amounts so determined exceeds 5% of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to appoint a third
appraiser. If no such appraiser shall have been appointed within such twenty
(20) days or within ninety (90) days of the original request for a determination
of Fair Market Value or Fair Market Rental, whichever is earlier, either Lessor
or Lessee may apply to any court having jurisdiction to have such appointment
made by such court. Any appraiser appointed by the original appraisers or by
such court shall be instructed to determine the Fair Market Value or Fair Market
Rental within forty-five (45) days after appointment of such appraiser. The
determination of the appraiser which differs most in the terms of dollar amount
from the determinations of the other two appraisers shall be excluded, and 50%
of the sum of the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Value or Fair Market Rental of the Leased
Property, as the case may be. This provision for determining by appraisal shall
be specifically enforceable to the extent such remedy is available under
applicable law, and any determination hereunder shall be final and binding upon
the parties except as otherwise provided by applicable law. Lessor and Lessee
shall each pay the fees and expenses of the appraiser appointed by it and each
shall pay the fees and expenses of the appraiser appointed by it and each shall
pay one-half of the fees and expenses of the appraiser appointed by it and each
shall pay one-half of the fees and expenses of the third appraiser and one-half
of all other costs and expenses incurred in connection with each appraisal.
ARTICLE 34
34.1. Lessor May Grant Mortgages. Without the consent of Lessee, Lessor
may from time to time, directly or indirectly, create or otherwise cause to
exist any Mortgage upon the Leased
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Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing.
34.2. Lessee's Right to Cure. In addition to the rights of Lessee under
Section 16.1, subject to the provisions of the Section below, if Lessor breaches
any covenant to be performed by it under this Lease, Lessee, thirty days after
Notice to and demand upon Lessor, without waiving or releasing any obligation
hereunder, and in addition to all other remedies available to Lessee, may (but
shall be under no obligation at any time thereafter to) make such payment or
perform such act for the account and at the expense of Lessor. All sums so paid
by Lessee and all costs and expenses (including, without limitation, reasonable
attorneys' fees) so incurred, together with interest thereon at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessee,
shall be paid by Lessor to Lessee on demand or, following entry of a final,
nonappealable judgment against Lessor for such sum. The rights of Lessee
hereunder to cure and to secure payment from Lessor in accordance with this
Section shall survive the termination of this Lease with respect to the Leased
Property.
34.3. Grant of Easements or Imposition of Restrictions. Lessor may
grant easements or impose restrictions with respect to any Leased Property
without the express written consent of Lessee, provided that such easements or
restrictions shall not materially and adversely impair or prohibit Lessee's use
or enjoyment of the premises or the conduct of Lessee's business thereon, as
permitted hereunder.
ARTICLE 35
35.1. Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other interest
rate provided for in any provision of this Lease are based upon a rate in excess
of the maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate. Neither this Lease nor
any provision hereof may be changed, waived, discharged or terminated except by
a written instrument in recordable form signed by Lessor and Lessee. All the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.
35.2. Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason, Lessor and Lessee shall do, and Lessee
shall cause its Manager to do, the following (and the provisions of this Section
shall survive the expiration or termination of this Lease until they have been
fully performed) and, in general, shall cooperate in good faith to effect an
orderly transition of the management or lease of the Facility:
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(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use commercially reasonable efforts (i) to
transfer to Lessor or Lessor's nominee or assignee all Franchise Agreements,
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental entities,
that may be necessary for the operation of the Facility (collectively, the
"Licenses"), or (ii) if such transfer is prohibited by law or Lessor otherwise
elects, to cooperate with Lessor or Lessor's nominee in connection with the
processing by Lessor or Lessor's nominee of any applications for, all Licenses;
provided, in either case, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and the
assignee shall assume all leases and concession agreements in effect with
respect to the Facility then in Lessee's name.
(c) Books and Records. All books and records for the Facility
kept by Lessee pursuant to Section 3.7 above shall be delivered promptly to
Lessor or Lessor's nominee, simultaneously with the termination of this Lease,
but such books and records shall thereafter be available to Lessee at all
reasonable times for inspection, audit, examination, and transcription for a
period of one (1) year (or such longer period required to comply with IRS or SEC
requirements), and Lessee may retain (on a confidential basis) copies or
computer records thereof.
(d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds remaining,
if any, after payment of all accrued Gross Operating Expenses, and other amounts
due Lessee and after deducting the costs of any scheduled repair, replacement,
or refurbishment of Furniture and Equipment with respect to which deposits have
been made.
35.3. Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
ARTICLE 36
36.1. Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State in which reference to this
Lease, and all options contained herein, shall be made. Lessee shall pay all
costs and expenses of recording such memorandum of this Lease.
ARTICLE 37
37.1. Transfer of Assets of Lessee. Upon the expiration or termination
of this Lease, Lessee, upon request of Lessor, shall convey all of the on-site
personal property, capital leases,
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Inventory and supplies of Lessee relating to the Leased Property in an amount
sufficient to comply with the requirements of the Franchise Agreement in effect
at the expiration or termination of this Lease to Lessor's new lessee, manager
or purchaser, or their designee, without any consideration therefor.
ARTICLE 38
38.1. Compliance With Franchise Agreement. Lessee shall comply in every
respect with the provisions of the Franchise Agreement (other than requirements
with respect to funding Capital Improvements which shall be the responsibility
of Lessor except as expressly provided in this Lease) so as to avoid any default
thereunder during the term of this Lease. To the extent a Franchise Agreement is
terminated solely as a result of the failure of the Lessor to make any Capital
Improvement required by the Franchisor, then Lessor shall pay any related
Franchise Agreement termination fee. Lessee shall not terminate, extend, modify
or enter into any Franchise Agreement without in each instance first obtaining
Lessor's prior written consent not to be unreasonably withheld. Lessor and
Lessee agree to cooperate fully with each other in the event it becomes
necessary to obtain a Franchise Agreement extension or modification or a new
franchise for the Leased Property. If the Franchise Agreement expires prior to
the expiration of the Lease Term, Lessee, with the prior approval of Lessor,
shall endeavor to obtain a new or extended franchise license. Lessee shall be
the franchisee under any such franchise agreement. So long as the Franchisor is
an Affiliate of the Lessee, Lessee shall cause such Franchisor to treat the
Franchise, the Hotel, the Lessor and the Lessee in a nondiscriminatory manner so
as not to give the Lessee any benefit not granted other franchisees to the
detriment of the Hotel or the Lessor, nor burden the Hotel or the Lessor in a
manner other franchise fee owners or hotels are not burdened; including, without
limitation, Lessee shall cause Franchisor not to require Capital Improvements
and Capital Expenditures at a level in excess of Capital Improvements and
Capital Expenditures for other franchised hotels or hotels owned and operated
directly or indirectly for the account of Prime.
ARTICLE 39
39.1. Capital Expenditures and Reserves. Lessor agrees to establish a
reserve account together with all interest earned thereon for the Facility (the
"Capital Expenditure Reserve Account") to fund Capital Expenditures in an amount
equal to four percent (4%) of annual Room Revenues from the Facility, net of
amounts actually expended for Capital Expenditures for the Facility during any
Fiscal Year. Any funds escrowed pursuant to a Franchise Agreement or Mortgage
and designated for Capital Expenditures shall be deemed to be part of the
Capital Expenditure Reserve Account for the Leased Property. Any funds escrowed
pursuant to a Mortgage may be pledged as security for such Mortgage, which
pledge may provide that, in the event of a default by Lessor under the Mortgage,
the escrowed funds may be applied to the balance of the loan secured by the
Mortgage; provided, however, that in the event the holder of the Mortgage
exercises such remedy, Lessor shall be obligated immediately to deposit into the
Capital Expenditure Reserve Account any amount which may then be necessary to
bring the funds in such account (together with any funds remaining in any other
accounts of Lessor dedicated for such purpose) up to the aggregate level
required by this
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Section. The Capital Expenditure Reserve Account for the Facility may be
commingled by Lessor with similar accounts of Lessor with respect to other hotel
properties leased by Lessor to Lessee. Upon request by Lessee not more
frequently than twice a year, Lessor shall provide Lessee a written report
stating the amounts held in such Capital Expenditure Reserve Account with
respect to the Leased Property and amounts disbursed out of said account with
respect to the Leased Property during the prior Fiscal Year. Upon written
request by Lessee to Lessor stating the specific use to be made and the
reasonable approval thereof by Lessor, the funds in the Capital Expenditure
Reserve Account shall be made available by Lessor for use by Lessee for Capital
Expenditures in connection with the Primary Intended Use as set forth in the
approved Capital Budget; provided, however, that no amounts made available under
this Article shall be used to purchase property (other than "real property"
within the meaning of Treasury Regulations Section 1.856-3(d)), to the extent
that doing so would cause the Lessor to recognize income other than "rents from
real property" as defined in Section 856(d) of the Code. Lessor's obligation to
fund the Capital Expenditure Reserve Account shall be cumulative and any Capital
Expenditures with respect to the Facility made by Lessor or an Affiliate of
Lessor in connection with the purchase or during its period of ownership of the
Leased Property in excess of four percent (4%) of Gross Revenues on a cumulative
basis shall be credited to the Capital Expenditure Reserve Account for the
Facility. All amounts in the Capital Expenditure Reserve Account are the
property of Lessor. Lessee shall have no interest in the Capital Expenditure
Reserve Account other than with respect to the funding of amounts in a Capital
Budget approved by Lessor.
ARTICLE 40
40.1. Definitions. For the purpose of this Article, the following terms
shall have the following meanings:
(a) "RevPAR Index Baseline" shall mean the RevPAR Yield Index
for the Leased Property on the Commencement Date, which shall be equal to 100.
(b) "RevPAR Market Decline" shall mean a decline of more than
fifteen percentage points of the RevPAR Yield Index of the Facility below the
RevPAR Index Baseline, unless Lessee makes a cash payment of additional Base
Rent to Lessor on the due date of the final Rent payment for such Lease Year in
an amount equal to the Rent that would have been paid if Gross Revenues for such
Lease Year equaled the amount necessary to cause such decline in the RevPAR
Yield Index to be not greater than 15 percent.
(c) "RevPAR Yield Index" shall mean the percentage amount
obtained by dividing the RevPAR of the Leased Property by the RevPAR of the
Competitive Set of the Leased Property, calculated in accordance with the STR
Report which contains a full calendar year calculation thereof for the Leased
Property (or if STR Reports are no longer published or do not contain sufficient
information to make such calculation, the RevPAR Yield Index shall instead be
calculated using the methodology presently used by STR Reports from information
contained in any other publication reasonably selected Lessor and recognized by
the hotel industry as being an authoritative source of
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such information or, if no such publication exists, from an analysis conducted
at the joint expense of Lessor and Lessee by a nationally recognized accounting
firm with a hospitality division chosen by Lessor of which neither Lessor,
Lessee or their Affiliates is a significant client).
40.2. Performance Standard. Unless caused by Unavoidable Delays, upon
the occurrence of a RevPAR Market Decline, Lessor shall have the option to
terminate this Lease, upon 30 days prior written notice to Lessee thereof,
unless during such 30 day period Lessee pays Lessor as additional Base Rent an
amount (reasonably calculated by Lessor and specified in such notice) equal to
the sum Lessor would have received as Rent had this Lease met the minimum
criteria to avoid such RevPAR Market Decline.
ARTICLE 41
41.1. Arbitration. Except as otherwise expressly provided, in the event
a dispute should arise concerning the interpretation or application of any of
the provisions of this Lease, the parties agree that the dispute shall be
submitted to arbitration of the American Arbitration Association under its then
prevailing rules, except as modified by this Article. The Arbitration Tribunal
shall be formed of three (3) Arbitrators each of which shall have at least five
(5) years' experience in hotel operation, management or ownership, one (1) to be
appointed by each of Lessor and Lessee and the third to be appointed by the
American Arbitration Association. The arbitration shall take place in the county
in which the Leased Property is located and shall be conducted in the English
language. The arbitration award shall be final and binding upon the parties
hereto and subject to no appeal, and shall deal with the question of costs of
arbitration and all matters related thereto. Judgment upon the award rendered
may be entered into any court having jurisdiction, or applications may be made
to such court for an order of enforcement. Any arbitration under this Article
shall be submitted within three (3) months following the notice which triggers
the arbitration, and shall be concluded within one (1) year thereafter. In the
event either of the foregoing deadlines are missed, either party may proceed to
commence a court proceeding to resolve the dispute.
ARTICLE 42
42.1. Right of First Offer. In the event that Lessor desires to sell
its interest in the Leased Property, Lessor shall first offer to Lessee by
written Notice (the "Offer Notice") the opportunity to acquire the Leased
Property at the price at which Lessor intends to offer the Leased Property (the
"Offer Price"). In the event that Lessee elects in writing, within thirty days
following receipt of such Offer Notice, to acquire the Leased Property at the
Offer Price, Lessor shall be obligated to sell the Leased Property to Lessee or
its nominee at the Offer Price, and the closing of said sale shall be
consummated within fifteen (15) days following Lessee's election in accordance
with the provisions of Article. Upon such sale, this Lease shall terminate with
respect to the Leased Property as if such date were the fixed expiration date
set forth in this Lease, without any further obligation of either party to the
other, other than any accrued obligations hereunder or any other obligations
that expressly survive the termination of this Lease. The provisions of this
Article 42 shall not apply to any sale, transfer or conveyance by Lessor of any
interest in the Leased Property to any Affiliate of Lessor.
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42.2. Sale of Leased Property by Lessor. In the event Lessee does not
elect to acquire the Leased Property in accordance with the preceding paragraph,
Lessor shall be permitted to sell the Leased Property to a third party at a
price equal to or greater than 100% of the Offer Price. In calculating the 100%
as stated herein, only the stated purchase price shall be relevant and no
adjustments offered to Lessee shall be considered in respect of the other terms
or conditions of the proposed sale. If such sale is not consummated within six
months after the delivery of the Offer Notice, Lessor shall be obligated to
repeat the procedure set forth in the preceding paragraph. If such sale is
consummated, this Lease shall terminate as of the closing date of such sale.
42.3. Termination of Lease. Upon termination of this Lease pursuant to
Section 42.2 above, this Lease shall be of no further force and effect except as
to any obligations existing as of such date that survive termination of the
Lease, and all Rent shall be adjusted as of such date. As compensation for the
early termination of Lessee's leasehold estate hereunder, Lessor shall pay to
Lessee (a) an amount equal to the Net Present Value (as hereinafter defined) as
of the date of such sale (the "Termination Payment") and (b) a sum equal the
liquidated damages required for early termination of the Franchise Agreement (to
the extent caused by Lessor's termination). No Termination Payment or Franchise
Agreement termination payment shall be payable where (i) such sale by Lessor is
made subject to this Lease (and Lessee shall attorn to such purchaser) or (ii)
Lessor causes such purchaser to offer Lessee a management agreement on economic
and other material terms at least as advantageous to the Lessee as the economic
and other material terms of this Lease and Prime or its successor or assign
remains as Franchisor. In lieu of the payment due under (a) above, Lessee may
accept at its option Lessor's offer, if any, to lease to the Lessee or an
Affiliate of Lessee one or more substitute hotel facilities pursuant to one or
more leases (the "Substitute Leases") that would create for Lessee and the
applicable Affiliate of Lessee leasehold estates that have an aggregate Fair
Market Value of no less than the Fair Market Value of the then remaining term of
the Lease with respect to the Leased Property and otherwise be on terms not
materially less favorable to Lessee than those of this Lease. If Lessee elects
the option and enters into Substitute Leases, Lessor shall have no further
obligations to Lessee with respect to payments under (a), above, for early
termination of this Lease. The "Net Present Value" shall mean the fair market
value of the remaining Term (excluding any unexercised renewal terms) of this
Lease, which shall be deemed to be the sum of 50% of the amount calculated by
multiplying (a) the average annual EBITDA (i.e., net earnings before interest,
taxes, depreciation and amortization) to Lessee net of all Rent (without
duplication) for the three (3) Fiscal Years ended immediately prior to the date
of sale, times (b) the number of Fiscal Years (or portions thereof) remaining in
the Lease Term excluding renewal terms times (c) one hundred percent (100%) plus
the average annual percentage increase in the Consumer Price Index during the
three (3) Fiscal Years ended immediately prior to the date of sale, and (d)
discounting the product of (a) times (b) times (c) above by the Base Rate plus
one percent.
42.4. Substitute Franchisee. Lessor shall have no obligation to make
any payment under subparagraph (b) of Section 42.3 with respect of liquidated
damages under the Franchise Agreement
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or otherwise, if as of the closing of the sale the purchaser of the Leased
Property enters into a franchise agreement with AmeriSuites Hospitality, Inc.
("AmeriSuites"), providing for the payment of royalties and other sums in
amounts at least equal to the royalties and other amounts provided for under the
Franchise Agreement and otherwise be on terms not materially less favorable than
those of the Franchise Agreement. The Lessee shall cause AmeriSuites not to
unreasonably withhold, delay nor condition the issuance of a new AmeriSuites
franchise agreement to such purchaser or its designee on the same terms and
conditions as the franchise agreement of the Lessee without any termination,
transfer or application fees.
42.5. Limitation of Terminations. Anything herein to contrary
notwithstanding in this Lease or in any Other Lease executed simultaneously with
this Lease , Lessor shall have no right to terminate this Lease under Article 42
hereof prior to the fifth anniversary of the Commencement Date, if this Lease,
when added to all other Affiliated Leases and Other Leases executed
simultaneously with this Lease previously terminated either under Articles 42
and 43 or as a result of a material event of default by Lessor (after applicable
notice and cure rights) would cause the number of Affiliated Leases and Other
Leases so terminated to exceed three. It is the intention of Lessor that the
total number of Affiliated Leases executed simultaneously with this Lease which
may be terminated prior to the fifth anniversary of the Commencement Date for
such reasons shall not exceed three. Nothing shall limit Lessor's right to
terminate this Lease under Article 16 or Articles 14 or 15, regardless of any
terminations of Other Leases.
ARTICLE 43
43.1. Change in REIT Status or REIT Regulations. In the event that
Equity Inns terminates its status as a real estate investment trust ("REIT") for
tax purposes, or in the event that the Internal Revenue Code provisions are
amended so that REITs are permitted to operate hotels, Lessor may elect to
terminate this Lease. In the event that this Lease is so terminated, Lessor
shall be obligated to pay to Lessee the Termination Payment calculated as set
forth in Article 42 hereof. Anything herein to contrary notwithstanding in this
Lease or in any Other Lease executed simultaneously with this Lease, Lessor
shall have no right to terminate this Lease under this Article 43 prior to the
fifth anniversary of the Commencement Date, if upon termination of this Lease
the total number of this Lease and Other Leases executed simultaneously with
this Lease terminated under Articles 42 and 43 or as a result of a material
event of default by Lessor (after applicable notice and cure rights) shall
exceed three. It is the intention of Lessor that the total number of this Lease
and the Other Leases executed simultaneously with this Lease which may be
terminated prior to the fifth anniversary of the Commencement Date shall not
exceed three.
ARTICLE 44
44.1. Lease Renewal. At least ninety days but not more than one hundred
eighty days prior to the expiration of the Term of this Lease, and provided that
(a) no Event of Default nor any event which with the giving of notice or passage
of time or both, would constitute an Event of Default has occurred and is then
continuing; and (b) Lessee has met the performance standards (as described in
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Article 40) with respect to the Leased Property (or cures any under performance
in accordance with the terms thereof) shall submit to Lessee a proposal for the
terms under which it is prepared to extend this Lease with respect to the Leased
Property for an additional five year period. Thereafter, Lessor and Lessee shall
endeavor in good faith to negotiate such extension. In the event that Lessor and
Lessee fail to reach agreement on the terms of such extension with respect to
the Leased Property at least sixty days prior to the expiration of the Term of
this Lease, Lessor shall be permitted to commence negotiations with third
parties which are not Affiliates of Equity Inns or Lessor with respect to the
lease of the Leased Property upon the expiration of the Term of this Lease,
provided that Lessor may not enter into a lease with any such third party with
respect to the Leased Property on terms substantially more favorable to such
third party than those last offered to Lessee. In the event the Term is extended
for such five year period, the Lessor shall make the same five year renewal
offer at the expiration of such initial five year renewal Term, on the same
terms and conditions as the initial renewal.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
[SIGNATURES ON FOLLOWING PAGES]
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LEASE AGREEMENT
SIGNATURE PAGE
LESSOR:
EQUITY INNS PARTNERSHIP, L.P., a
Tennessee limited partnership
By: Equity Inns Trust, general partner
By:
Name:
Title:
State of )
) SS.
County of )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared ______________________________________________________, the
____________________________ of Equity Inns Trust, general partner of EQUITY
INNS PARTNERSHIP, L.P., a Tennessee limited partnership, who acknowledged that
they executed the foregoing instrument for and on behalf of said general
partner, that the same was their own free act and deed, individually and as such
officers, and the free act and deed of the partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this ____ day of ________________________, 1997.
Notary Public
My commission expires:_____________
[SIGNATURES CONTINUE]
<PAGE>
LEASE AGREEMENT
SIGNATURE PAGE
LESSEE:
CALDWELL HOLDING CORP., a
Delaware corporation
By:
Name:
Title:
State of )
) SS.
County of )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared __________________________________________________________,
the ____________________________ of CALDWELL HOLDING CORP., a Delaware
corporation, who acknowledged that they executed the foregoing instrument for
and on behalf of said corporation, that the same was their own free act and
deed, individually and as such officers, and the free act and deed of the
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this ____ day of ________________________, 1997.
Notary Public
My commission expires:_____________
